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UK Energy Gap: Much Larger, Much Closer and More Expensive Than Reported

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LONDON, November 21 /PRNewswire/ --

- By 2015 the Energy Demand in the UK Could Exceed Supply by 23% at Peak Times

- The Impact of the 'Real' Energy Gap on GDP Will be Equivalent to GBP108bn a Year

- GBP3.7k a Year Cost for Every Working Adult In The Country

- Powercuts are Now Just as Likely in the Summer as the Winter

The UK energy gap is much larger and closer than currently being reported, according to a new white paper issued by LogicaCMG, a leading provider of business services to the energy sector. Within ten years the gap could cost UK businesses over GBP108 billion a year.

The Energy Review indicated that by 2025 energy demand in the UK may exceed the available supply by 30 per cent, but research by LogicaCMG suggests that a decade earlier the energy gap could already be 23 per cent at peak times. This shows that the gap is widening far quicker than anticipated, and will have a significant impact on UK business and households. The widening of the energy gap is a major issue as potential solutions like nuclear power simply can't be built in time to close it.

Based on the research LogicaCMG has estimated that by 2015, the impact on GDP could be GBP108 billion, or GBP3,700 a year for every working adult in the country. In just four years time, 2010, the gap could potentially be five per cent. This could require energy intensive industries to shut down operations at peak usage periods with an immediate cost to businesses of GBP7.9 billion a year.

The report also shows that it is not just the winter months that will be affected. If the effects (or assumed effects) of climatic change continue, longer hotter summers will mean that electricity consumption through the hottest months will increase as more air conditioning and cooling systems are used. We are not just looking at dark winters, but stifling summers as well.

Kieron Brennan, managing director of LogicaCMG's energy and utilities business, said: "Action needs to be taken now to reduce the energy gap. We are not trying to scaremonger but our job is to provide guidance to the businesses we work with and help them understand and manage their future energy requirements. We all need to use energy more efficiently and the Government will have to take steps to resolve this issue. If this doesn't happen, it is almost certain that the power will go off and businesses will lose money."

Following the major power outage in part of the US and Canada in August 2003, the Berkeley National Laboratory carried out research into the impact on business and consumers.[1] This blackout was broadly equivalent to a complete UK blackout. LogicaCMG has applied this research to the UK and found the average cost for each hour of a blackout is as follows:

- GBP2 - Residential

- GBP800 - Small Medium Enterprises (SMEs)

- GBP8,500 - Large Industrial and Commercial

Based on this model, a UK SME hit by a two day power cut would lose nearly GBP12,800. If the power outages led to the loss of just one day a week, which could be quite possible by 2015, the annual loss to each SME would be in the region of GBP300,000 per year. For larger I&C companies the average figure would escalate to over GBP3.5 million, but there is a wide range within this figure with four per cent of I&C companies losing in excess of GBP1.5 million every two hours. These figures denote economic losses that are clearly unsustainable.

"The energy supply industry is under great pressure. While nuclear, which some people hope will plug the gap, may be a viable solution for the 2020 period it is not going to be ready in time for 2015 so a range of actions need to be taken. We believe that the UK Government is taking the right steps to try and create open international markets in energy, but that planning laws around the storage of energy resources and the construction of new generation facilities will need to be changed as a matter of urgency. Companies in the UK will also need to look at the use of clean coal, increasing energy efficiency, through smart metering and energy reduction technology; and the energy industry will need to move to a distributed energy model, relying on more bottom-up rather than top down energy provision," added Brennan.

Notes to Editors:

Available for comment:

Kieron Brennan, managing director, energy and utilities, LogicaCMG UK

Ted Hopcroft, strategy director, energy and utilities, LogicaCMG UK

The figures in the release are based on the US (Berkeley Laboratories) model and present an outline indication of the impact power outages will have. They are based on a conservative case scenario. The full LogicaCMG Mind the Gap white paper provides a detailed analysis of the factors contributing to the 'energy gap'.

The paper is available to download from http://www.logicacmg.com/uk/mindthegap

About LogicaCMG

LogicaCMG is a major international force in IT services. It employs around 40,000 people across 41 countries. LogicaCMG's focus is on enabling its customers to build and maintain leadership positions using LogicaCMG's deep industry knowledge and its track record for successful delivery. The company provides business consulting, systems integration and IT and business process outsourcing across diverse markets including telecoms, financial services, energy and utilities, industry, distribution and transport and the public sector. Headquartered in Europe, LogicaCMG is listed on both the London Stock Exchange and Euronext (Amsterdam) (LSE:LOG; Euronext: LOG) and traded on the Xternal List of the Nordic Exchange in Stockholm. More information is available at www.logicacmg.com.

[1] Understanding the Cost of Power Interruptions to US Electricity Consumers, Ernest Orlando Lawrence Berkeley National Laboratories, September 2004.

SOURCE LogicaCMG Plc



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