Edward Davey speech to the Global Offshore Wind Conference
Check against delivery Thanks very much. I'm delighted to be here today. This is my first Global Offshore Wind conference, and I'm immediately struck by the size of the exhibition. From British engi...
Check against delivery
Thanks very much. I’m delighted to be here today. This is my first Global Offshore Wind conference, and I’m immediately struck by the size of the exhibition.
From British engineers to Norwegian shipbuilders, from the smallest control components to the largest installation vessels… the range of businesses on display is testament not just to RenewableUK’s vision and commitment, but also to offshore wind’s incredible potential.
This is truly a global conference for a global industry. Its scale - and the scale of the opportunities on offer - is deeply impressive.
And so it gives me great pleasure to welcome you to London for the concluding day of this Global Offshore Wind Conference.
History
A lot has changed since the first conference.
In 2002, renewables delivered less than 3% of the UK’s electricity. Today, it is closer to 10%.
Back then, the industry was still young. Britain had just one offshore wind farm, at Blyth. It boasted two of the most powerful turbines in the world, with a staggering 4 Megawatt output.
Next year, the world’s biggest windfarm will open just down the river. When it’s finished, London Array will deliver a thousand megawatts of capacity; enough to power nearly half a million homes.
In the past decade, Britain has gone from the new kid in class to the star pupil.
We have more installed offshore wind than the rest of the world put together. We have more projects in the pipeline than anyone else.
Five of the top ten biggest offshore windfarms are in British waters; by the end of the year, seven will be. We are the most attractive place for investment, and we are securing an ever-greater chunk of the supply chain.
Many of these successes belong to you. You have worked with us to bring wind power from the fringes into the centre of our clean energy policy; cutting costs, improving efficiency, creating jobs - and making the case for Britain’s renewable future.
This is about much more than simply offshore wind. And that’s why I’m delighted to be here.
Because it gives me a chance to restate my commitment - and the government’s commitment - to that future.
Today
I want to make four main points:
- First, our renewables target is not an optional extra. It is one of the foundations of our energy policy. We are on track to meet it. We are going to meet it.
- Second, our policies to meet it will be evidence based. While we do mind about the cost, we don’t mind what mix of renewable energy technologies we use to get there. We will follow the evidence.
- Third, this isn’t just about our energy future. Or our planet’s future. It’s about the UK’s future economy. And Britain must be an industrial leader in the global clean energy race.
- And fourth, I’m clear much of our political debate on renewables and wind in particular is out of step with public opinion. It is time to take the politics out of wind power. And we’ve begun to do that.
Background
But before I begin on these four points, I wanted to say something about my background. Because although my office do their best, I haven’t had time to meet all of you yet. So let me tell you a bit about why this matters to me.
The green economy is in my political DNA. It’s the reason I got into politics in the first place, back when I was a student. It’s the reason - as a young environmental campaigner - I chose my party, the Liberal Democrats.
And as a student of economics, what intrigued me most was the hard-nosed case for a green economy, for renewables, for energy efficiency. In my view, it made economic sense to start investing when these were nascent industries back in the 1980s. Today the case has become an economic imperative.
So my commitment to the green economy runs deep. And so does this government’s.
With our priority of growth, and our stress on a new more balanced form of growth. Where we take our decisions for the long term - whether it’s on banking reform. On budget reduction. Or on energy.
Target
And with that in mind, let me get one thing straight.
Our renewables target is not up for grabs. It is not a fair-weather promise; an airy ambition, to be discarded or downgraded when the going gets tough.
It is immovable. And our commitment to it is unshakeable.
We will get at least 15% of our energy from renewable sources by 2020. And I think it’s worth reminding ourselves why.
It’s not just because we’re signed up to legally binding targets. Although our commitment is indeed legally binding.
It’s also about energy security. About reducing our energy imports, and insulating our country from volatile global energy markets.
And It’s about environmental security, too. Better air quality, saving lives and increasing productivity.
And about economic security. About developing new sustainable energy sources to protect Britain from fossil fuel price shocks that seem to hit us with increasing frequency.
So I believe securing our clean energy future is a matter of strategic national importance.
That’s why we want more renewables in our energy mix. That’s the prize on offer if we hit our 2020 renewables target.
And we’re on track to do it. Over the past two years, we’ve added more renewable capacity than at any time in the last decade. Last year, 9.5% of our electricity came from renewables; in the last quarter, it was 11.9%.
But I’m under no illusions: we have a lot of ground to make up. If we’re to get 15% of our total energy from renewables, we’re going to need closer to 30% of our electricity to be renewable. That’s the challenge that the government faces.
We’ve got policies to support renewable electricity generation; the world’s first renewable heat incentive; and the world’s first green investment bank.
However, we need each of these to deliver - and more - not just to meet our energy and climate change targets. But to meet them in the most cost-effective way.
