UK renewables up 20% in 2012 but emissions rise

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5 April 2013, Nuclear, Solar, Wind

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With UK GDP falling by 0.3% in the last three months of 2012 and industrial production decreasing by 2.1%, the UK is poised on the edge of recession, with poor prospects for growth in 2013. Total generation in 2011 in the UK amounted to 367.8TWh, falling by 1.25% to 363.2TWh in 2012, largely as a result of decreased emissions from manufacturing in the industrial sector.

In the EU emissions fell by 1.4% in total, with a 3.9% fall in industrial sector emissions, but the power sector only reduced emissions by 0.4%, largely thanks to generous support schemes in Italy that saw a 5.7% fall in emissions. Renewable energy generation in the UK increased from 34.9TWh in 2011 to 41.8TWh in 2012, an improvement of around 20% that boosted renewables' share of electricity generation from 9.5% to 11.5% in the UK by the end of 2012.

After millions of pounds of investment and multiple government support schemes to decarbonize the power sector, the UK's renewable generation capacity rose by around 25% to 15.5GW by the end of 2012, with offshore wind and onshore wind each contributing an extra 1.2GW of capacity. But the most telling figure was that of overall emissions. Compared with 2011, emissions from the UK power generation sector actually increased by 4.7% in 2012. Elsewhere in Europe, France's emissions increased by 3.9% in 2012 and Germany's emissions increased by 0.5% due to the shale gas revolution in the US and the abundance of cheap coal imports.

There is a clear problem with overriding policy governing power sector emissions that has allowed a significant increase in carbon intensive power generation from coal in spite of huge efforts elsewhere to reduce emissions. The UK's Carbon Price Floor Plan will become effective this year, with a GBP16/ton price tag on carbon dioxide emissions, increasing to GBP30/ton by 2020, but in the rest of Europe carbon emissions are trading at less than EUR5/ton, and reduced output from the industrial sector could lead to further oversupply of emissions permits.

The effect of the imbalance in the cost of emissions for energy intensive businesses could be that the UK's manufacturing industry is burdened with higher costs than elsewhere in Europe with a loss of competitiveness. Under the constraints of a faltering economy, reduced demand, and increased competition, the UK's manufacturing industry will be at a disadvantage, and the effects of increased costs on already tight margins may push some of the UK's manufacturers out of the UK, or out of business altogether. / / @DatamonitorEN

Source: MarketLine

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