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Low Carbon Summit

The Rt. Hon. John Hutton MP,  Secretary of State for Business, Enterprise & Regulatory Reform
London,  24 June 2008

Can I start by thanking all of you for being here this morning. I believe this is an important day. We are opening a new chapter in Britain’s history as a nation of enterprise and innovation. Moving from the old, carbon intensive economy of the industrial revolution to the new low carbon technologies of the 21st century.

Every nation’s health and security depends ultimately, as we all know, on its ability to source reliable energy supplies. Energy that can power our industries, keep our homes warm and keep us all mobile.

But energy policy here and around the world needs to take into account the very powerful forces of change – both economic and environmental - that we can see swirling all around us. The era of cheap energy is over. Global demand for energy has driven the price of coal, oil and gas higher and higher. And high carbon emissions from energy usage threatens not just our way of life, but the very idea of development and progress right across the globe. Political instability in some of the worlds most energy rich regions adds a further element of complication into the equation. We must therefore respond to these forces of change and try and establish now a new consensus about the right way forward. And we must do so in a way that can best secure our vital national interests – not just for all of us here today, but for those who come after us.

Promoting the development of renewable energy must lie at the heart of our new energy strategy.

The publication this morning of the Government’s plans for developing renewable energy marks an important moment in this journey. It sets out our priorities. Firstly, we intend to make the most rapid progress possible to becoming a cleaner, greener economy. Secondly, we should make these changes in the most effective way possible, with the least cost to consumers. Finally, we should seek to generate the maximum economic benefit for the UK by creating a new generation of green collar jobs, spreading wealth and opportunity as widely as possible.

Now, to achieve all of these ambitions we will need to create a diverse mix of low carbon energy sources and reduce our dependency on fossil fuels.

In doing so the UK can be at the forefront of the new low carbon industrial revolution. One that could be worth, in just over 30 years, $3 trillion per year and employ over 25 million people world-wide.

So my job is to help ensure that the UK becomes a magnet for international investment, R&D, innovation and skills development.

Now we’ve got to face the fact that we’re not alone in that goal. Every country is competing for the same resources - infrastructure, finance, people and technology – as we’ve just heard.

But I strongly believe the UK has what it takes to be a global leader in becoming a low carbon economy, given our historic strengths as one of the world’s largest manufacturing economies; a world class centre of energy expertise and a leading location for international inward investment.

We already have a dynamic and growing sector with investment worth hundreds of millions in renewables. We have the largest clean technology venture capital market. And London is of course the global hub for carbon trading.

And as the Ernst and Young report published today suggests, we can reap the benefits from green business where we already have a degree of comparative advantage. But of course we should always be alert to new market opportunities.

We know that the actions of Government can make the critical difference between investors choosing to invest here or going elsewhere. So we must give investors the confidence and certainty to choose the UK as the right place to do green business.

We are already taking the necessary action to achieve this at a national and at an EU level. We’re working hard to build momentum and confidence in all forms of low carbon energy, including nuclear power.

Showing our firm commitment to cap and trade systems like EU-ETS to see them become a powerful mechanism in the fight against climate change.

And ensuring we have a planning regime that delivers quicker, more cost-effective and informed decisions for investors. This is why the Planning Bill is vital to remove the costly inefficiencies of our creaking system that has for far too long held up green energy business. It will mean we can reach decisions on vital new infrastructure quickly and efficiently.

But we need to press further ahead.

Today we are setting out four further key steps we are taking to deliver our goals.

Firstly, as the Prime Minister has mentioned, we are setting out how the UK can achieve our share of the EU 20% energy target from renewable sources by 2020.

With rising oil prices and growing evidence on climate change, the case for doing this is increasingly compelling.

Now we’re making good progress. This year we will overtake Denmark to become the country with the most installed offshore wind generation capacity in the world.

But this 2020 target requires us to go dramatically further and dramatically faster. So the measures we are proposing today are aimed at delivering a ten-fold increase in our use of renewable energy by 2020.

Now of course it is going to take a massive effort. And will only be achieved if government removes all of the barriers and provides the incentives to drive up deployment of renewable energy, and if business, in its turn, responds swiftly and strongly.

So we want to raise the level of the Renewables Obligation to encourage a third of our electricity to come from renewable sources by 2020.

We’re proposing to introduce a new financial incentive to encourage a very large increase in renewable heat sources.

And we want to extend financial support, including the possible use of feed in tariffs, to encourage more microgeneration of heat and electricity in our homes and buildings.

Also to support the next generation of offshore wind technologies, we shall fund a £10 million programme of demonstration projects, subject of course to State Aid clearance.

The benefits in reaching the 2020 target I think are going to be enormous, in terms of carbon reductions, security of supply and business opportunities. It should create around 160,000 jobs in the UK and beyond and involve at least £100 billion of new investment.

So although the cost impacts of this ambition will not be felt by consumers until the last part of the next decade, we must nevertheless strive to find the most cost-effective means from the outset and put saving energy and protecting those in fuel poverty at the forefront of this new thinking. And in all of these areas we will set out further proposals later this year.

Secondly, the issue of speeding up grid access will be vital.

We are determined to sweep away the barriers to grid access for both renewable and other forms of generation, so we have published today, together with Ofgem, a series of measures which are designed to do just this.

In the short-term we want to see the immediate introduction of a “connect and manage” type regime. This could help connect over the next 2 years up to around 1Giga Watt of renewables projects, including those that already have planning consent. This should help us make more rapid progress, increase the flow of orders, which I think is vital, and help the supply chain develop.

But we also need long-term fundamental changes to the way generators gain access to the electricity grid. And we are working with industry to achieve this and to ensure we have the essential infrastructure in place needed to support this new generation.

Thirdly, to build a regulatory system that meets our low carbon ambitions, we must continue to have an independent economic regulator that meets our changing policy priorities.

Our last guidance for Ofgem was issued in 2004 and much has changed in energy markets since then.

So we shall seek views from today on proposed revised guidance. This will stress our expectation that Ofgem contributes to our overall environmental goals. And takes a strong lead in co-ordinating activity to help low income and vulnerable customers benefit from competitive energy markets.

Fourthly, as the Prime Minister has said, fossil fuels will play a significant part in providing secure energy supplies for the foreseeable future – not just in the UK but in countries like China and India, where their use, as we know, is growing rather than declining. But if we are to succeed in tackling climate change, it is essential that we decarbonise that supply of fossil fuels.

So it is vital that we get in place the correct regulatory regime to support the deployment of Carbon Capture and Storage.

I believe the UK is already a world leader in developing CCS, as one of the few countries committed to supporting a commercial scale demonstration, and being one of the most advanced countries on regulatory regimes.

Next week we will launch a consultation on our approach to regulating CCS, and make further announcements on progress on the UK CCS demonstration project.

Conclusion

So our ambition is therefore clear and our commitment strong to deliver the certainty you need to exploit the opportunities from our transformation to a low carbon economy.

But this is a consultation process, and of course it is essential to listen to you. To understand what more needs to be done to enable you to capture the most value from this market, and what the Government’s role can be in assisting and addressing these remaining barriers.

This is another area where we need your help. I look forward to hearing your thoughts and ideas. Your contribution is absolutely vital if we are to make the UK the global leader in the low carbon revolution.

Thank you

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