Speech

Electronic Systems in Energy

Michael Moore, Scotland's Secretary of State, delivers a Keynote address at the NMI conference 'Electronic Systems in Energy'.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Michael Moore

We are entering a very exciting time for your industry and it is great to look around the room at those who serve with great distinction across your sector. Today’s event is very timely. With the renewables revolution well underway, we are entering a truly exciting time for the industry here in Scotland. This presents huge opportunities for the electronics sector to capitalise on this growth and explore how you can underpin our country’s energy supply and demand challenges.

Of course the backdrop to our discussion is the critical state of the world economy. This is a time of real international uncertainty and instability. And the United Kingdom is not immune to what is going on its biggest export markets. But within this difficult context, there are still opportunities to be seized.

Global energy challenges

So why are renewables proving to be such a success story? Put simply, the time is right. Global energy challenges are huge. Declining domestic production has made us increasingly exposed to risks from rising global demand. The UK became a net importer of gas in 2004. And a net importer of oil in 2006. The costs of this dependency on fossil fuels are felt in homes right across the country. This winter families faced gas prices around 40% higher than last year. We also need to meet statutory targets on climate change. Reducing our greenhouse gas emissions by 34% by 2020 and 80% by 2050. And this is within the context of a potential doubling of electricity demand by 2050.

UK government vision

So we cannot overstate the importance of the energy revolution - secure, affordable & clean energy is absolutely vital to our future and the government is committed to meeting those goals. In July last year we set out our aims and underlying principles in our UK Renewable Energy Roadmap. A UK-wide document, explaining our shared approach to unlocking our country’s renewable energy potential, achieving our 2020 targets and driving down costs. And crucially, it places renewables firmly within the energy mix.

Scotland’s strengths

So with Scotland’s potential in renewables, the prize is great. You will be well aware that there is a lot of publicity associated with the successes of the renewables industry. And there are some truly remarkable success stories. For instance, last June, SSE’s Clyde wind farm started exporting electricity to the grid. Once fully completed it will be Europe’s largest onshore wind farm, with over 150 turbines generating 350 Mega Watts.

In January this year, Moray Offshore Renewables announced plans for a £4.5 billion offshore wind project. If consented this will be the world’s largest offshore wind farm. And in March we heard the good news that Gamesa plan to build a major turbine manufacturing facility in Leith. The project is worth around £125 million of initial investment creating an estimated 800 new jobs with significantly more in the supply chain.

Attracting this kind of high tech, high value manufacturing to the UK is key to realising the maximum economic potential the sector can offer. And what isn’t often recognised so publicly are the wider benefits for the supply chain for industries like yours, producing the essential technology needed to support this activity.

Your companies are at the forefront of an emerging worldwide trend of seeking to capitalise on these opportunities. [The figures speak for themselves. Globally, low carbon goods and services are worth £3.2 trillion, and employ 28 million people. It is growing by 4% a year, faster than developed world GDP (gross domestic product), and will accelerate.]

Despite difficult economic times, the sector in Scotland is showing incredible progress. Attracting significant investment and winning significant work. Between April last year and March this year, we have seen announcements totalling 1.7 billion pounds of investment in renewable energy in Scotland, supporting more than 4,400 jobs. And there is a potential 8 billion pounds of investment in the pipeline to support over 3,300 jobs.

So renewables aren’t just a major part of our energy mix. They are now a major part of our economy and the daily working lives of so many people directly employed in the industry and in the wider supply chain. There are immediate linkages to the electronics sector. From advanced power electronic systems to affordable high performance devices and smart energy management principles - this technology is integral to the renewable energy systems of today and the future.

UK government economic reforms

It is a great pleasure to see big names like Alstrom and Siemens today, looking to develop their supply chain here in Scotland. And the UK government is keen to do everything we can to encourage this sort of investment and help to develop the growth of the supply chain opportunities in this sector. So what practical steps are we taking to make this happen?

First and foremost, we are focussing on the economy. The global economic difficulties have a huge impact on your sector, just as they do on every other industry up and down the country.

Returning the UK to sustainable, balanced economic growth is our overriding priority. The actions we have taken to reduce the deficit and rebuild the economy have secured stability and positioned the UK as a relative safe haven. Interest rates are at near record lows, benefitting businesses and families. The Budget in March announced wide-ranging reforms to the tax system to support growth and stimulate investment, such as reductions to corporation tax, falling from 26% to 24% from April this year, and reaching 22% in April 2014.

UK government energy reforms

Turning to the energy sector, we are looking closely at the subsidy framework and other incentives that enable the sector to compete. These are crucial reforms at the heart of the coalition’s policy priorities. In the Budget statement, the Chancellor reaffirmed our commitment to assist our world-leading renewable energy sector to thrive. An estimated £110 billion of investment is needed in electricity generation and transmission this decade alone.

We need to ensure that we send out clear and consistent messages to investors, and we are looking closely at the subsidy framework and other incentives that enable the sector to compete, through the Electricity Market Reform proposals. The Reforms will mean clear, stable and predictable revenue streams for investors across all forms of low carbon technologies and encourage long term investment decisions.

