Britain 'faces rising risk of power shortages'

Downturn likely to hit investment in renewables

The UK is closer to facing major power shortages than at any time for 20 years, a report from the consultancy CapGemini will warn today, with Britain still no closer to solving the dilemmaof how to meet higher demand whilereducing carbon dioxide emissions.

CapGemini's report will warn that the real margin, the amount of power available over and above the demand for it, has now fallen to 2.2 per cent, from 7.9 per cent last year, the lowest figure for 10 years.

CapGemini will add that the credit crunch and recession is likely to give the power sector some respite, with demand falling back as economic activity slows.

However, the downturn will also act as a major brake on investment in new generation capacity for the future, leaving Britain facing an even more difficult problem once the economy picks up again.

Investment in renewable energy supply and nuclear power is likelyto be hit hardest, according to CapGemini, presenting an additional environmental difficulty once economic activity increases.

"Security of supply and carbon dioxide emissions curbing issues will be exacerbated after the crisis," said Colette Lewiner, global leader of energy, utilities & chemicals at CapGemini. "To avoid this, utilities and governments should keep their investment plans in zero carbon generation investments."

An investment of €1trn in European electricity and gas infrastructure is needed over the next 25 years if demand for energy is to be met, CapGemini said.

The consultancy said there was some evidence of utilities continuing to invest in new capacity, but warned that most have weighted development towards fossil fuel-based power generation. Almost 60 per cent of new capacity currently planned for Europe will be fossil fuelled.

While there has been some modest investment in renewable power, most of the money has been spent on wind technologies, which do not yet produce reliable supply at peak hours. This is one reason, warns CapGemini, why the security of power supply has now begun to deteriorate.

Nevertheless, if European governments want to hit their climate change targets, they have no choice but toinvest in renewable sources of power. CapGemini's figures show thatcarbon emissions have been broadly flat over the past 12 months, but have not yet begun to decrease in line with targets.