{"id":91504,"date":"2018-04-30T16:57:03","date_gmt":"2018-04-30T16:57:03","guid":{"rendered":"http:\/\/mostafa.openonline.co.uk\/?guid=4fc2595187d762c9051d1d2bb097c40d"},"modified":"2018-04-30T16:57:03","modified_gmt":"2018-04-30T16:57:03","slug":"speech-aurora-spring-forum-2018","status":"publish","type":"post","link":"https:\/\/mostafa.openonline.co.uk\/?p=91504","title":{"rendered":"Speech: Aurora Spring Forum 2018"},"content":{"rendered":"
\n

It is wonderful to be back in Oxford, not only because of many happy memories, but also to be in a city that is central to so many energy breakthroughs.<\/p>\n

In 1976 Professor Goodenough formed a research group from around the world to tackle the intractable problem of how to make batteries rechargeable.<\/p>\n

And these great minds struggled, they even had to call out the fire brigade when experiments went wrong\u2026
\nBut of course in 1980 they published their findings in Materials Research Bulletin.<\/p>\n

The world took notice – the lithium ion battery changed the world, although it meant that officials could pester ministers at any time, day or night.<\/p>\n

So many academic innovations have sprouted from this academic powerhouse, from nuclear fusion research at Culham to Professor Snaith\u2019s new understandings of perovskites which could transform solar power.<\/p>\n

And it is harnessing the value of this sort of world changing innovation that we want to see right across the UK, and particularly in the energy portfolio.<\/p>\n

That\u2019s why this government has set out the biggest ever increase in public research and development investment; three billion pounds more invested every year by 2021.<\/p>\n

And it is that focus on innovation, research, development, commercialisation which underpins the Industrial Strategy.<\/p>\n

Looking at how we invest in Britain\u2019s historical straights to create the high-growth firms and well-paid jobs is essential to redress many of the imbalances of our economy, and make sure we are fit for the future.
\nAnd our modern Industrial Strategy doesn\u2019t just celebrate engineering developments, it celebrates ideas.<\/p>\n

That\u2019s why it\u2019s so great to be hosted by Aurora today, a relatively new energy research company, trying to do things differently\u2026<\/p>\n

\u2026 and one that has already grabbed a leading position across Europe.<\/p>\n

And that was one of the reasons we tapped into one of Aurora\u2019s founding directors, to ask for his wisdom and his experience of the energy sector, to lead the Independent Cost of Energy Review.<\/p>\n

This was commissioned as a no-holds barred look at how we deliver more affordable energy, to look at how we keep the lights on, while decarbonising, how we create innovation, and how we balance those relationships and those responsibilities between the public sector and the market.<\/p>\n

The review has sparked a debate, a vibrant debate if I might say, about how we actually get to an energy market where active consumers, not producers, are central; where the pyramid of supply and distribution is turned upon its head; where we realise the potential of the investments we\u2019ve been making now for many years in new clean energy technologies.<\/p>\n

And where we implement ideas and spending according to a framework. One of the frameworks we\u2019ve been using a lot in the Clean Growth Strategy<\/a> which I authored last year, is the idea of a triple test that investment makes sense if it decarbonises, if you can see a cost trajectory so that means you don\u2019t burden consumers with expensive innovations over the long term, and where you actually create and leverage a strategic innovation that means you can export that technology globally.<\/p>\n

And since Dieter\u2019s Review<\/a> was published, we have also published the Industrial Strategy White Paper<\/a>, which once again emphasised the importance of energy to our economic success.<\/p>\n

And showed a reliable, affordable, and smart energy system provides the backbone for a stronger, fairer, and more productive society.<\/p>\n

And how new technologies, AI<\/abbr>, big data, EVs<\/abbr>, autonomous vehicles are not just disruptive in their own sector but are also hugely disruptive to the energy sector as well.<\/p>\n

And how creating the conditions for success for fair competition is so central to innovation.<\/p>\n

And also how energy systems are central to the broader challenge of clean growth, 1 of the 4 Grand Challenge of the Industrial Strategy<\/a>. An energy system that underpins, benefits from and accelerates the transformation of our economy.<\/p>\n

And Dieter\u2019s Review covered very eloquently many of these arguments. Much of his diagnosis is compelling, articulated brilliantly.<\/p>\n

He talks about the disruptors that are coming along in this sector, the move from passive to active demand, more and more zero marginal low cost clean generation.<\/p>\n

We are now buying at prices unimaginably low compared to just a few years ago. Access to cost-effective storage technologies that scale; linking in electric mobility into the grid.<\/p>\n

Dieter says that these changes are happening regardless of what government does, whether we like it or not, this is the way the market is moving.<\/p>\n

And so for me the job of government is to re-examine the bits that we do, the bits of the market that we are involved in, the frameworks, the policies, the regulation that we put in place, to make sure that they are fit for purpose.<\/p>\n

That they encourage this innovation, they increase competition, and they don\u2019t have unintended consequences down the road.<\/p>\n

And I think if we manage these changes well, the historic tension between cost, CO2 and security becomes irrelevant.<\/p>\n

It\u2019s a little bit like the conversation we have for clean growth, where some had always imagined that a green future meant hunkering down in caves.<\/p>\n

Recessions are really good for cutting carbon emissions, and there are still politicians out there who would rather like that to be the case.<\/p>\n

But actually, if you look at what the UK has done when it has decarbonised more and grown faster than any other G7 nation since 1990, that these 2 things go hand in hand.<\/p>\n

