Mike O'Brien MP

MARINE RENEWABLES FINANCE AND INVESTMENT SEMINAR

You know about the important environmental benefits of renewable energy. Most scientists agree that climate change poses a real long term threat. It is vital we tackle it now.

We need to move away from our over reliance on fossil fuels to more sustainable forms of energy generation and to reduce our use of energy across the board.

But the arguments for renewables are not just environmental. Security of supply is also a key issue. We will no longer be self-sufficient in energy in the next year or two. We must develop new and diverse forms of electricity generation using the resources available here in the UK.

Indeed they are also economic. The costs of climate change are great. It will cost Britain £95m a year for 50 years just to keep the sea and rivers from overwhelming existing flood defenses.

Economic losses in Europe because of the 2003 summer drought were as high as £7bn in the agriculture sector alone. Insurers are struggling to keep pace with the rising regularity and severity of natural weather disasters and their premiums are rising every year.

The Government is taking steps to build Britain’s renewable energy industry.

Our target is to generate ten per cent of all our energy needs from renewable sources by 2010. Our aspiration is for twenty per cent by 2020. It is one piece of Government policy that is thankfully unchallenged by any of the major political parties.

Until recently most of the focus in the renewable energy sector has been on wind. This is no surprise since the technology to harness wind energy is already well developed and is backed by enormous amounts of investment. But wind energy alone will not be enough.

Most people agree that the best approach is one of diversity, in which each form of renewable energy plays its part. However, there have been media reports about speculation in the financial community about whether our targets are achievable.

In some respects the current debate is producing more heat than light.

But this Government is committed to this policy. We need to tackle both the speculation and the misrepresentation by the critic’s head on.

So I want to impress upon you the depth of our commitment to our renewables policy, the reasons for our confidence in our ability to meet the targets and the steps we are taking to encourage the industry as a whole.

The public is beginning to understand how important climate change is. In a major survey last year, over 90% agreed that “the Government should encourage the use of renewable energy”.

I am well aware of the various concerns from residents, about birds, shipping, fishing, and we are addressing those concerns with the knowledge that the vast majority of the public are behind us.

We know how important long-term stability is for investors. We have extended the Renewables Obligation to 2015 and I am committed to maintaining the level of confidence that the extension has generated during the current review of the obligation, the terms of reference of which I have just published.

Investors can be confident of making their investment decisions based on the knowledge that there will not be a fundamental shift in policy as a result of the 2005 review.

We also do not favour any one technology. Onshore wind happens, at this moment in time, to be one of the most cost competitive, and so benefits most from the RO market. But we are looking for a diverse energy mix.

By 2008 we will have spent some £500m worth of grants and subsidies on demonstration projects across the industry.

In wave and tidal, we are funding R&D prototypes some of which you will have heard about today. And look what is happening.

The installed wind rate this year will be four times that of last year. There has been significant investment from the likes of Centrica, who plan to invest more than £500 million, and RWE npower, who have attracted £400 million of City investment and Scottish and Southern who plan to invest some £850million. Our renewables policy is already delivering real results.

Now turning to specifically to wave and tidal. Although these technologies are prospects for the medium term. They have the potential to make a significant contribution to meeting both our future energy needs and emissions reduction targets.

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 this particular renewable resource.

Since the introduction of marine energy programmes in 1999 the DTI has already committed in excess of £15 million for research and development into wave and tidal energy devices.

Funding many of the key players in the UK who are making such exciting progress and helping the UK become the clear world leader in this field.

We are determined to ensure that this early progress is maintained. You will have seen from today’s presentations that this support has resulted in the development of a number of wave and tidal technologies.

Some of which have already been demonstrated at full-scale - with others close behind.

Hand in hand with this we have seen a number of initiatives to provide the infrastructure that will be needed if we are to see the development of a successful industry.

Facilities such as Narec, the European Marine Energy Centre and Regen South West’s Wave Hub provide a clear development path for these technologies.

They are a vital resource for technology developers and will be invaluable in the commercialisation of marine energy devices. However, we are not content with leaving it there.

Last year we published the results of a joint review carried out by DTI and the Carbon Trust.

A key message from the review was that wave and tidal stream had the potential to contribute significantly to the UK's renewable energy targets, and to create significant industrial capability – I want that capability to be in the UK.

The review also identified a major funding gap between the early demonstration and the commercial stages, which needed to be bridged.

On 2 August Patricia Hewitt announced a new Marine Renewables Deployment Fund, worth up to £50 million, to help bridge that gap.

We have looked very carefully at options for addressing this issue and listened to stakeholders – incluidng the Renewbles Advisory Board Finance and Investment Working Group.

The Carbon Trust’s presentation today outlined some of those options and I would encourage you – the Investment Community - to let us have your views on how best to deliver the support that is needed.

This will feed into the more detailed framework that is currently being developed and we should be in a position to undertake an informal consultation with stakeholders early in the new year.

Additional to supporting demonstrations we recognise that there are other areas that support from the deployment fund needs to be directed.

Investment in areas such as site development and industry standards are the sort of complementary activities that together with existing infrastructure will provide a cohesive framework for taking this sector forward.

Financial support is not the only thing we need to put in place. Investors will want to see a clear consenting regime.

We have been consulting with developers and other government departments on how best to take this forward and are now considering how the consents process can be simplified.

We have now decided to hold two workshops to explore ideas with developers and stakeholders – in particular the concept of proving grounds for demonstrating wave and tidal devices – followed by an informal written consultation exercise.

I hope I have shown today that renewable energy is at the heart of the Government’s energy policy and we are committed to meeting our renewables target.

The Government recognises the potential of wave and tidal power to contribute to our longer-term targets and goals.

We are also determined to secure the potential benefits of wave and tidal power for the UK in terms of both renewable energy and the industrial and economic benefits of a successful renewables industry.

To conclude, there is no denying our targets are tough. We need to keep delivering the stable, long-term regulatory framework that investment decisions need, however the level of attendance here today gives me the confidence that the investment community is engaged, listening and willing to invest.

And we intend to carry on talking with you to ensure that it remains a two-way dialogue.

If we see that willingness deliver real returns, then I believe that we can deliver on both our renewable targets and on our wider obligation to society.