Marine Renewables: Government Support

Alan Brown Excerpts

Wednesday 7th December 2022 Westminster Hall

[Mr Carmichael]

I very much agree, and I should acknowledge the support that the hon. Lady has given to EMEC over the years. I am grateful for the support from across the political spectrum, all parties and none, and I will come on to talk quite a lot about EMEC later on.

It is worth reflecting for a second on how we have reached this point. Despite the fact that these are significant commercial enterprises—essentially competitors—the companies working in the sector have presented a united and strategic case to Government and investors. That has been enormously important, and since we still have some way to go, I hope that approach will continue. Trade bodies RenewableUK and the UK Marine Energy Council have also been critical in maintaining that unity of purpose and message, as has, in our own small way, the all-party parliamentary group on marine energy, under the chairmanship of the hon. Member for Gloucester (Richard Graham), who I am delighted to see in his place.

It is invidious to single out individuals when the story is one of team success, but the leadership that Neil Kermode has given as director of the European Marine Energy Centre in Stromness in Orkney has allowed that body to fulfil the role it was set up for almost 20 years ago. I do not think the Minister has yet visited EMEC, but he may wish to make his way there once we are through the winter and the days are slightly longer again, so that he can see for himself the work that has been done and continues to be done not just at EMEC but on the Heriot-Watt campus at the International Centre for Island Technology and the full range of private companies that have been established as spin-offs from these bodies.

I mention EMEC, and am keen for the Minister to visit, not just to give it the recognition it has earned, but to engage the Minister’s attention in the issue of funding. EMEC’s success has been built on Interreg funding, which was a dependable source of funding for as long as long as we were part of the European Union; it was an easy fit. Since we left the European Union, however, the shape of future support that replaces what came through Interreg is still not clear, and for EMEC that could soon become critical. My first ask of the Minister, therefore, is whether he will meet me and a delegation from EMEC so that we may identify future sources of funding.

The Government have now made a significant commitment to marine renewables through the fourth allocation round, and EMEC remains central to delivering the full potential of the Government’s commitment. That may be in the Department for Business, Energy and Industrial Strategy or the Department for Levelling Up, Housing and Communities, or it may fall within the remit of the Scottish Government—perhaps it is some combination of them all—but having come so far we cannot now allow that critical operation to fall between the gaps of Government.

I hope this morning’s debate will be an opportunity for us to stop and take stock of where we have got to, to explore some barriers that remain on the road to development and commercialisation, and to look forward to where we go from here—in particular, to what decisions we need to see made as we move towards the next round of contracts for difference allocation round 5.

It is worth reminding ourselves what is at stake. The United Kingdom has the potential to develop about 1 GW of tidal stream energy by 2035 and up to 11.5 GW by 2050. That is equivalent to over three times the generation capacity of Hinkley Point C. The costs of technology have fallen significantly in recent years. Analysis published by the Offshore Renewable Energy Catapult this autumn showed that that tidal stream can become not only a significant part of our future energy mix, but a cost-competitive one. If the sector is supported, by 2035 tidal stream could provide power at £78 per megawatt-hour; compare that to Hinkley Point C at £92.50 per megawatt-hour. By 2042 that figure could be £60 and by 2047 we could be looking at something in the region of £50. That is about £10 per megawatt-hour more than wind and solar today but, importantly, without the challenges of unpredictability.

The real opportunity that comes from the development of tidal stream power in particular is the chance to develop the baseload capacity that will be so important and to remove the intermittency of renewables. For so long the missing link has been the funding that would give wave and tidal energy the chance to develop commercially, and, as we know from other renewable technologies, once the process of the commercial roll-out is under way, the costs fall like a stone.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I thank the right hon. Member for bringing forward this debate. He rightly makes the comparison with nuclear strike rates, but in doing so we should remember that the £92.50 strike price for Hinkley Point C is a 35-year contract, whereas tidal stream is a 15-year concession so it is even better value for money. Does he agree?

[Mr Carmichael]

That is a perfectly fair point. I make the comparisons, but I do not want to set one technology off against another; that is not in the interests of the industry. It is important that the figures are taken in the round when we look at getting value for money for the taxpayer.

Marine renewables is an industry that has the potential to support thousands of jobs across the United Kingdom—good-quality manufacturing jobs that bring with them the opportunities to grow an export industry, which would be an obvious route towards a just transition for many of those currently working in oil and gas. The oil and gas industry has been a critical part of the economy of the Northern Isles for the last 40 years, and I believe it will be a critical part of getting to net zero. Indeed, it is difficult to see how we could get there without having an industry on the UK continental shelf. The industry has a number of excellent apprenticeship programmes. When I talk to the young men and women who are undertaking those apprenticeships now, at the start of their career, I am struck by the fact that they tell me they believe that by the end of their working lives they will be working not in oil and gas, but in marine renewables.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. Like everybody else, I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on bringing forward this debate. As with many Westminster Hall debates, the main thrust is clearly one that all contributors agree with—in this case, it is support for marine energy.

