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Offshore wind and offshore oil - a shared sea and a shared workforce

Posted By Maf Smith, 22 April 2016
Updated: 02 June 2016
We’re proud to be the world leader in offshore wind – a technology which we started installing in British waters in the early 2000s. Sharing space out at sea is the UK’s world leading oil and gas sector which has been an important part of the UK economy since the 1960s. We are two industries both delivering economic success for the country.

However, right now the UK’s oil & gas industry is facing one of the greatest crises in its history, and low international oil prices are impacting on investment and employment. Many in the industry are thinking long and hard about the industry’s long-term prospects. Hardest hit have been cities like Aberdeen but the impact has been felt in coastal communities from Shetland to Lowestoft.

There is some hope, however, for the many experienced oil industry employees who may be worried about the future. That hope comes from offshore wind.

In January, the Government announced work on a “UK Oil & Gas Workforce Plan” to examine, among other things, how it can support workers who have lost their jobs, or may be in danger of doing so. RenewableUK has taken an active role in this process, helping Government identify the scale of the opportunity presented by offshore wind for former employees in oil & gas.

Offshore wind already contributes 5% of the UK’s electricity and supports around 15,000 people in employment. By the end of this decade the UK’s offshore wind sector will double in size, and there are opportunities in construction and operation of a growing number of sites. New offshore projects in development are exponentially larger than existing wind farms in terms of size and scale. These power plants will need huge numbers of highly skilled individuals to be built. Offshore wind farms have long development programmes, a construction phase of two to three years, and an operating lifetime of 20 to 25 years. For example, ScottishPower Renewables is currently developing its East Anglia One offshore wind farm; a £2.5 billion investment requiring an estimated 3,000 skilled employees.

This is where oil & gas comes in. The UK is perfectly placed to take advantage of its 40 years of offshore expertise by easing the transition for workers from fossil fuels into renewables. We have already seen traditional developers, such as Statoil and Repsol, diversify into offshore wind as early movers in the sector, while underneath we have a large supply chain of offshore contractors with a track record of winning work in offshore wind and oil and gas.

As the industry grows so it is learning from oil and gas about how to operate safely at sea. A great example is the use of helicopters by our industry for construction and maintenance work, with helicopter firms now active in the wind market.

There is a great opportunity for establishing a clearer path to retrain workers for a life in clean energy. This means providing resources for people who may not be aware of the opportunities to make the transition. Their experience working in other parts of the offshore energy sector is highly sought after, with the aptitude, professionalism and transferable skills all valued highly in offshore wind.

The practical work of our industry to support workers in transition comes in many forms. UK companies take their supply chain responsibilities seriously and are active in supporting UK firms win contracts. As an industry we run regular supply chain events to help companies and future employees understand about how to go about winning work. We have an annual skills fare putting companies and potential employees together while also providing advice and background to those wanting to move into our industry. And we work across training providers to make sure that there is good training available which is accredited to a suitable standard. A good place for individuals to start is the careers section of our webpage which provides information on apprenticeships, qualifications needed and has a jobs board of available work.

There is a lot that individuals can do for themselves to win work in this exciting industry. The Government’s work however is a vital part of coordinating efforts to support oil & gas industry employees, and it is equally important for offshore wind. Our sector is proud to be part of the solution for hardworking energy sector workers and their families.

This blog first appeared in BusinessGreen.

Tags:  government  Offshore Wind  oil  Scotland  Scottish Renewables 

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Budget blog - What might the Treasury say?

Posted By Gordon Edge, 15 March 2016
Updated: 24 March 2016

In all the frenzy about Brexit, one can be forgiven for forgetting that there is a rather important political/economic date imminent – the Budget. Given the apparent takeover of energy policy by the Treasury, the Budget this year is taking on even more significance, with some crucial announcements potentially on the cards.

The key issue to look out for is budget available under the Levy Control Framework (LCF), both in the immediate future and the longer term. This is a complicated area. Government’s recent policy changes have been primarily driven by a perceived need to rein in spending to within the current LCF envelope, which grows to £7.6bn in 2020 (in 2011 money). Early in the term of the current Government, figures were released indicating that they projected an overspend of £1.5bn above that figure. A number of factors were pointed at, including higher than expected demand for support through the Renewables Obligation and Feed-in Tariff, higher than expected load factors for offshore wind, and lower than expected electricity prices – this last driving greater draw on the LCF from the new Contracts for Difference (CfDs). However, Government has been less than fully transparent about how it has modelled the budget use, making assessment of whether there is any money left in the pot difficult.

