Energy Policies of IEA Countries: United Kingdom 2002

International Energy Agency

The International Energy Agency's 2002 review of the UK's energy policies and programmes. It finds that the UK energy sector has performed remarkably well during the 1990s. The gas and electricity markets opened up to competition. Real gas and electricity prices fell. Domestic natural gas replaced coal in the power industry, and carbon dioxide emissions and air pollution declined as a result. Increased oil and gas production on the UK continental shelf has contributed significantly to these developments. Central to the success of the energy sector however, was a readiness to adjust policies and regulatory measures when shortcomings became apparent. The last major adjustment was the introduction of the New Electricity Trading Rules in March 2001. These rules provided the decisive step towards a fully competitive power market.

Thanks to energy market reform and the resulting "dash for gas" in power generation, the UK is likely to meet its 12.5% greenhouse gas reduction target under the Kyoto Protocol. But the country has a national target to reduce carbon dioxide emissions by 20% below 1990 levels by 2010. Meeting this target will require extra efforts.

In the gas market, capacity auctions at the St. Fergus entry point into the UK’s onshore pipeline system have fetched very high bid prices in recent years. This has revealed bottlenecks at the St. Fergus terminal and farther afield. But so far the high prices have not resulted in capacity expansion. The regulatory regime may have to be adjusted to give stronger incentives for new pipeline construction.