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Annex A:
Speaking Note
Introduction
 Innovation has always been the key to successful
energy policy.
 It has never been as simple as rolling out one proven
means of power-generation. On the contrary, we have
always endeavoured to find new sources in new
places, whether we look at the first generation of
nuclear power stations in the 50s, or the opening up of
the North Sea in the 60s.
 In the past, innovation has given us access to more –
and therefore more secure – energy, and at lower
cost.
 Today, it must also mean cleaner energy, so that we
can more towards a low carbon economy and a
sustainable, secure, affordable energy future.
 I am going to set out what Government is doing to set
the framework for an innovative, diverse energy mix
and I will talk about some particular technologies at
the forefront of energy policy.
Electricity Market Reform – Outline
 Electricity Market Reform is the framework which will
deliver the cleaner energy and reliable supplies that
we need, at the lowest possible cost.
 Set out in the Energy Bill, which reached the House of
Lords this week, EMR will attract £110 billion
investment in this decade alone – the amount needed
to replace our ageing energy infrastructure with a
diverse and low-carbon mix.
 This is essential to keeping our homes heated, our
industries powered and our lights on.
 Renewables, fossil-fuel plant equipped with Carbon
Capture and Storage, gas and nuclear will all play
their part.
 Diversity will provide security for our electricity
supplies and the low carbon mix will help us meet our
emissions and renewables targets.
 It’s not only that this will power our economy – the
investment will also directly create jobs and growth
across the UK.
Electricity Market Reform – detail
 EMR works with the market and encourages
competition, thereby minimising costs to consumers
as we attract the investment we need.
 Costs to consumers will fall only when the new plant
start generating, with costs spread over the
operational lifetime of the schemes.
 At the core of our reforms is a new mechanism, the
Feed-in Tariff with Contracts for Difference.
 These long term contracts will provide long-term
electricity price stability, and therefore revenue
certainty, to developers and investors in technologies
such as carbon capture and storage, renewables and
nuclear.
 Competition will bring down overall costs and,
eventually, provide a level playing field where lowcarbon generation can compete without support with
other technologies in the electricity market.
 We will also introduce a Capacity Market, to ensure
that sufficient reliable capacity is available to meet
electricity demand as it increases over the next
decade.
 These new mechanisms will be underpinned by a
robust and transparent institutional framework which
will provide certainty for industry and investors.
Energy Bill
 The Bill is making good progress through parliament.
This is a reflection not only of Coalition consensus
around our reforms, but also representative of crossparty agreement on our objectives for the sector.
 Discussion in the Commons has been wide-ranging –
covering issues ranging from the setting of a
decarbonisation target for 2030 to transparency. This
debate is healthy and welcome – it is hugely
encouraging that these discussions are around the
fine-tune EMR rather than a disagreement with the
underlying principles.
 We are on track to achieve Royal Assent of the
Energy Bill by the end of this year, setting in law the
framework for Electricity Market Reform, and allowing
the first Contracts for Difference to be signed in 2014.
Decarbonisation Target
 The new Government clauses added to the Energy
Bill enable the Secretary of State to set a legally
binding 2030 decarbonisation target for the electricity
sector in 2016.
 These provisions enable the Government to set the
world’s first legally binding target range for power
sector decarbonisation and they do this in the right
way by taking into account the needs of investors for
clarity about the long term, the costs to consumers,
and the transition of the whole economy to meet our
2050 target.
 A decision to exercise this power will be taken once
the Committee on Climate Change has provided
advice on the level of the 5th Carbon Budget and
when the government has set this budget, which is
due to take place in 2016.
 This timing ensures that any target would be set at the
same time as the fifth carbon budget, which covers
the corresponding period1 and within the overall
framework of the Climate Change Act.
1
2028-32
 This means that a target would not be set in isolation
but in the context of considering the pathway of the
whole economy towards our 2050 target, and making
sure we do that in a way that minimises costs both to
the economy as a whole and to bill payers.
North Sea
 Last century, electricity generation was dominated by
fossil fuels. Oil and gas will remain central to the UK’s
energy mix as we make the transition to a low carbon
economy.
 We continue to work closely with industry and we
have a fiscal regime that encourages further
investment, bringing forward new UK fields while the
existing infrastructure is in still place.
 Working together, my two Departments have
launched an Oil & Gas Industrial Strategy to maximise
recovery, maintain competitiveness, and promote
growth of the UK supply chain.
Shale Gas
 Shale gas is a prime example of a new option
available because of technological innovation. A
combination of hydraulic fracturing and horizontal
drilling have opened the possibility of exploiting fuel
which were deemed too difficult or too costly to extract
just a few years ago.
