(Warm) Welcome and for Inviting Me to Speak Today. It's A

Thank you for that (warm) welcome and for inviting me to speak today.

It’s a pleasure to follow on from David and what was a forensic analysis of climate science which I am sure has given all of us much food for thought.

I also bring greetings from the rest of Labour’s Energy and Climate Change team, Shadow Secretary of State Caroline Flint, Shadow Energy Minister Tom Greatrex and our spokeswomen in the Lords Baroness Angela Smith.

The task I’ve been given today is to give the opposition’s take on the challenges facing policy makers now and over the coming years, where we think the government isn’t getting it right and how we might do things differently.

Trying to second guess what the government is going to do in the future is never an easy task.

This was bought home to me when in preparation for today I re-read the speech my colleague Huw Irranca- Davies gave to you here 12 months ago when he was Shadow Energy Minister.

One of the things which struck me looking back to that period was the quiet optimism about the low carbon agenda, which I think many people had at that time and it appeared all parties were pursuing.

The coalition had inherited somewhat of a green legacy from the previous Labour government which had led the way on climate change.

Internationally, putting the issue at the heart of the G8 and calling the first ever UN Security Council meeting to discuss it.

And domestically passing the world’s first Climate Change Act – binding the UK government, by law, to reduce carbon emissions by a third by 2020 and by 80% by 2050;

We reduced the UK’s greenhouse gas emissions by over 21% below 1990 levels, beating our Kyoto target;

Doubled renewable energy generation;

Established Britain as a world leader in offshore wind capacity;

Invested in R&D for wave and tidal;

Introduced Feed in Tariffs for solar generation;

Initiated the first CCS competition and proposed that no new coal fired power stations should be built in Britain without carbon capture and storage to drastically cut emissions;

We introduced plans for a Green Investment Bank in the 2009 budget;

Secured investment for electric car production in the north east;

And created hundreds of thousands of jobs in the low carbon sector.

I’m rightly proud of that record and it’s one this Government should seek to build on.

However we recognise that for all we achieved, our record needed to be built upon if we are to successfully tackle climate change and take advantage of the many opportunities moving from a high carbon to a low carbon economy presents.

The new government supported by Liberal Democrats in the coalition, who for years have claimed that environmental policies were one of their main concerns and the vote blue, go green, conservatives appeared committed to doing this too.

Yes there were some setbacks and poor decisions at the start of their term on office:

The cancellation of the loan to Sheffield forge masters, the abolition of consumer focus, significant cuts to warm front and the scrapping of the tidal barrage on the Severn estuary - for example.

However the mood music was still positive.

The Department for Energy and Climate Change appeared to have escaped relatively unscathed from a comprehensive spending review, in which the Chancellor announced cuts that went so far and so fast;

The Green Investment Bank was retained, albeit with delays on when, if ever, it might borrow;

The Green Deal was announced;

And Feed in Tariffs were untouched.

Given this I’m not sure many would have predicted that twelve months later,

Britain would have fallen from 3rd to 13th for investment in low carbon technology;

Feed in Tariffs would be cut by over 50%, cutting the solar industry off at its knees and risking 25,000 jobs just before Christmas;

Giving the Green Investment Bank borrowing powers would be delayed by another year until at least 2016;

Or that the £1bn of funding for CCS which was seemingly guaranteed would be ‘redeployed’ to other infrastructure budgets, putting its entire future in doubt;

As a result from the many low carbon businesses, investors, employees and green groups I speak to, it’s clear much of that early optimism has died away.

For many in the low carbon community the start of 2011 has come to be seen as the end of the Conservative’s green detoxification – the year the husky died.

Over the past twelve months we’ve seen a divided government, unable to stand up for the low carbon agenda, against vested interests that want to continue with business as usual.

These divisions go right through the coalition.

