Regulator proposes central energy buyer

3rd Feb 2010 07:32

Energy regulator Ofgem has suggested creating a central energy buyer to fund the UK's energy needs in a series of proposals that would see government take much firmer control over UK energy supplies.The regulator warned that the UK faced energy shortages and soaring prices unless more was done to encourage new power investment, adding there is "reasonable doubt" that Britain's current energy structure would be able to provide secure long-term supplies and that the current supply was only "relatively" secure for another five years.The central buyer suggestion is the most radical of a series of proposals, which also include a minimum carbon price and capacity tenders, on how to fund an estimated £200bn energy infrastructure renewal programme.In an interview with the BBC, Ofgem chief executive Alastair Buchanan suggested that as a result of the current structural problems energy bills could rise by between 14% and 25% by 2020.In today's statement, the regulator said it wants to promote low carbon investment through a minimum carbon price, which would best work as part of a European wide scheme, but if this did not happen it may be necessary to consider a minimum GB carbon price."By reducing uncertainty about the price of carbon it would encourage investment in low carbon technologies, while sharper signals in the gas and electricity wholesale markets would encourage suppliers to ensure that they had more access to back-up supplies, especially at times of high demand for energy," it said.Ofgem is also suggesting a requirement for suppliers to demonstrate they have sufficient plans in place to cope better with threats to security of supply and for National Grid to take additional measures to help further improve security of supply.Other proposals included tenders for renewable generation, which would run for a 20 year period, and capacity tenders for all forms of generation, including renewables, as well as gas storage and other gas infrastructure.If capacity tenders are deemed to be insufficient the most radical of the five packages would be a central energy buyer, Ofgem said. This solution would involve co-ordinating all future investment through a single entity.Whilst some of the measures could be taken forward individually by Ofgem and industry, many would require government action."Our evidence shows that Britain has a window of opportunity to put in place far reaching reforms to meet the potential security of supply challenges we may face beyond the middle of this decade," Buchanan said.'We do not advocate change lightly, but all the facts point to the need for reforms now to provide resilient supply security. Acting earlier will also help keep costs as low as possible for consumers and business.'