Examination of Witnesses (Questions 223-278)
DR GORDON
EDGE, MR
HENNING VON
BARSEWISCH AND
MR STEVE
CLARKE
7 JULY 2009
Q223 Chairman: Good morning. Thank you
very much for coming in. You have heard the evidence from our
previous witnesses. Perhaps I could start with a general point.
I think there is a sense of frustration amongst many of us that
Britain is a country with lots of natural advantages for renewable
energy, most obviously things like wind and tidal and so on, but
we are not a leader in this industry; in fact we are not even
anywhere near the leaders. What do you think the Government could
do to encourage more investment in renewable energy?
Dr Edge: The number one thing
the Government needs to do is to ensure that there is a strong
and stable market for renewable electricity. From this, all else
flows. We believe that in recent times the Government has been
trying to build up the coherent policy agenda for which we have
been asking for quite some time. We have had a support mechanism.
That has not been as effective as it might have been because a
number of non-economic barriers got in the way, notably planning
and the grid system, but we are seeing progress on that. We are
looking forward to the publication of the Renewable Energy Strategy,
probably next week, which we hope will bring forward more proposals
on that, but we have to understand that we have made a lot of
progress, and, indeed, we are leading in offshore wind. We are
the number one generator of offshore within the world and we will
continue to be so for the next ten to possibly 20 years. That
gives us an opportunity, also, to be a leader in the industry
as well.
Mr Barsewisch: My background is
that I am from Germany originally and I moved here six years ago
and started up REpower UK, a subsidiary of the German turbine
manufacturer in the UK. Over the last six years I have seen an
enormously encouraging development in the UK. Firstly, on the
onshore side there is very substantial progress. Things are really
happening and it is really an industry now. But, also, on the
offshore side it has been very impressive. The UK is the only
country in the world that consistently, year on year, installs
offshore wind farms. While the nacelle and the top bit might seem
the prize of it, it may come from somewhere else in Europe, it
has been a phenomenal track record and a phenomenal experience
also to British industry. No other country has managed constantly
to build, year on year, wind farms offshore, therefore the experience
in project management, on the finance side, on health and safety,
on logistics is second to none and it will come in very handy,
but what is very important to understand in that context is that
what it is all about is stability. The reason why Britain missed
out on the opportunity of having significant UK manufacturers
is because of the years that stability has not been in place.
Industry was not sure whether there would be a market in the future.
A home market is fundamental and is crucial. Because that has
not been in place, let us say, about ten years ago, some of the
very promising offshoots in the British manufacturing side died
because there was not a confidence there. That is why countries
like Denmark and Germany are extremely successful in terms of
creating jobs. The opportunity for Britain really is there on
the offshore side, in offshore wind but also in wave and tidal.
The underlying principle is what Gordon said initially: stability.
Do not rock the boat. What is coming there is extremely promising.
It is looking very good. It might not be quite there yet in that
there are massive numbers of jobs coming out of it, but the opportunity
really is there and it will prove very large in terms of the economy,
provided that the environment is stable and these companies can
continue to prosper and do their bit.
Q224 Chairman: I am not sure whether
those two bits of your answer reconcile. You say everything is
tickety-boo, we have the biggest offshore wind sector, there is
year-on-year growth and so on, but the truth is in terms of jobs
it is not producing many in this country. You have just acknowledged
yourself that because of a lack of stability we are not getting
the jobs here. If you look at the turbine manufacturing sector,
how many of the turbines are being put out in offshore now have
been manufactured in this country?
Mr Barsewisch: The view one should
take of that is the value-added that is done in the country, and
that is substantial. It does not take the full picture to say
that the turbines are coming from Denmark or Germany because the
top bit is coming from there. Nowadays in an offshore wind farm
less than half, maybe 40 per cent of the total value is the turbine,
whereas the steel, the substructure, the logistics, the grid connection,
all of that is largely made in Britain. While it might not seem
as sexy to produce cable, cable is awfully important and there
are British cable suppliers. There are companies that make towers
in Britain. Steve, maybe you can jump in that, on the share of
offshore wind farms of British value-added.
Mr Clarke: Yes, for sure. We cannot
correlate forward what has gone on in the past. Henning's point
is absolutely right that a strong home market is key. In the past,
Germany and Denmark have had strong home markets onshore, which
we have not. Now, and going forward, we will have the strongest
worldwide offshore market, and as a result directly we have the
opportunity to grow the sorts of turbines, technologies and supply
chains we need. The volume is leading to whole new turbines coming
to market. In the short to medium term there are massive opportunities
for UK companies to come in as what I call the "me toos",
to enter the existing supply chains to ramp up capacity that is
much needed, but, then, as we start to see bigger projects proliferate
in UK coastal waters, new turbines will come to the fore which
are currently being funded through big public and private investment
programmes. Those new turbines currently do not have a supply
chain prescribed, so there is a very, very big opportunity, whilst
we have the home market for the next ten years, to grow those
new supply chain companies. That is the step change that is the
opportunity ahead of us that does not correlate with what has
gone on in the past onshore.
Q225 Chairman: What is our share
of the value-added to date and what will it be in this more optimistic
scenario that you now paint?
