Speech

The Rt Hon Chris Huhne MP's speech on Scottish renewables

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

I’m sorry I couldn’t be with you in person today, but I’m glad we got the low-carbon video option working. I didn’t want to miss out on a chance…

I’m sorry I couldn’t be with you in person today, but I’m glad we got the low-carbon video option working. I didn’t want to miss out on a chance to address the leading lights of Scotland’s renewable energy industry.

If we are to meet our climate change targets, Scotland will be ‘mission critical’. Success here will define our low-carbon legacy.

In a world where financial fears have tempered green aspirations, Scotland has not only exceeded its targets - it is actively raising its ambitions, going further and faster than anyone else.

This week, the world’s largest tidal array has been given the green light. The Sound of Islay will host ten tidal turbines. The home of Lagavulin and Laphroaig will now be powered by clean, green electricity.

I want to make one thing clear: we need more projects like this. After all, the warm glow of 10-year-old single malt is a pretty powerful ‘renewable heat incentive’!

Crises in confidence

This is the first Scottish Renewables conference I have addressed as Secretary of State, but it could not be more timely.

Over the past year, crises of confidence have struck conventional energy.

In April, the disaster in the Gulf of Mexico brought home the environmental impact of our oil dependency. The takeaway lesson from Deepwater Horizon was that cutting-edge extraction can be high-risk - and high-cost.

Then, in December, protesters in Tunisia kickstarted a wave of revolution unlike anything we have seen since 1989.

Speculation and uncertainty meant the oil price hit $115 a barrel.

Around the world, the debate about how fast we should move to low-carbon kicked up a gear.

Japan

And then, 11 days ago, an earthquake of unprecedented ferocity struck 80 miles out from Sendai.

In its scale and its impact, the devastation visited on Japan’s Pacific coast is shocking. Our thoughts are with those who lost their lives, their families, their homes.

After the earthquake and the tsunami, all eyes are on the country’s nuclear power plants. The situation, particularly at the Fukushima plant, is extremely serious.

Millions are without power in Japan. Rolling blackouts and factory shutdowns compound the situation.

As the world’s third-largest economy starts to look beyond rescue and toward recovery, getting the grid back online will be critical.

So from Tokyo to Tunis, what’s happening in the world today reminds us that the energy choices we make now matter in the long term.

Decisions taken today can lock us into a particular set of risks, costs and benefits for decades to come.

Challenge

Our challenge is to come up with an energy policy that delivers safe, secure and low-carbon energy to 2050 and beyond.

It will not be easy. Despite our stepped-up efforts to save energy, demand for electricity could double by 2050. But over the next ten years a quarter of our nuclear and coal power plants will shut down. As the reserve margin of spare generating capacity falls, the risk of interruptions to our energy supply rises.

So we have to build a new generation of power stations. In the face of tough global competition, and a difficult financial environment, we must attract record investment in energy.

And it must be low-carbon.

By the end of this decade, the UK must cut our carbon emissions by 34% on 1990 levels.

In the UK we must generate 15% of our energy from renewables by 2020, up from 3% in 2009, to meet our contribution to the EU renewable energy target.

We must go from 25th out of 27 EU member states for renewable energy - the dunce in the class - to Europe’s fastest improving pupil.

That means a fivefold increase in the current rate of deployment of renewables.

And in Scotland, the Government has announced an even more challenging target: 80% of electricity from renewables by 2020.

Growth on that kind of scale will be challenging to say the least. It will require tough decisions, clever thinking, and tightly focused support.

We each have a role to play.

Industry must carry on making the case for renewables. Engaging with communities - and answering its critics by delivering renewable schemes that save money and save carbon.

Government must break through the barriers that are stopping new schemes being built. Overcoming the financial, planning and delivery hurdles that can hold up progress on renewables.

And together, we must do a better job of communicating the benefits of renewables.

Safety from oil shocks. Stability for our economy. Clean and secure electricity for our consumers.

Today, I want to look at the barriers that are stopping us from getting renewables online - and what we can do to break through them.

Barriers

Firstly, the finance.

From the small scale to the big picture, we have to get the incentives and structures right so that renewables are the smart choice.

That means providing certainty for investors, with clear and consistent market signals.

This is not always easy with new technologies, as we have found out with large scale solar. But we intend to put clarity and continuity at the heart of policy so we can unlock private capital on the scale we need.

