Good morning to all. It is an honour to be the first speaker of this Energy Summit. I am delighted to be with you this morning. It’s a good time to be together – it is a good time because we have a lot to discuss, the energy industry is operating in a turbulent world with many short term issues. And we still face this common long term challenge of delivering a future energy market and energy system which works for customers and for the planet.
EDF Energy is a company that takes a long term view and, at the same time, which is firmly grounded in daily operations, constantly adapting and responding to today’s challenges. With almost 16 years as Chief Executive, I know something about the meaning of long term and, at the same time, I know very well the everyday reality of our business.
Realising our long term vision: what we’ve achieved
A lot has changed since I arrived in the UK at the beginning of 2002. My own company has been transformed and in the coming years it will continue to permanently adapt. The experience of being a customer has changed and is changing. There are now more than 50 suppliers for customers to choose from. That drives companies like EDF Energy to be better and work harder. Competition is good for consumers if it is a fair one. Competition on price indeed, but not only. At the same, it should be on services and on the contribution to our low carbon future. In a nutshell, a competition with a purpose.
Our customer service is now among the best in the country and we have kept market share by fighting for it every day. It hasn’t been an easy journey, it took a lot of efforts from our teams and we made it happen. Last week, the regulator was asked by the Government to look at standard variable tariffs. I am pleased that they have been given this role. I want to be clear – EDF Energy will work constructively with OFGEM on this issue. We have always been open -minded and collaborative in looking at how to improve the way the market works – never adversarial or dismissive.
We have done more than many to drive engagement and help customers make active choices. And we see a future where fewer customers are on standard variable tariffs by default. We believe that fixed-term contracts and demanding targets for active choice by customers can form part of the solution. That solution has to apply across the whole industry. We also see the possibility of additional support for those who are vulnerable, and for microbusinesses to benefit from the transparency and choice that applies in the residential market.
In this highly competitive market we are also investing in innovation. Smart metering is one of the digital innovations intended to put customers in control – but clearly it is the biggest. At EDF Energy, we have put all the necessary IT systems in place for the programme and are now installing 1,000 meters every day. But, it is vital that the industry gets this critical project right. If we don’t, we risk a loss of consumer confidence which could have a long term impact on the whole of our industry and on Government.
That is why I have called and I renew my call on all interested parties to come together to review where we are with this immense national project. Security, safety, quality, customer engagement, costs and timeline – these are the key challenges we are facing and we must address if we want to make this programme a success.
Let me turn to generation
In the early 2000s when I came to the UK, coal was the backbone of the country’s electricity system with 40 per cent of generation. Now it is just eight per cent. But it is still needed. On sunny and hot days this month – when the wind has been still - our two coal power stations have stepped in to meet demand – a critical but very different role to the one they used to play. We took the brave and difficult decision to keep them in operation a few years ago. They will help to keep the lights on whilst we are transitioning towards their closure.
And we are fast approaching this time when coal is no longer part of our energy mix. We are investing in renewables where we are innovating to make wind farms more powerful and more efficient. Today we have 700MW of installed capacity and we have plans to develop and operate more renewables, with a strong focus on Scotland.
We are building the country’s first large scale battery storage project at West Burton in Nottinghamshire to help balance the grid. And we have invested a lot to improve dramatically the performance of our existing low carbon nuclear stations. Since EDF Energy acquired the UK’s 15 reactors at the beginning of 2009, we have invested and applied the expertise to safely extend the lives of our seven AGR nuclear power stations by an average of more than eight years.
Last year they produced more than 65TWH from these low carbon nuclear power stations, the highest output since 2003. They are playing their part in powering the UK until new low carbon generation can replace them – including new nuclear. Nuclear’s baseload availability means it plays a unique role among low carbon technologies in making our future electricity system both affordable and reliable.
I was pleased to hear the new energy minister Richard Harrington confirm the Government’s commitment to nuclear earlier this week. He said nuclear will play a “key role” in the UK’s future and that Hinkley Point C’s electricity will be an “excellent part of a mix of power for decades to come”. Hinkley Point C will be part of a mix that includes wind, gas, batteries for system balancing, demand side-response, centralised and decentralised generation.
No one technology is a panacea. They are all needed to meet our climate change targets. The construction of Hinkley Point C is now fully underway in Somerset. It is a phenomenal industrial and human project. There are 1,600 people currently on site and over 2,000 people based in offices working on this project. They are doing a fantastic job and the project is delivering its construction milestones on plan.
We announced a project reviews in March, that’s a normal practice – it will be soon a year ago since the Final Investment Decision was taken – and it is part of good project management. We will provide an update on our progress shortly. I advise people to look at what we say and not rely on speculation, remembering that it comes in the context of the project’s great progress and its great multi-year record in overcoming challenges and problems.
Getting to this point has been a long road indeed – with many steps and constant scrutiny. Making the case for nuclear, earning planning permission, winning design approval, agreeing a deal with the UK Government, completing a year-long examination by Brussels, putting in place financing, establishing the industrial team to deliver, partnering with CGN.
It is a long list – and as others are finding – these steps are not easy to achieve. I am proud that we have made it happen - and the immense benefits to industrial strategy, jobs and skills are flowing in to the UK economy. Hinkley Point C is making industrial strategy happen. Critics and commentators are free, especially from the responsibility to deliver or make anything happen. They can change their mind from one year to the next. But I know that consumers need real action and real investment and they need real businesses that will make it happen.
