Tidal Energy Generation: Ringfenced Funding
(3 years ago)
Commons ChamberRead Hansard Text Watch Debate Read Debate Ministerial Extracts
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Thank you, Madam Deputy Speaker, for the opportunity to bring this critical issue before the House this evening. I have been passionate about the tidal marine industry’s potential for some time. I am glad that now, only a few weeks after the conference of the parties in Glasgow, it is finally getting the focus and attention that it deserves.
Ahead of this debate, as we all know, the Prime Minister announced at Prime Minister’s questions yesterday that there will finally be some ringfenced funding for tidal energy: £20 million in the forthcoming contracts for difference auction. I wish I had known that securing a debate in this House is all it takes to get some movement out of the Government and the Cabinet. I must really start securing adjournment debates much more often.
Ian Blackford
Of course—I congratulate my hon. Friend on his Prime Minister’s question yesterday.
While my party colleagues and I were glad to see some movement yesterday, we have also been very clear that it amounts to only a partial U-turn. The Government have a way to go yet. Every little may help, but if we are serious about the scale of the opportunity, we need to go further.
In securing this debate, our ask was for a £71 million ringfenced fund. The ask remains for £71 million, which we genuinely believe is the level of investment that will allow the industry to fulfil its potential to provide green baseload energy that is so critical to our situation, and will support a sector that has massive potential not just at home but as an export industry. The level of investment that we put in now will ultimately determine whether the industry will reach its potential on these shores or we miss the chance and let it slip through our grasp.
Let me put the issue in context. The Royal Society report published this month refers to tidal marine contributing 11.5 GW of electricity. That is 15% of UK generation capacity.
Alan Brown
May I go back to the pots of money? As my right hon. Friend says, £20 million is clearly welcome compared with where we were, but would a bigger pot of money not unlock greater investment and create a better jobs return? A £70 million pot could unlock £140 million of private investment and create 400 jobs, whereas £20 million would unlock only £20 million and create 100 jobs. A bigger pot would get a better return for consumers.
Ian Blackford
My hon. Friend is right. We are, essentially, at ground zero today. This is about how we kick-start the industry. The modest Government support for which we are asking would unlock that private investment, and when we think about the 11.5 GW that I talked about—that 15% of UK electricity—
Ian Blackford
That 15% is equivalent to the contribution that nuclear makes. When we put into context the relative level of funding we are asking for, the scale of the opportunity is huge. We are talking about an industry in which Scotland and the UK lead the world in terms of technology. The ability to create green baseload electricity is there 24/7, 365 days a year, along with the capacity to use that technology and that ingenuity to export to Canada, Thailand, France, Japan and so on. There is a massive opportunity for us to benefit from that first-mover advantage, to get behind an industry where we can make sure that we control the entire supply chain and have the potential to navigate away from fossil fuels and create the jobs referred to by my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown).
Ronnie Cowan (Inverclyde) (SNP)
My right hon. Friend has talked of an opportunity. We have known about tidal energy for a long time. We should have invested in it 20, 30 or 40 years ago; if we had done so, we would have a much more mature industry today. If this Government do not invest now, we will look to the future and see nothing more than negligence.
Ian Blackford
We are where we are at the moment. My point to the Government is this. We know that the technology is there. We know that relative costs are already coming down dramatically; we can see that from the MeyGen project in the Pentland Firth, for example. Here is the opportunity to get behind something that could be revolutionary, in terms of providing clean energy—baseload energy, as I mentioned—but also the ability to create a manufacturing industry. We can perhaps learn from the mistakes that were made with wind turbines, and ensure that we are not relying on other countries to provide the infrastructure that we need, because we can do this ourselves. There is a responsibility that we have here, now, today, to get behind this industry.
Richard Graham
I am grateful to the right hon. Gentleman, and I much appreciate his relatively new-found enthusiasm for the marine energy sector. I pay tribute to his colleagues, the hon. Members for Kilmarnock and Loudoun (Alan Brown) and for Inverclyde (Ronnie Cowan), for the help that they have given the all-party parliamentary group on marine energy, which I founded in July 2016. The group has 25 members, two of whom are from the Scottish National party, and their support is greatly valued. However, this is a great British success story, which has an impact on opportunities from the Isle of Wight, along the coast of Cornwall, up through Wales and into Northern Ireland.
