Let me start by offering sincere thanks for Energy UK for hosting this conference.
And I want to thank Dhara [Vyas] for your leadership over the last year as CEO, can you join me in giving this tribute.
You are a brilliant champion of this industry.
Coming here today I am once again reminded that it is an incredibly exciting time for the energy sector.
Wherever you work, there is a sense of huge possibility for the future—and I want to thank you all for the work you are doing.
And I am incredibly proud of everything we have achieved together over the last 15 months, it has only been possible because of our work together, including
Consenting record amounts of clean energy, enough to power the equivalent of more than 7.5 million homes—including just today Tillbridge solar farm, which alone will power hundreds of thousands of homes.
We are ending the first come first served grid connections queue.
Introducing the biggest reform of planning in a generation.
Setting up Great British Energy.
Investing in the biggest nuclear building programme in half a century.
And kickstarting our carbon capture and hydrogen industries.
None of this would have been possible without your advice, support and delivery.
All these achievements speaks to a wider purpose, which I believe unites so many people in this room.
Building our country’s clean energy future as part of a bigger vision of a fairer, more prosperous economy.
Soon we’ll publish our Clean Energy Jobs Plan, which will show not just the hundreds of thousands of good jobs that already exist in this sector, but also the hundreds of thousands of new jobs we expect to be created by 2030. This making a difference.
But of course, we also know that creating an economy for the many involves tackling the long-running cost of living crisis that so many people face.
And that’s what I want to focus on today.
We will be judged on the success of our mission in delivering for consumers, and rightly so.
My case today is this
First, our exposure to fossil fuel markets remains the Achilles heel of our energy system, keeping bills high and giving us no long-term certainty over price.
Second, that we face further challenges of historic under-investment in our energy system and growing electricity demand. The choice for the future is therefore what kind of energy system we want to build, not whether we want to build it at all.
Third, building clean energy is the right choice for the country because, despite the challenges, it is the only route to a system that can reliably bring down bills for good, and give us clean energy abundance.
Fourth, as we build this new infrastructure, the government is determined to work with you to bring the benefits to families and businesses as quickly as possible.
First, memories can be short in Westminster.
But we should never forget the huge damage to family finances, business finances and the public finances caused by the energy shock we have been through in recent years—a shock that still reverberates today.
And the reason for this damage is because the UK was and is so exposed to international fossil fuel markets due to our dependence on gas across the economy.
Even today, wholesale gas costs for households are still 75% higher than before the energy crisis.
If they were at pre-crisis levels, bills would be more than £200 a year lower than they are today for families.
The same story applies to business.
Industrial electricity prices soared at the start of the energy crisis and have remained stuck at high levels.
So while it is true we have inherited a system of paying for network and other costs which is less weighted towards public spending than other countries, a large part of the issue facing industry in the UK is our exposure to fossil fuels.
As UK Steel said earlier this year when talking about why energy intensive industries like theirs pay higher electricity prices in the UK than our European competitors
“The main driver of the price disparity is now wholesale electricity costs, driven by the UK’s reliance on natural gas power generation.”
Going back further, this has been a long-standing weakness at the heart of the British economy and society, with half of our recessions since 1970 caused by fossil fuel shocks.
And looking forward it remains a massive risk, particularly at a time of global instability.
According to the Office for Budget Responsibility, if gas price spikes occurred even once every decade, it could cost the UK between 2 to 3% of GDP annually.
So anyone who tells you we can solve the issues of energy security and affordability without addressing our reliance on fossil fuels seems to me to be ignoring the evidence before our eyes and this country’s painful recent experience.
Second, this of course is not the only challenge we face in our energy system.
In the years ahead, we expect a massive increase in electricity demand—around 50% by 2035 and a more than doubling by 2050.
This is a massive opportunity for us.
We want as a country to seize the opportunities of electric vehicles that are cheaper to run, new industries such as AI, and the benefits of electrification across the economy.
But this task is made harder by the legacy of decades of under-investment in energy in this country to overcome.
Whatever power sources they favour, people need to confront this reality.
Much of the UK’s current nuclear fleet began operating in the 1980s and we haven’t brought a new nuclear power station onto the system since Sizewell B 30 years ago.
At the same time, according to NESO, half the existing gas fleet has already been operating for over 20 years.
To listen to some people talk, you would think there was a free pass to just carry on using unlimited gas from existing stations for the next few decades, but that is simply not the case.
Of course, we could decide to stop building renewables and just rely on a whole new fleet of gas-fired power stations, but we need to be candid that this would involve the costs of building not just operating these plants.
And the underinvestment we face isn’t just about generation
Much of the electricity grid was built in the 1960s and hasn’t been upgraded since.
So the reality is there is no alternative to investment in both generation and the network to keep the power system running and seize the opportunities and meet the needs of the future.
If the question therefore is not whether to build but what to build, the third part of my remarks is about why the government believes clean power is the right choice for the country.
Let’s be absolutely clear what the cheapest sources of power are in this country, according to levelised cost estimates.
Solar power and onshore wind.
Strike prices for solar and onshore wind in our last auction, AR6, were nearly 50% cheaper than the levelised cost estimate to build and operate a new gas plant.
Offshore wind, despite global cost pressures, was also cheaper than new gas.
At a systems level, the prize of a renewables-based system, supported by nuclear and other technologies, is clear
It gets us off the fossil fuel rollercoaster, reducing our exposure as a country. Clean power 2030 will mean volatile gas sets the wholesale electricity price much less often than today.
