Address to the RenewablesUK Offshore Wind Conference
Secretary of State Amber Rudd's speech at the RenewablesUK Offshore Wind Conference.
Ladies and Gentlemen, I want to start by taking you back 15 years to the year 2000, the first year of the new millennium.
It was the year the Spice Girls broke up. The year Chris Evans stopped making TFI Friday. It was the year we partied to see in the millennium.
But what is the significance of this milestone year for us today?
The offshore wind success story
Well it’s this.
At the turn of the century, do you know how much UK electricity offshore wind was providing?
None. None what so ever.
Then, at the end of 2000, off the coast of Northumberland, the Blyth pilot project got up and running.
The UK’s first offshore wind farm. With just two turbines, the largest turbines in the world at the time, producing just 4MW of electricity.
And from small seeds, orchards grow.
The last 15 years has seen a phenomenal growth in British offshore wind.
By the end of this year we are expecting 30 offshore wind farm developments to be contributing to Britain’s energy security.
Almost 1,500 turbines with the capacity to provide over 5GW of home produced, clean electricity - enough to power the equivalent of almost 4 million homes.
In the last 5 years alone, the amount of electricity being produced from offshore wind has more than quadrupled.
In the same period we have seen around £10bn of private sector investment.
And the industry now supports around 14,000 jobs.
So you represent one of the 21st century industrial success stories.
You – we - are world leaders.
Pioneers. Innovators. The best business minds working with the best engineers, within one of the world’s strongest policy and financial frameworks.
And working together we now have the most operational offshore wind here in UK waters than anywhere else in the world.
And that is where 21st century industrial Britain should be – leading the world.
As our friends over at the Department for Business would say - Britain is Great.
So today I want to talk about how we build on that success.
First – deployment and investment - keeping up the pace we have set to maintain our world leading status.
Second – costs - bringing them down so offshore wind becomes more and more competitive, requiring less and less public support, so the future is sustainable and subsidy free.
And third – economic benefit - making sure that this success delivers economic benefits throughout the UK - into local host communities, through the supply chain to the wider country.
But first, let me remind you all why we are doing all this.
Energy security, global security
Britain is upgrading its energy infrastructure.
To replace power stations reaching the end of their natural lives and to replace them with a more diverse, more secure, lower carbon mix.
The aim is to keep the lights on, and decarbonise on the most cost effective trajectory possible, supporting a diverse mix of low carbon energy.
Keeping the lights on is non-negotiable. Our modern technological society cannot function without power. And a diverse mix provides the most resilient system.
Tackling climate change is also non-negotiable.
The very things that make the British Isles the right place to exploit offshore renewables; makes us vulnerable to climate change too.
Surrounded on all sides by the sea, with an advanced, open, trade-based economy.
The physical manifestations of climate change in the future - such as increased flooding - and the economic manifestations - such as resource shortages, and trade wars – both will hit us and hit us increasingly hard if we don’t limit climate change.
Going for clean energy isn’t fluffy or indulgent: it makes cold, hard economic sense.
And it makes cold hard business sense: clean energy is a boom market – bringing jobs and investment and growth.
But it won’t make economic sense if we break the bank doing it – or lose the support of the public.
That is why it is imperative we control the costs of decarbonisation and limit the impact on people’s bills.
Decarbonisation must be affordable, sensitive to the impact it has on people’s pockets, sensitive to wider economic circumstances, and sensitive to the local communities where infrastructure is built.
We have a long term plan, underpinned by carbon budgets, to meet our responsibilities. It’s all set out in the Climate Change Act.
And this Government is committed to helping see it through.
We have a plan for Electricity Market Reform, set under the last Government, that will help the cost effective decarbonisation of the power sector, attracting the private sector investment we need.
That is of course underpinned by the Levy Control Framework that trebled the support available for low-carbon technology.
That pot is supporting a mixture of low-carbon technologies because both decarbonisation and energy security is best achieved through a diverse energy mix – not over-reliance on one technology or source.
And the EMR delivery plan sets out what we expect that mix to include by 2020 to meet our objective of generating 30% of electricity from renewables.
We already have enough onshore wind in the pipeline to hit the middle of the range we need for that technology.
Without action we are likely to deploy beyond this range.
We could end up with more onshore wind projects than we can afford, which would lead to either higher bills for consumers, or other renewable technologies, such as offshore wind, losing out on support.
We need to continue investing in less mature technologies so that they realise their promise, just as onshore wind has done.
It is therefore appropriate to curtail further subsidised deployment of onshore wind, balancing the interests of onshore developers with those of bill payers, and developers of other technologies.
So what is the plan for the future deployment of offshore wind?
Deployment and investment
The EMR Delivery plan set out a range of 8-15GW reflecting technology and cost uncertainties at the time of publication.
We expect to see around 10GW by 2020, much more than any country in the world.
And we are achieving real progress towards that.
Just last week we saw the opening of Gwynt-y-Mor, the second largest operating offshore wind farm in the world.
