Regulator: U.K. Needs £200 Billion to Meet Carbon Targets

By ALEX MACDONALD
LONDON -- Britain will need to invest up to £200 billion ($321.5 billion) over the next decade and a half to ensure the country can meet its carbon targets and secure adequate energy supplies, the U.K. energy regulator Ofgem said Friday.
Ofgem outlined four energy scenarios to assess the energy security risks over the next 10 to 15 years. In the four scenarios, Ofgem concluded Britain will face significant levels of gas imports, in particular for gas power plants to replace lost nuclear and coal-fired capacity.
The report also found that Britain will need to make significant changes to the way it generates and consumes power in order to manage fluctuations in power generation from the nation's increasing dependence on wind power.
Since massive levels of investment will be needed in order to make these changes, Ofgem said there is a high likelihood that consumer bills will rise -- especially if oil and gas prices continue their upward trend, evidenced since 2003.
"Our scenarios suggest that Britain faces a tough challenge in maintaining secure supplies whilst at the same time meeting its climate change targets," Ofgem chief executive Alistair Buchanan said. "However, there is still time to act. Ofgem will be putting forward proposals in the New Year based on today's consultation to ensure that Britain's energy industry can meet the challenges ahead."
The four scenarios -- which consider variables including economic recovery, investment, environment targets and security of supply -- would result in increases in domestic energy bills of between 14% and 25% by 2020 (from 2009 levels). Domestic bills could rise by as much as 60% in the interim if wholesale energy prices spike due to a strong rebound in the global economy.
The scenarios are labeled Green Transition, Green Stimulus, Dash for Energy, and Slow Growth. In all four, Britain's dependence on gas imports increases but in two of them imports stabilize from the middle of the next decade, Ofgem said.
Write to Alex MacDonald at alex.macdonald@dowjones.com