Britain could face regular blackouts within seven years if the Government does not intervene in the energy market to ensure that more power stations are built, the head of National Grid says today.

In an interview with The Times, Steve Holliday, chief executive of the company that operates the power and gas transmission network, said that Britain was facing an acute shortage of generating capacity because a string of ageing nuclear and coal-fired plants were due to be retired from service.

The warning came after Ofgem, the energy industry regulator, said on Friday that it was to consider fresh incentives to encourage the development of renewable energy schemes in Britain.

Mr Holliday said that National Grid’s own analysis indicated that, under a business-as-usual scenario, Britain would fail to attract enough investment in new plants and would lack sufficient generating capacity to meet peak demand around 2015.

“We are OK for a period of time . . . but when you go out to the medium term you can begin to see there is not enough collective generation being built in the UK.

“We will need to watch that very carefully over the next 18 months to ensure that window gets shut,” Mr Holliday said.

He said that the Government would need to introduce fresh incentives to guarantee that £100 billion of investment is made over the next decade to ensure the stability of the power grid.

This could include placing a floor on the price of carbon – a measure that would help to boost investment in new nuclear reactors and offshore windfarms.

“What is happening that people are not wanting to build enough power stations? The Government has an obligation to make sure that the markets are delivering,” Mr Holliday said. “You can’t afford for it to fail.”

Mr Holliday’s comments reflected similar remarks recently from Alistair Buchanan, chief executive of Ofgem, and Ed Miliband, the Energy Secretary.

Last week Mr Buchanan said that the falling price of oil and carbon had dealt a “punch in the stomach” to Britain’s energy markets.

On Friday, Ofgem revealed fresh details of a consultation designed to boost investment in Britain’s renewable energy industry.

National Grid is investing £3 billion per year in the power and gas transmission network to replace ageing wires and pipes and tie in new power plants and windfarms.

Critics say National Grid is being too slow in connecting many of these projects to the grid, as many renewable projects face long delays in obtaining planning consent.

Ofgem’s proposals include offering electricity transmission companies better returns to build grid connections that anticipate future demand and to invest in the expansion of networks, particularly to remote areas.

Britain has committed itself to ambitious new European Union targets to generate 20 per cent of all energy from renewable energy such as wind and solar power by 2020.

The European Commission is expected to report today on whether to allow the proposed £12.4 billion takeover of Britain’s nuclear industry by EDF, the French state-controlled energy company, or whether to recommend a detailed competition inquiry.

EDF wants to use its acquisition of British Energy as a platform to build a new generation of nuclear reactors in Britain to replace the current fleet, which are old and unreliable. Critics say that the deal would discourage competition in Britain’s heavily consolidated, wholesale electricity markets.

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