Examination of Witnesses (Questions 106-144)
MR GORDON
EDGE, MR
PHILIP WOLFE
AND MR
MARTIN WRIGHT
1 JULY 2009
Q106 Chairman: Welcome to our second
set of witnesses this morning. Welcome to Philip Wolfe, Gordon
Edge and Martin Wright. I would be grateful if you would introduce
yourselves to the Committee.
Mr Edge: My name is Dr Gordon
Edge; I am the Director of Economics and Markets at the British
Wind Energy Association.
Mr Wolfe: I am Philip Wolfe, the
recently retired Director General of the Renewable Energy Association,
now a non-executive director of the Association and the REA represents
renewable energy across all of the different technologies and
renewable heat production, renewable power generation and renewable
transport fuels.
Mr Wright: I am Martin Wright;
I am the Managing Director of Marine Current Turbines Limited.
I am also the Chairman of the Ocean Energy Group which is a sub-sector
of the Renewable Energy Association and as such I am also on the
Board of the REA.
Q107 Chairman: I will start by asking
you what impact you think the government's green stimulus will
have.
Mr Wolfe: We have to say to start
with that we are pleased to see the government moving in the right
direction and moving towards a more coherent mix of policies in
the sector. Having said that, my view is that it is still too
half-hearted and still too disjointed. Too many of the policy
measures do not mesh well together and there is still an insufficient
understanding of the need to develop the market, particularly
here in the UK, as a pre-requisite to achieving a good business
model that the industry can mature with. By way of example perhaps
and one of the reasons for inviting Martin Wright to this is to
look at the marine renewables industry. This is an industry at
the very early stage of development. It is a very promising industry
and it is an industry where, at the moment, the UK has arguably
a world leadership position. In fact it is an industry at exactly
what the British wind industry was at just as the market started
to become commercial. At that stage we, as a country, dropped
the ball. We failed to realise that we needed to adopt a new approach
as the market was becoming commercial; that we needed in principle
to make the UK commercial market attractive and that that would
bring industry and investment with it. We are now at exactly the
same stage with the marine renewables and in some danger, I would
suggest, of dropping the ball in the same way. It is now important
that we make market conditions attractive for companies like Marine
Current Turbines so that there is a business in which they can
start to actually build commercial sales and thereby attract investment
and thereby create employment opportunities in the UK. At the
moment we still do not see a sufficient coherence of policy across
the different sectors that make us really confident that that
is going to happen here in the UK.
Mr Edge: From our point of view
what is really important about the stimulus in the budget is unblocking
what has already been put in place and particularly the renewables
obligation which has been very successful in bringing forward
development of wind on and off shore and in that way we are very
pleased with the targeted support that was being proposed in the
budget, upping the multiple for offshore wind, trying to access
more capital with the European Investment Bank for onshore wind.
If those are successful it will have just the right kinds of effects.
What we need most in building the industries here in the UK is
a strong and stable market. We think the interventions were quite
good in building the confidence that the market that has been
set can be accessed. I have a slightly different view on the marine
renewables. There is a missing link but it is only really one
bit of the puzzle which is really missing, which is that gap between
the demonstration and the commercial phase. At the moment wave
and tidal in England, Wales and Northern Ireland will only get
two ROCs per megawatt hour under the banding regime; the Scots
are looking at three and five for tidal wave respectively. Up
to that point the UK is doing pretty well in its research infrastructure,
in the support for those initial research and demonstration phases,
but there are a couple of key gaps. If we could fix that one big
gap then we would have the whole suite and therefore that becomes
the strong basis on which we can build an industry. I am a little
bit more optimistic but it still is a very key bit of the puzzle
that is missing.
Q108 Dr Turner: The only thing I
disagree with is that it is a very big gap. In other areas of
innovation it has long been identified as the Valley of Death
which companies have to cross between having a product and turning
that into a market product. That is precisely where the marine
industry is at at the moment. I would like to ask Philip and Martin
what you would like to see put in place by the government—because
this definitely needs government intervention—in order to
create a sustainable market for marine devices which will enable
investment in that industry to make it happen.
Mr Wright: Before coming directly
to your question I would just like to add a little bit of background
to the position. There is indeed in any technical development
the knowledge that you have the Valley of Death to go from the
stage where you get a commercial product to where you have actually
got past cash burning and the need for investment and businesses
and those previous investments are then safe. At the moment that
situation, which would have existed anyway, is exacerbated by
what is happening in the financial markets. The background against
which we are trying to do something which requires massive amounts
of capital is that those who are supposedly going to support it
in a form of VCs, their investment is down 70 to 80% and they
do not want to go into long lead time, high capital cost sorts
of developments that these are. Secondly, you do not even have
the project finance in the projects going forward. That has dried
up, so any notion that the utilities are somehow going to play
in this area needs to be set against the fact that they are having
to use their balance sheets in other areas because they are not
getting the project finance and the hurdle rates have gone up.