The Renewables Obligation was a good start. It designed renewable energy into the electricity supply chain.

But it was created when we thought we might need 10% of our electricity from renewable sources. Now our ambitions are much higher. Single-digit low-carbon growth won’t cut it anymore.

We’re keeping up the support for large-scale renewable electricity, with a budget due to rise to £3.2bn over the next three years.

But we also have to change the way we think about renewable electricity.

Instead of treating low-carbon like a bolt-on, we need to think about it as one of the foundations of our energy system.

EMR

That’s where electricity market reform comes in.

Last year Niall Stuart said that EMR could ‘make or break’ progress on renewables.

Needless to say, I believe it will be the making of low-carbon energy. But that also depends on you.

Our proposals set out how we will encourage low-carbon investment, guarantee security of supply, and provide British consumers with the most affordable electricity.

They reflect a fundamental change in our electricity system: renewables are no longer a fringe industry, but part of the mainstream. One of the four key pillars of our strategy: energy saving, new nuclear, clean coal and gas, and renewables.

Support for new schemes under the Renewables Obligation will continue until 2017, so developers can keep building renewable energy projects.

As we move past early stage mechanisms, the key thing is to provide continuity and certainty for the future.

Under our proposals, all low carbon technologies will benefit from support by virtue of being low carbon. That is the compensation for what Nick Stern calls the greatest market failure of all time. A guaranteed feed-in tariff for all.

There must also be a premium payment for early stage technologies. Pioneer technologies like wind, wave and tidal stream will benefit from extra support in the prices that we pay for electricity, just as they do now through the Renewables Obligation. Those furthest away from full commercialisation - like wave - will get the most.

Our consultation also proposes a capacity payment, to make sure we can meet peaks in demand - like the infamous ad break in Coronation Street, when everyone gets up to put the kettle on. We will pay to save energy and generate it.

We will also send out a clear signal with an emissions performance standard, to keep our power plants clean.

And the Treasury has consulted on a carbon price floor, to underpin our signal to the marketplace - and to encourage low-carbon use of existing plants.

Our proposals will change fundamentally the structure of our energy markets.

But if we’re going to meet our renewables target, we can’t do it with electricity alone.

RHI

That’s why, in a tight, tough spending round, I fought hard to secure £860 million for the world-leading Renewable Heat Incentive.

We expect green capital investment in heat to rise by £7.5 billion by 2020, stimulating an entirely new UK market - and supporting 150,000 manufacturing, supply chain and installer jobs.

From Dundee to Dartmouth, we want to see industrial, commercial and public sector installations increase sevenfold by the end of the decade.

Scotland could expect to benefit by at least £80 million over the next four years.

Today, Scottish Renewables threw down an ambitious target. It is up to Scottish parties and the new Scottish government to decide on Scotland’s commitments, but let me be clear: the money is there, and I will support your ambition.

This is no flash-in-the-pan. The tariffs will be paid for 20 years to eligible technologies, with payments for each kWh of renewable heat.

But as the costs of the equipment and installation reduce through economies of scale, we expect the support for new entrants to the RHI scheme will decrease.

Because the long-term aim is to grow and sustain a green sector that delivers low-carbon energy at the lowest possible cost.

Building the future

We also need to ensure more low-carbon technologies are designed and manufactured here.

We have a blossoming low-carbon goods and services sector, which seems to be thriving even in tough times.

But China leads the world in solar photovoltaic panel production; Germany on passive house architecture and design. And although we have the most installed offshore wind capacity, Britain doesn’t even make the top 10 when it comes to wind turbine manufacture.

It would be crazy to support producers generating low-carbon energy, businesses selling low-carbon products, consumers installing low-carbon measures - and not try to capture some of the original value.

If our financing goes on buying in technology from overseas, we’re not getting the best return on our investment. We’re missing a trick unless we start supporting low-carbon manufacturing here in Britain - and grow the green supply chain.

Things are starting to change. Siemens are investing in Hull, and Gamesa and GE are looking at setting up research centres and factories here in the UK.

And I welcome Doosan’s decision to locate its renewables R&D base - and potentially turbine manufacturing - in Scotland.

This is great stuff. But we also need to encourage home-grown innovators.