It is homegrown clean energy, which cannot be weaponised by dictators or petrostates, giving us much greater energy sovereignty.
And it will significantly lower the wholesale costs of electricity, which will benefit heavy industry and has the potential to bring down consumer bills for good.
At the same time, of course, wholesale prices aren’t the only costs paid for by consumers, and we need to fund investment in energy infrastructure—including in the upgrade that is now sorely needed because of previous neglect.
In 2023 the previous government estimated four times as much transmission infrastructure needed to be built by the end of the decade as had been built since 1990.
That network infrastructure is what is now being delivered under this government.
Even taking this investment into account, the independent Climate Change Committee was clear in its Carbon Budget 7 advice
“As the electricity system decarbonises, with wind and solar displacing unabated gas, the underlying costs of electricity supply are expected to fall over time.”
Of course, in this majority renewables system we are building, we will need a mix of energy technologies.
That is why we are driving forward on renewables, nuclear, storage, CCUS, hydrogen, and gas will continue to play an important backup role for some time to come.
Now as I have said, people are entitled to advocate for more fossil fuels and less, or even no more renewables as part of this mix.
But here is the reality
They would leave us more exposed because we don’t control the price.
They are more expensive to build and operate.
They would leave us losing out in the global race for the jobs, investment and industries of the future.
And they would drive a coach and horses through our efforts to tackle the climate crisis.
That is why we believe that clean power is the right choice for the country.
And the task ahead is to bear down on the costs of building, which face significant upward pressures, and work relentlessly to translate the lower wholesale costs of clean power into lower bills for consumers.
As we face these challenges, we are looking at all the tools at our disposal
How public investment can help reduce costs, as we are doing through Sizewell C, for example.
Using Reformed National Pricing to plan and build a more efficient system, which provides the right incentives to build the right generation in the right places. This is crucial to reduce constraint costs.
And relentlessly focussing on value for money in each and every decision, as we have done for example by halving the subsidy for Drax power generation.
And this approach will be what we apply to the upcoming auction round, AR7, and beyond, where delivering value for money is our top priority.
We have made reforms to the auction to maximise competition between bidders and reduce the costs to consumers.
And there are multiple pathways and technology mixes that can get us to clean power 2030.
I want to be clear
We won’t buy at any price and if specific technologies aren’t competitive, we will look elsewhere.
We will take the long-term decisions to secure the right amount of capacity at the right price for the country.
In the coming weeks I will set the initial budget for AR7, working with the Treasury, and we will only go beyond it if it delivers clear value for money.
As we drive towards clean power, we know that many are struggling with their bills now.
And that takes me to the fourth part of my remarks about what we are doing to help families and businesses.
This winter we are expanding the Warm Home Discount to give nearly three million more families on the lowest incomes £150 off their energy bills.
We are increasing support for 7,000 energy intensive businesses.
And we will shortly publish our Warm Homes Plan, kicking off Britain’s biggest programme of home upgrades in generations.
Backed by £13.2 billion of public investment to upgrade up to 5 million homes over this parliament.
The Warm Homes Plan will help families with the costs of solar, batteries, heat pumps and insulation to lower bills and tackle fuel poverty.
In this room, we all know the potential this has to bring the benefit of clean electricity to people and lower their bills.
This is something consumers with the means to do so are already taking advantage of.
We want to spread those benefits much more widely so that this is not just a privilege for those who can afford it.
Alongside this, we will reform the system of consumer protection and advice to help families make the choices that work for them and ensure the highest standards of installation.
We also want to go further.
That is why we will ensure new homes are built with solar and clean heating as standard.
A common-sense policy which has been demanded by the public, championed by this industry, and will be delivered with the Future Homes Standard.
And we don’t just want to stop at new homes.
Solar power offers a cheap and quick way for people to generate their own energy and cut their bills by hundreds of pounds a year.
Currently just 1.5 million homes—around 1 in 20—have solar panels installed.
This is a massive opportunity to cut bills using the free resource of the sun.
I am determined to extend this possibility to millions more families and I want to work with you to do it.
So this is our plan pursuing clean power by 2030 and bringing the benefits to families as quickly as possible to help with the pressures of affordability that so many face.
The final point I want to make is this.
There are two roads opening up for Britain, in a way that hasn’t been true for the last two decades.
One road, a sprint to clean power—a partnership between industry and government.
The other road, doubling down on our exposure to fossil fuels and turning our back not just on the progress in clean energy of the last 15 months but on the partnership of government and business over many decades.
Going down this road would lose
The good jobs from the best economic opportunity of the 21st century.
The energy security and sovereignty within our reach.
And of course, our efforts on the climate crisis.
Indeed, waving the white flag in the climate fight would mean we were rightly held in infamy by future generations.
Now of course the breakdown of this consensus poses a challenge to our shared agenda.
I am really confident we can persuade people that the road we have chosen is the right one.
Because the country wants a positive vision and hope for the future and you are all in the hope business. I spoke to an apprentice at Sizewell C and he was buzzing about the opportunity and there will be many others.
This country wants hope and optimism.
Because it is in our economic interests as a country.
And because it is the answer to the affordability challenges that families and businesses face.
I feel humbled to be Energy Secretary.
Together I am determined we will make the right decisions in the months and years ahead to show the British people how our shared agenda can deliver for them.
