The negative impact that spikes in global oil, gas and coal prices have on the UK could be reduced by over 50% in 2050 as a result of climate change policies, Edward Davey said today.

The analysis, produced by Oxford Economics and commissioned by Government, shows how the UK’s sensitivity to oil and gas price shocks could be reduced by using low-carbon forms of electricity generation including renewables, new nuclear and through increasing energy efficiency.
 
Secretary of State, Edward Davey said: “Every step the UK takes towards building a low-carbon economy reduces our dependency on fossil fuels, and on volatile global energy prices.

“Only last year, the impact of the Arab Spring on wholesale gas prices, pushed up UK household bills by 20%.

“The more we can shift to alternative fuels, and use energy efficiently, the more we can ensure that our economy does not become hostage to far-flung events and to the volatility of market forces.

“Of course, there are costs to building more low-carbon plant, but the gains are so much greater, and crucially they are lasting.

“This is about building a more resilient economy and providing more stable energy prices for the generations that follow us”.

Energy prices have been trending up over the past decade and are becoming increasingly volatile.

Once the UK fully transitions to a low-carbon economy, the negative impacts of energy price volatility on these 4 factors are halved:

• Halving the impact of energy price volatility on disposable household income, and therefore reducing amount households would have to put aside to spend on energy bills.
• Halving the negative impact on the level of business investment.
• Halving the impact on inflation
• Halving the impact on levels of unemployment, which could rise through increased economic inactivity caused by high energy prices.
   

Climate change policies have the potential to mitigate against the volatility of fossil fuel prices, by reducing the UK’s reliance on fossil fuels. 

Out to 2050, as the UK economy becomes less energy-intensive through improved energy efficiency and through reforms to the electricity market,   these impacts will be more than halved.

Next week, the Government will publish the draft Energy Bill which will set out in detail how the UK’s electricity market can be reformed in order to keep the lights on, bills down and the air clean.

It will set out how the UK can attract the £110 billion of investment required to build new low-carbon plant, by designing a more attractive market with stable returns for investors and fairer prices for consumers.

The reforms will allow the UK to meet its climate change targets, an 80% reduction in emissions of greenhouse gases by 2050,  whilst incentivising the construction of a balanced mix of renewables, new nuclear and CCS.

Notes for Editors

• DECC commissioned Oxford Economics to carry out the research in 2011 - download the 'Fossil fuel price shocks and a low carbon economy' report
• Two scenarios were analysed, a low carbon and business as usual (BAU) scenario which compared the impacts of a 50% increase in the global price of oil and gas on the overall UK economy and different components of the economy: consumption, investment, inflation, employment and sectoral impact.
• The draft Energy Bill will be published next week. This sets out Government’s proposed reforms to the electricity market. It is being published in draft so that it can undergo pre-legislative scrutiny.
• The draft Energy Bill will reach Royal Assent in 2013, with the first low-carbon projects being supported through it in 2014
• The Electricity Market Reform White Paper published in July 2011 outlines Government’s proposals for transforming the power sector

The 2012 Annual Report on Fuel Poverty Statistics is published today, 17 May 2012. The publication covers new data for England for 2010, and an estimated level of fuel poverty in the UK for 2010. 

The main points are:

• The number of fuel poor households in England fell to 3.5m in 2010, from 4.0m in 2009. In the UK, fuel poverty fell from 5.5m households in 2009 to 4.75m in 2010.

The reduction in fuel poverty was caused by three main factors:

• rising incomes, especially amongst lower income households at risk of fuel poverty (see section 3.2 of main report);
• improvements in the energy efficiency of the housing stock and installations of energy efficient boilers (32% of households had condensing boilers in 2010 compared with 24% in 2009), enabling households benefiting from these to heat their home with less energy (section 3.4 of main report);
• little change in prices for domestic energy between 2009 and 2010 (section 3.3 of main report).

The UK level of fuel poverty is estimated based on 2010 data for England and Scotland and extrapolated estimates for Wales and Northern Ireland based on earlier years. 

Vulnerable households

In England in 2010, around 2.8 million vulnerable households were fuel poor, down from 3.2 million in 2009. In the UK, an estimated 4 million vulnerable households were fuel poor in 2010, compared with around 4.75 million a year earlier. A vulnerable household is one that contains the elderly, children or somebody who is disabled or long term sick.

