Sam Laidlaw

Energy has become the currency of nations; how it's safeguarded, sourced, bought, traded and used is now at the heart of national political and public debate.

Today, the UK faces an energy crunch from all directions.

Securing supplies for the UK is at a critical phase and this year we will be importing about 40 per cent of the gas we need, by 2015 it will be 75 per cent.

Britain now faces the fastest growth in gas imports of anywhere in the world and the cost of those imports is being driven by the oil price – as on international markets the gas price is set by the oil price – and by the worldwide demand for liquefied natural gas (LNG). These factors are creating a global gas market in which the UK is being outbid by Japan, Korea and China.

We are also being squeezed by the dysfunctional European energy market, in which the UK acts as a gas bank of last resort: when European gas prices are higher than ours, gas flows to the continent. However, when our price is higher, there is no certainty gas will flow back. This leads to price volatility which further drives up costs.

UK users have yet to feel the full impact of these new price pressures. As our evidence to the Commons Business and Enterprise Select Committee last week made clear, energy suppliers are now paying a wholesale cost of over £1 a therm for gas this coming winter – nearly double last winter’s price – yet it is being sold on at 60p a therm to customers. That position is unsustainable if we are to generate the money needed to invest in secure supplies for Britain's future.

Electricity production faces similar challenges. Spare generation capacity that meets spikes in demand is declining and a quarter of UK power stations will be retired by 2015 as older coal and nuclear plants reach the end of their life. Meanwhile, demand for electricity continues to rise.

So how can the UK best tackle this looming squeeze on energy supplies?

First, on the demand side, energy efficiency has a huge role to play. If we were able to achieve the same levels of energy efficiency as Germany, which has 200 times the amount of installed domestic solar capacity, this could potentially reduce our domestic consumption and customers' bills significantly. Second, on the supply side, the government has taken two big steps forward in the past week in grasping the nettle of self sufficiency with its Commons victory for the Planning Bill, and the publication of its Renewable Energy Strategy.

I fully acknowledge that some elements of the Planning Bill are controversial, but as it moves to the Lords for its first reading in the upper house I believe it is vital to keep in sight what is in the national interest – the prize of maintaining a degree of the energy security which Britain has enjoyed for centuries. A streamlined planning process is vital if we are to stand any chance of developing the offshore wind farms, power stations, gas storage facilities and transmission grids that this country needs. The UK’s current limited gas storage capacity means we are always exposed to price spikes on mid-winter, high-demand days. Yet there are storage projects held up in the planning process that could double our gas storage capacity.

None of us wants a planning regime that steamrollers local democracy and takes ministers out of the decision process. That is why the proposed National Policy Statements are a key tool in strengthening democratic accountability. They will be thoroughly scrutinised by Parliament, ministers will maintain responsibility for setting the government's policy via these statements, and they will then go to public consultation.

Centrica plans to invest £1bn a year to secure future energy, including an interest in participating in new nuclear builds alongside our major investment in offshore wind farms. But we cannot afford a process that took BAA seven years, 37 different planning applications under seven different pieces of legislation and multiple decision points before Terminal 5 became a reality. On those timescales, it would be 2015 before we were able to start building any new gas facilities or generation capacity, which will be well after a number of existing plants have to be retired.

The government's renewables strategy heralds an exciting leap towards a low-carbon future, with householders empowered to play a significant role alongside large scale generators. It will open up opportunities for British Gas and other suppliers to install solar panels, heat pumps and other renewable and energy-saving technologies in millions of UK homes, while at the same time increasing the amount of offshore and onshore wind generation tenfold.

I believe this is both achievable and essential if we are to deliver a low-carbon world, but everyone needs to recognise it comes at a cost. The investment needed is on an unprecedented scale – £100bn by the government's own estimate, which equates to about £1,600 for every man, woman and child in the UK over the next decade – or more than 10 times the current estimated cost of the Olympic games.

On top of this investment in renewable generation comes investment in new nuclear power, replacement gas generation, clean coal generation and of course standby generation for when the wind is not blowing. We also need to see further investment in energy-saving measures, particularly at the domestic level, to help to reduce continued growth in energy use. More targeted support from government and suppliers for those households unable to cope with the higher-priced energy environment of the future is also necessary.

This is almost certainly the largest investment programme in any sector of our economy. Without it, not only will Britain fail to meet its commitments on tackling climate change, but our customers and our economy will continue to be at the mercy of volatile international commodity markets.

Sam Laidlaw is the chief executive of energy giant Centrica

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