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utILIty WEEK | 23rd - 29th January 2015 | 9 Interview R ead investor hints for 2015 and you can't fail to receive advice that National Grid is your best bet for a safe and generous return. With a market capitalisation of approximately £35 bil- lion, it achieved an earnings per share rate of 66.4p in 2013/14 and this is expected to rise by 2.7 per cent per annum over the next two years. In short it is the epitome of sound, defensive stock and with its cost controls now firmly in place, investors can be sure of regular earnings. And yet, National Grid is also at the heart of a tur- bulent and uncertain transformation of the UK's energy system – a metamorphosis that will require it to adjust to a world of distributed, intermittent generation, smart technology and the increasingly imminent likelihood of a significantly electrified transport system. And all the while, it must keep in line with expectations to minimise costs to consumers. National Grid chief executive Steve Holliday, who has been in post since 2007, appears sanguine in the face of the challenge. He declares himself to be an "optimist" before admitting that the UK's progress towards a smart world – including, but not limited to, the energy system – is a "deep subject" and, at times, "an area of frustra- tion" for people in the energy industry. "This is because it attracts buzzwords that very quickly come to mean different things to different people," Hol- liday comments. "That's certainly true when it comes to the word smart and what is expected of smart grids." While Holliday is firm that there is "no question" about the direction of travel for the UK energy system and its supporting technologies, he is also cautious of second guessing the pace of change or the detail of future grid operation and energy supply. Using a smart grids pilot project in the US to demon- strate his thinking on this topic, Holliday says: "This pilot represents a $56 million investment in the local network and 15,000 end consumers. We've got four offerings for those consumers in terms of home energy automation, from the most basic smart meter to a fully integrated sys- tem across heating and cooling and a lot of the big white goods which works on a demand control premise. "We're looking to learn an awful lot from this project over the next couple of years and get some time of day pricing introduced. I mention this because one of the most interesting things about projects like this is how they show you that companies or government cannot dictate consumer behaviour. "In our Worcester [Massachusetts] example, of the four offerings – all of which are free – if you're an opti- mist, perhaps naively so like me, you might expect every- one to opt for the fully fledged automated system. But in fact we've had to incentivise people to allow us to install that, while there are plenty of volunteers for the bottom end tier." Why didn't consumers want the top end technology? Holliday says it was commonly down to concerns about invasions of privacy and data security. He continues, "We have to be careful, therefore, about trying to predict exactly what the world will look like in 2025 – it will be based on a mixture of the necessity for a smarter system – to address our trilemma – the appearance of lots of new technology, the familiarisation of existing technol- ogy which most consumers are not using today, but ulti- mately it will be driven by customer preferences. "Today – in both the UK and the US – as consum- ers we get a standard offering, fundamentally. We can