Edward Davey address to the All Energy Conference
"Green Growth, with investment in renewables at its heart, is a central plank of our future prosperity."
Introduction
It’s great to be here with you in Aberdeen.
Since becoming Secretary of State for Energy and Climate Change almost 16 months ago, I have been a regular visitor.
I think this is my ninth trip to Scotland in that time and my fifth to the Granite City itself.
And even over this short time I have seen things changing for the better.
I have seen how Aberdeen Council is pioneering new ways to keep the city powered and running.
I’ve just officially launched Aberdeen’s hydrogen strategy.
I think that gives Aberdeen the largest fleet of hydrogen powered buses in Europe.
This underlines Aberdeen’s status as an green innovation centre, an international energy super-city and the hub of the UK’s energy industry.
In the Offshore Oil and Gas industry, there is growing optimism, with investment at record levels.
In March, I was here to help launch the UK’s Oil & Gas Strategy that will help secure billions of pounds of investment and thousands of jobs.
Later today, I will be joining with GDF and others to celebrate the signing of a new multi-million pound contact.
Powering, protecting, prospering
And every time I come here, I see how Aberdeen is becoming one of the powerhouses of the new renewable energy industry too;
An industry that is bringing investment and jobs – not just here in Scotland, but across the United Kingdom.
You know when you read some news commentators, you’d think the green energy revolution was unpopular.
Far, far from it.
Increasingly, the people of Britain are embracing renewable energy.
My Department’s own surveys show that 4 in 5 people support our efforts to develop low-carbon, home grown forms of energy – wind, wave, solar, biomass.
And this is not just because renewables are good for the planet.
But increasingly, I believe, people are seeing the galvanising effect this drive for a green, low-carbon, sustainable society is having on the economy.
Because this is not just about powering the country and protecting the planet.
This is about prosperity too.
This is about Green Growth.
And that is what I want to talk about today.
The role renewables are playing in driving Green Growth.
Green Growth
As Secretary of State for Energy and Climate Change, my responsibility is to make sure we have secure and affordable energy supplies as we act to meet the ambitions of the Climate Change Act, bringing down greenhouse gas emissions by decarbonising the power sector and reducing demand.
But as a Secretary of State in the United Kingdom Government, I have another overarching objective:
Maximising the opportunity for job creation and economic growth through our energy and climate change policies.
All these objectives come together in the Energy Bill going through Parliament in Westminster.
The most radical reform of the UK energy system since the 1980s, and privatisation.
Creating a market that incentivises clean energy.
Designed to bring security and certainty in this age of transition to a low-carbon future.
By acting to replace the power stations which will close over the next decade (around a 5th of our current electricity generating capacity), we will drive £110 billion of investment in our energy infrastructure:
In low-carbon – nuclear and renewables;
In gas and in other energy security measures.
Reducing, over-time, our exposure to volatile international energy prices, and reducing green house gas emissions too.
Boosting energy security, and boosting jobs and growth at the same time.
As the CBI has pointed out, the UK’s green businesses already account for more than £120bn of annual sales and employ nearly a million people.
And new research by Shell and the Carbon Trust published this week shows that the small businesses that make up more than 90% of the low-carbon sector are bullish about the future.
Three quarters are planning to raise funding and expand into new markets in the year ahead, with two thirds planning to recruit.
The Renewable Energy Association estimates that we already have 110,000 jobs in the renewables sector which could rise to 400,000 by 2020.
This is because the investment environment for renewables is dynamic.
New research by my Department estimates that, since 2010, across the UK, over £29bn of private sector investment in renewables has been announced, supporting almost 30,000 jobs.
This is a fantastic record of success.
And there will be more such green jobs in the supply chain and in the local communities.
And the passage of the Energy Bill will fuel this growth.
The commitment of the UK Government to a vision of a low-carbon future is building up a bow wave of new jobs and investment in the economy.
And we can make this investment without adding to the Government’s balance sheet, by attracting private funds.
Energy is the largest infrastructure pipeline in the UK, dwarfing all others, more than transport, water and communications put together.
My fellow Ministers and I are committed to going out and getting the capital investment required to build the infrastructure that we need.
We have been spearheading a drive over the last few months to sell the benefits of investment in Britain.
This is a drive that includes the Prime Minister and the Chancellor, that includes my fellow Cabinet Members, that includes organisations like UKTI, working closely with devolved administrations, including the government here in Scotland.
From Treasury guarantees to the Green Investment Bank, we’ve found new ways to make the case:
Scotland, Britain, we are now the best and safest place to invest in clean, green energy in Europe and the world.
Treasury guarantees and the Green Investment Bank all support the reforms of the Energy Bill.
Contracts for Difference will give investors a stable and predictable income – not just for a couple of years, but for over a decade.