 It is true that shale has led to significant price falls in
the US. However, we are still at an early stage in the
UK and need to explore and prove the potential,
safely and while protecting the environment.

Despite some far-fetched claims in the media about
the implications of shale gas for the UK, there is no
doubt that it has the potential to add to indigenous
energy supplies.
 We are building momentum - by setting up the Office
for Unconventional Gas and Oil; taking forward work
on a new onshore licensing round; and planning to
incentivise shale gas development, as announced in
the Budget.
Carbon Capture and Storage
 Carbon Capture and Storage will have a critical role to
play in reducing emissions in the UK and allowing gas
and coal to continue to participate in our future low
carbon energy mix.
 We want to see CCS deployed at scale in the 2020s,
competing on cost with other low carbon technologies.
 To make this happen, Government has created a
comprehensive programme, including a CCS
competition with £1bn capital funding available.
 Our two Preferred and two Reserve bidders were
announced in the Budget. We aim to sign FEED
contracts in the summer; with decisions to be taken in
early 2015 to construct up to two full projects.
 These projects offer us the opportunity to ensure that
both gas and coal generation have a hugely reduced
impact on our carbon emissions.
Renewables
 We are strongly committed to a long-term future for
the UK renewables - a commitment underpinned by a
publicly-stated annual budget of £7.6bn for low-carbon
electricity by 2020.
 However, our ambition extends beyond 2020. Our
goal is to put renewables firmly in the energy mix over
the period of the 4th carbon budget.
 To take marine energy, we have prioritised funding for
the next big step for the industry: the move to the first
arrays. Firstly through DECC’s £20m Marine Energy
Array Demonstrator – MEAD for short; and secondly
through prioritising marine energy projects in
accessing EU NER 300 funding.
 As a result, a Scottish Power Renewables’ and a
Marine Current Turbines’ projects were recently
awarded around 40m € in total of NER 300 funding.
This represents a tremendous opportunity for these
two UK projects to demonstrate the sector’s future
potential.
New Nuclear
 The UK has everything to gain from becoming the
number one destination to invest in new nuclear.
 We are in negotiations with NNB Genco about the
potential terms of an Investment Contract (an early
form of CfD) that might enable a decision on their
Hinkley Point C project – for which planning consent
has been granted.
 The last quarter of 2012 also saw the successful sale
of Horizon Nuclear Power to Hitachi, regulatory
approval of the EPR reactor design, and the beginning
of site characterisation work at Moorside.
Direct Innovation
 The government also invests directly into a variety of
smaller projects across a broad portfolio of innovative
technologies - in excess of £800m in this spending
review.
 This will ultimately drive down the costs of new lowcarbon technologies, making clean energy cheaper for
householders and businesses.
Business Consumers
 I know higher energy bills are hitting businesses hard.
 Competition is key to keeping prices as low as
possible. Although there is more competition in the
business supply market than in the domestic market,
we need to see greater engagement from small
business consumers.
 Ofgem’s non domestic retail market review proposals
will provide greater protection and clearer information
to small business customers to help them engage in
the market.
 Ofgem plan to introduce new enforceable standards of
conduct will mean suppliers will have to act promptly
to put things right when they have made a mistake.
 And they will widen existing licence conditions to
enable up to 160,000 extra smaller businesses to
benefit from clearer contract information on their bills.
 Energy Intensive Industries are also critical to the UK
economy and the Government is committed to
ensuring that they remain competitive. We announced
the £250 million package of compensation for these
industries whose international competitiveness are
most at risk from indirect costs of the Carbon Price
Floor and the EU Emissions Trading Scheme.
Conclusion / Energy Efficiency
 So, Government is legislating to put in place a
framework which will see our energy supply diversified
to meet our energy goals: secure, low-carbon,
affordable.
 And work is underway across the board to facilitate
the development or deployment of promising power
generation technologies.
 One final area of innovation which may be of
particular interest to businesses is energy efficiency.
 The Coalition Government has a mission to seize this
opportunity. The Energy Efficiency Strategy sets out
actions to exploit untapped, cost-effective potential.
 We estimate that we could be saving the equivalent to
22 power stations2 in 2020.
 And we have also brought forward amendments to the
Energy Bill so that a financial incentive to encourage
permanent reductions in electricity demand can be
delivered through the Capacity Market.
 The Electricity Demand Reduction incentive would be
available to a range of sectors and technologies and
could target reductions at peak demand and so
incentivise reduction at times when it is more
valuable.
As you will appreciate, doing more with less makes
economic sense for businesses and for the country
2
196TWh [Terawatt hours]