The speech made by Claire Coutinho, the Secretary of State for Energy Security and Net Zero, at Chatham House on 12 March 2024.
As Secretary of State for Energy Security, it’s my job to make sure that here in Britain we can keep the lights on.
Putin’s invasion of Ukraine sparked the most severe threat to European energy security since the 1970s.
But Britain’s energy supplies held up.
Not only did we keep the lights on at home, but we also pumped fuel to our allies in Europe as they weaned themselves off Russian gas.
The UK banned Russian fossil fuels, making sure we were no longer contributing to Kremlin coffers.
We have led the world in driving Putin out of our energy markets once and for all, and I continue to encourage our allies around the world to do the same.
But, most importantly, we must never find ourselves in that position again.
From my time in this role, it is clear that we have entered a new era.
An era in which energy can be weaponised against us.
An era where our adversaries can inflict harm on British families and businesses through energy prices.
If we cannot protect families and businesses from the threat of future shocks, then we are not really secure.
So, we must be hard-headed and realistic about the future of our energy system.
We must put national interest over narrow ideology, and give time for the country to make the transition.
And, more than anything, we must take the necessary steps to protect British families and businesses by keeping energy bills down.
Because our country will only succeed in the decades ahead if we can source enough cheap and secure energy to power our nation.
The people at the forefront of my mind when I do this job are those up and down the country who may be worried about turning on the heating.
Or the small business who are worried about whether they can pay their staff.
If people can’t afford the gas in their homes, or the fuel in their car, or their electricity bills, then even if we have enough supply, we are not secure.
That’s why, in the last 2 years, the government has taken unprecedented steps to support people through the energy crisis.
We spent over £100 billion protecting the economy and households across the country. The average household received £1,500 of support, halving their energy bill when the crisis was at its worst.
We’ve given even more support to the most vulnerable households with our Winter Fuel Payments, Cost of Living payments and our home insulation programmes.
We’ve eliminated the premium on pre-payment meters.
We’re working with Ofgem to look at the fairness of standing charges.
Our Pumpwatch scheme is making sure drivers will get a fair price at the pump.
And we’re reforming the retail energy market to allow customers to benefit from the cheapest prices of the day which could save them up to £900 a year.
But no-one can deny how hard the last few years have been.
Whether it’s a business being unable to expand, or the tough choices that families have had to make at home – there has been a very human cost to the extreme prices that we have faced.
But thankfully, we are turning a corner.
From April, families will be paying their lowest prices for energy since Putin’s invasion of Ukraine, with the average household bill set to fall by almost £250.
But there is more to do if we want to make sure Britain’s energy is secure, reliable and crucially cheap, for decades to come.
If we look back over the last 300 years, Britain has boomed because of our access to homegrown energy.
The Industrial Revolution was made possible by British coal. Since the 1960s we’ve had North Sea oil and gas. And now, our windswept shorelines are increasingly powering Britain from Britain.
But make no mistake, we are in a global race for energy.
The growth in demand from emerging economies is soaring. In sub-Saharan Africa for example, there are 600 million people who have no access to electricity at all. That will change in the decades ahead and rightly so.
In Asia, the construction of renewables and demand for fossil fuels is breaking new records.
When it comes to energy and its supply chains, we need to be realistic about each source’s strengths and its weaknesses.
The West cannot wean itself off Russian oil and gas, only to then be dependent on China for critical minerals.
But Britain’s history, our expertise in energy, our geology, our infrastructure, our skills, mean that we have a competitive advantage.
But we must not throw that away.
That’s why we are doubling down on our offshore wind sector, which will provide us with cheap, clean, homegrown energy, replacing oil and gas as our North Sea reserves naturally decline.
Our world-renowned Contracts for Difference auctions, introduced in 2014, weave together the [political content removed] principles of competition and enterprise to drive down costs for consumers.
We have the first, the second, the third, the fourth and the fifth largest operational offshore wind farms anywhere in the world and we will go further thanks to our new auction round with the largest ever pot for renewables.
But we also know that we will need a stable baseload beneath it, and that’s why I’ve announced the largest expansion to our nuclear programme in 70 years.
