Oral evidence: Floating Offshore Wind in Wales, HC 827
Wednesday 26 October 2022
Ordered by the House of Commons to be published on 26 October 2022.
Members present: Stephen Crabb (Chair); Simon Baynes; Virginia Crosbie; Wayne David; Ben Lake; Rob Roberts; Beth Winter.
Questions 1 - 21
Witnesses
I: Tom Glover, UK Country Chair at RWE; Dan McGrail, Chief Executive Officer, RenewableUK; and Mike Scott, Project Managing Director, Blue Gem Wind.
Witnesses: Tom Glover, Dan McGrail and Mike Scott.
Q1 Chair: Good morning and welcome to this session of the Welsh Affairs Committee, where we are looking at the potential opportunities arising from floating offshore wind power in the Celtic Sea. We have three panels this morning. On our first panel we are delighted to be joined by Tom Glover, who is the UK Country Chair for RWE, Dan McGrail, who is the Chief Executive Officer of RenewableUK and Mike Scott, who is the Project Managing Director of Blue Gem Wind. Welcome.
I will ask you to start by very briefly outlining your perceptions of the opportunities arising from floating offshore wind in the Celtic Sea.
Dan McGrail: Thank you. First of all, the UK’s offshore wind industry has been one of our real success stories in decarbonisation. We have done a significant job in reducing the costs. Inevitably, as we intend to grow the industry, we need to move into deeper water to be able to do that sustainably. The advantage of doing that is that you get better wind speeds and, therefore, the other benefit that comes from this is it opens up the global market, because something like 80% of the seabed is currently inaccessible to fixed bottom offshore wind. This is a very big opportunity for global growth and, as the UK, we have a leading position in this.
The other big area of opportunity is that, while up until now our growth in this industry has been dominated by European technology, as we have taken an early mover position, there is a great opportunity to establish ourselves as the world leaders from a technology perspective, especially everything that happens below the water. This is an area where, over many years, the oil and gas industry has developed a real capability for UK world leadership in this area.
If we can apply and migrate much of that technology, we can start to take that global leadership position and establish the industries here in the UK that will then open up our export market. We believe the global export markets in this sector could be worth about £500 billion by 2050, so there is a significant global opportunity. If we move early in the Celtic Sea, and do the right things to stimulate the market, we can build the industry to approach that market.
Q2 Chair: Tom Glover, obviously, RWE has huge experience and is a global energy giant in the portfolio of energy generating activities of your parent company. How significant is floating offshore wind in the current view?
Tom Glover: We have to recognise where floating wind is. It is not an established technology. This is an aspiration and, for us, it is about evolution not revolution. As a company, we are deploying fixed bottom offshore wind globally at scale and this is the next step. As Dan said, in order to meet our carbon targets in the UK, we need to deploy floating offshore wind because there are not enough areas—even though we have a vast sea space, even in the UK—where we can rely on fixed bottom.
We have three demonstration projects already. We have one floating around the world from Spain to the US and, therefore, we are very confident we can do this at a commercial scale. We welcome the opportunity given by the Crown Estate to go with this 4 gigawatts that it has announced in the Celtic Sea.
I always think it is good to talk about the numbers. Roughly, we think that 1 gigawatt of the first type of project is going to be £1.5 billion of direct investment. Just for that first 4 gigawatts we are talking about £6 billion of direct capital investment into the Celtic Sea. Floating is not being deployed anywhere at commercial scale. Therefore, as Dan said, this is a real opportunity for the UK and for Wales to take leadership to develop the capacity to deploy this.
From our perspective, there are all kinds of figures quoted on what the gigawatt probability is in the Celtic Sea. RWE’s view is that 10 to 20 gigawatts is a perfectly reasonable, sensible planning assumption. When we get the cost down, that is probably £20 billion of direct capital investment. The Welsh Affairs Committee has looked at the Offshore Renewable Energy Catapult figures before. The indirect stuff is even more. It is multiples of about two or three times that money. That is the prize, if we get this right, and we have a prize to obviously export.
For example, it is possible that Welsh ports could service Dublin and could perhaps service north France. There is a limit to where it could service because of the cost of floating it. There is also an opportunity of going early to build some kind of export; of using the ports but also the expertise. That is where Dan is at. If you take Aberdeen and all the expertise that they have on deep water oil rigs, this is what we can deploy into floating offshore wind. Then we can export that technology and knowhow globally.