Projections

Projections for England indicate there are likely to be around 3.5 million fuel poor households in 2011 and 3.9 million in 2012. Price rises in the second half of 2011 will not fully impact on fuel poverty data until 2012.

Projections for 2010 over projected fuel poverty by around 0.5 million households and this is explained in chapter 8 of the report. The main reasons for this were:

• higher than expected income increases, especially for households in the bottom half of the income distribution; and
• greater improvements in energy efficiency of the housing stock, in particular through installations of new energy efficient boilers.

Actual fuel poverty figures for 2011 and 2012 will only be known when we have detailed results of the surveys on household income and efficiency programmes, and will be available for publication in 2013 and 2014 respectively.

Press Ref: 2012/060

16 May 2012

The Government has today published a list of companies that have signalled their intention to apply to the new UK CCS competition. 

Publication of the list is aimed at encouraging further discussion within the CCS industry to support collaboration between companies and any interested suppliers.

This forms part of the new concerted approach the competition is taking to help stimulate the early development of the supply chain for CCS.  

A Department of Energy and Climate Change spokesman said: 

“This high level of interest proves that the UK is back on track with CCS. From the outset, we are working through collaboration with industry to ensure we make CCS a reality and importantly create the maximum return for what is one of the best offers anywhere in the world.”

The list covers companies that have indicated that they will lead a bid and not all companies that may be involved in that bid.  It is not a list of applicants – the closing date for bids remains 3 July and we don’t expect all parties who have expressed an interest to apply. Over the coming weeks DECC will continue to hold meetings with potential bidders to ensure that Government and Industry continue to work together and bidders can submit their best bids possible. 

DECC will also be making bidder documentation available in the coming weeks. 

Consortium lead bidder / registered bidder
Air Liquide	Progressive Energy
Alstom	Portland Gas Storage
Centrica (Hydocarbon Resources Ltd.)	SEQ
Costain Energy & Process	Shell
CO2 Deepstore	SSE
Doosan Power Projects	SSI
National Grid	Summit Power
Peel Energy	2Co

Notes for Editors

1. The CCS Commercialisation Programme will, subject to State Aid clearance, support commercial scale CCS with the £1bn in capital funding that we have made available. Further details and a description of the CCS Commercialisation Programme can be found on the Commercialisation Programme section of the DECC website.
2. In order to qualify for the competition, projects must:

• Be CCS Full Chain, or part chain capable of demonstrating the prospect of being part of a Full Chain Project in the future;
• Have the Power Plant and capture facility located in GB and the storage site located offshore;
• Be operational by 2016-2020, though earlier is desirable;
• Abate CO2 at commercial scale (or be a substantive step toward that objective) whilst meeting all relevant environmental requirements; and
• Be an electricity generator, or an Industrial [CO2] Emitter where it is part of a Cluster Project.

3. Further details of the wider package of measures can be found in the CCS Roadmap at on the CCS section of the DECC website.  

16 May 2012

TOTAL has announced the gas release from the Elgin platform in the North Sea has been stopped.

A dynamic kill operation has successfully used  heavy mud to stem the flow of gas from the G4 well.

This is the first stage in the process to permanently seal the well. Monitoring will now take place over the next few days to assess the complete success of the operation. After that, work can begin to permanently plug and abandon the well.

Energy Minister Charles Hendry said:

“The fact TOTAL has managed to stop gas leaking from the Elgin platform is clearly excellent news. We will continue to monitor the success of the operation closely to ensure that the well can now be safely and permanently secured.

“The Government has been working closely with TOTAL throughout this incident  to resolve it as quickly and safely as possible with minimum impact on the environment.”

The Secretary of State for Scotland, Michael Moore added:

“This is welcome news from the Elgin platform and good progress. It is important that the work continues to manage and monitor the well over the coming days to ensure the operation to stop the gas leak has been a complete success.

“The UK Government has been in touch with the company throughout this incident and DECC has closely monitored progress throughout. I am certain that key lessons will be learned from this leak which can be applied across the sector.”
 

15 May 2012

TOTAL has informed the Department of Energy and Climate Change that their dynamic kill operation to try to stop the gas release from the Elgin well began this morning. 

DECC have been working closely with TOTAL and gave environmental consent to the company earlier in May to pump heavy mud into the well via a temporary pipeline connected to the G4 wellhead from the main support vessel, the West Phoenix semi-submersible drilling rig.

It is expected the pumping operation followed by a period of monitoring could take several days depending on conditions.

