Half of new power plants once due by 2016 now delayed by policy uncertainty, National Grid warns

A wave of new power plants due to come on line in the next two-and-a-half years have now have now been delayed because of political rows and policy uncertainty - increasing the risk of energy shortages, National Grid has warned.

More than half of a series of new plants that had been due to start generating across the UK by March 2016 have now had their start dates pushed back, Steve Holliday, the company’s chief executive, revealed.

He said that the delays could worsen the risk of power shortages in the winter of 2015-16 and called on politicians to deliver urgent certainty to investors who are now losing confidence in the British energy sector. He also warned that any short-term policy interventions could prove “very dangerous”.

National Grid, which runs Britain’s electricity transmission networks, had previously received requests from power generation companies to connect up 6GW of new plants over the three years from April 2013.

The new plants, which included gas-fired power stations and wind farms, would have been enough to meet 10pc of Britain’s peak electricity demand. But the total expected by March 2016 has now fallen to 2.5GW as projects are delayed, in what Mr Holliday said was evidence of investor confidence being undermined.

“In the last six to nine months they have asked for those connection dates to go back… much later,” Mr Holliday told the Telegraph. He said this should not affect whether Britain had sufficient generation capacity to meet demand “this winter or next winter, but potentially the winter afterwards”.

Investors delaying projects was “a function of the fact they haven’t got clarity around the framework in which they are investing at the moment”, he said.

The Government’s Energy Bill, intended to encourage investment in new power plants through a system of subsidies, is yet to pass into law, while household energy prices - including levies to pay for new power plants - have shot to the top of the political agenda as bills soar.

Mr Holliday said investors were now questioning whether the Energy Bill would become law “and is it then going to be trusted and stable for a long period to come?”.

“We need to convince them as a country that this is a good place to invest with real stability and real trust in the long term in the regulatory framework.”

Britain had long enjoyed investment from around the world because of its policy and regulatory stability, which had “allowed us to keep the cost of capital down and for lots of flows of capital to come to the UK”, he said. “It is therefore concerning that that might be under threat. Short-term interventions could be very dangerous.”

Mr Holliday was speaking as National Grid unveiled a 7.7pc rise in UK operating profits to £1.2bn for the first half of the year. Group pre-tax profits were dragged down 7pc to £979m by a weaker performance in its US business.

National Grid’s UK revenues are charged to customer energy bills at levels set by regulator Ofgem. Several energy suppliers have blamed increased network costs for recent household energy price risees. Grid says its total annual charge to customers has risen byabout £11 this year, to about £175.

Electricity transmission network operating profits rose 12pc to £614m, boosted by high use of its interconnector to import cheaper power from the continent, while gas transmission profits fell 18pc to £133m. The Grid says its transmission network costs have fallen by about £4 per household.

Grid also owns four of the UK’s eight regional gas distribution networks, and says costs to consumers of these networks has increased by about £15 this year. Profits in the division rose 12pc to £456m.