From RWE’s perspective—evolution—there is a lot of work to do, but there is a great opportunity.
Q3 Chair: Mike Scott, it is a compelling vision that your two colleagues on the panel have set out. Do you think that the UK and Welsh Governments are seized of that? Do you think they share that same optimistic, upbeat view of the opportunity?
Mike Scott: There is definitely an upbeat optimistic view of the opportunity, but it is realising it and having the right interventions to make sure it happens. It is great to talk about targets, but all of the mechanisms that allow the wind farms and the capacity to be deployed are the things that make those things happen.
As a developer, you are looking for that predictability and the ability to plan ahead to not only get the capacity into the sea but, also, for the supply chain to support it and for them to do their business plans. I am sure we will talk about infrastructure requirements for ports.
Certainly, as Blue Gem Wind, we are sitting on what is the first 100 megawatt scale project in the Celtic Sea. We are practising some of those practical aspects of delivery of a project right now. We hope to be up and running in 2026 as a demonstration of what can happen and to get some of that learning in place.
Q4 Chair: Do you feel you are moving in lockstep with the Government on this? I am going to press you slightly on the knowledge and appreciation within Government of the opportunities that we have just been talking about over the last few minutes. When you talk to BEIS or to the Welsh Government, or any of the other intermediary bodies, do you get a sense that the Government are moving in tandem with the industry to realise these opportunities?
Mike Scott: As a developer, it is never going as fast as you would like, but we certainly look for that predictability. If we can inform and advise people who have those influences on the process, that is part of our job as a test and demonstration project. It is 100 megawatts. It is the start of the stepping stone process for the broader capacity within the Celtic Sea that is pretty obvious to everybody.
Consenting for National Resources Wales, for instance, we are going through the determination process right now. We hope to get that fairly soon. The next step will be the CFD, to make sure that the pot is available and ready to allow floating to develop, as it is early technology, and beyond that the finance and the supply chain to be there ready to build it. Yes, people are with us, people see the opportunity, but it is always that encouragement to be involved and to demonstrate that and hopefully bring people with us.
Q5 Chair: I am going to bring in my colleague Wayne David in a moment. I will ask a final question to Dan McGrail. Obviously, RenewableUK and your interest in the whole suite of different renewable technologies—and there is a lot of demand on Government time for attention to be given to each of these different technologies—do you get a sense in the discussion that you have with civil servants at BEIS that they recognise the strategic importance of FLOW?
Dan McGrail: Broadly speaking, yes. There is some very good progress. We set the first target for this in the UK in 2019, before anyone else in the world had a target, and in part of the British Energy Security Strategy that was increased to 5 gigawatts. These are strong signals to send.
In terms of backing that up with action, there has been the £160 million floating port infrastructure scheme. That will be launched this autumn and is a very important step. It is vital. We undoubtedly will talk a lot more about ports, but that £160 million does not go that far when it comes to building the kind of port infrastructure we need.
We have quite a slow process in building port infrastructure in this country. We have big planning requirements, and we have the fact that we need developers, like the people on this panel, to be able to sign contracts with port operators to get the big investments away.
Just as a sanity check, we really use our ports very well in this country. We are an island nation. We have a lot of really good ports, but, by virtue of how industry works, the ports are typically long and thin. You bring goods in and you get them on to the roads as quickly as possible. However, each one of the foundations for a floating wind farm will be about the size of a football stadium and you have to build that in about a week to be able to do this industrial scale. I am talking many years in the future before we can get to that point. We need quite substantial changes in our port infrastructure. There is recognition in Government that that needs to be done, but I think the £160 million has to be understood as a first step.
A final point, just on innovation: good progress, £31 million invested with the catapult last year to move on some of the innovation on cable technology and so on. Again, that is the thin end of the wedge and I think if we were comparing ourselves to the aviation sector, defence or pharmaceuticals, the level of Government spending would not be comparable.
Chair: Thank you, that is helpful.
