Latest energy statistics show risk to energy supply is "not just rhetoric", says expert

Bob Ruddiman of Pinsent Masons, the law firm behind Out-Law.com, said that the figures in the Government's quarterly Energy Trends report (104-page / 2.6MB PDF) "brought the debate on energy supply into sharp focus".

"The risk of 'the lights going out' is not just rhetoric – we're being presented with the evidence and it's imperative that we act now to diversify our energy resources," he said.

"The statistics demonstrate the scale of the challenge for the UK Government in developing a sustainable energy policy. Shale is not a panacea. The UK needs a balanced energy mix across renewables, nuclear, oil and gas," he said.

According to the report, total UK energy production in the second quarter of 2013 was 9.5% lower than over the same period last year. Oil experienced a steep fall in production, at 14%, in part due to the general decline of and maintenance work on a number of fields; while coal production fell by 24% over the same period due to the closures of Daw Mill and Maltby Collieries and the Scottish Coal Company going into liquidation. This fall in production led to a rise in net import dependency of total primary energy to 51%, the report said.

Net imports of primary oils used by the UK in electricity generation, including crude, natural gas liquids (NGLs) and feedstocks, rose to 7.8 million tonnes – the second largest figure since oil production peaked in 1999 – according to the report. Imports, primarily from Norway, accounted for 45.1% of the UK's primary oil use. The report noted that crude oil import dependence was "on an increasing trend" as production declined on the UK Continental Shelf, exacerbated by ongoing production in the North Sea. Coal and natural gas imports also increased, by 7.5% and 8.5% respectively.

However there was encouraging news from the renewables sector in the report, as the figures showed a record 15.5% share of total electricity generation came from renewable sources in the second quarter of 2013. This reflected increased capacity levels as well as lower overall generation, according to the report. Total electricity generated from renewable sources increased by 56% over the year, from 8.2 TWh in the second quarter of 2012 to 12.8 TWh in 2013; while total UK renewable electricity capacity increased by 38% over the year.

Coal accounted for 35% of electricity generated in the second quarter of 2013, while the share of electricity generated from gas fell to 28.5% due to high gas prices. Nuclear generation accounted for 18.5% of total electricity, falling from 21.5% over the same period last year, according to the report.

The Government has estimated that around £110 billion worth of investment in electricity generation is needed to ensure that consumers continue to benefit from reliable energy supplies at an affordable cost. Around one fifth of the UK's existing power generating capacity is due to come off-line over the next decade due to aging power plants and more stringent environmental standards, while an increasing amount of the country's power will be generated from intermittent sources such as wind.

The Energy Bill, which is currently before Parliament, proposes the creation of a new system of financial incentives designed to ensure that low-carbon forms of electricity generation can compete fairly in the marketplace. This would be backed with a 'capacity market', aimed at ensuring security of supply.

"There is current capital expenditure on domestic oil production which will go some way to address the problem in the medium term," said energy law expert Bob Ruddiman. "However the debate on consumer energy prices, sparked by Ed Miliband earlier this week, clearly highlights the critical need for a stable fiscal and regulatory regime to attract investment and provide security of supply."

Labour leader Ed Miliband announced on Tuesday that if his party was elected in 2015 it would freeze energy prices for 18 months as part of a "reset" of the industry, aimed at increasing consumer confidence. However, the energy sector has warned that the policy would discourage much-needed investment and could ultimately push up consumer bills.