UK Secretary of State for Energy and Climate Change says that renewable energy technologies will deliver a third industrial revolution

November 5th, 2011 by Rt Hon Chris Huhne Secretary of State for Energy and Climate Change

“I’m delighted to be here at Renewable UK’s annual conference.

Our location is rather appropriate. Manchester was the thumping heart of the first industrial revolution. This was the world’s first industrial city. It is home to the first industrial canal, and the world’s oldest railway station.

The foundations for our prosperity were laid here. The engines which drove Britain’s extraordinary economic growth were built here – from the spinning mule to the steam engine.

We could not have picked a better place to discuss their modern equivalents.

Chris Huhne, Secretary of State for Energy and Climate Change addresses the RenewableUK conference in Manchester on 26 October 2011 (click image to expand - ©RLLord)

Renewable energy technologies will deliver a third industrial revolution. Its impact will be every bit as profound as the first two.

My argument today is a simple one: the revolution has already begun.

From the Western Isles to the Isle of Wight, across the length and breadth of Britain, new companies are creating new jobs, delivering the technologies that will power our future.

As we look to pull ourselves out of recession and back to prosperity, renewable energy can light the way.

Today, I want to look at the contribution renewable energy is making to our economy right now.

The investment in it is sparking, the jobs it is delivering, the growth it is creating.

And I will look at what we can to do encourage that growth and to sustain those jobs.

But first, I want to take aim at the faultfinders and curmudgeons who hold forth on the impossibility of renewables – the unholy alliance of climate sceptics and armchair engineers who are selling Britain’s ingenuity short.

“Renewables are too expensive”, they cry. “They cannot deliver energy at scale. They are uneconomic, unreliable and unwanted.”

It is time to retire these myths.

And let us start with the most egregious: that renewables are too expensive; that they could not exist without public subsidy; that they are held up by government cash alone.

Well last year, global investment in renewable energy rose by 32% to US$211 billion. And US$142 billion of that total was new financial investment, which excludes government and corporate R&D.

Renewables are grabbing a large and growing share of new energy investment.

Yes, some of that investment of course is attracted by public subsidy to off-set the substantial market failure we don’t take account of carbon. But globally, subsidies for fossil fuels outstrip subsidies for renewables by a factor of five.

We subsidise renewables to bring on deployment and reduce costs. And we’ve seen some remarkable successes: the cost of solar energy, if you look at solar photovoltaics, just keeps on tumbling year in and year out.

Right now, support for renewable energy costs the average household less than sixpence a day. But decades of underinvestment in energy efficiency and reliance on fossil fuels costs us much, much more.

About half of the average household bill goes on wholesale gas and electricity costs. These costs are highly volatile, and as Ofgem make clear, the higher gas price is the real reason bills have been going up over the past eight years.

That is why we need a flexible energy portfolio. And that’s where the counter-argument of the climate sceptics falls down. “Forget wind farms”, they say. “Shale gas will be our saviour. We should abandon everything else.”

Chris Huhne, UK Secretary of State for Energy and Climate Change, addresses the RenewableUK Conference in Manchester on 26 October 2011 (click image to expand - ©RLLord)

I don’t believe instinctively that government is very good at picking winners. And if you do, I refer you to a Department of Trade and Industry (that is the predecessor to the Department of Business) white paper from 2004 that estimated oil prices would reach the astonishing heights of $23 per barrel by 2010. Even last year my own Department (DECC) forecast oil at $80 per barrel. Brent crude is currently trading at $110 per barrel.

Lashing our economy to a single energy source is a risky business.

We don’t yet know the full extent of shale gas here, and here is here in Lancashire; how economically or environmentally viable it will be to extract, or by when. At best, it is years away. Unconventional gas has not yet lit a single room nor cooked a single roast dinner in the UK.