The right hon. Member for Orkney and Shetland is lucky to have the European Marine Energy Centre in his constituency, a facility I have visited. This world-leading facility came about partly due to the EU. As the right hon. Gentleman said, the EU funding scheme must be replaced by the UK Government to keep the centre going. The UK Government want to talk about levelling up, so there should be no ambiguity about providing replacement funding for the EMEC.

The right hon. Gentleman rightly highlighted the success of the fourth allocation round of CfDs, with Orbital Marine Power awarded 7.2 MW, SIMEC Atlantis awarded 28 MW through the further development of the MeyGen site—the world’s largest—and Magallanes, in Wales, awarded 5.6 MW. It was a pleasure last week to hear at a meeting of the marine energy APPG that all those projects are on track to deliver their AR4 commitments.

As the right hon. Gentleman said, the crucial things about tidal stream development are the jobs and manufacturing it creates in the UK, the export opportunities it provides, and that it forms part of the just transition for the oil and gas sector.

[Mr Carmichael]

The hon. Gentleman is absolutely right to draw attention to the fact that all these projects are on track with their timescale. However, the timescale we heard about at the briefing at the APPG meeting will still see the earliest device going into the water in 2027. That shows the problem with the pace of deployment.

[Alan Brown]

I agree with the right hon. Gentleman, and that is why further support is needed. In many ways, though, that also shows the pace of deployment to deliver these projects in the next few years. Looking at the Government’s overall renewable energy targets, it is really important that they back many sectors, particularly tidal stream.

I agree with the key asks mentioned by the right hon. Gentleman, including continuing the ring-fenced pots, reforming CfDs to continue to incentivise supply chain development, the 1 GW target for 2035 and, importantly, section 36 consent reform. I ask the Minister to work with the Scottish Government on that, because the regulations are reserved to Westminster.

I commend the hon. Member for Gloucester (Richard Graham), who chairs the marine energy APPG and does a lot of good work with it. It was good to hear him rightly commend the Scottish Government for our commitment to support in the 2022-23 programme for government and, although he did not say it, initiatives such as the Wave Energy Scotland technology programme, which committed £50 million for development of these technologies. It is not often that I say this in a debate, but I welcome and support the hon. Gentleman’s call for further investment in England, because that will help develop the supply chain right across the UK. Importantly, I agree with what he said about the need to support companies such as Nova Innovation to stay in Scotland and the UK.

[Richard Graham]

I thank the hon. Gentleman for all his comments. Will he pursue with Marine Scotland the anomalies in the speed of its processes, which seem to be holding up marine energy projects? For example, I understand that EMEC’s Billia Croo section 36 consent has only been sent on a year after it was ready to go for ministerial approval, and that the scoping opinion for EMEC’s 50 MW Fall of Warness consent application was completed in August, but the Marine Scotland team has still not forwarded the responses four months later. Does he agree that it is time for Marine Scotland to speed things up?

[Alan Brown]

I need to move on. However, if there are any blockages, I am happy to support streamlining. I know that Marine Scotland has massively increased its resource to try to speed things up in terms of its assessment and processing. However, if more needs to be done to streamline things, I support that. I remind the hon. Gentleman that, as I have said, the section 36 regulations are reserved to Westminster. However, I am happy to support any streamlining of the process to ensure we get deployment.

I congratulate the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) on her contribution. She rightly highlighted that these technologies encourage redevelopment and regeneration. Energy Island is a fantastic development that will move from fossil fuels to renewable energy. I support the call for an innovation report for CfDs and the call for the ability to group multiple technologies together, because that would facilitate the development of green hydrogen as well.

As always, the hon. Member for Strangford (Jim Shannon) made a fantastic contribution to the debate. He talked particularly about the developments for Strangford lough in his constituency. I liked what he said about helping to support the working poor in a drive for wages.

I completely agree with the hon. Member for Bath (Wera Hobhouse) that when it comes to nuclear, there is a lack of competition to bring costs down. I support her call for community energy. That has happened in Orkney through hydrogen development and the roll-out of electric vehicles; party of that community energy comes from marine energy.

[Wera Hobhouse]

Will the hon. Gentleman give way?

[Alan Brown]

Sorry, I need to go on.

