UK review to address energy insecurity - 23 May

Ofgem, the energy regulator, is to be given a new role analysing the long-term energy outlook, to address concerns about security of supply.

The energy white paper, to be published on Wednesday, will reflect the government’s concern over the reliability of supplies of gas, oil and electricity and will take forward plans for new nuclear power stations drawn up by the outgoing Prime Minister, Tony Blair. In a further bid to tackle climate change, associated with the burning of fossil fuels, the white paper will also propose that the UK adopt a world-leading carbon emissions trading scheme.

Ofgem will be given responsibility to assess the outlook for energy supplies to inform long-term policy and investment decisions. Other countries and international bodies produce strategic assessments of supply and demand, but there has been no equivalent in the UK.

Worries about Britain's access to oil and gas were sharpened on Tuesday by a US government assessment that North Sea oil production was set to decline faster than it had thought, and predicting European gas production would decline steadily after the turn of the decade.

Britain became a net importer of gas in 2004, and could be importing 90 per cent of supplies by 2020, as North Sea and other domestic production declines.

New terminals are being built to bring liquefied natural gas from countries such as Qatar and Egypt, and there are new and expanded pipelines connecting Britain to Norway, the Netherlands and Belgium. But Britain is increasingly linked to the continental European gas market, which is dependent on Russian supply.

As for oil, the US Energy Information Administration has predicted that Britain's production will fall from a peak of 3m barrels a day in 1999 to 500,000 b/d by 2030. The UK became a net importer of oil last year for the first time since 1980.

Electricity supply has been rising up the agenda, as concerns grow at the expected loss of about a third of generating capacity over the next 20 years. Old nuclear plants are coming to the end of their lives, and old coal-fired power stations will have to close because of European Union pollution controls.

Eon UK, the British arm of the German utility, said yesterday it was "keen to take leading nuclear role in UK".

But new nuclear power stations are seen as unlikely to come on stream before the end of 2017 at the earliest, leaving a potential gap in electricity supplies earlier in the decade.

Paul Golby, Eon UK's chief executive, said: "To keep UK plc's lights on we need to look at all our options and not just at one.

"That means we need new gas stations, new cleaner coal stations, clean coal with carbon capture and storage, renewables and nuclear, and we also need more energy efficiency and decentralised generation."