Yet those who clamour loudest for “realistic” energy policies would have us hitch our wagon to shale alone. Shale gas may be significant. It is exciting. But we do not yet know enough to bet the farm on it. Faced with such uncertainty, it is very clear to me that we do what any rational investor would do with their own pension fund, and that is to spread our risks and have a portfolio, and that portfolio has to include renewables.

The second fallacy is that renewables cannot deliver energy reliably or at scale.

But today, more than 10 gigawatts of our electricity capacity is renewable. That’s enough to power six million homes.

And with every passing year, renewable energy takes over another percentage point of global electricity capacity.

In 2007, 5% of the world’s electricity was renewable. In 2008, it was 6%. In 2009, 7%. And last year, 8%. And it’s still growing rapidly. More than a third of the new capacity added last year – some 60GW – was from non-hydro renewables.

The message is clear: when we build new power plants, increasingly globally we choose renewables.

In fact, renewable energy can make our system more secure – not less.

According to the International Energy Agency, renewables increase the diversity of electricity sources, making energy systems more flexible and more resistant to shocks.

Yes, some renewable technologies are intermittent. But the UK Committee on Climate Change estimates that even with 65% of our energy provided by renewables in 2030, intermittency may cost just one pence per kilowatt hour.

After all, biomass is instantly dispatchable. And providing back-up for intermittent renewables is just not that expensive. We already swing from a low of demand of 40GW in the early hours of the morning to a high, sometimes at 80GW during the day. Peaking plant has long been part of our mix. The reality is that without such peaking plant the nation’s kettles would be cold in the Coronation St ad breaks, so this is nothing new.

Every year, renewable energy is attracting more investment and delivering more capacity. It is also gathering more support. One hundred and nineteen countries out of roughly 200 worldwide have renewable energy targets or policies up from an estimated 55 just six years ago.

And that brings me to the third great misconception about renewable energy: that it is unwanted.

Earlier this year, Ipsos MORI polled a thousand UK adults on which energy source they preferred. And by a clear margin, people favoured renewables.

Eighty-eight per cent of those polled viewed solar power favourably; 82% for wind, 76% for hydroelectricity, 57% for biomass.

The highest placed traditional energy source for electricity was gas at 56%.

So 73% of people would support a new wind farm in their area, as opposed to just 21% for a new coal plant.

So when you get behind the headlines, and I do realise of course that if I as Energy Secretary could persuade everybody who protested at every new piece of infrastructure to sign a binding undertaking that they wouldn’t want any instant access to electricity in their own homes I think we would find it a lot easier, so when you get behind the headlines you find that support for renewable energy is strong and growing.  And so is its contribution to our economy.

Across the United Kingdom, renewables are providing jobs, investment and growth. And the numbers are really starting to add up.

Over the last financial year, nearly 4,500 new jobs were created in the low-carbon sector, which grew by 4.3%.

Fifty-one thousand six hundred companies in Britain provide low-carbon and environmental goods and services, and exports are now £11.3 billion which is a substantial increase.

By Christmas we will have 3GW of biomass installed, and by Easter 5GW of onshore wind. And in the past seven months alone, plans for £1.69 billion of investment and 9,500 jobs have been announced.

Here in the North West of the United Kingdom, more than 950 jobs: 340 at the Siemens Renewable Energy Engineering Centre, just a few miles down the road; up to 600 over the next decade at Cammell Laird; three new Farmgen developments planned in Cumbria with hundreds of jobs.

This is the reality of green growth, and at a time when closures and cuts dominate the news cycle, next-generation industries are providing jobs and investing capital in Britain.  And just as in the recovery after the last deep depression in 1929 to 1931, it is new and innovative industries that will grow fastest.

And renewable energy is surging out across the United Kingdom blazing a trail of start-ups and jobs.

Across the Pennines, in Yorkshire, 2,250 jobs, £130 million in Real Ventures’ biomass plant employing up to 285 people.

And in the North East, more than 1,400 jobs at TAG Energy Solutions, which I visited recently, delivering up to 400 jobs in the Billingham turbine factory.

