Electricity

Maintaining a balanced portfolio is important to ensure that we have access to a wide range of cost-effective and secure energy sources. Currently, approximately 55% of our electricity generation is fuelled by coal, 40% by gas and 2% by renewables. We are able to adjust this balance as necessary to give us the flexibility to respond to market conditions.

E.ON UK electricity production by type, %

	2005
Coal	55
Gas *	40
Renewables **	2
Peat ***	2
Oil	1

* of which 3% CHP (electricity to grid)

** comprising biomass, hydro, wind

*** at our Edenderry Power Station in the Republic of Ireland

The future of electricity generation

Looking ahead, there are a number of low-carbon investment options. Combined cycle gas turbines (CCGTs) are required to maintain security of supply through to the end of this decade and into the early part of the next. We are a major investor in renewable sources of energy and are exploring technologies such as cleaner coal and carbon capture and storage, which have the potential to make coal a viable long-term option.

Small-scale combined heat and power generation (micro-CHP) could provide a significant proportion of the UK's electricity needs although it is too early to provide definitive estimates.

Gas

Given the UK's increasing reliance on gas, we are investing substantial amounts of money to make our supply more secure. We are developing a £200 million underground gas storage facility in Cheshire. Our parent company, E.ON AG, is involved in the upgrading of the existing gas interconnector between continental Europe and the UK and in building the new Balgzand-Bacton pipeline between the Netherlands and the UK. At the same time, E.ON AG is part of a consortium, with Gazprom and BASF, currently building a new gas pipeline through the Baltic Sea, which will open up an alternative supply route for Russian gas to Europe. Our sister company E.ON Ruhrgas has also diversified its own sources of gas by purchasing Caledonia Oil and Gas, which has about 14 billion m³ of gas reserves in 15 different North Sea fields.

Nuclear

We do not operate any nuclear power stations in the UK, although like most of our competitors a proportion of the electricity we supply to our customers is bought from nuclear sources. The E.ON Group has 23 GW (gigawatts) of nuclear capacity in Germany and Sweden.

We believe new nuclear power stations can potentially help to deliver the UK's carbon dioxide (CO₂) reduction targets more cheaply than the alternatives. However, there are long-term practical and political issues that need to be resolved first, including public acceptance of nuclear power, licensing and planning issues, availability of sites, and waste management and decommissioning. We believe that the Government should remove the regulatory barriers and create a level playing field for nuclear investment, while working with the industry to ensure the safety of any future nuclear installations and the development of solutions for the safe and secure disposal of waste. We will then be in a position to decide if we want to invest in new nuclear power stations in the UK.