Centrica CEO Sam Laidlaw is calling for an open and honest debate with the Government, consumers and businesses when it comes to the challenge of decarbonising the UK economy.
It’s a stark fact, but just eight years ago the UK was self-sufficient in gas. Today we import around 50% of our needs, and that proportion is set to rise to 75% by 2020. With all but one of the UK’s existing nuclear plants due to be shut down by 2023 and 29% of current coal fired power stations to close by the end of 2015, by 2020, 30% of the country’s existing generation fleet will be gone.
Energy watchdog Ofgem anticipates that consumer bills could rise by anything between £250 to £600 over the next decade, largely due to the levels of new investment required and the increasing cost of carbon. But an opinion poll, commissioned by Centrica, gave a less than encouraging insight into the publics’ awareness regarding the true costs and implications of decarbonisation.
According to the surveys findings, the public seems to be completely unprepared for energy price increases on such a high scale. It found that one third of respondents were willing to pay an additional £100 on their annual bill to ensure decarbonisation and security of supply, but only 1% would be prepared to pay an extra £500, with 25% of respondents saying they felt it was vital for the government to stick to plans for creating a low carbon power industry if it led to higher bills.
Speaking at the Economist energy summit, Laidlaw said: “We are rapidly approaching a tipping point in the energy story of this country and there is a risk that society is not being realistic about the path ahead.”
“Over this next decade three forces are coming together – our growing dependence on increasingly volatile world energy markets; our commitment to make serious cuts in carbon emissions; and our obligation as a society to ensure that energy remains affordable at a time of huge pressure on household incomes.”
Laidlaw pointed out that while consumers can offset some of the increase in their energy bills by making their homes more energy efficient – for example, by fitting cavity wall insulation or loft insulation. – it would be somewhat dangerous to suggest that implementing such measures alone can prevent bills from going up over the next decade.
The Centrica CEO is proposing a few key actions to help the energy industry meet the challenges ahead, in the form of a five-point plan, which would see:
- Constructive engagement among all stakeholders to help create better public understanding of the degree and nature of the changes the UK faces to decarbonise and secure energy in the future.
- Timely progress on Electricity Market Reform and changes to the planning process – vital to deliver new nuclear.
- Recognition of the future role of natural gas in a low-carbon generation mix – providing back-up to large-scale intermittent wind power.
- A tax regime that encourages recovery of the remaining reserves in the North Sea.
- Prompt action to implement energy policy.
In conclusion, Laidlaw said “the clock is ticking” and that “we as a nation have got one year in which to take action, or our carbon reduction targets may have to be sacrificed in the interests of safeguarding the security of our energy supplies.”