Written evidence submitted by RenewableUK (PEG0220)
This is a response to the BEIS Committees Post-pandemic economic growth inquiry.
RenewableUK is a membership body with a mission to build our future energy system, powered by clean electricity. We bring them together to deliver that future faster; a future which is better for industry, billpayers, and the environment. We are a UK membership body with a mission to ensure increasing amounts of renewable electricity are deployed across the UK. We support over 400 members to access UK markets and to export all over the world. Our members are business leaders, technology innovators, and expert thinkers from right across industry.
Achieving net-zero will mean the deployment of renewable energy must increase at a significant and consistent rate over the coming decades. National Grid’s most recent Future Energy Scenarios show that renewable capacity could more than double by 2030 and will require at least 3 GW of wind to be built every year from now until 2050. Achieving this will require all parts of the energy system to align in delivering a net zero ambition that provides best value for consumers. The renewable energy sector continues to be in a position to play a cost-effective role in delivering a Net-Zero pathway, decarbonising the power sector, and providing the solution to challenging issues within heating and transport.
In light of the COVID-19 pandemic and the significant impact on our economy, the Government has recognised the need to stimulate economic growth in a sustainable and resilient way. A green recovery will accelerate the decarbonisation of the economy, enhance our position as a world leader in the low carbon technologies of the future and deliver benefits to local communities across the UK. Further information can be found in our “Recommendations for a Green Economic Recovery” document.
RenewableUK have six core recommendations for Government, falling across three areas.
The government should Maximise investment in renewable energy:
1. Lift capacity caps for next year’s Contract for Difference auction to maximise investment and job creation. The auction could secure over £20bn of new investment and support over 12,000 new jobs in the immediate construction of new wind farms.
2. Outline a cross-Departmental programme to address the barriers to achieving the Government’s 40GW target for offshore wind by 2030.
3. Establish a route to market and enabling infrastructure to unlock investment in innovative renewable technologies such as floating wind, wave and tidal stream which will support new
jobs around the UK in the short term, and price- competitive electricity and exports in the long term.
Increasing jobs and industrial benefits of renewable industry investment:
4. Adopt a new strategic approach to increasing
competitiveness and investment in the UK supply chain for renewable energy, including immediate programmes to raise industry investment, enabling port infrastructure development, R&D match- funding and export facilitation.
Bringing forward future decarbonisation:
5. Accelerate electrification, particularly domestic heating and EV uptake, alongside improving investment in grid infrastructure required to support this and policies to promote flexibility to ensure that consumers fully benefit from growing renewables.
6. Establish a strategy to accelerate the development of renewable hydrogen and bring forward investment and jobs in the sector, with the research and development funding, hydrogen production targets and strong demand side signals to ensure take advantage of our world-leadership in the technology.
The UK’s system of Contract for Difference auctions has been emulated by other countries across the world for its ability to secure investment in large volumes of renewable energy, at the lowest for consumers.
By maximising the size of the upcoming Contract for Difference auction, the Government can secure rapid investment in a short period of time. For example, an auction that secured 10.8GW of wind energy capacity would bring forward an investment windfall of over £20bn during the project’s initial construction phase, with over £17bn in offshore wind and over £3bn in onshore wind. This investment will support over 12,000 new direct jobs over the 2024-2026 period. These projects can be delivered in shorter timescales than other low carbon options and will provide long-term, low cost energy that will support competitiveness in the wider economy. We would strongly advise that the Government couple this with the more strategic approach to supply chain development outlined in recommendation 5 to maximise the economic benefit to the UK.
We also advise that the Government maximises the volume of capacity secured in the next Contract for Difference auction and continue auctions at least every two years thereafter. RenewableUK’s Project Intelligence has identified 3.4GW of ‘shovel ready’ onshore wind sites with planning approval which could bid into the next auction. Onshore wind can be relatively quickly constructed and typical UK content of these projects is c70%, so the economic benefits would be felt quickly and locally.