If you add to that the fact that you have the goal of "We
got two ROCs under wave and tidal, now there are two ROCs for
offshore wind" I have to say the conversations with financiers
are very short. You do not get a chance to finish your coffee
because it is just a no-brainer for them. If you are then looking
at a VC to invest behind companies such as ourselves, people like
Pelamis and others coming forward, they are looking at this and
saying, "How long have I got to fund this nightmare? When
do I actually see projects working?" As they cannot see the
projects working this has the ricocheted effect coming back. I
believe you have to see the situation in the whole and realise
that the shortage of capital really turns the tap off anyway where
we are. There is a need to set a market mechanism which absolutely
starts to turn the capital on and there is a willingness for people
to really look at the projects. We have talked about the ROC mechanism
and my view is that you do not need to be Einstein to realise
that if you are getting two ROCs for offshore wind—there
was the Ernst and Young report on the costs of offshore wind now
and the costs going forward—we are at a point where roughly
we are twice the cost of that at the minute, which I have to say
is nothing to apologise about, that is a superb position to be
in at this stage in the industry, there is everything to play
for. However, that means that we are going to need at least four
risk premium; we have been saying five. There is no signal of
that so you have an own goal from the budget. The second thing
is of course that we have this disparity between England and Wales
and Scotland and a further disparity in Scotland between wave
and tidal. The message coming out in Scotland to investors is
very simply: we want wave but frankly we are a bit marginal about
tidal. It is very, very confused. There needs to be a very strong
signal; that is one of the areas you can look at. The MRDF has
been sitting there and people are asking why it has not been used.
The answer is that we set up the university education for a child
and then did not think about getting it from the cradle to that
stage. The costs that companies like ours are having to face in
terms of consenting before you can enter the MRDF are very high.
They are uncertain because you do not know if you are actually
going to get the consent from the Crown Estate as well having
got the environmental consent. Everything is wrapped up in barbed
wire and it really needs looking at in a way to say to the financiers
that this is worth their while coming in and this is where we
want their money to go. At the moment it is not a great pitch.
Mr Wolfe: I think therefore there
are two main things that are needed. One is help with all of these
start up costs, the whole issue of consenting in a new technology;
this is all unknown not only to us in the industry but also to
government and there needs to be far more help with that. Secondly
there needs to be a very much more visible revenue stream that
investors can back and that would either mean a much higher multiple
extended over a long period of time or even moving to something
more like a tariff mechanism where you just know what the income
stream is going to be for the life of the project.
Q109 Dr Turner: We have established
that there are some very severe problems at present. What I would
like to hear from you is what you think the prize is if we can
solve these problems? What is the prize in terms of gigawatts
of energy from tidal stream, for instance, in how many years?
Also what are the industrial and economic benefits that it can
bring if we can untangle the barbed wire?
Mr Wright: As far as tide is concerned
you are looking at somewhere between 10 and 20 gigawatts identified
that you could put in place in the UK. The numbers for wave are
actually rather higher though the resource is further offshore.
Worldwide there is a very, very large market to play for, largely
in the mid-latitudes which is where you would see these conditions
typically. The UK leads in both wave and tidal with the emerging
technologies. If you follow on the size of the projects that are
going to come in you have a prize to go for which is every bit
equal to the likes of offshore wind and you think of how the multiplier
effect down through our economy where the skills are not just
in the bit that we are doing at the moment which is fundamentally
the design, but this is using industrial assets, it is using its
large engineering, we have port facilities and all the rest of
it which are important and underused at the moment; they are sitting
there as underused assets. Then there is shipping. I have to say
that the people who are going to clear up on this at the moment
are sitting largely in Holland; they have the capabilities. We
have the ability to actually start building some of that ourselves
because there is going to be a need for installation vessels.
We have to build them; we have to target the right machines in
the right market. We are going to have to man those. There are
on-going operations and maintenance which will follow from that.
Of course, once you have got that capability you have an export
base. Whilst you are looking at small technologies at the moment
there is a necessity for a supply chain to come from that and
that knowledge base is the basis of your export. There is interest
in us already. The US are looking at this, seeing what they can
do; the Canadians are very interested in what is going on here;
you have Chile, you have New Zealand, you have Korea, you have
others. Someone is going to pick this up and is thinking about
it in integrated terms, of what that supply chain could mean.
Once you start thinking about the nature of these projects this
is definitely a big scale industry.
Q110 Sir Robert Smith: You mentioned
Pelamis, but what was it that the Portuguese market had that made
it sensible for them to buy Pelamis and the UK market not?
Mr Wolfe: They had this long term
visibility of the income stream. They guaranteed a tariff for
the output of these devices at a level that made sense financially
and they guaranteed it for the duration of the project. They had
this long term visible revenue stream that we are now asking for
in the UK.
Mr Edge: I think it is worth bearing
in mind that the Portuguese have had that tariff for quite a long
time. There is only the one project with Pelamis. There is actually
more development work going on in the UK because we have all the
support infrastructure that I alluded to, research funding and
so forth. If we get that rather big chunk which both REA and ourselves
have been banging on about for a considerable amount of time,
in fact government admitted that two ROCs per megawatt hour was
not enough in the Energy White Paper and said there should be
more support forthcoming which has not materialised. If we can
get that right we have all the other bits which will make Portugal
look like small fry, but it is important that we get that rather
vital bit.