Whether it’s large power plants, small modular reactors or the next generation of advanced modular reactors – we are building it.
And we are being realistic about our need for oil and gas too.
The Energy System Operator and even the Climate Change Committee acknowledge that in a net zero world, we’ll still need oil and gas for a significant amount of our energy.
And that’s because it’s not absolute zero, it’s net zero.
That’s why we need to be honest and pragmatic about what else our new energy system will need.
A weather-dependent, renewables-based electricity grid means we will need to have flexible power for when the wind doesn’t blow, and the sun doesn’t shine.
Which is why we need to make the most of the main flexible power we have today: gas.
There are no two ways about it. Without gas backing up renewables, we face the genuine prospect of blackouts.
Other countries in recent years have been so threatened by supply constraints that they were forced back to coal.
There are no easy solutions in energy, only trade-offs.
If countries are forced to choose between net zero and keeping citizens safe and warm, believe me they’ll choose to keep the lights on.
We will not let ourselves be put in that position.
And so, as we continue to move towards clean energy, we must also be realistic.
A renewables-based energy system needs backing up with power plants, which we can ramp up and ramp down when it isn’t windy or sunny enough.
We are working hard to get new, cleaner technologies scaled up to deliver this flexible power. That might mean putting carbon capture technology on gas power plants or scaling up entirely new technologies like hydrogen gas-fired power when they are ready.
We are doing everything we can to propel new and innovative designs to market, but we also acknowledge that we will need some tried-and-tested capacity until these kick in.
For this brief window of time, that leaves us with unabated gas.
Anyone who tells you that we can ‘just stop’ oil and gas is not just wrong, but naive.
Imagine if we told people that we are going to shut down all petrol stations today because we think electric cars will be the norm in 2050. People would rightly tell us that we were insane. Their instincts would tell them that we cannot affect that kind of change overnight.
And that’s true of our energy system too.
Even the Climate Change Committee’s independent data finds that a power sector without unabated gas in 2035 would be, and I quote, “likely to increase costs and delivery risks”.
And the Energy System Operator’s analysis suggests that a net zero power system will be achievable by 2035, but only with fossil fuels in reserve.
We know that with around 15GW of gas due to come off system in the coming years we will need a minimum of 5GW of new power to remain secure. That might mean refurbishing existing power stations but will also mean new unabated gas power stations until the clean technology is ready.
So, I say this to all our electricity generators here in the UK: renewables will play an ever-more critical role in powering Britain, but I will not risk our energy security by refusing to address the difficult short-term choices we need to make.
The government will stand with you as you invest in building more gas power stations.
And if investors are serious about reaching net zero without damaging the economy, or hiking bills for families, then they should stand with you too.
There are two reasons why backing gas is not at odds with our world-leading net zero commitments.
First, we expect all new gas power stations to be built net zero ready.
That means companies must build power plants which are ready to connect to carbon capture technology or that can be changed to burn hydrogen instead of gas.
This is not just a government expectation, it’s common sense for investors too, because they know that the government is serious about reaching net zero.
But our position remains we must build these new power stations to ensure security of supply while the low carbon technology develops.
And I fully believe that this country can be a global leader in CCUS. We have the right geology, the right infrastructure, and the right skills to be a world leader in carbon capture.
That’s why the government is making a massive £20 billion commitment to this game-changing technology and why I am focusing on how to create a competitive CCUS market by 2035.
Second, these gas power plants will run less frequently as unabated as we build more and more low-carbon generation and long-term storage.
But while we are bringing other flexible sources online, we won’t take any risks.
In the past 6 months we have been accused of rolling back on our net zero plans.
So let me tackle this head-on: Britain is the poster child for net zero.
We’ve halved our greenhouse gas emissions since 1990.
Out of the top 20 largest economies in the world, nobody has done more than us.
To give you an idea, the EU has cut emissions by only 30%, the US not at all, and China’s emissions are up by 300%.
We’ve done that all whilst growing the economy and avoiding the riots and protests that we’ve seen abroad.
And that last point is critical. There is no point in being world-leading in cutting emissions if your businesses end up moving abroad and your people are suffering from high energy costs.