Mr Clarke: First of all, there
is the significant opportunity of growing a UK supply chain in
cutting metal, making components and so forth. But secondly, and
more importantly, when turbines are being delivered onshore, for
onshore markets, service could be delivered pretty much by setting
up a base anywhere. With UK coastal waters becoming home to the
large amounts of offshore wind farms, it is very, very appropriate
that the operation and maintenance bases around the coast are
also as close to those wind farms as possible; that is, UK coastal
locations. It minimises downtime, maximises speed of deployment.
Those jobs are minimum five-year jobs, maximum 20-year jobs too.
I see a vision, going forward, where if we proliferate large-scale
offshore wind farms we not only grow new technologies and commensurate
supply chains but we capture the long-term five- to 20-year operation
and maintenance jobs too. Then, as we start to see old wind turbines
being taken down and re-powered, as we are seeing onshore in Germany
and Denmark now for ones that are already 15 to 20 years old,
that opportunity is just perpetuated forward.
Q226 Chairman: What is the current
share of the value-added factor and what will it be in future?
Dr Edge: The high-water mark in
terms of local content for offshore wind projects was the Scroby
Sands project off Great Yarmouth, and that was at 50 per cent.
Most projects have not been at that level—perhaps as much
as half of that—but it is worth pointing out that offshore
wind has been only one or two per cent of the total global market
for wind power generally. Therefore, what you have seen is onshore
turbine manufacturers and people working in this sector, and,
indeed, when it comes to things like the foundations, people working
in the oil and gas sector and a very small part of their production
being devoted to this sector offshore, with the turbines being
primarily onshore turbines that have been made and then "marinised"
and taken offshore. Going forward, as Steve rightly says, there
will be dedicated, new, large turbines for which the factories
have not yet been built, and that is the opportunity, for the
UK to be able to capture that. The Government needs to ensure
the market and then also help us build the infrastructure to attract
those kinds of manufacturers. The model we point to is Bremerhaven
in North Germany. A lot of public money and resource has been
put into building an area which has been cleared and made available
to turbine manufacturers and blade manufacturers for the offshore
sector and they have been quite successful in getting some manufacturing
out of that, including Henning's company REpower. We need to see
that focus in the UK. We need to choose a hub for manufacturing
of offshore wind in the UK and really put resource into that,
making a deep-water port, lots of lay-down area, lots of areas
to make blades and towers and so forth and nacelles, and then
build it. We should then be able to capture that extra 25 per
cent which is involved in nacelles, as well as all those other
bits underneath it.
Q227 Chairman: Where would be a good
place to do this?
Dr Edge: Somewhere on the East
Coast. We are agnostic, but—
Q228 Joan Walley: Did you say the
East Coast?
Dr Edge: The East Coast, because
that is where the largest proportion of development will be in
the North Sea, the majority of the Round 3 sites are out there
in the North Sea, like Dogger Bank and Hornsea and so forth. There
will be significant development in the North West as well. If
you want to pick just one manufacturing hub: somewhere between
the Humber and the Tay perhaps.
Q229 Chairman: Is there a risk that
if we do not do this relatively quickly other countries—they
can see the market just as clearly as you can—may move in
and capture a bigger share of it?
Dr Edge: Yes. The window is there
but it will close if we do not act pretty swiftly.
Mr Clarke: May I say that I think
there are two risks there if we do not move quickly. The first
risk is we do not build out sufficient quantities of clean, green
gigawatts—that is the first and biggest risk. Secondly,
if we do not move quickly enough to capture the UK content, then
maybe we do get to deliver the gigawatts of low carbon energy
but they are delivered by Korean and Chinese companies.
Q230 Joan Walley: You have thrown
up a lot of issues there. I would like to come back to talk about
the manufacturing hub in a minute, but, just going back, in 2007
five per cent of the UK's energy came from renewable sources and
the Government has now set targets for 35 per cent by 2020. You
talked in your previous replies about the need for stability.
Does that commitment to 35 per cent of energy from renewable sources
by 2020 give the stability that was the fundamental plank of what
you said was needed for your industry's future?
Dr Edge: It is certainly really
helping. One thing that we have really found out of the whole
process of the European target for 2020 and the new Directive
has been a whole new sense of purpose behind government's policymaking
in the renewable sector. Whilst we had the Renewables Obligation
and different programmes in terms of bringing forward changes
to the planning system and so forth, this has given it a really
big push and underpinned that market stability and confidence
that we really think it is going to happen. The icing on the cake
was what came in the Budget. We were lobbying and saying, "There
are some short-term issues in terms of loans for onshore wind
and the economic situation for offshore wind," and the Government
then responded to that. It gave us a lot of confidence that they
are right behind this and they are going to stand behind it all
the way to 2020.
Q231 Joan Walley: You say that you
were given a really big push. Is that a clear enough signal for
industry, or is there some murking of the waters in terms of how,
for example, nuclear could well be part of the equation and could
make it less clear in terms of the signals about renewables?
