Energy sector faces 'Scooby-Doo issue', says Ofgem

Mark Milner, industrial editor
The Guardian, Monday 9 March 2009

Ofgem, the industry regulator, is conducting a root-and-branch review of Britain's energy markets and their ability to meet the UK's needs over the coming years.
Britain already faces big challenges in the energy sector as North Sea output declines, which is increasing dependence on imports, while up to a third of power-generating capacity is due to be retired between now and 2015. However, Ofgem is concerned about further challenges, from the impact of the credit crisis to new rules relating to climate change, the development of the European emissions trading scheme and the fallout from the recent row between Russia and Ukraine on gas supply.
Ofgem's chief executive, Alistair Buchanan, said the energy sector was facing what he is dubbing the Scooby-Doo question (based on the cartoon character's voracious appetite for multilayered sandwiches): whether the market would be able to swallow all these issues or whether it will need help to digest them.
Buchanan argues that the long lead times for projects such as the construction of new power plants and gas storage makes it essential for the analysis of the UK's options to be done now and not deferred. "Right now it's 30 minutes to midnight but by 2012 it will be five to midnight and by 2016 it will be midnight," he said.
Ofgem is labelling its review Project Discovery and expects the team responsible to report to the board in summer.
In the wake of the credit crisis, some projects are in doubt as investors show less appetite for risk and lenders impose tougher requirements. The combination of costs and uncertainties over the timing of building new nuclear plants and the development of carbon capture and storage means new gas-generating capacity could become a more attractive option. The team will look at the availability of gas supplies on a best and worst-case basis.