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Amber Rudd’s Speech

November 19, 2015

By Paul Homewood 

 

The Rt Hon Amber Rudd MP

 

They say that what a politician does not say tells you more what he does. Amber Rudd’s well trailed speech to the Institution of Civil Engineers yesterday was certainly full of coded messages, but we will have to wait and see just what it all means. 

 

These are some of the highlights she had to say in what was billed as “A new direction for UK energy policy”.

 

 

State Intervention

In his seminal speech in 1982, he defined the Government’s role as setting a framework that would ensure the market, rather than the state, provided secure, cost-efficient energy.

This was driven by a desire to create a system where competition worked for families and businesses.

“The changes in prospect,” said Lawson at the time, “will help us ensure that the supplies of fuel we need are available at the lowest practicable cost.”

Allowing markets to flourish. Open to trading. Independent regulation to provide confidence to investors. Competition keeping prices as low as possible.

Of course, the market that was created was not free from all government intervention. Markets never are.

Intervention was necessary then and will always remain so in an industry that delivers such a vital service.

But intervention was limited.

The second phase of modern energy policy began when Tony Blair signed the Renewable Energy Target in 2007.

What has this left us with?

We now have an electricity system where no form of power generation, not even gas-fired power stations, can be built without government intervention.

And a legacy of ageing, often unreliable plant.

Perversely, even with the huge growth in renewables, our dependence on coal, the dirtiest fossil fuel, hasn’t been reduced.

Indeed a higher proportion of our electricity came from coal in 2014 than in 1999.

So we still haven’t found the right balance.

 

It is a sad admission that we have replaced a free market system, which worked, with one that relies heavily on state intervention, which has not even met its aims.

 

Coal

To set an example to the rest of the world, the UK also has to focus on where we can get the biggest carbon cuts, swiftly and cheaply.

That is hard to do when, after 20 years of action on climate change, 30% of our electricity still comes from unabated coal.

Unabated coal is simply not sustainable in the longer term.

In an ideal world, the carbon price provided by the ETS would phase out coal for us using market signals. But it’s not there yet.

So I want to take action now.

I am pleased to announce that we will be launching a consultation in the spring on when to close all unabated coal-fired power stations.

Our consultation will set out proposals to close coal by 2025 – and restrict its use from 2023.

If we take this step, we will be one of the first developed countries to deliver on a commitment to take coal off the system.

 

The final death knell for coal is announced, not because of substantive reasons, but to “set an example to the rest of the world”. Interestingly though, she adds:

 

But let me be clear, we’ll only proceed if we’re confident that the shift to new gas can be achieved within these timescales.

 

 

Gas

We need to build a new energy infrastructure, fit for the 21st century.

Much of that is already in the pipeline – new gas, such as the plant at Carrington, and of course, a large increase in renewables over the next five years and in the longer-term, new nuclear.

In the next 10 years, it’s imperative that we get new gas-fired power stations built.

We need to get the right signals in the electricity market to achieve that.

We are already consulting on how to improve the Capacity Market.

And after this year’s auction we will take stock and ensure it delivers the gas we need.

 

As I pointed out last week, we need at least 20GW of new gas-fired to replace coal power, and saying you need it and actually getting it are two different things.

The scale of the problem is made clear by the problems holding up construction of the new Trafford gas power plant, which was awarded a 15 year capacity market contract only last year. Despite this, the project has so far failed to secure financial backers.

The problems facing potential investors are numerous:

1) Competition with heavily subsidised renewables, leading to uneconomic returns.

2) Reduced capacity loading, due to preferential access to markets for renewables.

3) The prospect of further rises in the carbon floor price, which John Gummer’s CCC wants to set at punitive levels, in order to make renewables look cheap.

4) The risk of being at the mercy of future political interference.

5) The likelihood that, given political imperatives, the full economic life of gas power plants won’t be seen out. Indeed, if decarbonisation targets are to be met, they may all end up being shut down in 15 or 20 years time, just as is being threatened with coal now.

6) Volatility on the global gas market.

 

No investor in their right minds is likely to take on board all these risks without asking for a substantial premium. Whether Amber Rudd is willing, or can afford, to pay it is another matter.

 

EU

That is why the Prime Minister has been calling for an ambitious Energy Union for Europe – to save hardworking families money and to guarantee energy supplies for future generations.

So we welcome the report out from the EU today on the “State of the Energy Union” which lays out the steps Europe needs to take to strengthen our partnership.