Frankly, there is no point in being world-leading at net zero, if nobody wants to follow your lead.
That’s why we are putting investment first. Since 2010 we have seen £300 billion invested into green technology, creating jobs up and down the country.
And in my past 6 months, I’ve delivered £30 billion of business investment into our energy revolution thanks to the negotiations and policies that we’ve put in place.
And this is key.
Global investors are choosing to back Britain.
Britain’s story is one of endless innovation. We are perfectly placed to develop the technology and expertise to help developing nations with their own transitions.
We have to be honest that this will be our biggest contribution to global climate change, more so than what happens with our own domestic emissions.
Innovation, expertise and exports.
That’s what the big energy economies, like the US, Canada, Norway, and Saudi Arabia are doing.
I will make sure that whether it’s fusion energy, hydrogen or carbon capture we will both meet our net zero targets and that Britain will reap the reward for it.
But we won’t reap the rewards if we’re not realistic about the time it will take to decarbonise our electricity grid.
Our target to decarbonise the grid by 2035 has been set to allow time for first-of-a-kind technology to evolve, and for British supply chains to bloom.
And that’s why just last week, the Chancellor announced that GIGA just got bigger.
Our Green Industry Growth Accelerator now totals over £1 billion and will grow the supply chains for all the clean technologies that we need for the future.
We are doing everything that we can to help our future technologies develop, with multi-billion-pound programmes, and capital allowances for clean investments in carbon capture, hydrogen, fusion energy and offshore wind.
However, anybody sensible will tell you that these things take time.
To pretend that you can do things overnight is a fundamentally dishonest position.
Everything we do in energy must work to keep the cost of energy down whilst keeping the lights on.
Yes, that means not taking chances with our energy system by ensuring it has everything it needs to remain resilient.
And it means allowing the market to bring forward those next generation technologies that will strengthen our energy system and turn a profit for Britain so we can grow our economy.
But it also means making sure our energy market prioritises the bill-payer.
Bills are most peoples’ only experience of the energy system. It is through cost that people will judge our success, and that is why we are leaving no stone unturned to cut bills.
This is what we must remember as we today launch the next step of our review of electricity market arrangements, or REMA.
This is the biggest electricity market reform in a generation. It will mean cheaper bills, massive investment, energy security for decades, and cleaner energy as well.
In this next round of consultation, we have kept zonal pricing on the table to explore it more thoroughly.
This is a potential supply side reform which would encourage companies to build infrastructure closer to where energy is needed. It would mean our energy system would be smaller and more efficient, and less energy infrastructure would be needed overall – leading to lower costs for consumers.
We’ve already seen it successfully used in other renewable energy powerhouses like Norway and Denmark.
Alongside other options we are considering, it could mean £35 billion in savings over 20 years – that’s a saving of up to £45 every year for each household.
But let’s be clear: every household, whether they are in Glasgow, Grimsby or Guildford, would benefit from market reform.
This ambition – cutting bills for everyone – is exactly why we are keeping zonal pricing on the table.
And that is why we are working hard to grasp the opportunities of renewables for consumers. With a smarter energy system, we can shave up to 11% off peak demand. It sounds technical, but that is a £50 billion opportunity for billpayers over the next 25 years.
An electric car driver on the right tariff could charge overnight when electricity is cheapest, meaning that while they used to pay 17p per mile using petrol, they now pay 2p per mile. The same would apply to household energy bills.
Our work on smart energy tariffs based on the cheapest price of energy in the day could save households up to £900 a year.
And this will cut costs for businesses too.
So, as we contemplate the challenges ahead, our strategy will follow common sense principles.
Principles that reflect the reality that energy security is not just about having plentiful supplies, but affordable energy too.
That Britain, with our history of energy expertise, is well placed to reap the rewards of creating the new energy technologies of the future if we manage that transition well.
A hard-headed and realistic approach about our future energy system.
Prioritising the national interest over narrow ideology.
And taking the necessary steps to cut costs for families and businesses.
That’s the approach I’ve outlined to you today.
And that’s the way Britain will continue to lead the world towards a cleaner, cheaper and more secure future.
