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Malcolm Wicks MP, Minister of State for Energy
Newcastle (by videoconference), 08 February 2006
I’m pleased to be able to speak to you today at the start of this conference, during the consultation phase of the energy review, and I ‘m sorry that Parliamentary business has prevented me being able to make it to Newcastle, so I am only able to speak [by videoconference].
Since the launch of the review I have been speaking about the long-term challenges we are facing. Put simply - the UK’s own energy reserves have declined faster than anticipated, and we have moved to being a net gas importer earlier than envisaged. Global demand for energy has increased massively as economies such as China have boomed. Evidence of the adverse impacts of climate change has continued to grow, and progress towards truly open energy markets has been slow.
If anyone has any doubts about the reality of these challenges, you only have to look some of the events we have seen since the review began – reports on the increasingly serious threat from climate change, the supply situation between Russia and the Ukraine, and the impact of high prices on both business and consumers.
Whilst the review is looking at achieving our long-term energy goals, we must face the reality that these challenges will not just materialise when we get to 2020 - we are seeing them now.
We set our long-term energy policy framework in 2003, and since then there have been many achievements. However, as I have indicated, the national and international context of our energy policy has changed since 2003. There is undeniable and growing evidence of the global challenge of climate change.
A recent report, Avoiding Dangerous Climate Change, concluded that the risk of climate change might well be greater than we thought. At the same time it showed that there is much that can be done to avoid the worst effects of climate change. A rise of just 2 degrees Celsius, the report suggests, will be enough to cause a tripling of poor harvests in Europe and Russia, large-scale displacement of people in north Africa from desertification, and maybe nearly 3 billion people at risk of water shortage.
Some progress has been made. Combating climate change was one of the UK’s top priorities for our recent Presidencies of both the G8 and EU. At Gleneagles, G8 leaders agreed a wide-ranging Plan of Action to transform the way we produce and use energy, to promote R&D and increase finance. In addition, the G8 and the leaders of the major developing economies agreed to pursue a Dialogue on Climate Change, Clean Energy and Sustainable Development. The first meeting of the dialogue was in November, when the Partners agreed to work together on the deployment of clean technologies and incentives for private sector investment in this field. Mexico is hosting the Ministerial meeting in the second half of 2006.
More recently good progress was also made in December at the UN Montreal Conference where agreement was reached on processes for discussion on future action to tackle climate change post 2012.
Whilst each country has a responsibility to take action, we in the EU will have greater influence if we continue to work together. The Hampton Court Informal Summit in October successfully agreed a way forward on a range of international issues, including action to take major steps forward in technology development to tackle the challenges of Kyoto and increase energy efficiency. It’s clear from these international outcomes that the development of new technologies, and innovations in established technologies, will be absolutely crucial if we are to rise to this challenge.
We need to continue to develop a portfolio of low carbon energy technology and ensure the distribution system is up to the job of handling tomorrow’s energy mix. This is not just important for tackling climate change but vital to maintain a diverse energy mix and ensure security of energy supply.
With this in mind, I am pleased to be able to announce one and a half million pounds of funding from the DTI’s Technology Programme for three new marine energy projects. This includes an innovative shallow water turbine scheme from Pulse Generation Tidal.
Last year was a good year for renewables. Development activity, particularly wind, continues on an upward and increasing trajectory. We have seen the construction of some 500 megawatts of additional wind capacity in 2005. However, there may be some misconceptions about the direction of future energy policy. As this is the first time I’ve addressed you since the review was launched, I want to nail some of those on the head.
The renewables sector has nothing to fear from the energy review. Burgeoning evidence of climate change, and questions around the reliability of global energy sources, guarantees it a place at the table. The 2010 target remains. The 2020 aspiration remains. By that time I am confident that our children will be learning about the reality, not the promise, of bulk generation from renewables.
I'm aware, of course, that nuclear dominates the headlines, and there's a lot of lobbying from that direction. But this is my Energy Review, and I am in no doubt that our future lies in a healthy mix of energy sources. I want you to carry on engaging constructively during this consultation phase of the Review, as there is still everything to play for.
In addition to wind, wave and tidal power have - in the longer term - the potential to make a meaningful contribution to the UK's energy goals, and to create significant industrial capability. The UK is blessed with having one of the best marine resources available anywhere in the world so it makes sense for us to develop the technologies to harness that resource.
Over the last 5 years, £25 million has been committed to research and development in this area. This has led to the development of a number of technologies with some already tested at full-scale. The UK is now clearly the world leader in this field. The DTI’s £50 million ‘Marine Renewables Deployment Fund’ will help ensure that lead is maintained. The Fund provides a package of measures - at the core of which is the DTI Wave and Tidal-Stream Demonstration Scheme. This will provide £42 million to support to the first grid-connected wave and tidal arrays.
The Scheme applies a novel approach that delivers funding support through a combination of up-front capital grant and then revenue of £100 per Mega Watt Hour for up to 7 years. This ‘front-loading’ of the funding significantly reduces the risk for these early projects – but importantly rewards success.
Today I am pleased to launch the first round of the Scheme. The deadline for receiving bids will be the 8th May. Further information will be made available at the conference today and over the coming weeks. We now look to industry to bring forward the projects that will take us further towards realising the potential for marine renewables.
Financial support is not the only thing we have put in place. A clear consenting regime for marine developments is essential and in November, consenting guidance was published to underpin the £50 million Development Fund. The guidance sets out how demonstration projects can gain access to the sea in England and Wales.
The UK industry's leading position will only be maintained if demonstration devices can be developed into commercial devices. The best way to do this is practical experience, and this of course does not come risk free. It will require devices to be allowed into the water in the absence of perfect knowledge. But, the potential environmental return of a successful industry I believe justifies our approach.
This is an early stage for this sector; many of you are small high tech companies who need room to test and develop your ideas. What you need from Government is support, not burdens. Regulation must be no more than necessary. As a result there are no formal constraints on location, physical size of generating capacity for demonstration projects.
Renewable energy remains at the heart of the Government’s energy policy and we are committed to meeting our renewables target. I go in to our energy review neutral on nuclear but not neutral on renewables. We all recognise the potential of marine renewables to contribute to our longer-term targets and goals. The Government is determined to provide opportunity for the development of a successful marine industry, and to realise the benefits it could bring.