Offshore Renewable Energy (East Anglia)

Charles Hendry Excerpts

Tuesday 31st January 2012 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

It is a pleasure to serve under your chairmanship, Mr Leigh. I am delighted to congratulate my hon. Friend the Member for Waveney (Peter Aldous) on securing the debate. He has shown a long-term interest in the scope for East Anglia to become a leader in renewable technologies and, within the Department of Energy and Climate Change, we are very grateful indeed for his constant support. I am delighted that he is supported today by some of my hon. Friends who represent Suffolk constituencies. They share his ambitions for East Anglia and how it can take advantage of the opportunities that are clearly there.

My hon. Friend is absolutely right to say that there are bright prospects for East Anglia and that this is an area where international opportunities could develop for the businesses setting up and operating within Norfolk and Suffolk. The expertise they can gather is something they can certainly take overseas as well. Earlier on in this Government, the Prime Minister said that we would be the greenest Government ever. The actions that we in DECC have since taken have shown how seriously we take that commitment.

I well remember my visit to my hon. Friend’s constituency a year ago, when I had the chance to go with him to the OrbisEnergy centre to meet some local business leaders to try to understand the commitment, enthusiasm and excellence that they can bring to this area. On that visit, I was also pleased to have a chance to go to Great Yarmouth, Sizewell and Norwich to see for myself how well poised East Anglia is to take forward opportunities in the low-carbon sector. I have also had opportunities since then to talk to the New Anglia local enterprise partnership. I am very encouraged by its enthusiasm and commitment to make the best case for businesses in East Anglia and to address the skills issue, which my hon. Friend rightly mentioned.

As my hon. Friend said, since my visit, both Lowestoft and Great Yarmouth have been designated centres for offshore renewable engineering, or COREs. That is a great achievement and a tribute to the skills that are already based in those areas. Both towns are home to an impressive energy sector supply chain, with some 500 businesses employing more than 10,000 staff directly within the two port areas, and many times more people in the wider supply chain spread across East Anglia more generally.

My hon. Friend raised the issue about supply chain opportunities. I want to reassure him that the Government are not neutral about that. We are sending a clear message to those who are developing the offshore facilities that we would like them to give British companies every opportunity to pitch for their business. My concern is that sometimes they are not even on the tender list. We are going to great lengths to ensure that they get the chance to pitch. At the end of the day, it is a commercial decision, but we are very happy to call up the chairman and the chief executives of those companies investing here to highlight to them the strengths of British companies and those companies operating out of the United Kingdom in this area.

My hon. Friend also raised the issue of the UK ports funding scheme. As he will be aware, that shifted from being a ports project across the whole of the United Kingdom to an economic development scheme, because we felt it was important to link the development of the port to a specific economic activity. As a result, under EU state aid rules, the funding can go only to assisted areas. However, it is encouraging to note the extent to which companies are willing to look outside the assisted areas for where they see the right port facilities and the rights skills base. We are seeing some good, encouraging interest from companies looking at the United Kingdom more generally.

Great Yarmouth and Lowestoft are home to some of the leading offshore wind companies, including ScottishPower Renewables, Vattenfall, SSE, Seajacks, ODE, Gardline, SLP Smulders, CLS, Petrofac and AMEC, among others. Lowestoft is already the operations base for the Greater Gabbard wind farm and is well positioned to take advantage of future developments. Later this year, we expect the first offshore wind project from the East Anglia zone—East Anglia ONE—to submit its application for development consent to the Infrastructure Planning Commission. East Anglia is well positioned to take advantage of future wind farm developments.

My hon. Friend understandably picked up the issue of planning. During this year, those decision-making powers will be transferred from the Infrastructure Planning Commission, where such decisions are currently taken, directly to Ministers. The one thing we have been absolutely clear to enshrine in that is the time scale. The final decision will be taken by Ministers, which means there will be no extra delays as a result of the process. Somebody can be sure that, within just over a year of submitting their application, they will have a determination. What frustrates people most is not being turned down; it is the absence of a decision at all. People want to know whether their investment is likely to go ahead and therefore we are keen to ensure that they have that clarity.

I am sure that my hon. Friend agrees that the future of the UK’s energy supply has to be secure, flexible and low carbon. We envisage a mix of low-carbon generation made up of new nuclear, carbon capture and storage, and renewable sources. We must also combine that with energy efficiency, as the cheapest energy of all is the energy not used. In all those areas—nuclear, carbon capture and storage and renewable sources—East Anglia has an extremely important role to play. The skills base and expertise that are already there are very encouraging and the ambitions of the companies involved to take this forward is something we can truly celebrate.

Renewable energy, and offshore renewables in particular, are set to be a major part of our future energy supply. Some technologies, such as onshore and offshore wind, are already established and some, such as wave and tidal, are still emerging, which is why we have given the higher level of ROC support to them. It is absolutely clear that offshore wind will play an important part in the UK’s energy future. It is a low-carbon energy source. It is also a domestic energy source, which means that it will play a role in securing our long-term energy security.

The UK is already the world’s biggest offshore wind market. We are working hard to maintain that position, and are determined to do so. We already have the most installed capacity and this is only the beginning. We also have the biggest pipeline of projects to 2020 of any country. Deployment of offshore wind will require an investment of tens of billions of pounds. For that huge sum to be invested by industry, we need to do all we can to ensure that developers, investors and manufacturers have confidence in the market and see the UK as the No.1 destination for their money.