Chairman: Let us now look at some of
that potential, particularly as far as wind is concerned. Mike
Weir?
Q111 Mr Weir: Wind energy contributed
2.2% of the UK's energy supply in 2007. What proportion do you
think it will contribute by 2020?
Mr Edge: In the region of 25%
of electricity from wind; a more than 10 fold increase.
Q112 Mr Weir: Do you think there
is anything the government needs to do to stimulate a domestic
market for wind power?
Mr Edge: It has stimulated a market
for the power itself through the Renewables Obligation and that
has, as I alluded to earlier, brought forward a lot of development
work. Indeed, we have successfully brought forward something in
the region of one-third of the projects that we need to get to
the 2020 target. Onshore if you add up what is operating, in construction,
with consent and a proportion of what is in the planning system,
you are already talking about 11,000 megawatts of onshore wind.
This has already been identified and you are talking about 14
or 15 to get to the 2020 target. Offshore, once round three has
been awarded, there will be 40,000 megawatts of sites in process.
We do not have a problem in terms of identified sites; it is about
bringing them through the consenting system and making them happen.
It is much less about providing the market and more about making
sure that the obstacles to that element are removed.
Q113 Mr Weir: What particular obstacles
do the industry find? Is it to do with planning? Is it to do with
the grid? What are the problems?
Mr Edge: Onshore planning is a
still a huge problem. We are still waiting word from the renewable
energy strategy that there will be some developments on that.
Under the renewable energy directive the government needs to be
putting forward how it is going to be removing planning obstacles;
that needs to happen. The grid also is a very big issue. We were
very pleased to see the development around the ENSG report. The
plan has been formulated to develop our onshore grid to accept
the power both from on- and offshore wind and from nuclear. We
think there is some work to be done on evolving the enduring regime
for the offshore transmission; we are working with government
to make that happen. All the bits are in play, we just need to
drive through some of the issues.
Q114 Mr Weir: We have had conflicting
evidence about the effect of transmission charges, particularly
on renewables. Is that a problem that your members complain about
or have a particular problem with?
Mr Edge: Some people feel that
there is an issue with transmission charges in the north of Scotland.
We think that there needs to be an element of cost reflectivitiy
in transmission charging but it does not need to be as punitive
as it is at the minute. There are other changes that we might
want to see in terms of the way the grid is charged but we think
that is not going to make a massive amount of difference in terms
of how much could be brought forward. People are still bringing
forward a lot of projects in Scotland despite the system we have
in place.
Q115 Mr Weir: How much of that is
because that is where the wind is, if you like, rather than because
you are establishing a particular wind farm? Maybe Scotland is
the best place, irrespective of the transmission charging regime.
Is that an element of it or does the transmission charge regime
not really make a great deal of difference?
Mr Edge: When you have the excellent
wind resource that you have in Scotland it is natural to try and
develop projects up there. I think it is important to note that
you do need to build a grid to get that wind resource. The issue
for us is that wind is the first technology on the grid system
ever in the UK to actually pay for its own grid. All previous
technologies have had the grid paid for under the old CEGB system
and there has not been that kind of massive grid extension for
50 years. Now it is being extended for us essentially, we are
expected to pay for it. It has to be paid for by someone eventually
and that has to be the end consumer. However, do you pay for it
by charging wind farms and they have to have a higher income for
it or do you pay them through some other way? We do not mind,
just give us the grid, but if you are asking us to pay for it
then give us enough income to pay for it.
Q116 Mr Weir: Is there a potential
similar problem with marine?
Mr Wright: There will be. To put
it succinctly, the car industry did not pay for roads and that
is how I see it. I think it is a question of whether we want this
sort of energy or not. If we do then we have to facilitate its
route to market. There is only so much that the industry itself
can pay for.
Q117 Mr Weir: Are there similar consenting
issues?
Mr Wright: Yes, the consenting
issues are very similar at the moment. It is notable that our
costs are much higher on the consenting because of the environmental
issues. Those will fade in time but there still seems to be considerable
lack of evidence coming out which would reduce the hurdles that
you have to cross elsewhere.
Q118 Sir Robert Smith: I have a quick
question on the Danish economists that we met and their theory
that with the next round of emission trading for electricity generation
being open across the whole of Europe, any other financial stimulus
into low carbon electricity generation by a national government
in effect is a subsidy to the whole of the European Union and
not just to that national government because of the way you interfere
with the emission trading market.
Mr Edge: That is only if you are
stupid in setting your targets under the Emissions Trading Scheme.
If you take into account the fact that you have renewables there
and you have a target (it is set in law under the new Energy Directive),
you calculate targets you need to go to under that scheme. I find
that argument very bizarre.
Mr Wolfe: I feel in the short
term the cost of carbon is not the primary driver for new renewables
capacity. There are specifically targeted incentives for renewables
which provide the primary drive and therefore the carbon factor
is a second order rather than a first order factor.
Mr Edge: It is also worth pointing
out that it is not just the carbon benefit. There is security
of supply and developing domestic industries and rural development
which are not captured by carbon price. It is important, therefore,
that you target extra support on renewables because that gives
you those extra benefits.
