Speech by Vincent de Rivaz at Talk Power 2011 Conference: Energy - The Decade Ahead
Talk Power 2011 Conference: Energy – The Decade Ahead
"A Decade for Delivery"
Vincent de Rivaz
th February 2011
Setting the Scene…
Welcome to 2011’s Talk Power Conference.
As I mentioned briefly earlier, this event comes at a pivotal time for business and the energy industry.
Crucially, this conference comes right in the middle of two landmark Government consultations, which are set to deliver a comprehensive package of reforms that will affect us all.
I want, today therefore, to focus in on that word – delivery.
Perhaps, today’s event would have been better titled – Deliver Power…
For our challenge in the electricity industry is to make investment in new, low carbon generation of the order of around £100 billion over the next decade.
And without that investment and measured intervention from Government, you can expect volatility, perhaps high prices and far higher future costs to decarbonise.
So we need delivery, especially nuclear delivery, to start now.
Only then, will we stand a chance of delivering a cost effective, decarbonised power sector by 2030, to support your ongoing success…
…something that David and his colleagues at the Committee for Climate Change have shown is essential, if we are to allow other sectors such as heat and transport to decarbonise in turn.
So it is not surprising that there is now a clear consensus amongst a whole range of parties, that fundamental reform of the power sector will be required to deliver that low carbon investment. Vincent de Rivaz, 8th February 2011
They are reforms that will allow us, now, as the UK’s largest generator of low carbon electricity, to make the additional investment required in new nuclear – delivering, secure and affordable energy to you – our major customers.
And they are reforms that will drive wider decarbonisation – allowing the UK to deliver on its 2050 targets.
So today, I want to show you why delivering reform of the electricity market is something that is not only relevant to you, but also essential to your future.
Building our Market for the Long Term
First, let me give you a sense of the scale of what our own contribution stands to be, within a reformed market…
I mentioned just now our new nuclear ambitions, where we plan to lead our industry in spearheading the nuclear renaissance here in the UK, building on the existing nuclear expertise we have here, and also right across EDF Group.
Those are ambitions that will translate into direct benefits for you as major energy users, through keeping prices stable and competitive.
For as the 2050 Pathways Report published last year showed, if we fail to deliver new nuclear generation in the UK, we will not only experience higher energy costs, we will also have to spend significantly more than the £100 billion currently needed in new generation.
That is why, over the coming years, we aim with our partner Centrica, to roll out 4 new nuclear powers stations, with the first coming on line in 2018.
That is a potential investment representing expenditure of upwards of £20 billion.
Keeping to that 2018 timeframe will be imperative – if we are to establish the momentum that will allow the first, the second, and a whole following series of new stations to be delivered.
To do so, we need the Government to deliver on the historic reforms it has clearly set out in its two current consultations….
Getting that reform right and delivered on time will provide the necessary incentives for us as investors, through ensuring a degree of certainty and visibility over future revenues…
It will also deliver stable, manageable prices for you, our customers, for the long term.
So what sort of reforms are we looking to deliver?
The two consultations published in December from Treasury and DECC, cover proposals for a carbon price floor and wider energy market reform measures.
Both consultations present a coherent, fair and holistic framework that builds on our existing, competitive market.
There are three specific elements of the reforms, which will be particularly instrumental in delivering our investment, and investment in all other low carbon generation…
a floor price for carbon.
That will remedy the failings of today’s trading scheme, driving investment in low carbon generation.
Whilst a floor price may lead to slightly higher power prices in the short term, we are very clear that it will actually mean lower prices for the long term, when compared to an unreformed market.
In fact the Government’s analysis shows us that bills in 2030 are likely to be 4% lower than they would have been, precisely because the floor promotes investment in such low carbon generation as nuclear.
And, if we look further at the detail, our own analysis tell us, that if we are to strike the right balance for both customers and industry, the floor price should follow the Treasury’s middle path - reaching £30 per tonne of CO2 by 2020.
The second reform component, covers capacity Payments.
These will reward investment in firm, available generation - helping provide the security of supply we all need, as increasingly more intermittent generation such as wind is placed on our grid.
And, in rewarding such generation for its important role in maintaining security of supply, we believe it is only sensible that these payments should be made to all plant that is ready and available at times of peak demand.
The third, and final component of the package covers contracts for differences.
Through addressing risk and volatility in the market, these arrangements will complement carbon price reform through providing certainty for you, our customers, and us, as investors.
Specifically, they will allow us to deliver our investment at the lowest possible cost, whilst protecting energy users against the possibility of high gas and power prices.
All three of these reforms are required – they work together as a holistic, fair package, towards a common agenda.
They will deliver the investment needed.
Investment that will produce a new, diverse, low carbon generation portfolio, including nuclear, wind, and CCS technologies.
A portfolio in which nuclear has a key role to play – as the only proven provider of secure, large scale, low cost, generation.
Delivering for Business Today
Reforming our market is vitally important – for us and for you.
It is not, however, designed to address the challenge of demand side management…
And whilst much work is being undertaken to secure the roll out of Smart Metering and the Green Deal for domestic customers, we remain clear about our responsibilities as the largest supplier of electricity to business in the UK - to you.
That is a responsibility which we feel even more acutely in today’s tough economic climate.
So, we have taken the lead through looking closely at how we can reduce your costs, not only through delivering energy efficiency measures, but also by delivering more accurate predictions of how and when you will use your energy.
For there are significant costs to us as energy suppliers when we buy energy you do not use, and to you as businesses when you use more than you had planned.
We have built these challenges directly into our products and services.
Already, we are delivering a product which bundles together an energy supply and savings contract – allowing us to provide a whole range of guaranteed energy efficiency measures, in as cost effective a way as possible.
As one example, we are currently in discussions with a customer to help manage spending in the order of £20 million on efficiency measures
Such measures include things such as LED lighting, controls for heating and cooling and effective power management for large scale, industrial processes.
And we have also invested the time and resource needed to get better at predicting the energy you use.
40% of you are already benefiting from improved ability, and the rest of you will be shortly.
The people delivering these important initiatives, and a host of others, are here and available to talk to you today…
A Call to Action…
I have talked about the landmark reform being made to our upstream market – and I have touched on the work we are doing with you to deliver efficiency savings downstream.
In both of those areas, EDF Energy is making significant investment; for the benefit of you – our customers, and for the wider economy, and for society.
Today, EDF Energy stands poised to turn a corner, stimulating the creation of thousands of low carbon jobs across our sector, growing our economy, and delivering for our customers.
All of which will be driven by a reformed energy market.
Earlier this year, we gave a sense of just what sort of other long term benefits we can bring.
In January we announced, in the presence of the Secretary of State for Energy, our intention to invest £6 million in training and skills facilities at Bridgwater, near our first new nuclear development site in Somerset.
That will be but one part of the £100 million annual contribution that will be made to the local economy – one of the most deprived areas in Britain - during our construction phase.
It is an investment that will stimulate tens of thousands of job opportunities right across the supply chain. It will drive forward wider economic recovery and growth for the long term – and it will keep the fabric of our society together.
There is then, much at stake, and much to deliver.
We are already investing to help you now, we want you to help us by adding your voice in favour of the reforms the Government is proposing, and by working with us to tackle efficiency.
We will succeed if we can take action together, now.
We have the consensus, we have the momentum, we stand ready to deliver our transition to a low carbon, affordable and secure energy future.