And I can say to Europe that Britain stands ready to help make this vision a reality.

This is an example of where we can achieve more working together than alone, and where Europe can adapt to help its citizens where it matters to them.

 

Heaven knows what this means, though no doubt Cameron had this inserted to burnish his EU credentials.

There is of course a role for Interconnectors to play, but the thought that more “Europe” will help matters is like the Titanic sailing around to find a second iceberg!

 

Nuclear

We are dealing with a legacy of under-investment and with Hinkley Point C planning to start generating in the mid 2020s that is already changing.

It is imperative we do not make the mistakes of the past and just build one nuclear power station.

There are plans for a new fleet of nuclear power stations, including at Wylfa and Moorside.

This could provide up to 30% of the low carbon electricity which we’re likely to need through the 2030s and create 30,000 new jobs.

This will provide low carbon electricity at the scale we need.

 

No mention of the mind boggling cost.

 

Offshore Wind

Climate change is a big problem, it needs big technologies.

That’s why we should also support the growth of our world leading offshore wind industry.

In the global context this is a technology which has the scale to make a big difference.

It is one area where the UK can help make a lasting technological contribution.

On current plans we expect to see 10GW of offshore wind installed by 2020.

This is supporting a growing installation, development and blade manufacturing industry. Around 14,000 people are employed in the sector.

This ground breaking expertise has helped the costs of contracts for offshore wind come down by at least 20% in the last two years.

But it is still too expensive.

So our approach will be different – we will not support offshore wind at any cost.

Further support will be strictly conditional on the cost reductions we have seen already accelerating.

The technology needs to move quickly to cost-competitiveness.

If that happens we could support up to 10GW of new offshore wind projects in the 2020s.

The industry tells us they can meet that challenge, and we will hold them to it.

If they don’t there will be no subsidy.

No more blank cheques.

Today I can announce that – if, and only if, the Government’s conditions on cost reduction are met – we will make funding available for three auctions in this Parliament.

We intend to hold the first of these auctions by the end of 2016.

 

There is only one reason why our offshore wind industry is world leading, and that is because nobody else is daft enough to throw such obscene subsidies at what is an extremely inefficient and costly technology. I am sure Brits will be eternally grateful that they are making a lasting technological contribution!

But what we really want to know is just what level of cost would Amber find “competitive”. The market wholesale price of less than £50/MWh? There is certainly no prospect of offshore wind ever getting down to those levels.

We may see a slight reduction in prices offered, but the subsidy will remain at unaffordably high levels .

 

Paris

But climate change is a global problem, not a local one.

Action by one state will not solve the problem. It’s what we do together that counts.

And that is why achieving a global deal in Paris next month is so important.

Paris is a city that is currently in mourning.

But in a less than two weeks’ time, we will see the leaders of the world gather there in solidarity to seek to achieve the first truly global deal on climate change.

Since I became Secretary of State I have been working with my counterparts in India, China, the US, Europe and others across the globe to help make sure we come to Paris in the best place possible.

The commitments countries have made so far are significant and a deal is tantalisingly close.

This much I know, climate change will not be solved by a group of over-tired politicians and negotiators in a conference centre.

It will take action by businesses, civil society, cities, regions and countries.

Paris must deliver a clear signal that the future is low carbon that unleashes the levels of private investment and local action needed.

Collective action works when you share the burden fairly, but also when each makes a distinctive contribution. We know that in isolation, cuts to Britain’s own greenhouse gas emissions, just 1.2% of the global total, would do little to limit climate change.

 

Amber is not daft. She already knows that the commitments made by the developing nations will not stop emissions from continuing to rise. So will she carry on with our disastrous policies, in the knowledge that the rest of the world is ignoring our example?

 

Controlling Costs

What is the UK’s role in that global decarbonisation? Where can we make a difference?

Our most important task is providing a compelling example to the rest of the world of how to cut carbon while controlling costs.

As I set out earlier, it is not clear we have done that so far.

The Climate Change Act, which the Conservatives helped create, is a good model that is being copied by other countries

Long-term time-tables, regular budgets, independent review.

We are committed to meeting the UK’s 2050 target.

We are on track for our next two carbon budgets.

But it’s clear, as the Committee on Climate Change has said, that the fourth carbon budget is going to be tough to achieve.

We do need to meet that challenge, but we need be pragmatic too.

We will need action right across the economy: in transport; waste and buildings.