The dynamic kill is the quickest option to control the release. Work on another option to drill a relief well is already underway. 

A Department of Energy and Climate Change spokesman said: “We continue to monitor the situation closely and hope this operation successfully stops the gas release.”

Greg Barker MP

15 May 2012

The Coalition Government, as part of its reform of the public bodies sector, has committed to undertake Triennial Reviews of all Executive and Advisory Non-Departmental Public Bodies.

As part of this process I am announcing today the Triennial Review of the Fuel Poverty Advisory Group (FPAG).

FPAG is a non-departmental advisory body of the Department of Energy and Climate Change, which consists of a chairman and senior representatives from the energy industry, charities and consumer bodies. The role of the Group is to:

• Consider and report on the effectiveness of current policies aiming to reduce fuel poverty; 
• Consider and report on the case for greater co-ordination;  
• Identify barriers to reducing fuel poverty and to developing effective partnerships  and to propose solutions;  
• Consider and report on any additional policies needed to achieve the Government’s targets; 
• Encourage key organisations to tackle fuel poverty, and to consider and report on the results of work to monitor fuel poverty.

The aims of the review are:

1. to provide a robust challenge of the continuing need for an NDPB to carry out these roles – both their functions and their form; and
2. if it is agreed it should remain as an Advisory NDPB, to review the control and governance arrangements in place to ensure that the public body is complying with recognised principles of good corporate governance.

There will be a short consultation process and we welcome views from interested stakeholders regarding the role of FPAG.  We will publish the findings of the Review on the DECC website in the summer. 

See DECC spokesperson statement of 13 April regarding progress in talks between employers and the Unite union to reach a negotiated settlement.

Tanker fuel drivers who deliver fuel to the UK’s forecourts have just announced their intention to strike over a dispute with their employers over working conditions.

The Unite union, who are representing the 2,000 members involved in the action announced today that 69% voted in favour of a strike.

The Government has robust resilience and contingency plans to deal with the event of a strike and has already started to put these in place in order to minimise any disruption to the general public.

Secretary of State for Energy and Climate Change, Edward Davey said:

“The Unite ballot result is disappointing. The Government is strongly of the view that strike action is wrong and unnecessary. The union should be getting round the negotiating table, not planning to disrupt the lives of millions of people across Britain.

“This is an industrial dispute and we strongly urge Unite to resolve it by getting back to the negotiating table, not by threatening the nation with economic and social disruption.

“Our economy is just getting back on its feet and any action that makes that harder is totally unjustified.

“With the London 2012 Olympics approaching, it is unacceptable and selfish to behave in this manner and jeopardise our international reputation.

“Unite has committed to ensuring that essential services are not disrupted. We trust it will live up to this commitment and not put anyone in harm’s way.

“The Government stands ready to take whatever action we can to minimise the impact of any strike. If we have to, we will use emergency powers to make sure supplies for emergency services are prioritised and we will work to ensure trained military personnel are available to drive oil tankers. The Police will be on hand to ensure that strike action does not intimidate or prevent drivers that wish to work from doing so.

“While their main concerns are pay and conditions, which are matters for their employers, they have also raised health and safety. We take health and safety very seriously and will be looking carefully at what Unite is saying. Ensuring people are safe at work is a priority for us and we are committed to resolving any issues around this.

“But we are clear - first and foremost - the parties must get back around the table. There is no justification for this. It’s the wrong action at the wrong time.”

Notes for Editors

• Around 2,000 members of Unite at seven companies have been voting on whether to launch the first national campaign of action for over a decade.
• Unite drivers supply fuel to 90% of the UK's forecourts.
• Workers in seven major distribution companies were balloted for industrial action - Wincanton, DHL, Hoyer, BP, J.W Suckling, Norbert Dentressangle and Turners.
• There are 8,706 forecourts across the UK
• Tanker drivers are paid on average £45,000 a year – double that of a regular haulage driver.
• Tanker drivers work 12 hour shifts, driving a 44 tonne vehicle, holding between 36,000 and 40,000 litres of petroleum product.

Check against delivery
10 May 2012

Introduction

Thank you for your invitation to deliver this keynote address. I am very pleased to be here today as we celebrate the North West’s nuclear successes to date and look towards the future.

I would like to start by acknowledging the important contribution that this region has made to the UK nuclear industry since the 1950s and the importance of the nuclear industry to the economic prosperity of the area. There is a great wealth of nuclear expertise and knowledge here that we want to maintain and use for the future.

