Sector Review by Lloyds TSB

A significant proportion of the UK’s power generating capacity will need to be replaced in the next decade, due to obsolescence and for environmental reasons. An overview of future prospects

A significant proportion of the UK’s power generating capacity will need to be replaced in the next decade, due to obsolescence and for environmental reasons. The regulator Ofgem estimates £200bn of investment will be required to secure sustainable energy supplies, though the Green Investment Bank Commission estimates a much larger figure of £550bn.

The deep recession has alleviated some of the near-term capacity pressures in the sector and we do not expect output volumes to return to previous peak levels until 2014 at the earliest. Moreover, new capacity under construction or with consent for construction of about 16.5MW (20% of current capacity) is expected by 2016, more than offsetting expected capacity loss of 13.5MW over the same period. Nevertheless, the downward pressure on electricity prices may be hindering the ability to meet longer-term investment needs.

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