Thank you to the Micropower Council, Mitsubishi Electric and Vaillant for the invitation to this evening’s event.
David Cameron pledged on taking office that this would be the greenest government ever.
We are now six months into the Coalition Government. Dealing with the biggest peacetime deficit of the modern age has meant we have faced tough choices.
We had to really focus on our key priorities, question the real value of all our programmes and drive greater efficiency out of everything we do - but our ambition to deliver on the PM’s audacious green pledge, it burns stronger than ever.
We have already taken some bold steps. Not only have we:
scrapped plans for a third runway at Heathrow
committed to cut emissions from the Government estate by 10% in our first year, and
with the Green Deal, set about creating Europe’s most innovative and transformational energy efficiency programme
Delivery track record
But most importantly of all - DECC emerged from the Spending Review with its core mission fully resourced.
The Spending Review was crunch time for the Coalition’s green credentials, but the result for DECC can leave no one in any doubt. No more empty government rhetoric, the Coalition is putting our money where our mouth is. Let me remind you what DECC achieved at the Spending Review:
up to £1bn of funding has been made available for Carbon Capture and Storage demonstration - the largest public funding contribution in the world to an industrial scale CCS project, ensuring that the UK will lead the way in this industry of the future.
£1 billion for the World’s first genuine Green Investment Bank, but that’s just for starters. There will be more money from asset sales to build the capital base.
we have secured £200 million for low-carbon technologies including offshore wind technology and manufacturing infrastructure at port sites.
£860 million Renewable Heat Incentive - the first of its kind in Europe
clear commitment to the funding of Feed-In Tariffs
a science budget of £4.6 billion a year
Big money for a green agenda that is central to the mission of this Coalition Government.
But it’s the enormous potential of the distributed energy economy that I want to talk about tonight. This is a speech about growth - green growth; about decentralised, low carbon energy innovation with all the growth opportunities that can bring.
We are about to embark on a period of profound change in our energy sector. We are determined to bring fresh thinking and new ambition to DECC:
this Government wants to see distributed generation become the norm not the exception
we want consumers to be engaged not alienated by the technological transformation that is about to unfold
we want technology to break down the barriers to consumers becoming active participants in the green energy sector
we want market reform to create new opportunities to crowd in billions in new investment and an army of new players, participating in a dynamic electricity internet that will set a new paradigm for the sector, just as we did with privatisation in the 1980s
That way we can literally bring power to the people, to communities, to local businesses.
This change is not some abstract vision that will happen at some undefined date in the future - this is happening now. In the words of Karen Carpenter: “We’ve only just begun”.
We need to drive the scale and pace of change even harder. We don’t have the luxury of time. We must ensure all the elements of the supply side are ready to deliver and grow in-step with the market.
The government’s role
And the role of government in this? We have to own this bold vision and have a clear strategy to deliver. Our vision of a decentralised energy economy must give confidence to the market. So, we are determined:
to give clear leadership to the industry
to bring together those able to identify and remove the barriers to development and then do all we can to remove them
we are determined to marshal the clear advice and information both consumers and business can rely on, and by securing financial incentives at the Spending Review
we are determined to create the necessary support for industry to advance the market, drive down costs and drive up standards
The opportunities for distributed generation are enormous. But ambitious leadership from government will only deliver so much.
We need both a top-down and a bottom-up approach. Not just consumer buy-in but genuine excitement is vital if we are to make the transformational change to a low carbon, dynamic, decentralised model.
Microgeneration is where climate security and energy innovation meet the Big Society. The Big Society is the natural ally of the distributed energy world I want to see.
But there are some big technical challenges we still need to overcome.
For too long politicians have failed to distinguish between heat and electricity when discussing local-level energy issues.
Rapid technological advances are making small-scale energy more attractive and the range of effective and reliable technologies is increasing all the time. But it is critically important that we don’t pick ‘winners’ on small-scale heat or electricity generation. Different requirements and locations will require different technologies - installed individually or in combination.
Importantly, we must ensure that in setting high standards consumers can rely on, we do not prevent new technologies entering the market. In fact encouraging innovation in the sector will be vital to ensure consumers benefit from improvements in performance, efficiency and price.
Rolling out innovative new technology at scale will give communities and individuals the ability to become genuine participants in their local energy economies.
