Inward Investment in Wales

Written evidence submitted by E.ON

Introduction

E.ON is one of the UK’s leading power and gas companies – generating electricity, and retailing power and gas – and is part of the E.ON group, one of the world's largest investor-owned power and gas companies. We employ around 12,000 people in the UK and more than 85,000 worldwide.

Through our global Climate and Renewables business we are one of the leading green generators in the UK, with sites located from Cambridgeshire to Kintyre. Our current operational sites include three offshore wind farms, Scotland’s first biomass plant at Lockerbie, a wave energy convertor and 18 onshore wind farms. We also have some 1500MW of renewable generation in development. Our comments on this inquiry are from the perspective of this area of our business and the potential we see for investing in renewable energy in Wales.

Across our business our footprint in Wales includes a gas fired power station at Connah’s Quay in North East Wales, involvement in energy and carbon saving programmes, including for example a new low carbon heating system to serve off the grid properties in Ceredigion, mid Wales and our Community Energy Saving Programme (CESP) scheme at Tai Calon in South Wales. We are also partners, with RWE, in Horizon Nuclear Power which is developing plans for a new nuclear power station at Wylfa on the Isle of Anglesey. However, in terms of investment in renewable energy we currently have just one joint venture project in Wales at Rhyd-y-Groes.

Investing in renewable energy in Wales

Our primary concern when considering whether to invest in renewable energy in Wales is the lack of ambition shown by the Welsh Assembly Government (WAG), given the significant renewable resources which are available. The identification of the TAN-8 areas for development led to winners and losers and explains our small renewable footprint in Wales. For those developers unsuccessful in securing an area as part of TAN-8 there are now limited options for investment in wind projects in Wales.

We believe that there is much potential and that, if there are suitable projects that broadly meet the criteria used for selecting TAN-8 site but fall outside the TAN-8 areas, they should be considered favourably as part of an important contribution to meeting carbon emission and renewable energy targets across the UK and, importantly for Wales, as an important economic driver for local towns and communities. We also recognise the need to preserve the Welsh countryside and it is important that this is balanced with the desire for economic growth.

There are other signs of growth within Wales in the skills and infrastructure required – highlighted recently by the opening of the Mabey Bridge wind turbine factory in Chepstow – and this is positive when looking at inward investment. However, in turn we believe there needs to be a step change in the WAG ambition for renewable energy.

In contrast, the investment opportunities for renewables in Scotland are much clearer. Whilst direct comparisons are not always helpful it is worth noting that the Scottish Government has adopted challenging targets and is very much "open for business" for new renewable energy developments. We were recently selected by the Forestry Commission Scotland as a development partner for new renewable energy projects.

Scotland is a key area of focus for us and this announcement added to our existing Scottish renewables portfolio.

Investment in Grid infrastructure

When looking at where to invest in the UK we also have to be mindful of grid connections and the subsequent impact on the economics of a project. If generation has to be reduced because the power cannot be transmitted across the grid system, this will damage the economics of renewable investments. Given that Wales is a net exporter of electricity from all sources (mostly coal, gas and nuclear) to the rest of the UK it is necessary to transport some of the energy generated over significant distances to reach the point of demand. Significant investment in the grid infrastructure is required in Wales and adjoining parts of England to enable the full potential of renewables and other forms of low carbon generation to be realised.

This points to the importance of an open and efficient planning system to ensure speedy decisions can be taken about the infrastructure required to support renewable energy projects. We have welcomed the steps taken by the UK Government to improve the planning system and hope this continues.

However, there is a separate layer of approvals for electricity generation schemes of 50MW and above (defined as nationally significant infrastructure projects under the Planning Act 2008) when consenting associated works to a project and these separate decisions may fall under the jurisdiction of the local authority. This can lead to further delays to a project and could act as a deterrent to an investment decision in the first place.

We would recommend that investment in renewable energy projects in Wales would be greatly improved if all the decision makers worked together r to ensure an integrated approach which delivers timely decisions.

Conclusion

Wales has huge potential as a location for renewable energy projects. With greater ambition from the WAG and more attention paid to the infrastructure and grid challenges, Wales could see significant inward investment in renewable energy from a wider group of developers and companies.

June 2011