Speech to the RenewableUK Conference
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
"The prospects for renewable energy in the United Kingdom have never been better", Edward Davey addresses the RUK conference in Birmingham.
It’s a pleasure to be with you here in Birmingham today.
Since 1978, RenewableUK, and its predecessors in the wind and marine sectors, have been making the case for a clean, green, sustainable way of powering our society.
And I think it’s fair to say that in that time there have been ups and downs for renewable energy in the UK.
But I would contend that this year, as the Energy Bill goes through Parliament, the prospects for renewable energy in the United Kingdom have never been better.
This Government is putting in place the most robust and stable long-term framework for the transition to low-carbon energy this country has ever had.
Not just aspirational targets and objectives, but a comprehensive legal, financial and political framework that provides industry and investors with the confidence, certainty and predictability needed if we are to meet the energy challenge we face.
With a fifth of electricity generating capacity due to close this decade, we need £110bn of investment to keep the lights on.
And as the latest report from the International Panel on Climate Change made crystal clear - if we are to make sure that keeping the lights on today does not mean that future generations have to pay the price in a hotter, more dangerous and volatile world, our energy use needs to be progressively carbon-free.
Win, Win, Win, Win, Win
So today, I want to reaffirm the Government’s commitment to renewable energy.
As a country we have a huge amount to gain from leading the global clean, green energy revolution:
Tens of thousands of jobs – reinvigorating local communities and bringing financial security to many families;
Growth in the economy - with billions of pounds of investment, reaching down through supply chains to every part of the country, increasing tax revenues, boosting exports, benefiting local communities who embrace green power;
Greater energy security –keeping the lights burning by increasingly using the home-grown natural resources of the country;
Protecting bill-payers - cushioning them from the increasing costs of volatile fossil fuel imports from risky parts of the world - shielding our citizens, over time, from the rising price of competing for diminishing resources.
And in the process, we will be cutting harmful greenhouse gas emissions, so that we play our part in limiting climate change and live up to our responsibilities to future generations.
This course we have set ourselves on is win, win, win, win, win.
Good for jobs, good for the economy, good for energy security, good for bill-payers and good for the environment too.
But we will only realise this future if we stick to the long-term path we have set ourselves resolutely.
The framework we have put in place, including the financial support available, has already been extraordinarily successful.
Today I have published, alongside my Ministerial colleagues in Scotland, Wales and Northern Ireland, the 2013 Update to Renewable Energy Roadmap Update.
And by any measure progress has been impressive.
Since 2010, £31 billion worth of private sector investment in renewable electricity has been announced with the potential to support over 35,000 jobs across the UK.
And look at what this has meant over the last year, alone.
A 56% increase in renewable electricity generation.
Including bioenergy up by 58%.
Offshore wind up by 51%.
Solar PV up by 22%.
And onshore wind up by a breath-taking 70%.
As of the second quarter of 2013, over 15% of the nation’s electricity came from renewables - halfway to the objective of generating around 30% of our electricity from renewable sources by 2020.
And my prediction is, that with the framework we are putting in place, we’ll do even better than 30%.
With the tripling of support available to low-carbon technology to 2020 agreed as part of the Levy Control Framework;
With the stable legal, financial and political framework being put in place by the Energy Bill;
And with our commitment to delivering the renewable energy target;
We are creating the most attractive electricity investment markets anywhere in the world.
So let me make this crystal clear: there should no doubt about the Government’s commitment to renewable energy as part of a cost effective, low-carbon, secure and diverse energy mix.
No doubt about the level of support available.
But, I am equally clear, this revolution must remain affordable.
Real energy security can only be achieved by delivering all these things at a cost that our people, and our economy, can afford.
That is why like, many countries, the UK have put in place measures to ensure that our energy-intensive industries are supported through the transition to a low-carbon economy – in line with state-aid rules.
And it is why we keep under continuous review the impact that our domestic green policies are having on energy bills.
But let me reassure you as clearly and unequivocally as I can, the current review is not about changing investment incentives for renewables, such as the Renewables Obligation, Contracts for Difference or the Feed in Tariffs scheme.
The level of support will remain, as planned and as published.
These are essential for investor confidence in the renewables sector and our commitments to a low-carbon economy.
The review is looking at what I called the social green levies - Warm Homes Discount and the Energy Company Obligation.
