When Stephen Timms became Minister for Energy, he already had a ministry to run. He had been Minister for e-Commerce since May 2002, and when Tony Blair asked him to replace Brian Wilson as energy minister, he accepted and took over the top seat of the DTI – the Department of Trade & Industry. He is now in charge of the Blair administration’s policy on energy and sustainable development, as well as e-commerce and postal services. A strange combination, some might say. And it may prove difficult to strike a balance between traditional fossil energy production and a new focus on renewable, environmentally friendly fuels. But Timms is determined to commit Britain to a modern, future-minded policy with focus on renewable energy.
Brian Wilson left the department after the administration botched the rearranging of several ministerial portfolios. He was known as a big fan of low carbon and sustainable energy. Timms intends to continue in the same vein, and has vowed to strengthen the British emphasis on renewable and sustainable energy as a big part of the country’s energy strategy. Of course, he has to. The blueprint of Britain’s long term energy policy has been laid down in the recent Energy White Paper, and the message is clear – the way forward is through a significant reduction in carbon emissions, and a commitment to renewables.
Renewables is the Future
Timms is a firm backer of the plan: “The Energy White paper sets a strategic framework for our energy policy over the next fifty years. For the first time we have put the environment right at the centre of our energy policy objectives,” he told PRASEG, the Associate Parliamentary Renewable and Sustainable Energy Group at their conference in July. It will be up to Timms to set Britain on the way to the four goals for energy policy articulated in the White Paper:
- To cut Britain’s carbon emissions by 60% by 2050 – and to show significant progress by 2020;
- To maintain a reliable level of energy supplies, and to ensure that domestic and industrial consumers can get the energy they need, when they need it.
- To promote effective and competitive energy markets, and boost productivity;
- To make sure every British house is adequately heated.
There is a real challenge in achieving these goals – all at the same time. A significant question arises: Is it possible to enforce stricter environmental regulations, and lower carbon emissions, while at the same time ensuring that industry and private homes alike get the energy they need? Timms thinks so: “Our view is that these four goals can be achieved together. The White Paper sets out a clear framework of what we plan to do, with practical measures set in the 130 or so commitments it contains. We see the White Paper as the start of a process,” he says.
Britain has a mix of energy sources, and most of them, such as nuclear plants, oil & gas, and coal, are distinctly non-renewable. In a challenging time for the oil and gas industry, and a historically low level of employment, it could prove a challenge for the Energy Minister to defend an environmentally sound policy, while assuring the old guard that they are not forgotten. But Timms focuses on the new opportunities created by and for those who want to work with renewable energy.
“Renewables play a key part in all our energy policy goals. In the White Paper, we re-affirmed our target of renewables contributing 10% of the UK’s electricity supplies by 2010, and set out our aspiration to double the share accounted for by renewables by 2020, “ he says. This would mean a significant reduction in carbon emissions – around 2,5 million tonnes by 2010. At present, under 2% of Britain’s energy supplies are generated by renewable sources. Timms realizes this won’t take emission reduction as far as is needed. “The present rate of progress will simply not be enough,” he says.
The Renewables Obligation
The most important weapon at Timms disposal, and the sword hanging over him, is the Renewables Obligation, which calls on all licensed electricity suppliers in England & Wales to supply a specified and growing proportion of their electricity sales from a choice of eligible renewable sources. The Renewables Obligation Scotland is the equivalent instrument in Scotland. This regulatory device was introduced by Timms’ predecessor, Brian Wilson, and requires the current minister to follow the energy industry closely. Timms believes this creates great opportunities for the energy industry: “The Obligation has created a long-term and assured market for renewable energy, estimated to be worth over £1 billion a year by 2010. It is a very important commitment on the part of Government,” he says.
Timms sees the renewable energy sector as a future major employment sector: “I want to see UK renewable developments create and sustain UK jobs, and DTI’s Renewables UK is working hard with the industry to turn this into a reality. There are many opportunities for the UK to continue to develop a highly skilled and competitive supply chain and to win a larger share of the world market. This is beginning to happen.”
Apart from his clear environmental profile, the Energy Minister has a plan for the future of British oil & gas as well. With his new post, he has taken over the stewardship of the PILOT partnership – the successor to the Oil and Gas Industry Task Force (OGITF) which was created in 1998 to deal with the challenges faced by the industry as a result of the dramatic fall in oil price, the prospect of reduced world demand, and the maturing United Kingdom Continental Shelf (UKCS.)
The PILOT partnership aims to unite senior management –operators, contractors, suppliers, unions and relevant Government Departments, thereby joining forces to address the need to reduce the cost base of activity in the UKCS. It also wishes "to create a climate for the UKCS to retain its position as a pre-eminent active centre of oil and gas exploration and development and production and to keep the UK contracting and supplies industry at the leading edge in terms of overall competitiveness,” according to its own charter.
"PILOT has been extremely influential in advising and supporting both Government policy and industry practices in the UK oil and gas sector,” Timms says. Through PILOT, the industry is working with Government to maximise economic recovery of the UK's remaining oil and gas reserves. This includes clear targets for the level of production, expenditure and employment in the sector in the year 2010.
Close Ties with Norway
An important part of the initiative is UK-Norway cooperation. A report issued jointly by former Minister Brian Wilson and Norway’s Minister for Petroleum and Energy, in August 2002, came with a clear recommendation for strengthening the cooperation between Norway and the UK in the oil & gas sector. This comes about naturally, since the two countries share the fields of the North Sea. The report outlines 14 areas where cooperation can be improved, spanning the industry, and with a possible payoff of about $2 billion. The gains can be made in savings on capital, operating and decommissioning costs, and in the acceleration of new development.
And development is continuing on both the UKCS and the Norwegian shelf. In Britain, the interest in the North Sea was confirmed through the 21st Offshore Licensing Round, at the end of July. Stephen Timms offered 88 new licenses to companies that want a part of the revenues still lying beneath the North Sea bottom. They are spread across 62 companies, of which a record 27 companies are new entrants. 53 of the licenses were so-called “Promote” Licenses, which are designed to bring more of the industry’s smaller, independent players into the North Sea.
Timms is very happy about the allocation of so many of the licenses to new players. “Today’s offers are fantastic news for the UK oil & gas industry, and I am particularly pleased with the number of newcomers to the North Sea who have taken advantage of the new Promote Licence,” he said. The “Promote” Licence offers the licensee an opportunity to assess and promote the prospectivity of the licensed area for two years without adhering to the stringent regulations required of traditional licensees. They will not be given approval as Operators – and hence cannot carry out exploration. They work as a way of getting into the area, and an opportunity to prove a company’s mettle in the industry.
“The Promote Licence has attracted fresh and energetic players from both home and overseas,” Timms said. “We have always maintained and promoted the North Sea as a developing area and today’s offers, which are the largest since the late 1980’s, are proof positive that this approach is the right one.”
The Licensing Round is a breath of fresh air and optimism for a beleaguered industry. It comes only a few weeks after the groundbreaking energy treaty between UK and Russia was signed. The agreement intends to promote investment and development of energy sources in Russia, while securing an important supply of natural gas for Britain. While this is good news for the energy consumer, it creates pressures for the domestic production, and so the clear sign that the North Sea is a priority is a welcome signal.
Mr. Timms acknowledges that the post is demanding, and that there are many challenges inherent in Britain’s complex energy strategy. But he is confident that the challenges can be met. The next few years will be very important in determining how the balance between renawables and traditional fossil fuels will be struck. And if Stephen Timms lives up to his promise, the British energy industry will remain vital and based on diverse sources.