Marine Renewables: Government Support for Commercial Roll-out

Tuesday 8th December 2020

(12 months ago)

Westminster Hall

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Department for Business, Energy and Industrial Strategy

[Judith Cummins in the Chair]

Alistair Carmichael Portrait Mr Alistair Carmichael (Orkney and Shetland) (LD)
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I beg to move,

That this House has considered Government support for the commercial roll-out of marine renewables.

It is a pleasure to be here in Westminster Hall—not least because somebody thought it would be a good idea to turn off the heating in Portcullis House today—and to serve under your chairmanship, Mrs Cummins. This debate is both timely and—for a half hour Adjournment debate in Westminster Hall—very well attended. I thank all right hon. and hon. Members present.

I say timely because it follows hot on the heels of the speech by the Prime Minister last week, where he announced plans for a green industrial revolution creating 250,000 jobs. That has the potential to be a highly significant milestone on the road to net zero carbon emissions by 2050. The speech included many laudable goals, and it is my experience from many years in the House that where ambitious targets are made and married to genuine political commitment, that building cross-party consensus in the House for them is not a difficult process; I do hope that we will be able to do so.

If what we got from the Prime Minister last week was the strategy, then today I want to focus the attention of the House and the Minister on one very important tactic: marine energy. The generation of electricity using wave and tidal power is an industrial sector in which the UK has the ability to lead the world. Much of what I want to discuss today will not be new to the Minister. It follows on from a briefing he had in the House from leading industrial developers in the sector earlier in the year, organised by the all-party parliamentary group on marine energy and tidal lagoons.

What is needed now is the finely tuned support mechanisms from Government to turn technical feasibility into commercial application. I declare a very obvious and particular constituency interest. Living in an island community, one is acutely aware of the power of the sea and never far away from it. It can affect just about every aspect of life. Orkney is home to the European Marine Energy Centre, the undisputed world leader in testing wave and tidal devices, both domestic and international. Others envy that status, but it will not last for ever without the positive signals of support that I seek to get from the Minister today.

The Minister will be aware that the EU is already looking at ways to ramp up its efforts to exploit the opportunities that marine renewables present. History tells us that, although we have an advantage having done the groundbreaking research and development work, there are plenty of other places in the world where that could be deployed commercially, as happened with the development of onshore wind.

Although my constituency is currently central to this emerging technology, even now this is not an industry confined to any one constituency, region or nation of the United Kingdom. Work is ongoing in engineering workshops and university research centres throughout the country, from Strangford lough to the Isle of Wight, from the Pentland firth to the south-west of England, this is a truly UK-wide industry. Of course, on the mention of Strangford lough, I give way to the hon. Member for Strangford (Jim Shannon).

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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As an Orangeman, there is only one green revolution that I will support, and it is this one. Does the right hon. Gentleman agree that the movement of the tide is as sure as the sun rising and setting? Projects such as the tidal energy generator in Strangford lough, which is a pilot scheme, has given my constituency a glimpse into tidal potential that should be further explored.

Alistair Carmichael Portrait Mr Carmichael
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I absolutely agree, and I would add to that list of tides and sunsets the attendance of the hon. Member for Strangford (Jim Shannon) at Adjournment debates in the Chamber and Westminster Hall. I think the chairman of the APPG wished to intervene.

Richard Graham Portrait Richard Graham (Gloucester) (Con)
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I am grateful to the right hon. Gentleman for securing this debate and allowing me to intervene as chairman of the all-party parliamentary group on marine energy and tidal lagoons. As he and the hon. Member for Strangford (Jim Shannon) have highlighted, this is a resource of enormous potential across the UK.

We have representatives here from Wales. It is true to say that Bardsey will become the first island in the world to be entirely powered by tidal stream. The other projects in Morlais, Pembrokeshire and Perpetuus Tidal Energy Centre on the Isle of Wight, which is one of five centres funded through the Government’s TIGER project, give an idea, as the Minister is aware, of the potential. Does the right hon. Gentleman agree that, with COP26 in Glasgow next year, if the contracts for difference auction were to be just beforehand and marine energy to be given a fraction of the capacity there, that would be a fabulous project to highlight at COP26?

Alistair Carmichael Portrait Mr Carmichael
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I absolutely agree because, as I am about to illustrate, we have a nascent industry. It is growing but it is in a position to undertake that important role for the UK on the world stage. According to the UK Marine Energy Council, there are currently 22 tidal stream and 23 wave developers active in the UK, with an estimated investment to date exceeding £500 million of private capital in developing marine energy technologies, and £70 million in direct public support.

Estimates of support suggest that the tidal stream could deliver £1.4 billion gross value added by 2030, while the figure for wave is £4 billion by 2040. Those figures, plus the thousands of jobs that would come with them, are a tremendous prize. There are currently tidal stream sites with an aggregated output of 1 GW under development in the UK, awaiting a positive signal from the Government. The industry is ready to move, the technology is there, the private investment is primed but it does need a helping hand from Government at this critical stage.