North of the border, one of the jewels in our renewable energy crown – £160 million of new investment and more than 420 Scottish jobs.

And across the Irish Sea, 450 jobs in Belfast Harbour thanks to DONG Energy’s Duddon Sands offshore wind farm; 1,400 jobs in Wales. In the heart of England, 100 jobs in the East Midlands – and 50 in the West; 120 in East Anglia. Two thousand and two hundred jobs in the South East, supported by £172 million – from Vestas, The Green Home Company, and more. And at Tilbury, the first UK coal plant to convert completely to biomass, safeguarding livelihoods.

Across Britain, from the industrial heartlands to the northernmost extremities, new energy technologies are delivering jobs and growth just when we need them most.

Capitalising on our geographical, physical and human advantages; Scotland’s research and natural resources. The Solent’s marine expertise. Manufacturing in the North East. Technology development in the M4 corridor.

Renewable energy doesn’t just have the potential to bring Britain’s economy back to life – it has already started.

Our job now is to allow it to really flourish. How? By setting clear and coherent objectives. And using regulation and closely targeted support to hit them.

By the end of this decade, we must cut our carbon emissions by 34% on 1990 levels. By the end of the next decade, they must be halved.

To hit our EU renewable energy target, which is legally binding, we must generate 30% of our electricity from renewables by 2020. That means a fourfold increase in deployment.  We must turn our back on the inheritance that we had from the last Labour government that ranked us as the dunce in class, 25th out of 27 EU member states for renewables.

Growth on that kind of scale will not be easy. It will require tough decisions, clear thinking, and tightly focused support. And everyone has a part to play.

Industry must carry on making the case for renewables. Engaging with communities, and answering its critics by delivering renewable schemes that save money and save carbon.

Government must break through the barriers that are stopping new schemes being built, overcoming the financial, planning and delivery hurdles that can hold up progress on renewables.

I will do my bit by saying loud and clear that I think onshore wind is beautiful. When I said that I was booed on “Any Questions?” What you didn’t hear is that when Jonathan Dimbleby thought he would add to my embarrassment afterwards by conducting a poll with an audience in Wotton-Under-Edge in Gloucestershire very near a controversial onshore windfarm development, and he thought he would add to my embarrassment by clearly showing a massive against vote from the audience, and about 40% put their hands up against onshore wind, and about the same number out their hands up in favour and I have to say the panel was gobsmacked so there is much more support out there than I think some of us recognise on the basis of the noise that some of the protestors make. And together we have to do a better job of communicating. That means engaging with the communities who stand to benefit, and the investors who don’t yet see the promise that renewable energy holds.

We must ensure that the silent majority aren’t drowned out by the vocal minority – those opposed to renewable energy in all its forms. Indeed, it seems to me to any type of energy in all its forms.

That means making sure communities, which host renewables benefit more directly. That’s what our proposals on business rate retention are for. And that’s why we were pleased to endorse Renewable UK’s Protocol on Community Benefits.

My challenge to you today is this: keep it up. Continue to develop and publicise new ways of rewarding those communities most affected by development. Because, as the report you are publishing today shows, the opportunities are simply too great to ignore.

Globally, around half a trillion dollars has been earmarked for green stimulus spending. We will need to spend a hundred times that by 2050 to hit our climate targets.

We must be realistic. The pressure on the public finances means we cannot support everything at the level we otherwise would. So we must ensure we send clear market signals: deploying public finance intelligently, and breaking through barriers to growth. Our starting point is simple. We have a responsibility to the taxpayer and the bill payer to get the most carbon and cost-effective electricity generation online.

That is why the Renewables Obligation Banding Review has studied carefully how much subsidy different technologies really need.

The Renewables Obligation reinforces our commitment to renewables, and it provides what developers most need: a stable framework as we look ahead to the Electricity Market Reform.