It might have taken slightly longer to get to this point and there are good reasons for that, but Scotland leads the world in wave and tidal stream technology. The deployment of tidal stream to date has come about because of a combination of the tenacity and drive of the developers; Government support, particularly that of the devolved Administrations; and the presence and work of EMEC.

Of course, a big reason for our optimism about the future is the £20 million ring-fenced pot that was allocated in AR4. That sent a clear message to investors and allowed certainty for the market. The message is clear: continue this £20 million ring-fencing in AR5 and, as a minimum, do the same for AR6. However, what would really help industry is a long-term view of what funding could be available. Hopefully the Minister will confirm that AR5, which is due to be announced later this month, will contain some ring-fencing.

We know what happened with offshore wind, where pipelines of projects brought prices down dramatically and much quicker than was originally intended. That was a real success story and one that the UK Government are proud of. As we look to the future, there are some things that can be replicated with tidal stream. That can be as big a success, but one that is based on UK supply chains and that will lead to our exporting the technology and patents.

The UK has 11.5 GW of potential, which equates to 11% of the UK’s current electricity demand. It goes without saying that the flows of tides are entirely predictable, so if there is a belief in the need for so-called baseload, tidal stream can clearly be part of that.

Of course, it is the reliability and predictability of this green energy that is so important. As we have heard, it is also cost-efficient, particularly if given the right Government backing. The 40 MW allocation in AR4 will be delivered at £178 per MWh, which is already 15% below the administrative strike price and represents a 40% reduction in the levelised cost of energy since 2016. As we have heard, it could go as low as £78 per MWh by 2035 and below £50 per MWh by 2050. However, such cost reductions are possible only with continued Government backing.

As we have heard, those prices compare very favourably to the strike rate for Hinkley Point C, which is £92.50 per MWh, and, as I have said, that is a 35-year concession as opposed to a 15-year concession. If we work that 35-year concession backwards, tidal stream is already as cheap as nuclear, or cheaper, albeit not at the same scale, so I admit we are perhaps not comparing apples with applies in terms of output. Nevertheless, in that comparison, tidal stream is already cheaper than nuclear. Tidal stream does not have the backing of Sizewell C, which has just been allocated £700 million of taxpayers’ money just to get to the final investment stage. Again, what we are calling for is continued Government backing that will see tidal stream developed quicker and in a way that is much more beneficial to bill payers.

Given that time is running on, I will sum up by reiterating what the key asks are for industry. We must maintain the tidal stream energy ringfence in future renewable options, which is worth at least £20 million in AR 5. We want the Government to set a 1 GW target for 2035 to send, again, that strong signal to investors. Small modular reactors at Sizewell C will not be able to achieve that target in that timeframe. We want to expedite the route to market for UK projects. That goes to the point other Members have touched on about the consenting process, which needs to be sped up.

Other contributors have also said that the UK needs to increase the pace and scale of its investment in its electricity grid. We should do an exercise where we ask, “What does 2050 look like in terms of where energy generation takes place?” From that, we can map out what grid upgrades there need to be, instead of continuing to incorporate constraints, in the way that short-term lookaheads for grid upgrades have done.

We ask that a renewables investment allowance be created. When we are trying to embrace a renewables revolution, it makes no sense to have an oil and gas investment allowance, which offsets the massive profits that oil and gas behemoths are making, but not to have an investment allowance that encourages them to invest in renewable energy, to divest and to pursue that long-term just transition to net zero.

There really is a fantastic opportunity for renewables as a whole in the UK and a fantastic opportunity for tidal stream technology to continue to be world leading, to be manufactured here and to be exported to the rest of the world. It just needs that continued support, and hopefully the Minister will tell us that that is what it will get.

[Kerry McCarthy (Bristol East) (Lab)]

As always, it is a pleasure to see you in the Chair, Mr Hollobone. I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing the debate. We have had quite a tour of the UK today, from Orkney and Shetland down to the south-west of England via Wales and Northern Ireland. I smiled a little when the hon. Member for Strangford (Jim Shannon) said it was his desire to talk about Strangford lough that brought him here today, given how omnipresent he is in Westminster Hall debates, but as always his contribution was valued.

This is one of those ideal Westminster Hall debates, where everyone has something of real interest to say and is not political point scoring, but trying to speak with a common purpose, highlighting individual and local concerns. What has come through clearly is a desire for clarity from the Government and for support for the sector, so that it feels that the Government are behind the desire to harness our marine energy resources and we can expedite the roll-out. As has been said, value-for-money decisions or calculations that were made some time ago may need to be reassessed in the light of the current energy situation. The point was made that, once we get to a tipping point, things become a lot cheaper.

