Special Report on the Electricity Industry: Calculating the future

FORECASTING energy trends has become far more difficult since privatisation because internal forecasts by the generators and regional electricity companies (RECs) are commercial secrets, writes Alison Eadie.

The National Grid Company prepares a seven-year statement each year based on demand forecasts supplied by the RECs and other users. This year's forecast for peak demand is an average growth rate of 1.17 per cent per annum and for energy needs a growth rate of 1.11 per cent.

This shows the possibility of an increasing surplus of capacity. However, the NGC said it believed market forces would precipitate the decommissioning of some plants, narrowing the gap between demand and capacity.

Lack of central planning has caused concern. The Commons Energy Select Committee said the Office of Electricity Regulation (Offer) and the pool supplying electricity should try to ensure new capacity was provided in an orderly manner.

Offer replied that market incentives already ensured that new capacity was meeting demand more efficiently, and meeting increases in demand.

Tony White, an electricity analyst with stockbrokers James Capel, believes blackouts are less likely now than in pre-privatisation days. Getting the supply-demand balance wrong would hit the profitability of the generators and RECs; so they will try harder not to let it happen, he added.

However, Tim Woolf of the Association for the Conservation of Energy, said that allowing the market to do all the planning led to shortsighted decisions. The association would like to see planning covering the development of natural resources.