Examination of Witnesses (Questions 234-239)
Dr Gordon Edge and Ms Maria McCaffery
12 MAY 2008
Q234Chairman: Thank you very much indeed for
coming. Our last witnesses this afternoon are from the British
Wind Energy Association. I wonder if you would be kind enough
to introduce yourselves and if you have an opening statement or
opening comments, it would be much appreciated. Then, with our
somewhat depleted Committee, I am not going to pursue the questions
we have circulated in order but if we have not in our 30 minutes
covered any of the issues you particularly like to get on the
record, please raise them. As you know, we are trying to produce
a report to the House of Lords in order to give our views prior
to British Ministers agreeing the target which has already been
discussed of 15% of energy being generated from renewables. Over
to you.
Ms McCaffery: Thank you very much, my
Lord Chairman. I am Maria McCaffery, I am chief executive of the
BWEA. I have been in post for a fraction under two years. I am
not from the renewable energy industry, my background is in national
membership organisations and predominantly international business
support, with close links with Government. So it has been something
of a very steep learning curve for me over the last two years.
Dr Edge: My name is Dr Gordon Edge, I
am the Director of Economics and Markets at BWEA. I tend to be
providing the technical back-up for Maria who has a lack of background
in the sector.
Ms McCaffery: I have prepared a short,
comfortably less than five minute, statement and I have copies
for the shorthand writer. In a nutshell, BWEA represents the wind,
wave and tidal energy sectors in the UK. We are exclusively concerned
with electrical power generation. As you recognise, the European
target includes all primary energy but we are only concerned with
electrical power and specifically, at least for the time being,
in wind, wave and tidal. Our members view the European Union's
15% renewable energy target as a tremendous opportunity; there
is a lot of positivism about the target. Over the next 12 years,
up to 2020, approximately a third—it varies from 30 to 33%
but we will just call it a third—of the total capacity of
our electrical generating plant will retire and to fill that gap
we have two basic choices. We can increase our dependency on imported
fossil fuels, especially gas, which will subject us to increased
vulnerability in supply and volatility of price. Alternatively,
we can persuade the Government to stand four-square behind its
support for the renewable energy sector, and assist us in harvesting
the tremendous natural resources we have in the wind, wave and
tidal resources around the UK. We have coined a phrase recently,
we refer to offshore wind as the "new North Sea oil".
In that context we believe it has the potential to attract over
£65 billion of private investment and at the same time generate
at least 100,000 new, what we now term, green collar jobs. At
the same time it will reduce our dependency on imported fossil
fuels, reduce our carbon dioxide emissions and provide a sustainable
source of electrical power at a fixed price. To exploit this tremendous
potential we believe we need four things. We need the resource,
the technology, the capital and the political will. We can tick
the boxes of the first three—we have an enviable resource;
the technology is very highly developed as far as wind is concerned,
still emerging on the wave and tidal front and so we are expecting
a later contribution from those technologies; and there does not
appear to be any shortage of capital, in fact we have attracted
tremendous interest from global investment markets here in the
UK. On the political will front, I am pleased to say that there
are encouraging signs that positive political will is developing.
It does appear to have been a long time coming but, as the national
representative body for these leading renewable technologies and
for the stakeholders, we are imploring Government and the opposition
parties to embrace the opportunities of the domestic and European
targets and to work with us to overcome the remaining obstacles
to delivery.
Chairman: I will ask Lord James to start. Lord James,
Lord Powell and I were members of the Committee who have just
been in the North Sea with E.ON looking at the wind farm of 30
turbines operating 2½ kilometres off Great Yarmouth, and
we were much impressed by what we saw but Lord James will outline
some of the problems we could identify.
Q235 Lord James of Blackheath: You
speak with some enthusiasm and apparent comfort about the levels
of investment which are available, but one of the messages we
brought back from Friday's trip to the wind farm is that this
is not translating into the creation of the necessary supply chain
equipment required to develop more rapidly the growth of more
wind farms. Could you suggest how that capital might be inspired
to move more quickly in creating that infrastructure?