We have been trying to model future LCF use within RenewableUK. With a number of the policy changes behind us, and the RO level set for 2016-17, the possible range of outcomes is narrower than it was in the middle of last year, but there are still uncertainties. However, best modelling efforts appear to indicate that budget use still overshoots the trajectory every year out to 2020. It’s worth noting that if the wholesale price projections that Government published when the LCF was set in 2012 (which are higher by about £20/MWh) were to be used instead, the story would be very different. There is a further problem, though: current and forward power prices are about 50% lower than those being used by DECC for the next two years. The risk is of further downward revision in DECC’s power price forecast and a worsening of the ‘overspend’.

So it appears unlikely that Treasury would sanction any budget for further CfD allocation ahead of 2020, unless there was an over-riding reason to do so, outside of meeting environmental or renewable energy targets. Security of supply could be one such reason, though a more pertinent one is likely to be to protect supply chains and project pipelines that will be needed post-2020, when new budget is available and tough decarbonisation targets need to be met. The things to look out for on Budget day are the latest OBR figures for the LCF, and any word on budget for the promised CfD allocation round later this year.

If Government determines that there is no more money before 2020, then budgets for future allocation rounds will have to come exclusively from the settlement that is made for the LCF post-2020 – and only projects delivering in the 2020s will have access. So far, that post-2020 budget has not been set out, and Budget would appear to be an obvious point at which to do so. While having clarity on that budget would be helpful, there is a worry with an imminent announcement: Government has made no attempt to consult with the industry about anything to do with the future level of budget, and nor has there been any indication of a change to the accounting for the CfD. The risk is that the structural problems of the current LCF are just continued, leading to a similar problem of uncertainty over the ‘buying power’ of the LCF as the volatile wholesale price leads to budget use depending on exogenous factors that are likely uncontrollable. The win-win opportunity of making the LCF a more dependable investment signal, reducing risk and therefore cost of capital and strike prices, would be lost. So look out for any statement on the LCF, but be careful to interrogate the meaning of a large budget number.

In all, there may be important news on Wednesday. It just may not be quite as good as it sounds.

Article originally posted on Business Green 14/03/2016

Tags:  2020  Budget  CfD  DECC  government  LCF  Treasury 

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What the Papers Say about our future energy market

Posted By Maf Smith, 15 February 2016
Updated: 18 February 2016
It’s been a busy media weekend for renewables. First up, Emily Gosden dug behind the exchange between Energy Minister Andrea Leadsom and Peter Lilley MP at DECC Questions on Thursday 11th February.

Peter Lilley asked the Minister about work on a no subsidy contract for difference, and asked if this will reflect the value of the electricity. For him the value of the electricity depends on the time that it is produced, where it is produced and how reliably it is produced and he is sceptical of the ability of renewable electricity to deliver.

In reply the Minister said “On the subsidy-free CfD, he is also right that we must take into account all the various costs. We are looking at the matter very closely. I am not making any promises here, but, alongside other subsidies and other CfDs, we are looking carefully at the proposition.”

Emily Gosden’s incisive Telegraph article looked at this issue in detail. What is interesting for me is how some are mistakenly thinking this is a debate about future support for wind. But it isn’t – it’s about how to make sure our energy market works properly to deliver a reliable, diverse supply at lowest cost.

My brief appearance in the article was to highlight that an energy market which excludes technologies like wind or solar would be anti-competitive. And if you look at the different views in the article you can see there is a lot of common ground hidden behind the contrasts.

The UK’s energy challenge is how to keep the lights on at lowest cost, while keeping within carbon reduction commitments. This means moving away from dirty coal toward low carbon options like renewables, CCS and nuclear.

One problem Government has is that wholesale energy price is a weak price indicator not strong enough to encourage new investment. It is effective as a “dispatch signal” in the day ahead and hour ahead markets; making sure that the lowest price options are used first each day. But it cannot work as a long term price signal to encourage the construction of any new power plants. Anyone who insists that only new power plants which can build at this wholesale cost is wishing on the UK an era of power station blackouts and instability. Instead Government is using an auction system to provide longer term price certainty for new power plants in a way that minimises cost to the consumer.

Everyone in this debate agrees that subsidies must end. They would like to see markets strengthened rather than undermined, so that competition forces innovation and reduces cost better than it is doing now. And they would like to see the market recognise the full costs of that energy system. Where the parties differ is that renewable generators want to see the cost of carbon, and the full system costs of different energy types both factored in. Others though only want to talk about the latter.

We can see that there is a lot of agreement on the principles, but disagreement on how to embed these into the market in practice.

The last five years have seen some significant changes in the energy market with auctions introduced to contract for new generation and subsidy programmes such as the Renewables Obligation all now scheduled for closure. This shift is necessary, but not complete. Innovation is transforming how we use energy, and there is no going back to a time when we simply relied on big power stations providing power via big energy utilities.

And this shift is what Danny Fortson lays out in his excellent piece about the future of energy utilities. It’s quite a coup to get two Big Six CEOs saying that the model needs to change, and they echo the views of National Grid CEO Steve Holliday who said last year that “The idea of large power stations for baseload is outdated.”

