Speech by Secretary of State Edward Davey to the Tidal Energy Summit.
It’s great to be here today at your annual Tidal Energy Summit. It’s my first time – and despite the election, I hope it won’t be my last.
The reason for that is because I’m passionate about the potential of tidal technologies which I think are vital for our green, low carbon future.
We only have a half an hour session together, so I want to keep my remarks brief to ensure as much time for Q&A as possible.
Because I know there are issues that you will want to explore.
But my main message to you today I hope is a positive one.
The UK is the world’s foremost centre for tidal energy development.
You are the world’s foremost experts, pioneers seeking to exploit what is one of the last untapped renewable resources.
And this Government has been determined to maintain that world leading position.
With any new technology, there will be – there have been – setbacks along the way – and no doubt we’ll talk recent ones later on.
But I think they should only make us even more determined to work together to bring this industry to commercial realisation.
The tidal opportunity
It is no accident that Britain is at the cutting edge of tidal power – and on the verge of turning tidal’s potential into commercial reality.
Yes, our unique geography makes marine energy exploration particularly viable.
But it is because successive Governments have believed in tidal power that it has so many opportunities.
We have put in place arguably the strongest policy framework of support anywhere in the world.
And it is this framework that attracts the best scientific minds, the best engineers working in the field.
And has attracted at least some of the capital investment needed.
Why have we done this?
Because tidal power has the potential to contribute significantly to Britain’s energy security and provide clean energy and predictable clean energy, as part of a diverse mix.
And we’re doing it because tidal power could be one of the cornerstones of the global low-carbon economy that we need to develop if we are to tackle the growing threat of climate change.
So if we can bring this industry to commercial realisation, it will be a gift to world.
We’re not speaking about pure altruism.
Tackling climate change is a necessity not an option.
The very attributes that make the British Isles viable for exploiting marine energy;
These outward looking, technologically advanced island trading nations;
Also mean that we as islands will be exposed to impacts of climate change.
The physical manifestations such as flooding.
And the economic manifestations – resource shortages, interrupted trade.
So it is not altruistic to be green: it makes cold, hard economic sense.
Of course, currently marine energy makes only a tiny contribution to global energy needs.
But the International Energy Agency estimates that generation could increase from around 05.TWhs now to 66 TWhs by 2040 – with the majority of that being generated within the European Union.
The Marine Energy Programme Board estimated this year that by 2035 the UK marine energy industry could be worth over £6bn a year, employing around 20,000 people supplying both domestic and global markets.
But in realising such goals, despite all the hard work to date, we are of course at an early stage in this journey.
Today we have viable full scale prototypes which, partly thanks to Government R&D support, have been proven in real marine conditions.
Some are now ready for demonstration in small arrays – the necessary next step for commercialisation.
I was particularly pleased that Atlantis was able to launch their MeyGen project in September.
The world’s first tidal array.
The product of a unique partnership between government and industry.
And of course the Swansea Bay tidal lagoon project is at pre-application stage in the consenting process.
Again, this would be a world first, should the project be successful.
And given the potential for a significant number of tidal lagoons across the British Isles, this could be another significant breakthrough.
So there is good news on both counts for the development of tidal stream and tidal range.
But as you well know, there is a flip side to this.
Despite Government support – for instance through the Marine Energy Array Demonstrator Fund – it remains difficult to attract risk averse funders.
We have seen planned array projects which have been shelved or pushed to the right.
And last week’s sad news about Pelamis Wave Power filing for administration shows that risk aversion has real, and potentially devastating, effects on companies, their employees and families.
This is always hugely disappointing for all concerned – but we need to secure all the lessons and know-how the fantastic team at Pelamis developed.
And of course, we’re all equally disappointed about Siemens’ decision not to take forward MCT.
Having visited MCT myself, I had felt that the deployment of more of their tidal stream devices was just a matter of time.
MCT had gathered the most operational experience of tidal stream in the whole industry.
So I sincerely hope Siemens will do their utmost to ensure that MCT’s, expertise and know-how are appropriately managed and transferred so that they can continue to benefit this industry.
So such recent developments are – if we ever needed them – stark reminders of how fragile and young the industry is.
And they make even more important the challenge we face - what can we do to make sure that the future of the tidal industry in the UK is a secure as can be?
Framework for support
Let me start with what we already have put in place, because we should not underestimate the strength of the support that already exists – and that continues to exist.
You’ll know our policy framework overall for low carbon energy.
The 2013 Energy Act represents the biggest revolution in our energy sector since privatisation in the 1990s.
It establishes the world’s first low-carbon electricity market.
And the most comprehensive long-term legal and financial framework for cost-effective energy decarbonisation anywhere in the world.