Looking ahead, our vision: innovation and people
So what of the future?
In this changing world, our Group, EDF, and company, EDF Energy, have set a clear direction. We have a compass: EDF Group’s Cap 2030 vision to be the efficient and responsible electricity company and the champion of low carbon growth. And we remain convinced of the absolute need to fight climate change. As the French President, Emmanuel Macron, recently said, “we all share the same responsibility: Make our planet great again”.
At EDF Energy, we have a map to get there – we call it EDF Energy 2020. In our Customers business, these plans are underpinned by the idea that we will be “Simply Better”. Our focus is on operational excellence. It is about doing the basics brilliantly and delivering a great service to our customers. That is how we earn the right to innovate and to sell energy services and new products.
We are investing in R&D to anticipate and adapt to the rapid changes we are seeing in the market, so that the Connected Home can become a reality. We expect that customers will be increasingly active in managing the consumption and production of their own electricity. We will also respond to the growing need for energy services from our business customers.
Earlier this month, we announced the acquisition of Imtech, a leading engineering services company and provider of technical services to business and the public sector. Soon the people in Imtech and EDF Energy will begin working together to serve customers. It is a significant step in our development of innovative energy services and how low carbon solutions for our business customers can be developed. It is our plan, we are making it happen.
In generation, we know that we will begin moving from operating existing nuclear plants to defueling and deconstructing them in the 2020s. We are the people who know these stations better than anyone else. We believe that we are best placed to deliver this next phase. It is a major and exciting industrial opportunity. But to earn the right to do that, we know that we must offer the best value-for-money for taxpayers and we will make it happen.
Our people, as they are today, will continue to be tomorrow fundamental to our future success. Regarding our people, let me say how proud we are of our industrial safety performance, an industry leading one. It has played a critical role in building strong employee engagement. We are a people business, in constant evolution, with strong values and a solid industrial heritage.
For tomorrow what skills do our employees need to be more digital? Or to turn their expertise from operation to decommissioning? Tomorrow, our success will come from our ability to anticipate these changes and see them as positive opportunities to adapt. It will require new skills and new mind-sets. It will require us to be agile, not fragile.
Our future will be marked by more collaboration within our Group and inside our company and externally with more joint ventures and partnerships. And we will continue to see the transformative impact of digital and new technologies in the workplace and across all our activities – from customer service to our power plants. We are on a path to become a digital and an industrial company.
Future market vision
We also have a clear view of a UK energy market that works best for customers. Our vision for the 2030’s is that Britain will be generating around a third of its power from nuclear, a third from renewables and a third from gas. We know the system will be more complex, balancing centralised and decentralised generation.
Our vision for this system is to be fair – working for the many, not just the few. Electricity Market Reform has been key to bringing about new investment in low carbon electricity and tipping the balance away from the most polluting fossil fuels. I’m proud of EDF Energy’s contribution – working constructively with Governments – to make it happen.
The Carbon Price Floor in particular, is a key pillar. Many countries have been talking about it, the UK Government made it happen. Today it is essential that this mechanism is maintained and strengthened. The Carbon Price Floor enables the low carbon transition tipping the balance away from coal and – in this challenging wholesale market – its role has been vital to support the life extension of our nuclear fleet.
Now we face new challenges. We need to ensure the continuing fairness of that market design. For example we need to fairly allocate network costs as the proportion of embedded generation like solar and wind increases. Because when a homeowner with solar panels on the roof finds that the sun isn’t shining, they need the network as much as anyone.
It is right that that OFGEM confirmed last week their decision to reform embedded benefits. Their Targeted Charging Review is a good next step. We will continue to play our part in helping shape policies that support this ambition.
Nuclear and affordability
I need to pay tribute to politicians from all parties who have stood behind Electricity Market Reform. They too have taken a long term view and have made it happen. Prices for low carbon electricity are falling – precisely because the market design is working to encourage developers to push costs down.
Hinkley Point C’s CFD (Contract for Difference) is a strong positive step forward in the Public – Private partnership. Hinkley Point C’s price is £92.50 per MWh has to be compared with, the average weighted price of low-carbon CFDs in the 2020s is £124 per MWh and that excludes the cost of intermittency at an extra £10. Hinkley Point C set a new target for others to chase.
But we are not complacent. The market challenges all developers to do better. And because we have restarted the nuclear industry at Hinkley in Somerset, we will be able to make our next projects cheaper – starting with Sizewell C in Suffolk and then Bradwell B in Essex.
We are making it happen and we are doing it with our 30-year long industrial Chinese partner CGN. We have seen elsewhere, the clear benefit that comes from a series. It is the best way to bring the construction and operations costs down. And if, at the same time, in the future, we can continue to adapt the nature of the public and private partnership, clearly we can reduce further the costs for consumers.
So in conclusion – there is a lot to do. And, very importantly, we should not forget what we are all doing for to fight our common enemy, Climate Change. As I said, the battle for our climate continues and we all have a responsibility to make our planet great again.
There is a pressing need to make it happen – rather than to sit on the sidelines – doing nothing. I am confident that EDF Energy will face these long term challenges with a focus on short term issues with an open mind. And we will keep sight of the long term goal – we will keep sigh of our duty to make it happen.
That is why we have a compass and a map. A compass and a map to make it happen. And I am pleased to say that – as I prepare to handover this great company here in the UK– the foundations are in place and we can face this future knowing we are ready.