VZCZCXRO0662
PP RUEHAST RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
DE RUEHLO #2294/01 2551341
ZNR UUUUU ZZH
P 111341Z SEP 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 9699
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE PRIORITY
RUEHBL/AMCONSUL BELFAST PRIORITY 1107
RUEHED/AMCONSUL EDINBURGH PRIORITY 0974

UNCLAS SECTION 01 OF 02 LONDON 002294 
 
SENSITIVE 
SIPDIS 
 
DOE FOR DEP SEC KUPFER 
 
E.O. 12958: N/A 
TAGS: KERG
SUBJECT: SCENE SETTER FOR VISIT OF DEPUTY SECRETARY OF 
ENERGY JEFFREY KUPFER 
 
LONDON 00002294  001.2 OF 002 
 
 
¶1. (SBU) Embassy London welcomes the visit of Deputy 
Secretary Jeffrey Kupfer on September 15-17. Issues of the 
economy and security of energy supply have come to the fore 
in the UK, and the conflict between Russia and Georgia has 
served to highlight that an increasing amount of the UK,s 
natural gas is imported. Although the UK has relied on its 
North Sea oil wells to provide domestic oil and gas, in 
2007 approximately 25% of the UK,s natural gas was 
imported. Production from the UK,s North Sea fields is 
beginning to decline. 
 
The Energy Markets: Dwindling Supplies, Higher Prices 
--------------------------------------------- -------- 
 
¶2. (SBU) Last week was a bad week for the current 
government, with Chancellor of the Exchequer Alistair 
Darling publicly saying that the UK,s economy in its worst 
shape in sixty years. Following that statement, the OECD 
released a report on the world,s seven largest economies, 
noting that only the UK was facing a recession, with all 
others only a slow-down. The property market and the 
financial sector, two main drivers of the UK,s growth, have 
both been hit hard by the credit crisis. There are 
indications that the UK economy may already be shrinking, 
with manufacturing output falling for the past five 
consecutive months to July. If the economy has contracted 
in the three months ending in September, it will be the 
first full quarter of contraction since 1992. 
 
¶3. (SBU) The rise in commodity prices has hit consumers 
particularly hard. The cost of food has risen sharply this 
year, as have petrol prices. Consumers are feeling squeezed 
by higher prices, including drastic rises in home heating 
and electricity costs. In August, most major electricity 
and gas companies pushed up rates, led by British Gas, 35% 
increase. &Fuel Poverty,8 defined by the government as any 
household that spends more than 10% of its income on home 
heating, is a topic of public debate. 
 
¶4. (SBU) In the past few years, the UK has become 
increasingly reliant on imported fuel. According to The 
Independent, the UK uses gas for heat in 85% of its homes, 
and for 40% of its electricity production,. In 2007, it 
also imported 80% of the coal it used for electricity. With 
a decreasing share of its oil and gas coming from domestic 
pipelines, there is impetus to find long-term alternatives. 
The UK has supported the Nabucco Pipeline project, and 
continues to be a voice for diversification away from 
Russia and Russian-controlled pipelines. HMG has also been 
in discussion with Nigeria regarding technical assistance 
to help increase its output of both oil and natural gas. 
 
Alternative Energies and the Nuclear Option 
------------------------------------------- 
 
¶5. (U) The UK will have to produce roughly 14% of its total 
energy consumption from renewables by 2020 to meet EU 
guidelines. While this target is significantly lower than 
for some other major European economies, it reflects a 
steep increase from today,s 1.5%. Secretary of State for 
Business, Enterprise and Regulatory Reform John Hutton and 
the Minister for Energy Malcolm Wicks have both pushed for 
more rapid expansion of wind farms, both on and off shore. 
Although Britain is gifted with excellent wind energy 
potential, a lengthy planning process and a weak grid 
infrastructure are seen as large impediments. The current 
Energy Bill being debated in Parliament is seeking to 
change the planning process for large energy projects from 
a predominately local affair to a national process. Many 
are hoping that this will help speed up the building of 
large-scale wind farms and grid improvements. The UK is 
increasing its funding for research in all areas of 
renewable energy and carbon capture and storage (CCS), and 
is about to announce a $2 billion program to promote energy 
efficiency in homes and buildings.  The UK has a biofuels 
mandate to produce a steadily increasing percentage of its 
transportation fuels from renewable sources, but recently 
public sentiment has turned against biofuels as 
&unsustainable.8  Marine energy from waves and tides is a 
popular topic when renewable energy is discussed but the 
technologies are far from being ready for large-scale, 
commercial deployment.  Nonetheless, there is strong 
sentiment, including from Members of Parliament, against 
building new coal-fired power plants.  The Government 
advocates a diversified mix of energy sources, with 
transition over time to low-carbon and renewable sources. 
 
LONDON 00002294  002.2 OF 002 
 
 
 
¶6. (U) While it is not considered renewable energy, there 
is a nuclear renaissance in the UK. With all but one of the 
existing reactors scheduled to be decommissioned by 2024, 
it is imperative that the UK build new plants if nuclear 
power is to remain a part of the energy equation. 
Presently, it makes up just under 20% of the UK,s 
electricity. The government has been strongly in favor of 
new nuclear, and has put up for sale its controlling stake 
in British Energy (BE), which operates all of the current 
nuclear fleet. Although Electricite de France (EDF) bid on 
BE, its offer was rejected by shareholders in July because 
it was too low. It now remains to be seen if EDF will 
return with an improved offer, and if other utilities are 
interested. The stated aim of EDF is to build the first new 
reactor in the UK by 2018. This week, the Nuclear 
Decommissioning Authority, which is in charge of all 
decommissioning projects in the UK, announced that it would 
sell land adjacent to sites that are decommissioned for the 
building of new reactors. 
 
Visit London's Classified Website: 
http://www.intelink.sgov.gov/wiki/Portal:Unit ed_Kingdom 
 
TUTTLE