Dr Edge: It is not an either or
with nuclear and renewables. There is an argument that you need
everything you can get, but we do not see why it is the case that
if you are choosing to opt for nuclear that would necessarily
impact on our sector. As long as the signals are there and the
support system is there and we are getting a lot more signals
on planning and the grid system it should be okay. We would love
to see government being a bit more publicly behind our sector.
Q232 Joan Walley: What more could
it do?
Dr Edge: The Government speaks
at nuclear industry supply chain events and works in strong partnership
with organisations. We feel there is perhaps a bit more they could
be doing there for renewables, but it is getting a lot better
than it was.
Mr Clarke: We will probably come
on to the green jobs aspect shortly, and when we do we will see
a vision that fundamentally we need a lot more mechanical and
electrical engineers in this country coming through the system
to take up jobs. Those kinds of skilled people will be just as
relevant to nuclear as they will be to wind. There are some benefits
in the green jobs agenda for growing those sorts of skilled people
for both of the sectors that you mentioned.
Q233 Joan Walley: Could you put a
figure on those jobs that you could see being created?
Mr Clarke: We are focused on wind
energy. We have done some empirical analysis through the Bain
Report.
Dr Edge: We could supply that
for you.[16]
Q234 Joan Walley: Coming to what you
said just now about needing to have a hub that would be there
to take advantage of this new investment and the future projections
of greater take-up of renewable energy, what is the interface
between regional development policy, which is presumably what
is driving that readiness on the ground. I represent a constituency
in the West Midlands where we have manufacturing skills in abundance.
You mentioned the East Coast. Where is the strategic discussion
taking place between your industry, in the places where it is
scattered about around the British Isles, and the regional strategy
and the opportunity for investment in jobs that could go a long
way towards dealing with some of the unemployment black spots
that are currently there because of the way in which some manufacturing
industries no longer exist or are in a state of transition? Where
is that debate taking place?
Dr Edge: There is not the leadership
at the moment on a national strategic level. The Government has
made great noises about finding somewhere to make this hub and
it has been talking with the ports industry. There was a very
interesting ports seminar back in March and there is a prospectus
now on the DECC website showing where there are facilities available,
but we think the Government needs to sit down with the RDAs and
knock some heads together and say, "Right, between you guys
you cannot all win here. One of you is going to have this major
investment and we need to decide." Yes, there will be other
things that other regions will get out of this—and I am
sure the West Midlands will be able to build up strong component
supply chains to feed that hub as long as they know they are there.
You are only going to get the turbine manufacture if you really
focus the investment and entice those manufacturers in to set
up. Only then can you have a target for those component manufacturers
to supply to. We have to club together and make that agreement
so that everyone can win, but not everyone wins big in terms of
having that hub.
Q235 Joan Walley: If those discussions
are not taking place, where should they be taking place?
Dr Edge: The Department of Business
Enterprise, Innovation and Skills needs to be the one that takes
a lead on this. We are hopeful that in the Low Carbon Industrial
Strategy there is some strong focus in this. The day after the
Budget, BERR, as it still was, and DECC published a report called
Investing in Low Carbon Britain, which for the first time
in a government document put out the objective of having a large
single manufacturing hub for offshore wind. We are hopeful that
the Government really has that message and is wishing to pick
up that ball, but we have not yet visibly seen them taking that
initiative with the RDAs and other interested stakeholders, like
the major ports group and so on, and forcing a decision.
Q236 Joan Walley: The existence of
that strategy is an example of government showing leadership,
is it not?
Dr Edge: I hope so. I want to
look at the strategy, and I would reserve judgment, but I am hopeful
that the messages that we have been giving for quite some time
now have got through and that therefore they will be taking further
leadership.
Q237 Joan Walley: You would disagree
with the evidence that you heard just now from the EIC that there
is no leadership.
Dr Edge: In our area we are starting
to see leadership emerge and direction.
Q238 Dr Turner: All the discussion
in the past half hour has been couched in terms of wind energy
because that is what most people recognise renewable energy to
be, but obviously it is not the only one and it ignores the fact
that we have enormous marine resources, almost uniquely, in the
UK. What is your view on the balance of renewables that could
be achieved in producing 35 per cent of our electricity from renewable
resources? Where do you see the potential for wave and tidal power?
Dr Edge: We estimate that even
with quite a strong policy push you are looking at somewhere in
the region of 1500 megawatts of wave and tidal capacity by 2020.
The number of grid-connected wave and tidal generators in the
world is countable on the fingers of my two hands, with a total
megawattage of perhaps ten. That is where the wind industry was
in 1980 and it took a further ten years to get to the first thousand
megawatts of wind power. We may be able to accelerate some, but
there are limits. We have a huge opportunity in the UK to continue
the leadership we already have in terms of the research infrastructure,
the testing infrastructure, the intellectual skills that have
been developed in our universities over the last 20 years, and,
indeed, as you rightly point out, that huge resource, but we do
need to make sure that all the links in the innovation chain are
covered, there is that major gap between the Marine Renewables
Deployment Fund which supports early stage projects and the wider
market. We do not like using the term "valley of death"
but that seems to be the accepted term. If something is not done
to fill that, then we will not progress further, but there are
also links ahead of that, getting the full-scale prototype area
which we see. On the funding in the Budget, the £405 million,
we have had an indication from DECC that a significant proportion
of that will be going towards the wave and tidal sector which
will be very welcome.