Q6 Wayne David: You are obviously talking about a massive process over a long period of time. Speed is important in the development of all of this. You have talked about the importance of the Welsh Government perspective, the UK Government’s support, but what about the Crown Estate? It is a strange body that many people do not know much about. How do you see its role and what do you think of it?
Dan McGrail: The Crown Estate has a very important job to do to send the signal about the long-term picture and, also, in creating the framework for how we invest in the sector. Let me unpack that a little bit.
Setting targets is great, and I think the 4 gigawatt ambition that has been set out in the Celtic Sea is really good. If you build that 4 gigawatts that will utilise port infrastructure for a certain period of time. I come back to ports quite a lot because it is one of the big bottlenecks that we need to tackle to build this industry out. When you invest in a port you do it for 30, 40, 50 years. It is a major long-term investment, so it is not only important that the Crown Estate signals the 4 gigawatts but, also, what is coming after and approximately when. We do not necessarily need right now to know details, but fundamentally that process, that roadmap for opening up beyond the initial 4 gigawatts, is an important part of this equation.
In the short term, when there are leasing rounds—clearly, the Crown Estate raises money that goes into the Treasury, that is also raised from developers and that cost ultimately goes back to the consumer. We would like to see ways to make sure that those leasing rounds can be optimised to get more investment early on in the supply chain. One of the challenges we face in the industry in general, not just in floating, is that investment signals come quite late in the process, principally through the CFD. That is often too late to rematerialize the investment to the benefit of the projects. The Crown Estate can raise that money early, but also then recycle part of it in ports, in the supply chain and helping the industry collaborate better early on in the process.
Tom Glover: Just to add a couple of points. In relation to the Celtic Sea floor opportunity, I think the Crown Estate is doing an excellent job at the moment. It has the 4 gigawatts, but it is also doing early surveys and that is really helping. Assuming those surveys are done to the standard that we need them, that will enable us to accelerate the projects. That is the first time the Crown Estate has done surveys. What normally happens is it does the lease area and then we do the surveys. It is doing the surveys in advance, which hopefully will accelerate us.
When we are talking about Wales, the Welsh floating opportunity is competing with the ScotWind floating opportunity and ScotWind went first. It is important that the Celtic Sea accelerates so that it is a level playing field across the whole of the country. That is really good. The Crown Estate has also said that 20 gigawatts is also realistic in the Celtic Sea, so that is also a good ambition to set. From our perspective the Crown Estate is doing a good job there to make it clear. As Dan said, more transparency of when those will come up would be good.
Mike Scott: I would echo the points I was making earlier on about predictability. The Crown Estate is right at the start of that process of releasing the seabed rights to allow the developments to happen. It is doing well in getting the Celtic Sea up and running. We need that predictability about when the next 20-odd gigawatts is coming and mapping that out very clearly, so that the developers can get themselves ready and the infrastructure can start taking the risks and understand that there is something coming rather than waiting for a transaction to happen.
Q7 Wayne David: I will just press you a bit on the role of the Crown Estate. You mentioned you are concerned about the slowness in the leasing process. The relationship between devolved Government and the Crown Estate is different in Scotland compared to Wales. If there was more accountability for the Crown Estate’s actions or lack of actions, do you think that we would have a better process?
Dan McGrail: I think the constitution of the Crown Estate is a political question. For us as an industry, what—
Wayne David: In purely practical terms.
Dan McGrail: For us as an industry, one of the things that we want to see is this general principle of acceleration and I think Tom makes a good point about what the Crown Estate is doing. In some ways it has brought a lot of the development work that we have to do as developers, and bear in mind that electricity generation companies are not specialists necessarily in bird migration and things like that, which they have to analyse at the moment. The Crown Estate bringing that forward is a good step. It is responding to the message that we have given as the industry to help us speed up and help us also derisk.
My other point would be consistency. We are essentially one industry which moves where the opportunities are. The consistency of how rules are applied, irrespective of how the constitution works, making sure that there is clear transparency of rules and consistency of rules and how they are applied around the country is important for us.
Tom Glover: I would like to split the problem in two. We do not think the Crown Estate is going too slow. Four gigawatts is ambitious. There is no one deploying floating offshore wind commercially in the world. Of course, the ScotWind number is much bigger, but we would argue almost too big because you just blow the supply chain. It cannot deliver that amount of gigawatts.