As the right hon. Gentleman will know, this wonderful decision by the Government has been greeted by the chair of RenewableUK as a
“major step forward for the…tidal energy industry.”
The chair of the Marine Energy Council has said:
“The impact of this support cannot be overstated.”
Furthermore, Nova Innovation has said that this will be
“turbocharging the delivery of tidal energy”.
This is a pivotal moment, and I am sure the right hon. Gentleman will agree that it is a huge leap forward for marine energy.
Madam Deputy Speaker (Dame Rosie Winterton)
Order. It is not customary to read out very long interventions.
Ian Blackford
I must say to the hon. Gentleman that my support for this is not just for the short term; I was at the port of Nigg when the MeyGen project was launched many years ago, so the subject has been dear to my heart for a long time. I do, however, agree with him about the scale of the opportunity. Of course the £20 million of investment that was announced yesterday is important, because it will allow us to develop the industry, but the question at the heart of today’s debate is about the scale of our ambition.
I respectfully ask the Minister, as I would ask the Chancellor of the Exchequer, for a recognition of the scale of this opportunity. Phase 2 of the MeyGen project has already been permitted to go up to 80 MW, and in the Pentland Firth it could ultimately reach as much as 400 MW, but the ability to expand from the current 6 MW installed in MeyGen phase 1 is restrained by the investment that has been put in place in this round. We would certainly not be looking at deploying the 80 MW; it would be a much reduced figure. I would simply say to the Minister and to all Members: let us have that ambition. Let us have that desire to see this green energy source get to 15% of UK electricity production. To do that, however, we have to show more ambition than is being shown today. I do not wish to be seen as ungrateful for what has happened; all I am asking the Government to do is to recognise the scale—
Ian Blackford
Let me make a little bit of progress. At this rate, I am going to use up all the time myself, but I want to be respectful to the Minister.
My message to the Minister is to reassess what has been done and to do all that he can to ensure that we develop this green potential. The funding of £71 million that we have asked for would have resulted in 100 MW of capacity deployed in the very near term from what we know from planned projects. Let me ask him this specific question. With a funding pot of £20 million, what specific assessment of capacity deployment have the Government made? I genuinely ask him not to duck this question, as it is critical to revealing what assumptions the Government have made in relation to their lower level of investment. I am sure that they will not have made this announcement without making such an assessment, and I look forward to the Minister addressing that question when he responds.
It is important to set out just how obvious an opportunity investment in the tidal marine sector is, and why it is important for us. First and foremost, we should remind ourselves of how deeply fortunate we are that this world-leading technology is already located in the United Kingdom and particularly in Scotland. We have a chance to grow this sector exponentially, but we have to take it. It is estimated that the tidal stream industry could generate a net cumulative benefit to the UK of £1.4 billion and support at least 4,000 jobs by 2030. Additionally, although wave energy is a less mature technology than tidal stream, it could add a further net positive contribution to the UK economy of £4 billion and support 8,100 jobs by 2040.
This industry is not alone as an emerging opportunity; there is also emerging evidence of just how big this opportunity can be for our present and future energy needs. A recent report for the Royal Society, led by Daniel Coles at the University of Plymouth in collaboration with the Universities of Aberdeen, St Andrews and Highlands and Islands, has found that the UK can get 15% of its electricity production from tidal stream power. That would be a massive contribution to the work that needs to be done to get to net zero by 2045 in Scotland and by 2050 in the rest of the UK. Achieving this would require around 11.5 GW of tidal stream turbine capacity to be installed.
Just to put that in context, we currently stand at 18 MW. This takes us to the nub of the issue regarding the support required from the Government to create the investment in the industry that my hon. Friend the Member for Kilmarnock and Loudoun mentioned. To meet those ambitions means installing a least a further 124 MW by 2031. That would put tidal stream on a trajectory to install the estimated 11.5 GW needed to generate 34 terawatt-hours a year by 2050.
The recent research for the Royal Society also indicates that if we build up this targeted support for the tidal industry, it will drive down the levelised cost of energy to below £150 per megawatt-hour. This would make tidal stream cost-competitive with other technologies such as combined cycle gas turbines, biomass and anaerobic digestion. So, from the current position where there is no route to the domestic market, it is now clear that if this sector gets the investment it needs, it will quickly become a key component in meeting our energy needs.
