29 November 2012
Introduction
Mr Speaker, I am pleased, ahead of the Energy Bill’s introduction later today, to publish the Annual Energy Statement.
It
shows that this Government is making good progress towards our vision
of a thriving low-carbon economy with secure energy supplies, and sets
out an energy policy that is good for growth and good for consumers.
Alongside
the Annual Energy Statement, I am publishing our Energy Security
Strategy, the Statutory Security of Supply Report, a consultation on
Electricity Demand Reduction, and more detail on electricity market
reform. I am today laying copies of all these documents before the
House.
Investment and growth
Mr Speaker, Britain’s energy sector is embarking on a period of exceptional renewal and expansion.
The
scale of the investment required is huge, representing close to half
the UK’s total infrastructure investment pipeline. The electricity
sector alone needs investment of around £110 billion in the next
decade: that’s equivalent to building Crossrail seven times over.
But
the vast majority of this will not be taxpayers’ money, with Government
subsidies targeted at levering in private-sector investment in
low-carbon energy - so our plans are consistent with the Government’s
overriding goal of deficit reduction.
Indeed, the energy sector
can play a major role in stimulating economic growth, creating jobs, and
positioning British companies for success in export markets.
One
third of the UK’s economic growth in the last financial year is likely
to have come from green business, and the UK’s low-carbon sector now
takes a £122 billion share of the global market worth £3.3 trillion.
Many
projects are shovel-ready, and they are spread relatively evenly
through every nation and region of the UK. So the stimulus to the
economy and to supply chains, and the job creation, can come at the
right time – now – and in the right place – nationwide.
Low-carbon future
Those short-term benefits of our transition to a low-carbon future are followed by still greater ones in the longer term.
First,
of course, it will help us meet our Carbon Budgets on the path to our
2050 emissions target, so that Britain will continue to play a leading
role in tackling climate change.
Second, it will diversify our
energy mix, improving our energy security and insulating households and
business consumers from high and volatile fossil fuel prices on global
markets.
And third, it will keep British companies at the forefront of the fast-growing global green sector.
The challenge
But investment on the scale needed will not happen under the current framework.
Industry
and investors have told us very clearly that Government has to play its
part – by creating a regulatory framework against which they can invest
and by giving clarity on the level of incentives available.
We
cannot afford to miss this opportunity. We need those shovel-ready
projects to get underway now – and the energy security challenge we face
is real, with fossil fuel imports set to increase, electricity demand
to rise, and around a fifth of our existing power plant to close by
2020.
Our solutions
So, Mr Speaker, we propose nothing less than the biggest transformation of Britain’s electricity market since privatisation.
This
follows agreement across the Coalition, not only on electricity market
reform and the Energy Bill, but also on a real-terms tripling of the
budget for support for low-carbon generation.
We need to improve
revenue certainty for investors in low-carbon generation – including
renewables, nuclear power and carbon capture and storage. So we will
take powers through the Energy Bill to introduce Feed-in Tariffs with
Contracts for Difference. This mechanism will give investors precisely
the confidence they seek – and we have responded to the Select
Committee’s concerns and will create a single counterparty for the
Contracts for Difference.
We will also introduce a Capacity Market
to ensure that there is sufficient gas generation to provide the backup
and flexibility we will need. Gas remains a vital part of our energy
mix, and we will support the exploitation of unconventional gas
resources where it is economic and can be carried out with full
protection of the environment. Our Gas Generation Strategy will be
published alongside my RHF the Chancellor’s Autumn Statement.
We
will legislate to allow Government to set, in the next Parliament, a
2030 decarbonisation target for the power sector – and in the shorter
term we will introduce an Emissions Performance Standard. This will
ensure that new coal plant can only be built with carbon capture and
storage technology.
All these mechanisms will be supported by a robust, transparent institutional framework.
These
reforms will maintain Britain’s energy security while providing a huge
opportunity for jobs and growth. Competition for long-term contracts
will drive innovation, raise productivity, and give UK industries a
strong platform from which to compete internationally.
Consumers
Mr
Speaker, consumer bills are one of my greatest concerns. They have
been driven remorselessly up by wholesale fossil fuel prices: global
gas prices were 50% higher in the five years to 2011 than in the
previous five years – and they have continued to rise over the last
year.
High energy bills can put huge pressure on households and
businesses. So let me be very clear, especially given recent misleading
reports in the media: Government policy is designed specifically to
reduce consumer bills.
Of course we can’t control global commodity markets.
But
we can and will put consumers in control by driving a wedge between
wholesale energy prices and consumer bills. That’s why we propose to
legislate in the Energy Bill to ensure that consumers are placed on the
cheapest tariff that meets their preferences.
We can and will
diversify our energy supplies: our policies stand to reduce the UK’s
sensitivity to fossil fuel price spikes by around 30% by 2020, and by
around 60% by 2050.
We can and will push energy companies to make
switching easier and quicker – households can already save up to £200
per year simply by switching provider.
We can and will pursue
savings wherever we can find them in the energy system – for example up
to £3.5bn from offshore transmission coordination.
We can and will
continue to place energy efficiency front and centre. Over 2 million
insulation measures were installed in the year to June 2012. The
savings are considerable: the half-million households who insulated
their cavity walls in 2011 are saving around £135 a year each.
And
last month we put in place the framework for the Green Deal, which
allows households and businesses to install energy efficiency measures
without any upfront cost, and to pay for them through the savings on
their energy bill.
If you look ahead to energy bills in 2020, Mr
Speaker, energy efficiency savings are set to outweigh – more than
outweigh- the cost of supporting low-carbon electricity generation. The
net effect of Government policies on energy bills is downwards, not
upwards.
But of course vulnerable households need our help now – and they are getting it.
Over
a million low-income pensioners will get £130 off their fuel bills this
winter. And all pensioner households will get a Winter Fuel Payment:
£200, or £300 for those over 80.
Energy suppliers provided around
£250m of support under the Warm Home Discount scheme in 2011-12,
assisting around 2 million low-income and vulnerable households.
The
new Energy Company Obligation will channel £540m of Green Deal
investment per year, reaching around 270,000 vulnerable and low-income
households and those living in harder-to-treat properties by 2015.
And
to help people better manage their own energy use, we will be rolling
out smart meters across Great Britain: 53 million new meters installed
by 2019, delivering an estimated £7.2 billion in net benefits to the
economy.
Conclusion
Mr Speaker, the heated debate around
energy policy can sometimes obscure what is in many ways a great success
story for this country.
The UK already leads the world in offshore wind, and we are on track to meet our renewables targets.
Energy investment in Britain is running at a 20-year high, according to Energy UK.
We have the world’s first Renewable Heat Incentive.
This year’s offshore oil and gas licensing round received the highest number of applications since licensing began in 1964.
Our
Carbon, Capture and Storage offer, including the £1 billion
Commercialisation Competition, is one of the world’s most comprehensive.
We
continue to make progress in international talks on climate change: I
will shortly be attending the COP18 talks in Doha, working towards the
genuinely global deal to which Durban opened the door, to be agreed by
2015 and come into force from 2020.
And now we are preparing a
once-in-a-generation transformation of the energy landscape to bring on
massive private-sector investment which will boost the economy, create
jobs, and power Britain towards a prosperous low-carbon future.
Mr
Speaker, The Government’s energy policy is good for the British
economy, good for consumers, and good for the planet. And I commend the
statement to the House.
