Grid boss warns of energy challenges

The chief executive of National Grid last night spoke of the "extremely challenging times" facing the energy sector.

Speaking at a meeting of Cardiff Business Club, at the St David's Hotel and Spa, Steve Holliday said security of supply and providing green energy were the main objectives for the industry.

Mr Holliday said the economic imperative to tackle climate change was clear, while all types of energy - from renewables to coal - were needed to meet the challenges facing the UK in the next 15 years.

"Gas will remain a critical energy source for homes, business and manufacturing for many decades to come," he said.

"It will also provide the lion's share of the electricity generation in the short to medium term."

Mr Holliday predicted investment in gas and electricity infrastructure between now and 2020 was likely to be at least £69bn. Meeting the challenges of the future meant people would have to consider being more energy efficient, according to Mr Holliday. He went on, "Incentives to encourage people to be energy efficient, have proper building standards and more encompassing energy efficiency standards will encourage innovation and prompt change.

"My industry must and will change. Policy makers must be open to look at ways in which utilities can be incentivised to reduce energy demand while still delivering a reliable source.

"An example is changing the business model from being rewarded for selling more and more energy to incentivise business models around providing heating and lighting in the most efficient way.

"It's also about frameworks that encourage innovation. Energy efficiency will always be held back if people don't know what their energy consumption is in the first place, so smart metering is important."

Mr Holliday said he had concerns over policy at EU level, arguing that the European Commission might be "trying to back too many horses".

He said, "Do not read into this that I do not support significant increases in renewables. I am absolutely behind this but it's not clear to me whether the real aim is to reduce greenhouse gas or to increase renewables.

"It does not follow that the quickest and cheapest way to reduce greenhouse gas by 2020 is only by renewables."

Mr Holliday called for simplification of the planning process so a low carbon economy and security of energy supply can both be achieved.

He added, "To ensure we get investment built in a timely way, that satisfies our security of supply needs, that reduces the costs of energy projects and therefore energy costs, we all need to support planning reform."

Mr Holliday, 50, joined National Grid Group as group director for the UK and Europe in March 2001. He was appointed chief executive in January 2007, having been deputy chief executive from April 2006.

Mr Holliday was formerly an executive director of British Borneo Oil and Gas and spent 19 years with the Exxon Group, where he held senior positions in the international gas business and managed major operational areas such as refining and shipping.

Cardiff Business Club was sponsored by South Hook LNG.

The next meeting of Cardiff Business Club takes place on Monday when the speaker will be Richard Parry-Jones, group vice president and chief technical officer of Ford.