How the United Kingdom pursues energy security
25 July 2014
The United Kingdom enjoys a relatively high level of energy security, but it has not always been like this. During the 1970s, power cuts became commonplace. In 1974, the three-day week imposed as a result of coal strikes prompted Time magazine to write about “Britons bundled up in sweaters inside their chill homes and offices, scurrying at night through streets in a curiously darkened country”.
Thankfully, this is a picture of Britain’s past. In recent history, electricity capacity margins have been high. And network resilience systems mean that power interruptions due to weather or technical failure are dealt with swiftly.
This energy security is built on a framework of regulated, competitive markets that incentivise reliable supply. It is supported by home-grown resources, with oil and gas from the North Sea, nuclear power and the new boom in renewable energy. Renewables now provide about 15% of our electricity needs and, alongside a strong drive for energy efficiency, help us meet carbon reduction ambitions.
Rising reliance on imports, and major investments in infrastructure
But there is no room for complacency. Despite considerable reserves remaining in the North Sea, the United Kingdom is increasingly dependent on imports and more at the mercy of the volatile global markets that serve a more competitive, energy-hungry world. And events in Ukraine have shown how quickly circumstances can change.
At the same time, we Britons face more than a decade of structural transition as our networks are upgraded and around one-fifth of our generating capacity is replaced. This will require about GBP 110 billion of capital investment in electricity infrastructure this decade alone. Our priority is to ensure that we have sufficient power capability at all points during this transition.
The UK Energy Security Strategy tackles both the physical challenge of new power generation and grid infrastructure and the price challenge that requires us to balance risk with affordability. Our solutions are designed to be lasting, to 2050 and beyond, alongside our decarbonisation timescales.
Key to delivering energy security in the long term is making sure we have a diverse energy mix, not over-reliant on any one source or fuel. So we have embarked on a significant Electricity Market Reform to create one of the world’s first low-carbon electricity markets. Long-term fixed-price contracts will incentivise investment in low-carbon electricity generation. A capacity market will help guarantee security of supply. And a new regulatory regime in the wholesale and retail markets will boost competition, encourage new entrants and bear down on prices for consumers.
Investment is already flowing. Britain has become Europe’s renewables hotspot, with investment increasing by more than 20% over the last year. Annual investment in the electricity sector as a whole is now at record levels. And we have an electricity infrastructure pipeline of projects to 2020 worth over GBP 100 billion.
In support of the single European energy market
We recognise that booming investment and market reform will not suffice to guarantee our energy security. That requires working with our neighbours for mutual benefit. So we are foremost among European nations arguing for the completion of the single European energy market. We must step up integration and interconnection so that countries can buy clean, competitive, low-carbon electricity from wherever it is cheapest. Europe must not fail to exploit the potential advantage of a single energy market. That means across Europe we must fully implement the European Union’s energy liberalisation legislation and facilitate the investment needed in physical links between countries.
So we are entering a challenging period, with increasing competition in the global markets and domestic margins tightening. But with the historic resilience of existing networks, our home-grown resources, our ambitions in Europe and the plans in place for domestic electricity market reform, the United Kingdom is well-placed to weather any storm.
This column by Edward Davey, until 2015 the UK Secretary of State for Energy & Climate Change, originally appeared in IEA Energy: The Journal of the International Energy Agency. Through the end of 2014, the IEA regularly produced IEA Energy, but analysis and views contained in the journal are those of individual authors and not necessarily those of the IEA Secretariat or IEA member countries, and are not to be construed as advice on any specific issue or situation. Click here to read issues of IEA Energy.