Just as we have seen the successful growth of the notion of local food economies, with more local production, sourcing - procurement, so I want local communities to build resilient, sustainable, local energy networks.
I want to unleash those of you who harbour an ambition to re-define how electricity and heat are generated, and distributed to and from your home, your business or even your local community. And I want to emphasise the potential of this market to those of you on the supply side, who are able to make this happen.
Big Society engagement on energy isn’t just a theory, I’ve seen it works in practice. I have been struck by how galvanising it is when people come together to realise a shared ambition, working with local partners and local business, pooling resources, and commissioning and bringing in the necessary project know-how.
I saw a fantastic example of this earlier in the month when I visited a small-scale hydro project in the Peak District - the New Mills scheme - a project brought to life by a community group of 230 members. An old mill that has been on the site for 200 years, was restored, and re-commissioned, the area around the river was cleaned up and an electric turbine reintroduced. It now not only generates green electricity but also an income of around £25-30,000 it has actually become a tourist attraction in itself.
The community group pooled their investment of over £125,000 and then raised the remainder of the scheme’s full cost - around £330,000 - from community bank loans and grants. The scheme earns an income from the energy exported to the local Co-op supermarket.
This is a clear example of the power of local action. And of course once this community has mobilised to achieve something on this scale it can be a fore-runner of other ambitious community projects - this is the Big Society in action.
Micro-hydro is just one of a range of technologies at this scale but I like it because it works with the grain of the local environment not against, has brought a range of benefits with it and is helping demonstrate that community-level clean technology means a lot more than just large scale onshore wind.
This is just one example of the type of local energy solutions that are happening right now. I want enterprising communities across the country to look at what is being done elsewhere and seize this opportunity to harness their local potential.
To drive this forward, later this week we will be unveiling a new central on-line resource to help communities get the information they need : DECC’s Community Energy Online website will bring together best practice advice, information about funding and financing opportunities and links to accredited installers and sources of more detailed information and support. Everything you need to get started in one place.
In my introduction I mentioned the financial incentives that are in place to support microgeneration. These are absolutely vital to drive our ambitions. The Coalition is absolutely committed to FITs and indeed it was the collective votes in Parliament of the Conservatives and Liberal Democrats that defeated the last Government and ensured that FITS were included in the last energy Bill.
I have been really encouraged by the positive response that the FITs scheme has received since its introduction in April and hope this will continue.
It’s still early days but early indications show that the scheme is working well. My best information is that Ofgem’s live FITs data showed the number of FITs installations is approaching the 15,000 mark, with nearly 55 megawatts of installed capacity supported by the scheme.
The recent Spending Review made clear our commitment to FITs but also to maximising the scheme’s value for money, particularly in the current fiscal climate. That is why when every area of Government is looking to tighten its belt we have said that we will look to reduce the scheme’s projected costs in 2014/15 by at least £40 million i.e. 10%. This is in line with changes made in other European countries, as technology costs come down.
This doesn’t represent any watering down of our ambition, far from it. The coalition Government is committed to an ambitious roll out of the widest possible range of domestic and community scale renewables, but there is a potential problem.
The fact is we inherited a system from the previous administration that simply failed to anticipate the potential for industrial scale stand alone, greenfield solar. While we will not act retrospectively, large greenfield based solar farms will not be allowed to distort the available funding for domestic solar technologies.
We want to see an ambitious roll out of solar panels on Britain’s roof space but not all over the countryside. I will not allow the hard won available funding to be scooped up by a few industrial scale PV farms at the expense of the domestic or small business installations.
The economies of greenfield stand alone solar are clearly very different from roof top installations, but that is not reflected in the scheme, not least because the last administration failed to listen properly to industry.
At the moment there is no cause for undue alarm but if the current growth of solar farms show signs of getting out of hand, I will act. Speculators and hot money should find another home for their investments.
Sustained long-term growth is our aim and I shall be listening carefully to the industry at the roundtable I have convened for tomorrow to ensure that’s what we deliver.
There is more to growth than just finance. Our low carbon future will need an economy with a workforce with the skills and capacity to deliver this transformational change, to sustain and adapt and develop it, and to compete internationally.
As Vince Cable said at the launch of the Investing in Skills for Sustainable Growth Strategy [last] week: “If we are to achieve sustainable growth, nothing is more important than addressing current failings in skills training, and this strategy reflects this Government’s determination to do both. We are not in a position to throw money at the problem, but even against the backdrop of reductions, resource will be found to expand the apprenticeship programme for adults and support more people undertaking an increasingly respected form of vocational training.”