For we do need to make sure that such support is paid for in a way that is fair to consumers.
Is it right to help the fuel poor via the bills of the nearly fuel poor?
But even on these social green levies, I am clear; we will not cut energy bills on the back of the fuel poor.
The Challenge for the Renewables Sector
So, with the Government’s commitment undiminished, the challenge for the renewables industry is one you are familiar with and one you have made already made real progress in meeting.
Attracting investment, building capacity, and, crucially bringing costs down.
I have set out how successful that together we have been in the first two of these – and there is much more detail in the Roadmap update published today.
So let me dwell for a minute on the last of these – bringing costs down.
Public support for renewables remains high.
The latest DECC research published today confirms that over three quarters of people continue to support the use of renewables to power our society.
But people remain significantly concerned about steep rises in energy prices, now and in the future.
So there is an imperative to demonstrate that the vision of a competitive market that keeps bills as low as possible is not a fantasy but is within reach.
And that means a market where renewables and other low-carbon technologies increasingly participate on a level playing field.
Renewable energy is still more expensive, megawatt for megawatt, than other conventional technologies.
This is normal for a developing industry.
Indeed, we expect it. Our policies assume it.
But nobody – least of all the industry – should expect that subsidies will remain for one moment longer than necessary.
Ultimately, renewables must reach grid parity. In a world where carbon is properly priced.
The Government is meeting its end of the bargain by providing a market that can deliver investment.
The industry needs to continue to meet its end of the bargain by bringing costs down.
The evidence is encouraging.
There has been a reduction of almost three-quarters in raw solar PV costs over recent years.
Support rates needed for onshore wind have reduced by 10% this year.
And the offshore wind industry has set out a clear pathway for cost reduction.
But we still need to see further cost reductions and we need to see them as quickly as possible.
This means a real commitment to innovation - improving the affordability of existing technologies and working to make new technologies commercially deployable in the future.
Successful innovation could save the UK up to £160 billion in energy supply costs to 2050 and generate UK-based business activity contributing up to £89 billion to GDP over the same period.
Let me take the example of Offshore Wind.
The UK is the Offshore Wind world leader.
We have the most offshore wind deployed anywhere in the world, and the most clarity for investors.
This year alone we have seen the Greater Gabbard, London Array, Lincs and Teeside farms completed.
And we are now giving consents under new Planning Act regime with the go ahead for the Kentish Flats Extension, Galloper and Triton Knoll projects.
It was just yesterday Vattenfall announced its plans to invest around £150m in the Kentish Flats Extension with construction beginning in 2015.
I am determined to see the UK retain its global lead in this sector and we have set out the framework to achieve that.
Contracts are for the long term.
Prices are visible.
And we have confidence that the industry can deliver our shared vision.
In our draft delivery plan we set out a range of 8 to16GW by 2020.
I know some have concerns that our ambition is limited to the low end of that scale.
Let me tell you clearly; this is not so – far from it.
Working together I am confident we can deliver towards the higher end of this range – particularly if costs continue to fall.
Offshore wind will be a crucial part of our energy mix well beyond 2020.
Our draft Delivery Plan set out a scenario showing up to 39GW of offshore wind by 2030.
Together we should be aiming to deliver the cost reductions that enable that.
I understand the concerns that have been raised on the support package for offshore wind – in particular the draft strike prices.
We are taking your responses into account as we work to finalise the EMR Delivery Plan.
And price is only one part of the whole package we’re working on to ensure delivery of offshore wind projects.
As you know, we published a draft contract earlier this year including a range of measures to make offshore wind investable.
You should look very closely at what those proposals mean for your projects, and for the strike prices they can access – including phasing, commissioning windows, and capacity adjustments.
We are finalising those contract terms with the aim of making sure that the new system works for the complex, multi-year processes that are involved in developing offshore wind farms.
So work with us to find solutions which enable a healthy pipeline of projects to be delivered.
And not just delivering cost reductions but helping to build a supply chain that will deliver economic benefits to the UK.
This summer I went with the Prime Minister to open London Array to celebrate the milestone of the world’s biggest windfarm.
There I met some of the young apprentices who are now embarking on a career in the offshore wind industry.
I want to see more as the industry expands.
