It seems few things arouse passions these days like energy and how it affects us all. And so it should – it’s imperative that we have an honest and balanced debate on energy policy so that we take the right decisions before it’s too late.
We have a lively debate in Spain, where we are striving to get the right balance in our solar energy subsidies, and there most certainly is one in the UK with the pressing need to secure the country’s energy needs. This endeavour comes against a background of underinvestment, obsolete infrastructure and lengthy planning procedures.
We welcome this debate in the UK, where we are investing in generation and distribution. But with energy sector investment projected as high as £200bn this decade, we must have a framework that guarantees sufficient returns and the right generation mix. The Government has launched its Electricity Market Reform (EMR), providing a regulatory framework for new generation projects, but there are still issues to be resolved affecting wind and nuclear. Regulatory uncertainty will make it harder to borrow from capital markets or persuade pension funds to invest.
It’s worth remembering that half of Britain’s power plants will need to be replaced by 2020 and the grid needs upgrading to provide access for new supplies. The options for avoiding shortages are basically coal, gas, nuclear, hydro and wind. Each has its pros and cons but each has a role to play. Coal is available, but pollutes and won’t help Britain to meet its emissions targets. Gas is cheap and quick to build, but carries with it a reliance on imports and the vagaries of the oil price. Hydro is relatively reliable but there are few available new sites. Nuclear offers continuous supply but is costly to build with a lengthy development phase. Wind is abundant and indigenous, but can be intermittent.
Unfortunately, there’s no easy fix, and the answer lies in a balanced energy mix, with the right incentives in place. We operate all these energy sources, and among them wind is significant. It’s not a holy grail for us, but is reliable, clean and cheap to run. It’s true wind farms are capital intensive in development but thereafter are the cheapest low-carbon energy source, and the cost to consumers is relatively low. For the times when the wind doesn’t blow, a system of capacity payments should be available for gas plants as backup supply.
The UK is fortunate to possess some of the best wind, wave and tidal resources in the world off its coasts. Offshore wind is more productive than onshore, and while the costs are currently greater, technology and designs are advancing with bigger turbines whose costs are coming down.
We are developing some major offshore wind development zones, which we view as a complement to tried and tested onshore installations. We’re also testing new marine energy technologies such as wave and tidal power. And we continue to advance on plans for a new nuclear plant at Moorside together with GDF Suez.
The development plans our group and others are progressing will have a positive impact on jobs and growth. In the UK, we plan to invest £12 bn during the current decade and Ofgem’s fast-tracking of our transmission programme will create up to 1,500 jobs. Offshore is another good example, where port infrastructure is needed in the supply chain, potentially creating thousands of jobs for British companies.
But for these developments to take place, we need the right political and regulatory environment with a number of preconditions, including:
· A solid consensus of public opinion behind policies that must be applied for years to come and probably by different governments.
· Faster planning and approval processes
· Rapid progress on EMR to establish the right conditions to attract investment
· Early deployment of the supply chain to kick-start manufacturing, infrastructure growth and job creation.
Wind can play a major role in meeting Britain’s energy goals and provide an engine for growth and jobs through the supply chain. Though reservations have been expressed in the UK, a YouGov survey found 56pc of the public backed more investment in wind power. This is truly a great opportunity to channel jobs and investments and provide a legacy for future generations of reduced fossil fuel dependence, even if it means costs in the short-term. It would be irresponsible to squander these opportunities by polarising what should be a constructive debate.