Wind keeps powering on

Wind power reached a significant milestone last week. For the first time ever, onshore and offshore wind together generated 10 GW of electricity in the UK, three times the power expected from Hinkley Point C nuclear power station, and around 23% of the country’s demand at the time. Of course this was a particularly windy day: the usual figure is just over 9% of the mix. But it demonstrates that the grid can successfully integrate large amounts of wind power.

Offshore wind continues to grow in strength

Last week also saw Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, travel up to Hull to open the new Siemens factory. Siemens has invested £310 million in a new plant that will manufacture the blades for offshore wind turbines. Almost 800 new jobs have been created, with the majority filled by local Hull residents. This kind of investment in the domestic supply chain for renewables is what the forthcoming industrial strategy will seek to encourage.

The offshore wind sector is set to continue its expansion: last month, the Government released further details of the next two auctions for new offshore wind in the early 2020s. Although the Government has set ambitious cost-reduction targets, projects commissioned in other European countries, such as the Netherlands and Denmark, have had impressively low prices. So there is every reason to be confident the UK industry can meet the challenge.

Onshore wind faces turbulence

The situation for onshore wind is much less optimistic. The Conservative Party manifesto for the 2015 general election contained a pledge “to halt the spread of subsidised onshore wind farms”, by ending “any new public subsidy for them” and ensuring “local people have the final say on windfarm applications”. These commitments were swiftly met following the election through the Energy Act 2016 and revised planning guidance to local authorities.

Yet this technology has potential to contribute to meeting the UK’s energy needs. Earlier this month, the Department for Business, Energy and Industrial Strategy (BEIS) published updated cost estimates for the different generation technologies. For projects commissioning in 2020, onshore wind is forecast to be the cheapest way to make electricity. Their models predict that, including the carbon price, onshore wind projects will generate electricity for £63 per MWh, while highly efficient combined cycle gas turbines (CCGTs) – the next cheapest technology – will produce power for £66 per MWh.

Currently, long-term contracts (Contracts for Difference), which guarantee a fixed revenue stream for developers of new energy infrastructure, are only being awarded to nuclear and offshore wind. Onshore wind, despite being much cheaper, is not eligible to bid. Consumers’ energy bills are starting to rise again, largely due to rising wholesale costs from a weaker pound. But the annual cost of supporting renewables, which is added to consumer bills, is forecast to increase significantly in this parliament, from £5.2 billion this year to £8.4 billion by 2020/21. Excluding onshore wind will cause the subsidy bill to increase more than is necessary, as contracts for new capacity will instead be awarded to more expensive technologies.

The future for onshore wind

Given the political discourse around them, it is surprising that polling shows broad public support for onshore wind farms, even in rural areas. ComRes data from October 2016 shows 73% of the British public support onshore wind. In rural areas, where people are more likely to directly experience turbines, they enjoy 65% approval. Further research is required into what Conservatives in particular think about onshore wind, and whether they object more to the subsidy element or their own potential proximity to turbines. Bright Blue will shortly be publishing new polling, conducted by Populus, to try to answers these questions.

Some have proposed ‘community energy’ schemes to overcome local opposition to new developments. These involve local residents either receiving some payment from the developers in return for their consent, or taking a stake in the project themselves. Renewables company Good Energy has proposed building a new onshore wind farm in Cornwall, which would be co-financed by local residents. This would be the first onshore wind farm constructed without government subsidy. They hope the community financing for the project will demonstrate to the planning committee that it enjoys local support.

Technological innovations could also improve onshore wind’s prospects. For instance, Shell, EON, and Schlumberger have recently invested in a new high-altitude kite technology that generates electricity from the wind. The firm developing this idea is based in Essex. The technology is expected to have much lower capital costs by dispensing with the expensive towers and blades used by conventional wind farms. Two kites pull in opposite directions to create a rotating motion while tethered to a turbine on the ground to produce electricity.

Conclusion

There is a strong case that onshore wind should no longer receive subsidy: it is a mature technology that has had an opportunity to become cost-competitive. However, as we argued in Green and responsible conservatism, it is important to distinguish between a subsidy and a long-term contract. A project is only subsidised when the total lifetime payments it receives under the long-term contract exceed those received by other conventional generators.

No new, capital-intensive energy infrastructure can be built in the UK without a long-term, government-backed contract. Even new gas plants will only be built if they can secure a 15-year contract through the Capacity Market mechanism, which is the Government’s policy for guaranteeing security of supply. Allowing onshore wind to compete for fixed contracts against other technologies could help keep down consumer bills. And this could be done without subsidy and without removing control over planning decisions from local communities.