Ms McCaffery: It is perfectly true that
one of our challenges at the moment is in the supply chain but
we regard this as very much a chicken and egg situation. We believe
if the strong message is sustained about the UK being open for
business for renewable energy, the supply chain will follow. The
current members of the supply chain, turbine and component manufacturers,
are expanding both in terms of the size of the machine they are
producing and in their capacity to step up to the opportunities,
particularly in offshore and particularly in the UK. Naturally
we want to attract as much of that as possible into the UK but
there is a little bit of a stand-off position at the moment waiting
to see what is actually going to happen. There is a dialogue underway
at the moment with a Dutch-based manufacturer talking to a British-based
gear box manufacturer who are exploring four possible locations
for foreign direct investment, two of them in the UK, and looking
to explore that dialogue and encourage participants from British
manufacturers to step up to the plate and exploit these opportunities.
Q236 Lord James of Blackheath: At
a comparable stage in the development of the North Sea, say about
1982, there had been a huge proliferation of Scottish companies
created in and around Aberdeen and Edinburgh and as a matter of
fact there would be five or six gear box manufacturers in Scotland
by this time, if it was comparable technology required. Nothing
like that has happened in England. Even allowing for the fact
that the Scots are fanatical patriots anyway and throw money at
anything they think is good for Scotland, what is missing here
which has not achieved the same?
Dr Edge: I think it is not fair to say
that we are in the same place as North Sea oil was in 1982. I
think it is much fairer to say we are where North Sea oil was
in the early 1970s, a much, much earlier stage of development,
and we have not seen the very strong pipeline of work which would
encourage people to set up manufacturing. What manufacturing companies
need is a strong consistent flow of orders and that is precisely
not what they have had out of the UK for the reasons of planning.
Q237 Lord James of Blackheath: It
was notable at the meetings on Friday at Scroby Sands, that the
only gear box they wanted to consider is the Siemens one and they
were not interested in anything else at all. Given that attitude,
that mindset, how are you going to provide adequate stimulation
for a British manufacturing source to come up to it?
Dr Edge: There are a number of British
companies who might be about to enter that market. There are some
barriers in that you have to go through quite a serious qualification
procedure in order to prove that you are producing gear boxes
of the highest quality, which is what we need, plus we are talking
about Danish and German companies with established supply chains
with established suppliers, so you have to break into new company
supply chains. I think that is where offshore becomes interesting
because it is a whole new industry and it is there to be created
and that is right at the start.
Q238 Lord James of Blackheath: You
say we are in the early 1970s compared to the 1980s, I think if
we are in the early 1970s then we are way behind the timetable
required to get up to the necessary production level here. How
do you react to that and what can be done to catch up?
Dr Edge: We can learn very much from
the experience of the oil and gas areas and transfer a lot of
those technologies. Maybe I was mischaracterising the state of
play, but we are certainly at a place where we need Government
to be making it much, much more certain that this is going to
happen. There is still an element of doubt there and we need to
be absolutely clear this is what we are going to do and then the
companies can invest in it.
Q239 Lord Powell of Bayswater: I
am glad to say we were on the North Sea and not in it, which would
have been rather uncomfortable. Perhaps just three points, not
unrelated to the ones Lord James has already asked. First of all,
your figure of £65 billion, would you like to explain how
you reached that? It is somewhat larger than China's sovereign
wealth fund and it is about 12 times Saudi Arabia's sovereign
wealth fund, so it is a pretty sporting figure. How do you arrive
at it?
Dr Edge: That is looking at offshore
wind at about 20 gigawatts, which is in the region of £2
million per megawatt, and onshore wind of 13 gigawatts at about
1. That gets you most of the way there, then there is investment
in manufacturing to make that happen as well.
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