What Mike was saying is more important, which is the 4 gigawatts now is fine. It is that longer-term target. It is not about going faster; it is about setting that long-term vision. This is a nascent industry, so this is going to take 10 to 15 years to grow. Therefore, as a developer, we want to know not just the 4 gigawatts that is available now but when is the 10 gigawatts coming? When is the 20 gigawatts coming? It is not about being fast. It is about taking this sensibly because speed will just not develop the supply chain.
Dan McGrail: To take one simple analysis on this. If you look back at the fixed bottom offshore wind, there were three rounds of leasing in the early stages. Round 1 was demonstration of projects, and we are doing that at the moment. Round 2 was commercialisation. The first big scale projects: could we make this work on a larger scale? The final stage, with round 3, which was the 33 gigawatt leasing round, opened up the industrialisation. All the success we have seen since is because that set a very clear picture of what was going to be developed over the next decade or so.
Q8 Wayne David: Could I press you on something you said earlier, about the importance of consistency? Presumably you were talking about the whole of the United Kingdom. Are you suggesting there is a lack of consistency with what is happening in Wales compared to elsewhere?
Dan McGrail: No, I don’t think that is the case. Clearly, there has been a different process in Scotland, but as an industry we have been working with the Crown Estate in England and Wales for a very long time. What we have seen develop in Scotland over the last year or so has been a new chapter. The ScotWind leasing round is a very significant leasing round. Also, I would say that the collaboration that we have had—and which we have built on with the Crown Estate as an industry over the last two decades—is part of the reason why we have been successful up until now.
Q9 Virginia Crosbie: A question to Tom. As you can imagine, we have quite a lot of conversations about the Crown Estate here in the Welsh Affairs Select Committee. I want a very clear answer from you: do you feel working with the Crown Estate means that you are going to get faster and further than if you were not working with the Crown Estate?
Tom Glover: I was about to say yes, but I am not sure what the alternative is. My perspective is we are fully happy with the Crown Estate, but until you tell me what the better alternative is, I cannot really say whether we will go faster.
Q10 Rob Roberts: Also for Tom. You mentioned “provided that surveys are done to the level that we need”. They were the words that you used in the context of being competitive with Scotland. To the level we need dictated by what? Dictated by you or the UK Government or Welsh Government, what determines that quality of survey?
Tom Glover: It is a combination between us as a company about what we need to do to be a responsible company. We will have our own standards about what kind of surveys we need in order to invest this amount of capital, but it also to do with what we think is going to be consentable. When we go for the consent process with the marine regulatory authorities then effectively we have to meet certain standards.
Unfortunately, we have not been able to find out exactly what surveys the Crown Estate is doing in precise detail to know if it is going to meet our requirements. We assume it will, but until we see the surveys we don’t know. It could be that if they are not to the standard we will have to redo them. That would delay it. It is pure speculation.
Mike Scott: Just to add, the timing of it is very important too in the controlling of the overall timeline for development and making sure it is fed into the process at the right time with the right quality, because they get assessed by experts within their fields on ornithology or benthic or marine mammals or whatever it is. It has to be at that agreed level to allow it to be acceptable for the consenting process, because that is what it is feeding into.
Rob Roberts: Understood, thank you.
Q11 Ben Lake: Can I briefly take you back now to the ScotWind leasing process and some apparent differences that have been proposed for the Celtic Sea process when it comes to the leasing design? One of the things my attention has been drawn to is the fact that in the invitation to tender process, especially the second phase, the bidding phase, the Crown Estate suggests that it awards the rights on price and the fees are uncapped. Whereas, for the ScotWind process the leasing round placed a cap on fees of around 100,000 per kilometre square of seabed. My question is very simple: does that discrepancy or inconsistency raise any concerns with you? Would it be the case that if projects in the Celtic Sea were in the same pot as those from ScotWind when it came to CFD would we find ourselves at a competitive disadvantage?
Tom Glover: It is a different process. You are right about the uncapped bit. We should talk about the first two stages, which also talk a lot about socioeconomic effects. As industry, we think that is probably the most important bit. To get through it is making sure you have the supply chain, you are going to invest locally and so on. You have to remember there are two processes of pass and fail before you can get to the uncapped bit.
