Energy Policies of IEA Countries: The United Kingdom 2006 Review

The United Kingdom is facing a critical moment in its energy policy: North Sea oil and gas production is declining, dependence on imported energy is increasing, while rising energy prices and climate change considerations pose further challenges. Energy Policies of the United Kingdom 2006, the second thematic review of an IEA country, addresses these challenges, focusing on energy investment, energy efficiency and the return of nuclear power to the political agenda. Almost all coal-fired and nuclear power capacity in the United Kingdom will be retired within the next 15 years. The review encourages the government to maintain its trust in the market mechanism for the delivery of required investment and security of supply. Nevertheless, it also identifies the need for the government to play a more active role in setting the framework. On the demand side, the IEA considers the government's “Energy Efficiency Commitment” (EEC) an impressive success. The EEC was introduced in 2002 and is an energy-saving programme under which suppliers must achieve efficiency targets in households. Challenges, such as the requirement that 50% of savings come from low-income households, remain. The review invites the government to investigate ways in which fuel poverty could be reduced without distorting the EEC. Energy Policies of the United Kingdom 2006 also assesses the government’s shifting direction on nuclear and backs this new path. It argues that the development of a positive investment framework in planning and licensing, without direct intervention in investment decisions favouring nuclear, will allow investors to judge the viability of new plants.