27 Sep 2012

Coalition rift undermining green business confidence

Washington Correspondent

As the third largest offshore windfarm opens off the Norfolk coast, there are fears that the government’s increasingly mixed signals on renewables are putting future private investment at risk.

There was much fanfare as the two Agusta Westland helicopters touched down on the pristine lawns of Holkham Hall in Norkfolk this morning. As the deer scampered across the lawns, the Crown Prince of Norway and his entourage stepped down to greet the group of excited schoolchildren there to meet him.

Less attention was paid to the two Norwegian Oil Chief Executives whose companies between them have just completed Britain’s third largest windfarm, Sheringham Shoal, just off the coast here.

Luckily, a chirpy Ed Davey, the Energy Secretary, was at hand to acknowledge their £1 billion investment, helping to cement the UK’s position as the world leader in offshore wind development.

Sheringham Shoal windfarm, off the Norfolk coast (screengrab)

With the 88 turbines today officially “opened” the UK now generates some 2.4 Gigawatts of energy from offshore Wind. It’s an impressive total but there’s still a long way to go to meet our challenging 2050 target of cutting the UK’s carbon dioxide emissions by 80 per cent.

Conservative cold feet

To get there, we need to agree a series of mini-targets along the way, each one committing the UK to using more and more renewable technology – from Wind, solar, tidal – to generate ever larger quantities of power. Unfortunately, despite a manifesto full of green pledges, the Conservatives appear to be getting cold feet and a rift is developing within the coalition.

Just this week, Ed Davey referred to some of his Tory counterparts as wanting to remain “toxic” rather than embracing renewables. The latest spat centres around the next key “decarbonisation” target, in 2030. The Government has been advised by its own independent body, the Committee for Climate Change, to cut emissions from electricity plants from 500g of CO2 per kilowatt hour to about 50g by 2030.

Ed Davey and Labour are behind the recommendations but the Treasury is firmly opposed to the measure, which was ruled out earlier this year by the Chancellor, George Osborne. Instead, he wants to see gas play a big role in the UK’s energy mix “well into 2030 and beyond”.

You can argue that 2030 is a long time away , so what’s all the fuss about? They’ll reach agreement by then.

investors are wondering whether to reduce the size of their projects or to delay investment decisions

The problem is businesses need the certainty now. That’s because it takes 5 years to build a wind farm the size of Sheringham and another 10 to 15 years to recoup your investment. So those multibillion investment decisions need to be made imminently.

Ed Davey played down the rift today, saying he was confident he could win the wind-sceptics over. Others say the mixed messages coming from Government are already having a damaging effect.

One source said: “Given the lack of clarity provided by the Government to investors in the last couple of years, some investors are wondering whether to reduce the size of their projects or to delay investment decisions until they are clear about where UK energy policy is heading and what the future of renewable energy is in the UK.”

The clock is ticking. Mr Davey needs £100 billion worth of investment between now and the end of the decade for Britain to meet its targets. But in the absence of a stable policy environment, the jury is out as to whether or not he’ll get it.

UK offshore wind:
88 turbines at Sheringham Shoal, each with a potential capacity of 3.6MW, will supply up to 220,000 homes with clean energy.
It is the third largest offshore wind farm, after Greater Gabbard and Walney I & II.
The UK is now number one in the world for offshore wind, having overtaken Denmark in 2008.