CBI urges government to downgrade wind targets and push nuclear

The CBI is today calling on the government to deliver a major shift in the UK's energy policy that would see a reduction in wind targets and an expansion of plans to build a new fleet of nuclear reactors.

The employers' group is to publish a major new report warning that the UK will fail to meet its target to generate 15 per cent of its energy from renewables by 2020 and as a result investment in new gas-fired power stations will have to increase post 2020 in order to keep the lights on.

The study predicts that under current energy policies gas will represent 36 per cent of the energy mix in 2030, undermining efforts to curb carbon emissions.

"The government's overambitious targets on wind are not going to be reached cost-effectively, which will crowd out other technologies in the energy mix," said CBI deputy director general John Cridland. "That will leave us eventually investing in the default option – gas."

The CBI report, which comes just days ahead of the government's long-anticipated renewable energy strategy, argues that an approach based on less ambitious wind energy targets and an increased focus on nuclear energy and carbon capture and storage technologies would increase the UK's chances of meeting its goal of cutting emissions by 80 per cent by 2050.

It calls on the government to give the go-ahead for up to 15 nuclear reactors, rather than the eight reactors currently planned, increasing nuclear's contribution to the 2030 energy mix from 20 to 34 per cent, and argues that renewable energy targets for 2020 should be cut from 32 per cent of the UK's electricity mix to just 25 per cent. The reactors would be built on existing nuclear sites.

It also urges the government to ensure clear funding arrangements for four carbon capture and storage (CCS) plants to be put in place no later than June 2010, and advises that the planned national roll out of smart meters should be accelerated as part of moves to cut overall electricity demand by 20 per cent by 2030.

Management consultancy McKinsey, which undertook the study on behalf of the CBI, said that both the CBI's proposals and the government's current targets would involve significant hikes in energy bills of over 30 per cent by 2020.

It also attempted to head off criticism from the wind energy industry, noting that lower renewable energy targets would not slow wind development between now and 2020. However, it admitted that an impact would be felt after 2020 and that by 2030 the UK would have 24GW of wind capacity - 10GW less than is currently planned.

The CBI's proposals received strong backing from business leaders in the energy sector.

Steve Holliday, chief executive of the National Grid, said he was "very impressed" with the report, adding that it "recognises the vital interplay between security of supply, climate change mitigation and affordability".

Meanwhile, Paul Golby, chief executive of E.ON UK, urged the government to take full account of the issues raised in the CBI's report in the forthcoming energy strategy document.

The government's renewable energy strategy is expected to be published later this week and Cridland said the CBI's proposals "would not come as a surprise" to officials. However, neither the government nor the CBI gave any indication as to how closely government policy will reflect the CBI proposals.

A spokesman for the Department of Energy and Climate Change said: "The point to make here is that the contributions from each sector that we are going to set out in the Renewable Energy Strategy later this week are not intended to be targets, and, once the right incentives are in place, the market may deliver the target very differently."