It does slightly worry me about the uncapped nature of bids because, as you quite rightly say, when we get to a CFD process all the floating projects are going to be in the same pot and the Welsh projects are going to compete with the Scottish projects. You do not want them to be uncompetitive. Where you get protection is, as a developer, I know that so even in an uncapped bidding process why would I bid more to a point where I think that project is going to be uncompetitive? It wouldn’t make sense. I am not going to bid a number that makes it uncompetitive because then I am just wasting my money.
In a way, although it is not capped in the formal process, as a developer, when I decide what to bid I will be looking at the relative economics of the Celtic Sea versus ScotWind, including the lease costs. I am only going to bid to a level that makes sure that this project is going to be competitive. There is a natural thing that means in the actual pot as a developer I will try to make those projects as competitive as possible, otherwise I am wasting my development money.
Mike Scott: Also, just to ask what they are going to do with the fees when they come in. Clearly, when we are talking about Wales, there is an advantage of the development of infrastructure down there because it is pretty well developed on the east coast, pretty well developed in Scotland but not so good down in Wales and the Celtic Sea particularly. Is this something to do with those fees that come in? We don’t know. We are just playing with the initial statement about the rules that came out in October.
Dan McGrail: My concern would be linked to where I started: being the next frontier of industry is building the supply chain and the jobs and the economic opportunity. The first part of the process, the prequalification part of the process is absolutely essential for that and that is a good step from the Crown Estate. I agree with Tom on the uncapped fees. I think developers will take a view and where the risk lies is that different developers will take different views.
My concern is around: will we skew investment towards those with the deepest pockets? Also, there are other barriers to entry in the UK. We talked about ports. The Korean market has all the deep water ports already so would someone be willing to—if they cannot be successful in the UK auctions—take their investment somewhere else? It is a barrier, but fundamentally the market will shake that out, as Tom alluded to. In some respects, capping it would be a complex process for us and perhaps a missed opportunity. Especially, as Mike says, if we can recycle some of that capital into the port investment and into other things.
Ben Lake: Thank you, that is very useful.
Q12 Beth Winter: Thank you for coming this morning. I am interested in exploring the guarantees that offshore wind can provide around opportunities for workers, Welsh ports and the supply chain. I note that the offshore wind industry comes with skilled intelligence that is estimated at currently 47 jobs, which is going to increase to about 600 in 2030, compared to Scotland, where I will add that the Crown Estate is devolved, which is currently about 2,500 and will rise to around 30,000 in the same period. Are you working with trade unions and others to set decent employment conditions, apprenticeships in maritime supply chains as well as working with towns and cities where jobs can be developed?
I will add also that being inclusive and gender balance is important. I think a couple of us were taken aback when inclusively all men entered the room today as representative of the workforce.
Mike Scott: Yes, skills and diversity inclusion are vitally important to the workforce. We are looking at school activities to show how people can get involved; the age groups coming through. They are getting this opportunity when it arrives and developing that interest for an industry that does not exist in South Wales at the moment. It is important to get that message out there to see that it happens.
Q13 Beth Winter: What concrete steps have been taken in developing those opportunities for the workforce? Decent, good, well-paid jobs as well I am looking at.
Mike Scott: We are adding to the market in putting our construction contracts in place ready for our CFD next year, and it is all part of the order of that process. It is part of our bidding strategy to ensure that we have skills development with our contractors to develop the workforce that is in that area.
Q14 Beth Winter: Local contractors?
Mike Scott: We hope so.
Q15 Beth Winter: Apprenticeships?
Mike Scott: Nothing definite is planned as yet because we are still working through the bidding process with the contractors.
Tom Glover: First of all, apologies about the lack of diversity. Awel y Môr, is our fixed bottom and will probably be the largest infrastructure in Wales in the next five years. The project director is female. Also, I am very glad to say that our person responsible for supply chain won a future leader award. She won the award last night at our award ceremony. We are diverse, and I apologise that this panel does not reflect it, but it is not a good reflection of the industry.
With jobs and everything else, I am always a little bit worried when I hear all these thousands of staff, because it is all done by consultants and so on. However you cook it, if you put in £20 billion of investment, there are going to be lots of jobs and opportunities coming. I would rather not talk about numbers because my eyes roll sometimes when I see some of the numbers. You just have to be practical.