And it\u2019s the same with the age-old energy trilemma.<\/p>\n

And of course, if it\u2019s the UK innovators who develop the technologies to achieve those goals, we reap those industrial and economic benefits, bringing home the benefits of the world\u2019s pivot to this low-carbon future in a way that generates highly productive jobs and growth at home.<\/p>\n

So Dieter\u2019s Review brings that challenge to life, and without front-running the response to the consultation, I did want to dwell on three of his findings, not all 68 of them, don\u2019t worry.<\/p>\n

The first was the necessity for more active management of the system.<\/p>\n

The huge increase in distributed generation, the opportunity for more demand-side response, and the potential for creating new demand for electric heating creates a requirement for a less passive local grid.<\/p>\n

Grid management is hard enough in the current top-down system, the idea of having intermediates and end-states of supply and demand I think is incredibly challenging.<\/p>\n

And so, Dieter\u2019s proposal for the system of neutral regional systems operators is extremely interesting.
\nAnd it\u2019s part of the process that we\u2019re already going through, which has already seen us create a much more independent systems operator role for National Grid.<\/p>\n

Dieter\u2019s review challenges us to consider whether and how we should go further. The network industry has come forward with initial proposals, which we\u2019re looking at, many of them suitably ambitious.<\/p>\n

But we will be working closely to ensure that these go beyond \u2018business-as-usual\u2019 and deliver the framework that we need to move us to this future. We have to get this right.<\/p>\n

And secondly, Dieter\u2019s eye-catching proposal for the equivalent firm power auction is worth dwelling on.
\nWhen considering this, I am mindful that many of the tools are actually working well.<\/p>\n

I know we\u2019ve taken a fair share of criticism for how we got here, but if you look at what the tools are delivering, CfDs<\/abbr> are delivering offshore wind at 57 pounds per MWh<\/abbr> with every prospect of further reductions, and with an industry that is being created as part of that supply chain, right across the UK.<\/p>\n

The Capacity Market is giving confidence to industry that there is no risk to supply at keener and keener prices.
\nAnd of course the \u2018Beast from the East\u2019 tested the resilience of the systems right across Europe and the UK.
\nI think there are lessons to be learned, but overall our gas and electricity systems proved robust and responsive.<\/p>\n

The market frameworks we had in place provided National Grid with the tools they needed.<\/p>\n

Dieter\u2019s challenge is how do we evolve today\u2019s arrangements, so they can adapt to this pace of change and achieve this end-state that we want to see going forward.<\/p>\n

And the Capacity Market is obviously a key part of that evolution.<\/p>\n

So later this year, we will be conducting a formal review to mark 5 years since this introduction, asking some key questions:<\/p>\n

Have we got the penalty regime right? Are the outcomes of the market aligned, not just with the security of the energy system, but with the triple test I described, and the ambition we have in the Industrial Strategy?<\/p>\n

Should it be open to new technologies, like renewables as we are seeing in Ireland? How do we include battery technology into this mix? How do we work with demand-side response and small-scale gas installations, which have already confounded prior expectations?<\/p>\n

Understanding and answering these questions will help simplify the system in line with Dieter\u2019s recommendations, whilst maintaining robust energy security and delivering on our triple test.<\/p>\n

But as we consider these changes, we have to create market structures and regulation that continue to make the UK one of the leading destinations for energy investment.<\/p>\n

I think that clarity of regulatory structure and confidence in the system are a hugely important part of that.
\nAs we look to the future, I think it\u2019s worth reflecting on the work that we\u2019re doing now to ensure well-regulated, competitive markets deliver value and service for customers. That markets work for customers in a way that consumers perceive industry they should.<\/p>\n

We\u2019ve seen huge improvements in the efficiency of our home energy system, thanks to the smart regulation insulation measures.<\/p>\n

I\u2019ve given lie to the argument that all this stuff we do, the investing in the future of energy, is somehow putting up prices.<\/p>\n

Whilst we\u2019ve seen a policy price increase, bills have gone down in the average household because of excellent improvements in energy efficiency, and as we made clear in the Clean Growth Strategy.<\/p>\n

We want to build on that success. I\u2019ll be reviewing the ECO<\/abbr> obligation very shortly, which I want to pivot as much as possible to helping those living in fuel poverty, making sure that it provides a much better route to market for innovation technology in the home efficiency space.<\/p>\n

We\u2019re regulating so that landlords have to ensure the homes they let are cheaper to run.<\/p>\n

We\u2019ve exempted many of our energy-efficient industries from many of the levies that we have brought forward.
\nAnd we\u2019ve also taken tough decisions in 2015 to cut subsidies while focusing resources on strategically important sectors like offshore wind and nuclear.<\/p>\n

And just this month you may have seen that I brought forward the Price Cap Legislation, with very strong cross-party support.<\/p>\n

This is not an attempt to set energy prices in Westminster.<\/p>\n

This is an attempt to help the market speed up its evolution to a more competitive marketplace.<\/p>\n

We have a problem in this market as in so many others, which is asymmetry of customer information: a group of highly enabled, digitally-savvy consumers who are able to take advantage of switching deals that are on offer given the new entrance on the market, and then a much larger group of those who are not as aware or as able to take advantage of those opportunities and worryingly tend to be older, less wealthy, less educated, often more vulnerable.<\/p>\n

And we know that the market is working hard with its regulator to address many of those problems\u2026
\nBut we want to make sure that that acceleration continues. That\u2019s why we\u2019re bringing forward a time-limited, intelligent intervention in the market to help reset this market to ensure it works for consumers.<\/p>\n

And it\u2019s part of a huge package of work that is coming forward:<\/p>\n