Because we’re not just supporting companies with public funds, but also through energy bills. And I have to tell you: I’m worried about the pressures on people’s household budgets. Research suggests people are worried too: according to one study, energy bills are the number one financial concern for 9 out of 10 Britons.
Of course, it’s mainly wholesale gas and electricity costs that are driving bills up. Support for the Renewables Obligation makes up around £18 - or 3% - of the £600 average household electricity bill. In four years’ time, we project that will rise to around 8%.
So the cost of support for renewables isn’t huge - but it is there. And we have a responsibility to our citizens to get a low-carbon energy mix that’s affordable - for the taxpayer, and the bill payer.
Neutrality
Affordable renewables will mean more wind power - both onshore and offshore.
But I’m not going to pretend that I know exactly what our energy mix will look like. Just as I really don’t know what our overall energy mix will look like in a decade’s time - given the huge uncertainties.
And it’s not for government to decide what blend of energy technologies will keep the lights on - and the air clean - in 10, 20 or 30 years’ time.
What I want is a fair race for different technologies. Competition.
Our strategy is to gradually move towards the right framework to allow clean energy sources - including energy efficiency - to compete. That is what the Energy Bill is all about - a transition to low carbon, at the lowest cost, thanks to the magic of competition.
But in renewables, in the next few years, we can’t jump straight from government price setting to market price discovery. And so while we remain in the old world if you like, and as we make the transition, a prudent government must be guided by the evidence. The evidence on costs.
We are looking, hard, at the current and projected costs of generating electricity, rates of deployment, and opportunities for technology leaps.
And we will design our policies to encourage technologies that we stand to gain the most from; because they are most cost effective now, because we can gain real competitive advantage by moving fast, or because they have the greatest potential to change things.
Those are the circumstances in which the government can - and should - intervene. The failure of the market to properly price carbon - and the slow progress toward a global deal on emissions - is locking us into a dangerous future. We must correct this failure at least cost and without warping the market. It’s in no-one’s interest to develop clean energy industries that are hooked on subsidy and unable to compete on the global stage.
I am absolutely determined that the UK will retain its reputation as one of the best places in the world to invest in renewables.
It is critical, as we approach the decision points on the Renewables Obligation banding review, that investors and industry know that we won’t play fast and loose with the figures. Britain will stick to its word.
Of course, in technology-intensive industries which are defined by cost-reducing innovation, anyone promising total unchanging stability is not to be trusted.
But what I can guarantee is predictability. So, for example, we’re working to provide more certainty to developers over the new Contract for Difference regime, and keeping the Renewables Obligation open to new projects until 2017, to ensure investment can come forward.
We will be transparent. We will be open. And we will follow the evidence.
Cost
Because properly designed and carefully targeted subsidies can bring on new technologies and processes - and bring down costs. They can support new industries, and boost Britain’s competitiveness. But we must be honest: they come at a price.
Our support for renewable industries under the Renewables Obligation is currently worth around £2 billion a year. That means that in 2010/11, subsidies for offshore wind cost the average household less than 1p per day.
For families struggling to make bills add up, I know every extra pound counts.
But if we deliver on our ambitions, this can represent extremely good value. I absolutely believe that getting more secure, homegrown energy in our mix - and supporting more jobs and investments in Britain’s future - is in all of our interests. Subsidising new industries can work.
Just look at Denmark, whose history of supporting offshore wind is still reaping benefits today. It is no coincidence that the first turbines installed in British seas were Danish; nor that Danish companies have filed nearly a thousand patents for turbines in our Intellectual Property Office.
And let’s face it - subsidies worked for our oil and gas supply chain. They benefited from direct and indirect government support, building a world-class industry that prospers to this day. And as Lord Browne has argued in a report for the Royal Academy of Engineering, we can do the same for offshore wind.
Developments
Because there are some fantastic developments in the pipeline.
The Energy Technologies Institute is working with industry partners to design and build more efficient, bigger blades to feature in the next generation of turbines.
DECC has recently launched the 2nd round of our £15m Offshore Wind Component Technologies Development and Demonstration Scheme, to help companies with innovative ideas improve key components for the next generation of offshore wind technology.
And I’m incredibly pleased to see the Norstec project really gathering momentum. Almost 40 companies, from developers through to the deeper supply chain, have now signed up to deliver a common vision for a second energy revolution in the North Sea.
And as the Cost Reduction Taskforce showed yesterday, by working together, industry can take the lead in bringing costs down, and building a competitive industry for the future. The Taskforce’s report was led by industry and based on evidence; and it shows that the ambition of £100/MWh by 2020 is difficult, but doable.
We will continue to work with the industry to figure out how we can do things better, more quickly and more efficiently. So my challenge to you today is to go further, to look deeper, to do everything you can to bring costs down further.
Race
Truly cost-competitive offshore wind could be less than a decade away. Right across the supply chain, from research and design to operations and maintenance, I want all of our renewable industries to be ready and able to hold their own on the world stage.
