Business needs a revamped, coherent energy strategy as key policy gaps could threaten the security of energy supplies in the future, the CBI said today (Monday).
Publishing its paper, ‘Powering the Future’, the CBI said energy costs rising to uncompetitive levels, and concerns over gas supplies this Winter, had shot the issue of UK energy needs to the top of the business agenda.
The document identifies that a third of UK generating capacity, much of it nuclear, needs to be replaced by 2020 - in ways that maintain long-term security of supply, deliver prices that compare favourably with EU rivals, and fit with the UK's environmental aims.
The CBI is therefore calling on the Government to get a coherent energy policy in place as a matter of urgency, including a decision within a year on whether to back a new generation of nuclear power stations.
Sir Digby Jones, CBI Director-General, said:
“The threat to companies of gas shortages and rising energy costs this Winter has shot the issue of energy to the top of the business agenda.
“Risk is an accepted fact of business life. But what users and producers of energy need, as in any marketplace, is a clear framework that lets them manage that risk in the most effective way.
“One third of UK power generating capacity needs to be replaced by 2020. But without a coherent and integrated energy policy there is a risk that the billions of investment required will not come at the right time or at the most efficient cost.
“The challenges the Government didn't tackle in its 2003 Energy White Paper have not gone away. The opportunity must now be seized - Government must grasp the nettle and make some tough decisions. It has to govern for the whole country in the long term, and not just for the ideology of any one vested interest."
The CBI’s paper stresses that business does not want to see greater intervention in the energy market by Government – just greater clarity. It calls on the Government to:
- Reduce the risks associated with unclear Government policies, that otherwise will hold back investment in new energy infrastructure;
- As part of delivering that clarity, lead a national debate to resolve the future of nuclear by the end of 2006;
- Prioritise energy market liberalisation in EU political negotiations;
- Streamline the process for energy infrastructure planning applications;
- Increase Government investment in energy R&D and actively promote a wider range of low-carbon technologies;
- Work with industry to assess in more detail the risks to security of supply;
- Improve emergency planning to minimise the impact of short-term disruptions;
- Make the economy more resilient to price rises by increasing the efficiency of energy use;
- Promote a stronger engineering skills base for the energy industry.
On nuclear power, the CBI paper says that the 10-year lead-time for nuclear build and the lack of clarity from Government so far means public debate must start without delay, and be concluded by the end of 2006.
As part of that debate it calls on the Government to commission immediately a definitive study on the economics of nuclear power relative to other sources, and to finalise swiftly its strategy for the disposal of existing and future nuclear waste.
To ensure any positive decision on nuclear can then be delivered quickly, it also calls for the ‘pre-licencing’ of reactor designs, and for the scope of public planning enquiries to be limited to ‘site-specific’ issues.
Sir Digby Jones said:
“A decision on the future of nuclear power has been allowed to drift too long. Potential investors and the British public both deserve certainty.
“Nuclear’s position as a reliable, low-carbon energy source is without doubt, but understandable concerns exist about costs and waste. The Prime Minister has rightly promised a comprehensive debate on the future of nuclear power. The Government must now deliver positive leadership to increase public awareness and ensure public ownership of the outcome.”
The CBI also warns that further tax increases for North Sea producers would hit investment in exploration and appraisal activities, significantly reducing the proportion of the UK's gas needs that can be met through domestic production.
The document recognises the Government’s efforts to push for liberalisation of the EU energy market, but says more must be done. Sir Digby said:
“There is no shortage of EU Directives requiring our continental partners to open up their energy markets. But in too many countries, political resistance and a disregard for the rules means that state monopolies have a stranglehold on energy supplies - making every UK business and householder pay more for energy.
"If progress on liberalisation stalls at the same time as we start to rely more and more on gas imports, it could lock in permanently higher gas and electricity prices in the UK. It is not in the interests of business or consumers for this to be allowed to happen. The recent European Commission report is a welcome development, but we need more than fine words to stamp out the anti-competitive behaviour. The Government must work with others to sustain the pressure on member states to play by the rules.”
The paper also highlights the 80 per cent decline in UK energy research between 1990 and 2001, and the woefully inadequate Government budget for energy R&D. Despite a doubling of the DTI’s budget, which the CBI welcomes, public spending as a proportion of GDP remains at less than a tenth that of the United States.
Sir Digby concluded:
"These challenges have not just appeared overnight. They have been flagged up by the CBI and many others for a long time. We shouldn't have to wait until Five to Midnight before Government pays attention."
1. The CBI's energy brief, 'Powering the Future: Enabling the UK Energy Market to Deliver', is attached.
2. The CBI's Annual Conference takes place on 28-29 November 2005 at the Business Design Centre, Islington. For details about media facilities and how to accredit, please contact the CBI Press Office on 020 7395 8090.