As an industry, we have a target to get to 60% local supply chain. That in itself says of that £20 billion that it gives you a good number; 60% of that is coming locally. Apprenticeships: as RWE, our national offshore apprentice scheme is based in Coleg Llandrillo and so all our offshore apprentices go there. We currently have 36 apprentices going through that college in North Wales that are being trained and then put on our offshore wind farms across the UK. There is a range of diversity there. A good range of diversity. I apologise that I don’t have the figures. The apprenticeships are there. The investment is there.
I am going to be a little controversial and say you have to be realistic that government policy has to be changed if you want to get things like nacelles, turbines and blades in the UK. We do see a lot more support by Governments in other countries, tax breaks and so on, to get these big factories to come. As a target the 60% is ambitious as a sector, because we are not getting the support to get those big factories here. We are looking at the rest of the supply chain to fill that.
We would say the industry cannot do that on its own. If you want those big factories to come, the Government need to give things like more tax incentives, more direct investments and somehow—I know we are restricted by things like state aid and so on—the Europeans manage to do it and we don’t.
Q16 Beth Winter: Can you invest in work, training and education so we can generate our own experts and workforce with those skills rather than relying on those outside?
Tom Glover: Yes, but we are the world leaders in offshore wind. We already have that. We already have the great apprenticeships. That does not mean we are making stuff here.
Beth Winter: However, we could.
Tom Glover: If I look at my developers around the world, we send British employees to develop offshore wind farms in Taiwan, in Japan and in the US. We export the intellectual capital. We do not get the manufacturing side of it in the UK yet.
Q17 Beth Winter: I take your point about numbers, but there is an anomaly between what is happening in Scotland and Wales. Is there any explanation for that anomaly?
Tom Glover: It is not an anomaly other than people have made up some different numbers. We honestly do not know yet—nobody knows, whether in ScotWind or Wales—how many indirect jobs will get created. We have a target to get as many as possible. We have a 60% target. The numbers quoted by Offshore Renewable Energy Catapult and other people are as good as they can be because they use expert consultants to calculate them, but they are guesstimates. To nail down exactly how many jobs and exactly the gross value added is academic. There is £20 billion of investment that can come into the Celtic Sea that will create good jobs and good inward investment. The sector has a 60% local content ambition. Therefore, you can be confident that a good proportion of that is local.
Dan McGrail: Tom is right. If you look backwards and look at the east coast of England as a comparator—where all of that early initial development happened—in the last year alone there has been an expansion of the factory that Siemens built in Hull, a cable factory for JDR announced in Blyth and a big foundation factory announced in Teesside. These are big, positive investments that bring with them high-value jobs, a more diverse workforce and local impact. What made that happen? Fundamentally, the demand has been there on the east coast. If we stimulate that market and we unlock that £20 billion on the west coast, then we start to see the opportunity and basis for that to happen.
This is a global industry, but proximity matters. It counts. It costs a lot of money to rent an installation vessel every single day. If you are close to your market, it delivers benefit for the project and, therefore, a reciprocal benefit that can end up in the community. Creating the market is the key.
Chair: Quickly, because we are running out of time for this session, Wayne and then Rob.
Q18 Wayne David: It is said that because we have left the European Union, the restrictions on state aid—which the Government have been obliged to follow in the past—no longer apply. Is there scope, therefore, for more governmental support to your industry?
Dan McGrail: Even if we look within the framework of EU law at the moment, the EU recognises that building an industry based on price-only signals is not the most sustainable pathway. That opens up the opportunity for Chinese competition to come in and others from all over the world. We have great Europe-based knowhow.
The frameworks tell us to value things other than price—value economic development, value innovation, value sustainability, value community impact. Take that into consideration in auctions. If we do that, yes, we have to care about price because that matters to consumers. It matters to the public and it matters to competitiveness. Ultimately, valuing other factors is allowed, so we can start to bring that forward. It is starting to make its way into EU law without treading on the TCA and without treading on broader policy. Yes, there are opportunities from coming out of state aid. However, even within that competitive framework, we can still send better signals to industry than we currently do.
