Offshore Renewable Energy (East Anglia)

Peter Aldous Excerpts

Tuesday 31st January 2012 Westminster Hall

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Leigh. I am very pleased to have secured this debate, because it provides an opportunity to focus on the East Anglia offshore renewable energy industry at a particularly important time in its fledgling life. Much work has already been carried out, both by the Government and industry, and exciting times lie ahead, if the right policy and investment decisions are made and seen through.

The future can be bright; thousands of new jobs can be created; the economy can be rebalanced towards the regions and towards engineering and specialist manufacturing; and the country can have a source of energy that is secure, stable in terms of price and environmentally friendly. Looking further ahead, we can build an industry that can compete on a global stage, with firms taking their services and skills around the world, and in due course we can become net exporters of electricity, instead of being importers vulnerable to fluctuations in fossil fuel prices.

We are at the dawn of a new era. The two largest wind farm developers off the coast of East Anglia—Scottish and Southern Energy and East Anglia Offshore Wind—are about to enter important stages in the process of obtaining the necessary statutory approvals for their developments. Moreover, the Lowestoft and Great Yarmouth enterprise zone, which is focused on the offshore energy sector, will come into operation on 1 April.

These are exciting times, but it is important that we ensure that we realise the full potential that this opportunity presents for the East Anglia economy. The Thanet wind farm is a great engineering feat, but much of the value generated by that project went to companies outside the UK. Non-UK ports have been large beneficiaries of the round 1 and 2 offshore wind farm projects. Lessons must be learned so that we can ensure that our coastal communities, such as that in Lowestoft in Waveney, which I represent, benefit fully from this opportunity.

Much good work has already been done and the foundations have been laid. The original foundation stone, which has been there since time immemorial, is the North sea, one of this island’s most vital assets. It is a great resource, out of which the fishing industry in Lowestoft and other ports was created, only to be reduced to a shadow of its former self by the common fisheries policy. The North sea also gave us the oil and gas industry, which has many features that are transferrable to the renewable energy sector—skills, a supply chain of approximately 500 businesses employing more than 10,000 people across Suffolk and Norfolk, and the best health and safety regime in the world. Now the North sea offers another dividend, in the form of wind in the immediate future and, in due course and with the right nurturing, wave and tidal power.

I should emphasise that, while I want to ensure that we realise the full potential that the North sea has to offer, I am conscious that it is an asset, a treasure that we should nurture for future generations. The role of guardian is played by organisations such as the Centre for Environment, Fisheries and Aquaculture Science, which is based in Lowestoft, has a long track record of applying science in the management of fisheries and provides sound impartial advice to support the green economy.

The OrbisEnergy centre in Lowestoft has become a centre of excellence for the offshore renewables sector. Six sites in and around Great Yarmouth and Lowestoft form part of the enterprise zone. The New Anglia local enterprise partnership is a green economy pathfinder, and Lowestoft and Great Yarmouth ports have been granted CORE status as one of five centres for offshore renewable engineering.

All that work is to be applauded, but various challenges need to be addressed if the industry’s full potential is to be realised in East Anglia, and I shall outline those challenges in the time remaining. The first is the policy framework. The offshore renewable industry is highly mobile—investment will flow to the most attractive destinations. It is, therefore, important that the Government send out the right message that there is a stable fiscal regime and a secure support mechanism to encourage the necessary investment in new technologies.

My right hon. Friend the Member for Mid Sussex (Nicholas Soames) addressed the need for a stable fiscal regime when he referred to the oil and gas sector during his Adjournment debate last week. On the need for a reliable support mechanism, the Government’s proposals in the consultation on renewables obligation banding for offshore wind and wave and tidal technologies are acceptable to the industry, but it is vital that those for offshore wind are not reduced any further, because that could delay the projects, and wind supply chain companies might be tempted towards competing European nations.

It is also important that electricity market reform mechanisms are delivered quickly and at a level that gives confidence to developers, investors, manufacturers and contractors to invest in the post-2017 opportunities that will come from the round 3 wind farms.

On the wave and tidal sector, the proposed five renewables obligation certificates per megawatt-hour will help the UK maintain its lead over the other competing nations in this emerging sector, and that can be reinforced if support is forthcoming from the green investment bank. It is also important that the UK takes a lead role in developing transparent European market rules that in due course will allow us to export surplus renewable energy to Europe and vice versa.

The second challenge is planning. As I have said, both SSE and EAOW are at crucial stages in obtaining consent for their developments. There is a concern that the consent process is taking too long, that statutory bodies are not showing sufficient flexibility in considering applications and that they should adopt what the developers call the Rochdale envelope approach.

Delays could have a negative knock-on effect on investment decisions in relation to the wind farms themselves, in terms of the creation and reinforcement of supply chains and in relation to grid connections. That could lead to a loss of confidence in the UK sector just as it has become a world leader. It is important that decisions are made promptly and that statutory consultees are properly funded to cope with the number of planning applications, which will increase dramatically with round 3 applications.

