Adam Smith Institute Lecture The e Future utu e of o Utilities Ut t es SECURING RELIABLE ENERGY SUPPLIES FOR THE FUTURE Sam Laidlaw, CEO, Centrica 10th March 2008 1
SECURING RELIABLE ENERGY SUPPLIES FOR THE FUTURE A UK PERSPECTIVE The supply picture The impact on retail prices The future investment required The economic and political framework needed 2
UK Gas Supply/Demand (1990-2030) 160 Gas Demand 140 120 100 Import Requirement BCM 80 60 40 North Sea 20 Gas Production 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 By 2015, the UK will be importing as…
Major new gas import facilities Tampen link to FLAGS: 4 BCM capacity Langeled pipeline: 27 BCM capacity BBL: 16 BCM capacity (3 BCM expansion planned) IUK: Milford Haven LNG: 25.5 BCM reverse flow (vs. initial 8.5 BCM)…
Gas supply diversity This investment has facilitated a diverse and secure gas supp supply y mix a and d Centricas Ce t ca s pu purchase c ase commitments have played a material role 2006 2010 UKCS C ti Continent t…
But capacity does not mean volume Our experience: Emden Can not rely on markets Bacton BBL Julianadorp Oude for gas to flow into UK UK Transmission constraints on the Continent IUK Both physical and THE NETHERLANDS…
Retail p price economics Retail Price Cost Components - proportion per therm 100 Profit 80 Corp tax VAT 60 Operating cost Metering g 40 EEC/CERT T&D 20 ROC C Commodity dit 0 2005-2007 Commodity 51% After tax…
UK Gas and Power Prices are Strongly Correlated 70 G Gas vs. Power P relationship: l ti hi Annual A l prices i 60 Jan 02 Dec 07 50 40 /MWh 30 y = 0.8896x 20 R2 = 0.975 10 0 0 10 20 30 40 50 60 70 p/th 9
UK also has significant planning constraints tthat at impact pact gas sto storage age Local planning is a major constraint on much-needed new storage g projects, p j , especially p y onshore 9 Storage working volume 8…
Projected j UK Power Reserve Margin g 30% 25% 20% 15% Nuclear 10% New Coal 5% R Renewable bl 0% CCGT Existing (5%) (10%) (15%) (20%) 07 08 09 10 11 12 13 14 15 16 17 21 / / /…
LNG is creating a global gas market, but supplies are tight Possible Probable Under Construction Existing Middle East Atlantic t a t c Basin as Asia Pacific BC M , 0 0 1 0 0 8 0 0 6 0 0 4 0 0 2 -…
Greater global opportunity not without risk Increased dependency on Russian, African and Middle East supplies Suppliers are no longer purely commercial entities but state t t controlled t ll d enterprises t i (NOC (NOCs))…
Concluding g remarks The UKs energy supply picture is changing dramatically The challenges of security of supply and climate change will require enormous capital investment This investment requires q an open p and stable fiscal…
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