Q19 Rob Roberts: I am sure you will all be aware, gentlemen, that last week we published our report on grid capacity in Wales. I know Tom came and gave evidence on that. I am working on some kind of loyalty scheme for people who keep coming back to give evidence. We can sort that out.
You said that you applied for a connection to South Wales at Pembroke but you were offered one in north Devon instead, because there was no capacity in Wales. You also mentioned earlier on that, arguably, ScotWind is too big as an initial project. Looking at 4 gigawatts sounds like a sensible number to start with. Is it sensible because of grid capacity or is it sensible because of some other factor? To what extent is grid capacity affecting your plans?
Tom Glover: Thank you very much for your report. It was great to be here for that Committee and, also, we appreciated everything that you said in that report and wholeheartedly agree with it.
The comments I made there remain the same. Four gigawatts is realistically what you can do when you are growing an industry. It is nothing to do with grid capacity. Our grid connections are still to Alverdiscott in north Devon. They have not moved to Wales yet.
When I was here, I do not know if I mentioned it specifically, but when you look into the ESO scenarios, if you assume 10 gigawatts of Celtic Sea, you would build that line we talked about that goes from Swansea to the English border. From our perspective, it is reasonable to anticipate that will happen. Ten gigawatts is at the low end of most people’s expectations of the Celtic Sea. If you said you were going to do the 10 gigawatts now and both the Government and the Crown Estate said it was there, you would build that line. Once you built that line, the projects now would probably go into Wales.
It is important to go into Wales, not because we are in front of the Welsh Affairs Select Committee but because we want to build a decarbonisation hub in Pembrokeshire. We want to use that green electricity directly to make green hydrogen and provide green hydrogen to local industry, which starts to decarbonise that important economic area for Wales.
Everything I said in the Select Committee for the grid still happens. All your recommendations we will pick up, but to answer your specific question: the 4 gigawatts is not driven by grid capacity. It is driven by a sensible project to start with when you are building an industry.
Mike Scott: However, you do need that capacity for the longer term and it takes a long time for that capacity to be realised. It is a project in itself. You are back into the predictability to have the access to the market to allow things to be developed. Put the plans in place for us.
Q20 Rob Roberts: What needs to be done to address that capacity in Wales, in that case, briefly?
Mike Scott: The Crown Estate has announced an ambition for 20-plus gigawatts by 2035, the next round after 4 gigawatts. It has not given the precise timetable for it. The National Grid infrastructure is going through a holistic network design. Is it looking at that capacity within the region to allow the gigawatts of capacity that will develop to get into the market? It has to go somewhere and it has to get into the transmission network. Build a network for it. I am not convinced that it is being planned right now, because of the length of time that it takes to get new substations built and new lines up ready to run. That is what you need to get the transmission away.
Rob Roberts: You have about 60 seconds.
Dan McGrail: We should not underestimate the significance of the challenge of building the grid that is needed. The amount of time that it takes and the complexity from a consenting point of view is significant. There are supply chain challenges.
Net zero has been in law since 2019. The regulator still does not have net zero in its mandate. If it did, it would be obliged to start thinking about this in a more strategic way. That needs to be addressed soon.
Q21 Chair: Rob Roberts, thank you very much. I will try to shoehorn in one quick question from me. Mike Scott said that you are not convinced that the grid is being planned in a strategic way. Earlier in the session, Tom Glover talked about the need for longer-range targets.
Is all of this coming back to the theme, essentially, of leadership and somebody somewhere in the system, the UK Government or elsewhere, having to drive a plan to deliver this massive, complicated set of initiatives that you talk about?
Tom Glover: Yes. In particular, we talked about the Crown Estate, but the Crown Estate has said 20 gigawatts. The only part that has not said more than 5 gigawatts is the UK Government. We have a 5-gigawatt target by 2030. We need to know what the 2035 target is and what the 2040 target is. That provides us as developers, the industry, the supply chain and the ports with the confidence to invest.
Mike Scott: It has to be a co-ordinated approach. If you have somebody who is prepared to announce a target, behind that is the co-ordination to allow all of those pieces to come into place.
Chair: Thank you very much. Our time is complete. We will move seamlessly over to our second panel as elegantly as possible. Thank you for the co-operation of my colleagues on the Committee with your short and succinct questions. That was helpful.