Q239 Dr Turner: So far there has
been no single government initiative to directly benefit wave
and tide. The only thing has been the marine development fund,
which has not yet paid out a penny. Do you think that we are great
danger in terms of wave and tide, where we have fragile lead in
terms of technology development, rather comparable to our state
of development in both wave and wind power in the early 1980s
when we lost it? We just lost it. You know what happened in wind.
Are we not in grave danger of repeating the same mistake with
wave and tide?
Dr Edge: I absolutely agree that
there are risks here. If we do not take strong action in the near
future there is a risk it will go away. I underline that we have
strong advantages and a lead, and with one or two very key steps—obviously
the valley of death being the key one—we can have that industry.
Yes, there is a risk. We pressed government quite strongly about
this, that there needs to be further funding in that chain and
if we do not get it, it will go somewhere else. You say the Marine
Renewables Deployment Fund (MRDF) has not given any money. The
Portuguese have had a feed-in tariff for quite some years and
there is only one project which has been able to access that so
far. I am not aware of any more being developed to meet it. I
do not think it is necessarily the fault of the MRDF; I think
it is the fault of us not making sure that things were ready to
get into the sea in the right way, which is further down the innovation
chain. I think we are in danger of talking ourselves down, if
we are not careful.
Q240 Dr Turner: We are in a position
now where things are ready to go into the sea. Things are in the
sea in limited numbers. The valley of death is still there and
it is still littered with all the bodies from the whole field
of innovation. What would you like to see done? We know the MRDF
is a complete failure. What would you like to be seen to be done,
in order to pull through with early stage technologies so that
they can get through to full commercial scale?
Dr Edge: I would disagree that
the MRDF has been a complete failure. The fact that it is there
has been an important staging post carrot on the way.
Q241 Dr Turner: It is a carrot that
nobody is interested in.
Dr Edge: Our failure has been
to fund the prototype stage enough to allow people to access the
MRDF. That is not the fault of the MRDF.
Q242 Dr Turner: You do not think
there is a market failure.
Dr Edge: There is a market failure
beyond that. That is the next carrot you need to have to be pulling
it all through.
Q243 Dr Turner: My question to you
is what do you want to see done about establishing the market?
You have made the point, very correctly, that we now have a market
established for offshore wind. It will just happen now. That is
almost a given. The only thing that is an issue is how much value-added
we get out of it for our economy. What do we need to establish
the market for wave and tide? The technology is there. It needs
the market pull now.
Dr Edge: Absolutely. Our position
has been that post MRDF the general model of a capital support
and revenue support mixture is good. There is still a lot of technology
risk, even after that first project through the Marine Renewables
Deployment Fund, and therefore we still see a role for extra capital
support immediately going beyond that. Fix the revenue to a certain
extent.
Q244 Dr Turner: How? I am trying
to get at how. Give me an answer.
Dr Edge: Our preferred model,
in the model of the Non-Fossil Fuel Obligation Contracts, would
be to have an agency buying the power and the ROCs at a fixed
value, or perhaps just the ROCs. They could then sell those certificates
on the open market to part-fund that process, with a top-up coming
from government funds. There would be a capital grant, there would
be some revenue support, with the capital grant and revenue support
tailing off until they can function at two ROCs per megawatt-hour,
as currently seen in the longer term under the Renewables Obligation.
We think that model could work.
Q245 Dr Turner: We are in a situation
where there is an absolute investment drought. There is certainly
no investment available for high risk, in commercial terms, technologies,
such as wave and tide, because of the lack of reasonable market
certainty. You have not said anything or suggested anything that
would give an investor any confidence.
Dr Edge: Why not?
Q246 Dr Turner: You have not. Others
might argue that four or five ROCs might make a difference, which
would be a substantive suggestion. What is your position on that?
Dr Edge: I am sorry, I am just
a little puzzled as to why mine is not a substantive suggestion
and giving five ROCs is. It is a support mechanism.
Q247 Dr Turner: I am just asking
you to say it. Is that the sort of mechanism you want to see?
Dr Edge: Yes. We have said so
in our response.
Q248 Dr Turner: I am trying to get
you to say it for the record here.
Dr Edge: I am sorry. I thought
I had said that that was our position.
Q249 Dr Turner: Right. That is better.
I was just trying to get a substantive answer from you. Okay.
The prize is quite considerable, is it not? I disagree with your
estimate of the potential by 2020 for marine technologies. I think
it could be much greater. The other great advantage is, whereas
we may get 50 per cent if we are lucky in terms of value-added
out of offshore wind, we could get something approaching 100 per
cent out of wave and tide if we get it right. Is it worth pursuing
this with greater vigour?
Dr Edge: We believe that wave
and tidal should be pursued with all vigour. We have always said
that. We just believe that, having had the experience of wind
power, especially since we are going into a harsh environment
like the sea, it is very easy to over-promise and under-deliver.
