GREEN NETWORKING
How skyrocketing energy prices could affect the industry Power and Cost Efficiency By Andrew Jones, Managing Director, Alquist Consulting
Andrew Jones examines how skyrocketing energy prices may affect the data centre market.
Introduction Improving energy efficiency has historically ranked low on UK corporate agendas. It typically forms part of a diffuse ‘green agenda’ responding to employee and customer sensitivities, oil price hikes, and proposed penal carbon taxes. Over the next decade energy efficiency is likely to become a much more pressing concern. An unprecedented combination of UK capacity closure, increasing industrial demand, and global energy shortfall is predicted by most commentators to lead to sustained real price increases of 10 to 15 percent per year.
Energy Costs Even if fuel costs remain unchanged, which is highly unlikely, electricity prices will continue to rise to pay for new generation capacity and distribution infrastructure. £110bn of investment is
required to replace our aging electricity infrastructure. 21 percent of our current 90 gigawatts of generation capacity is scheduled to close by 2020. This includes eight of Britain’s nine nuclear power stations, which are due to reach the end of their operating lives between 2014 and 2023. 30 gigawatts of new generation capacity, estimated to cost £75bn, must be constructed before 2020. These costs will ultimately be passed on to consumers. Government must balance internationally agreed, legally binding, carbon reduction limits with security of supply concerns. Previous visionary Government policy planned to rely on increasing amounts of green generation capacity (wind, wave and nuclear) however the financial crash has critically delayed investment and delivery of new capacity is well behind schedule. To kick-start the market subsidies were provided to renewable generators to allow their
higher cost electricity to compete with traditional coal fired plants. Simultaneously the EU introduced the Large Combustion Plant Directive (LCPD) which forces coal fired plants to close by 2015 unless they invest in expensive, and as yet unproven on a commercial scale, Carbon Capture and Storage technology to clean pollutants from exhaust gasses. 12 gigawatts of fossil-fuel power stations will close by 2015 thanks to the LCPD. Since the LCPD legislation was introduced existing coal fired generators have been ‘running down’ their plants and most would be unable to continue operation even if we ignored the LCPD legislation and restarted them all today.
Rising fuel costs and generation capacity will continue to raise electricity prices. 24 NETCOMMS europe Volume III Issue 3 2013
New Nuclear There are a relatively small number of global companies that have the skills, capacity and finance to build and operate new nuclear power stations. RWE and E.ON announced in March 2012 that they had decided pull out of plans to build 6 gigawatts of new nuclear generating capacity in Britain by 2025. Nuclear power stations have high capital costs (about £10bn for 3.2 gigawatts) and long build times (around 12 years). Utility companies may not be able to provide all of the finance or take all the construction risk themselves thanks to the increased cost of finance following the credit crisis. Gas is environmentally cleaner than coal and many consider it to be a short term solution for electricity generation whilst keeping CO2 emissions relatively low. Gas currently generates about 40 percent of UK electricity. It was originally forecast to drop to 20 percent but is instead expected to grow to 60-70 percent by 2020 as the green capacity has not been delivered. The UK used to export surplus gas, originally a waste product from the oil industry, but since 2005 has become a net importer. Worldwide gas demand has increased as a result of the Japanese tsunami. Japan shut down their nuclear power stations and switched to gas. Despite not being near any earthquake zones Germany and Belgium have also shut their nuclear plants and switched to gas. European gas demand is rising resulting in
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