In Britain we talk of balancing the ‘energy trilemma’ – securing supply, ensuring sustainability and maintaining affordability.
Meeting these challenges will require significant change and, importantly, an honest dialogue between industry, government and consumers.
At Centrica we believe that this open dialogue is a necessary part of improving energy literacy, which, in turn, is crucial in building constructive relationships between the energy industry and wider society. Through greater understanding of the issues we face, industry and society will be better prepared to meet the challenges of the energy trilemma.
Until recently, the UK was a net exporter of gas. Now we import over half our gas requirements. As a result we are increasingly exposed to volatile global commodity markets and affected by events beyond our shores.
Over the next six to seven years, roughly a quarter of the country’s power generation fleet will retire. Securing supply is therefore rightly front-of-mind among many of our stakeholders.
In parallel, the UK is seeking to lead the transition to a low-carbon economy. Ambitious targets have been set to de-carbonise the power sector. Commitments have also been made to transform the UK housing stock through energy efficiency measures.
All of this will come at a cost: some £110bn of investment is estimated to be required in the power sector alone. These costs come at a time of economic austerity, making affordability a key element of our energy policy.
So how can the private sector engage with society and help respond to this energy challenge? I believe in three ways: investment, partnership and innovation.
Firstly, we need significant new investment. In electricity, government proposals to reform the market have the potential to unlock the necessary capital for new low-carbon generation, whether it be wind, biomass or nuclear.
In gas, a positive investment climate will help the recovery of the remaining resources from the North Sea.
It is clear that with the right regulatory framework, utilities have a central role in delivering investment. However, the scale of investment required is so great that we need to look further afield to access capital.
This brings me to my second element: the need for partnerships.
The UK is not alone in the challenges it faces. And it is not just British companies who see these challenges as opportunities. More and better partnerships mean greater access to capital, enhanced capabilities, and shared learning between companies and countries.
The final element is, I believe, innovation. At one end of the scale this means pioneering new offshore wind farms; delivering modern, flexible gas plants; and innovating with new drilling and extraction techniques to access oil and gas reserves.
At the other end of the scale, it means embracing new technologies to help customers control their energy in a smarter way. Smarter usage is the best way to tackle all elements of the energy trilemma: affordability, sustainability and security of supply.
Energy companies like Centrica are already enabling their customers to control the temperature of their houses remotely from their phones, and sell surplus power from microgeneration back to the grid.
The familiar phrase “in every challenge lies an opportunity” is particularly apt for the energy sector.
Author: Sam Laidlaw is chief executive officer of Centrica Plc, a founding signatory to the Energy for Society Initiative of the World Economic Forum.