I think that would be a bad thing. Our estimate of what is possible
by 2020 is tempered by that experience, but that would still make
us by far the world leader and the strong centre for this industry
going forward. The important thing, I think, would be to set a
further objective, out further, so that the industry knows that
2020 is just a staging post and in fact there is much more to
come in the years after.
Q250 Dr Turner: How much responsiveness
do you detect from government to this imperative?
Dr Edge: We believe that a large
chunk of the £405 million that the Government set aside in
the Budget would be given over to wave and tidal. We are talking
to DECC around issues to do with this valley of death and what
happens. I do not think they are being particularly responsive
to our particular model, partly because it involves having to
spend a chunk more of government money which, obviously, is in
very short supply at the moment.
Q251 Dr Turner: Can you tell us something
about the resistance. It sounds great: there is £405 million
sitting there, plus access to the European Bank funds. In theory
there should be no problem, but it is not happening. No-one has
yet accessed that money and DECC has not made it clear how people
will access that money. Do you have any answers that no-one else
has?
Dr Edge: No, but we understand
that out of the Low Carbon Industrial Strategy and the Renewable
Energy Strategy they will make clear what they are going to be
spending that money on. We are just getting indications that they
think that wave and tidal should be getting a disproportionate
chunk and that what they are focusing on is those areas leading
up to the Marine Renewables Deployment Fund. We are still working
with them and saying, "Can we please talk about a strong
message post that?" It is not that they do not want to, it
is just that they are sitting there saying, "We have no money."
Q252 Dr Turner: But they have money.
Dr Edge: That £405 million
has to be spread about a lot of things. You need to be talking
in the region of £1 billion over ten years in above current
market costs to try to bring forward that development and I think
they are nervous about committing that as government funds.
Q253 Dr Turner: This is precisely
the sort of nervousness that has seen us lose industries before,
is it not?
Dr Edge: It does not mean they
are going to do nothing. We are looking forward to the Renewable
Energy Strategy to see what they think they can do, but I think
there will be something in there.
Q254 Dr Turner: It is clear from
the German experience that it is fatal to do nothing. You have
to do enough. If you fall short, you might just as well have done
nothing, in practice.
Dr Edge: Yes, but we have been
working with government to make sure that enough is done. We still
need to be waiting for the Renewable Energy Strategy and what
is in there. As I have said, I do not think government wants to
do nothing; it is just that it has not yet done it. It may be
happening very soon.
Dr Turner: Perhaps I can suggest that
you need some sharper steel-toecaps.
Q255 Mr Chaytor: Coming back to the
suggestion of jobs in offshore wind and onshore wind, are the
companies that are starting to generate the new jobs either in
turbine manufacturing or in logistics or in cables completely
new start-up companies or do they tend to be companies already
in existence that have been supplying other forms of industries?
I am interested in the extent to which, with the growth of renewables,
we are going to see a whole new set of industries and new set
of skills emerging from nowhere but at the same time significant
redundancies in companies that have previously been servicing
the fossil fuel industries, or is there a way of managing the
transition by building on older skills and retraining?
Mr Barsewisch: The second point
you are suggesting is more the way the reality would work out.
At the end of the day renewables is part of the energy mix. That
is where it belongs and that is the wider picture. That means
that a lot of the existing players that are active in the power
industry are starting to ramp up their renewables activities,
be it by acquiring some more start-up companies or by expanding
on their own basis. If you are making an offshore cable, it does
not quite matter whether that connects an oil rig or a wind farm.
Granted the power rating might be different, at the end of the
day it still ties in. There is that gradual transition. We are
not living in a black and white world, where it is the old industry
versus the new one. This is a gradual transition and it is also
reflected in expanding skill base and looking at the skill base.
BWEA, for example, is doing some quite significant work in terms
of leading an apprenticeship programme, making sure that we have
the skills in the future. We expect—we have had some work
done by Bain & Company—that by the year 2020 57,000
people will be working in renewables, in wind, wave and tidal,
compared to the 5,000 that that was the starting point around
2007. There is a massive growth. Where do these people come from?
They have to come from somewhere. We also see that it is not an
entirely different curriculum that they have to go through. In
many cases, the skills that are needed to make them employable
in our industry are more add-ons, bolt-ons, modifications of existing
programmes. That is why the turbine technician programme that
we are looking at is something that we are optimistic we can roll
out pretty swiftly, together with EU skills and a number of other
players, because it is effectively taking an existing apprenticeship
and adding to that the renewables bit, adding to that working
at height. Somebody will have been working with high voltage and
now they have to be working with high voltage and at height. Working
at height is understood and working with high voltage is understood:
it is bringing those things together and making it one package.
Dr Edge: This Friday I shall be
going up to Middlesbrough to attend the opening of a new factory
in a company called JDR Cables which came from the oil and gas
sector. They were doing cable and now they have seen and gained
a lot of work in this new market of offshore wind and they are
building a new factory for that reason. That is a very good example
of people coming across from other sectors.
Q256 Mr Chaytor: Are we seeing something
of a geographical concentration here? In the way that in the past
Lancashire and Cumbria have been strong in the nuclear industry
and Aberdeen has been the centre of the oil industry, are there
now geographical locations that you would identify as increasingly
strong in the development of renewables?
