Stephen Timms MP

The Energy White Paper

A key step is the Energy Bill, which I am currently taking through Committee in the House of Commons. It implements a number of commitments in the Energy White Paper: establishing a legislative framework for offshore renewable energy beyond territorial waters, setting up a single wholesale electricity market for Britain with particularly important implications for Scotland - and implementing the 2002 White Paper, "Managing the Nuclear Legacy", establishing the Nuclear Decommissioning Authority to provide long-term strategic direction to the clean-up of Britain's civil nuclear sites with a focus on safety, security, environmental protection and value for money.

Successful delivery of our energy policy needs a lot of people to be involved and contributing, and that's why I welcome so warmly this event and Mark's initiative in setting it up.

Within Government we have set up the Sustainable Energy Policy Network, comprising Whitehall departmental policy units, the Scottish Executive, Ofgem and other organisations involved in delivering the White Paper commitments.

On 26 April the Network published its first annual report. We are aiming for an open, transparent and joined-up process. We also report monthly on key delivery milestones on the Network's website, so that everyone can see how we are progressing towards our aims.

SEPN published its first annual report on 26 April setting out our progress towards the aims in the White Paper. The report includes a summary of the latest available outcomes including key indicators and our achievements in developing and implementing policy and responding to new challenges.

The Europe-wide Emissions Trading Scheme is central to our work set out in the White Paper. It is a key measure in helping us to meet our domestic goal of moving towards a 20% reduction in carbon dioxide emissions on 1990 levels by 2010 as well as our international commitments to reduce emissions of greenhouse gases.

We recently submitted our National Allocation Plan to the European Commission. This will require further fleshing out as we move towards a final Plan later in the year.

As well as achieving real environmental benefits, the EU ETS has been designed to safeguard security of supply by maintaining generation from a diverse range of energy sources, at the same time as recognising industry concern over competitiveness. We consulted industry throughout the development of the Plan and the responses have been an important factor in formulating it.

In all these areas, Whitehall Departments and the Devolved Administrations need to work closely together. On emissions trading, we agreed with the Devolved Administrations to put in place a single regime so that businesses in all parts of the UK are assessed against the same requirements.

As part of our programme, we are strongly committed to developing renewable energy sources.

Our principal lever is the Renewables Obligations in England and Wales, in Scotland and in Northern Ireland, which, with almost 2 years of experience, are proving popular with both investors and developers. Before Christmas I announced an extension of the level of the Obligations out to 15.4% by 2015/16, a further important demonstration of long-term commitment to renewable energy.

In Scotland, Scottish Ministers granted consents last year for over 400MW of new capacity, almost three times the then existing renewables capacity in Scotland. A further 140MW-installed capacity has already been consented in 2004.
We are turning our attention now to the review of the Renewables Obligations. We need to ensure that the Obligations are working to best effect to support the fast growing renewables market.

We envisage - to get the projects off to the earliest possible start - consultations on their scope and terms of reference in the summer of this year. I am well aware of industry's wish to have this work concluded as rapidly as possible to build stability and confidence and to minimise uncertainty. I share that aim. We will be working closely with industry throughout the process.

The unprecedented expansion of renewables will create big opportunities for UK business. We published an analysis recently showing there are already more than 8,000 people employed in the renewables sector in the UK and that could rise to 35,000 by 2020. At the International Conference on Renewable Energy in Bonn ten days ago, Gerhard Schroder made the point that there are 120,000 jobs in renewable energy in Germany today. There is great potential in Scotland.

In looking at proposals for wind farms, we will continue to address concerns about aviation, radar, shipping, and the environment taking all views into account as part of the well established consents process. The transmission network will need to be developed to accommodate new renewable generation and I am please to note that the first significant upgrade application in Scotland will be submitted into the consents process later this autumn.

We are equally committed to our ambitious goal for improving energy efficiency on which my colleagues at Defra lead, and our Energy Efficiency Action Plan was published alongside the White Paper annual report.

We need to double the rate of energy efficiency improvement compared to recent decades, for example through extending the Energy Efficiency Commitment for household energy suppliers through improving building standards and by extending the incentives we have introduced for industrial energy efficiency. We also need to communicate better how every individual and business needs to play a part if we are to make successfully the transition to a low carbon economy.
Recent analysis by Cambridge Econometrics of the Combined Heat and Power (CHP) capacity we can expect to have in place by 2010 suggests we are likely to achieve some 8.1 to 8.5 gigawatts, disappointingly short of our 10-gigawatt target. We remain committed to that target and will continue to monitor progress towards it. The Government's Strategy for CHP to 2010 was also published alongside the Network's annual report. The Strategy sets out a framework to support the growth of CHP capacity in the UK and to enable the CHP industry to meet the challenges ahead.