Chairman: We have mentioned a few problems,
let us now look at some non-economic barriers, planning and other
factors, so far as wind is concerned. Judy?
Q119 Judy Mallaber: You have already
said quite firmly that planning was a problem. Do you think the
new proposals, the Infrastructure Planning Commission and the
National Policy Statements, will help overcome some of those problems?
Mr Edge: For onshore wind the
short answer is no. The IPC will only address projects over 50
megawatts in England and Wales and the number of those that you
have already had you can count on the fingers of two hands and
there are not that many others left that would go through that
system. The question then becomes: does the National Policy Statement
that comes out of this system have a material impact on decisions
at local authority level? We do not think it has been given enough
force in order for it to have an overriding impact on those decisions.
We would anticipate that we will have to continuously appeal against
decisions to the planning inspectorate and indeed the secretary
of state. We do not like that; that takes time and money. We much
prefer local authorities to have incentives, that they find it
a beneficial thing to have wind farms in their local area. We
would like to see the business rates that are paid by our members
being seen by the local authorities in the UK. The only financial
benefit communities see from having a wind farm is a voluntary
payment by developers, whereas in countries like Portugal and
Spain local taxes go to the local authorities. People understand
that that wind farm on that hill equals that swimming pool. That
becomes really powerful. They want that because that aids their
community. We do not have that link at the minute.
Q120 Judy Mallaber: Do you think
that is the only way of getting over the objections that we all
understand? If we have about 50 letters of objection to a wind
turbine it is quite difficult for a local authority to resist
that pressure. You think that a strong financial incentive link
is the way forward.
Mr Edge: It is a powerful one
because it then builds up a constituency in favour who are vocal
about it. The point about all the letters of objection is that
it is those who are against who are the ones who get up and down
and shout and write letters; the people who are pro tend to be
quite laid back and say, "Sure, it should happen" but
they do not get out there and do so. If you actually give people
good incentives to say that if they do not actually support this,
they will miss out on this development. I think that is going
to be really powerful.
Q121 Judy Mallaber: Are there other
ways of overcoming objections, for example noise or the thought
that it will be very noisy is one powerful issue that people raise?
Are there things about that which you think the industry could
do more on? In my area we put a lot of money into trying to restore
an ancient historic windmill which is rather ironic as people
do not like modern wind turbines. Is there more the industry could
do to promote the cause, do you think?
Mr Edge: There is not much more
we can do to provide the evidence base. What else can we do?
Mr Wolfe: It is important to pick
up on a point that Gordon already made and that is the extent
to which the National Policy Statements become a factor in the
local planning considerations and that is still not strong enough.
If the National Policy Statements became effectively binding on
the local planning process and then you took out of the local
planning inquiries a whole lot of issues that that have already
been decided at national level and the local planning inquiry
then focussed on only the local issues and did not revisit a whole
lot of issues that have been resolved time and time again, that
would just help speed the system up. It would not necessarily
change the results but even speeding it up would be a very positive
move for the industry.
Mr Edge: I think it is also important
for offshore wind. The IPC have been taking projects of 100 megawatts
or more into consideration. We had a very good presentation in
our offshore wind conference last week by the chair designate
of the IPC who came across very well and gave us a lot of confidence
that they are taking on board the issues and that this will speed
up the consenting process and make it simpler. That is essential
if we are going to get the kind of enormous quantity of offshore
wind projects through the consenting system that need to be done
for the 2020 target.
Q122 Judy Mallaber: What sort of
timescale in the planning process do we need to get it down to
for it to be financial viable to a major offshore project?
Mr Edge: At the moment you are
talking about a whole surveying and consenting process which takes
in the region of five or six years. We need to halve it essentially.
Q123 Judy Mallaber: Then it becomes
potentially financially attractive.
Mr Edge: It is more of a market
confidence issue and becomes a bit cheaper. People can see these
projects going into the system and know that in two or three years'
time they will be coming out, and therefore they can plan to build
factories to supply that.
Q124 Judy Mallaber: How much of the
delay in achieving planning consents are a result of concerns
about radar interference? How big an issue is that?
Mr Edge: We reckon that 4500 megawatts
of projects are held up in the system due to issues around aviation
radar of various kinds. I think it is important to note that the
industry and government departments across the board have signed
up to this memorandum of understanding to tackle the technical
issues. We feel a bit disappointed that government so far has
not stumped up money to help us drive those technical solutions.
Once they are in place and proven then our industry would be ready,
I am sure, to contribute to the rollout of some of that in order
to alleviate issues around their particular projects. For instance,
the Whitelee project of Scottish Power Renewables paid for an
extra radar in order to mitigate effects on Glasgow Airport. It
can be done but we need to have the technical solutions in place
in order to have that investment and that is what we are missing
at the minute.
Q125 Judy Mallaber: Is it the planning
issues that are the most problematic? How much of an issue is
the general recession?
Mr Edge: That is having an impact
on independent developers who rely on project finance. We surveyed
our members earlier this year for precisely this reason and we
found a market of two halves, those companies with large balance
sheets that could get corporate finance and indeed large utilities
have been able to access the bond market. It is possible and they
are going ahead. People who require banks to lend them money are
having a real problem. The fact that the UK government is attempting
work with the EIB and UK banks to bring forward an intermediated
loan scheme of about a billion euros to support this is good news.