The Government are still to decide the parameters of the next CfD auction. We advise the Government to maximise the level of investment and deployment which could be unlocked through the auction. From previous experience, once these contracts are awarded in the 2021 allocation round, we would see spending and investment begin immediately, supporting local economies across the UK.
The public have been clear that an economic stimulus should aim to build a greener economy than the one that preceded the COVID lockdown, with an understandable focus on jobs. However, continued issues with the policy, regulatory and infrastructure environment surrounding renewable construction could result in lower development and investment in the sector - in the short and long term.
To support green businesses in our post-pandemic economic recovery, we need to maximise the industrial benefits of our renewables sector and bring forward some of the economic transformation the UK will need to undertake on our path to net zero.
We advise Government to accelerate electrification, particularly domestic heating and EV uptake, alongside improving investment in grid infrastructure required to support this and policies to promote flexibility to ensure that consumers fully benefit from growing renewables.
Transport is the largest source of UK emissions, most of which comes from road transport. To reduce overall emissions in line with net zero by 2050 in a linear fashion, emissions from transport and heating will have to fall to 131Mt CO2 by 2030. However, according to the government’s latest emissions projections, these sectors will reduce to just 200MtCO2 on current trend.
Government must bring forward the rollout of EV charging infrastructure and secure grant funding for EVs and home chargers. We would also recommend that market frameworks are put in place that will enable EVs, and other smart technologies, to support future grid management. At a time of economic slowdown, we need to maximise consumer benefit and minimise the costs of energy to UK households – particularly when doing so is at no cost to Government.
Despite current domestic heat incentives, the upfront installation costs and lack of transparency on schemes remain an issue for individual homes. Possible public policy solutions for low carbon heating could be delivered through a mix of incentives and targeted support, taxation measures and regulation.
Government should, therefore, work with industry to reach an economically viable deployment strategy for heat pumps and district heating that will accelerate the electrification and decarbonisation of heat. In developing new policy on decarbonisation of heat, ability to pay must be central to policy and vulnerable customers protected in this transition.
Whilst electrification will go some way to support further decarbonisation, other applications, such as freight transport on land and sea, and industrial processes, need molecules not electrons. Renewable hydrogen is the low carbon molecule that can deliver decarbonisation of these sectors and, as such, it is vital that its development is brought forward as soon as possible.
We recommend that Government should publish a clear strategy for how demand for hydrogen will develop in transport, industry and heat. This strategy must bring together all government departments, especially BEIS, DfT, MHCLG.
The UK’s renewable energy industry has shown that clean technologies are capable of supporting thousands of high-value jobs and new investment across the UK, transforming communities where industry has clustered, for example, along our East Coast.
Aura and Green Port Hull commissioned Energy & Utility Skills to undertake a comprehensive skills study of the UK’s offshore wind industry and to provide a specific focus on that industry in the Humber region (2018) . The purpose of the study is to provide a deeper understanding of nature and extent of workforce supply and demand issues within the development, construction and operation of the UK’s offshore wind energy sector through to 2032.
A summary of recommendations from the study are outlined below:
The Offshore Wind Sector Deal demonstrated that there are benefits to an Industrial Strategy. For example, establishing the Offshore Wind Growth Partnership (OWGP) and providing skilled jobs across the UK. The Sector Deal estimated that 30GW of installed capacity by 2030 could support 37,000 jobs.
Today, with the target for offshore wind deployment in the UK being raised to 40GW by 2030, the Government will need to go further to address industry barriers and meet targets which have been raised since the launch of the Sector Deal. Whilst this presents a challenge, raised targets will provide more skilled jobs across the UK and support post pandemic growth.
Moreover, the Government must now go further in bringing forward decarbonisation investment to support a green economic recovery. With raised targets for the electrification of industry, for example, Electric Vehicles (EV’s), Government must ensure that the UK’s energy industry is equipped to meet raised demands. In light of this raised demand, coupled with a need for jobs today to create a resilient economy, the Government should bring forward the Contracts for Difference (CfD) auctions and raise caps.
