Courage will be needed to reduce carbon and save our planet

We cannot let the lights go out. Serious climate change must be averted through action now and energy costs must be managed. If we are bold, within this decade we can cut the carbon footprint of the average household in Britain by more than a third.

Achieving this means nothing less than turning the traditional energy business model on its head. A company like British Gas must be as much about energy saving as it is about energy supply.

Cleaner electricity is not only vital in itself but a stepping stone to decarbonising other sectors, particularly heating and transport. That is why, if we are to meet our 2050 commitment to reduce carbon emissions by 80 per cent and fulfil our obligation to future generations, the power sector needs to be decarbonised by the 2030s.

Lowering the risk of climate change is a tough task. But with the right market reforms it can be achieved. Two new nuclear power stations, almost five times as much wind power as now, a new carbon capture plant, all of which is perfectly possible, can cut power sector emissions by more than 20 per cent in a decade.

But we need decisions and investments now and this is simply not happening at the scale and speed required. We need to get planning right, to prevent delays, while giving communities a real voice. Liberalised market forces brought prices down. Now they must be captured to bring carbon down. This means a strong price on carbon, so the polluter pays and climate change slowed.

In addition, the market needs to reward all forms of low-carbon generation: firm ones that provide baseload power, and flexible generation to back up intermittent wind power. Energy security lies in energy diversity. We need a balance. Nuclear power fulfils many of the requirements — a proven technology that can provide low-carbon energy at a cost well below that of renewables. Through our Joint Venture with EDF we plan to see the first of a new fleet of nuclear power stations at Hinckley operating by 2018. But this will only happen if we have the necessary carbon price and market mechanisms in place.

Centrica also has offshore wind projects of over one gigawatt, the equivalent of another nuclear power station, awaiting consent. But, again, the regime beyond 2014 needs clarity for investors to move forward.

I also believe gas must act as a bridging fuel to the low-carbon future. In comparison to coal or oil it is low carbon and provides the flexibility we need to back up intermittent wind.

The challenge is big. The Government should be commended for launching the energy market reform. But the timetable is tight.

Britain’s households are responsible for over a quarter of the UK’s CO2 emissions. We are already improving the energy efficiency of new homes but we can’t ignore existing stock. There are still over four million inefficient boilers in the UK; six million homes are without cavity wall insulation, seven million without proper loft insulation. Just putting this right could cut the carbon footprint of the average home by about 20 per cent.

The coalition Government’s proposed Green Deal has the potential to transform Britain’s housing stock. By helping customers finance energy saving measures through credits on their bills, it can help save money, reduce carbon emissions and help energy security. Today I am announcing a £30 million package for British Gas to “go early” on the Green Deal.

We also need to help customers manage energy in a smarter way. Just as we are going early on the Green Deal, we are taking the lead on smart meters. By the end of 2012 we aim to have installed two million. Smart meters are the building blocks for a smart grid and help reward homes for generating their own power. Micro-generation brings “power to the people”. South-facing roofs that catch the sun’s power, boilers that use their waste heat to generate power, pumps that gather heat from the ground to warm the home — if they are to help deliver, we need Government to support them through incentives.

The opportunity for UK business to save energy is just as important. It not only provides a big boost for productivity, it is also a huge opportunity for new green industries and jobs.

Within a few years we want energy services to be as big a part of British Gas as energy supply. But customers need encouragement to play their part. The estimated cost of new investment required in the energy sector over the next decade is some £200 billion, to keep the lights on and meet our carbon targets. This is a daunting sum. With public finances tight, it is up to us to find the funding from our own balance sheets or with partners.

But there is need for a reality check, Although it will be up to companies to supply the funding, it will ultimately have to be recovered from consumers’ bills. We need to be honest and transparent with them about the potential costs.

The prize we are aiming for is to cut the average carbon footprint of Britain’s homes by 35 per cent within ten years, through decarbonising and improving energy efficiency. But for our industry to deliver, we need to raise our game. We also need the active involvement and support of Government, regulators and consumers.