I think it is also interesting to note that if we do not play
our cards right with that scheme we could fail to support London
as a financial centre for this which has been a real motor for
potential growth here. We need to rebalance our economy. It is
still important that the financial services sector is strong and
we have built quite strong links in this area; people in banks
based in London have built up teams and so forth. If we can use
this money from the EIB to help support them across the board—not
just two or three banks as might be the case—then we have
a real opportunity to support a really important part of development
change in the UK.
Q126 Sir Robert Smith: If we get
all the things right on planning, infrastructure, the grid and
everything else and it really takes off, and the target that has
been set for marine renewables looks like being achieved, how
much of a barrier will it be to actually get the service side—the
sub-sea vessels—to actually manage the cable laying and
the installation? Will we have the support vessels and so on there
to actually achieve that goal?
Mr Edge: The industry says that
if you want something in five years, tell us you want it and we
can supply it. It really is a kind of how long is a piece of string
question. If there is a clear enough signal that that is the market
and that is what the demand will be, then they will invest to
make it happen. It is really important that that market stability
and confidence is there and that will also help to bring down
the costs as well because people will be investing, particularly
in offshore wind, in the capacity to decouple offshore wind from
the onshore wind market, from the oil and gas sector which are
directly competing for things like vessels. Once you reach that
critical mass then you can really concentrate on costs. Until
then it is a real struggle.
Q127 Chairman: I have a vision in
400 years' time of a latter day Noel Edmonds leading a team to
restore an ancient wind turbine.
Mr Edge: It would be ironic if
it was Noel Edmonds.
Chairman: Perhaps we can move on to discuss
other technologies now, green energy, carbon capture and storage,
low carbon vehicles and other technologies. Des Turner?
Q128 Dr Turner: Do you think the
government is focusing on the right areas? It is promoting carbon
capture and storage, offshore wind, marine energy, nuclear and
low carbon vehicles. Do you think those are the right areas to
work in?
Mr Wolfe: I think it would be
ill advised of the government to seek to pick a limited number
of areas and assume that they are going to get to the right result
through doing that, particularly in the renewables field. Clearly
offshore wind has a higher medium term potential than any other
individual technology, but that does not mean that just focussing
on offshore wind will deliver what they need to deliver in renewables.
In fact it will fall a very long way short of that. Historically
government has neglected, at its peril, the whole issue of heat
production and renewable heat is a very, very important sector.
It is important for the areas that you were talking about with
the previous witnesses, the built environment in particular, and
our expectation is that actually renewable heat can achieve a
very significant proportion of the 2020 targets that we now have.
It is very important that that is part of the portfolio, but not
one of the ones you just listed, Mr Turner. We think it would
be inappropriate just to focus on a limited number of technologies.
I think it is very unfortunate that all of those technologies
that you listed are, if you like, energy supply side technologies.
It is very important to increase the level of demand side activity;
it is very important to increase the proportion of de-centralised
energy within the mix, not to the exclusion of centralised of
course but as an adjunct to centralised, particularly because
by doing that you can also bring forward energy efficiency that
we all agree is the most important aspect of sustainable energy.
Q129 Dr Turner: Staying with the
supply side for the moment, we have already established from your
previous answers that marine energy has the potential to be a
highly significant contributor to our energy economy. It has also
been established that there are barriers to its proper implementation.
Would you like to comment on those barriers, and in particular
what is your feeling about the consenting process for marine projects
and the implications of the new consenting regime set out in the
Marine and Coastal Access Bill which means that all marine projects
effectively will be dealt with under that regime as opposed to
large offshore wind which will go to the IPC?
Mr Wright: The answer is that
anything which presents the investors with something different
and makes the investment more difficult is going to be a barrier.
It is not just the fact that you have to get through this; it
is the fact that it puts off anybody being willing to play the
game because, very simply, those who are looking at marine energy
now see the application of the technology and are willing to invest
in the technology. What they are not willing to invest in is a
Whitehall two-step. It is as simple as that. Our view is that
the barriers at the moment are because you are dealing with multiple
agencies; you have the regulators in there on the environmental
side who are following the European directives or whatever that
are in place. We have to get to a position where, whatever is
done with these early projects, actually pays off in terms of
giving sufficient evidence to reduce the consenting barriers going
forward. I can speak obviously from our own experience; I am not
so sure about the wave. We have a programme running which is that
after a long amount of baseline data and with a machine now in
the water producing water of its actual effect, to date the message
is that there is no measurable impact. That is improving confidence
but it has not had any impact on the sort of scoping and the requirements
we are going to have to go forward to the next project, et cetera.