Alan Brown
Does my right hon. Friend agree that another thing the Government could do that would not cost them or consumers any money would be to set an interim date and target for hitting 1 GW of tidal stream? That would send a signal to investors about how seriously the Government are taking this.
Ian Blackford
Absolutely, because it is about that ambition. I hope the Government share our ambition to see this sector generate the level of electricity we believe it can generate. It is about creating the circumstances, by kickstarting the sector with modest Government investment, so that investors come in. We have developed an opportunity for green energy, but let us also think about the opportunities for manufacturing and for a global success story, given the technology that has been developed on these islands.
A proper level of investment will allow existing developments such as the MeyGen project to take off. This project, the world’s largest tidal array, is already exporting significant amounts of electricity, and it has significant capacity to grow. This presents a transformational opportunity for the tidal sector and would once again demonstrate Scotland’s commitment to a green recovery. It could also create thousands of new full-time roles in the Scottish supply chain, helping to achieve its full potential.
We also need to think about the opportunity for our industrial base in Scotland, because the ability to tie in green energy to the powering of data centres, for example, would be an enormous opportunity throughout Scotland, particularly in my area of the highlands and islands. From this ability to generate green energy, we can develop a wider industrial strategy to create the job opportunities and the wealth that we all want to see.
Douglas Chapman (Dunfermline and West Fife) (SNP)
My right hon. Friend mentioned supply chains, and 25% of Nova’s supply chain spend is in Shetland, with 98% of its spend being in the UK. If the UK Government are serious about levelling up manufacturing, is this not a golden opportunity for them to get behind it fully, instead of the partial funding we have seen in the last 24 hours?
Ian Blackford
My hon. Friend makes an important point. Actually, 90% of the Nova project’s supply chain comes from the UK, but let me put that into context. For a traditional wind turbine, the UK contribution is some 30%. We lost the opportunity to command the supply chain for the traditional wind industry, and here is an opportunity to make sure we do not make the same mistake again. It is important the Government recognise that.
We have an opportunity to have a green future driven by green jobs, but it will happen only if the opportunity is matched by the ambition of Government investment. In truth, the ask from the industry is modest compared with the support offered to other sectors. The ask is for a £71 million ringfenced fund from the UK Government so the sector can flourish. Although the Government’s offer of £20 million in yesterday’s contracts for difference auction is a step in the right direction, it is not the full stride that the sector deserves.
As my hon. Friend the Member for Kilmarnock and Loudoun has repeatedly stated on the Floor of the House, £71 million is a drop in the ocean compared with the billions that have been offered to the nuclear industry. There was seemingly no problem in finding £1.7 billion to further develop and design the Sizewell nuclear power station. There can be no reason, no logic and no excuse for failing to find the £71 million needed to support this vital industry.
Let us remind ourselves of the potential. This is an industry that can grow to 15% of the UK’s electricity production. If we look at a typical day over the last few weeks, on 16 November nuclear contributed 14.6% of the UK’s electricity. We do not need nuclear in Scotland. We can provide the baseload we need from this clean source of energy. We have the potential to deliver safe green energy and to provide jobs and energy security for a fraction of the cost of nuclear.
There are many other favourable comparisons, too. The predictability and stable power output of tidal stream energy offers additional benefits over other technologies for our future energy supply. For instance, this predictability and stability even compares positively with floating offshore wind, which secured a £24 million ringfenced budget in the draft budget for the fourth-round allocation.
The ask is modest and the picture for investment is clear. If we do not grasp this opportunity, other countries will. Countries including Canada and France have already put in place financial mechanisms to capitalise on tidal energy. Canada has a feed-in tariff equivalent to £300 per megawatt-hour, with many multi-megawatt projects in the pipeline. Nova, based in Leith, has an order to ship 15 turbines to Canada. The Canadians would love to have our technology, and they are enticing companies such as Nova to relocate. The French Government are about to announce a feed-in tariff for tidal energy backed by the EU green deal. Japan and Indonesia are piloting projects and negotiating power purchasing agreements to accelerate tidal energy deployment. We need a domestic market for the industry to grow and thrive. It is a case of use it or lose it. It is that stark, it is that simple. The grim reality is that if the UK Government fall short and short-change this sector, the industry could be lost to other countries that are willing to invest in this technology. We are back to where we were with wind and, in many cases, where we were on oil and gas. We must make sure that we do not lose the full extent of this opportunity. We must make sure that tidal stream cannot be lost to Scotland and the UK—it will certainly not be lost to the world, and we need to make sure that we fully play our part .In case that all sounds familiar, we should remember exactly what happened to the wind industry in the 1980s and 1990s. As I have mentioned, only 30% of the UK supply chain for UK wind is domestically generated.
