Energy minister defends ‘competitive’ energy policy

Posted on 13 Sep 2011 by The Manufacturer

Government energy policy will both reduce carbon emissions and make Britain an attractive place to invest, Minister of State for Energy and Climate Change Charles Hendry claimed today.

The Government’s energy policy will be attractive to business investment while being effective at reducing carbon emissions, the Energy Minister Charles Hendry told delegates at The Energy Event today (September 13).

He said that the UK has no choice but to tackle the “biggest energy challenge of our lifetimes”, where electricity generation will need to double by 2020.
The electricity network will need £110 billion of investment – mainly from the private sector, he stressed – and up to £225bn investment across the whole energy sector, just to satisfy this demand.

The BBC’s John Humphrys, moderating the conference, asked Mr Hendry why the government was keen to go further than our other EU members in pursuing renewable energy obligations, which push up energy prices.

“We’re not going further,” he said. “The EU directive asked for both 20 per cent of electricity to come from renewables and 20 per cent reduction in carbon emissions by 2020. Because we have a high electricity energy component, for the UK that translates as 15% of our energy sources need to come from renewables by 2020, and that means in turn 30% of our electricity. It has been spread fairly across Europe recognising the different potential in each country.

Answering the critics
Energy intensive users, notably several large manufacturers including Tata Steel and Rio Tinto Alcan, have recently criticised the Government’s green taxation policy following the introduction of the carbon floor price in April.

Asked how the his department planned to balance the interests of, often foreign-owned, energy intensive businesses while reducing carbon emissions through fiscal disincentives on energy consumption, Mr Hendry emphasised that the policy is linked to the wider Government strategy for a business-led economic recovery.

He said: “This recovery has to come from business growth and manufacturing is a key part of this. We are ensuring that we have enough energy generation and supply, which requires millions of pounds of capital investment, but we need to introduce that in a way that recognises the particular costs of energy-intensive users. That is why we’re bringing forward a package of measures towards the end of the year that supports those industries.”

Companies are hoping that where they are already eligible to pay both the Climate Change Levy and the, now mandatory, Carbon Reduction Commitment, they would be exempt from the carbon floor price. Mr Hendry said: “We have to make sure that those energy-intensive companies who are looking to locate with the lowest energy rates are not forgotten in this package, and that we give them a very good reason to stay in the UK. We’re linking up across Government to make sure these needs are heard and part of strategy. In November there will be a big regulatory drive, where we plan to cut red tape for business across the board. At the moment, our department has focused on emissions reductions in business.”

Companies have been concerned about the cost of energy derived from renewables, especially offshore wind, at a time when a shadow has been cast of new nuclear viability and troubles in the Middle East have threatened oil and gas supplies. Mr Hendry said renewables will create jobs and help decarbonise the economy long term, despite the very carbon-intensive period of renewable infrastructure build.

“At the moment, the UK is third bottom in its renewables mix along with Luxembourg. We have some of the best natural resources in Europe so it is ridiculous to have this record, especially at a time of such high energy security, to avoid being reliant on energy imports.”

Mr Hendry ran through a list of new low carbon economy job opportunities from renewables, carbon capture and storage and clear power.

The Energy Event runs from September 13 to 14 at the NEC in Birmingham.

The video interview with Charles Hendry will appear on soon.