Because despite recent speculation the future for new nuclear in the UK is bright. I want to take this opportunity to reassure you all of the Government’s ongoing commitment to nuclear power, despite recent events. Nuclear power continues to have a vital role to play in our energy mix alongside other low carbon forms of generation. There is continued commitment from energy companies to making real progress in bringing forward their plans to develop new nuclear power stations in the UK and from government to make the UK the number one destination to invest in new nuclear.

Horizon

You will all be aware of RWE and E.ON’s decision to withdraw from Horizon. Clearly this is very disappointing but, as both companies have made clear, their decision was a commercial one, based on pressures elsewhere in their businesses and not any doubts about the role of nuclear in UK’s energy future.  We should not see this as a sign that the UK’s nuclear renaissance is under threat, as some have suggested. Irrespective of RWE and E.ON’s announcement we are proceeding apace with our plans to make the UK the number one place to invest in new nuclear.

The Horizon sites at Wylfa and Oldbury represent an extremely attractive investment opportunity and there is strong interest. We as Government are talking to interested partners and investors about the UK’s policy and commitment to new nuclear. However the sale is a commercial process which is being led by the current owners and their sales advisors Nomura.

We all know that the UK’s new nuclear programme is far more than one consortia. As you will be well aware NuGen has set out plans to build at Moorside and EDF/Centrica’s plans to build four new reactors at Hinkley Point and Sizewell are on track. Nuclear is vital for our energy security now, and we want it to be part of the energy mix in the future, alongside renewables and clean coal and gas.

Getting the conditions right for investment 

It is important that we provide these consortia, and other investors, with the certainty they need to invest in new nuclear. This Government remains committed to ensuring that the conditions are right for investment. We have completed all of our facilitative actions and set out a package of reforms to transform the power sector so that we can achieve secure, low carbon and affordable energy. We expect to legislate in the next session to provide the long-term certainty needed by investors in all forms of low carbon. We also intend to publish an overarching overview of electricity market reform and a draft operational framework for Contracts for Difference soon, with the aim of giving investors increasing confidence about the structure of the policy framework.

Skills and Supply Chain

With such investment come fantastic opportunities for the UK workforce and supply chain. We must ensure that UK companies of all sizes are in a position to seize maximum benefit from the opportunities presented by new nuclear and to use this experience to springboard into other markets given our position at the vanguard of new nuclear programmes.

The UK’s civil nuclear expertise is recognised and much sought after. The UK civil nuclear supply chain has both excellence and experience. Its key strengths of Innovation, Quality, Adaptability, Sustainability and Knowledge can make a critical difference to any project anywhere in the world.

For example, last month the Prime Minister signed a Framework on Civil Nuclear Cooperation with Japan. This is a key enabling agreement that establishes a high level commitment to a UK-Japan partnership in support of nuclear decommissioning. It recognises UK skills and engineering strengths and will help open up opportunities for UK firms to work with Japanese industry and to continue to share the UK's world-class expertise, just as we did in the aftermath of Fukushima.

And as a further example, in February the UK Prime Minister Cameron and French President Sarkozy put the green economy and energy security at the heart of their relationship. This came as companies from both nations agreed a raft of commercial nuclear deals including:

• A ground breaking £400m deal on nuclear reactors between Rolls Royce, Areva and EDF. This will underpin a new Rolls Royce factory in Rotherham and support 1,200 new jobs across the nuclear supply chain in Britain; 
• A new engineering contract between EDF and Kier/BAM for the UK’s first proposed new nuclear project at Hinkley Point, Somerset, meaning another £100m for companies operating in the South West and 350 jobs.

The Government is committed to ensuring that UK companies are in a position to compete for the significant opportunities present within the nuclear sector and are working with industry, nuclear reactor vendors and operators to help create and support a globally competitive UK nuclear supply chain. The Government will act as a gateway to market information, contact networks, activities and organisations, to help the supply chain fulfil the opportunities presented by nuclear projects, along with specific initiatives, such as:

• In December 2009, we announced the new £25m Nuclear Advanced Manufacturing Research Centre (NAMRC), led by the University of Sheffield with Rolls-Royce as the lead industrial partner.The Government, via the Technology Strategy Board (TSB), is providing support to build specific supply chain capabilities via the Advanced Manufacturing Supply Chain Initiative, a competitive fund of up to £125 million to support transformative projects in advanced manufacturing supply chains. Additionally, the TSB is providing £15m of funding for small projects in 2012 delivering nuclear R&D.