Whether it’s David Cameron and Chris Huhne failing to stand up to the big six at the number 10 energy summit;

George Osborne pandering to climate sceptics on the Tory backbenches, and repeatedly criticising environmental regulations;

Or Chris Huhne and Vince Cable clashing over the Green Investment Bank;

Any policy which would boost our green economy seems to fall victim to division, dither and delay, resulting in it being watered down or in some cases scrapped completely.

This has created a deep uncertainty about the government’s commitment to tackling climate change.

This approach is wrong.

Wrong for Britain, because we are missing out on the opportunity to rebalance our economy and foster new industries, creating the jobs and growth we need.

And it’s wrong for the British people, because all of us are counting the cost of higher gas and electricity prices, created by a market which is uncompetitive and is no longer working.

Instead of creating this uncertainty the government should focus on three areas:

Firstly, rebuilding our economy and stimulating growth in low carbon industries which will sustain it in the future.

Secondly, meeting our climate change targets and ending price volatility while maintaining security of supply;

And finally, reforming the retail market, so that it isn’t just working for the big energy companies, but for hard working bills payers up and down the country.

JobsFirstly on rebuilding our economy, we have put forward a 5 point plan to get demand and growth back into our economy - including tax breaks for small businesses taking on extra workers, a temporary VAT cut, a tax on bank bonuses to fund 100,000 jobs for young people and a 5% cut in VAT on home improvements.

This is a plan that we say should be implemented immediately.

As well as taking the vital action to get our economy moving again, we must also consider the type of economy we want to see emerge from the wreckage of the crash.

This is crucial.

We face a choice. We can return to the path of businesses as usual, to the high risk, high stakes, short-termism which culminated in the financial crisis of 2008.

Or we can take a different road. One set out by Ed Miliband, the Leader of the Opposition, in his speech to the Labour Party conference a few months ago.

He recognised that a “something for nothing” economy is neither good for business nor good for Britain.

For too long our economy has failed to reward the real wealth creators who build sustainable, successful businesses based on the values of decency and hard work.

The financial crisis exposed the deep structural problems which exist in our economy:

A lack of good jobs, apprenticeships and opportunities for all.

A finance system which encourages predatory behaviour and short- term decision-making

And powerful vested interests who feel they can do what they want.

Instead we need to build a new economy based on investing in skills, encouraging sustainable growth and rewarding long-term decision making.

To make this a reality, we need a change in approach.

What is the Government doing? It has adopted precisely the wrong approach.

It is making the wrong choices for our economy in the short term, choking off the recovery. But it is also making the wrong choices for Britain in the long term.

And we see this clearly in the green economy, critical to our future growth.

The case for investment in green growth could not be stronger.

There are many studies but, the United Nations Environment Programme report released earlier in February makes a powerful argument concluding that:

"the green economy is expected to generate as much growth and employment – or more – compared to the current business as usual scenario, and it outperforms economic projections in the medium and long term, while yielding significantly more environmental and social benefits."

The global market for low-carbon goods and services is growing.

It’s estimated it will be worth £4trn by 2015, with the potential to create 400,000 new jobs in the UK.

And just last week Bloomberg reported that over a trillion dollars have been invested in renewable energy, energy efficiency and smart energy technologies since records began in 2004.

Significantly, much of the growth is coming from non-OECD countries such as Brazil, China and India who have recognised the threats presented by climate change and are mobilising investment to tackle

7 their domestic emissions far faster than many developed economies.

Unfortunately while other countries are powering ahead, we are seriously at risk of falling behind.

As if it wasn’t bad enough for the Prime Minister to put Britain in the slow lane of Europe at the weekend, it’s even worse that the chancellor has left us on the hard shoulder when it comes to building a low carbon economy.

It might sound good to the Conservative Party Conference for the chancellor to talk down the green economy.

But what does it say to the companies who want to put their money behind carbon capture and storage or renewable investments?

To the small business owner who’s thinking of providing energy efficient goods?

To the manufacturer planning to build the parts for a new generation of wind farms or solar panels?

It says think again.