Where new technologies desperately need help to reach the market, where they can be scaled up significantly while bringing down costs over time, we are raising support.

Where investors are on the cusp, we will give them the short-term impetus they need. So marine energy projects up to 30 megawatts will receive five ROCs under our plans.

Where market costs are coming down in onshore wind, for example, we’re consulting on reducing the subsidy.

On offshore wind, we set our ambition high in our recent Renewable Energy Roadmap. And because we want to see a huge increase in deployment by 2020, we must see costs coming down.

So we’re working to help to bring investors and developers together, for example through the offshore wind investor conference.

And our host today, Andrew Jamieson, is also lending his talents to the Offshore Wind Cost-Cutting Task Force.

On biomass, our support will focus more strongly on cheaper transitional technologies. Conversion from coal to biomass, for example, exploits existing assets and helps build the supply chain here in the UK.

Overall the new arrangements will mean a lower impact on consumer bills than staying with the current bandings. In total, and this is absolutely key, our low-carbon and energy-saving policies will reduce household enegy bills compared with a ‘do nothing policy’. If we just stood back and let the market rip we anticipate, given the likely development of oil and gas prices, the British household will end up paying more than they will with our low carbon and energy saving policy.

Of course on the Renewables Banding Review, this is a consultation. We want to hear views from industry and beyond. I am sure you will not be backwards in coming forward.

Our approach to renewable energy must encourage investment and deliver value for money for consumers. We are doing three things to help.

First, we are using policy to create new markets that will stimulate new investment, like the Green Deal being launched in October 2012, our unprecedented energy efficiency programme. The first of its kind in the world. It will bring jobs, growth and opportunities right across this country.

Or the world’s first Renewable Heat Incentive. It will create a whole new market in renewable heat. Not just big industrial and commercial installations, but also homes and businesses too, being piloted this year and then rolled out next.

We expect green capital investment in heat to rise by £7.5 billion by 2020, supporting 150,000 manufacturing, supply chain and installer jobs.

So the first thing we’re doing is to create new markets; the second is to make existing markets work better.

That is why we published in the summer 2011 our plans for the reform of the electricity market, which will deliver secure, low-carbon and affordable electricity.

We’ve listened to the renewables industry in drawing up those reforms. That’s why we support a contract for difference model tailored to renewables and not auctioning in the near future and although that remains a longer term goal.

We’ll publish a technical update on the institutional framework and the capacity mechanism around the turn of the year, and we’re planning to provide more information on the Contract for Differences as well.

We’ll also build in a phased transition from the Renewables Obligation to the new arrangements. By offering certainty and clarity, we can secure the scale of investment we need. And by attracting in new investors, we will also increase competition in the UK energy market.

Our third priority is to capture the benefits of the low-carbon revolution here in the UK. That means ensuring more clean technologies are designed and manufactured here.

We have a blossoming low-carbon goods and services sector, which seems to be thriving even in tough times.

But China now leads the world in solar photovoltaic panel production; and Germany on energy efficient housing design.

We’re missing a trick unless we start supporting low-carbon manufacturing here in Britain, and grow the green supply chain: locking in profits and expertise, and creating the exports that will keep Britain competitive for decades to come.

Yes, climate change is a man-made disaster. Yes, the UK does produce just 2% of global carbon emissions. But if we grasp the opportunity now our businesses and our economy can be much more than 2% of the solution.

We are not going to save our economy by turning our back on renewable energy.

Chris Huhne, Secretary of State for Energy and Climate Change, answers questions at a RenewableUK press conference after his speech (click image to expand - ©RLLord)

This has been at the heart of Liberal Democrat policy for decades and it is something the Deputy Prime Minister, the Business Secretary, and the Chief Secretary to the Treasury instinctively understand.

But this goes beyond any one party. I know the Prime Minister agrees, which is why he is putting so much effort in to securing offshore wind manufacturing in the UK. And it is something I know my predecessor Ed Miliband understands. It is this three-party consensus that makes the UK such a good place to invest.