Finally, investment in other forms of renewable technology should be maximised. Innovative renewable technologies, namely floating wind, wave and tidal stream, will bring further economic, consumer and environmental benefits to our country, such as jobs around the UK in the short term, and price- competitive electricity and exports in the long term. Now is the time to also invest in the emerging technologies that we know will play a key role in the delivering net zero and in which the UK can be a world leader, such as renewable hydrogen, floating offshore wind and marine technologies. Taking forward and scaling up these projects will deliver growth, investment and productivity into the longer term and create new export opportunities for UK goods and expertise.
Regional and local governments will be better equipped to deliver growth locally if granted greater investment for infrastructure. The success of regional funding has been shown with the Offshore Wind Centre based at East Coast College – funded by the New Anglia Local Enterprise Partnership (NALEP) Skill Deal. However, the opportunities for investment needs to go further in order to deliver local growth across the UK.
Tees Valley Mayor Ben Houchen has urged for Government investment Teesside to support its significant offshore wind industry. For example, plans to build a heliport at Teesside International Airport could provide service work and act as an operations and maintenance base for the world’s largest wind farm – Dogger Bank. However, without sufficient investment, Teesside will not have the opportunity to provide more jobs and support our thriving offshore wind industry.
The UK’s support for offshore wind has not only placed Britain as the world-leader in the technology, but 11,000 people are now employed by offshore wind developers and Tier 1 supply chain companies, with thousands more employed in the UK’s wider diverse supply chain. These roles range from ecologists, planners and project managers to engineers, communications professionals, business developers and helicopter pilots.
Industry investment has revitalised coastal towns across the UK, with Teesside, the Humber, Aberdeen and East Anglia and others becoming hubs of industry, academia and innovation. As well as servicing the UK market, many supply chain companies are now exporting, bringing the UK closer to its target of £3.2bn in offshore wind exports each year by 2030.
In getting our economy back on track, a green recovery with renewables at its heart will accelerate the decarbonisation of the economy, enhance our position as a world leader in the low carbon technologies of the future and deliver benefits to local communities across the UK.
The Government is due to run an auction in 2021 to secure the next round of new low-cost renewable power. RenewableUK calculates that if Ministers lift capacity caps, the 2021 auction can secure 11GW of new onshore and offshore wind. This would translate into over £20bn of investment supporting over 12,000 jobs. Our analysis shows that since lock-down was imposed on 23rd March, UK-based companies working in the wind industry have announced contracts and investments in new projects worth more than £4bn, creating over 2,000 UK jobs at a time when economic activity in other sectors has been shrinking.
Maximising the development of low-cost renewable power sources will also support a faster roll-out of electric vehicles and the decarbonisation of heating in homes through the installation of electric heat pumps and other low carbon options. Transport and domestic heating are the two largest sources of UK emissions and decarbonising these sectors are an immediate priority if the UK is to meet our net zero target.
In summary, putting low cost renewables at the heart of this agenda will get investment flowing into the economy quickly and create jobs. Government already has the tools it needs to further support renewable energy projects, which will make it much easier to achieve wider net zero objectives, such as the switch to EVs and low carbon heating.
The offshore wind sector is a highly resilient industry, with its adaptability to challenges notably being demonstrated in the UK’s resilience to Covid-19. Since lock-down was imposed on 23rd March, UK-based companies working in the wind industry have announced contracts and investments in new projects worth more than £4bn, creating over 2,000 UK jobs at a time when economic activity in other sectors has been shrinking (July 2020).
For example, the East Anglia ONE offshore windfarm (ScottishPower Renewables) was completed during the pandemic. Around 20 per cent of the turbine installation and around half the turbine connection work was completed during lockdown, with ScottishPower Renewables and its project partners transforming how they worked.
