Good morning ladies and gentlemen.
I am delighted to be here today to share the UK’s experiences of energy efficiency policy. I’m the newly appointed minister energy in the newly formed Department for Business, Energy and Industrial Strategy, in a new government under the leadership of Theresa May.
But I wanted to start by taking the opportunity to thank the IEA for their warm welcome and to pay tribute to the huge influence and expertise they bring to policy makers across the world. Their leadership and insight offers the chance for all countries to learn from one another. To share our experiences of what works and to accelerate progress right across the energy landscape
Energy efficiency is, as the phrase implies, a good thing in itself. It can also make a useful contribution to meeting our Paris commitments, though if we are to succeed in doing so we’ll need to do more.
Of course, the UK is currently going through a big change in leaving the European Union. I want to be clear that Brexit does not diminish our responsibility to the Paris Agreement or our wider efforts to cut carbon. We are still the outward-facing country we have always been and we are very much open for business in energy and in everything other area.
If anything, this change brings us opportunities. So the strong link we now have between energy and business in our new Department and in new our industrial strategy makes sense: smarter energy use improves productivity and competitiveness and helps with our climate change targets. And of course the cheapest energy is the energy that you don’t use.
This link made by our new Prime Minister between energy and industrial strategy also recognizes that energy as a sector, especially renewables, has the virtue of offering jobs and opportunities right across a country in rural and coastal areas as well as in our cities.
In the UK we have already made good progress, as the figures show. In 2015 our emissions are 38% lower than they were in 1990. This reduction was achieved against the backdrop of a growing economy. Since 1990 GDP has grown by 64%.
So we have had some success but need to achieve more.
Whilst we strive to find new ways to be efficient all the time, and in fact a significant proportion of advance in every area of economic life comes from small incremental improvements of which energy efficiency is such a good example.
So how have we managed to be increasingly energy efficient?
In the UK we are rolling out smart meters, both electric and gas, to all domestic consumers, which can reduce their consumption significantly.
We upgraded our building standards regulations in 2013 so that all new build is much more energy efficient - a 30% improvement – and there’s a consumer effect that reduces energy bills by £200 on average for a new home.
And we are developing and deploying schemes to improve the energy efficiency of our older buildings, which is a big challenge for us in the UK given our legacy housing stock. In England alone there are nearly 5 million properties built before 1919. And across Great Britain, millions of properties are without adequate insulation, with over 8 million homes requiring simple additional loft insulation, and 5.5 million needing cavity wall insulation.
In particular we have set increased standards of energy efficiency for privately rented buildings, which will prevent buildings being let out after April 2018 unless they meet a minimum efficiency standard.
And we’ve provided help for 1.6 million homes since 2013 to improve efficiency by insulating their roofs and walls. It is estimated this will save over 27 million tonnes of carbon and save bill-payers around £7.6 billion over the lifetime of the measures.
Not everything works of course, our Green Deal which allowed consumers to pay for energy saving investments through their energy bills did not get the level of take up we hoped for. We discovered that lack of finance was not the only, indeed in some cases not the main, barrier to investment. The sheer inconvenience of home improvements were often equally or more important. So we’re thinking carefully about how to motivate people.
We are also thinking about how to motivate people to install energy efficient solutions. When I was an executive at Tesco, a major supermarket chain, we found that installing lobbies on our stores returned the cost of capital needed within 2 years. When people move house they are more likely to make improvements to their bathrooms and kitchens, but why not the efficiency of their houses, which can save them money - as well as emissions?
Increases in the efficiency of our renewables sector have been particularly marked. This is very welcome since in the long run only systems that don’t require subsidy can be viable.
Taking offshore wind power as an example, when the Contracts for Difference Scheme was launched 3 years ago, we set the maximum price we would pay for electricity generated by offshore projects in 2017 at £140/MWh. In March this year we announced that this would fall to £105 for projects generating in 2021 – already a 25% reduction. With projects competing against each other in an auction we expect the actual price we pay to be even lower. And we have set out our ambition that offshore prices continue to fall.
We are keen to promote the greater use of heat networks in built-up areas - they’re a very efficient way of delivering heat, and can utilize a range of low carbon sources. And they work well already in Scandinavia, Germany and France for example, and there are already some in the UK.
And we’re about to take a big step forward. We are launching a scheme shortly to provide capital support for new infrastructure investment, to kick-start the heat network market and ensure that schemes that we’ve already got can be developed much more widely in the UK.
Here in Paris, you have the world’s largest deep geothermal heat network, providing renewable heating to tens of thousands of homes. Such ambitious projects are not cheap, but we need to create an energy infrastructure for the UK that is fit for the 21st century.
We also have plans to increase substantially the capacity of our electricity interconnectors to neighbouring countries. Our calculations show that when these plans have been fully implemented it should be possible to run our grid with the same level of confidence as before, but with less overall capacity, so that increases efficiency.
These are illustrations of the seriousness with which we are seeking to increase the efficiency of our systems and also to meet our Paris obligations.
I have spent a lot of time encouraging digital innovation as a business Minister. I believe we can capitalise on new technologies like storage and smart meters allowing us to use energy more efficiently and avoiding the expensive peaks. As we’ve seen, that market is already responding with innovations with for instance new types of battery-run household appliance, better meters, and electric car technology.
We’re serious about increasing our efficiency. Our Paris obligations represent an enormous challenge, they are also an opportunity in which energy efficiency can play a very significant role.
We are keen to learn from others where they have good ideas. And I will listen very carefully to what others have to say today.
Which is one of the advantages of meetings like this – we can all learn from each other.