Competitive energy markets across Europe and beyond will be key to achieving our second and third White Paper objectives - security of supply and competitiveness.

I welcome the valuable debate we have had recently on energy security, prompted in particular by a clause that was inserted into the Energy Bill by the Lords and subsequently removed in Commons Committee. Industry has made an important contribution to that debate, not least the helpful proposal that the Secretary of State might report annually to Parliament on security of supply, emphasising her ultimate responsibility in this area and her accountability to Parliament. I am hopeful that, as the Bill makes progress, we will be able to draw on industry submissions and agree the way forward.
Despite the maturity of the North Sea basin, there are still plenty of opportunities for those with drive, determination and the confidence to invest there. Oil and gas make a huge contribution to the UK economy, particularly in Scotland and through PILOT - the joint industry/Government forum - we work collaboratively in pursuit of PILOT's targets for maximising production and ensuring the longer-term security of our energy supply.

As well as making a contribution to the UK's energy supply, North Sea activity is also important in sustaining employment and economic development on-shore. Once again, the Scottish Executive works closely with PILOT. Last week, the First Minister, Jack McConnell, spoke at the PILOT dinner in Edinburgh, reflecting the priority he attaches to the North Sea oil and gas industry.

The White Paper sets out our view that we need to retain the option of new nuclear build for the future, and we are taking steps to ensure this.

But new nuclear build is currently economically unattractive - no one is coming forward with proposals for new build. And of course, there are important and difficult issues around the disposal of nuclear waste to be resolved.
Any future decision to proceed with building new nuclear power stations will need to be based on fullest public consultation. If we believe that new build is needed, we have said that we will publish a White Paper clearly setting out the case before going ahead.

Establishing the British Electricity Trading and Transmission Arrangements or BETTA is an important step in securing a properly competitive UK energy market. The legislation to bring in BETTA is in the Energy Bill and BETTA is due to Go-Live in April next year.

The aim is to bring down prices and raise service standards through increased competition.

There's a lack of effective wholesale competition in Scotland at the moment. BETTA will mean real competition rather than administered prices in Scotland; it will reduce barriers to entry in Scotland and make it easier to trade electricity between Scotland and England and Wales.

Without BETTA, the cost of any upgrades to the transmission system in Scotland to accommodate new renewable generation could only be recovered from Scottish users. BETTA will allow these costs to be spread across all GB users.
There has been heated debate over the increases to transmission charges for Scottish generators that BETTA will bring. This needs to be taken alongside lower connection charges and the abolition of interconnector charges. Overall, the impact on Scottish generators in aggregate should be broadly neutral. Our policy is that transmission charges should be cost-reflective, non-discriminatory, and should promote competition.

The renewables industry is still in its early stages of development, so we have taken a power in the Energy Bill to adjust transmission charges for renewable generators within a single designated area of high renewable energy potential but where that potential could be held back by unadjusted charges. It's a reflection of our determination to realise the potential in northern Scotland for renewable electricity generation.

Our fourth and final objective is to remove vulnerable households from fuel poverty by 2010.

Scotland has seen good progress, with 2002 figures showing a reduction of 50% from 1996, even on your more stringent standards for heating requirements: based on the 1996 standards, the reduction would have been more like two-thirds. However you slice it, its a tremendous achievement.

WButith fuel prices more likely to be on an upward trajectory than a downward one in the months ahead, its going to be a tough job to maintain this level of achievement. We hope the introduction of BETTA and the increase in competition will bring an important contribution, especially in Scotland, to bearing down on electricity prices. Than on a downward path, there are some tough challenges on this too.

I am grateful for the encouragement and help our stakeholders have given to the delivery of the White Paper. We fully recognise that we cannot deliver this challenging agenda alone. We must continue to build on the excellent start we have made in working together towards leaving the planet in a better condition for our future generations.

So that's a summary of how far we have reached in delivering our aims. There's been good progress, but there's a great deal more to do - and we need to be working with all the organisations represented here this morning if we are to be successful. I am grateful to the Centre for Scottish Public Policy for giving me this opportunity and I hope now we'll have the chance for some discussion.