Both Emily Gosden and Danny Fortson are sketching out the fast evolution of our future energy market and the debate we need to have about this. Advocates of renewable energy want to see their technologies able to compete, and are confident they can deliver on cost and performance. They will do this because renewables costs are falling and new innovations are coming to market which better price in different system benefits and costs. They are also making energy generators and users more responsive to price signals. The question then is: why stand in the way of greater competition?

We already use the Capacity Market to ensure capacity adequacy and Contract for Difference auctions to provide low carbon power. Some further tweaks to these will make sure we can deliver lowest cost power free of any subsidy.

Commentators like Policy Exchange and the Conservative Environment Network are clear that onshore wind and solar are already cheaper than new gas plant. If we make sure that new gas plant pays its way and is not subsidised, then there is no reason not to continue these capacity and power auctions. Leadership from Government means action to ensure a stable power market: we can then be confident that consumers have the lowest cost route to a secure and low carbon source of power. This is something everyone wants.

Tags:  CfD  DECC  electricity  government  markets 

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Time for Government to Think Big on Small Renewables

Posted By Maf Smith, 02 February 2016
Updated: 15 March 2016

Today, Baroness Featherstone, the new Liberal Democrat Energy spokesperson, will attempt to keep alive the support programme which makes small scale renewable projects happen.

The process is quite arcane, but the debate that lies behind it is critical for the future direction of small scale renewables, so bear with me, and perhaps also marvel at the way the House of Lords works. Baroness Featherstone has tabled a “Humble Address” which seeks to annul the Government “Feed-in Tariffs (Amendment) (No.3) Order 2015”. A Labour motion to debate the Order in the Commons looks unlikely to succeed and so today’s debate is likely to be the only effective Parliamentary scrutiny this legislation will receive. Its impact, however, will be felt by households, communities and rural businesses across the country.

This Order, which the Government introduced as a statutory instrument just before Christmas 2015, will radically change how the small scale renewable energy market works. Government has decided to drastically cut levels of support given to schemes, and to introduce caps on spending. The reaction from the wider public was significant. Energy policy is normally arcane and hard to follow. Energy only usually gets seen as a political issue when people debate energy costs. But Government has seen that people also want to know where their energy comes from, and were appalled that in future it would be harder for householders, schools, farmers, communities and small businesses to install their own renewable energy equipment. In fact people were so appalled that over 60,000 of them wrote to the Government about it as part of its consultation on the changes.

All those people wanted to see Government think again, and we did win some important concessions introduced into the Feed-in Tariff scheme. And of course some of what has been proposed is absolutely necessary – all those who make use of the scheme know that costs have to be managed better and we should only support renewable technologies at a level that is affordable.

What is a tragedy in all this is the fact that Government is introducing major changes to a popular scheme without putting any thinking into the longer term role of small scale renewables, or what comes after the Feed-in Tariff. Its approach is more all or nothing and betrays a lack of imagination or creative thinking. The consultation had no views on the merits of the scheme or how to support continued growth of small scale generation in the absence of subsidy. The statutory instrument has been lodged in Parliament without any thinking or debate about how we best support ordinary people and businesses to meet their own energy needs.

Instead we have a process which has been little more than an accountancy exercise. The need for Government to manage the costs of the Feed-in Tariff has blinded them to thinking about alternative ways to support small scale renewables, or to thinking about what the longer term plan is.

But for the Conservative Party this shift to decentralised energy, and to more people having power over their own energy generation, was exactly what they stood for in opposition. Fast forward to 2016 though and there seems no pride in the fact that over 10% of farmers now have their own wind turbine and are better equipped to manage food and energy price shocks. Thanks to renewables these farmers are more resilient; their businesses are healthier and the overall rural economy is healthier.

Thanks to the Feed-in Tariff, the UK built a vibrant small scale manufacturing industry. Up to the end of 2014 UK manufacturers exported one turbine for every one they sold at home, and we led the world in this area. Now though that UK market is disappearing and these small manufacturers are either going out of business or looking very carefully at how they better supply to other markets.

So now we have a sector in decline. But there is no discussion about this. In its decision about changes made to the Feed-in Tariff there was no long term view about how the companies behind this small scale revolution can be encouraged to get off subsidy. Government did not consider the use of tax incentives or innovation funding to encourage businesses to generate their own energy. Nor did they look at the mountain of red tape that makes it so expensive for anyone to install their own renewable energy equipment, and plays some part in making subsidies necessary in the first place.

So it is good that we have a motion tabled and the chance for the House of Lords to debate this issue. Lynne Featherstone’s motion may not succeed, but hopefully she will succeed in raising Government’s ambition, and forcing a debate about whether the UK is still serious about decentralising how energy is generated and used, and putting power back into the hands of the families, schools, farmers and small businesses across the UK.