Because the global clean technology race is well underway. Our companies are competing in a global green market that is now worth £3.3 trillion, and is growing at 3.7%. And the competition is fierce.
Around the world, governments are making clean technology a policy priority. 89 countries have renewable energy targets; 81 countries worldwide have feed-in tariffs. It is often the countries whose growth we most envy who are going furthest. China aims to produce 16% of its primary energy from renewable sources by 2020. Korea is spending 2% of annual GDP on green growth. Germany’s development bank is leveraging over 100 billion euros for renewables and energy efficiency.
These policies will bring real rewards: Korea expects to create nearly a million jobs through its green new deal. More people work in Germany’s solar PV industry than in the US steel industry.
And this growth in jobs and investment can be part of our economic story, too. In fact, it already is.
Growth
Figures published by our Department for Business, Innovation and Skills show that the UK’s green economy grew by £5.4 billion in 2010/11. It generated £122 billion of economic activity here in UK, and a trade surplus of £5 billion; supporting 940,000 jobs, in 52,000 companies right across the country.
For renewable energy, too, the story is one of strong growth. In the last financial year alone, the industry invested £3.75 billion and created 7,800 jobs: at places like Huddersfield and Hull, and for companies like Gamesa, Mabey Bridge, and Osbit. The industry also announced plans to invest a further £3.19 billion, supporting another 11,000 jobs.
Wind is the fastest growing renewable technology, and the biggest employer. Over £1.6billion has been invested in onshore wind, supporting around 1800 jobs.
And for offshore wind, the numbers are bigger still. Since the last RenewableUK offshore wind conference, we have seen 517Megawatts of completed projects. And in the last financial year, £1.95 billion of investment has been captured, with the potential to create 6300 jobs.
Much of this investment and many of these jobs will be based outside the South East: the Midlands, the North West, Yorkshire and the Humber and Scotland all saw sales in excess of a billion pounds in 2010/11.
And just this week, the Centre for Economics and Business Research published a study which suggested that ambitious deployment of offshore wind could increase UK GDP by 0.2% in just three years, creating over 45,000 full time jobs. By 2020, it could employ 97,000.
When we as a nation and a government are so focused on growth, numbers like this should be grabbing headlines.
Debate
The truth is that most people support renewable energy, even if it’s large scale, even if it’s to be built near them. There is a quiet majority out there.
According to forthcoming DECC research, eight out of ten people support renewable energy; only one in twenty opposes it.
Three out of four people are concerned we’re not investing fast enough in alternative sources of energy. 69% of people think renewable industries and developments bring economic benefits to the UK.
55% of people would be happy to have a large scale renewable energy development in their area; only 19% would oppose it. And a recent Ipsos MORI poll found 60 per cent of people would support a wind farm within five miles of their home.
Onshore wind, which occupies so many column inches, is supported by a clear majority - 66% of those polled. Three-quarters of us support offshore wind; just 7% oppose it.
And a poll for the Sunday Times found that 56 % of the public think that Britain should use more wind power, compared to only 19% opposed; and that 60% of the public support further Government investment in wind.
The numbers are many, but the message is clear: people support renewable energy. They think we should invest more in clean energy technologies. And although opposition is growing in some quarters, the evidence - back to the evidence - the evidence shows the majority of people support the expansion of wind power, both on and offshore.
So I think we have a pretty clear mandate here.
But I want to acknowledge the problems that some communities have run up against when local wind projects are proposed.
Simply put, not enough has been done to consult, to communicate, to give people a stake and a say in what happens in their area. That is starting to change.
We have reformed the planning system to encourage sustainable development; in England, the new National Planning Policy Framework encourages communities to plan for renewables and puts planning at the heart of our efforts to protect our most valued landscapes. And we are about to deliver proposals to let communities keep the business rates generated by renewable energy projects, to help people feel the benefits - and be engaged in the low-carbon transition.
Conclusion
That transition remains the ultimate prize. It is the future we are working toward: one where vibrant, globally competitive industries deliver affordable low-carbon electricity, strengthening our economy and delivering energy and climate security.
Over the coming years, electricity demand will soar as we electrify heating, transport, and industry. We could need twice the capacity we have now, and it must be low-carbon.
Looking to 2050, we have three options - off-shore wind, nuclear, CCS. Other technologies can help, but can’t give us the kind of scale we’re going to need. So the next decade is about demonstrating technologies at scale - so that we can mass deploy in the decades after.
This future is inconceivable without wind power.
Wind could provide up to two-thirds of our renewable electricity by 2020. And RenewableUK’s research shows that offshore wind’s contribution to our renewables target could quadruple in the next five years.
So it’s time for us to see it for what it is: an industry of strategic national importance. One that can help us secure our energy supplies, reduce our dependence on imported fossil fuels, and protect our environment. An industry on which our clean energy future rests.
Thank you very much.