It is hugely important that it does start to have much quicker
feedback loops in that regard. If we look at the Marine Bill as
well, concern in the Marine Bill is driven from the conservation
side with a presumption—which we are concerned about—that
doing anything in the sea so far as marine energy is concerned
is going to have a negative impact. In fact, we could be having
a positive impact and that is not properly in the thinking. Very
simply, we know that the fisheries, for instance, are being devastated
and in a very parlous condition. At the very least we are going
to be providing areas where there will not be any fishing. Why
is that not seen as a positive? It has worked around the Isle
of Man; it has worked wherever you have closed fisheries. You
get a very, very quick return on that biomass and that is what
we are going to need. Paradoxically everybody knows that the best
thing that happened to the North Sea fisheries was the Second
World War because it basically gave us large areas of no-go. Our
concern is that there is legislation coming through in the form
of the Marine Bill which is based on the presumption that what
we are going to do is going to damage and we need to ensure that
there is proper feedback from the evidence. I want to see that
and I want to see the costs come down and for there to be basing
decisions going forward for marine energy and on evidence which
is clear and coming from the early developments.
Q130 Dr Turner: Given that the lower
limit for referral to the IPC is 100 megawatts and marine projects
are not likely to be of that scale for some years to come, anything
over a megawatt in terms of marine energy at the moment could
be considered strategic. Would you rather see those projects being
referred to the IPC for consenting rather than going through the
Marine Bill process?
Mr Wright: Very simply yes, if
it is going to move it more quickly. I did not mean that you ignore
the science around it but there are questions as to where the
benefit comes in that and who should be paying for it and where
that is shared. I think there is an industry issue there which
is to get to the point where we do not have the shackles around
us. To make it very simple, we have an extremely good relationship
after a long with time with the regulator in Northern Ireland
but I know we are starting at almost ground zero again with a
different regulator sitting in Wales. This is not comfortable
for someone who is trying to get a bit of pace into an industry
and to make sure that we are applying capital sensibly. It is
just the sort of thing that will slow it down.
Q131 Dr Turner: You have pointed
out—I suspect quite rightly—that it is counter productive
in wider environmental terms because the greatest threat to marine
ecosystems is climate change and one of the greatest weapons against
climate change is decarbonising energy and using the marine resource.
Would you agree?
Mr Wright: I think the reality
of the driver is something else which is the European directives,
in particular I have to say, the precautionary principle. It was
put in place for all good reason but it has a paradoxical outcome.
The outcome is that if you are trying to do something new then
because it is new and its effects are unknown you should not do
it because that is the precautionary principle. It is incredibly
difficult to get the new things moving and you have to fight extremely
hard for that because of the application of it. Because that is
European law the regulators have the problem that they could be
infracted by the European Commission if they do not put procedures
in place which absolutely give them the paper trail and the process
trail which says that we have done everything to sit by the precautionary
principle. That is their greatest fear and so it is much easier
for those bureaucratic organisations to say no or to load up the
costs et cetera than it is to cut through. I think the problem
is the European law and the way that is couched.
Mr Edge: The Marine Bill has been
a very long time coming and we have been engaging over the past
five years. One of the key things that we, the REA and other members
of the Seabed Users Development Group (the grouping of the people
who are developing the seabed) is this focus that the Marine Bill
should be about sustainable development and not purely about conservation.
We were really pleased that the government took that on board
and actually the Marine Bill, as written, going into committee
has that focus. We are fearful that certain siren voices will
sing and backbench MPs will line up and say that this is a conservation
bill and it should be about conservation when it really needs
to be about sustainable development. We are hopeful that it will
be defended going through the process and that it comes out the
other side still with the focus on sustainable development. The
MMO with a sustainable focus should be okay for development. We
did argue for the IPC taking it and we were rebuffed in that.
So long as the MMO has that focus then it should be okay but we
are fearful that if it is taken away it just becomes a conservation
body and that would be wrong.
Q132 Dr Turner: Philip, do you think
the balance of the Bill is right?
Mr Wolfe: There is always a high
degree of uncertainty. In principle I would support the points
that Gordon has made and I do think it is very important that
it is used as a development tool rather than as an out and out
conservation tool. I think in principle we are on the right track
but there is still too much uncertainty really.
Chairman: The Bill is in its third session
next week so it is on-going. Can we move to energy efficiency
considerations? The phrase "low hanging fruit" has been
a frequent metaphor employed in the Committee today. I do not
know whether you want to mention low hanging fruit, Mike.
Q133 Mr Weir: I will desist from
mentioning it. We have heard a lot about the low carbon building
programme. Do you have a view on how it could be expanded to deliver
a cumulative target of 12 million upgraded homes by 2020?
Mr Wolfe: I think our perspective
is that the low carbon building programme has had an unfortunate
history for a variety of reasons and in a way I think we would
be happy to see it being replaced with the new renewable energy
tariffs, the feed-in tariffs for electricity and the renewable
heat tariffs. We think those will prove to be a far more effective
mechanism than what was effectively a grant programme for some
of the same reasons that we talked about in respect of other technologies,
that it gives a visible income stream to the people installing
the project and that should open up finance for new projects.
We would see the primary mechanism for delivering these 12 million
homes as being the tariff mechanism rather than the low carbon
buildings programme. We would see it as being a very important
way of addressing the part of the market that again you talked
about in the earlier evidence session and that is the existing
homes that are already there. Of course the zero carbon homes
will start to impact on new build but the vast majority of the
building stock that will be there in 2020—come to that,
that will be there in 2050—is already built and it is therefore
fundamentally important that policy mechanisms address the existing
building environment and the tariffs can do that.
