Oliver Colvile is MP for Plymouth Devonport. Follow Oliver on Twitter.
Over the next decade the UK faces three specific energy challenges:
- Securing a stable energy supply;
- Making sure we play our part in cutting C02 emissions in the fight against global warming; and
- Developing new business for growth in our economy.
According to OFGEM, Britain will face a potential energy shortage by the winter of 2015/2016. This could lead to a significant rise in the cost of energy bills. According to a recent report by the energy regulator, the amount of spare UK’s energy capacity is likely to fall from 14% to 4%.
Britain could become increasingly reliant on foreign energy supplies or see the lights being turned off just as we prepare for the next General Election.
On a recent trip to the British Antarctic Survey, I was shown how the world climate has changed over the last 800,000 years. Drilling down into the ice, it appears that the only change in global warming over first 770,000 years was due to a tilt in the earth’s axis. But in the last 300 years of industrialisation, whilst the quality of life improved dramatically, our climate is much more acidic. Plymouth Marine Laboratories tell me that a more acidic sea is having a significant impact on our fish stocks or more importantly the plankton which are part of their food chain. The Stern report warned that unless action was taken to reduce these carbon emissions, the global economy and the world’s environment would face some significant challenges.
That is why I want the Government to make greater use of renewable and nuclear energy. I welcome the proposal that, by 2020, renewables should account for 15% or our energy supply. Unless we are careful, the current campaign against the visual impact that wind farms are having on our countryside and the level of government subsidies to the industry could damage our case to attract investment into marine renewables.
Now I confess: my Plymouth Sutton & Devonport constituency is totally urban and does not have a single piece of countryside. My city is a global leader in marine engineering research with a very great science base. Key players include the Royal Navy, Plymouth Marine Laboratories, Plymouth University, the Marine Biological Association, Sir Alister Hardy Foundation for Ocean Science and the National Aquarium.
In April last year, Greg Barker, the Climate Change Minister, announced that part of Devonport dockyard would be the host for a new marine energy park. With a local economy dependent on the public sector (38%) and a shrinking Navy, we can create a unique manufacturing facility which not only develops goods to be sold to India and other emerging countries facing energy challenges, but also help deliver renewable energy for the domestic market.
It is generally recognised that the UK has an unrivalled abundance of tidal stream potential and is currently the world leader in developing this technology. In 2011, the Government published the UK Renewable Energy Roadmap which suggested that up to 300 MW of wave and tidal stream could be deployed by 2020, providing around 0.9 TWh/y of electricity. While this won’t make a major contribution to the 2020 renewable energy target, it does have the potential to significantly deliver in the longer term, provided costs are reduced. For this to happen, the industry must deliver demonstration projects to test devices and identify cost reductions.
To encourage commercial investment in renewables, the Government put in place a mandatory requirement for licensed UK electricity suppliers to source the electricity they supply to consumers from eligible renewable sources. If they don’t, they have to pay a penalty.
The scheme is administered by Ofgem; they issue Renewables Obligation Certificates (ROCs) to electricity generators in relation to the amount of eligible renewable electricity they generate. Generators sell their ROCs to suppliers or traders, which allows them to receive a premium in addition to the wholesale electricity price.
Suppliers present ROCs to Ofgem, demonstrating their compliance with the obligation. If they do not present sufficient ROCs, suppliers pay a penalty known as the buy-out price. The money collected by Ofgem in the buy-out fund is recycled on a pro-rata basis to suppliers who do present ROCs. Suppliers that don’t present ROCs pay into the buy-out fund at the buy-out price, but don’t receive any portion of the recycled fund.
At a British Irish Parliamentary Assembly meeting in Glasgow, it became apparent that that Scotland and Ireland are well ahead of England in researching and delivering energy supply from the tides. The devolved Scottish Government and Northern Ireland Executive have the flexibility to set the ROC bands to reflect their national circumstances and objectives. This flexibility means that the Scottish Government and the Northern Irish Executive can set a more attractive ROC subsidy than those for England and Wales. I have no doubt that the SNP will claim an independent Scotland will be more attractive to potential investors. This, in turn, could make England and Wales less attractive.
Potentially, manufacturers of marine renewable equipment could be attracted to Scotland at England’s expense. In short, we are into a game of chess and we need to make sure that we don’t send the wrong messages to potential investors that England isn’t interested in developing a marine renewable industry. If not, that will mean check mate.