Take Artemis, pushing ahead with ‘Digital Displacement’ offshore wind-turbine transmission. Or Burntisland Fabrications, pioneering a new process design and layout for the manufacture of foundations for offshore wind structures.

These companies are building the technologies of the future here on our shores. Locking in profits and expertise, and creating the exports that will keep Britain competitive.

We can do more to help.

The spending review settlement included £200 million for the development of low-carbon technologies.

And the Green Investment Bank, capitalised with at least a billion pounds, will help get private sector investment at scale. The Chancellor will have more to say on the Green Investment Bank tomorrow.

We’ll keep funding research and innovation - not just through DECC, but through the business and transport departments, too.

Non-financial

So from the structure of the electricity market to research funding, we’re breaking through the economic barriers.

We’re also focusing on non-financial obstacles.

If our renewable industry is to flourish, we need to get the infrastructure right, making it easier for renewable projects to plug in to the grid.

Broadband providers often talk about the ‘last mile’ problem. You can have the fastest, best-designed national transmission network, but if the thousand yards from the local exchange to the customer are old-fashioned copper wire, then all that investment is wasted.

It’s the same with energy. We have to make sure that the right transmission charging regime is in place to meet the challenges of renewable generation throughout Scotland.

I know developers have real concerns about the current level of forecast transmission charges - particularly in the Scottish Islands, where major projects are on hold.

I also know Ofgem recognise these concerns, and like you I await their review of the transmission charging arrangements through Project TransmiT.

The key thing is to deliver a simple, fair and predictable charging regime that recognises our new energy landscape. Our purpose is not to build plant near consumers, but to wire up plant wherever the wind blows and the tides run.

I’m not going to prejudge Ofgem’s review. But I have asked my officials to look closely at whether there’s a case for adjusting transmission charges for renewable generation on the Scottish Islands under section 185 of the Energy Act 2004 - so we can act quickly if we need to.

Planning is rightly a matter for Scottish ministers, and over the last decade you’ve had a better record than England.

But on a national scale, there are things I can to help get the green light for green energy.

The revised draft National Policy Statements will give investors clarity and certainty.

And we’re working with our partners in Whitehall to help smooth the way for new renewables on a national scale.

Take radar and aviation. For many wind developers, radar interference causes business headaches.

That’s why we’re working closely with aviation bodies like the National Air Traffic Services and the Civil Aviation Authority to develop and install new radar software.

This can be a win-win situation: bringing new state of the art radar and releasing up to 5GW of new onshore wind capacity.

And today, I’m happy to announce a new partnership agreement between government, aviation bodies and the windfarm industry to work together to implement new radar solutions.

Roadmap

So we’re tackling the financial and the non-financial barriers to getting renewables online.

The next step is to get a plan for delivering renewable energy.

That’s why we’ll publish the Renewables Roadmap later this spring.

The roadmap will be the first detailed step-by-step plan to deliver renewable energy.

It will take a practical approach, looking at deployment systematically, identifying specific barriers, and setting out how to overcome them. It will show how we will meet the 2020 renewables target, sending an important signal to investors and technology developers alike.

And it will set out milestones and metrics that enable us to monitor deployment progress and respond if we are falling behind our ambitions.

The Renewables Roadmap will be the UK’s first systematic blueprint to deliver renewables at scale.

Rather than being imposed from Westminster, it’s being drawn up together with our partners in the Devolved Administrations - and based on input and evidence from industry.

And rather than being a fixed document, it will evolve and change as renewables come online.

We want your feedback. We want to know which obstacles you think are most important, and then we will work harder, sector by sector, to shift them.

This is open-source government at its best. And it will make DECC the happening department.

Green growth

So from finance to delivery, we’re making it easier to bring renewable projects onstream.

We must hit our renewables target. We must cut our carbon emissions. We must make the case for green growth and ambitious emissions targets at a European level.

It’s in our direct economic interest to do so. These are the jobs and businesses of the future.

Renewable energy employed more than a quarter of a million people in 2009 - nearly a third of the low-carbon sector.

Getting more renewable energy in our mix could reduce our energy import dependence by up to 40%, giving us more security and a greater degree of energy independence.

As we reflect on a tumultuous year in global energy markets - one marked by tragedy and volatility in equal measure - that extra security sounds all the more attractive.

So let’s work together to deliver the green energy revolution that Scotland, the UK and the world so desperately needs.

Thank you very much.