If we are to reach net-zero and have a just transition, we simply cannot repeat those mistakes of the past. Let us just think of the job opportunities through developing the Scottish, UK and global markets. There are expectations of a global market of 100 GW, an industry that will be worth £126 billion by 2050. We have a choice: lead this emerging green energy sector or sit back and watch our sector-leading companies move wholesale to overseas markets. We can embrace the opportunity for green jobs, for base-load energy and for transitioning to that green energy future. We can lead the world in tidal marine or we can walk away from the opportunity to develop and deepen the sector leadership that has been developed in Scotland and the UK.
It will come as no surprise to Members from across this House that I am not the biggest cheerleader or supporter of the UK Government. Normally when I walk into this Chamber, I do so to firmly oppose those on the Government Benches. Today, though, I walked into this Chamber with a different intention, because this is an issue where we have a chance to work together; here is an area, an industry and an opportunity where we can genuinely work together in our common interests. With a modest amount of support in terms of the overall intervention in energy—of £71 million—the industry can reach its potential and we can all benefit. I hope the Government see it that way too, and I hope that yesterday was only the first step and that there are bigger and better strides to come. I hope the Government are listening, and I very much look forward to the Minister’s response.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I congratulate the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) on securing this important debate, and I welcome his support for the UK Government. He said that he came into the Chamber and, unusually, wanted to support the UK Government, and I am very grateful for that. I very much welcome that change of tack.
Marine energy, and tidal stream energy in particular, is of great interest to the Government. Our theme today is the merits of ringfenced funding for the deployment of tidal stream generation, and I shall say first that I agree entirely with the right hon. Gentleman that tidal stream is a homegrown industry of considerable potential. We have Europe’s and probably the world’s foremost tidal and wave energy testing centre—the European Marine Energy Centre on Orkney. We have other exciting testing centres and marine energy hubs burnishing their reputation on Anglesey, the Morlais project, and on the Isle of Wight, with the Perpetuus Tidal Energy Centre. That cropped up two weeks ago in Department for Business, Energy and Industrial Strategy questions, when my hon. Friend the Member for Isle of Wight (Bob Seely) asked about it. We have a raft of brilliant developers designing and building tidal stream devices in the UK, notably in Edinburgh, in Leith.
The right hon. Gentleman said that the UK Government funding of £20 million has come “only now”, but the picture is so positive, in large part because we have under successive Governments provided more than £175 million—not just the £20 million announced yesterday by the Prime Minister—in innovation funding to the marine energy industry in the past 18 years, of which more than £80 million has come since 2010. So when he talked about 20 to 30 years ago, this is exactly what we have been doing. Thanks to the extensive support afforded under the renewables-obligation mechanism, we were able to build in 2018 the largest tidal stream generating array in the world in the fast-moving waters of the Pentland firth.
It is fair to say, then, that the Government have a sound track record of supporting the tidal stream industry and helping to get it into the position it is in today, on the cusp of commercialisation and with good export potential. This week, however, is an occasion for looking to the future. We were all delighted to hear the Prime Minister announce yesterday at Prime Minister’s questions that the Government will establish a ringfenced budget of £20 million for tidal stream developments in pot 2 of the upcoming fourth contract-for-difference allocation round. The CfD scheme is our flagship mechanism for supporting the cost-effective delivery of renewable energy. Our decision this week will ensure that the nation’s tidal stream innovators get the opportunity they need to bring their cost of energy down, to ramp up the UK’s capture of the abundant energy flowing along our coastlines and to learn the valuable and exportable lessons that come with being the first in the world to deploy a cutting-edge technology at scale. The decision has been warmly welcomed.
Richard Graham
The Marine Energy Council has said clearly that it is grateful to Ministers for having listened, understood and acted, and so am I. There is now an opportunity for the sector to make a success of delivering on the funding that my right hon. Friend the Prime Minister announced and then of ramping up domestic capacity. At the same time, as the Prime Minister’s trade envoy there, I will continue discussions with Indonesia about perusing potential opportunities. Will my right hon. Friend accept an invitation to come and meet members of the sector and interested colleagues at the next meeting of the all-party parliamentary group on marine energy before the House rises?