What other industry or business anywhere in the world provides that level of long-term certainty for investors in the green economy?
So this is a powerful pitch we are making.
The United Kingdom offers a uniquely attractive stable, transparent and supportive environment for investment in low-carbon generation.
Renewables
And it is in the renewables industry that all of my objectives - for energy security, for reducing greenhouse gas emissions – and for investment and growth - come together.
I am clear, the cleaner the energy the better, the greener the growth the better.
The transition to the low-carbon future must happen – and that makes the generation of renewable energy an indispensible part of our strategy and a priority for investment.
Between now and 2020, the support we give to low-carbon electricity will increase year on year to up to £7.6 billion - a tripling of the support available for renewables and a record the Government can be proud of.
Our long-term vision is for a competitive market where renewables and other low-carbon technologies participate on a level playing field.
Where people get value for money because the market is responsive to competition – not just to volatile international fossil fuel prices.
At the moment the current electricity market is skewed to fossil fuel capacity.
And the current system in which we bring on low-carbon doesn’t deliver best value for consumers.
The Energy Bill will encourage investment in renewables and other forms of low-carbon generation, by guaranteeing contract prices for low-carbon generators.
And because I recognise that more certainty is required right now, I set out further detail on the Final Investment Decision Enabling Programme for renewables, two months ago.
Developers of renewable electricity projects are able to apply for support, thereby enabling investors to make final investment decisions this year ahead of changes to the electricity market next year.
This will encourage construction on a number of projects to start sooner rather than later.
But my main message is this.
The main shape of Electricity Market Reform is agreed.
In July we intend publish a draft Delivery Plan and draft strike prices for renewables for consultation.
We expect that, subject to the will of Parliament, we will receive Royal Assent on the Bill by the end of the year, when we will publish a final Delivery Plan and strike prices.
Contracts For Difference will then become available in mid 2014 – on time, on schedule.
So now is the time to prepare to take advantage of the new certainty that will be on offer.
Attracting the investment.
Building the infrastructure.
Creating the jobs.
Developing the technology.
So we can build, over time, the secure, affordable low carbon future that we have committed to – and contribute to a prosperous economy.
Interdependence
Of course, here in Scotland, there is a debate about whether Scotland could go it alone – leave the United Kingdom.
Well of course it could. Just as the United Kingdom could go it alone outside the EU.
But in both cases our respective citizens would be less secure, less prosperous, and less influential.
The Scottish Government’s economic paper, published yesterday, rightly pointed to renewables as one of Scotland’s key growth sectors.
With over £13bn of new investment announced since 2010 supporting over 9,000 jobs, this is definitely a fantastic success story.
But you cannot ignore the critical role the wider United Kingdom plays in supporting Scottish renewables.
Take the case of the support provided to renewables.
Under the current UK Renewables Obligation system some 37% of the support – around £530m annually - goes to Scottish renewables projects.
But only 9% of UK electricity sales are here in Scotland.
So would an independent Scotland be able to deliver a similar level of support to renewables on the back of a domestic electricity market that is only one 10th the size of the UK?
At present Scottish renewables benefit from the ability to spread investment costs across the whole of the UK consumer base.
But an independent Scotland would be just that – independent.
We cannot assume that English, Welsh and Northern Irish consumers would still be willing to subsidise Scottish renewables.
It would be more natural to assume that the rest of the United Kingdom would rather see the benefit of such investment fall within its borders.
And if the UK did look further afield to source renewables, Scotland, as a separate country, would be just one of a number of places it could buy renewables from.
Yes, it could be from Scotland, but it could also be from Ireland, from Norway or elsewhere.
Now, I am not saying Scotland won’t be able to compete.
But as part of the British energy market, Scotland and its energy industry, as net exporters of energy, have immediate, unquestioned access to a market of over 23 million households and the integrated energy networks that deliver to them.
But it will be much harder for a nation potentially having to spread the costs of investment in renewables across just two and a half million households to keep their green energy prices competitive.
So far from holding Scotland back, being part of the UK helps Scotland to prosper.
And Scottish renewables have flourished precisely because Scotland is part of the United Kingdom.
As the Scottish Government itself admits: ‘Scotland is already one of the best places in the world to invest in renewable technology’.
To continue that success, we need to build on the UK framework of support, not break it up.
We can achieve more working together as the United Kingdom, than we ever would apart.
Conclusion
So let me conclude by saying this.
If we stick together and maintain the attractive environment for investment in renewables and other low-carbon technologies, we will see our energy infrastructure overhauled, modernised and decarbonised and our energy security enhanced at a cost that is affordable to our people.
We will be living up to our responsibilities to pass on to our children an economy that is prosperous and a planet that can sustain them.
And I have set out today Green Growth, with investment in renewables at its heart, is a central plank of our future prosperity.