Stephen Crabb Portrait Stephen Crabb (Preseli Pembrokeshire) (Con)
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The right hon. Gentleman and I worked together in Government, and he knows that my constituency in Pembrokeshire is one of those hot prospects for the development of marine renewables in the years ahead. Does he agree that this area has been discussed a lot? It is very easy for everyone to be in agreement about the rhetoric, and how good these things would potentially be in the future, but what we need now is some practical steps that help build investor confidence to unlock the projects and see actual, practical growth in the sector.

Alistair Carmichael Portrait Mr Carmichael
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I absolutely agree. I have been watching and engaging with this industry since I was first elected in 2001. Candidly, we have seen a few false dawns over that time, but it is clear that we have got to that point, where it is so tantalisingly close, that we are now looking at that missing link to get us over the line.

I will offer a couple of illustrations from my constituency. Orbital Marine Power is at the forefront of this industry, and the most recent prototype successfully generated 3.25 GWh into the UK grid during a 12-month period of trials at the European Marine Energy Centre. Orbital has raised £7 million of construction debt finance through the Abundance crowdfunding platform to finance the building of a commercial tidal generator for deployment in spring 2021. Orbital and its investors are now awaiting the right signals from the Government to go fully commercial.

Orbital illustrates well the opportunity that we have here. Some 80% of the Orbital machine currently under construction is from UK suppliers. It believes that this could increase to 95% if the correct market conditions were put in place. The contrast with wind power, which has relied overwhelmingly on imported machinery, is almost too obvious to mention—I say almost, because nothing is ever too obvious to mention in politics.

The same runs true of Nova Innovation, which deployed the world’s first offshore tidal array in Shetland. Construction of the Shetland tidal array had over 80% UK content, including 25% of the supply chain spend in Shetland. Operation of the array has seen 98% UK supply chain content, with over 50% of project expenditure going to companies in the northern isles, such as Shetland Composites, which made the blades for Nova’s turbines and is now one of the top tidal blade manufacturers in Europe. Nova expects this high local content to be replicated at its other UK sites in Wales, Scotland, Northern Ireland and the south of England.

If we can be world leaders in the domestic application of marine renewable technologies, we will also be in pole position to become the leading exporters to the world. Make no mistake: these devices are substantial pieces of engineering, so the potential for jobs and green industrial benefits is enormous—I would say, parenthetically, that this is the point at which we should be looking at export finance support for these companies, so that when we get to that point we are not having to play catch-up.

The missing link, however, has long been one that would give wave and tidal energy the chance to develop commercially to the point at which it would, like other renewable technologies, outgrow the need for subsidy. To get to that stage, it simply cannot be linked in with other renewable technologies—often better established—and told to compete.

That brings me to my first ask of the Minister. We need a bit of fine tuning of the Government’s approach in the next CfD round. It is welcome that tidal and wave technologies will be in pot 2 for the forthcoming CfD round, with offshore wind in a separate pot 3. That learns from the failures of the past, and goes some way to addressing the most obvious weaknesses, which pitted so many technologies at very different stages of development against one another.

What the industry is really looking for is a pot within a pot—in other words, an allocated amount to be competed for by tidal and wave developers at a price that will not only make their projects economically viable and able to attract investment but, importantly, will do so in a manner that does not interfere with the overall objectives of the CfD round. The ability to create that ring-fenced refinement exists within legislation already. It is imperative that we act now. As we know from other renewable technologies, once the process of a commercial roll-out in underway, the costs drop like a stone.

As well as having an immediate effect, the creation of a tidal and wave-specific allocation would provide a clear and long-awaited policy signal and will pave the way for private investment, and not just in the technologies but in the infrastructure required to support the deployment. It is worth remembering that, by definition, most of that work will take place in coastal communities, from the Cromarty firth and the Clyde to the north-west and south-west of England, many of which have suffered badly for years as a result of post-industrial decline, even before the impact of the current pandemic.

My second ask of the Minister is one that he has heard before. The Government should support technology developers by implementing a complementary proposal that would support technology developers not yet able to participate in the CfD process. The innovation power purchase agreement would allow a developer to sell electricity to an electricity supplier at a strike price to be agreed with the Department for Business, Energy and Industrial Strategy.

I understand that that is not a BEIS responsibility and that it sits with the Treasury, and we all know that the Treasury is not always the easiest Department to deal with, so I offer it to the Minister as his opportunity for glory. This emerging industry needs a champion inside Government, someone who will prosecute the case with the Treasury so that the potential that we have all spoken about today can be realised and something that he has heard about can then become a reality. He could be that champion for the marine renewable industry. I can think of nobody better for the role.