RenweableUK, the trade body for the wind and marine industry, has recommended the establishment of a stakeholder resource fund to build capacity and expertise among statutory consulting bodies. It recommends a total spend over the next three years of £12 million and that the industry should be open to considering the possibility of making contributions itself.

Further down the line—although this is already concentrating people’s minds in Suffolk and Norfolk—is how best to connect the East Anglia Array, which will generate electricity equivalent to five Sizewell C power stations, to the national grid.

Traditionally in Britain, electricity has been generated in the north and the midlands and has been transported up and down the spine of the country. We are now looking to change this axis so as to transmit power in an east-west direction. It is important that, if possible, use is made of the existing infrastructure. At present, the National Grid Company is establishing whether that will be possible. If not, it will be necessary to provide a new transmission route. In doing so, open dialogue will be vital from the outset between communities, the National Grid Company and councils, to ensure that all factors are taken into account when determining the most appropriate and best means of transmission, whether overground or underground, and when determining cost—both immediate and whole life—and environmental impact.

All parties must face up to this challenge. With 25% of the current electricity generating capacity due to be retired by 2016, it is important to move quickly to ensure that the lights do not go out. At the same time, however, we must not unnecessarily blight what is a special landscape.

Thirdly, it is important that we ensure that people in Suffolk and Norfolk have the necessary skills to take up the many jobs that will be created. At a recent seminar on supporting young people in Waveney, which I held jointly with Jobcentre Plus, Mark Jones, the managing director of Lowestoft-based AKD Engineering, spoke graphically about the importance of doing this and the fact that, if we do not, a once-in-a-lifetime opportunity to bring prosperity back to the Lowestoft and Yarmouth area will be lost, with work going elsewhere. The further education and apprenticeship policies that have been enthusiastically promoted by the Minister for Further Education, Skills and Lifelong Learning provide an ideal basis on which to build, but we also need to promote the teaching of science, technology, engineering and maths in our schools.

The technology and innovation centre for renewable energy needs to be up and running as soon as possible, and I hope that organisations such as OrbisEnergy and CEFAS in my constituency will play an important role in that project. The private sector and the East of England Energy Group, through its skills for energy programme, also have a key role to play, and it is important that national and local government work with them.

Fourthly, it is important that the supply chain is reinforced. The enterprise zone and CORE designations will help do that. We should promote manufacturing processes, whether they involve turbine manufacturing, foundation manufacturing or the provision of sleeves for turbines. If we can encourage those to take place in East Anglian ports, it will help to support supply chain businesses. That will lead to costs being driven down, which will make offshore wind more affordable and, in turn, will consolidate the UK’s position as a world leader in this sector.

A problem that supply chain companies often face is that they need three types of contract to come together at the same time: the contract with the wind farm developer for the provision of a piece of equipment, the contracts with sub-contractors for component parts, and, finally, a financing agreement with their bank. At present, securing any one of those three types of contract requires certainty on at least one of the other two. That leads to an unenviable chicken and egg problem. A means of addressing that dilemma would be for the green investment bank to offer loan guarantees to offshore wind projects entering the construction phase. I would be grateful if the Minister could look into that.

Finally, I come to infrastructure. Good infrastructure is vital. In previous debates, I have emphasised the importance of improving road, rail and broadband links to the East Anglian coast, which is very much at the end of a line. I will not restate that case here, other than to repeat the need for investment in the road network in and around Lowestoft, which is currently gridlocked as a result of sewer repairs taking place in Station square.

Instead, I want to emphasise the importance of two other types of infrastructure investment—first, ports and, secondly, the grid. The enterprise zone and the CORE initiatives will help Lowestoft and Great Yarmouth ports, but they are at a disadvantage both when compared with other British ports that are in assisted areas and that benefit from capital allowances and the £60 million UK ports competition, and when compared with European ports that are in public ownership. I wholeheartedly support the tradition of private sector investment in UK ports and the advantages of innovation and dynamism brought to the industry by a market-based approach. However, East Anglian ports need to be able to compete on a level playing field. I therefore urge the Government to consider the provision of a three-year replacement fund that would act as the equivalent of the capital allowances and port infrastructure funding that is available elsewhere.

With regard to the grid, there is the need not only for upgrading with additional transmission and distribution capacity, as I have mentioned, but for a smart grid and a European supergrid. That would allow peaks and troughs in electricity generation to be smoothed out while enhancing security of supply and, in due course, enabling Britain to export electricity, thereby helping the balance of payments.

In conclusion, this is not a plea for a blank cheque, although the coastal communities fund should recognise the contribution of offshore wind farms to the UK economy. The Government have already made a significant investment and are pursuing the right policies. However, we need to ensure that such policies come to fruition and that they hit their two targets: first, to achieve a secure low-carbon energy supply with less price volatility and, secondly, to build a new industry in which Britain is a world leader and to create new jobs.

East Anglian people and businesses want to be at the forefront of this drive. On their behalf, I conclude by saying this to the Minister: work with us and together we can not only hit these targets, but achieve the economic growth that this country so urgently needs at the current time.