Charles Hendry's speech at the Energy and Utility Forum, House of Commons

Check against delivery To me, the issue of energy security is absolutely at the heart of the issues we have to discuss. And what was said in…

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Charles Hendry

Check against delivery

To me, the issue of energy security is absolutely at the heart of the issues we have to discuss. And what was said in the introduction was a very telling point about what’s happening at Tesla cars.

Companies around the world are now looking at the opportunities in the low carbon area. Tesla is saying that you can drive the fastest car around, probably with faster acceleration than their petrol car.

You can sit in absolute luxury, in an electric Range Rover as I did recently. You can be part of the low carbon revolution, in a way that looks after the future of the planet as well.

And so industry across the world sees this as an exciting opportunity, and my job as Minister is to see that investment starts coming through.

Now it’s not a case that we’re simply doing this now because we want to - we’re doing now because we have to.

Our plants in the UK are historically old. They’re old, they’re dirty and will become increasingly expensive to run.

They have to be replaced as we will lose a third of our coal plant in the course of the next few years. We lose much of the rest by the end of the decade. All of our nuclear plant will have to close apart from Sizewell B, by the early 2020s.

We will have to rebuild it, and that is a challenge, and. We need £200 billion of new investment to replace the outdated stock, or the lights will go off. And therefore we have an opportunity to rebuild that in a way, which is genuinely low carbon.

And we now see a huge range of interest from people who want to invest in those areas - and that clearly against a difficult economic background. But what we’ve shown yesterday is that even in those circumstances we can put really important markers down for how we want to see this change go forward.

We believe that our security of supply is enhanced by using a mix of technologies. Some people say it should all be nuclear, but for seven months one of our major nuclear plants has not been operating and during that time wind has actually been powering 400,000 homes.

So actually, the importance of having a balanced portfolio is something to which we attach tremendous importance.

Nuclear will I believe be an important part of that mix going forward. The government has made it quite clear we want to see new investment in new nuclear.

And this week we have done a great deal to start to move that forward. On Monday we published the National Policy Statements, to deal with some of the planning issues, which could potentially hold up some of the developments.

We published our view on regulatory justification, which will remove some of the risks of legal challenge.

We published what we mean by subsidy because we’ve been absolutely clear that there will be no subsidy and we want to set out now what that means so people will actually be able to invest with certainty rather than face a challenge later down the line.

And from then we go on to the electricity market reform package, which will be published in the autumn. This is probably the most important issue we will address this Parliament. Because in the course of the next few years we have to re-invent the electricity market. We have to put in place measures, which will stimulate investment in a world which in increasingly uncertain.

So at the heart of that will be the price of carbon. But looking at other issues such as capacity payments, looking at what other measures may be necessary to secure investment. But if we don’t put that in place it’s not a question about climate change, we simply won’t get the investment coming forward into Britain in the new plant that is going to be necessary.

In addition, what we did yesterday, by committing extra resources to the nuclear decommissioning programme, was to say that we are determined to be a government which ties up the legacy issues, because I believe that gives us permission to go forward with the public in terms of a new build policy for nuclear.

We also believe that renewables will be part of that mix. And again it’s not just about climate change, it’s about looking at our natural resources, which we have in the UK. We have 40% of the Europe’s wind, we have the highest tidal reaches in the world, and we have 11,000 km of coastline. We ought to be using those resources for our future energy security.

And so seeing that happen is going to be part of this as well. And developing now the technologies that will truly make a difference, not necessarily before 2020 but actually in the 2020s and 2030s. The marine, tidal and wave technologies, which we could make such enormous use of in this country. And again what we’ve done this week is to drive forward that investment opportunity.

Then there’s the Green Investment Bank with a billion pounds in it from day one. People say not enough. But actually in these times to commit a billion pounds to taking this forward and the commitment to adding extra assets to that in due course, is a very significant commitment indeed. Add to that, the commitment to marine energy parks, so we really start to attract people from around the world to invest in this sector in the UK, with the engineering and academic skills, which can potentially be brought to bear as well.

Then there’s the £200 million announced for the supply chain, to make sure that we get the jobs in the UK and don’t see the problem that we’ve had before - where we’ve had the projects built here but the jobs have gone elsewhere. And dealing as we’ve already started, to deal with the transmission issues and looking at how we rebuild our grid for the way in which this system is going to evolve in the future.