Clearly this applies to the microgeneration industry, to the installation engineers and technicians and those across the building and products sector. But I don’t underestimate the size of the challenge if the microgeneration supply side is to meet the future projected growth in the take-up of new technologies.
We estimate that there are over 300,000 heating, plumbing and electrical engineers who could potentially install microgeneration technologies in the UK. Currently there are over 1350 MCS-registered installer companies and over 10,000 qualified installers available to work on microgeneration technologies.
Our projections suggest that take-up of technologies, particularly the solar PV market and heat pump technologies, following the introduction of the Renewable Heat Incentive, will continue to grow significantly in the years ahead.
We need a workforce trained, equipped and able to grasp this opportunity.
I know there is a developing training sector and companies taking action to prepare the workforce of the future. For example, British Gas Energy Academy in Leicester and Mitsubishi Electrics UK backed Renewables Training Centre run by Able Skills Ltd in Dartford which opened earlier this month. And there are many more industry-led training opportunities coming forward.
Recognised, effective, accessible training needs to be developed, accredited and publicised to help to ensure market confidence - this must reach the smallest operators to protect the current diversity of the supply chain at the local level.
And the Microgeneration Certification Scheme must be at the heart of setting the standard for all training provision.
Next month the Coalition Government will publish the Microgeneration Strategy Consultation. The Consultation is the product of extensive engagement with industry and other groups over the summer considering the non-financial barriers to deployment. Thank you to those of you who have been involved.
One common thread running through the Consultation is Quality Assurance.
The Microgeneration Certification Scheme - the MCS - approves microgeneration products and installer companies against robust standards. It offers third party certification which gives greater confidence about the quality, durability and safety of installations and a route for complaints.
Only those microgeneration installations carried out by MCS installers qualify for feed-in-tariffs. We envisage this will also be the requirement for installations to be eligible for the Renewable Heat Incentive.
The investment by individuals and companies will only happen if they have confidence in the technologies, their design and installation and their maintenance. That is why the MCS must be robust enough, fully established, and marketed to provide this crucial underpinning to the sector’s growth.
I cannot stress this strongly enough - particularly given the high value of these installations, the greater complexity of installation, system integration and on-going maintenance and repair of such equipment.
MCS must be the industry-brand that is instantly recognisable and trusted - there must be an authoritative, consistently applied quality standard for these new technologies, their design and their installation and maintenance. Should this not be sufficiently robust the implications of a failure of ‘standards’ will have a disproportionately negative effect on the market.
MCS has been and must continue to be industry-led and I know there have been real problems to be addressed and that it still has its critics. In the Consultation we will be seeking views on how best to re-invigorate the MCS - we must ensure that the governance, funding and staffing of the MCS are appropriate for the sector, now and for the future.
There is one other issue that I’d like to touch on. We know the design and commissioning of installations is crucial to ensure that systems perform as intended. We must ensure that consumers receive the best advice possible to arrive at the best solution for their property or project.
Again, in the Consultation we will be seeking your views about how we can ensure the right expertise is accessible at the right points in the supply chain.
To summarise: We aren’t interested in supporting the status quo or incremental improvements in microgeneration. We see this as a transformational agenda: Big Society as a viable alternative to Big Energy.
To do this we need to unlock billions in new private sector investment. The Coalition Government has said we would provide industry, investors and consumers with plenty of ‘TLC’; transparency, longevity and certainty of policy - unlike the previous practice of stop-start grants, short term initiatives, piecemeal programmes and a very narrow horizon - this Government gets the big picture.
There is a growing market opportunity at the household and community-level and we need all technologies in play - to offer the right local solutions.
We need to ensure financial incentives reach their anticipated market.
We need a supply-side with the skills and capacity to match future demand.
We need an industry standard robust enough to safeguard consumers, and ultimately to safeguard the sector’s future as a whole, and we need to unlock investment and innovation on a scale never seen before.
But local energy solutions don’t rest with government. The new distributed energy economy needs new champions. I want exemplars in every part of the country but most of all I want to make real progress now.
As an industry that has spent decades waiting in the wings your time has come. You have a Government ready to be your partner in growth.
Let’s make it happen.