In short, what the marine energy sector needs today from the Government is not a handout, but a signal of support that can in turn be used to open the door to private investment and to create a platform for a vibrant industrial sector that ticks all the Government’s boxes: clean energy, technical innovation, world leadership, export potential, industrial regeneration, a genuinely British product, and economic benefits for hard-pressed coastal communities the length and breadth of the United Kingdom. It is an opportunity to turn the rhetoric of the Prime Minister’s speech last week, and the Government’s laudable aspirations for levelling up, into a genuine political reality. If the Minister will take on that cause and fight it for us, he will have the support of all parties and all parts of the country.

Stephen Crabb Portrait Stephen Crabb (Preseli Pembrokeshire) (Con)
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I had not intended to speak, but now I am on my feet, and why give up the opportunity? I will put on the record again how excited I am by some of the developments off the west Wales coast. There is no shortage of projects coming forward and companies with various track records, but lots of good ideas and good intent for this new industry, which we have debated and talked about a lot in recent years. As the right hon. Member for Orkney and Shetland (Mr Carmichael) said, we are on the cusp of seeing those developments come to fruition if the right conditions are put in place.

Ben Lake Portrait Ben Lake (Ceredigion) (PC)
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Will the right hon. Gentleman give way?

Stephen Crabb Portrait Stephen Crabb
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I will give way to my next-door neighbour in Ceredigion.

Ben Lake Portrait Ben Lake
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Does the right hon. Gentleman agree that one of the most exciting aspects of the sector’s potential is that areas such as ours in south-west Wales have the opportunity to be at the forefront of a new green industrial revolution?

Stephen Crabb Portrait Stephen Crabb
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The hon. Gentleman is absolutely right.

The only other point that I will make, before I allow the Minister to respond, is that in a constituency such as mine, for the last almost 50 years, the economy has been heavily dependent on oil refining. We as a country, and as a Government, have now made a commitment to bring forward a ban on the sale of new diesel and petrol engines, and we are moving away from a carbon-based economy. Constituencies such as mine are vulnerable to the big strategic changes that we are mandating as part of our efforts to meet the global challenge of climate change. There is a duty on the Government to help bring forward replacement jobs—high-quality jobs and apprenticeships—in new exciting clean technologies.

Virginia Crosbie Portrait Virginia Crosbie (Ynys Môn) (Con)
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I thank my right hon. Friend for giving way, and I particularly thank the right hon. Member for Orkney and Shetland (Mr Carmichael) for securing the debate—he and I have an awful lot in common, both in our commitment to marine energy and because we come from island communities. However, does my right hon. Friend agree that projects such as Morlais and Minesto on Ynys Môn need to have bespoke Government support packages?

Stephen Crabb Portrait Stephen Crabb
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I absolutely agree. My hon. Friend is a very active and vocal champion for energy developments in her constituency, and she has put her point on the record very effectively.

I will now allow the Minister to respond to the debate.

Kwasi Kwarteng Portrait The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)
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I am delighted to be able finally to respond to the debate. There have been some really interesting interventions, and it is a shame that we have only had half an hour for it. It is also a real pleasure to participate in this debate with you in the Chair, Mrs Cummins.

I will address the two points made by the right hon. Member for Orkney and Shetland (Mr Carmichael), and then I will address some of the wider concerns relating to economic opportunities and the levelling-up agenda. First, the right hon. Gentleman gave me two challenges: the first was to look at the pot structure of the CfD round; and the second was, as he put it, my bid for glory within the Government, by championing the cause of marine energy. He will know that I have a real interest in this subject. I have seen the APPG on marine energy and tidal lagoons and its chair, my hon. Friend the Member for Gloucester (Richard Graham), a number of times on this issue, and I have also attended APPG meetings that the right hon. Gentleman, my hon. Friend the Member for Gloucester and I have had the privilege of hosting here in Parliament.

To begin with, the right hon. Gentleman is absolutely right about the pot structure, and I pay tribute to him for actually attributing some degree of good policy on the part of the Government, because we split the offshore wind element—the offshore wind competition—into a separate pot, and we have allowed marine tidal projects and remote island wind projects, which may be of interest to him, to remain in pot 2.

The right hon. Gentleman said that the competition was unfair, but of course when we set up the pot structure we did not know that it was unfair, because we had not seen the progress in the development of offshore wind. And all I will say to him now on this issue is that I am very sympathetic to ideas, as he put it, of having a pot within a pot. That means that within pot 2 there would be a reserved quantum for marine projects, particularly tidal projects, to be able to compete for. I can assure him that that idea is being considered.

