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The United Kingdom 2002 Review INTERNATIONAL ENERGY AGENCY INTERNATIONAL ENERGY AGENCY Energy Policies of IEA Countries The United Kingdom 2002 Review INTERNATIONAL ENERGY AGENCY Energy Policies of IEA Countries The United Kingdom 2002 Review INTERNATIONAL ENERGY AGENCY ORGANISATION FOR 9, rue de la Fédération, ECONOMIC CO-OPERATION 75739 Paris, cedex 15, France AND DEVELOPMENT The International Energy Agency (IEA) is an Pursuant to Article 1 of the Convention signed in Paris autonomous body which was established in November on 14th December 1960, and which came into force 1974 within the framework of the Organisation for on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) to Economic Co-operation and Development (OECD) shall implement an international energy programme. promote policies designed: It carries out a comprehensive programme of energy co- • to achieve the highest sustainable economic growth operation among twenty-six* of the OECD’s thirty and employment and a rising standard of living in Member countries. The basic aims of the IEA are: Member countries, while maintaining financial stability, and thus to contribute to the development • to maintain and improve systems for coping with oil of the world economy; supply disruptions; • to contribute to sound economic expansion in • to promote rational energy policies in a global Member as well as non-member countries in the context through co-operative relations with non- process of economic development; and member countries, industry and international organisations; • to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance • to operate a permanent information system on the with international obligations. international oil market; The original Member countries of the OECD are Austria, • to improve the world’s energy supply and demand Belgium, Canada, Denmark, France, Germany, Greece, structure by developing alternative energy sources Iceland, Ireland, Italy, Luxembourg, the Netherlands, and increasing the efficiency of energy use; Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following • to assist in the integration of environmental and countries became Members subsequently through energy policies. accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), * IEA Member countries: Australia, Austria, Belgium, Mexico (18th May 1994), the Czech Republic Canada, the Czech Republic, Denmark, Finland, France, (21st December 1995), Hungary (7th May 1996), Germany, Greece, Hungary, Ireland, Italy, Japan, the Republic Poland (22nd November 1996), the Republic of Korea of Korea, Luxembourg, the Netherlands, New Zealand, (12th December 1996) and Slovakia (28th September Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the 2000). The Commission of the European Communities United Kingdom, the United States. The European takes part in the work of the OECD (Article 13 of the OECD Commission also takes part in the work of the IEA. Convention). © OECD/IEA, 2002 Applications for permission to reproduce or translate all or part of this publication should be made to: Head of Publications Service, OECD 2, rue André-Pascal, 75775 Paris cedex 16, France. TABLE OF CONTENTS 1 SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS ...... 5 2 ORGANISATION OF THE REVIEW .............................. 11 3 ENERGY MARKET AND ENERGY POLICY ........................ 13 4 ENVIRONMENT, ENERGY EFFICIENCY AND RENEWABLES . 43 5 FOSSIL FUELS ................................................. 75 6 ELECTRICITY ................................................... 109 7 NUCLEAR ..................................................... 133 8 ENERGY RESEARCH AND DEVELOPMENT ....................... 137 A ANNEX: ENERGY BALANCES AND KEY STATISTICAL DATA ......... 145 B ANNEX: INTERNATIONAL ENERGY AGENCY “SHARED GOALS” . 149 C ANNEX: GLOSSARY AND LIST OF ABBREVIATIONS ............... 151 3 Tables and Figures TABLES 1. Vehicle Excise Duties .............................................. 37 2. Projections of UK Greenhouse Gas Emissions ........................ 44 3. Summary of the UK's Climate Change Programme ................... 48 4. Renewable Energy in the UK ....................................... 61 5. IEA Secretariat Estimates of Total Producer Subsidy Equivalent for Coal Production in Selected IEA Countries ................................ 77 6. Oil and Gas Reserves on the UK Continental Shelf, 2000 ............. 79 7. Nuclear Power Plants in Operation, 2001 ........................... 133 8. Fuel Cycle Facilities, 2001 ......................................... 134 FIGURES 1. Total Final Consumption by Source, 1973 to 2020 ................... 15 2. Total Final Consumption by Sector, 1973 to 2020 .................... 