Sam Hall is a researcher at Bright Blue

The new energy mainstream

When Amber Rudd set out the Government’s thinking on energy in her “reset” speech, one of her comments was that “it may sound a strange thing to say, but fundamentally I want energy policy to be boring. Frankly, if at all possible, it shouldn’t be noticed.” It’s a sentiment I strongly agree with. 

The Secretary of State’s problem is that we are a long way from that point. Like it or not, energy policy has become a political battleground. But we all have a role to play in helping to deliver her vision.

In this critical territory, Bright Blue’s role has been very important. It is one of a number of groups which led and won the argument for the early retirement of coal-fired power stations. 

The question we now face is how we keep the lights on in a secure, sustainable and affordable way. 15 gigawatts of coal capacity will be coming off the system by 2025, along with most of our current nuclear capacity, leaving an energy gap equal to 20% of Britain’s power needs.

It would be foolish to claim that this gap could be filled by renewables alone. We will need a balanced energy supply in the future. Gas, nuclear and renewables, as well as storage, interconnection and more decentralised energy will all play a part. What role can the companies I represent play? What do we offer? 

The businesses I work with are pioneers and innovators in this changing market. Look at the progress we are making on storing electricity. Renewable companies are leading the way. Britain’s two largest storage projects - the landmark announcement by RES on a 20 megawatt battery storage system, and Statoil’s Batwind project at its Buchan Deep floating offshore wind farm – come from my members. 

The innovation we are now seeing in the energy market will – and must – also improve the deal for British consumers.  

Here, we are at a turning point. Onshore wind has become the cheapest large scale technology for generating new power in Britain. If we had a market signal, there are onshore wind projects which would clear at the lowest price, cheaper than new gas. The question we face as a country is do we want our consumers to benefit from this cheap source of power or not? And if we do, how can we create a market which allows onshore wind to compete?  

The onshore wind industry has benefitted from support from British consumers for over a decade. Now that costs have fallen, it is only right that consumers should benefit. 

The Government has rightly said that communities will be in the driving seat on decisions about future projects. The projects where benefits for consumers are greatest are likely to be in Scotland, Wales and Northern Ireland where wind speeds are higher. They are unlikely to be in England, and certainly won’t be in the wind-poor Home Counties. 

And if there is to be a future for onshore wind in Britain, the industry is also going to have to engage seriously and respectfully with those who have doubts about wind or renewables more generally. This includes those who have led the successful grassroots campaign within the Conservative Party over recent years to end subsidies for onshore wind, which led to last year’s election pledge and the recent Energy Act. We need to listen to our critics and we need to acknowledge the legitimacy of their feelings and reach out to them. I believe that for those who are not opposed in principle to onshore wind, there is a great deal of common ground. 

The overall economic and industrial opportunities offered by renewables are becoming clear. According to Bloomberg, half of all new energy investment globally last year was in renewables. Here in Britain, those who choose to be RenewableUK members now employ over 250,000 people. The offshore wind sector is driving down cost, innovating and investing in our country on a massive scale – over £20 billion in this decade; £6 billion by DONG in the Humber alone, an area with some of the highest levels of unemployment in Britain. In a few months, 1000 workers in Hull will start producing the largest single mould component in the world at the Siemens / ABP site in Hull. 

But the story reaches further and deeper. A few weeks ago in Bridlington I met companies building boats, training people for working at height and at sea, installing winch systems and other specialist equipment. I met experts in sea bed analysis, financial advisers, legal advisers, even a former Asda store manager whose father had invested in his business filming the building at the Siemens site and who now has a successful digital media business.  
 
And slightly under the radar in Scotland, Wales, South West England and Northern Ireland, Britain has built a global leading marine industry on the cusp of commercialisation. Global leading test facilities. Global leading companies. At a former oil and gas fabrication site, the turbines for the world’s first commercial scale tidal stream array are being built. Charles Hendry is reviewing the prospects for tidal lagoon power. We know there is value here – the Chinese, the French, the Canadians and the Irish are all looking to take what they can from British-led innovation and research.
 
There is a new energy mainstream globally and it is coming to Britain. It is disruptive. It is cutting edge. It is bringing investment and new business models. And above all it is shaking up existing markets. We should embrace it. It is not the only answer to the challenges and opportunities we face. But it can – and should – help. It will power Britain forward. 

Hugh McNeal is Chief Executive of RenewableUK

The views expressed in this article are those of the author, not necessarily those of Bright Blue.