Knowledge & Insight

Spotlight on the UK Energy Industry

Tue 2 June 2015

The UK energy industry is a central pillar of our country’s ongoing prosperity and stability. Its efficient functioning together with its ability to attract new investment and new talent are all critical to our continued economic success. Yet many commentators share a rather pessimistic view of the future, speculating that domestic energy production will fail to meet demand, leading to widespread power cuts. One of the main arguments opposing this scenario is based upon the fact that demand for energy in the UK has fallen every year since 2005, due in part to increasingly efficient technologies and a focus on conservation-driven energy reduction. Of course, high prices have also had a significant effect in dampening demand.

The effects of fluctuating oil prices

Falling oil prices have had a ripple effect through the industry, producing a lost list of winners and losers, and there’s no doubt that for base load power generation, gas remains the more eco-friendly option. Yet cheap coal supplies from the US often present a more cost-effective energy source, and with overseas supplies showing little signs of declining in the short to medium term, gas powered and nuclear powered electricity production is likely to suffer. Yet this has done little to put off continued investment in a wide range of alternative generation technologies such as landfill gas, crops and other biomass sources, plus imported wood chip.

UK energy sector – facts and figures

The UK energy sector makes up 6% of our entire GDP and employs almost 700,000 people. Last year, the sector attracted £13bn of investment in infrastructure projects and contributed almost £6bn to Treasury coffers. Despite question marks over government subsidies, the growth in renewable energy projects continues to gather pace, and around half of total new investment is now centred upon sustainable energies. This figure looks set to growth further with installed capacity for renewables forecast to reach 38GW by 2020.

A focus on renewable energies

With such an extensive coastline, the UK offers enormous potential for tidal energy initiatives, and projects such as the proposed tidal lagoon in Swansea Bay are likely to provide a further boost to the UK’s green credentials. The UK’s exposure to regular westerlies blowing in from the Atlantic makes wind power a viable growth area too. While in the solar sector, the removal of subsidies has suppressed growth, yet small-scale projects integrated into new build residential and commercial developments may provide a way forward.

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