Embedded in that Energy Act is the recognition that we need to develop and support the new, less-mature renewables – like tidal, like wave - just as we are encouraging the cost reduction in the more mature sectors like wind and solar.
What this means is that support for tidal energy is written into the fabric of law.
The fabric of how we support the energy sector.
I hope you will see that this will provide your industry with more certainty and stability than what has gone before.
All the major parties support the Contracts for Difference system that will eventually replace the Renewables Obligation.
So this is a framework that we’ve built to last, that investors can rely on, and that allows the industry to plan ahead.
We are on target to run the first auction for Contracts for Difference in a few weeks’ time.
While there are no bids from the tidal industry in the current allocation round, I’m keen to see future bids.
That’s why I ring-fenced a protected allocation of contracts worth 100MW up to 2019, for the industry.
This is guaranteed if people come forward. And it’s not a limit or cap!
And we continue to believe that post-2020 marine energy will have a much bigger role to play in helping us meet our low-carbon ambition.
Second – as well as this policy framework, we’ve put in place at least some of the infrastructure the industry wanted.
Because to bring tidal to commercial viability the right infrastructure has to be in place.
And the Government wants to support that journey.
Along with colleagues in Scottish Government, the Orkneys Council and others we funded the world’s first wave and tidal energy testing centre in the European Marine Energy Centre, in Orkney. EMEC is still a globally unique facility.
Alongside that we created an onshore tidal energy drive train testing rig at NaREC, now the Offshore Renewables Catapult.
Of course, I know that grid availability remains a concern.
That is why we have identified this as a priority for work – for example, in the Scottish Islands, as part of our “Framework for the Islands” agreed between the UK Government and the three Scottish islands councils.
And with the policy framework and infrastructure there’s also the key third ingredient, finance.
This is an area which I know that the tidal sector is grappling with.
You are on the verge of commercialisation and I believe that we have put in place a market framework which should support this.
But continually bidding for and securing Government finance as everyone knows will not be a sustainable model in the long-term.
Only by attracting private sector capital into projects can we realise the potential of tidal energy.
My officials and others from around Government, including the Green Investment Bank, are working with the sector to consider what can be done to prepare the tidal sector for commercialisation.
Two weeks ago Renewable UK hosted the second of a series of tidal sector seminars bringing the key sector players together with investors to discuss how to help the sector prepare for that move to commercial deployment – and commercial investment.
We will continue to work with you to help realise this ambition.
In the meantime, we have put in place a market support infrastructure which is designed to act as a runway for projects.
Through the Renewable Obligation Scheme, marine energy gets over twice the support rate of any other renewable technology.
Tidal stream will attract a strike price of £305 per MWh – significantly more than any other technology – and benefits (along with wave) from a 100MW reserved CfD allocation.
Marine energy was not the only sector to claim an imperative need for such a minimum allocation – but it is the only technology to benefit from one!
Over the current spending review £80m of public funds have been available for innovation from the UK and Scottish Governments.
Of course, just like the other renewables technology, the key to tidal’s future will be increasing cost-effectiveness over time, which is why in 2012 we created the Technology Innovation Needs Assessment which sets the groundwork for cost-reduction.
This is being updated now and should be ready in the Spring.
So over this Spending Review Period to 2016 the grant and support structure is in place – and guaranteed.
And the stated ambition beyond that is also clear.
Now I know that you would like nothing more than to have fixed funding beyond the current Spending Review period.
But of course there will be a general election between now and the next Comprehensive Spending Review.
And as much as I would like to provide that additional certainty, I cannot.
But I can say that any Government that my party the Liberal Democrats are part of would ensure the tidal sector is increasingly supported.
We have pledged already this Autumn, in our pre-manifesto process, to lift innovation and research funding in four key low-carbon areas – Energy Storage, CCS, Low Emissions Vehicle and Tidal Power.
This includes my party’s support for at least one tidal lagoon project through Contracts for Difference, subject to, of course, the project meeting planning, environmental, value for money and commercial requirements.
But the bottom line is this.
Tidal power is part of the UK’s future.
The 2020s will see tidal power contributing to the UKs energy security – and to our economic growth.
But the challenge for the industry over the next five years remains one of moving from demonstration to commercial viability.
I believe many if not all the building blocks are in place. But if I am wrong in that, I want you to tell me, I want you to tell my officials. Every time I meet colleagues in your industry, my constant refrain has been – what else should we be doing?
For in this country we have a proven track record of bringing technology to maturity.
And proving its worth.
Through your vital low carbon industry, once again Britain is the focus for global development and we should not let that moment pass.
So perhaps I should leave at least this part of my address to our greatest writer.
And I’m sorry if you get this at every tidal conference!
“There is a tide in the affairs of men, which taken at the flood, leads on to fortune.
On such a full sea are we now afloat. And we must take the current when it serves.”