And we’ll be setting out our plans for meeting the fourth and fifth Carbon Budgets next year.

But simply meeting the targets we have set ourselves will not be example enough for the rest of the world to follow.

We need to get the right balance between supporting new technologies and being tough on subsidies to keep bills as low as possible.

We can only expect bill payers to support low carbon power, as long as costs are controlled.

I inherited a department where policy costs on bills had spiralled.

Subsidy should be temporary, not part of a permanent business model.

Most importantly, new, clean technologies will only be sustainable at the scale we need if they are cheap enough. When costs come down, as they have in onshore wind and solar, so should support.

For instance, we have enough onshore wind in the pipeline to meet our 2020 expectations.

That is why we set out in our manifesto that we would end any new public subsidy for onshore wind farms. The costs of solar have come down too.

Over 8GW of solar is already deployed and even with the costs controls we have proposed we expect to have around 12GW in place by 2020.

These technologies will be cost-competitive through the 2020s.

We need to work towards a market where success is driven by your ability to compete in a market. Not by your ability to lobby Government.

This will only be possible if carbon pricing works properly.

Despite its flaws, the EU Emissions Trading Scheme is exactly the kind of intervention that should be made at a European level where collective action is more powerful.

The UK has worked hard with others to get major reforms that are helping restore a more stable and robust price on carbon.

But I’m determined that we help deliver more this Parliament to restore the ETS to full health.

 

Ah, carbon pricing!!

For all the tosh about controlling costs and eliminating subsidies, low carbon can only be competitive if the costs of fossil fuels are forced up by a carbon tax. If renewables do eventually become properly competitive, I am sure we would all have been a lot more grateful if we had waited for some other countries to waste their money providing a compelling example to the rest of the world.

 

Intermittent Renewables

In the same way generators should pay the cost of pollution, we also want intermittent generators to be responsible for the pressures they add to the system when the wind does not blow or the sun does not shine.

Only when different technologies face their full costs can we achieve a more competitive market.

 

Now that is interesting! Is she really suggesting that renewable operators will have to pay for standby capacity? I won’t be holding my breath!

 

    

 

The $64000 Question  

Amber talks the talk, but can she walk the walk?

Will she manage to reduce the ruinous costs of decarbonisation policies? Is she prepared to cut back on decarbonisation targets if the price is too high?

Above all, will she recommend suspension of the Climate Change Act if there is no global, legally binding agreement coming out of Paris, which guarantees substantial emissions reduction?

 

   

 

 

The full speech is here.

24 Comments leave one →
  1. A C Osborn permalink
    November 19, 2015 6:13 pm

    Well it could be that “Reality” is starting to intrude on their fantasy world, so the answer to your 3 questions are “maybe”.
    But not very likely yet, but if we have a very cold winter then it becomes more likely.

  2. markl permalink
    November 19, 2015 6:44 pm

    So it has become obvious that the world will not stop using coal as an energy source and follow the UK, EU, and US over the cliff like lemmings to economic and energy ruin. Now comes the back pedaling as reality sets in with a harsh winter forecast and already signs of electricity blackouts emerging. What really needs to happen is for people to question the validity of the AGW narrative to stop all this destructive foolishness.

    • Retired Dave permalink
      November 19, 2015 8:09 pm

      Saved me some typing there Mark thank you – I couldn’t have said it better – well actually I couldn’t have said as well.

  3. November 19, 2015 7:17 pm

    Doh, ending cheap coal is just a futile “green” gesture that will cost us dear, now the gas generation industry can join in the fleecing of the bill payers, safe in the knowledge that they face no low cost competition.

    Trafford will probably pay the puny fine for not delivering in 2018, knowing that much better prices will be on offer in subsequent years.

    • Retired Dave permalink
      November 19, 2015 8:14 pm

      Well while that is true, it is no good blaming the gas gen companies for that. If you ensure that gas has no definite base load role and you subsidise renewable it is the certain outcome – ask the Germans who are now subsidising everything except nuclear.

      You simply couldn’t make it up – but they did.

  4. Bloke down the pub permalink
    November 19, 2015 7:26 pm


    Now that is interesting! Is she really suggesting that renewable operators will have to pay for standby capacity? I won’t be holding my breath!

    I’m pretty sure it was in a comment on one of your posts that I said I’d have more time for suppliers of renewable energy if they provided their own back-up for when the wind doesn’t blow. Maybe Amber reads your blog.

