It’s my very great pleasure to welcome you all to our Annual Conference once again. Last time I spoke to you all I was still on maternity leave, and it is nice to be here with you properly again, and for my son to be somewhere else. My thanks to all of you who kept the show on the road at Energy UK as I returned to work slowly – you know who you are. The later start time issn’t because I cannot work out how to get out of the door on time with two children, but I certainly appreciated it.
I must thank National Grid for sponsoring today, and also take the chance to thank the Energy UK team for pulling together a brilliant line up of speakers at this sell-out event. Our new Chairman, David Laws, is attending his first Energy UK Annual Conference – although I am a little worried that Charlotte and the events team have set the bar for his future expectations too high.
Just as last year, I am speaking to you as a new, horrific conflict dominates the headlines, in which, once again, energy access and security are matters for urgent diplomacy, and trading desks are watching whether regional disruption will impact global energy prices. As many of you will have heard this morning, the price of oil has now hit $85 a barrel.
In the UK, wholesale prices have come down since the initial invasion of Ukraine, but consumer groups estimate nine million people are struggling with bills, and debt in the retail sector stands at record levels at around £2.6bn.
Over the last few years of crisis, the interconnectedness and vulnerabilities of global markets have become clear – our customers here are impacted by instability abroad, and our dependency on gas imports is an economic issue at times of uncertainty.
Oil and gas markets remain tight and volatile – a strike by Australian dockworkers at one LNG terminal is still capable of spiking global energy prices. For us in the sector, it very much feels like the crisis is not over.
Even before the events in the Middle East, we were dealing with the dawn of a very different age for both energy and the global economy.
The pandemic, rising inflation, and competition for skilled labour, supply-chain companies, and the materials and commodities of the modern economy are causing real pressures for industry and for global trade.
The costs of projects have gone up by as much as 40% – such that no offshore wind developers could bid into the Government’s most recent renewables auction.
And hanging over all of this, the havoc that rising temperatures and extreme weather are already inflicting on countries and people across the world.
You’d have to be especially detached from reality not to see the current state of ocean temperatures, the floods in Pakistan, the fires in New York, the levels of migration from equatorial regions – and not think that systems are more fragile than we probably realise.
And yet despite this – actually I would argue because of this – difficult economic situation, we are seeing growing ambition and a global race for green investment.
Countries are recognizing that the green industrial revolution offers the best way out of our current difficulties and will ultimately shape the destiny of each country in a new global economy.
For the last decade, China has been moving to secure the global market in everything from gigafactories to nanochips, from copper to cables. In the US, the Inflation Reduction Act (IRA) and the CHIPS Acts, and in the EU, the green stimulus packages are driving the onshoring of supply chain and filling factory order books across the world; planned factories are up 20% in the US this year.
India has a 5GW Hydrogen target by 2030. France and Japan are both spending more per capita now on clean investment than the UK.
The UK, with its proud industrial history and (I’m told) world class aquifers, is not expected to be in the top ten of countries investing in hydrogen or carbon capture and storage technologies by 2030.
Meanwhile, in an energy transition where we expect 70% of the cost to be met by private capital, we are also experiencing more competition for that investment – with the CEO of JP Morgan saying that the IRA had caused the biggest shift in capital markets in his 30-year career in finance. Considering that period covers the 2007-2008 financial crash and the global pandemic, it is an extraordinary statement.
In fact, Energy UK and Oxford Economics analysis suggests that the rapid acceleration of global efforts on clean power means the UK will fall from near the top to the bottom of the world’s largest eight economies for investment growth in low carbon generation between now and 2030.
We are on the cusp of a new energy era, a new industrial age, a new geopolitics, a new pattern to global trade – and countries all over the world are now competing for their place in it. But that competition brings its own challenges for us.
Energy matters to the wider economy
The events of the past two years mean that energy now matters politically – grid and planning policy featured in the speeches of both the Prime Minister and the Leader of the Opposition at Party Conferences this year.
We further expect the Chancellor to offer a UK response to the US IRA when he is considering measures to drive growth in the Autumn Statement and the upcoming Investment Summit.
This autumn, the Prime Minister should start delivering on the “spatial planning” he has committed to for the grid and the Treasury should be considering options for targeted support and energy efficiency for households to manage debt and to also reduce the inflationary impacts of high prices this winter.
Beyond this, we should expect, as a bare minimum, that the Government will set better prices in the coming weeks for the next renewables auction.
It is right to see energy in a wider economic lens. Energy has often been treated as “just another” piece of the economy – like tech, the creative industries, or pharmaceuticals – and of course we need to value and invest in other industries.
But the scale of the opportunity from investing in this sector and a modern energy system is massive.
We estimate that an ambitious support for clean energy investment could create an economy that is £240 billion larger by 2050 than it would be on our current path – equivalent to the size of today’s entire manufacturing sector.
Energy is also a driver for other sectors, a critical co-dependency for their own growth.