The Government is due to run an auction in 2021 to secure the next round of new low-cost renewable power. If Ministers lift capacity caps, the 2021 auction can secure 11GW of new onshore and offshore wind. This would translate into over £20bn of investment supporting over 12,000 jobs. These projects, unlike many other infrastructure investments that have long lead-in times, can ramp up spending quickly once contracts are secured and will generate low cost power that provides net benefit to consumers. The last Contracts for Difference (CfD) auction in 2019 secured 5.8GW of renewable energy capacity at prices below the long-term market price of electricity.
Government and industry can work together to achieve the goals of kickstarting the economy after the Covid pandemic, levelling up economic opportunities throughout the UK and reaching net zero emissions as fast and as cheaply as possible. Maximising the development of low-cost renewable power sources will also support a faster roll-out of electric vehicles and the decarbonisation of heating in homes through the installation of electric heat pumps and other low carbon options.
Moreover, supporting innovation and the growth of the UK supply chain is vital to maximising the benefits of the clean energy transition and the offshore wind industry is already investing £100m in the Offshore Wind Growth Partnership, which supports the rapid expansion of companies in the UK supply chain. The industry is calling for the Government to also provide funding for this initiative, as is the case in other sectors like aerospace. More small and medium firms can be attracted into the supply chain through new grants and business rates support. This will create further export opportunities for our cutting-edge companies.
It is also recommended that UK port facilities are upgraded to ensure they can handle the giant offshore wind turbines and components now being manufactured, which will grow even larger in the future. At present there are only a small number of UK ports able to accommodate turbines of the size expected within the next five years; investing in upgrading ports will improve the competitiveness of the UK in this global growth industry.
Devising a hydrogen strategy to accelerate the number of renewable hydrogen pathfinder projects could build a whole new industry in a technology seen as the gamechanger needed to reach net zero. More investment in Research and Development would unlock further innovation, and this needs to match those of competitor countries such as Germany, the Netherlands, Denmark and Japan.
There is a significant opportunity for the UK to export wind engineering expertise, components and services to the large European wind market and rapidly expanding global market. This fixed offshore wind market alone is set to rise to £30bn pa by 2030. However, many UK SME’s in offshore wind lack the knowledge and resource to promote and sell their products and services to these export markets.
We welcome the support available from Government Departments to achieve the sector’s aim on increasing UK offshore wind exports to £2.6 billion a year, but the Department for International Trade (DIT) should be further resourced to meet the scale of demand for these services and the export opportunity. Increased resource would also enable DIT’s services to become more dynamic and collaborative with the work of the FCO and COP Team in encouraging the expansion of offshore wind in developing markets like Brazil, India, Turkey and South Africa.
We welcomed the Government’s consultation on reforms to the next Contract for Difference auction which could support the development of floating wind, wave and tidal stream technologies. However, the development of each technology will require targeted measures from Government, which should be brought forward to support the UK’s economic recovery.
With the correct support, floating wind has the potential to provide UK export value of at least £230m by 2031 and £550m by 2050. Moreover, The Offshore Renewable Energy Catapult estimates that the tidal stream industry could generate a net cumulative benefit to the UK of £1.4bn, including considerable exports and support 4,000 jobs by 2030.
The ability of the UK’s offshore wind supply chain to compete in the UK and global market will be significantly dependent upon owning appropriate intellectual property and system integration knowledge. To accelerate this development, the government should allocate funding to support appropriate R&D investment, at least to the levels of competitor countries such as Germany, the Netherlands, Denmark and Japan.
The majority of funding to support R&D, productivity and quality management in the supply chain has been provided by industry, historically through schemes like the Offshore Wind Accelerator, but currently most notably through the £100 million Offshore Wind Growth Partnership (OWGP) scheme. Established as part of the UK Offshore Wind Sector Deal, the OWGP supports UK supply chain companies with research and development, strategy and leadership, project management, people excellence, process excellence, health and safety culture, and quality management.
The Government should make further funds available to the OWGP, as is the case with the joint government-industry funded Aerospace Growth Partnership and its Supply Chain 21 Competitiveness & Growth programme.