Written statement: Energy White Paper - Dec 14

Secretary of State for Business, Energy and Industrial Strategy (Alok Sharma MP): Today the Government has published the Energy White Paper which sets out the strategic vision for how we will transform our energy system to build a cleaner, greener future for our country, people and planet.

Building on the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, this White Paper provides further clarity on the practical actions that will shift our energy system from one reliant on fossil fuels to one that makes us a world leader in clean energy. We will do this in a way that creates jobs, as we build back greener from Covid-19. And we will protect the most vulnerable in society by keeping bills affordable as we transition to net zero.

Consumers

We want to create a fair deal for consumers, protecting the vulnerable and fuel poor with support of £6.7 billion; increasing competition to drive better products and services, saving money on bills; and giving us warmer, more comfortable homes to live in.

The White Paper sets out a raft of measures to help households to save money on their bills. We will support the lowest paid through a package of measures that could save families in old inefficient homes up to £400. This includes extending the Warm Home Discount Scheme to 2026 to cover an extra 750,000 households and giving eligible households £150 off their electricity bills each winter. This is on top of the £2 billion Green Homes Grant announced by the Chancellor, extended by a further year in the Ten Point Plan.

We will also keep bills affordable by making the energy retail market truly competitive. This will include offering people a simple method of switching to a cheaper energy tariff and testing automatically switching consumers to fairer deals to tackle “loyalty penalties”.

Putting consumers at the forefront of our approach means not just deploying measures that save energy, but making markets efficient, incentivising energy companies and consumers to choose clean energy, and making sure the rules that govern the market are swift to adapt to new technologies. We will make sure our energy system and networks are fit for the low carbon transition by consulting on new strategic guidance for Ofgem, legislating for competition in onshore networks and delivering greater co-ordination of offshore networks. We will also encourage the development and uptake of innovative tariffs and products, and ensure customers have more transparent and accurate information on carbon content when they are choosing their energy services and products.

Creating jobs and growth

The Energy White Paper comes at a vital time of rebuilding. It reinforces commitments made in the Ten Point Plan to support a green recovery from Covid-19 through investments in new infrastructure, and technology that will grow the economy, supporting many thousands of jobs and creating new business opportunities at home and abroad.

We estimate that measures in this White Paper could support up to 220,000 jobs in energy by 2030, many in clean industries such as Carbon Capture Usage and Storage, Offshore Wind and Electric Vehicles. Many of these jobs will be created in our industrial heartlands, supporting our promise to level up the whole country and leave no one behind.

Clean energy transformation

We will transform our energy system from one that is 80 per cent based on fossil fuels today to one that is consistent with net zero. This will see us changing how we heat our homes and travel. It will lead to a doubling in how much electricity we use and the emergence of a new hydrogen economy.

The White Paper reaffirms our commitment to 40GW offshore wind, including 1GW floating wind, by 2030, and sets out £160 million of support for offshore wind Integrated Manufacturing Hubs. This will support our world-leading offshore wind sector in delivering 60% UK content, and up to 60,000 jobs by 2030.

We have also committed to work with industry to aim for 5GW of hydrogen by 2030 and which will unlock £4bn in investment and support up to 8,000 jobs, and will develop low carbon industrial clusters by 2030 by putting in place the framework required to mobilise investment.

Low carbon electricity will be a key enabler of our transition to a net zero economy with demand expected to double due to transport and low carbon heat. Our trajectory will see us have overwhelmingly decarbonised power in the 2030s, and fully decarbonised electricity generation by 2050.

New nuclear power

The White Paper is clear that nuclear power will continue to be an important and proven source of reliable clean electricity. With existing nuclear power plants due to cease generation by the end of the next decade, we need to take action to secure our future energy sources. Therefore, the Government is today confirming that we are entering negotiations with EDF, in relation to the Sizewell C project in Suffolk. EDF has proposed two reactors at the site, based on the design of Hinkley Point C, with a combined capacity of around 3.2 gigawatts of low-carbon electricity. By replicating Hinkley Point C, EDF believes it could be built more cheaply.

No decision has yet been taken to proceed, and the successful conclusion of these negotiations will of course be subject to full Government, regulatory and other approvals, including value for money. I will keep the House informed as we progress our discussions with EDF. And if we do reach a successful outcome, this would lead to tens of billions of pounds of investment into the UK and thousands of jobs during construction.

Today the Government is also publishing responses to the consultation on the Regulated Asset Base (RAB) funding model, which involves an economic regulator granting a licence to a company to charge a regulated price to users of the infrastructure. The funding model is based on private investment and is used in many significant infrastructure projects. Such a model could help secure private investment and cost consumers less in the long run. Following the consultation, the Government will continue to explore a range of financing options with developers, including the RAB model. In particular, we will also continue to consider the potential role of government finance during construction, provided there is clear value for money for consumers and taxpayers.

UK Emissions Trading Scheme

To support businesses to decarbonise the Government is today confirming a new and ambitious UK Emissions Trading Scheme (UK ETS), will be in place from 1 January 2021. This new UK carbon market will be the foundation on which the UK achieves net zero emissions cost effectively.

The scheme has been designed by the UK Government jointly with the Scottish Government, Welsh Government and Northern Ireland Executive and is a crucial step towards net zero, and will bring benefits for business, trade, and innovation.

The UK ETS will replace the UK’s participation in the EU Emissions Trading System (EU ETS) and will be a market-based measure which will provide continuity for participants. The UK ETS will initially apply to power stations, energy-intensive industries, and aviation.

Our UK ETS is more ambitious than the EU system it replaces - from day one the cap on emissions allowed within the scheme will be reduced by 5 per cent, and we will consult in due course on aligning it with net zero.

The UK ETS will also allow us to expand carbon pricing across the economy and encourage innovation in emerging decarbonisation technologies. We have committed to exploring expanding the UK ETS to the two thirds of uncovered emissions, and will set out our aspirations to continue to lead the world on carbon pricing in the run up to COP26. This will also include how the UK ETS could incentivise the deployment of greenhouse gas removal technologies. In addition to this, the UK is open to linking the UK ETS internationally in principle and we are considering a range of options, but no decision on our preferred linking partners has yet been made.

As we move out of the shadow of coronavirus, this Energy White Paper opens the door to exciting new opportunities for our country, creating new jobs as we build the economy of tomorrow. Taking action now ensures the UK is set on the path to ending its contribution to climate change while enabling UK industry to seize new opportunities.