Greg Hands
I gladly accept my hon. Friend’s invitation to meet. He does a brilliant job as the chair of that APPG and he does an amazing job as the Prime Minister’s trade envoy to Indonesia. He mentioned one or two of the warm words of congratulation on the announcement yesterday. RenewableUK said it was “a major step forward” and that it
“puts us in pole position to”—
lead—
“the global market in due course.”
RenewableUK also said it would
“unlock private investment and secure green jobs”,
while Neil Kermode of the European Marine Energy Centre on Orkney said:
“This support for the marine energy industry is absolutely pivotal”.
I appreciate the right hon. Member for Ross, Skye and Lochaber having brought this topic to the House. He perhaps might have left one with the impression that just he had made representations to the Prime Minister, but I checked back and found representations from my right hon. Friends the Members for Portsmouth North (Penny Mordaunt) and for Preseli Pembrokeshire (Stephen Crabb), and from my hon. Friends the Members for Meon Valley (Mrs Drummond), for Rother Valley (Alexander Stafford), for Rugby (Mark Pawsey), for Banff and Buchan (David Duguid), for Isle of Wight (Bob Seely), for West Aberdeenshire and Kincardine (Andrew Bowie), for Moray (Douglas Ross), for Ynys Môn (Virginia Crosbie), for Truro and Falmouth (Cherilyn Mackrory), for Gloucester (Richard Graham), for Sedgefield (Paul Howell), for Blyth Valley (Ian Levy), for Workington (Mark Jenkinson), for North Cornwall (Scott Mann), for St Austell and Newquay (Steve Double), for North Devon (Selaine Saxby) and for Barrow and Furness (Simon Fell).
I heard some doubt from the right hon. Member for Ross, Skye and Lochaber as to whether the £20 million per annum is a substantial-enough sum to put the tidal stream sector on its best footing. Indeed, the right hon. Gentleman suggested that £71 million is the minimum required for the job. I am afraid I cannot agree with him on that, because £71 million would mean the awarding of a contract to virtually every developer who shows interest in the auction as long as they bid at a level just a single penny under our stated maximum price. He and I worked together in the City of London in our time. He will know from his knowledge of financial markets—I know that he has since rebranded himself as the simple crofter—that there is no way to run an auction of that sort in that way.
Ian Blackford
I hope that we can dispense with the silly gibes.
What I explained to the Minister was that £71 million would justify 100 MW of output. Perhaps he can explain what he expects to see from the £20 million. Crucially, I did point out that MeyGen has consent for 80 MW and that, within the envelope of that £71 million, it could have been fully exploited and ultimately ramped up to 400 MW. As things stand, MeyGen 2 cannot be fully exploited and that is the impact of not going to the £71 million.
Greg Hands
The right hon. Gentleman is mixing up funding with the process of an auction. It is a contract for difference auction. The idea of £20 million being available is that it allows us to have a competitive process between all of the different parties that may be interested, and then to make sure that at least £20 million goes towards these projects. It is not the same as granting funding, which is what I think he is looking for, of £71 million. It is a competitive auction process. The purpose of the CFD scheme is to support and push for—
Greg Hands
I will try to fit in a response to the right hon. Gentleman.
The purpose of the scheme is to support and push for only the most promising and competitive projects in the offing. My Department’s analysis shows that £20 million is optimal for that purpose and that a larger ring-fenced budget would serve neither the interests of the electricity bill payer, nor the interests of the sector itself, which must be pushed to innovate and find ways of bringing down its costs. So, yes, the Government have, this week, delivered for the burgeoning tidal stream industry and it is for the developers now to really push on and make good on their promises and their potential to demonstrate the value for money and the scalability that we need to see from our renewable energy technologies as we transition to an efficient and net zero-ready power sector.
We all remember the remarkable fall in the cost of offshore wind energy, to which the right hon. Gentleman referred in his speech, once it was able to take full advantage of the contracts for difference scheme. We have, this week, given the tidal stream sector the chance to push on and try to do the same. It will all be to our benefit and to the benefit of our planet and environment if the sector succeeds in this endeavour.
Question put and agreed to.