I’ve spent much of the last year talking to my colleagues in other sector-specific trade bodies – industries cannot invest here in advanced labs, data centres, movie studios, or factories without secure energy and a decent grid. (If I had a £1 for every time that a business had mentioned grid connections to me then I could have given you all a free ticket to this conference)
There are 600 projects in the queue for grid connections at the moment, with the Government’s response to the Winser Review and the Connections Action Plan on grid both due this autumn.
We need a power sector 2-3 times the size of the one today to power that future economy, and to build five times the amount of infrastructure in the decade ahead as in the previous three.
The scale of the task to modernise our infrastructure is immense, and we must make sure the build-out is efficient, that the whole system is flexible and dynamic, and that it is funded fairly by people in this country.
I am pleased we will hear today directly from both John Pettigrew of National Grid and Nick Winser on their plans.
The size of the prize, the scale of that task, is also why – outside of the moral imperative – the UK must not blink on our ambition for Net Zero, nor on the positive narrative we want to hear around it.
We need to give investors the reassurance that this is the place they want to put their money, so that the public purse has to pick up less of the cost of the transition.
We need to take policy decisions that make the transition as fair as possible for people and communities. We need to champion the benefits of modern technologies, so that even in a cost-of living crisis, people areinspired about the changes ahead.
We know – because we recently polled people with the help of Public First – that 75% of the UK public not only agree with being ambitious on Net Zero, but also with many of the specific policies on energy we would need to get there.
We should welcome the public debate. We have full confidence in the strength of our arguments. We know the benefits this will bring to the country and we want to bring people with us every step of the way. We know people support tackling climate change and believe they will support ambitious action when the facts are laid out before them.
The energy transition isn’t just about protecting people from the impacts of climate change, it is about securing our place in the world, building modern infrastructure, making the economy fair and prosperous for all – that is the case that we should all be making.
The UK’s Role
Sometimes – not by anyone in this room – I get asked why “winning the race” on the global energy transition should matter.
There is a moral imperative for wealthy countries to do their bit on tackling climate change when no member of the G7 is currently going fast enough to meet their stated ambitions.
But the UK also has a genuine choice about what we do next.
We are both the home of the world’s five biggest operational offshore wind farms (with Seagreen at full power just this week and the first power produced at Dogger Bank last week), and yet England installed fewer onshore wind turbines than Ukraine last year.
We are the home of globally admired policymaking like Contracts for Difference and Carbon Budgets. But, we are also a country where our carbon pricing, again once world-leading, is causing investment to flow into Europe rather than here.
We are a country with world-class expertise in flexible and smart systems, in innovative consumer energy technologies. But we are also the country that requires many people to get planning permission just to install a heat pump, and where switching is still the primary driver for our retail market.
We are a country where millions of households signed up for the world-first demand flexibility service last year, producing a gas-fired power station’s worth of demand reduction in response to a price signal. But we are also a country where nine million households will struggle to pay their energy bills in 2023.
The point is, we are, today, able to choose the future we want for the UK and for our sector.
So today, we are launching our new Manifesto – titled Energy Matters – timed as the political parties are writing their own plans for the next Government and the decade ahead, that starts a conversation on the future.
We don’t have all of the answers to the big issues I’ve named (yet), but we do have some, covering everything from social tariffs to planning reform. And crucially, this Manifesto matches suggestions for policymakers with reciprocal commitments from the industry.
We have ideas that are about:
making sure that people everywhere benefit from the transition in terms of jobs and access to new technologies AND by bringing back predicable bills and protecting the vulnerable.
making sure that we remove regulatory blockers to building modern, efficient infrastructure in our grid and planning system.
making sure that the private sector can crowd in the majority of the £1.4 trillion in investment opportunities we have identified up to 2050.
to deliver on our commitments and to maximise the economic benefits from early mover advantage, and because – on things like bill support or energy efficiency – we have so many people struggling this winter that we cannot wait.
Lastly, we cannot do any of this alone. We are all here to solve problems together, and our vision is one of partnership – partnership with government, charities, thought leaders, and the wider business community.
The panels today are organised around our Manifesto themes: People, Power, and Prosperity, and we look forward to what we are hoping is the start of the conversation on the task ahead.
I am delighted that our keynote speakers: Jonathan Brearley, the CEO of Ofgem, Shadow Secretary of State Ed Miliband MP, and Secretary of State Claire Coutinho MP, will share their own thoughts about the immediate challenges facing us and our customers, and their ambitions for the industry beyond this winter.
I know that times are challenging, and that looking to the future can feel hard in these circumstances. I do not underestimate the size of the task around urgent action before the next election on grid, planning, energy efficiency, support for households, and the rest.
But with an Energy Bill – hopefully – now finally through Parliament today, manifestos being written, and narratives being written for the General Election, it is also important that the message from industry is one of confidence, opportunity, and hope for the people we serve.
Energy Matters. It matters for powering a modern society. It matters for people who want fair services, new technologies, and jobs in this country. It matters as the engine room of our future prosperity.
Energy matters, and Energy UK will be enthusiastically, collaboratively and proudly making that case over the next few months. Please join us.