A £2bn project built by RWE, with the capacity to produce enough electricity to power the equivalent of around 400,000 homes.
Vattenfall’s Kentish Flats Extension will deliver an extra 15 turbines, capable of generating enough electricity to power the equivalent of 35,000 homes.
And DONG’s Westermost Rough also opens next week, the first windfarm anywhere to use the next generation 6MW turbine on a large scale.
The UK already has over 5GW operational.
Over 4GW has already secured support through Contracts for Difference.
And there is a strong pipeline for possible future projects.
All this means I am confident that we will double installed capacity in the next 5 years.
I know that for the sector to grow, developers and supply chain and investors need as much predictability as possible.
That is why Contracts for Difference were introduced.
The last CfD auction round was a great success for offshore wind with - East Anglia ONE and Neart na Gaoithe both securing contracts.
As you would expect, I am considering plans for the next CFD round and will set those out in due course.
I am determined that our low-carbon future remains on a stable long-term footing and therefore I am determined to ensure that the financial support is sustainable before proceeding.
Let us be clear. You and I know there is no bottomless pit of bill payer support for low carbon.
We have a responsibility to keep costs to consumers down.
Because only by keeping costs down will we maintain public support for the action we are taking to bring down carbon emissions and combat climate change.
And that means two things:
First, Government support must help technologies eventually stand on their own two feet, not to encourage a permanent reliance on subsidy. Cost must come down, subsidies must be progressively reduced.
Second, the public, and particularly host communities, must see the benefits of the moral and financial support they are providing the industry.
This means that the commitments being made, on community benefits and on UK jobs and UK content in supply chain plans, must be met.
Our decision to proceed with a major expansion of offshore wind in this decade is based on a strategy of investing early in emerging low carbon technologies where the UK has real potential.
But these levels of subsidy cannot be sustained indefinitely, particularly if we foresee further deployment in the 2020s.
It is provided now explicitly in order to enable industry to drive down costs, invest and innovate so that offshore wind is well positioned to expand in the 2020s and beyond.
That expansion must be on the basis of rapidly reducing costs.
I am very pleased that the industry has been straining every sinew to meet this challenge.
The Cost Reduction Monitoring Framework shows that costs have already fallen by over 10% since 2011, and more quickly than expected.
Reaching £100 per megawatt hour is definitely achievable in the near future.
Every pound saved puts offshore wind in a strong position to contribute even further to our decarbonisation objectives in the next decade.
And every pound that is spent within the UK economy – creating jobs, strengthening the supply chain – provides added incentive for the Government and the public to back offshore wind.
Home grown capacity is growing.
Siemens blade factory in Hull, 1000 jobs.
Mitsubishi Vestas Offshore Wind blade factory on the Isle of Wight, 200 jobs
Offshore Structures (Britain)’s foundations factory in Teesside, up to 350 jobs.
These are real and positive signs of an industry maturing and delivering real benefits to UK communities – regenerating, rejuvenating, reskilling.
Just after I have finished my speech I understand that Dong Energy will be signing an agreement with JDR Cable Systems for inter array cable supply.
I am not the first Secretary of State to celebrate in JDR winning a contract, but I am delighted they continue to be a successful example of the quality and cost which UK based companies can deliver.
And we want to see this development of the UK manufacturing base continue. In particular, we want to see investment into priority areas like towers, jackets and cables.
We have high expectations for the delivery of UK content targets in supply chain plans.
I welcome Scottish Power Renewables’ intention to deliver at least 50% UK content for their East Anglia ONE project.
And as the UK industry develops, the opportunity to export goods and skills grows too.
In 2013/14, the UK Government supported less than a million pounds worth of UK exports in offshore wind.
Last year that had leapt to £90m.
The UK may be the No.1 country for offshore wind deployment, but we are not alone in this journey.
Overseas markets are becoming increasingly attractive.
Experienced British companies are highly sought after.
Outside the UK, over 15GW of offshore wind projects are likely to be operating in Europe by 2020.
This represents a huge commercial opportunity on our doorstep.
£40bn in component supply and construction contracts will be made available through competitive tender procedures.
My Department and I are determined to back you.
And our colleagues at UKTI are geared up to help UK companies bid successfully. So I urge UK companies to check out their new ‘Passport to Europe’ guide so you can access the Government support available to help you export successfully.
And the opportunity is not just European, it is global.
The Chinese market is potentially huge.
Last year the Government supported £12m in offshore wind exports to China.
And we expect that to grow significantly.
So ladies and gentlemen, this is the challenge.
To maintain the UK’s leading position.
To reduce costs so support can go further, and offshore wind can begin to compete on a more level playing field, cementing its long-term future in the energy mix.
To spread the economic benefits ashore through the supply chain, continuing to build home-grown capability and resource.
And to project this success outward into the growing global market.
Offshore wind is a significant economic opportunity for the UK.
But it is also an essential part of our plans for delivering energy security and decarbonisation.
And as we approach the climate change talks in Paris later this year, thanks to you, the UK’s offshore wind success will be a feather I can wear proudly in my cap.