Stephen Timms MP

Renewable & Sustainable Energy

I want to speak today about the Government’s approach to increasing the contribution that renewables make to our energy supplies. On Day 2 in my new post I visited Aberdeen and was asked about my priorities for the job, and I said that I regarded encouraging the development of renewable energy as my top priority. Three weeks later that remains my view and I look forward to working with members of PRASEG and others towards that end in the months ahead.

Let me add my voice to congratulations voiced this morning to Brian White for his skill in piloting his Bill through the Commons.

The Energy White Paper describes the Government’s blueprint for the future. It 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. To address the challenges of climate change, of declining indigenous energy supplies and of updating the UK’s energy infrastructure, we have set our four goals for our energy policy.

• To put ourselves on a path to cut the UK’s carbon emissions by some 60% by 2050 and to make real progress in that direction by 2020;
  
  
• To maintain the reliability of energy supplies so that domestic and industrial consumers can rely on energy being there when they need it;
  
  
• To promote competitive energy markets, to improve our productivity; and
  
  
• To ensure every home is adequately and affordably heated.

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.

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. Meeting the 10% target by 2010 would mean a reduction in carbon emissions of around 2.5 million tonnes, a very important contribution to our carbon reduction targets. These are ambitious targets. It is worth remembering that at present only 1.7% of our electricity supplies are generated by renewables eligible for the Renewables Obligation, 3% if large hydroelectric plants and energy generated from waste incineration are included. But even so, it is clear that we are starting from a low base and that we need a step-change to reach our targets. The present rate of progress will simply not be enough.

We have an important part to play in creating a climate in which renewable energy projects can flourish, both the right investment climate and a supportive regulatory framework. I pay tribute to the work of my predecessor, Brian Wilson, in promoting renewables, and I want to build on the foundation, which he has established.

The main instrument for encouraging the uptake of renewables is the Renewables Obligation, which was introduced just over a year ago. The Renewables Obligation creates an assured market for the renewables industry until at least 2027, and so signifies our long-term commitment to renewables and provides a degree of security for potential investors. 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.

It requires licensed electricity suppliers to provide an increasing proportion of their electricity from renewables each year, reaching over 10% by 2010. We will review the Obligation in 2005/06 to assess its results, taking account also of progress on Emissions Trading. The review will also consider whether the profile of the Obligation should be revised to introduce higher targets for the years between 2010 and 2020.

The energy white paper commits us to review the obligation in 2005/06 on the basis that it is too early at this stage to commit ourselves to measures for a further expansion of renewables for the years after 2010. Equally, it is probably too soon to reach conclusions on a long-term policy, set for 25 years, just after the first year of its operation. Nonetheless I am always willing to listen to your views and those of the industry on this issue, and I am aware that some are calling for the review to be brought forwards.

In the short term, we are conducting a technical review of the Obligation, basically to make sure it is working in the way we intended, and we shall issue a consultation paper later on in the summer. This exercise will take the opportunity to review the rules in relation to co-firing of biomass plants, and assistance to micro-generators to reflect concerns expressed about these sectors in particular.

While the Renewables Obligation provides support for those renewables which are close to becoming commercially competitive such as onshore wind, we also need to bring on those renewables that have potential but are further from the market place, such as offshore wind, biomass, solar photovoltaics, wave and tidal power. We have introduced a substantial support programme worth nearly £350 million made up of capital grants to kickstart developments in emerging technologies, and grants for research, development and demonstration. The bulk of this money will be spent in the form of capital grants, such as those that have already been awarded to the offshore wind farms that have received consent.

We also need to address the barriers to renewables. We are at a crucial stage in the development of our electricity infrastructure as we move from the present system, which was developed in very different circumstances where large coal power stations were the dominant force. We need to change to a system that can accommodate a much larger number of renewable power stations, some of which will be relatively small. Renewable power stations need to be located near the renewable resource, often in peripheral areas far from centres of population. We need to meet the challenge of how to get the energy from where it is generated to the centres of population and industry where it is needed.

The regulatory system must facilitate our aspirations for renewable energy through delivering the necessary investment to extend and upgrade the grid. I know that Ofgem has already started working with the industry to address these issues. The Transmission Issues Working Report, published last month, estimated the costs of these works to strengthen the network to enable us to exploit our massive potential for onshore and offshore wind.

I am delighted that planning works for the initial upgrades has been started by the Transmission Asset Owners, following agreements made with Ofgem earlier this year in response to requests from wind farms to be connected to the transmission system. The Transmission Issues Working Group will continue to monitor the progress of this work.