And how must the 800,000 people currently working in Britain’s low carbon economy feel?

The chancellor shouldn’t be talking down the work they do.

They aren’t part of the problem; they are part of the solution.

The government’s lack of ambition is holding us back, damaging confidence and deterring investment.

The results of this are clear.

Last year, when Labour left office, the PEW environment report ranked the UK third in the world for investment in green growth.

Today we are 13th. And falling

As well as creating uncertainty and deterring investment by talking down Britain’s low carbon prospects, minsters are threatening to strangle emerging industries at birth.

On October 31st climate change minister Greg Barker announced a 52% cut to Feed-in-Tariffs, a move that could almost destroy the entire solar industry.

By the Government’s own admission, costs for solar have reduced by about 30%; most people accept that there should be a reduction in the tariff to reflect this. Yet the seemingly arbitrary new figure of 21p/kWh, a cut of 52%, with just six weeks’ notice before implementation, appears to bear no relation to the reduced cost of installations.

The government’s, savage cut threatens to kill off the domestic solar industry - the same solar industry which now employs 25,000 people across the UK, compared to just 3000 a year ago

Many companies fear for their survival as a result of the Government’s cut to Feed-in Tariffs.

The proposals will also consign many community projects to the scrapheap – the opportunity for schools, for public sector housing and other innovative local schemes has been lost despite, in some cases, months of preparatory work.

But the cuts to the Feed-in-Tariff will not just impact the solar industry. They will mean that nearly 9 out of 10 families will be excluded from solar, as their homes are not an energy standard of ‘C’ or above.

Ordinary people who try to green their homes and protect themselves from hikes to their energy bills will be amongst the biggest losers.

At a time of soaring unemployment and a flat lining economy, it seems bizarre for the government to be destroying one of the few industries which is thriving in spite the challenging economic backdrop.

As well as supporting existing industries we should be preparing for the future by investing in emerging technologies, like Carbon Capture and Storage.

Chris Huhne promised no “Treasury backsliding” on CCS, but the Chancellor’s raid on the budget in the Autumn Statement just a week ago shows that is exactly what we have got.

Since then Chris Huhne, George Osborne and Danny Alexander have each had opportunities to provide clarity and spell out how much money is available in this Parliament for a demonstration project, but all have avoided the question.

Like FITs there was little consultation with the industry before the decision was made and the result is to damage investor confidence.

Government needs to stop the dither and delay on CCS and make explicitly clear exactly how much funding will be available for it before 2015, and what the current timetable for the development of this vital low carbon technology on a commercial scale is.

Creating uncertainty by breaking promises on FITs and CCS also makes it more difficult to make progress in other areas because, understandably, it makes people think twice about investing in new schemes.

Take energy efficiency where this is already happening with the green deal.

We have been very supportive of the principles behind the green deal.

Improving energy efficiency will reduce our carbon emissions and our energy bills. A pay as you save scheme is something Labour piloted in office.

However, the government’s proposals as they stand don’t seem to add up for consumers or for businesses.

The lack of detail on crucial issues like the interest rates for green deal finance means many companies are wondering if it is worth the risk of delivering the scheme, when they can’t even work out if they could make a profit.

Tomorrow’s growth lies in today’s small businesses. The 2 million SME’s in the UK are the lifeblood of our economy.

But instead of supporting them the government is locking them out of the green deal.

Labour's vision for the green deal is one where small businesses, co- operatives, charities and social enterprises are able to compete alongside large companies that want to take part in the scheme.

We tabled proposals to reduce administration fees and guarantee of fair access to the green deal for smaller providers.

The government voted against them.

Instead of giving all providers fair access to the new Energy Company Obligation which will under pin the green deal and drive demand in the initial stages, the government has limited access to the subsidy to the big six, meaning other companies will struggle to compete.

The only way for small businesses to realistically take part in the Green Deal will be to undercut each other for ECO contracts from the big six, instead of the market being genuinely open and competitive.

