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The UK needs to rethink its ‘romantic’ energy policy or face disaster

Daily Telegraph: The UK needs to rethink its ‘romantic’ energy policy or face disaster

By Ambrose Evans-Pritchard
Last Updated: 1:40am BST 10/04/2008

Wulf Bernotat, head of German power giant e.on, tells Ambrose Evans-Pritchard why the UK needs a policy rethink

Puffing on a Sumatran Nobel cigar, Germany’s energy baron Wulf Bernotat has a few words of friendly warning for Britain: face up to the harsh realities of the global power crunch, or face strategic disaster.
 
“The UK is in a very bad situation. Roughly 40pc of its power is from coal, and 20pc from nuclear. It all needs to be replaced. But is anybody in the British Government out there making the case for clean coal? I don’t see anybody,” he said, speaking over a capuccino in Madrid.

Dr Bernotat, who heads Germany’s power giant e.on, is no shrinking violet. Last year he lashed out at Brussels, calling the EU competition police a bigger threat to energy security than the Kremlin.

Brussels had forced e.on to cede its stake in the German grid as part of its anti-trust drive. He called it “expropriation”, and blamed British officials – free-market vigilantes controlling the key levers of power in the EU’s economic apparatus, as indeed they often do. Germany’s Frankfurter Allgemeine newspaper calls the commission a branch office of Whitehall.

Dr Bernotat praised Downing Street for settling on some sort of energy strategy at long last after years of drift and muddle, but said Labour seemed to have gone overboard all of a sudden with a “romantic” enthusiasm for green power.

“You cannot replace 60pc of the country’s generating capacity just by betting on renewables, which is what the pressure groups are demanding. It will be decades before we reach that point, and until then Britain is going to need coal-fired units. I hope some realism comes through in energy policy,” he said, speaking in near perfect English from his London days as a Shell executive. He was once in charge of Shell’s operations in Eastern Europe, and Africa.

E.on – Europe’s biggest private energy group – is itself taking a €6bn (£4.8bn) gamble on wind turbines, hydro and tide power, solar technology, and biomass (wood chips) over the next three years, hoping to double the share of renewables in its energy mix to 24pc by 2030. But green power alone cannot plug the gaping holes in Britain’s grid.

Critics say Britain has been remarkably complacent for years on energy policy, despite the steady slide in oil and gas output from the North Sea since 1999. Crude output is falling 10pc a year, not helped by Labour’s windfall taxes on Brent production. The country became a net importer of oil in 2006.

A series of energy White Papers have failed to grasp the nettle, raising the risk of eventual blackouts, or worse. While Labour has now agreed to grant planning permission for nuclear plants, it has not yet fleshed out the details or clarified funding. The one piece of good news for Britain is the emergence of liquefied natural gas from Qatar and Egypt as a tradeable source of energy, free from pipeline blackmail.

Mr Bernotat expects the Government to put out tenders for four nuclear power sites, costing a total of around £15bn. “No single company can take the risk of investing that much money in any one country, so the contracts will have to be split up.

We want to be part of it,” he said. E.on is willing to put up its own capital. It is not expecting any government subsidy.

The company is investing €63bn by 2010 in a drive to raise its electricity output by half to 90 gigawatts by 2015, mostly through organic growth. It already owns Powergen in Britain and runs a 1940 megawatt plant at Kingsnorth in the Medway Estuary, where new technology is raising the level of energy capture to 46pc.

The group’s planned Wilhelmshaven plant in Germany will be the most advanced hard coal site in the world, reaching 50pc capture.

Mr Bernotat said the company had no plans to launch a fresh takeover blitz after gobbling up €11.8bn of assets spread across southern Europe from Spain’s Endesa – the consolation prize for a losing a bitter battle last year.

The Spanish government blocked e.on’s bid for the Madrid electricity group amid a burst of anti-German feeling, instead orchestrating a joint deal with Italy’s Enel and the Spanish white knight Acciona. Brussels said the move was a flagrant breach of EU competition law.

“It leaves a bitter taste. I hope that a similar case will never be repeated,” Mr Bernotat said.

“I have to say that the British play by the rules, and don’t fiddle behind the curtains. The UK is the most open country for investment in Europe”.

Britain is not alone in its dreamy approach to energy security. Germany is turning its back on nuclear power altogether, and coal is out of fashion. That could one day leave the country almost entirely beholden to Kremlin gas supplies.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/10/cnenergy110.xml 

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