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Ofgem has drawn up four energy scenarios to assess the energy security risks over the next 10-15 years. They reveal a range of potential risks to supplies when exposed to shocks.
Further, Ofgem identifies the need for investment of up to £200 billion in power plant and other infrastructure over the next ten years to secure both energy supplies and climate change targets.
The need for this investment arises at a time of volatile world energy prices and Britain's increasing dependence on gas imports.
Ofgem Chief Executive Alistair Buchanan said: "Our scenarios suggest that Britain faces a tough challenge in maintaining secure supplies whilst at the same time meeting its climate change targets. 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."
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Ofgem's four scenarios highlight a number of risks: Britain will face significant levels of gas imports, in particular for gas power plants to replace lost nuclear and coal-fired capacity. This increases our exposure to uncertainties in the global gas market, supply disruptions and potential price increases.
Significant changes in the way in which we generate and consume power may be needed to manage the variability associated with increasing reliance on wind power.
Given the massive levels of investment needed, there is a high likelihood of rising consumer bills, especially if oil and gas prices continue their underlying rise since 2003.
"These are big challenges. Consumers are already enduring high energy prices," said Mr Buchanan. "This is why we are consulting with consumer and environmental groups, the academic community and industry to ensure any policy proposals we make are grounded on the best evidence available. Early action can avoid hasty and expensive measures later."
(CD/GK)
