Charles Hendry’s speech to the University of Edinburgh Business School

There are four key challenges to address for UK energy security – in the medium to long term:

• Declining domestic production: The UK became a net importer of gas in 2004, making us increasingly exposed to risks from rising global demand.
• Global factors are driving wholesale fossil fuel price rises: international demand – such as from China.
• Power Station Closures: A quarter of existing power stations to close over the next decade, and;
• The need to decarbonise: Huge investments – up to £110bn in electricity sector by 2020 alone, to meet greenhouse gas emission reduction targets. And a potential doubling of electricity demand by 2050 for heating and transport.

The challenge is clear – but what is the correct path to choose?

Our 2050 Pathways Analysis – which is fully openly accessible on our website - presents a framework through which to explore a range of potential energy pathways from today to 2050.

It’s been used by the public with 20,000 people submitting their own vision and over 150 000 unique users trying their own pathways and joining debates online. Experts and NGOs submitted their views.

Government is listening to these views. In the medium term we are looking at becoming smarter with the energy we use. The Green Deal this year will focus on improving our energy efficiency, both at home and at our work places. Also, we need to move our electricity generation mix as well as our transport sector to low-carbon solutions.

We are building a coalition for change – government, businesses, NGOs, academia and the public – to deliver this 2050 vision.

A key output of the 2050 Pathways work is that innovation and new business models are going to be key.

Globally, the low-carbon goods and services is worth £3.2 trillion, and employs 28 million people. It is growing by 4% a year, faster than developed world GDP, and will accelerate.

Private finance is already rushing in. In the first half of 2010, green technologies accounted for a quarter of all US venture capital investments. Globally, investment in renewables now outstrips investment in fossil fuels.

In the UK we have committed to significant investments in low carbon growth solutions.

Capitalised initially with £3bn, the UK Green Investment Bank will play a vital role in addressing market failures affecting green infrastructure projects in order to stimulate a step up in private investment. £1bn has also earmarked for commercial scale CCS demonstration in the UK.

It is also a sector driven by relentless innovation in business practices. To meet these challenges investment alone is not enough, but changing our behaviour towards the usage of energy will be at least as important. These are choices which will impact our daily lives, just for example:

• The investment associated with our reforms to the electricity market has the potential to generate around 250,000 jobs in low carbon electricity to 2030.
• We will roll-out a smart meter to every UK home by 2020.
• We aim to insulate between 2.5 to 5.2 million solid walls in the UK until 2030.
• By 2050, we expect to be using per capita a third less energy from today.

These goals together with other sector targets are described in our December 2011 publication ‘The Carbon Plan’. The document sets out the scale of investment and the opportunities for industry and business within the overall national low carbon challenge.

Of course one cannot look to the future and not address the issue dominating the present Scottish political horizon - independence.

In energy we have a united ambition –Scotland as a renewable energy powerhouse of Europe.

We are working closely with the Scottish Government to make sure Scotland fully benefits from its resources. Being a United Kingdom means we can attract the large investment necessary and spread the costs. I firmly believe that Scotland’s ambitions profit from being part of the union.

Huge investment is needed in the electricity sector in the coming years. For example from 2020 to 2030 30-40 GW of low carbon capacity needs to be added to the grid in order to meet our energy and climate change commitments. This will require an investment of around £100 billion.

Last week Scottish Power and National Grid announced a £1bn contract for the longest underwater connector in the world between Hunterston, in Ayrshire, and the Wirral peninsula, near Liverpool.

The 260 mile long cable is due to be operational by 2016 and improves grid connections by bringing power produced by remote wind farms to consumers.

These improvements are critical – and made easier because of the size of the market. By being a United Kingdom we can attract the large investment necessary and spread the costs.

You (Students) are the generation which will shape and deliver this low carbon vision in the coming decades.
You can join this debate by developing your own 2050 Pathway for the UK on our website and:

• Submit your 2050 future by using the My2050 simulation on our website
• Join our discussion on 2050 on our DECC blog; or
• Contribute to our 2050 Pathways call for evidence on the issue of costs and air pollution impacts. In a wiki-like format we hope to ensure that all views are being heard and are part of the analysis.

It is by taking action now that we secure the low carbon jobs for Britain and keep prices affordable. Only with you can we make this happen.