Q134 Mr Weir: Is it not also the
case that greater insulation or micro-renewables or whatever in
a home might also help address that and it is wrong to just go
on tariffs as the only solution?
Mr Wolfe: If I gave that impression
then I should not have done. It is fundamentally important that
the two are addressed together and I am pleased to say that I
think our industry has a very good track record of that. I have
personally installed renewables in my house and I am now off the
gas grid because I heat my house renewably. All the suppliers
who came in and made proposals to me made it quite clear that
it would be wrong to go through this without first insulating
the loft adequately, without first insulating the cavity walls
and all of those things. The installers in the sector are very
familiar with that. I think the tariff mechanism will have incentives
to ensure that one tackles energy efficiency as well. It is fundamental
that the two progress hand in hand.
Q135 Mr Weir: You touched on the
zero carbon homes target, do you think that could be important
in driving investment, development and job creation?
Mr Wolfe: I think it could be.
The uncertainty about what a zero carbon home means is very unfortunate.
Some of the suggested definitions of zero carbon are effectively
misnomers. Some of the definitions that have been advanced would
allow one to build houses pretty much the way you build them today
and then effectively offset emissions through remote energy efficiency
or renewables projects and I do not think that is the spirit of
what the words zero carbon home would mean to the sort of person
who is buying one. If someone buys a zero carbon home I think
they would rightly expect that they will not be using any net
fossil fuels; they should have a net zero fossil fuel bill and
if actually they find that this zero carbon home uses quite a
lot of fossil fuels but has some kind of nominal share in an offshore
wind farm somewhere else, I think that will not have consumer
buy-in. It is very important that the definition of zero carbon
homes is not drawn as loosely as some of the suggestions that
have been put forward.
Q136 Sir Robert Smith: Mr Wolfe,
you have been a consumer in the market of turning your house into
a renewably heated home. How easy was it to get access to effective
advice and information on the options available? You are probably
a very informed consumer, but would the average consumer find
it easy to embark on what you did?
Mr Wolfe: I had almost hoped you
would not ask that question. The correct and honest answer is
that it was really quite difficult. If I were not as committed
as I am, I am sure I would not have gone through the process.
It was really quite hard and I think it is incumbent partly on
government but also on us in the industry to make that much more
straightforward, to provide one-stop-shops that will hold consumers'
hands all the way through the process.
Chairman: Can we finally turn to the
issues of the extent to which skills and training will be an important
element and the ability of those developments to either benefit
or be impeded by the fact that there is a skills and training
base available.
Q137 Judy Mallaber: I was interested
that the BWEA evidence talked about us having considerable expertise
and manufacturing capabilities from areas like aerospace and certainly
one of the Aberdeen MPs, when we had a downturn that was affecting
Rolls Royce, also suggested their skills could be used in the
oil and gas industry. There is a suggestion that we do have a
lot of capabilities and expertise, but the REA is also saying
that we need to have a major investment in training and education.
Is there a sufficient skills base, either transferable or skills
that we currently have, to be able to develop a low carbon economy,
or do we have a big gap and if so where is it?
Mr Wolfe: We think there is a
substantial skills base but in many cases it will need a degree
of retraining to apply people who have been used to and trained
in one sector to move into renewables, in many cases a related
sector. I will let Gordon speak about the large scale wind, for
example, which is a very promising area, but referring back to
what we have been talking about—the renewables in the built
environment—that can be installed in the case of electrical
systems by electricians and in the case of heating systems it
will be installed by heating engineers. These are people who last
week would be installing a gas boiler and next week should be
installing solar panel systems and heat pumps. In principle they
will need a degree of re-training to be able to do that but it
can be the same people. I am not concerned about a person shortage,
the important thing is to ensure that the people who are already
out there now get the retraining that is necessary to enable them
to support the growth in the renewable sector. Our submission
was calling for that training input, not for growing an entirely
new employment base.
Q138 Judy Mallaber: Would the same
apply to wind?
Mr Edge: What we find in wind
is a need for technical skills across the board right from lower
level skills right through to PhD scale design engineering type
capabilities. In the short term we need a lot of maintenance engineers.
We are putting up a lot of wind turbines, we need thousands of
people to be able to go out and fix them when they go wrong and
maintain them.
Q139 Judy Mallaber: Those would be
new people.
Mr Edge: Yes, but we are faced
across the board with shortages of people with technical skills.
There is a key challenge in just getting enough people into the
power sector or indeed other forms of engineering technical areas.
There are fewer young people going into those stem subjects—science,
technology, engineering and maths—and we have a key challenge
to bring people to the table to do technical subjects. If we can
do that I think the renewable industries have an advantage: we
are a bit sexy and we help save the planet. My members are turning
away new graduates who do not have the right skills and training
because they just want to get into our industry and they are really
short of people who have the right skills, training and experience.
We have an immediate gap there which we are hoping to fill with
various training programmes. We are working very hard to bring
forward an apprenticeship programme so that we can have those
people to do the maintenance; we are working with higher and further
education colleges to bring forward the right courses at the right
level. At the end of the day we do have a very key issue around
the energy workforce in existing sectors and a lack of supply
of young people with the right training coming in.
