Energy efficiency investment top priority, says BP chief

Energy efficiency will play a vital role in delivering energy security, Tony Hayward, group chief executive of BP told the London Business School in a speech yesterday.

Energy security has become a defining issue for the 21st century and "in all circumstances, energy efficiency is the number one priority. That means more efficient vehicles, buildings and electronic appliances – more investment in technology and infrastructure such as smart grids," he said.

Fears of overdependence on expensive, imported energy were best allayed by focusing on efficiency, he said: "The most effective way to reduce such dependence is to curb energy consumption – and costs – by significantly investing in energy efficiency."

Scares over Britain's dependence on imported gas – which came to the fore during the recent cold period – were more problems of storage and distribution than issues of supply structure, he reasoned. "It’s about the need for investment in infrastructure such as pipelines and storage capacity."

But energy independence is an unrealistic aim for the UK, he said, and gas will remain the optimum short-term solution to the UK's energy needs. "Gas is the fuel that offers the greatest potential to achieve the largest greenhouse gas reductions – at the lowest cost, in the shortest time – and by using technology that's available today."

Hayward also told the audience that the Copenhagen climate talks should not be seen as a failure but the moment when the global climate debate became " realistic".

"There is a dawning realisation that we can’t afford to be paralysed by the absence of agreed targets... Individual governments need to act regardless of whether there is a global treaty…moving in the same direction, not necessarily in lockstep.

"For the first time since the climate debate began in earnest 20 years ago, the vast majority of the world’s countries are lined up and heading in the same direction. Most importantly, China and the US are on board," he said.

BP forecasts that global energy demand will roughly double by 2050, a demand which can be met only by a diversity of energy sources, Hayward said. "That’s going to require investment of more than $1tn (£638bn) a year – every year."

Consequently, fossil fuels will be with us for many years to come, he predicted.

"There will still be a major role for hydrocarbons… The share of renewable energy will certainly increase, but we have to be realistic about its contribution… The International Energy Agency can’t see [renewables] accounting for much more than five per cent of consumption in 2030, even with aggressive policy support."

Nevertheless, BP will continue to factor a carbon cost into the investment choices and engineering design of new projects, he promised. "This is our way of ensuring that our investments are competitive not only in today’s world but in a future where carbon has a more robust price."