Having said all that, however, there is an issue, as the right hon. Gentleman will be aware, about the actual costs—the initial costs of marine technology and how we can support such technology. This is very much a chicken and egg situation, because people who are keen supporters of marine energy technology would say, “Well, if you don’t support it, how are you going to bring the costs down?”, and of course, our friends in the Government, including within the Department for Business, Energy and Industrial Strategy and, in particular, the Treasury, would say, “Well, if something is going to cost £250 per megawatt-hour and nuclear is at £92 per megawatt-hour, there is a discrepancy there.”

Obviously, public money must be well considered and looked after, and the challenge is very much on the industry, as I have said to industry players and champions on separate occasions. The challenge is for them to show how these costs can come down. If they can, then I am sure that the Government would be very willing to support the technology.

We have initiated a marine energy call for evidence. The right hon. Gentleman will remember that there was a whole debate about the Swansea Bay lagoon. When the development consent order for that lapsed, the Secretary of State said that we would have a call for evidence and we are engaged in that process. I fully recognise the economic opportunities for the coastal communities that he represents so ably, and I also pay tribute to the European Marine Energy Centre in Orkney, which, as he reminded us, is a world-beating centre. Of course, it initially enjoyed Government support, as he will well remember, because he was in government at the time. It is something that I would be very willing to engage with him on.

Alistair Carmichael Portrait Mr Carmichael
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First of all, I understand the point the Minister makes about the operation of CfDs. When I was in government in 2011 and 2012, when the CfDs were introduced by the Energy Acts, we did not really know how they would work, so we have learned from the experience. Every time there is a development pot, one technology emerges, which is why the ring-fencing is important. On the issue of the evidence, will the Minister look at the figures that I have given him today relating to the private sector investment that is primed and ready to go? Surely there could be no better indicator of technological ability than the willingness of the private sector to put its money into it.

Kwasi Kwarteng Portrait Kwasi Kwarteng
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The right hon. Gentleman raises a fair point. The private sector is willing to go, of course, provided it is supported initially by the Government. That is exactly the kind of conversation we should be having. He made some good points in his opening speech. One of the phrases that stuck in my mind was that we should “open the door” to private investment. That is exactly what the CfD round has done. That is exactly what we would hope to achieve, should we go down that route with regard to marine energy. No Government in the world can simply spend their way to creating the industry. The trick is to create the financial incentives, as we have done with offshore wind, to allow us to open the door to private investors.

I pay tribute not only to the right hon. Gentleman, but to the communities he represents and to my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb)—I am glad I got the constituency right; I knew it was not Ceredigion. He made the point well. He represents a community that has clearly been under a huge amount of economic pressure and even distress with covid, and the green industrial revolution represents a real answer and a real chance to build back better, to level up, and to increase and widen economic opportunity across the country. It is rare to see three constituent countries of the United Kingdom represented in debates in Westminster Hall. I do not think we have Scottish representatives here.

Alistair Carmichael Portrait Mr Carmichael
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All four are here.

Kwasi Kwarteng Portrait Kwasi Kwarteng
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Forgive me; I saw straight through the Scottish representative. In this debate, we have representatives from all four countries of the United Kingdom. That is significant, and points to the fact that the levelling-up agenda is geographically extremely diverse. The green industrial revolution and green energy topics engage all four of our constituent nations. It is an excellent debate for that reason.

The Government remain absolutely committed to renewable energy, and that was highlighted specifically by the Prime Minister’s 10-point plan. We believe that the only way we can get to net zero by 2050 is through innovation. Tidal technology is part of that innovation. The only caveat is that it cannot come at any cost.

My right hon. Friend the Member for Preseli Pembrokeshire referred to eternal waiting and eternal words and rhetoric. We must have this dialogue and we must at least show a pathway to reducing costs, and if we can do that—I am sure we will be able to do that—we will in the short term be able to put flesh on the bones and realise in fact some of the aspirational rhetoric exchanged across the House for many years.

Richard Graham Portrait Richard Graham
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The Minister has been generous in his support for renewables in general, and for marine energy specifically. As referred to by the right hon. Member for Orkney and Shetland (Mr Carmichael), he has been willing to see representatives of the industry and hear ideas for the future auction. Will he, at the same time, try to find a few moments to look at the innovative purchasing agreement proposed by the industry, allowing a tax reduction basis but with nothing rewarded till it has been delivered, in terms of energy? Will he commend it to his friends at the Treasury?

Kwasi Kwarteng Portrait Kwasi Kwarteng
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I can absolutely assure my hon. Friend that that is something I will be looking into. With regard to my BEIS commitments specifically, we can potentially get some movement on the auction. I do not know, and it is part of a discussion. Once that is up and running, perhaps we could have a further debate and a further push on tax treatment in the way he describes. I would clearly be happy to raise that with Treasury colleagues, although the right hon. Member for Orkney and Shetland knows from his experience in Government how fraught some of those conversations can sometimes be. BEIS will certainly look at the auction seriously. We hope to push forward with that innovation.

Question put and agreed to.

Sitting suspended.