U.K. Energy Policy Risks Prompting Renewed `Dash for Gas,’ Lawmakers Say

By Kari Lundgren, Bloomberg

Changes to U.K. energy policy may lead to a renewed “dash for gas” as utilities choose cheap gas-fired plants over renewable projects, Parliament’s Energy and Climate Change Select Committee said in a report today.

Government policy needs to “put the cleanest form of energy at the top of the agenda,” Committee Chairman Tim Yeo said in a statement. If the type of capacity is not part of the decision-making process, companies will choose the “cheap and easy” option, the committee said in the report.

The British government is in the process of reshaping the country’s energy market and changing how plants are approved to meet climate change targets and replace aging stations. The U.K. has pledged to get 15 percent of its energy from renewable sources by the end of the decade and about a quarter of the country’s generation capacity will go off line by 2015.

“The first so-called ‘dash for gas’ took place in the 1990s and helped to provide affordable energy, but a second dash for gas could crowd out the development of renewables and make the U.K. miss its climate change targets,” the report said.

Power from a natural gas-fired power plant costs about $54 a megawatt hour to produce, compared with $176 for energy coming from an offshore wind farm, according to Bloomberg New Energy Finance data. A gas-fired power station emits about half as much carbon dioxide as a coal-fired plant.

“Gas plants are one of the solutions to greenhouse emissions, not one of the problems,” Mike Fulwood,an analyst at Nexant, said in a telephone interview. “There are plenty of economies in Europe that have survived on imported gas for many, many years.”

Damhead Creek

Gas-fired power plants can take as little as 18 months to build, Fulwood said. Plants approved since January last year include Scottish Power Ltd.’s 1,000-megawatt plant at Damhead Creek in southeast England and a Wainstones Energy Ltd. plant near Manchester. As many as five applications for combined-cycle gas plants are under consideration, according to the Department of Energy and Climate Change.

The Secretary of State should be required to review plans and take into account what plants have already been approved, the Committee said in the report. This will protect the U.K. from becoming overly dependent on fossil fuels and ensure the country meets climate change targets, they said.

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