Affordable, reliable energy is critical to our economy, to our national security, and to family budgets. Our challenge is how to ensure energy remains the backbone of our economy while we transform to a low carbon system.
We are doing all of this to provide the foundation of our future economic success:
Secure energy so that people can get on with their lives and businesses can plan for the future.
Affordable energy so the people that foot the bill, the households and businesses of Britain, get a good deal.
And clean energy to safeguard our future economic security.
Energy security is my first priority. It is fundamental to our economy’s health and to people’s lives. It underpins everything we need to do. I want a consumer-led, competition-focused energy system that has energy security at the heart of it: one where markets flourish, which is open to trading and where competition keeps prices down.
Securing supply and the role of gas
We have a robust plan for securing supply.
Gas we use in our homes and businesses is relatively cheap and secure thanks to a diverse supply of pipelines - but we import half of it. Encouraging investment in shale gas exploration will help add new home-grown supplies to the mix and create a bridge to developing renewable energy, improved energy efficiency and new nuclear capacity.
In the next ten years we need new gas-fired power stations: gas is central to our energy secure future.
Climate change and decarbonisation
How do we live up to the challenge of decarbonisation? Climate change is an issue of environmental responsibility and of economic security. It is a global issue. Action by one state will not solve the problem. It’s what we do together that counts. That is why we are pushing for a strong global deal in Paris as a platform to transform the world into a sustainable low carbon economy. But Paris won’t be the end.
Britain’s role in this global effort is to demonstrate to the rest of the world how to cut carbon at the lowest cost, delivering economic growth and affordable energy prices. Our Climate Change Act has led the way and is inspiring others. We met our first carbon budget and we’re on track to meet two and three, but there’s a gap on the fourth. We need pragmatic action to meet it, across the economy and we will set out our plans next year.
To set a global example we need a cost effective approach in generation, by controlling subsidies and balancing the need to decarbonise with keeping bills low. And we have to get the balance right. New, clean technologies will only be sustainable at the scale we need if they are cheap enough. When costs come down so should support. Subsidy should be temporary, not part of a permanent business model.
I want us to become the first developed country to deliver on a commitment to taking coal off the system. We will consult next spring on whether and how to close all unabated coal fired power stations by 2025 and restrict the amount that can be generated from 2023. But, we will only do it if we can shift to new gas in time.
I believe Government must intervene where it can really make a difference. We are world leaders in offshore wind and globally we can make a lasting technological contribution. On current plans we expect to see 10GW of offshore wind installed by 2020. If – only if - Government’s strict conditions on cost reduction are met we will make funding available for three further auctions this Parliament, the first by the end of 2016. If offshore wind moves quickly to cost competitiveness we could support up to a further 10GW of offshore wind projects in the 2020s.
North Sea Oil
Like industry, investors need certainty and I want to provide it for UK oil production. The North Sea offers significant value to the UK and has ongoing potential and we must act to safeguard it. That’s why we have created the Independent Oil and Gas Authority and are beginning a consultation on a Strategy to Maximise the Economic Recovery of the North Sea.
To deliver the kind of system change we need we must unleash innovation to develop energy technologies that will take off at scale. Government’s role is to create the conditions for new ideas to flourish by removing barriers that get in the way.
Smart meters are the basis of an approach that could allow radical new models to develop, sparking new ideas, creating new efficiencies, keeping costs low. They will be in every home and small business by 2020. But they alone won’t fully realise the benefits of a new approach. A fully smart system could help reduce costs dramatically.
National Grid plays a pivotal role in keeping the energy market working; and there is a strong case for the system operator to have more independence to allow it to adapt to necessary changes as the system changes. Alongside the National Infrastructure Commission, we will work with National Grid, Ofgem and others to consider how to reform the current system operator model to make it more flexible, responsive and independent.
DECC funding for innovation is already supporting the development of transformative technologies here in the UK; in energy storage, in low carbon transport fuels, in more efficient lighting.
And we need to look towards a strong long term plan for heat. It’s the cause of a third of emissions, but progress to innovate and decarbonise has been slow. I want to test new approaches to find out what works best. We will set out our approach next year, as part of our strategy to meet our carbon budgets.
I’m determined that energy efficiency is concentrated on those in greatest need. The cheapest energy is the energy not used; and we’re committed to ensuring a million households benefit from energy efficiency improvements in this Parliament.
For businesses, energy efficiency can reduce costs, which in turn improves productivity and competitiveness. But the tax and policy framework designed to encourage this is complex and we are now looking at streamlining it.
These are my priorities; for our energy security, for our economy and for our future.
Now let’s get on and deliver them