Dr Edge: Yes. Steve can talk about
Lowestoft, which is a key one, we believe. We are seeing concentration
around the Humber, Teesside and especially in Northumberland,
around Blyth, where the New and Renewable Energy Centre is set
up.
Q257 Mr Chaytor: So this is good
news for the East Coast.
Dr Edge: Absolutely. Places like
Mostyn and Belfast are getting good work out of this sector as
well.
Mr Clarke: We are seeing a time
dynamic. We need to see those clusters now develop and proliferate
and seize market share, which if you like kick-starts the industry.
As a result, the North West will then start to develop, the Scottish
territorial waters will start to develop—as will Northern
Ireland.
Q258 Mr Chaytor: In the last few
days, the Chief Executive of EDF has finally admitted that he
cannot build a nuclear power station until the carbon price hits
€60 a tonne. What are the implications of that for the wind
industry? What do you need the carbon price to be at to make offshore
commercially viable?
Dr Edge: The carbon price will
underpin the power price, and that is always going to help. But
the more important thing for us is the Renewables Obligation.
If we have a high and stable carbon price, that helps the stability
in the power price part of our income, and that will help us.
Then you can crank down on what you need out of the Renewables
Obligation as time goes on. It is part of the mix, but it is not
as vital as it is for some other sectors.
Q259 Chairman: Given the very long
period over which investments have to pay a return, particularly
in offshore wind but in other renewables as well, is there enough
stability in the present incentives? Does the Renewables Obligation
provide enough long-term predictability and stability?
Dr Edge: We certainly welcome
the fact that it is a long-term mechanism, out to 2027 for sure,
and the Government is committed to taking it out to 2037 at least.
As time goes on and we approach what would be called "guaranteed
headroom", sometime before 2015, then the price of ROCs will
be pretty stable from then on. So long as there is a general agreement
that that is the mechanism and we are not going to mess with it—which
we are hopeful we can get from across the political spectrum—then
it should be something about which increasingly people will say,
"It has been there now for seven years. We expect it to be
there for as long as we need it."
Q260 Chairman: The implication of
what you have just said is that there is still an element of uncertainty
which it would be helpful to have removed. Is that right?
Dr Edge: A small residual amount.
Q261 Chairman: Is there anything
else the Government could do to provide a greater degree of stability
and certainty and predictability in order to encourage investment?
Dr Edge: It is the non-economic
factors. We would like to see progress in that space, particularly
in the planning field for onshore wind where it is inconsistent
and slow and expensive. We are seeing progress in the offshore
sector with new rounds from Crown Estate and the application of
the new Infrastructure Planning Commission. We see that that is
making some significant progress there. I think grid would be
the other one where we would like to see more help, more clarity
on the regulatory side, to make sure that we can deliver on time.
Q262 Chairman: Realistically, given
that this is quite a crowded country, whatever changes are made
to the planning system there are always going to be difficulties
about expanding onshore in the southern half of the UK. We have
a natural disadvantage compared with America in terms of onshore,
because of the crowded nature of the country, whereas we have
a natural advantage in that we have lots of sea right on the doorstep.
In terms of playing to our strengths, I take the point about the
grid connections and so on, and that clearly is relevant, but
I think it is optimistic, perhaps even naive, to think the planning
system can be changed so that onshore gets much easier. It is
always going to be difficult, is it not, in this country?
Dr Edge: I think it could be made
easier, more predictable and faster. These are things that could
happen. When you compare wind farms with other developments that
require environmental impact assessments, 70 per cent of those
other developments are decided within their statutory limit of
13 weeks. Only five per cent of wind farms are decided within
the statutory supposed limit of 16 weeks. We feel that you can
do better on that.
Q263 Chairman: You would rather there
were no—
Dr Edge: That would possibly be
the case, unless it was a stupid no that we had to appeal. There
are plenty of noes that are completely inconsistent with national
policy guidance or against planning officer recommendations—which
we think would be bad.
Q264 Chairman: Would feed-in tariffs
provide more certainty than the Renewables Obligation?
Dr Edge: I think it is a case
of the old Irish joke, of pulling up to the farmer and saying,
"How do you get to Tipperary?" and him saying, "Well,
I wouldn't start from here." We are where we are and to move
away from the Renewables Obligation would be too much of a change
and would impact market confidence. If you address these non-economic
barriers, then it becomes a much more effective system overall
and the difference in terms of cost-effectiveness is low. We agree
with government, with the analysis it did as part of the renewable
energy consultation last year, that that is in fact the right
way to go. Feed-in tariffs have many good advantages but I think
it would be a case of the perfect being the enemy of the good
if we changed horses now.
Mr Barsewisch: To support that
point from an industry point of view, that is extremely important.
The one thing that always upsets industry and undermines investment
decisions is changing the rules of the game, and even though feed-in
tariffs might have some advantages, everybody is used to the ROCs
now and that is a system that works.
Q265 Martin Horwood: Can I ask you
about some of those barriers that you have identified, and this
does not have to be just about wind. You talked about planning.
