The Rt. Hon. Patricia Hewitt

Meeting the Challenge of the Energy White Paper

· The challenges and opportunities of the Energy White Paper

CO2 levels are now rising faster than ever before. The Thames Barrier - used once every two years in the 1980's - is now needed a dozen times a year.

Climate change, if it continues unchecked, threatens billions of pounds of damage in Britain - the risks could be even greater in developing countries with millions of people exposed to disease, hunger and flooding.

At the same time, our indigenous energy supplies are dwindling. By the end of this decade we will be a net importer of both oil and gas. Imported energy could account for three quarters of our total primary energy needs by 2020.

This shift from being an exporter of energy to being an importer means we need a new energy policy and securing reliable energy supplies will become even more important in our relationships in Europe and around the world.

Consumers are demanding cleaner, greener energy. The public want a low carbon economy. And they want security of supply. They expect their lights to come on and stay on.

Quality of supply, and in future, diversity of supply will be fundamental to satisfying consumers. And our quest for a low carbon economy will be central to the opportunities and challenges for change.

These are significant challenges. But also great opportunities.

First, the opportunity to protect our environment. We have a choice of how to meet our low carbon target. Some of you here today argued that we could do it by building a fleet of new nuclear power stations. But, my deliberate policy choice, and the governments, was to give top priority to improving energy efficiency and increasing renewable energy sources. But there continues to be a role for nuclear power for many years to come.

But it is a market that is changing. I want to send the strongest message to you today that we are serious about transforming our energy economy in Britain by developing this low carbon economy. And we are committed to renewable energy sources for the long-term. We are making a significant investment in wind power on shore and off shore.

Second, opportunities to serve customers better. Making it easy for customers to get the renewable energy they want. But also protecting our networks from extreme weather to ensure supplies are secure. Making sure that if something goes wrong, like it did in the October storms in 2002, there is every incentive for it to be put right. Different companies responded very differently in the aftermath of last year's storms. Ofgem are working with companies to ensure that, where necessary the right investment and the right changes, tree felling etc, are put in place.

Third, opportunities to develop new technology. We are supporting research and development into new longer-term options such as the hydrogen economy. We need to consume less energy - and we need to consume differently. Innovation and green technology mean that consumption no longer has to cost the earth. I want to see Britain become a world leader, exporting new high tech green equipment. Creating high value, high skill manufacturing jobs in the UK. Our outstanding University science base needs to be harnessed by business and together with our manufacturing excellence develop new, cleaner products.

Fourth, opportunities to diversify supply. In March this year, we gave the go ahead for the same number of wind farms as in the whole of the 1990s. In the past year, we've approved more than 1GW of generation capacity for both onshore and offshore wind power, double the capacity currently in operation. And a further 2GW is on the way - producing enough energy to meet the domestic electricity needs of a city the size of Greater Manchester. We are under no illusions about how much more needs to be done

For network operators the challenge is how to get this new, more diverse supply onto the network and delivered to the customer?

Many network operators are already responding to these challenges. Companies like Northern Ireland Electricity who are using intelligent IT systems to recognise and diagnose faults by automatically matching information from a customers phone number, with network equipment, the minute they make the call. Resulting in better customer service and more rapid response. Exactly the kind of fast customer service we need across the network.

We want more to do the same. Working together in partnership with the regulator and the unions can pay huge dividends. I urge network operators to put forward network improvement schemes to Ofgem for their consideration.

Because we know that, despite investment, our network is getting older and was not designed to cope with the huge changes we are going through. We must find effective and efficient solutions to make networks live longer and perform better.

Ofgem, in a way, sits in the middle of all this. They have a crucial role to play and we expect them to deliver on the White Paper priorities and we have given them the guidance they need to do this.

Improving the distribution network is partly about getting capital investment. And it's partly about better management, better skills and better customer service.

The energy industry, like the rest of the economy, faces skills shortages. Earlier this year we published the skills strategy, jointly with DfES setting out how we start to close the skills gap - working in partnership with the RDA's, Learning Skills Councils, Job Centre Plus and the Sector Skills Council for Energy and Utilities.

Many of you are finding your own way to recruit and retain the best staff. Some of you, by going for Investors in People status, some by offering flexible working, some of you by having workplace partnerships that show a real commitment to the development of your staff. Trade Union Learning Representatives are doing great work encouraging people to update their skills and getting them to recognise that opportunities for learning continue throughout their working life.

Better management and better skills will make a real difference to your customers and it is their needs and wants that are driving the agenda for change.

There is concern among the industry and among consumers who are worried by what they have seen in Europe and North America in recent months -

· Chaos on the streets of New York - 60 million without power · The whole of Italy without power for 9 hours - 50 million affected · 5 million without power in Denmark and Sweden

And we have experienced it ourselves here in London and in the Midlands, but on nothing like the scale that others have suffered. And for very different reasons.

The cuts we suffered were serious but it is important to keep them in perspective. Ofgem, the DTI and the companies involved are taking them very seriously but they were not caused by capacity shortages. They were not caused by the liberalised market. There was no cascading through the system as experienced in the US and Italy. And the recovery was very rapid - just over 40 minutes in each incident.

NGT has assured me that the power cuts in August were not down to a lack of investment in the grid. They have invested over £3 billion since privatisation - three times pre-privatisation levels.

But, of course, winter is a time when anxiety runs high as the temperature drops. And consumer anxiety is fuelled by scare stories predicting winter blackouts. What we are doing is working together - the industry, the government, Ofgem and Energywatch through the Network Resilience Working Group - to learn the lessons of last year's storms and try to ensure that history does not repeat itself this winter.

What is clear from National Grid Transco's (NGT's) Winter Operations Report, published on Tuesday this week, is that the energy capacity outlook is not as dark and gloomy as many people would have us believe. What we are seeing is a properly functioning market. Generators were mothballing capacity until demand is sufficiently high. NGT acknowledge that the generation capacity reserve is increasing as the market responds to higher prices - Powergen, for example recently announced it is bringing some of its mothballed capacity back on line. We can expect other similar announcements.

At the same time NGT, given their legal responsibilities, are taking a sensibly, prudent approach -

· Tendering for additional reserve capacity and · Working with industry to address some long-standing issues like interactions between gas and electricity markets.

Winter is always a difficult time but we have a robust, well-regulated system. The average number of power cuts has fallen by 11% and their duration has dropped by almost a third since 1991/92. We're certainly not complacent we will learn from the recent incidents in the UK and we're looking to Europe and to America to see if there are lessons to be learned there.

You have a full programme ahead of you - so let me draw my comments to a close.

We have set out the right strategy and policy framework in the Energy White Paper. We have to work together so that it delivers for consumers, for the environment and for future generations. And it will contribute to the high skill, high value added manufacturing industry we all want to see.

Thank you.