It may be lights out for Britain next winter, says npower energy boss

 

Britain is at risk of power cuts next winter unless major investment takes place in Britain’s energy infrastructure, according to industry figures.

Amid ongoing criticism of power companies’ profits and prices, npower’s chief executive Paul Massara said that the margins between demand and supply were narrowing and he did not know if the lights would remain on over next winter.

His criticism came as a senior world economist warned that Labour’s policy of freezing energy prices could deter investment and potentially bankrupt some companies.

Mr Massara, whose firm is a member of the Big Six firms criticised for hefty increases in bills recently, said: “Will we get through this winter? Yes. Will we get through next winter? I don’t know.”

Speaking to the BBC for a Panorama programme to be screened tonight, he said: “The amount of spare generation that is around at the peak day has gone down from about 15 per cent to this winter [when] we’ll be at about 5 per cent and I think next winter will be even smaller,”

Mr Massara also warned that investors were worried about the industry’s future. “Every time we sign a windfarm deal or nuclear deal with long-term contracts, those are expensive contracts relative to where we are today,” he said. “Now they may actually be very, very good deals for us if gas prices dramatically increase, but if gas prices stay where they are or fall these will be very expensive bets.”

His views were echoed by another Big Six boss, EDF’s chief executive Vincent de Rivaz, who said yesterday that a “massive investment” was needed to prevent power cuts. “At the same time, we need to think about the long term, we need to invest in this country... to keep the lights on,” he told the BBC.

Ann Robinson, the director of consumer policy at uSwitch, said there was a “certain amount of scaremongering going on” about the potential for power cuts and the situation “might not be that desperate”.

However, a government source admitted that it would be “irresponsible” to say energy supply was not an issue. “We need investment to keep coming through,” they said.

The last time Britain had a major power supply problem was in the early 1970s, when a three-day working week was introduced to save electricity.

The industry regulator Ofgem currently estimates that £110bn of investment is needed to secure the UK’s energy supply.

Consumer anger has focused on the high cost of energy in recent months and the Labour leader Ed Miliband has promised to freeze prices for 20 months if his party wins the 2015 election.

But Angel Gurria, the secretary-general of the Organisation for Economic Co-operation and Development, said: “If you freeze the price of energy and the international price of energy rises it means there’s going to be a very big difference to pay. Who’s going to pay the difference?

“Well are you going to ask the investors to take the difference, well you know they’ll probably go bankrupt. How are you going to get people to come in and invest to get their money back in 30, 40 year’s time, when you are saying there’s going to be a freeze?

“I think this is simply not consistent, not economically objective.”

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