And we’ve also committed to Feed-in Tariffs and the Renewable Heat Incentive - because we want to turn consumers from people who actually understand these issues into generators; to understand what they can do to contribute to a secure energy future and giving them a system that can reward them for doing so. But in doing that we’re looking absolutely in the value of different technologies. We’ll be guided by the facts, we’ll be guided by the science and by the economics. As a duty to the taxpayers, we have to make sure that is done.

And then there is coal. We have the best part of a 100 years of coal reserves and we know by 2050 coal will still be a critically important part of the energy mix worldwide. We want to lead the world in CCS and clean coal - and we have every opportunity to do so. We have the sequestration sites in the North Sea. We’ve got the skilled people who are used to working in those conditions. We have the need to make those new plants operational. So what we announced yesterday was a billion pounds to help bring that first CCS plant to fruition. That is more than any government anywhere in the world has committed to a single plant. And that really shows our determination to lead.

We know for their own reasons E.ON decided not to go ahead with Kingsnorth, so what we’ll now do is work with Scottish Power to see if their project will meet the criteria, which we have set, whilst also setting out what we want to achieve with projects 2-4 - whether industry wants to invest in gas plants or biomass plants; whether they want to collaborate rather than work on their own. So we can frame that competition in a way that actually meets what industry wants to invest in.

But all of that is some way off. And the challenge we face is that this plant is coming out of commission early. So we still face the fact that we need more gas in the mix. And people will only invest in gas if they believe there is a long-term future for that. Rather than something we expect them to turn off in a few years’ time.

The capacity market will help deal with the fact that people may want to use plants when demand is particularly high. And we also need to address the issues of storage and security because we are now in world when we are import dependent. And as we go forward to 2020 that will only increase. So we attach tremendous importance to the energy security issues and gas security in particular.

I’m pleased to be able to say that tonight I’ve issued a license for a plant that will potentially double our gas storage facilities in this country - ENI’s gas storage facility at Beckton.

If that goes ahead it will make an enormous difference to our security of supply. And the message that we want to send absolutely without hesitation is that if you’re involved in ensuring there is gas in the mix, you’ve got to able to satisfy the Regulator or government that you have access to the long-term supplies, which are necessary.

It may not be storage. It could be pipeline connections. It could be long-term contracts or interruptible contracts. We’re not going to specify what it will, be but are determined to make it absolutely clear that this process going forward has got to be part of the solution.

Now all of this, as Benny as has said is enormously expensive. Ernst and Young are doing fantastic work in this area. £200 billion of investment will be required in the next 10-15 years, and as a result of that we know this impacts on the bills of consumers. There is a price for energy security but it’s nothing like as high of the price of energy insecurity.

There is a price for low carbon but it’s nothing like the price of not going to a low carbon economy. And we have to have the honest debate with consumers. And say today these are the pressures, which will drive your bills up. And then this is what we’ll then do to try and bring them down.

We will roll out faster smart metering, not by 2020, but certainly by a couple of years earlier than that and faster if we can. Because that will give the consumer the ability to determine what tariff they’re going to be on and what suits them best. This is not just about smart metering, but the real prize of a smart grid, so peak demand can be shaved more effectively, and we can use the system much more effectively than we do today.

And also with energy efficiency, rolling out across the housing stock, the Green Deal, which is the centrepiece of the Energy Bill this autumn - a programme to make our homes energy efficient.

We currently have some of the least energy efficient homes in Europe, and that’s going to change, with a programme which will systematically work through the housing stock to bring them up to the standard that they need to be.

And then we can have a truly honest debate with the consumer, and say what we’ve done is to address the issue of energy security. We’ve secured the investment necessary to re-build our energy infrastructure, not just the plants, but the transmission network as well. We’ve moved to a low carbon society at a time we believed it fundamental to be doing so. And we’ve done it always with a view to the cost to the consumer in mind.

I think that adds up to an energy policy. I think standing back and saying we don’t need an energy policy is an absolute dereliction of Government responsibilities. I think energy is at the heart of what this Coalition is about. And there are people in this room with huge amounts of expertise from working in this sector for many years. I look forward to working with all of you to achieve that.

Published 21 October 2010