I also recognise that meeting the demand for skilled workers during the new build programme will be a challenge, particularly with ongoing operations and decommissioning work at existing nuclear power stations.  But I am confident that we - the nuclear industry, skills bodies and Government - can meet this challenge together. The new build programme is a fantastic opportunity to create jobs and drive economic growth across the UK, including here in the North West.

We know that we need to work in a co-ordinated manner and have developed the Nuclear Energy Skills Alliance (NESA) to help this way of working between the different expert skills bodies.  NESA brings together all relevant nuclear skills bodies and Government in order to set the strategic direction for the nuclear skills landscape.  The Alliance promotes collaborative working between skills bodies to identify potential skills gaps and take co-ordinated action to resolve these.  We are already starting to see the benefit of this joined-up approach, with the development of a common labour market intelligence model which will allow the group to plan targeted, evidence based interventions and industry must engage with them to ensure that we use the most up-to-date data to provide this information.

Concluding Remarks

To conclude, I’d like to assure you all that Government remains firmly committed to its efforts to ensure that the conditions are right for investment in new nuclear power in the UK. The opportunities are truly massive and I hope that we can continue to build upon the real progress we have made so far. The UK has done a lot in the last year but delivering our  new build agenda in the coming years will be an ongoing process.  I know the UK nuclear industry is ready to deliver.

Her Majesty The Queen today delivered her annual speech at the state opening of Parliament.

As part of her speech the Queen announced that the Government will propose reforms to the electricity market.

“My Government will propose reform of the electricity market to deliver secure, clean and affordable electricity and ensure prices are fair”, the Queen said.

The Energy Bill aims to reform the electricity market to enable large-scale investment in low-carbon generation capacity in the UK and deliver security of supply, in a cost-effective way.

Commentating on the forthcoming Energy Bill, a DECC spokeswoman said:

““This is crucial legislation.  The Energy Bill would reform the electricity market to keep the lights on and emissions down in a more cost-effective way, while reaping the economic benefits. 

“It is designed to provide investors with long-term certainty and incentives to invest in low-carbon.

“We will shortly publish a draft Bill for pre-legislative scrutiny, to enable swift passage of well considered legislation.

“We are publishing the Bill in draft in order to speed up its passage through Parliament and to enable pre-legislative scrutiny which will help make the legislation more robust.
This will not delay the date at which the reforms are introduced, and making it available for pre-legislative scrutiny has been welcomed by industry and the opposition.

“We anticipate legislation reaching the statute book in 2013 so that the first low-carbon projects can be supported (as we originally envisaged) in 2014."

Electricity Market Reform: further information

For further information on the Energy Bill, follow the links below.

• Electricity Market Reform White Paper (2011)
• Technical Update to the EMR White Paper (2011)

Press ref: 12/058
08 May 2012

Energy Minister Charles Hendry today granted consent to Vattenfall for the Pen Y Cymoedd project, a 299MW wind farm between Neath and Aberdare in South Wales.

Made up of 76 turbines, it would have the highest generating capacity of any onshore wind farm in England and Wales. The developer predicts that it will generate enough electricity to power the equivalent of up to 206,000 homes a year.

The developer has also pledged to a community benefits package potentially worth more than £55m over the lifetime of the development, including £3m for habitat management and £6,000 a year per megawatt to a Community Trust Fund.

Charles Hendry said:

“Onshore wind plays an important role in enhancing our energy security. It is the cheapest form of renewable energy and reduces our reliance on foreign fuel.

“This project in South Wales will generate vast amounts of home-grown renewable electricity and provide a significant benefits package for the local community.”

Neither of the relevant local authorities objected to the wind farm subject to conditions, covering such issues as construction, noise, archaeology, habitat management and hydrology, being included in any planning permission granted.  In response to concerns about possible effects on mining, conditions have been included to safeguard the future extraction of coal from under the site of the wind farm. The requested conditions are attached to the deemed planning permission.

The onshore wind farm would be within an area identified as being suitable for large scale wind farm development by the Welsh Government, under Technical Advice Note 8 (TAN 8). 

Notes for editors:

1. The decision letter and associated documents are available on the DECC website. 
2. For more information about TAN 8, see the Welsh Government website.
3. To contact the developer, please contact Jason Ormiston at Vattenfall on 07794 524 801 or jason.ormiston@vattenfall.com