But whatever happens in the debate, what we do know is that we need a long term plan and a renewed political consensus about how we make sure that keeping the lights on, cutting our dependence on fuel imports and tackling climate change is the responsibility of everyone and needs to happen in big and small ways.


Feed-in Tariffs (Amendment) (No. 3) Order 2015 Baroness Featherstone to move that a Humble Address be presented to Her Majesty praying that the Order, laid before the House on 18 December 2015, be annulled (SI 2015/2045). 20th Report from the Secondary Legislation Scrutiny Committee.


Tags:  Feed-in-Tariff  government  Liberal Democrats 

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Where next for People Power?

Posted By Maf Smith, 16 December 2015
Updated: 15 March 2016

Sometime before Christmas, and probably this week, the UK renewables industry expects our Government to publish the results of the Feed-in Tariff Review. The signs are not promising.

At the end of August Government launched its review and sought responses to its proposals to radically change the Feed-in Tariff, which I blogged about here.

Industry and the wider public responded, and in two months Government received some 55,000 responses. In the last 6 weeks a small group of officials in DECC will have been through them all.

There are apparently “only” a few hundred substantive responses. That is still a lot of detail for Government to consider. And while the other 54,500 odd may have been generated by wider public campaigns, I hope that the Government has taken note. This stuff is popular.

A cynic might say, of course it's popular, who doesn’t like subsidy? But they’d be missing the point. People simply want to see more renewable energy in use in our homes, on our farms, on our factory and office roofs and car parks. People get it, they like it, they want more of it. Asked recently by the National Infrastructure Commission what type of infrastructure they saw as most important the public said simply: investment in renewables. Conservative, Labour and Lib Dem voters all listed renewables as the type of infrastructure we should be investing more in.

I hope that the consultation has at least alerted Government to the fact that UK voters from all walks of life see renewable energy as important.

These same people would also agree that Government is right to worry about energy bills. And these same people know that renewables can add to our bills. But it’s not the case that the public doesn’t know what it wants. What the public wants is for Government to show leadership and to square the circle; supporting renewable energy but finding ways to make it cheaper and getting it on a sustainable path where it doesn’t require subsidy.

Unfortunately though, the Feed-in Tariff review did not set out a plan to move industry off subsidy. Its tone was that “there is no money”, “enough is enough” and “please close the door behind you”. There was no positive vision to be found anywhere in its 62 pages.

And so ready was Government to paint industry as little better than a group of subsidy junkies, they failed to notice that within the UK renewables sector is a group which is up for a difficult conversation. That could have been started by Government using the Review to say “look, we’ve spent what funding we had available. This is a great success, but in the current climate something has to give. Here are our thoughts for how we change the Feed-in Tariff scheme and some options for how we can support you in the future without giving you a subsidy”.

Our hope is that the significant public response, and the creative, mature way in which many have replied, has given Government cause to reflect. So despite the lateness of the hour, and despite getting off to a bad start in the original review, there is still time for Government to conclude this Feed-in Tariff review in a meaningful way. How? Well here are some things we will be looking for when Government publishes its response.

  1. Government must come clean and admit that while it is right that costs have been falling, the cost assessment made was very poor, and supporting some renewable technologies still requires a level of support.
  2. Government can be clear that the future has to be a subsidy free one. Renewable experts agree, but need help to get there. However, there should be an acknowledgement that there are wider benefits to small scale renewables, including helping communities and rural businesses manage energy costs, opening up the market to a diverse mix of generation and supply, and drawing people in to doing their bit to tackle climate change. These are worth supporting and this can be done without subsidy.
  3. Government should re-profile what funding is available to provide a sustainable glide path of funding for these subsidised technologies that is spread over the next two (rather than four) years. Doing this means using any available money more usefully.

Building on this, the most important thing we need from Government is that any statement on the Feed-in Tariff is not the beginning of the end for renewables, but the beginning of an open conversation about what next.

What industry needs is an opportunity to work with Government, with an open discussion about options to back small scale renewable energy without subsidy. If Government moves fast this could be done before the March budget. How good would it be to have a Chancellor use his next budget to set out how Government is supporting people, farms and businesses in being able to install renewable energy, manage costs and do their bit, without adding more money onto customer bills?

A response like this would be good politics. It would be Government leading on protecting consumers, while working with industry to identify solutions, and giving the public both things they want.

Alternatively, the Government could decide that it simply wants to phase out the Feed-in Tariff and avoid any discussion about what comes afterwards. In doing this it could talk up the money it is saving consumers. But it could not credibly claim to have a low carbon plan. The frustrating thing is that within many of the 55,000 responses, there is a credible plan that offers both these things. Let’s just hope that that’s the plan which captured their attention, as it deserves to be the blueprint for the way ahead.

Tags:  DECC  Feed-in Tariff  government  subsidy 

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