UK Green Investment Bank

We are seeking out innovative routes to fund green projects. Earlier this year, we announced the UK Green Investment Bank - the world’s first investment bank solely dedicated to greening the economy. Capitalised with £3 billion of UK taxpayers’ money, the UK Green Investment Bank will play a vital role in addressing market failures affecting green infrastructure projects, leveraging as much as £15 billion of private sector capital in low carbon infrastructure by 2015.

Proposed priority areas for the Bank include offshore wind power generation and non-domestic energy efficiency, where your expertise is needed. Following state aid approval, the Bank will be established as a standalone institution, headquartered in Edinburgh, with a view to the bank being fully operational by Autumn 2012. The Bank will be an enduring institution that will build deep expertise in financial expertise and green markets.

Research & development

And as we meet here in one of Scotland’s leading universities, it brings home the message that we need to encourage constant innovation. Your industry has to sustain skills and keep up with the cutting edge of technology to stay ahead of your competitors worldwide. So for those technologies that need additional support, we are providing dedicated funding to help them on their path to full commercialisation.

Again, Scotland is leading the way. Here at the University of Strathclyde the £50 million Offshore Renewable Energy Catapult will be headquartered. This is in addition to a share of the £140m High Value Manufacturing Catapult. Linking with an operational centre at the National Renewable Energy Centre in the North East of England, the Offshore Renewable centre of excellence will draw on skills shared across the UK at the Wave Hub and Marine Energy Park in the South West of England.

The aim will be to bridge the gap between university research and full commercialisation, a period which can be especially difficult. Prof Jim McDonald is going to speak shortly on the detail of the Catapult and what we hope to achieve from this venture.

It is worth noting also that the Pentland Firth and Orkney Waters will soon be the UK’s second Marine Energy Park, fostering co-operation and collaboration within the marine industry.

Importance of partnership

Turning to that theme - cooperation and collaboration are essential to release the potential of Scotland’s renewable energy resources. Partnership across the private sector to drive growth amongst the leading players in the field and the wider supply chain and to attract investment in this competitive global marketplace. Partnership between industry and academic institutions to transfer the latest research and technological advances in pursuit of world-class innovation and to foster innovation.

And yes - partnership between the UK and the Scottish governments so that we can use the economic levers at our disposal as effectively as possible to help industry to thrive - in the best interests of Scotland and right across the UK. Although at times the politicians may disagree on many things in the constitutional debate - one thing we do not disagree on is the need for Scotland to fulfil its true potential in the field of renewables.

And the UK government is prepared to do everything in its power to work collaboratively with the Scottish government to make this happen.

This Catapult is a prime example - the UK government, through the Technology Strategy Board, is committing funding and strategic vision, but working closely with Scottish Enterprise to make the all-important links with local companies. Together we are greater than the sum of our parts. UK government relationship with electronics community

Finally - I would like to reinforce the message that the government is also keen to work in partnership with you. The electronics community in the UK covers a breadth of application areas and markets that few other industries can match. The nature of this sector means that it has a strong role to play in underpinning energy supply and demand challenges.

We want companies like yours - directly or through organisations such as NMI - to play an active part in our thinking on how to address the economic challenges ahead. For example through publication of the National Strategy for Power Electronics last Autumn, produced by NMI and the Department for Business Innovation & Skills.

I look forward to the forthcoming report outlining the Challenges and Opportunities facing the wider Electronic Systems community in the UK, expected to be published this Autumn.

Scotland in the UK

Before I conclude I hope you will allow me to reflect on our current constitutional debate. All of our considerations about energy policy, innovation and investment occur in the context of the great debate on Scotland’s future.

Of course I am committed to ensuring Scotland remains in a strong and prosperous United Kingdom. Along with many other Scots that you will speak to, I believe Scotland is stronger within the UK and the UK is stronger with Scotland as an integral part of it.

Because Scotland’s interests are UK interests.

And we work together to reach places, and have influence, and win contracts that would be impossible for Scotland alone. Pooling risks and sharing resources with your neighbour - the UK is a stable home which is envied world over. We are seeking the answers to all of the questions that the proposal for independence raises. Questions that affect the lives - and the livelihoods - of everyone in this country.

These questions are of fundamental importance to Scotland’s future and must be properly answered by those who argue for independence.

Conclusion

Ladies and gentlemen, by committing firmly to new institutions such as the UK Green Investment Bank and the Renewable Energy Catapult, we can harness our shared strengths. By continuing to work together as a strong, united country we are best placed to meet the economic and energy challenges we face. Combining our natural resources with investment in skills and infrastructure, our world-class research base and strong economic framework, Scotland is well placed to lead the world in the renewables revolution.

I have every confidence that your skills and ingenuity will continue to attract global investment needed to make the renewables revolution flourish here in Scotland. And this government will do all it can to make sure that happens.

Thank you.

Published 13 June 2012