Source: UK Labour Party
URL: http://www.shadowdecc.org.uk/caroline-flint-speech-to-the-cbi-energy-conference-
Date: 17/07/2014
Event: Caroline Flint: the UK energy market "a once in a generation opportunity"
Credit: UK Labour Party
People:
[Caroline Flint speech to CBI Energy Conference.]
Caroline Flint: Nick, thank you for that introduction. All of us, by now, are very well acquainted with the fact that in the next decade a quarter of our power supply will be shut down or switched off for good. The decisions about what we replace it with will have to be taken in the next few years. But the consequences of the choices we make, as a country, will last for generations to come. They will determine whether we succeed in keeping the lights on, the energy bills that land on people's doormats, and whether we manage to limit our carbon emissions and prevent dangerous climate change.
Today, I want to set out three principles that will guide Labour's approach, and which I believe will help us capitalise on the transition to a low-carbon economy and secure long-term gains for our country.
First, reducing energy demand is much cheaper and quicker than building new generating capacity. And it will become even more important as the electrification of transport, heating and industrial processes increases pressure on the grid. The Government's own analysis shows that Britain could reduce its demand for electricity by over a third by 2030. And the key thing is this - reducing demand does not have to mean a drop in living standards. Wastefulness is built into the system we use.
Let me give you one example. For most shops, electricity bills are the second biggest cost after staff. And refrigeration accounts for 40% of a typical electricity bill. Fitting doors on fridges reduces this by half. In 2012, the Co-op supermarket began installing doors on its fridges, with a plan to retrofit about 200 stores a year, until eventually they've been rolled out to all of their 2,000 stores. The cost of fitting doors is immediately offset by a smaller motor needed to pump refrigerants in the system. So it's cost neutral before the first energy bill even arrives.
The new motors also tend to break down less often, so the maintenance costs are lower and less stock is lost. And every month, the Co-op saves 20% on their electricity bills. As a result, at the same time as energy prices have continued to rise, in the first year of the programme Co-op supermarkets managed to save £50 million pounds from their electricity bills. And by 2020, they hope to have cut their greenhouse gas emissions by 50%.
That's just one example of the scale of the savings that are possible through demand reduction. But we still haven't grasped its full potential. Allowing demand reduction to be included in the capacity market - to cover periods of peak demand when the system is under strain and power is at its most expensive - is a sensible proposal. But it has two very serious flaws. First, it only really gives an incentive for demand reduction when there's a potential shortfall in capacity. But demand reduction should be a priority all of the time - not an option of the last resort.
And second, by offering only one year contracts for demand reduction, compared to 15 years for new plant and indeed to three years for refurbished plant, it potentially creates perverse incentives to build new capacity when there may be cheaper, lower carbon alternatives. In any case, the complexity of the Capacity Markets means it's completely unsuitable for delivering energy savings for households or small business. Only large energy suppliers and other specialist companies will be likely to participate. But to achieve the full electricity saving potential identified by the Government, it is vital that we capture savings from small businesses and homes as well.
There have been a number of energy efficiency schemes and programmes under this Government and indeed, under the last Labour Government too - but what frustrates me is that we don't seem to be learning from what works and what doesn't work. I agree entirely that what this country would benefit from is a long-term consensus on energy efficiency. But I cannot sign up to a consensus of mediocrity. To a Green Deal that's so far had fewer than 2,500 sign-ups. To the Energy Company Obligation which will lift fewer people out of fuel poverty in ten years than fell into fuel poverty last winter alone.
I want to be ambitious about energy efficiency, I want other countries to look at us and say look at what Britain is doing. I don't want to be asked to comment on why in Europe only Estonia has a higher proportion of its population in fuel poverty than the UK. And I want us to recognise the tremendous impact on jobs, on health, and on the rest of the economy if we get energy efficiency right. And when we publish our next Green Paper on energy efficiency shortly, which I would welcome views on, I hope we will have the policies to meet that challenge.
The second principle is this: investment in low-carbon sources of generation will ultimately be more affordable for consumers, than investment in high-carbon sources. Climate change is a threat to our national security - so urgent and sustained action to reduce our carbon emissions at home and secure agreement abroad must be a priority for any responsible government. The longer we leave it, the costlier mitigating and adapting to climate change will become. And it is simply not possible to reduce our carbon footprint without decarbonising the power supply. So if we are elected, the next Labour Government will set a clear decarbonisation target for 2030.
