Select Committee on Welsh Affairs Written Evidence


Written Evidence from CBI Wales and Wales TUC

ELECTRICITY FOR WALES

INTRODUCTION

  1.  This is a joint paper presented by CBI Wales and the Wales TUC outlining our concerns about the long-term stability of electricity supply in Wales.

  2.  The CBI is the UK's foremost business representative body dealing principally with cross-sectoral issues affecting the business environment in which all companies operate. The CBI's objective is to create and sustain the conditions in which business in Wales can compete and prosper. The CBI's strength lies in its breadth of membership, which includes all types of companies, from small to global, and covers all sectors of manufacturing, services and education. The CBI represents companies employing about 50% of the private sector workforce in Wales.

  3.  The Wales TUC is the voice of Wales at work. With over 50 affiliated trade unions representing around half a million members across Wales, we campaign for a fair deal at work and for social justice at home and abroad.

  4.  The supply of electricity in Wales is a crucial issue to Wales and to the Welsh Assembly Government if the aspiration set out in A Winning Wales is to be achieved. Of particular concern for business in Wales is having access to a stable supply of electricity at a price that enables businesses based in Wales to be competitive.

  5.  As most electricity in Wales is supplied via the National Grid, the electricity needs of Wales must be considered in the context of the supply and demand pattern in the UK as a whole.

FORECAST DEMAND AND SUPPLY

  6.  The forecasts for electricity demand and supply in the UK until 2020, as quoted in the DTI/Ofgem JESS report, indicate that a much higher proportion of the UK's electricity requirements will be produced from gas fired power stations (65%) than is presently the case. This is due to the planned retirement of the older generation1of nuclear power stations and the expected reduction in coal-fired capacity.

  7.  Approximately 41% of electricity generated in Wales comes from gas-fired stations. When Wylfa nuclear power station closes in 2010, and assuming the proposed gas-fired power stations at Milford Haven and Uskmouth come on stream in that time, that percentage will rise to approximately 50%. On present trends this dependence will continue to increase.

  8.  The closure of Wylfa will remove 8.6 TWh of capacity from Wales (28% of present Welsh generation) and will make North Wales a net importer of electricity. South Wales is presently a net importer of electricity and bears the highest electricity costs in the UK because of the high transmission costs.

RISKS TO SUPPLY

  9.  There is a significant danger that in the short term there may be disruption to UK electricity supply in the winter months due to a lack of gas storage facilities in the UK. Although this situation is likely to change over the next few years as new gas storage facilities are built, it highlights the dependence of UK and Welsh industry on gas supplies to provide the electricity to keep the economy moving.

  10.  Given that a higher and higher proportion of gas used in the UK will be imported as North Sea reserves are progressively depleted consideration has to be given to the source of the gas and whether that supply is stable. Although gas will be piped from Norway in the near future, other supplies will come from Russia and, of particular interest to Wales, Qatar in the Persian Gulf.

  11.  It is easy to envisage a political climate where supplies of gas from Russia and the Middle East could be prevented from reaching the UK. If the UK depends upon gas for 65% of its electricity supply then it is clear that disruption to the supply of gas would have dire consequences to the economy and society of the UK and Wales.

  12.  Even if supplies themselves are not disrupted the threat of disruption can cause great volatility in the price of gas that has to be absorbed by industry. This volatility will greatly affect the ability of Welsh industry to remain competitive and would have serious consequences for the Welsh economy and society.

  13.  We are extremely concerned that unless key policy actions are taken now, then business and society as a whole will face an unacceptably high risk of significant disruption in the future. As the risks inherent in the forecast balance of supply are untenable we wish to see more electricity generated from non-gas fired power stations. If the UK and Wales is not to be too dependent on imported gas then more electricity must be generated from other sources.

POSSIBLE SOLUTIONS—FOSSIL FUELS/RENEWABLES

  14.  Oil-fired power stations face many of the same issues as gas-fired power stations. The development of clean coal energy production is an important part of achieving a better balance of supply. However, the use of coal is limited by emission controls and climate change considerations unless significant investment is made into carbon abatement technologies.

  15.  Support for renewable energy is critically important in reducing reliance on gas-fired power stations. Wind power is already becoming an important contributor, however we believe it is important to accelerate the development of tidal and wave technologies so that they can start to provide a meaningful contribution to UK electricity supply within the next 10 years.

POSSIBLE SOLUTION—NUCLEAR POWER

  16.  Increasing electricity capacity using the above technologies is important, but it is unlikely that these technologies will reduce the dependence on gas sufficiently to bring the risk of disruption down to an acceptable level.

  17.  At present there is a planned reduction in nuclear generating capacity. We are not convinced that investment in renewable technologies will be sufficient to replace this loss in capacity. In our opinion the risks of over dependence on gas-fired power stations are so high that serious consideration must be given to investing in new nuclear generating capacity.

  18.  There are significant issues that need to be addressed if the establishment of new nuclear generating capacity is to be considered but we believe that if the economy and society of Wales is to prosper, the possible use of nuclear power has to be fully explored.

ROLE OF THE WELSH ASSEMBLY GOVERNMENT

  19.  The powers of the Assembly Government in this area are limited but we believe that there are several important steps that the Assembly Government must take in order to ensure that the policy it develops in this area is genuinely based on evidence.

  20.  These steps are:

    —  The Welsh Assembly Government must make a clear statement that it is willing to consider the continuance of a nuclear generating capacity within Wales if that can be demonstrated to be the best option for the Welsh economy and Welsh society.

    —  The Welsh Assembly Government must ensure that Welsh planning guidance does not arbitrarily preclude the development of nuclear power in Wales.

    —  The Welsh Assembly Government must commission research to help determine the likely demand for electricity in Wales over the next 40 years.

    —  The Welsh Assembly Government must not lobby the UK Government against the development of nuclear power.

    —  The Welsh Assembly Government must accelerate its support for tidal renewable technologies and take a proactive stance in bringing the best of such technology to Wales.

CONCLUSION

  21.  If the Welsh Assembly Government is prepared to take a leadership role in having a full and rigorous debate on the electricity needs of Wales then the Wales TUC and the CBI will work with the Welsh Assembly Government to ensure that the people of Wales are fully informed about the issues at stake.

December 2005





 
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