In addition, the forthcoming legislation to bring in the British Electricity Trading and Transmission Arrangements (BETTA) will enable all renewable developers access to a Great Britain-wide electricity market through an independent GB system operator. BETTA is an important part of the Government’s commitment to a regulatory regime, which does not discriminate against renewable developments

We also need to address the concerns expressed by a number of developers about the planning process. I know that the Office of the Deputy Prime Minister is developing a new Policy Planning Statement 22 on renewable energy developments and I welcome this. We need to work with local planning authorities to develop best practice and also to develop new measures to promote national objectives through local and regional decision-making.

We have made an encouraging start, in particular with wind energy. While of course we need to encourage all forms of renewable energy, which have the potential to make a contribution to our targets, in the short term, it is going to be wind power that will provide the majority of the new renewable capacity, onshore wind, mainly from Scotland, and offshore wind too.

At present in the UK, we have some 580 MW of wind energy capacity in place. Over the past year, consent has been given to new projects with a total capacity of nearly 1000 MW, and there are projects amounting to a further 2000 MW, 2 GW, in the pipeline. In fact consent has given to more wind capacity this year than was given in the whole of the 1990s. So it is clear that we are on the verge of a very welcome major expansion of wind energy capacity, and that will make a key contribution to achieving our renewables target.

Over the past year, we have made encouraging progress in offshore wind. Consents have been issued for seven offshore wind farm developments around the coastline of England, Scotland and Wales and applications for another six are currently being considered. Those projects, which are currently in the pipeline, could contribute about 1500 MW, 1.5% of the United Kingdom’s electricity requirements. The first of these new offshore wind farms, North Hoyle, is scheduled to come on stream in late autumn this year.

And we are keeping up the momentum. I anticipate being able to make an announcement on the next round of offshore wind farm leasing later this month, with sea bed leases being awarded by the Crown Estate later in the year. Taking into account these new developments and further rounds, as well as the large onshore projects coming forward, by 2010, we expect to have a total wind power capacity of some 7,500 MW in place.

The mechanisms we have set in place, the Renewables Obligation, together with the Capital Grants programme and our support for R&D, I believe make the UK one of the most attractive places to develop renewables in the world. I want to see the UK benefit from this not only in terms of climate change objectives but also in terms of jobs.

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. I met yesterday with the Chief Executive of Aberdeen City Council and he briefed me on the work of the Aberdeen Renewable Energy Group, working to apply offshore oil and gas skills to renewables. 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. In the wind sector alone a number of major companies have established themselves in the UK including:

• Vestas Celtic in Machrihanish, in Scotland, assembling wind turbines for both on and offshore wind;
  
  
• Cambrian Engineering in Bangor, Wales & Arnish, on the Isle of Lewis making offshore and onshore wind turbine towers, monopiles & support structures;
  
  
• DE Wind in Loughborough manufacturing onshore wind turbines with ambitions to enter the offshore market;
  
  
• NEG Micon on the Isle of Wight and NOI in Kirkcaldy among others making blades.

In addition to wind power, we want to exploit the potential of all forms of renewables. For example, we have contributed £1.2 million to the establishment of a marine test centre off the coast of the Orkney Islands. We have the opportunity to consolidate Britain’s world leadership in wave and tidal technology and we need to exploit this to the full.

We have world leading companies like Wavegen; Marine Current Turbines, Ocean Power Delivery and The Engineering Business to name just four. The Orkney Test Centre will help us to maintain our lead in this area as we head towards commercialisation. The UK has also developed leading expertise in photovoltaics, biomass, hydrogen, hydro and fuel cell technologies.

Renewables UK will continue to work with the industry and other support agencies to develop the UK supply chain and to ensure that UK companies are given the opportunity to get involved with renewables projects so that we can maximize UK content both at home and abroad.

I have outlined some of the ways in which the Government has played its part in encouraging the development of renewables, and also some indications of the excellent response we have had from developers. Our targets for renewables are ambitious and, to meet them, we are going to have to work in partnership with the industry, with regulatory authority, with consumers, with investors, and with devolved administrations, regions and local authorities. I am looking forward immensely to working with everybody here and with all those involved in renewables over the coming months to achieve our objectives, objectives which command the enthusiastic support not just of everybody here but increasingly of ordinary people in every part of the country. It is a great cause, and of vital importance, and I relish the opportunity to do all I can to make it a success.

Thank you all very much.