UK GOVERNMENT ENERGY REVIEW: MORE SECURITY, FEWER

UNCLAS SECTION 01 OF 02 LONDON 005471 SIPDIS SIPDIS ENERGY PLEASE PASS TO VICTOR REIS E.O. 12958: N/A TAGS: ENRG SENV UK SUBJECT: UK GOVERNMENT ENERGY REVIEW: MORE SECURITY, FEWER EMISSIONS BY 2020 1.(U) Summary. The UK Government released its much talked about energy review on July 11 which, as expected, includes a role for new nuclear power in the British energy mix. PM Tony Blair issued this review as part of his effort to increase the UK's energy security and to meet its emissions targets. The review contains a diverse set of proposals to meet these two challenges. It promotes increased energy efficiency, competitive markets, better information for consumers, distributed energy systems, and clean sources of energy including renewables and clean coal. Full implementation of the proposals contained in the review would, it claims, cut carbon emissions 13-17 percent below what they would be otherwise by 2020. To monitor progress and ensure coherence of actions across the government, the review recommends establishing an Office of Climate Change. The full review can be found at www.dti.gov.uk/energy/review. End summary. -------------- Cleaner Energy -------------- 2.(U) The review supports increased energy efficiency, but recognizes that even with reduced energy use, energy must become cleaner. The review predicts that the UK will lose one-third of its power generating capacity over the next two decades to power station closures. New investment in the near term is likely to be in renewables, especially wind, and gas-fired power stations, but it will require the right framework to encourage business to make the needed investments. Some of the measures proposed to improve that framework are to: maintain a strong commitment to carbon pricing, reform the planning regime for electricity projects, and make a clear statement of support for new nuclear plants that will give investors confidence. 3.(U) The review regards nuclear power as a significant part of the UK's energy policy and says the safety and security of new nuclear plants are the foremost considerations. However, "it will be for the private sector to initiate, fund, construct and operate new nuclear plants and to cover the full cost of decommissioning and their full share of long-term waste management costs." The Government will help by removing barriers to the planning process. It will develop guidance for potential promoters and help with a decision on the long-term management of waste. The Government has repeatedly promised not to tilt the market in favor of nuclear power. 4.(U) To improve the situation for renewables, the review proposes to increase the amount of power suppliers must source from renewable energy from 15% in 2015-2016 to a maximum of 20% by 2026-27. The hope is to boost investor confidence in the returns they can make from renewable energy projects. The review also proposes to revamp the obligation so that it offers more assistance to emerging renewable sources such as offshore wind turbines. 5.(U) HMG still sees coal as an essential element in the energy mix, but notes that it needs to be cleaned up. According to the review, carbon capture and storage (CCS) is a promising technology that could cut emissions by 80-90 percent. HMG plans to remove regulatory barriers to CCS and conduct a commercial demonstration project if preliminary research indicates the technology is cost-effective. -------------- Energy Security -------------- 6.(U) The UK faces two energy security challenges: ensuring the supply of enough electricity while managing the risk of increasing dependence on foreign oil and gas imports. The Government believes the best way to maintain energy security is through diversity -- diversity of sources, suppliers, and supply routes. The review sees competitive markets as a way to achieve diversity, and those markets will be improved by better information on the outlook for gas and electricity supplies. To secure gas supplies, the review recommends maximizing recovery of gas from the North Sea, limiting dependence on gas, and managing the risks in higher gas import dependence. -------------- Reactions -------------- 7.(U) Reactions to the review were swift and predictable, focusing on nuclear power. The Liberal Democrats, Green LONDON 00005471 002 OF 002 Party, environmental groups, and the Sustainable Development Commission -- the Government's independent watchdog on sustainable development -- all criticized the decision to reinvigorate the nuclear program. They point to the unsolved problem of what to do with nuclear waste and are also concerned that the nuclear push will divert resources away from developing renewable energy sources. Industry leaders, while applauding the overall push for new nuclear power plants, cautioned that the review did not go far enough or offer suitable incentives. They believe the Government must offer more concrete plans before they can win support for new nuclear power stations. However, EDF Energy, one of the UK,s biggest power suppliers, called the review a "major step forward." Meanwhile, some backbench Labour MPs are upset with the Government,s new position on nuclear power and pledged to fight the streamlining of the planning process for new nuclear power plants. -------------- Comment -------------- 8.(U) The energy review's findings were not surprising. The push for new nuclear power had long been hinted at by the Prime Minister and other cabinet ministers. The inclusion of nuclear energy has dominated the debate over the review and will continue to stir debate this fall as HMG prepares a white paper that will give greater detail on how new nuclear power plants will be built. The review's call for a significant increase in renewable power use by 2020 points to HMG's continued pressure on industry to develop renewable power sources. Visit London's Classified Website: http://www.state.sgov.gov/p/eur/london/index. cfm Tuttle