By taking this approach, ministers are leaving Britain's 2m small businesses with empty order books, as the big players squeeze them out of the market place.

Security

As well as taking action to create jobs now, it’s vital that we invest in low carbon energy generation and our infrastructure.

Only by moving from being dependent on foreign fossil fuels to low carbon generation in the UK can we end the up and down price volatility for consumers.

Doing this won’t be easy and the size of the task is huge.

Over the next ten years it’s estimated the UK needs to invest £200bn to meet our target of 15% renewable generation by 2020.

Spread evenly that’s around £20bn every year for ten years, a figure which currently we are falling short of.

Some of this will come from the utility companies, but they will only be able to afford to put so much of this onto their balance sheets.

Much of the funding will need to be raised from private finance - so if the EMR proposals are to be successful they will need to be simple to understand and provide certainty for investors.

Despite the importance of these reforms we are yet to see comprehensive, across the board proposals from the Government, which will do just that.

And this isn’t just the opposition’s view, a recent report by the Energy and Climate Change select committee concluded that:

“The proposals presented in the consultation are over-complex, potentially expensive and fail to recognise the urgency of the transformation that needs to take place. The proposed reforms would not do enough to attract the £110bn investment needed in the electricity sector in less than a decade and they miss the chance to put the UK at the forefront of innovation and competition.”

It won’t have given investors much confidence that the chancellor had to go back and amend the carbon floor price in the autumn statement because it was poorly designed and would put Britain’s energy intensive industries at a disadvantage.

And despite this amendment there are still weaknesses.

The purpose of Carbon Price Support should be to discourage CO2 producing technologies and reward low-carbon generation, as the report succinctly notes.

This should encourage investment in low-carbon generation – contributing towards the green economy and helping to meet our ambitious carbon reduction targets.

The great failure of the government’s Carbon Price Support proposals is that whilst it provides an incentive for nuclear and renewables, which is to be welcomed, it currently fails to encourage or prioritise new generation.

As the Energy and climate change select committee report also concludes, the “Carbon Price Support will not influence investment decisions until 2018 at the earliest...Until then, the Carbon Price Support represents little more than an additional energy tax, which will be passed on to consumers.”

As with so much of the Department for Energy and Climate Change’s policy agenda, what started out with the best of intentions, quickly becomes a tax grab for the Treasury.

So much work is needed over the next few months to improve the EMR proposals and we hope that the government will work with us to do that before bringing forward the new energy bill next year.

Prices

Crucially the most glaring omission from the EMR proposals is reform of the wholesale electricity market.

Nowhere is it clearer that the government isn’t willing to stand up to vested interests on behalf of British consumers than when it comes to reform of the retail market.

And the government’s failure to address the fundamental problem with the market has grave knock on effects in other areas.

Take feed in tariffs which I mentioned earlier.

This as I’ve said was a bad decision, compounded by poor management by ministers and a lack of engagement with business.

It will cost jobs, cripple an emerging industry and put our economy at a disadvantage in the future.

But what makes it even worse is the justification given for that decision.

It wasn’t justified by minsters, as with so many other choices by this government, as a way of cutting the deficit, but rather this was a way of lowering bills.

A justification which I think has been rightly undermined by the government’s own figures showing the actual amount that was being added onto bills was extremely low, written answer from DECC a fortnight ago showed the cost for FITs between 2010 – 2011 was 21p on an annual bill.

But even still none of us want people to have to pay more for our gas and electric than we have to.

Especially not at times like these when things are really tough for so many.

And it’s true the cost was set to rise.

That’s why the solar industry had agreed on the need to reform the tariffs and had put forward plans to lower the tariffs without crippling the industry. As the slogan for the solar industry’s campaign says – ‘cut don’t kill’. The government chose to ignore this and impose a 52% cut which the industry can’t sustain.

So why do this?

Why make such catastrophically bad decision? With no time for implementation or for the market to adjust.