UK consumers are paying to support these technologies and expect benefits to stay in the UK in the form of jobs.
It also means investing in innovation.
Technology innovation analysis highlights that by 2050, offshore wind innovation alone has the potential to deliver cost savings of £45 billion. And business creation for the UK worth £18 billion.
From the Offshore Wind Cost Reduction Taskforce to Catapult we’ve sought to identify with you a whole range of initiatives to realise that innovation opportunity.
And that’s why I am pleased to announce today government funding of more than £2.5m to four projects under the Offshore Wind Component Technologies Scheme.
This Scheme aims to help companies to test and demonstrate devices and to develop component technologies that can cut the costs of offshore wind energy in the run up to 2020 and in the subsequent decade.
This is part of a package of support being provided by members of the Low Carbon Innovation Coordination Group (LCICG), who together are providing over £100 million of targeted financial support to develop innovative offshore wind technologies between 2011 and 2015. And who are getting results.
Now while I am determined to see a successful, flourishing offshore wind sector here in the UK – I am just as committed to onshore wind.
Our onshore wind industry continues to thrive too, with 1.5GW installed so far in 2013 alone. That brings us to nearly 7GW installed, with 1.25 GW under construction and over 5 GW consented.
It is a huge success story and we should be proud of what has been achieved.
And of course onshore wind is one of our cheapest large-scale renewables.
I know there has been controversy, but I am pleased that the industry has been thinking seriously about how to make sure that developments are built with the support of local communities.
Community benefit packages are becoming the norm across the industry. And they are popular - not least when they help people with their energy bills.
So I’m delighted that R-UK is [today] launching its new community benefit protocol with a five-fold increase in community benefit levels.
I recently visited Vattenfall’s huge Pen-Y-Cymoedd project in South Wales which is a great example of creative thinking about how to make sure local businesses can win contracts. The strong community backing for what will be the largest onshore wind farm in England and Wales was fantastic.
I met a miner’s son, working on the construction. He told me his family were pleased he was working above ground, delivering clean energy for Wales.
It was a great story. We need to hear such stories of local investment and young people being told around wind farms up and down the country - supporting local businesses, creating local jobs.
And getting communities on side does mean making sure that wind farms are built in the right places.
That’s why we issued new planning guidance, making clear that the National Planning Policy Framework already includes strong protections for the natural and historic environment, and that proper weight must be given to landscape and heritage.
And it’s right that Government continues to monitor decisions carefully, to reassure communities that their concerns are being addressed, and that decisions are taken in line with existing guidance.
Because we all know that planning works best when communities have the opportunity to influence decisions.
This industry best-practice will become even more widespread when we legislate to introduce compulsory pre-application consultation later this year.
Looking further into the future, marine energy has good potential as a clean green source of power, and could make a contribution to UK electricity demand in the next decade as part of the mix playing a major role as we move towards 2050.
The UK is one of the leading nations in the development of marine energy.
And we are putting money behind our commitment: we will be investing £80m in marine energy over this spending review period.
Together with the Scottish Government, we are working with developers towards financial closure for the deployment of the first tidal arrays.
We are also working with the key players in the industry to address the non-financial barriers in the market.
The marine sector is making progress, but there is much more still to do.
Large manufacturers, the innovative developers and the utility investors need to get behind our first commercial arrays and together we can get the marine sector moving.
So let me conclude, today, by saying this.
As I said at the start, the prospects for the UK renewables sector are better today than at any time in its past.
The legal, financial and political framework is being put in place for sustainable delivery – providing stability and certainty for many years to come. From ROC to FITs, from CfDs to the Levy Control Framework, these are British financial systems of committment investors can rely on.
While the focus is so often on the big investment decisions, small-scale renewables are thriving too - bringing home to local people that they can be more than just consumers of energy – but producers too.
And public support for renewables remains high.
But we cannot take this support for granted.
The industry need to consistently demonstrate its efforts to bring costs down as it brings forward the investment we need
It needs to continue to engage with local communities, showing how the benefits of hosting renewable infrastructure can be significant.
Working together we can meet these challenges.
So colleagues, I am very proud of what we have achieved - what you’ve achieved. But I know we can and will do much, much more here and abroad.
Your industry is critical to the growth agenda of this government - the green growth agenda our country needs, short and long.
Your success is showing just what is possible.