We will respect the independence and advice of the Committee on Climate Change, end the uncertainty over the fourth carbon budget and act swiftly to implement the fifth carbon budget. And we will continue to support the Levy Control Framework and the Electricity Market Reform package, as we have done in this Parliament. But to unlock the full potential of the UK's renewable energy resources and develop other low-carbon technologies like nuclear, businesses must play their part too.
We need to see costs come down, and tell a clear story about how and when technologies will be able to compete without subsidy. We need proper engagement with communities and sometimes more intelligent siting of projects. And we need to support UK content and build a proper supply chain to maximise the economic benefit. Because decarbonisation isn't just about saving the planet, important though that obviously is. It has the potential to yield huge economic benefits too. New industries. New companies. New jobs. Nearly a million people are already employed in the low-carbon sector. Two thirds of these jobs are located outside London and the South East. And there is the potential for many more.
But thirdly, we should also be honest: fossil fuels will be an important part of our energy mix for years to come - which is why carbon capture and storage is so crucial. Today 70% of our electricity is being generated from coal and gas. 80% of heating in our homes relies on gas too. That's why Tom Greatrex and I have consistently said that if there is an indigenous source of gas that can replace the rapidly depleting North Sea gas reserves, and if it can be extracted safely and sustainably, then for reasons of energy security at least, it should not be dismissed out of hand.
I've also said that the big overlooked area is the potential for greening the gas network, which could improve our energy security, help us cut our carbon emissions and provide a solution to waste management as our landfill capacity declines - all while utilising our existing infrastructure. But even if we can develop green gas and even if there is plentiful shale gas, it doesn't make the problem of carbon emissions or climate change go away. In fact, it makes the need for the development of carbon capture and storage all the more essential.
The fact that the UK can still boast a commendable pipeline of projects, after four years of very little progress, is due to the resilience of the industry, rather than strong support from Government. But White Rose and Peterhead cannot be allowed to stand in isolation. They must be the vanguard of a new industry, rather than engineering curiosities. And the responsibility for developing CCS resides with both Government and industry - and as Tom Greatrex set out in the paper we published last week, under Labour it will be a priority.
Underpinning everything I've said today is what your director John Cridland described as a 'managed market' at the last CBI energy conference I spoke at. It's true to say that at no point since privatisation has there been greater state involvement in our energy system than now. We do this to provide a clear long term policy framework and give businesses the confidence they need to invest. And alongside this clear direction of travel from Government, it is vital that we secure the finance to create and de-risk investment. The Green Investment Bank should play a key role in this but is currently hampered in its ability to operate.
The Bank claims to have leveraged in £3 from the private sector for every £1 that they have invested and has the potential to do so much more. So we will give it the powers to borrow and the freedom to act as a bank capable of attracting new investment. This will enable it to offer a range of financial solutions to accelerate the rate of private sector investment in clean energy. And to help ensure our country has a secure energy supply for the future, we will establish a new dedicated Energy Security Board.
Currently no single institution has responsibility for establishing what our future capacity needs are and developing a strategy for meeting them. This is divided up between DECC, Ofgem and the systems operator within the National Grid. Given the pressures on our existing generation capacity, there is an urgent need to give security of supply a much clearer institutional focus, which is why we're proposing to establish an Energy Security Board with a statutory responsibility for identifying our energy needs, taking co-ordinated action to meet this need and providing a clear framework for investor certainty.
This is what a managed market looks like. And it offers tremendous potential benefits not just to the public, but to this industry too. Because if the energy industry can treat its customers better and open itself up to greater scrutiny, and if it can show that it is doing everything within its power to shield its customers against rising prices, then that puts a responsibility on consumers to do everything they can to manage their energy usage and on politicians to take the right decisions for the country and to explain our choices to the public.
This transition to a low-carbon economy, fuelled by the sun, the sea, the wind and the waves, has the potential to be a major source of wealth and prosperity for decades to come, creating jobs here, exporting expertise and technologies abroad, and making our economy smarter and leaner. But we will only secure the public's consent for these big changes if they believe there is fairness in the way our energy market is run. They know something isn't right. You know something isn't right, too - and your businesses depend on trust in this market.
So resetting the energy market and restoring people's faith in it, as we have proposed through our temporary price freeze and market reforms, is as much in your interests, as it is in consumers'. This may be a once in a generation challenge for our country, but it is also a once in a generation opportunity. We are on the verge of another industrial revolution as transformational as the one that came a hundred and fifty years ago. Whether it's energy efficiency, smart meters, shale gas, carbon capture and storage, renewables or nuclear, this industry has the potential to be a massive success story for our country.
Let's seize that opportunity. Thank you very much.