The truth is that because they are choosing not to reform the market, ministers have put themselves in this position.

With the average duel fuel bill at over £1,300 a year, the Government feels it has to take some action to lower the cost of bills for consumers.

We agree they should be taking action.

But the huge increases aren’t because of a growing solar industry; they are because of a broken energy market.

Ministers aren’t prepared to stand up to the big six, they are tinkering at the edge, with disastrous outcomes.

And who will pay the price for this lack of action?

It will be those who did the right thing by choosing to install solar on their homes;

It’s the community and social housing projects which are now unviable;

And it’s the thousands of people who could lose their jobs just before the new year.

Rather than crippling the solar industry, reform of the retail market should be a priority for government, not just in the next few years but right now.

If it wasn’t obvious before, over the past 12 months it’s become clear that the market is broken and we must act to fix it.

There has been a clear breakdown of trust between the big six companies which supply 99% of gas and electricity to consumers.

There are things the government could be doing right now to address this but isn’t.

Ed Miliband has put forward a comprehensive package of reform which we want to see implemented right away.

Firstly, we need an investigation into the miss-selling by energy companies and compensation for consumers who have been misled.

For too many years, cold call doorstep sales have led to hundreds of thousands of people paying more for their energy after switching to a worse deal.

It is welcome news that five out of the big six have ended this practice, but questions remain about selling methods.

The only way to restore trust is to have an immediate investigation into what has occurred, with proper sanctions if wrong doing is found, and compensation for the victims.

Secondly, energy companies should use their significantly increased profits to help families and businesses struggling to make ends meet, by cutting their bills now.

In October OFGEM published research showing the average duel fuel bill is now a mammoth £1,345 per household.

But at the same time energy companies’ profits soared from £15 in June, with their margin now standing at a whopping £125 per customer.

It can’t be right that at a time when consumers are being told that increases in their bills are unavoidable, energy companies are increasing profit margins by 700%.

It just isn’t fair.

Thirdly, we need transparency.

This means publishing trading data so it’s clear how much it costs companies to buy their energy.

Only then can customers be sure that they are getting a fair deal.

Fourthly, simple tariffs.

We need tariffs that are fair to consumers by being easy to understand and compare.

70 per cent of consumers say they find the number and design of tariffs on offer confusing.

And when even the Energy Minister himself says he gave up trying to switch because he found it too confusing something is clearly not right. We want to see a new simple tariff introduced across the board.

With a daily standing charge, covering the cost of delivering the energy to people’s houses;

And a unit price so that people can see clearly how much they are using and how much they are paying.

This would end confusing charges; making it easier for people to properly compare between suppliers’ prices.

Finally and most importantly we need to increase competition in our energy market.

For too long it has been dominated by a handful of companies.

At one time it seemed to be working.

But no longer.

Research by OFGEM has shown that as soon as the wholesale price goes up, so do people’s bills.

But when wholesale prices come down, bills don’t.

We need to get back to a genuinely fair, transparent and competitive market.

So our proposal is for all generators to sell their power on a long term market, to any supplier.

By reforming the market in this way and opening it up, new entrants can join, increasing competition and lowering bills.

That is why Scottish and Southern Energy’s announcement that they will sell all of their electricity into the day ahead market is a step in the right direction – but we need all the firms to do more – selling their electricity into the long-term wholesale market, so purchases can be made a year or more in advance.

The government should be leading the calls for reform not running to catch up with them.

The challenges we face in the coming years will be substantial.

Making the energy market work for consumers as well as suppliers;

Investing to secure security of supply, while meeting our climate change commitments for future generations;

And building a significant low carbon economy to create new jobs and sustainable growth.

Meeting these challenges will not be easy and to do it we need government to raise its ambitions and end the uncertainty.

But I believe the rewards of a new approach, one that creates jobs, supports businesses, lowers our carbon emissions and puts fairness at the heart of our energy market will be worth it.

Thank you very much indeed.