If you look at the example of Denmark, we seem to have had less
problems with communities opposing wind farms. In fact they have
generally been supportive of them, partly because of the different
attitude and the different way in which wind power is developed
from the more community-up, bottom-up approach. The industry does
seem always to blame the planning process and the fact that they
are not allowed to steamroller their way through local communities
more effectively, but do you not think that some of the fault
may lie with the way in which the industry is approached?
Dr Edge: I would respond to that
by saying that community ownership is not a panacea. If anything,
our experience in the UK is that community-owned schemes have
no easier ride and some have an even worse ride from the planning
system than projects brought forward by commercial developers.
It really is no panacea on that one. The only monetary benefit
that a community sees out of having a wind farm in its area is
a voluntary contribution from that developer, whereas if you go
to somewhere like Portugal or Spain, the local land property taxes
from that development go into the coffers of the local council.
In the UK, business rates go straight to the Treasury. If you
are in Spain, you can say, "That wind farm on that hill equals
that swimming pool" and that connection starts making you
think, "Actually, I want more of this." It becomes a
much more beneficial thing for people to have it in their area.
That would be a better change and then the planning system would
work in our favour.
Q266 Martin Horwood: What is your
judgment on the Partnerships for Renewables initiative? Has that
fulfilled its potential?
Dr Edge: I think it is still early
days for that one. They are still working with their public sector
partners to try to identify good sites and bring them forward.
I think it is too early to say.
Q267 Martin Horwood: Could we be
removing a barrier there if we gave more support to that?
Dr Edge: I do not think it needs
more support. I think it needs local authorities and other public
bodies to be encouraged to take advantage of what is already going
to be a decent deal if they took advantage of it.
Q268 Martin Horwood: You mentioned
the grid. Clearly infrastructure is an issue, is it not, especially
with offshore and perhaps with other renewables as well? Should
the Government be doing more to develop infrastructure for renewables?
Dr Edge: We were very pleased
with the report from the Electricity Networks Strategy Group recently
which identified the investment programme out to 2020 to support
the connection of 29,000 megawatts of wind and 4.4 gigawatts of
new nuclear with an investment programme of £4.7 billion
in the onshore grid. We thought that was an excellent report.
We are looking forward to more initiatives to make sure that is
delivered in that timeframe. In terms of the strategic development
grid, we think there has definitely been excellent progress. We
are a bit concerned about the progress of the Transmission Access
Review and the reform of access arrangements. We believe that
DECC will be invoking the powers that it has in the Energy Act
2008 to impose a solution there, since there has been a bit of
a breakdown in taking forward the solutions under the current
governance arrangements. Hopefully that will lead to something
coming in in the near future.
Q269 Martin Horwood: Mr Clarke, are
you pleased with the way infrastructure is progressing?
Mr Clarke: One of the biggest
things I can see a need for from our perspective—and we
are developing offshore wind energy projects throughout Europe
and not just in UK coastal waters—is more alignment of the
SuperGrid agenda, where we start to address the socio-political
barriers to delivering energy where it is required, irrespective
of where it is generated. I am pleased to see that a lot more
support is starting to gain momentum on that European-wide grid
connection agenda, but still more needs to be done both in terms
of investment (clarity on obligations and trading and so forth)
and then finally the technologies that will therefore pump into
those new, high voltage, direct current grids that are starting
to emerge. My plea would be more joined-up talks with Europe to
speed up that whole European SuperGrid agenda.
Q270 Martin Horwood: Are you disappointed
that the British Government is not explicitly supporting that
yet?
Mr Clarke: One can only be disappointed
about the pace of SuperGrid since it has been talked about now
for approaching ten years. So, yes, there is a degree of disappointment,
but, equally, we are really pleased it is getting on to more and
more agenda now.
Q271 Martin Horwood: As I understand
it, the Commission does support it now and various governments
do support it but ours is not signed up to it yet. Is that how
you understand it?
Dr Edge: It is not the only one
that has been expressing reservations. Germany has been a bit
of a laggard on this one as well. We think that is extremely disappointing.
We think that having that large-scale interconnection across the
North Sea will facilitate a much larger connection of wind, both
on and offshore, in Europe as a whole but the UK in particular,
so we would like to see government putting much more priority
on this initiative.
Q272 Martin Horwood: Do you think
there is a role for a large-scale public works programme in any
of this? Would that be relevant to the infrastructure?
Dr Edge: More capital would be
useful from whatever source it came, whether it is public money
or private EIB is public money as well to a certain extent.
Mr Clarke: I cannot help thinking
it needs to be both public and private, to give that sort of industry
focus as well, not just purely public.
Q273 Chairman: Why did Vestas close
its blade manufacturing plant in the Isle of Wight?
Mr Clarke: I could offer one perspective,
and that is that it comes down to a certain degree to do with
product. Vestas's products in the past have been extremely successful
onshore; they have been less successful offshore. Their order
book for offshore turbines has reflected that.
Mr Edge: I would add to that that
all the production pretty much of that plant was being exported
to the US and that market went through the floor this year as
a result of the economic crisis. It is also a plant that has been
there for quite some time. It was there for historical reasons.
