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.

[1] http://pledgingforchange.com/sustainability/green-economics.php

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