  5. Retired Dave permalink
    November 19, 2015 8:21 pm

    Well Mrs Retired tells me that at least my blood pressure was much lower while reading this speech by Amber Rudd than anything written or spoken by the cretin that was her predecessor.

    Writing that just reminded me that I used enjoy writing staff reviews back in the day, and would occasionally open my door and ask the people around whether there were 1 or 2 “t”s in cretin. It is amazing how these days small things keep me smiling. Matron I need to calm down now.

  6. November 19, 2015 8:55 pm

    What is interesting is that there will be a consultation in the spring on when to close all unabated coal-fired power stations. We need to get involved and insist that no coal-fired power stationsare closed until an equivalent capacity of other despatchables (CCGTs) is built to replace them.

    • Graeme No.3 permalink
      November 19, 2015 9:48 pm

      Phillip:
      Just watch South Australia race the UK to the cliff edge. The coal fired station is to close in March, followed next year by the large CCGT plant, leaving the State dependent on wind and household solar. (And an inter-connector bringing brown coal fired power in from Victoria which is NEVER to be mentioned in terms of net emissions, especially as its capacity will be quite inadequate at peak demand periods in summer).
      At least the UK has the option of retaining capacity until enough unicorns are bred.

  7. John Peter permalink
    November 19, 2015 9:45 pm

    “Amber talks the talk, but can she walk the walk?” – not if she follows the talk. I hope that the “talk” is to keep “The Green Blob” at bay and the “walk” will be reliable energy at an affordable cost. I doubt it though. On the other hand, the introduction referring positively to Lord Lawson’s energy policy may mean that she may have listened to the old fox. In that case she will know that the renewables industry will not be able to provide competitive prices and John Gummer’s carbon floor tax will drive up energy prices and provide for the inevitable black-outs, which will push the sitting government out of office.

  8. R2Dtoo permalink
    November 20, 2015 3:49 am

    Canada will now race down the same path. And for the same reason- to show the World that we are “good and responsible citizens”. The peer pressure exerted by the green blob and left-leaning politicos is difficult to fathom in 2015. We have elected our very own ‘O”.

    • Derek Buxton permalink
      November 20, 2015 9:34 am

      I seem to recall that the “green blob” originated in a Canadian who first ruined the pretty good Ontario Electrical system and then went onto the UN to ruin everybody elses. The first thing we need is the scrapping of the Climate Change Act. Than sack the Energy and climate change gang of thieves. Carbon is NOT a pollutant it is essential to all growth in combination with Oxygen, but then she is obviously too stupid to know that.

  9. soundarden permalink
    November 20, 2015 7:57 am

    Excellent points in why no one will still build a new ccgt. The only carrot here is we will close coal if you build them but won’t if you don’t ! Very risky to rely on only one fuel source after fukashima the gas price went through the roof. But we must set an example to the world as they build station that will emit 80 billion tonnes compared to our40 million. If they want a free market get rid of all subsidies and the cheapest technology and fuel will prevail….oh problem there it would be coal.

  10. NeilC permalink
    November 20, 2015 9:12 am

    Decarbonisation is the most ridiculous word I have ever heard in respect to the climate change debate. Decarbonisation would mean the complete destruction of all forms of life on Earth. All life is made from carbon or are they just stupid. Does saving the planet mean the planet, but no life? What does WWF, RSPB, FoE have to say about that?

    If the UK does close coal fired power stations, with China building 155 this year, it won’t make a jot of difference to the global situation, even if CO2 was a problem in the first place.
    https://notalotofpeopleknowthat.wordpress.com/2015/11/16/china-approves-another-155-coal-fired-power-plants-this-year/

    Our politicians, terrified of the green blob, are ruining energy generation in the UK and hence UK industry. Rather than being world leaders in “decarbonisation”, how about keeping the lights on in the UK.

  11. November 20, 2015 10:36 am

    #1 Have we really reduced CO2 in the Electricity supply chain..I guess not
    But Amber should offer stats for how much each tonne of CO2 reduction/increase has cost us
    #2 Paul, have we got actually quite a few GigaWatts of gas mothballed which could be working in a month ?
    #3 Someone one made a good point that coal power stations are a reliable source with resilience cos coal is stockpile-able and other fuels aren’t

    • November 20, 2015 10:47 am

      #2

      I’ve asked Decc in the past about mothballed capacity, but they could not tell me. All they know is the overall gas-fired capacity, which is 34GW out of the total of 84 GW.