It wasn’t always like that. It is nothing short of a national disgrace that in the 1980s the UK lost our leading wind research position to Denmark, because government refused to support the industry.

It is a mistake I am determined that this Coalition Government will not repeat. That is why in the recent ROC banding consultation I have sent a clear signal to the tidal stream and wave industry. We want the UK to be the best place in the world to invest, deploy and commercialise these technologies.

So I can today assure you that this Government has resolved that we will be the largest market in Europe for offshore wind. We already have more installed offshore wind than anywhere else in the world and we are determined to remain at the forefront.

That’s why we set aside £200 million for the development of low-carbon technologies in the comprehensive spending review, including £60 million for supporting major new manufacturing projects on the English coast.

We will be the best place to invest in marine power, and we will be the fastest growing country in the EU when it comes to renewable deployment.

That’s why the Green Investment Bank has been capitalised with three billion pounds, to help unlock private sector investment at scale, and don’t underestimate the achievement with the Green Investment Bank. For the first time ever in our economic history, Britain will join every other leading developed economy in having our own public development bank, which is focused on key economic goals.

And that’s why we’ll keep funding research and innovation, not just through DECC, but through the business and transport departments too.

We’re also funding the Offshore Wind Accelerator, a partnership between the Carbon Trust and leading developers to demonstrate a new generation of full-scale, low cost energy. I’m pleased to announce today that a project funded through the Accelerator has been has been successfully installed with a met mast by the SMart Wind consortium, with funding support from DONG Energy.

This kind of innovation will bring down the cost of offshore wind even more quickly. That’s why we’ve allocated up to £30 million over the next four years to fund innovation to reduce offshore wind costs. And as part of this work, our first call for proposals will focus on components of emerging offshore wind systems, with budget of up to £5 million. I expect it to be launched shortly.

We’ve also allocated up to £20 million to support the world’s first commercial-scale marine energy arrays.

And we’re working closely with organisations such as the Energy Technologies Institute, which just announced plans to invest up to £25 million in an offshore wind floating system demonstration project. Opening up new areas off the coast of the UK, and helping to bring generation costs down.

So from the structure of the electricity market to research funding, we’re breaking through the economic barriers. But we’re also focusing on non-financial obstacles.

We’re reforming the planning system, to ensure it’s no longer a brake on sustainable development.

The energy National Policy Statements set out the national need for new renewable energy infrastructure. We have introduced a fast-track process for consents. And we will close the Infrastructure Planning Commission and return decisions on major energy infrastructure to democratically elected ministers.

More than one thousand pages of local planning policy for England are being replaced by clearer and more streamlined National Planning Policy Framework. And the Government will consult on measures for a ‘planning guarantee’.

We’re also working to improve grid connections. The connect and manage scheme is now up and running. Network companies are now looking much further ahead in their planning and engaging more effectively with stakeholders. Together, this will help the network acts as a facilitator rather than an obstacle to renewable generation.

And a few months ago, we published the Renewables Roadmap, setting out for the first time how we will overcome barriers to deployment.

It’s a comprehensive action plan to accelerate the UK’s deployment and use of renewable energy.

In many ways, Britain can lay claim to be the home of renewable energy.

It is thought that the oldest tidal mill in the world once stood across the river Fleet, in London. The white cliffs of Dover looked over a tide mill that was recorded in the Domesday Book. And 130 years ago, we connected the world’s first public electricity supply, in Godalming, Surrey. It did not burn coal, or gas. No, the power plant in question was a Siemens generator driven by 100% clean, renewable power: a watermill on the River Wey.

When Britain began its journey towards electrification, renewable energy was the future. But we ended up choosing another path. This time, things will be different.

We will not heed the naysayers or the green economy deniers.

With more than £200 billion worth of energy infrastructure needed by the end of the decade, this is our golden chance to deliver a greener future. Thank you.”

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