Q140 Judy Mallaber: To what extent
is that a job that the industry is seeking to address or is it
a job for government? How do they relate together? How are the
current structures working or not working to try to fill the gaps?
Mr Edge: We are working with EU
skills, the sector skills council in the power sector, setting
up a national skills academy for power. We are feeding in what
we need and the levels that we need. We are working on the planning
for the academy so that it helps bring forward the right number
of people at the right level. We are working with our colleagues
in the wider power sector to address common challenges. I think
that needs to be done that way; we need to grow the pie for the
entire electricity industry of which we are a key part.
Mr Wolfe: We are also, together
with BWEA, supporting a project and IPPR just doing a study on
what the skills landscape is likely to be for the next decade
or two so we can answer these questions with a rather more informed
background.
Mr Wright: To give you a view
from the marine sector, bearing in mind it is pretty embryonic,
we can get engineers to come in and we largely train them. We
bring in the right sort to work within our company. To support
them it is notable that they are really sitting in Germany or
Denmark because we have a lot of connections with the wind industry
and wind components. When you want the expertise in very detailed
bits of software or certain components, that is where it sits.
It is worth reporting that because we do not have that sitting
within other parts of our industry. The second area where there
is a shortage is, in our view, in the marine construction side.
There is no doubt that the Dutch have the strength and depth in
terms of the way they bring people into that industry. They have
very capable equipment but they have very capable people as well
right the way through from the crews to the captains of the ships,
the project managers et cetera. It is difficult to find
that. You will find consultants and you will find people who have
been in other parts of the marine industry, but you will not find
that cohesive capability to the same extent within the UK.
Q141 Judy Mallaber: Who needs to
be doing what to fill those gaps and make it happen? Are we on
the right path?
Mr Wright: To my mind it all comes
down to the fact that if you create the market then it will come.
That is the evidence of German and German wind. It is the same
in Denmark. The critical thing is to create the market. Put the
fundamentals in place that say that this is the place to play
and if it has the right structure to it then the supply chain
will appear because it makes sense to do it locally as well.
Mr Wolfe: That answer does not
apply just to marine renewables; it applies across the board to
all of the areas we have been talking about.
Q142 Judy Mallaber: You also talk
about the importance of raising awareness of the requirements
of a sustainable economy but Gordon has quite rightly said that
it is potentially a sexy industry; you have a natural advantage
to attract people. You have the market so you can ensure the jobs
will be available. Do we still need to do a lot of work in terms
of education about the importance of the requirements of the sustainable
economy?
Mr Edge: It is obvious as far
as I am concerned. I saw an advert that was on the television
over Christmas trying to encourage young children to take up these
subjects at school and they were using wind turbines as a key
enticement. It is fertile ground. People know it is part of the
future but the pathways in are not clear and that is to do with
the training landscape. It is hideously confused; there are thousands
of different bodies who have a role. I have a full time person
sitting in the audience here working on this since November and
she is only just getting to grips with all the different bodies
that are out there and she keeps popping up with new ones every
day.
Mr Wolfe: I agree with Gordon
on that. I don't think we need government to be lecturing people
about the importance of this. What they could and should be doing
is showing them by example how important they take it to be and
we would like to see government, in its own very substantial estate
for example, using a far greater proportion of renewables than
they do at the moment. They are lagging when they should be leading.
Mr Wright: To add to that, I actually
think it is a generational thing. I think the younger generation
coming through have actually got it far better than we have. They
see the links. It is not just about climate change, it is about
security of supply. They are well educated and looking at economic
systems, they are looking at what the future geo-politics will
be. You only have to be in the schools to realise that they have
absolutely got it. We are the ones that are not recognising it
to the same extent.
Q143 Judy Mallaber: I hesitate to
ask this after what Gordon has said about how difficult it is
to get in, once it is established that people reckon there will
be a job in this industry are we looking at needing to put on
more generalist courses so we are turning out generally trained
engineers or whatever it might be, or do we actually need to have
far more very specific focussed courses which are relevant to
different parts of the industry.
Mr Edge: We need a bit of both.
One of the things we are focussing on is those courses that take
you from a general engineering degree through to something that
people can take on, like MSc type courses. There is a need for
that. Whether you also need to be doing degrees in renewable engineering,
there is an argument for and against that. We just need more engineers
at the minute. We would love to be able to work with them to bring
them to the kind of skills we need specifically in our industry.
We just need more engineers, full stop.
Mr Wolfe: I think renewables need
to be part of the general education system. On the whole the very
specific skills individuals need tend to be built up on the job.
It is not something you are necessarily going to learn in a classroom.
Q144 Judy Mallaber: Are you getting
women into the industry?
Mr Wolfe: Yes.
Chairman: That is a good note to finish
our evidence session on this morning. Philip Wolfe, Gordon Edge
and Martin Wright, thank you for your evidence to us this morning.
May the wind blow on your wind farms, the tide come in on the
wave machines and the sun shine on the photovoltaics. Thank you
for your evidence today.
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