16 3. Final Consumption by Sector and by Source, 1973 to 2020 .......... 17 4. Energy Intensity in the United Kingdom and in Other Selected IEA Countries, 1973 to 2010 .......................................... 18 5. Energy Intensity by Sector in the United Kingdom and in Other Selected IEA Countries, 1973 to 2010 ...................................... 19 6. Energy Production by Source, 1973 to 2000 ........................ 23 7. Total Primary Energy Supply, 1973 to 2020 ......................... 24 8. Total Primary Energy Supply in IEA Countries, 2000 ................. 25 9. Carbon Dioxide Emissions by Fuel, 1973 to 2000 ................... 45 10. Carbon Dioxide Emissions by Sector, 1973 to 2000 .................. 45 11. Final Consumption of Coal by Sector, 1973 to 2020 ................. 76 12. Hydrocarbons Licence Area and Production Facilities ................. 82 13. Oil and Gas Pipelines in the UK, 2001 ............................. 84 14. Final Consumption of Oil by Sector, 1973 to 2020 ................... 88 15. OECD Unleaded Gasoline Prices and Taxes, Fourth Quarter 2001 ..... 90 16. OECD Automotive Diesel Prices and Taxes, Fourth Quarter 2001 ...... 91 17. Natural Gas Prices in the United Kingdom and in Other Selected IEA Countries, 1980 to 2000 .......................................... 97 18. Natural Gas Prices in IEA Countries, 2000 .......................... 98 19. Final Consumption of Natural Gas by Sector, 1973 to 2020 .......... 99 20. Electricity Consumption by Sector, 1973 to 2020 .................... 114 21. Electricity Generation by Source, 1973 to 2020 ..................... 115 22. The Electricity Transmission System in the United Kingdom ............ 117 23. Electricity Prices in IEA Countries, 2000.............................. 127 4 1 SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS SUMMARY Over the past four years, the United Kingdom (UK) has continued its process of liberalising its energy industries. Since 1998, all natural gas consumers have been free to choose their supplier,and since 1999, all electricity consumers have enjoyed the same right. Both markets have become highly competitive. Some 15 million domestic gas and electricity customers have switched suppliers since the markets were opened. Currently, about 67,000 gas customers and 100,000 electricity consumers switch suppliers every week. Residential customers have enjoyed reductions in their gas bills of 25% in real terms since 1990. The British natural gas and electricity supply industries have gone through a phase of intense restructuring in these last years. The overwhelming majority of these acquisitions, mergers and de-mergers were the result of commercial considerations, as the industries are almost exclusively privately owned. The only exception to this is BNFL Magnox Generation, a state-owned company that retains the magnox nuclear power plants. Today the UK has eight major gas suppliers, including Centrica, which developed from the trading arm of British Gas, the former public gas monopoly. England and Wales have 38 major power producers, as well as seven large and many smaller companies supplying electricity. The restructuring also has resulted in closer integration of the gas and electricity markets, as gas suppliers increasingly also sell electricity and other services such as water, telecommunication services and financial services. In recognition of this trend, the separate regulatory authorities for electricity and gas were merged in 2000 to form Ofgem. The decisive breakthrough towards a fully competitive electricity generation market was achieved through the introduction of the New Electricity Trading Arrangements (NETA) in March 2001. NETA replaced the Electricity Pool, the mandatory electricity trading mechanism, that had been at the core of the power market in England and Wales for ten years following the first reforms in 1990/91. NETA is a very flexible, voluntary mechanism for electricity trading. It has led to a decline in electricity wholesale prices of 20-25%. Liberalisation of the gas and electricity markets was highly successful and is now nearly complete. Industry restructuring continues, based on private-sector decisions: at the end of April 2002, Lattice, the UK’s gas transportation company,and National Grid Company which runs the electricity transmission grid, announced their intention to merge. 5 A few areas need to be addressed nevertheless. The electricity markets in Scotland and Northern Ireland are not as competitive as the market in England and Wales. In Scotland, competition still only occurs in the form of third party access to the networks of two vertically integrated companies, ScottishPower and Scottish & Southern
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