Getting large-scale, 45-metre blades in and out of that plant
was quite challenging. If you were to go any bigger, they would
have to have some very significant investments in that plant,
including access—which they felt was not really justified
by the order book that they have for the UK.
Q274 Chairman: From your earlier
answers I think you did say that there was the potential for more
manufacturing to take place in the UK, particularly if offshore
expands in the way you expect. Apart from the creation of a hub
that you talked about between the Humber and the Tay—there
would seem to be a very wide range of choices there—are
there any actions the Government should take if they want to try
to attract manufacturers to the UK in the face of the possibility
they might go to other parts of Europe?
Mr Clarke: One of the most successful
examples is where, when Henning and I set up REpower UK, it was
through collaboration: a German existing technology company partnering
with a longstanding British engineering firm, Peter Brotherhood
Ltd. The trade and investment programmes which start to broker
partnerships between the existing supply chain leaders and the
UK capacity that could ramp up, I think that sort of activity
is key. It is always easier for somebody to get in through partnership
than it is to be a completely new entrant trying to win orders,
so anything on the trade and investment front I think would be
most welcome. Then, in the example we discussed earlier, if a
cluster is set up in a specific location it is how you then generate
the corridors of supply chain within the UK to those clusters,
from the manufacturing centres like the Midlands through to the
East Coastal clusters. Any focus that can be done there on transport,
logistics, knowledge transfer would be extremely welcome.
Dr Edge: Also, what I call the
intellectual infrastructure is incredibly important here. That
is the research, in terms of places like the New and Renewable
Energy Centre where they do testing, the skills base, the colleges
and the universities. That needs to be very much an integrated
part of this plan to bring manufacturing to the UK.
Q275 Mr Chaytor: Earlier you were
quite relaxed about the issue of skills shortages. Henning, you
said that the skills were there in other industries and it was
a question of simply building on those. Is there an issue in Britain
about leadership and skills? Do we need to do more specifically,
other than developing new skills in renewable industries? How
do we compare with Germany, Denmark and Spain, for example?
Mr Barsewisch: Maybe just to clarify
my remarks, in that sense I am relaxed that the potential is there.
It is an enormous mountain to climb. I make no bones about it.
This will take a lot of very significant work in order to get
there, to really get those people and to be able to train them
up and to qualify. In terms of leadership, the National Skills
Academy for Power is being set up. We see it as one of the key
elements and a key driver. We fundamentally believe that skills
development needs to be demand-led. Employers need to say, "This
is what we want," and we need to be involved in the detail
of setting up those programmes; however the Government should
still have an overall view of where things are happening from
a strategic perspective. The Power Academy is very important in
that context, and together with the work that the BWEA is doing
will hopefully provide some significant leadership in getting
that on board. The BWEA is working quite hard on it as well. At
this annual trade conference that we are organising we will be
hosting a skills summit, and we hope to get industry in that,
the sector skills council and a number of other key players in
the skills landscape, but also, importantly, the Government to
back a bundle of measures that we are putting in place, including
an apprenticeship framework for turbine technicians. So there
is some joint leadership, but fundamentally it needs to be industry
and demand-led.
Q276 Mr Chaytor: You have the structure
there of the skills academies, you have the process which is the
expansion of apprenticeships. Is there anything else that is needed
to complete the package?
Mr Clarke: I really think there
is one massive aspect and it touches on both of those. For apprenticeships
to be most successful they need a vocational aspect to them, where
individuals go through a certain amount of generic training and
then they move on to the production lines and get their product
specific training, their hands-on training. Because we do not
yet have the UK supply chain, there is a lack of availability
of internships or hands-on production roles to complete the apprenticeships.
That is very acute if you consider that the apprenticeship programmes
are four years and we cannot see wind energy engineers coming
out of apprenticeships and taking up jobs until they are 21. Somehow
we need to overcome that valley, where we have generic training
and then hands-on training within supply chain companies that
then deliver 21-year olds ready to take up the job. There is a
huge opportunity to diversify skilled people redundant from jobs,
for example, that are already over the 21-years old age barrier,
but we fundamentally need more work-based placements for individuals
to complete their training.
Q277 Mr Chaytor: Are there enough
companies who are willing to offer placements that are coming
from the companies?
Mr Clarke: Not yet. This is where
the supply chain is absolutely key. The clusters are absolutely
key. The growing of small companies into bigger ones is absolutely
key.
Dr Edge: I think Steve is being
a little bit bashful about some of the initiatives that Mainstream
are taking with NaREC (New & Renewable Energy Centre in Blyth)
in terms of setting up facilities with Northumberland College
to train technicians. I think we need to see much more investment
in training centres, including large equipment, like nacelles,
that people can work on to train on, and towers where they can
work at height, and that is quite expensive.
Q278 Chairman: Are there any other
burning points you wanted to make while you are here?
Dr Edge: Those are our three key
messages really.
Chairman: Okay. Thank you very much for
coming in. It has been a very helpful session for us. Thank you.
16 http://www.bwea.com/pdf/publications/Bain%20Brief-Wind%20Energy%202008-FINAL.pdf
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