    • November 20, 2015 12:30 pm

      There are at least a few GW of about to be unmothballed CCGT for this winters reserve, e.g. Killingholme did an SBR test on 2015-11-11, also Corby, Barry and Deeside.

    • November 22, 2015 11:59 am

      7% of capacity sat mothballed claims one article.
      Coal provides 29% of supplied electricity so I guess when it goes offline you need a lot of new gas plant to replace it, even if Drax woodburning replaces some of it.

      #2 “New gas power stations will only work a few days of the year” that’s what Prof Ekins said on R4Today. Hmm By 2020 wind still be 10-15% of supply. So i guess he’s dreaming if he thinks a gas plant will only runs less than half the days in a year. The economics though must mean it takes too long to recover construction costs if not run 70% of the time.

      #3 It’s spin to say renewables are 100% the cause of gas plants not being invested in.
      FT article says #3.1 Milliband’s “price fix” plan sent the wrong message
      #3.2 cheap coal meant low demand for gas plants
      #3.3 cheap coal meant coal plants burnt through their EU total emissions allowance earlier than expected so close earlier

  12. Bloke down the pub permalink
    November 20, 2015 10:40 am

    I’ve always considered the conversion of coal fired power stations to burn bio-mass as a pointless waste of money. The possibility has struck me that it may have been a clever ruse designed to keep them running until the cagw scare had blown over and they could revert to burning coal. There again, I always was an optimist.

  13. CheshireRed permalink
    November 20, 2015 10:40 am

    Cameron’s departure will offer the next main chance to repeal the CC Act, as whoever takes over can absolve themselves by saying up until now they were simply following orders. Repealing the Act is essential as the whole point of it was to make the UK ‘world leaders’ in decarbonisation that everyone else would then follow. That hasn’t happened. Instead China, India, Brazil and Russia are pointing and laughing while we continue with a truly ruinous domestic energy policy.

    1. Repeal the Act.
    2. Leave the EU.
    3. Therefore exempt ourselves from ALL our ‘carbon’ legal obligations.
    4. Install sufficient gas, nuclear and some coal, but NO MORE ‘renewables’.
    5. Sanity restored.
    6. Launch public inquiry into the (obvious) ‘Global Warming’ scam.
    And finally
    7. Grab a beer, sit back and watch as the Green Blob spontaneously combust in self-righteous fury.

  14. November 20, 2015 10:45 am

    Aside from the stupidity of the whole subsidy and penalty driven policy that as everyone above says is going to ruin the UK, where would the gas come from even if the new CCGTs were built?

    We have little gas storage available now and gas supplies are not easily expanded apart from :
    1. LNG stations with massive LNG imports, and massive security risks;
    2. Fracking: as yet an unknown quantity for the UK – especially if most of the frackable-gas is under the fault that passes through London.

    The coal fired power stations could be refurbished and life-extended as a much smaller cost and lower real generating cost than CCGT if religious dogma could be taken away.

    Amber does seem to be edging in the right direction given that she started-out as a confirmed believer: needs a bit of a push now to move to the real world.

    • CheshireRed permalink
      November 20, 2015 11:09 am

      Ms Rudd has intimated at a clever little quandary approaching for Greenies. She said she’d close coal by 2025…IF replacement gas capacity was ready.
      So our little green fruitcakes what’s it to be: campaign against fracking and existing coal plants will stay, or (reluctantly) ‘allow’ the lesser of two evils fracking so we can move to cleaner, lower-emitting gas plants? Nice move, Amber.

  15. john in cheshire permalink
    November 20, 2015 10:47 am

    Slightly tangential to this report, concerning the Carrington Power Station. When it was announced, it was promised that many of the construction jobs would be filled by local labour. I can say from some experience that this did not happen, instead most of the work has been given to foreigners from other EU countries such as Poland. And these same foreign workers have been given accommodation in the environs of the power station. Maybe that then classifies them as a local workforce.

  16. Green Sand permalink
    November 20, 2015 11:16 am

    “Forget Paris: Germany Opens Another New Coal Power Plant”

    “A new coal-fired power plant has opened in Germany a day after an expert commission told the energy minister the country must triple its annual rate of decarbonization to meet its ambitious 2020 climate policy goals.”

    http://www.thegwpf.com/forget-paris-germany-opens-new-coal-power-plant/

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