Declining consensus
There was great concern that a political consensus that had more or less been established before the financial crisis was unravelling. Barry Gardiner MP certainly felt aggrieved that, just a few years ago, all parties had broadly agreed on a mixed energy policy including a strong renewable element. Julie Elliott concurred pointing to the consensus at the time of the passage of the Climate Change Act in 2008 compared to the present day.
Lord Whitty put much of this down to a combination of the recession and increasing complexity and misinformation. He also worried that the antagonism to renewable energy had “infected the media and the commentariat generally.” Glyn Davies MP on the other hand suspected that an antipathy to specific onshore wind projects had spread to all wind energy and now to all renewable energy.
A need for certainty
Whatever its cause, the damage of this declining consensus is not to be underestimated according to the participants. The impact on investment of a lack of certainty is potentially severe. The roundtable took place a matter of hours after RWE announced their withdrawal from the Atlantic Array project providing a real world example. JDR Cables’ Andrew Norman added to this with the example of one of their own partners who had backed out of a decision to build an export cable facility in the UK due to the recent policy uncertainty.
Norman then outlined his ideal scenario of a “clear cross-party agreement which states ‘this is the direction and we’ll stick to it’ that would make investment decisions a lot easier and lead to economies of scale.”
RSA’s Steve Kingshott echoed this sentiment. As the world’s biggest wind turbine insurer, RSA seek to reduce the cost but to do so need reduced risk. Kingshott pointed out that “financiers, developers and contractors are all building a margin into prices in this market” due to the lack of certainty.
Vestas’ Sarah Merrick added her own voice to this case suggesting that “the whole debate is incredibly toxic to investors” and suggesting that the length of vision in the UK is “myopic.”
However it was not just the industry voices at the table that raised this concern. The parliamentarians were similarly worried about the impact, with Ian Swales MP commenting that “the industry needs clarity and consistency and every time a politician stands up and says something a bit different, it undermines investors, it undermines financiers, it undermines the industry in general.”
Peter Aldous MP said that industry “wants to see ambition from Government so they can go about building an industry and a supply chain” while Lord Whitty said there is “enormous industrial need for the government to clarify.” Ian Swales MP summed it up by simply stating that “investment in this country isn’t going to happen until we’re consistent.”
Shadow Energy Minister Julie Elliott MP said this reflected the messages she had heard from industry who were less bothered about the specifics of the system and more about getting a firm commitment: “they want stability, they want to know where they are, they want to know the broad direction we’re going in.” Glyn Davies agreed adding “I’m more hung up on direction than I am on targets.”
Some of the blame was apportioned to elements within the Conservative party, with Ian Swales MP suggesting they were rowing back from the position at the General election and Peter Aldous MP pointing out that a commitment to promoting the offshore industry “is right at the heart of the coalition agreement.” However Lord Oxburgh didn’t see just one party at fault saying that “watching from the cross-benches, you would almost think there was a conspiracy between government and opposition to destroy commercial confidence.”
Pivotal time
Not only is consistency required, there was a high level of concern that the opportunity is being missed and swift action is needed. Peter Aldous MP said we were at a “pivotal time” with the Autumn Statement and EMR making the next few weeks “critical.” He conceded that there had been a “hiatus of investment over the last few years” but said that “Britain remains a global player” and, with the right commitments, we could see “an avalanche of investment” in 2014.
Julie Elliott was similarly concerned about an apparent lack of urgency commenting that “if we don’t get our act together as a country in the next few months, it’s an opportunity completely lost.”
RSA’s Steve Kingshott summarises saying “investment decisions are on a knife edge… there’s a window of opportunity here but it won’t be here forever. If we don’t jump into it, someone else will.”
Economic benefit
The strength of the argument for the roundtable’s participants was very much connected to the potential economic benefit of the industry. Peter Aldous said that only by the Government showing more ambition could we expect to see wind turbines and farms made in Britain. JDR Cables’ Andrew Norman was particularly keen to see this. He argued that with the increased employment this would bring, the costs of initial subsidies would take on a different form. By way of example, he said that nearly 100% of the content of German wind turbines is made in Germany compared to between 4-20% of the content of UK turbines being UK manufactured. He also stressed that the recyclability of turbines should be taken into account compared to decommissioning other sources of energy generation.
Ian Swales MP illustrated this by pointing to the 27 turbines off the coast of his Redcar constituency being made with foreign materials by Dutch contractors.
Cost of living
It was suggested that the impact of supporting the industry on the cost of living should also be clarified. Co-operative Energy’s Ramsay Dunning was clear that ECO should be primarily about helping people to be able to afford to heat their homes with the environmental benefit seen as secondary.
Vestas’ Sarah Merrick said there was a need to be clearer that green energy costs were only a small part of the upward pressure on bills compared to things such as global gas prices. Lord Oxburgh added to this pointing out that “We don’t really know what will happen to fossil fuel prices over the next few decades but they will probably rise. The cost of the wind blowing or the sun shining will not.”
Simplicity
If consistency was the first ask of industry, simplicity was undoubtedly the second. Lord Palmer raised concerns that responsibility for renewable energy stretches across four or five government departments. Co-operative Energy’s Ramsay Dunning suggested that terms like “green taxes” to describe a wide variety of schemes was unhelpful and said the government should work towards an energy policy simple enough that anyone would be able to understand and explain it.
Taking the community with you
Even with a greater degree of certainty and simplicity, it was considered vital to secure community support for projects. Ramsay Dunning said this was a niche Co-operative energy sought to fill in the energy market by helping to support community driven schemes with advice and practical help.
There was support from the politicians for this approach with Julie Elliott MP saying “the public don’t mind wind turbines but you have to take the public along with you.” Ian Swales MP agreed but wanted to ensure proper community benefit. He warned that “it doesn’t mean it’s ‘community’ because the local Scout group gets £500. It’s got to feel like the generation is benefiting us from an energy point of view and from a bills point of view.”
Attendees
• Tony Grew, Parliamentary Editor, PoliticsHome (Chair)
• Julie Elliott MP, Shadow Minister for Energy and Climate Change
• Joan Walley MP, Chair, Environmental Audit Committee and Climate Change APPG
• Barry Gardiner MP, Shadow Environment Minister and former Special Envoy for Climate Change and the Environment
• Peter Aldous MP, Vice-Chair of the Renewable Energy APPG
• Glyn Davies MP
• Ian Swales MP
• Lord Palmer, Chair, Energy Costs APPG
• Lord Oxburgh
• Lord Whitty
• Ramsay Dunning, Managing Director, Co-operative Energy
• Andrew Norman, Chief Executive Officer, JDR Cables
• Steve Kingshott, Global Director, Construction & Engineering & Renewable Energy, RSA
• Sarah Merrick, Head of Public Affairs, UK and Ireland, Vestas Wind Systems