The left-leaning Institute for Public Policy Research has found that the government has done too little to attract wind turbine manufacturers to set up in the UK, with the result that only a small proportion of the tens of billions of expected investment in offshore wind will benefit British manufacturers. Consequently, the public subsidy for wind, paid for on energy bills – and which will also run to billions – will reap much less in jobs and benefits to the UK economy than it could have.
Will Straw, associate director at the IPPR, said: “The current policy trajectory could achieve a worst of all worlds outcome – low volume [of energy generated], low jobs and high costs. This would fail our climate challenge, our jobs challenge and our rebalancing [of the economy] challenge. Unless Britain pumps up the volume, there is little prospect of bringing down the costs of offshore wind or creating domestic jobs.”
Last week, David Cameron opened the world’s biggest offshore windfarm, the London Array, in the Thames Estuary. With shallow surrounding seas and a strong wind resource, the UK is regarded as one of the best sites in the world for turbines in the sea.
But the government has refused to put in place a target of decarbonising power generation by 2030, and is opposing European Union plans for an exacting 2030 goal on renewable energy. Renewable energy investors argue that both measures are needed to secure long-term certainty for the fledgling offshore industry.
The IPPR also criticised the government’s apparent lowering of ambition for offshore wind – in 2011, the government set an aspiration of 18GW – amounting to several thousand turbines, potentially – coming from offshore wind by 2020. But that has been revised drastically downwards, with the latest projections from the Department of Energy and Climate Change (Decc) showing an expected generation capacity of only 11.5GW by 2020, rising slowly to 16GW by 2030. If such low levels are realised, the chances of the UK meeting its emissions reduction targets are small, according to government advisers, the Committee on Climate Change.
A fortnight ago, the government set out the “strike price” for offshore wind, of £155 per megawatt hour of energy generated. This is the price that offshore wind companies will receive as a minimum for the power they supply to the grid. Renewable energy companies said that driving down costs to ensure they could make a profit at such a price would be “challenging”.
According to the IPPR, the government must as a matter of urgency attract at least two – and preferably more – wind turbine manufacturers to set up shop in the UK, with a boost to jobs locally but also in the supply chain among components manufacturers and engineering and services companies. Many of the skills and equipment needed are already in place, because of the UK’s well-developed offshore oil and gas expertise.
Jennifer Webber, director of external affairs at RenewableUK, the trade association for wind companies, said: “[These recommendations], if adopted, would stimulate the healthy growth of the offshore wind industry not just for the rest of this decade, but also in the decade which follows. We’ve made progress on the development of the UK supply chain in areas such as manufacturing foundations and electrical equipment, but we must ensure that we reap the full manufacturing benefits by bringing big offshore turbine factories to ports around the UK rather than seeing them sited in other countries.”
She called for ministers to lay our a “long-term vision to show the direction of travel beyond 2020, to increase the number of investors and entrepreneurs”. She said: “Clear targets stimulate confidence, and the further they stretch into the future, the greater the sense of trust generated. Meanwhile the offshore wind industry will continue to build on the steps we are already taking to drive down costs significantly.”
But the government rebuffed the accusations, arguing that the current subsidy arrangements are succeeding in promoting the construction of offshore turbines. Decc said: “Offshore wind is an important contributor to our energy mix. We have a massive natural resource and expect to see more capacity built to 2020 and beyond. We have provided certainty to offshore wind investors with draft strike prices for contracts in the future electricity market.”
Decc said that the ranges of expected offshore wind generation were not targets, but “indicative estimates”.