We know we need a diverse mix of energy sources if we are to get to net zero. It is always frustrating when clean energy sceptics say, “What happens when the sun doesn’t shine or the wind doesn’t blow?” and conveniently ignore the fact that our tides, as the hon. Member for Kilmarnock and Loudoun (Alan Brown) said, are a predictable source of energy and something we should be harnessing. We could also use hydroelectric reservoirs, which I do not think anyone has talked about, which release stored water and therefore generate energy at short notice.

I will pick up some of the points that other hon. Members have made as I go through my speech, but I want to start by talking about some of the really inspiring projects that are in the pipeline. The groundbreaking Blue Eden project in Swansea will generate 320 MW of energy, create 2,500 jobs and support another 16,000 in the supply chain. It was interesting to hear about the potential of the blue energy island, which is a small way to make a real difference.

In Merseyside yesterday, metro Mayor Steve Rotheram signed a deal with the South Korean state-owned water company, which owns and operates the world’s largest tidal range scheme, to develop the Mersey tidal power project, which could generate enough energy to power 1 million homes. It will create thousands of jobs and help the region get to net zero by 2040.

In Cumbria, where the Government are about to give the go-ahead to a new coalmine—I thought we might have had the news by now—there is the potential for thousands of jobs in green industries such as offshore wind, tidal power and green hydrogen. The choice facing us is whether we doggedly rely on dirty fossil fuels—hon. Members mentioned the investment allowances being put into new fossil fuel exploration instead of supporting renewables—or embrace the green industries of the future and the potential for jobs. The right hon. Member for Orkney and Shetland said that 80% of the content is UK-generated, which will have a great impact on the supply chain. It is a no-brainer that there should be Government backing behind that.

In my local area, the Western Gateway group of local authorities has set up a new commission to explore tidal options for the Severn. The hon. Member for Gloucester (Richard Graham) knows that that has been an ongoing discussion ever since we have been in Parliament. Talks stalled in the early years of the coalition Government. There was a feasibility study. There were concerns about the cost, and talk about whether a barrage or tidal lagoons would be the better option.

There were also valid concerns about the impact on the natural environment in the estuary. We have not touched on that much today, because people are so excited about the potential of tidal power, but we have to look at some of the possible negatives. In the case of the Severn, there were concerns about the impact on migrating bird life at the wonderful wetlands at Slimbridge, for example. Environmental campaigners have also expressed concerns about the Morecambe bay project.

I hope we can find a way through this and harness the potential of the Severn, which has the second-highest tidal range in the world, but we need to do so in an environmentally sensitive way. More generally, we need to look at preventing sea life from being caught in the blades of the turbines and to assess the impact of vibrations and noise on marine mammals that echolocate to communicate and navigate, such as whales and dolphins. Such things need to be taken into account.

I recognise that the costs of tidal stream are far higher at the moment than those of solar and wind, but they have fallen significantly in recent years and are expected to fall further still. The comparison was made with Hinkley Point C. As the right hon. Member for Orkney and Shetland said, it is not about setting one off against the other and saying either/or; it is about making that comparison. If we are investing in Hinkley Point C, we should be looking at renewable options. It is estimated that, by 2035, tidal stream could provide power at £78 per MWh, which could fall to £50 per MWh by 2047 —quite a few Members have mentioned those statistics.

[Alan Brown]

The hon. Lady says it is not an either/or, but the reality is that if too much money is invested in nuclear, its generation capacity means that there is not enough scope for renewables coming on to the grid, so in some cases it is an either/or.

[Kerry McCarthy]

The hon. Gentleman answered his own question earlier by flagging up the investment allowances attached to the windfall tax that are being given to the fossil fuel companies. That money should be directed towards this investment and not towards fossil fuels. It is not money for nuclear versus money for renewables; it is money for fossil fuels versus money for clean energy sources.

We have talked about the UK having the potential to develop around 1 GW of tidal stream by 2035 and up to 11.5 GW by 2050. National Grid’s future energy scenario models up to 3% of UK electricity demand being met by marine renewables by 2050, but we need to do more to release that potential. According to Energy Monitor, 14 GW of planned UK power capacity has been cancelled, is dormant or is stuck in the early stages of development but, as has been said, lack of investment and of a clear sense of direction are not the only barriers.

The grid has been talked about—it is a massive issue—and we have heard about the Welsh Affairs Committee report. The same issues come up time and again when I talk to people as part of my shadow role: long waits—sometimes of up to 10 years—to connect clean power sources to the grid, delays to projects and investors being deterred.