News, Politics

Bills to go up to go green says National Grid chief

September 20th, 2010
Author: Jeff Taylor

According to the National Grid boss Steve Holliday energy bills are going to have to go up in order for the UK to meet the government's environmental commitments.

Speaking to the Telegraph the rugby loving Mr Holliday said "To the fundamental question of should we clean up our energy and decrease the impact on the climate then the answer is yes, categorically yes. Prices going up is fundamentally the right thing to do when we need to reduce our energy consumption."

The industry needs to invest heavily over the coming years with Ofgem putting the figure at a huge £200 billion required to do the job. But as Steve Holliday sees it the returns for any investors will only come about if prices rise. There will also have to be a reduction in energy use on top of new technology if we are to meet environmental targets.

So that means higher prices to use less energy. It will also mean Ofgem allowing prices to be set with these aims in mind.

There is then an uncomfortable triangle between shareholders, Ofgem and the National Grid with funding of course being the issue.

The National Grid recently raised funds via a rights issue (which came a little unexpected as a lot of people thought that Steve Holliday said there wouldn't be one), which will keep things going for another five years. The rights issue was supported despite being controversial as shareholders assumed the returns will make it viable.

According to the report National Grid could sell off its US Massachusetts operations and / or its liquid natural gas terminal in Kent to raise some funding.

One way ahead Steve Holliday sees is the more widespread use of smart metering that could be used to regulate energy flows to houses. "We need to balance demand for energy with supply. That gets into smart metering so if we need to interrupt power supply for a few hours during the day when you're not at home that's okay." he said "We could switch off your freezer for five minutes during the night. We need to invest in technology for a balanced system."

So it seems that the requirements to go green will be ecologically sound but not economically sound, despite the claims of the green lobby [1]. If they were economically sound then surely investors would be flocking in. Or if the green lobby is right no-one's told investors.


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5 Responses to “Bills to go up to go green says National Grid chief”

  1. Tweets that mention Bills to go up to go green says National Grid chief | The Economic Voice -- says:

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  2. Phil Grimm says:

    I have often watched the likes of Grand Designs and seen vast arrays of halogen lights installed in new houses snd wondered, "what does that cost to run?". The principle applied in Britain is, provided you can afford the energy you can do what you like. Very few things are frowned on but patio heaters were frowned upon very effectively by the green lobby. Consequently, if there is demand for fuel/energy (gas, oil, pertol, electricity, coal) it is incumbent on suppliers and generators to deliver.

    Yet businesses are treated differently and now go so far as to trade carbon emmissions.

    I have to agree that prices should rise, significantly, to ensure that demand is cut and therefore emmissions but the brunt of the change is bound to be felt by the lower and middle income bands in society. Such a move would be deeply unpopular and lead politicians to relax the targets and break the international obligations they signed up to. Not that the British public should care that much. Which other western countries will meet their committments either???

    Personally I'd like to see a system not dis-similar to what businesses are doing. Thus each person or household would be entitled to a quota, ration if you like, and if their needs exceed the quota the excess would be charged at a penalty rate – a punitive fine. Those with spare quotas would be free to sell them to the highest bidder, presumably at a rate below the penalty rate. Such a scheme if priced and controlled properly would encourage people to use less energy and consider ways to generate their own power which would not be subject to rationing and if grid connected could be sold back to the generators (as now).

    Only a system of rationing can provide any degree of equality if energy use has to be cut.

    I heard a while ago that if the USA had a photo-voltaic (solar) panel 300 miles by 300 miles square, that's 90,000 square miles, it would provide all the electricity they need and eliminate a big chunk of their emmissions. The trouble is, that far exceeds all the p-v panels ever made worldwide.

  3. admin says:

    Yes, prices will have to rise, but one of the big factors is the return for the investor. That is going to drive the prices up.

    Also I always assume that as use drops the price will per unit will have to keep going up for two reasons: shareholder returns and government revenue.

    Gain for the environment(?), gain for the shareholder, break even for the government(?), more cost for the consumer who uses less power.

    Consumer gains due to better environment(?)

  4. Phil Grimm says:

    Consumer gains due to better environment????

    Hahahahahahahahahahahaha. Not in my lifetime, so why should I care? But I do. The trouble is my caring is pointless. Most of the planet is only interested in consuming and breeding [otherwise known as life (as we know it, Jim)]. It's a one way ticket to oblivion for humanity, and we deserve it. I'm not championing the lot of the consumer, I'm advocating that "we're all in this together", so to speak. You already know that I have no belief in the non self-evident truth that all men are created equal, it very much depends on who your parents are but we have no choice but to live on this planet.

    Returns for shareholders are dependent on regulators and Government. Railtrack shareholders got screwed, Northern Rock shareholders got screwed…. I don't fancy their chances.

    Government revenue? I'm ignoring that because my plan is better and it's all taxation so it comes from consumers one way or the other.

  5. admin says:

    It seems Phil that everyone gets screwed over for the benefit of the shareholder or the tax-collector.

    The shareholder takes the risk and the government makes the rules.

    We are not all in this together.

    Unless of course the revenue collector collects it for the common person.