STRUCTURE OF PRESENTATION

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STRUCTURE OF PRESENTATION

1. Energy Policy goals and Review remit
2. Key challenges
3. Conclusions and Impact
4. Next Steps/Issues

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ENERGY REVIEW REMIT

• Review progress against 2003 Energy White Paper
  goals
• To put UK on path to cut emissions by 60 by
  2050, with real progress by 2020
• To maintain reliable energy supplies
• To promote competitive markets in the UK and
  beyond, helping to raise the rate of sustainable
  economic growth and improve productivity
• To ensure that every home is adequately and
  affordably heated

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KEY CHALLENGES I

• Climate Change and Greenhouse Gas Emissions
• Strengthening scientific evidence of nature of
  problem
• 70 of emissions from energy production and use
• Needs international response

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World Primary Energy Demand
Source IEA World Energy Outlook, 2005
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Global Carbon Emissions to 2030
Source IEA
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UK Carbon Emissions
Source DTI (UEP 26)
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KEY CHALLENGES II

• Security of Supply
• UK as net importer of oil and gas
• Replacement of electricity generating plant and
  networks

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Risks From Increased Reliance on Gas As Domestic
Production Declines

• Risks
• Long supply chains
• Untimely infrastructure
• Ineffective markets
• Politicisation of supply and demand

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KEY CHALLENGES III

• Energy Prices
• Oil prices doubled between 2003 EWP and July 2006
• Implications for UK business of faster rise in
  electricity and gas prices than among competitors
• Implications for fuel poverty

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CONCLUSIONS I

• Valuing carbon
• HMG committed to there being a continuing carbon
  price signal
• EU ETS the key mechanism to provide this signal
• But Scheme needs strengthening
• Will reinforce it if necessary to provide greater
  certainty

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CONCLUSIONS II

• Saving energy
• Raise standards for new homes, cars, products
• Incentivise emissions reductions from commercial
  and public sectors
• Billing and metering
• Change incentives on suppliers to household
  sector
• Government procurement

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CONCLUSIONS III

• Distributed Energy
• Potential to cut emissions, increase reliability
  of supply, lower costs, engage public on climate
  change
• Some policies to encourage DE already in place
• But need more analysis
• So reviews
• Long term potential (Office of Science
  Innovation)
• Barriers and incentives (DTI OFGEM)

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CONCLUSIONS IV

• Transport
• Need transport innovation strategy
• Increase use of biofuels in road transport (RTFO)
• Consider mandatory cuts in new car fuel emissions
  to replace current EU voluntary agreement
• Confirm positions on Aviation and Surface
  Transport in EU ETS

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CONCLUSIONS V

• Electricity generation
• Continuing carbon price/strengthen EU ETS
• New nuclear would make significant contribution
  to meeting energy policy goals work programme to
  facilitate new build
• Renewables restructuring of Obligation and
  increase to 20
• Planning reform
• Improved market information/monitoring of
  investment outlook

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CONCLUSIONS VI

• Nuclear route-map
• Consultation on Policy Framework (underway)
• Planning inquiries to focus on local issues
• NII guidance on Pre-licensing, and EA on
  discharges, by start of 2007
• Risk management frameworks for waste and
  decommissioning costs
• Justification process and Strategic Site
  Assessment to start in 2007

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CONCLUSIONS VII

• Energy Security
• International Action
• Promote open and competitive markets
• Strengthen key supplier relationships
• Develop EU energy policy
• National Action
• Maximise economic recovery from UKCS
• Energy saving
• Right conditions for energy investment
• Improve gas market flexibility

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ENERGY REVIEW IMPACT(1)

• Annual carbon savings of 19-25 mtc in 2020 (up to
  17 on baseline)
• Gas consumption down by 11-17 by 2020
• (1) Includes effect of proposals announced since
  publication of the new Climate Change Programme
  in March 2006.

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NEXT STEPS

• Further develop international strategy (Stern,
  EU, etc)
• Consultations (Nuclear, Renewables, Gas, EPC,
  etc)
• Coal Forum
• New technologies (Energy Technologies Institute)
• Carbon Capture and Storage (PBR)
• Fuel Poverty
• Planning reforms
• Role of Distributed Energy
• Further public engagement
• ENERGY WHITE PAPER

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Coal Forum 1

• coal continues to be an essential source of
  electricity generation up to 50 at times last
  winter. Competitive and flexible.
• and UK mined coal continue to be a key part of
  electricity generation roughly 40 of all coal
  burnt.
• BUT.........

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Coal Forum 2

• But...
• coal is a dirty fuel. We have to clean it up or
  phase it out.
• UK coal mining industry is not strong. Issues
  around quality, cost and geological issues.
• imports of coal are growing and there is wide
  availability of competitive supply
• Government is committed to market solutions not
  Government role to tell generators where to buy
  their coal from.

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Coal Forum 3

• Its role
• to facilitate improved dialogue and understanding
  between those with an interest in coal production
  and use.
• to encourage the participants to find commercial
  solutions which promote the best use of UK mined
  coal.
• to see whether there are things which Government
  can do to help e.g. planning, supporting
  cleaner coal developments.

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Coal Forum 4

• Style
• already had preliminary meeting, chaired by
  Malcolm Wicks. First full meeting planned for 14
  November. Then every two months.
• clear preference for limited membership the
  industry has told us it wants to discuss
  commercial and technology issues and not be a
  political talking shop.
• but early days.

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