Electricity market reform, as my hon. Friend rightly says, will give confidence and long-term visibility to investors, and will encourage the investment we need to renew our generating infrastructure. We have seen great progress in just a year-and-a-half, since the Government were elected. It was not even on the agenda before the election. In the course of just more than a year-and-a-half, we have established the structure of an entirely new electricity market—massive progress that we will shortly enshrine in legislation, but with ongoing discussions with developers to ensure that, if they need to make earlier decisions, they will understand how the funding will work to secure their investments.

Our reforms to the planning system will ensure faster, more efficient consenting, while retaining democratic accountability. We are currently considering the responses to the consultation on the bands for the renewables obligation to ensure appropriate levels of support for renewable technologies and value for the taxpayer and consumers. We are creating the green investment bank, to which my hon. Friend referred, to deliver financial interventions that address market failures specific to green investment needs, thereby supporting growth and environmental objectives. One of the priority areas for the green investment bank will be offshore wind.

We are working with Ofgem to ensure cheaper and timelier offshore grid connections, to encourage innovation through competition, and to enable new entrants to compete in the market. Ofgem has already run one successful tender round for offshore transmission and is in the process of running a second.

My hon. Friend rightly raised the issue of onshore grid issues. This week, the Institute of Engineering and Technology publishes a very authoritative report, which goes into more detail than anything I have ever seen before, about the comparative costs of undergrounding and overgrounding. Where it is possible to use existing infrastructure, that should of course be part of the process, because significant concerns have been raised.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

I congratulate my hon. Friend the Member for Waveney (Peter Aldous) on all his work in pushing Suffolk to be the greenest county and for Waveney to develop a national leading hub, and I acknowledge the support given by the Minister.

The issue of where cabling goes is very important. Suffolk wants to be the greenest county, just as the Government want to be the greenest Government, but it would be a contradiction in terms if developing the green hub means putting pylons all over the countryside. I ask for the Minister’s support in pushing those energy companies hard to ensure that pylons are not installed in a way that will destroy the beautiful Suffolk countryside.

[Charles Hendry]

I am grateful to my hon. Friend for his interest and for the recent event he hosted for businesses in East Anglia to talk about that matter. He raises an issue that is current and important. We face the absolute fact that when electricity is generated we need to find ways of getting it to market, and that requires a massive upgrading of our grid infrastructure. We have made changes to how that is dealt with. In a national policy statement on grid, we talked about the need to explore alternatives to overgrounding. The report published this week by the IET is a further example of our determination to get a clear understanding of the facts. The companies involved—National Grid, in particular—are in no doubt whatever about the public anxiety that this can create, and they are looking at ways of ameliorating that. I am encouraged from my discussions with them that they are keen to explore how best to ensure that a new generation comes through in a way that is harmonious with the communities through which that electricity will pass.

Offshore wind is quickly making the jump from an emerging technology to a major part of the UK’s electricity supply. Through the industry-led Offshore Wind Cost Reduction Task Force, we are working to create an action plan to bring down the costs of offshore wind to make it cost-competitive with other forms of low-carbon generation. The task force will report to Ministers in spring. It is clear that industry and investors recognise our commitment to offshore wind. Many companies, including those in East Anglia, are gaining access to that new market. I want the UK to benefit from the jobs associated with offshore wind, not just from the low-carbon electricity. I want UK companies not just to supply UK wind farms, but to start supplying other countries, too.

The supply chain is already building up to support the wind sector, and it is doing good business. As this debate is focused upon East Anglia, let me just pick a few recent examples since April 2011. Gaoh Energy, in the constituency of my hon. Friend the Member for Waveney, has secured a met mast order for the Moray Firth offshore wind development. In the constituency of my hon. Friend the Member for Harwich and North Essex (Mr Jenkin), there is a new energy skills centre, where courses will be offered to support the UK offshore wind industry from early 2012. It will eventually be able to accommodate more than 200 young people a year on engineering and welding courses. Wells Harbour, in the constituency of the hon. Member for North Norfolk (Norman Lamb), has secured contracts for work at Sheringham Shoal offshore wind farm.

We are therefore already seeing some key investments coming forward, and not just in the domestic market. Seajacks, which is based in the constituency of my hon. Friend the Member for Great Yarmouth (Brandon Lewis), has won a £100 million order to supply the Meerwind offshore wind farm in Germany. There is no doubt that the levels of deployment we are likely to see in the UK and in Europe are far in excess of current production capacity—rapid scaling up will be needed. That offers the potential for significant employment and economic benefit for the UK, with the opportunity to create a broad manufacturing base in a high-value-added sector that, partly as a result of the sheer size of the turbines, really needs to be somewhere close by. I intend it to be here in the UK.

The industry is at an early stage of development, but is set for huge growth. The UK is well placed to make the most of it, and the Government intend to do so. We have a strong research and development capability, and some excellent engineering, technology and manufacturing opportunities. In East Anglia, I have seen for myself some of the outstanding examples of businesses that are ready and able to take advantage of those opportunities. I have met the people in the local authorities who are determined to ensure that the educational provision is there to bring forward the skill set. I have met with the local enterprise partnership, too. That, combined with the immense commitment and enthusiasm of my hon. Friend the Member for Waveney, and my hon. Friends from other parts of the county, shows that this is an area with immense potential and we look forward to it being realised.

Question put and agreed to.