Thank you for the invitation. We live in interesting times. For me personally - following the Brexit vote and the reconstruction of the government I have a new role in a new Department, one which brings together Business, Energy and Industrial Strategy.
We are reaching out to business and trying to engage as much as we can, so it is good to be here today. Brexit is on everyone’s minds and we are working hard to do the right thing and reduce uncertainty; for example by giving a timetable for invoking Article 50 last week. We have talented teams of Ministers and officials working full time on Brexit and we are supporting them with the expertise in other departments; in my case energy and intellectual property. I am still attending the Competitiveness and Energy Councils and working constructively on day to day issues sustaining and building up relationships for the future.
As new Ministers we are also interested in hearing views and engaging on all aspects of business, industry and services. We will be setting out our Industrial Strategy for the UK as a whole in the months ahead.
Let me emphasise one major point. I would not favour seeking to buck the market in some fundamental way.
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We can create a tax and regulatory framework which encourages enterprise and small business growth. We can back innovation, building on our strengths in research and intellectual property. We can encourage balanced growth with more of a focus across the whole country.
And we can be smarter especially in areas where Government has a clear role – such as in infrastructure and R&D and in those which are heavily shaped by Government – such as energy. Given my new responsibilities I will concentrate on energy today.
Energy is a very important cross cutting area affecting everyone in society and in the economy.
So we must seek to maintain security of supply - keeping the lights on in our businesses and our communities. We must minimise the cost impact on UK domestic and industrial consumers - including Energy Intensive Industries - so affordability is key.
We must maximise the UK’s business and industrial benefits from the construction and maintenance of energy infrastructure and indeed exports as I am speaking to an international audience today - so a major wedge of our industrial strategy.
And we must meet our obligations for carbon abatement - so playing our part in achieving the 2050 targets on climate agreed in Paris and reinforced at the G20.
So, what might this look like in practice?
Where better to start than with Hinkley and nuclear new-build. Britain has a sixty year history as a global leader in nuclear power. Yet after the completion of the last new nuclear plant, Sizewell B in 1995, which I remember seeing while it was under construction, the nuclear industry was regrettably left to atrophy.
In recent years the Government has worked to rectify that - paving the way for a new nuclear renaissance. The recent decision to take forward the Hinkley project signals the start of that renaissance and it demonstrates that the UK remains very much open to business.
But the process also showed that we will take issues of national interest very seriously. We will, for example, continue to ensure that the decisions we take are in the interests of national security. And other countries including our Chinese investors have made it entirely clear that they accept this here as in other competing countries like the US.
It means factoring in the costs and the benefits:
- Costs in terms of the subsidy paid for by the consumer; and
- Benefits in terms of security of supply and the industrial and business benefits that creates.
Overall and on our best estimates, we judge that Hinkley remains a good deal for taxpayers and consumers. The arguments and the figures are set out in the Contract for Difference documents which we published 10 days ago.
Many of you will be aware that Hinkley is expected to provide 7% of UK’s power in a non-intermittent and low carbon manner. Whether or not the sun is shining or the wind blowing, it will provide a secure base load.
Importantly, too, the risks for the project will be entirely borne by the developers, EDF and CGN, ensuring protection for consumers and taxpayers if there are any cost overruns.
There are other advantages to the deal: EDF expects around 64% of the value of construction to be spent in the UK and Hinkley will deliver 26,000 high quality jobs and apprenticeships for people in Somerset and across the UK. Creating an expert, and mainly British pool, for the future.
Going forward, for future projects, we should continue to secure value for money – thereby limiting the impact on bills for UK domestic and industrial users, for example steel; and be similarly ambitious about the opportunities for UK companies in future nuclear projects. The new nuclear renaissance can, and must, be a springboard for a domestic nuclear industry to build the skills and capability for growth.
So, how will we do all that?
Let’s take the issue of UK content first. We need to make it clear to providers we expect substantial involvement of UK industry and also help industry to be in a position to respond to developers’ needs.
For example, in the area of nuclear, we will want to work with organisations like the Nuclear Advanced Manufacturing Centre (N-AMRC) to align their programmes with the contract opportunities that are available.
And what is important is that this approach applies to all areas of energy.
In offshore wind, we must continue to drive down costs. But developers will continue to be required to publish supply chain plans, helping us all understand what kinds of jobs are being created or sustained in the UK; and what further opportunities there might be.
Likewise when developing the exploration of shale gas safely in the UK we must consider how the approach can improve the outlook for energy costs and the UK’s security of supply.
We should be considering the positive effect of shale as a feedstock to manufacturing industries such as chemicals. And we must examine how the levers that Government holds can be used to open up the supply chain opportunities for UK-based companies.
In this way, we can capture economic benefits to the UK as a whole, whilst also maximising economic activity in places like Yorkshire and the North West of England.
This is also true in other growing areas of our energy sector. There is a strong pipeline of new electricity interconnector projects with neighbouring countries, providing opportunities for developers and the supply chain and I know the Norwegian Energy Minister talked about interconnection earlier.
Some of you will know that I have spent a lot of time studying and encouraging digital innovation and investment. This is another UK strength. I believe there is a lot of potential for us to capitalise on the growth in smart technologies like storage, smart meters and demand-side response - put simply we will be able to offer customers a much better price for electricity outside of peak times when these changes work through.
As a believer in the market I know business will respond by moving consumption to the night and reducing the national expense of the peaks - later dinners, robotic vacuum cleaners, which are already produced by Dyson, and batteries for the Teslas and electric lorries of the future.
This cross-cutting thinking – considering energy policy and industry together and thinking about digital opportunity - applies to energy demand in industry. If we can help industry reduce their energy demand through improvements in energy efficiency, we can help them reduce their costs, reduce demand on the grid and, very importantly, reduce carbon.
There is also a strong link to our industrial strategy when we turn from the supply of energy to its consumption. The cheapest energy is the energy you don’t use. Taking steps to be more energy efficient will help improve the productivity and competitiveness of industry.
And, in the longer term as countries meet the commitments agreed at Paris last year, and we move towards an increasingly carbon constrained world, the ability to minimise energy use and take other steps to reduce carbon emissions will help industrial competitiveness.
So, to summarise, a major link between Energy and Industrial Strategy means being as smart as we can be.
Energy has the virtue of offering jobs and opportunity right across the UK - last week I was in Scotland and last month at Sellafield and I was very impressed by the skill, expertise and, above all, hard work of the energy industry employees.
I believe there is a very positive future for energy as part of our new industrial strategy. Working with UK industry, with investors here and overseas, with project developers and with local communities, we can maximise the benefits to the UK as a whole.