Motion made, and Question proposed, That this House do now adjourn.—[Tony Cunningham.]
Some proponents of renewable energy are fond of clinching their argument for its radical extension with a phrase that goes roughly thus: Britain has the largest supply of wind, the highest tidal range and the most powerful barrage of waves of any country in Europe; there is enough of nature’s power to warm and heat every home in the country and still tap only a fraction of what is out there. That is, of course, true, but it can be seen as a truism: it does not in itself power anything, and for the statement to be practically true, as some opponents of renewable energy are fond of pointing out, we would have to be served by veritable forests of wind turbines stretching across the country and perhaps dam our estuaries with substantial tidal barrages.
Wind energy has made great strides in recent years. With, I have to say, considerable and often under-recognised support from the Government, it has come into the mainstream of non-carbon-emitting energy in the UK. Onshore wind is providing better capacity than was predicted, but we have to acknowledge that practical problems remain, such as that of generating enough power over the area covered by conceivably erectable future wind farms, the planning process and, in some parts of the country, the opposition—misguided, I believe, and sometimes based on spurious grounds—from people opposed to the siting of wind farms near their homes and in their area.
Offshore seemed to be able substantially to solve the problem of deriving a greater amount of power from wind, but there are difficulties with that, too. Under the Energy Act 2004, the Government have provided licences in two phases so far: first, for building wind farms in inshore waters close to the coast, a number of which are operational; and secondly, for larger wind farms further out to sea, in areas such as the Wash, Morecambe bay and the Thames estuary. However, offshore wind is more expensive per kWh than onshore and some other forms of energy supply, and there are some potential problems. Those include difficulties with grid connections and the connections between wind farms and landing stations. Recently, for example, the London Array site suffered the refusal of its landing station permission by a local council. We hope that that will be resolved soon, but there are problems with how those much larger sites, located as they are fairly well away from shore, can land their power and feed it into the national grid.
Having said that, offshore appears to be the future of large wind as a part of the energy mix. It resolves the problem of space versus output. For example, when the London Array is fully operational, it will provide sufficient electricity for the whole of Kent. In the medium to long-term future, the grid is likely to be far more decentralised. I envisage it becoming a more overlapping series of grids, more on the model of the internet than on the present model of a few big power stations wastefully converting fuel and sending it, equally wastefully, up and down the country on non-intelligent pylon cables. However, we shall need larger base loads and grid connections if the system, as a whole, is to work well into the second half of the century.
The question is: how will things go from here? Do we stop at phase 2 of the commissions that have been given for offshore wind, important though those are? Section 92 of the Energy Act 2004 provides not only for commissioning in the offshore areas beyond the 12-mile limit which have already been agreed, but of
“waters within an area designated under section 1(7) of the Continental Shelf Act 1964.”
That approximates pretty much to the areas that were designated when the licences for oil and gas exploration were issued some while ago.
If we provide allocations in the third phase in deeper and further waters, essentially up to the boundaries of the energy allocation zone for gas and oil, will it be viable or will we be chasing an insurmountable problem of greater costs unless there are viable grid connections? This is where we need to take a step back, to consider whether such allocations simply tread the present assumed path of connecting umbilically to the UK shore, but with longer umbilici, if that is the right declension—or are there other ways forward?
Why not consider, for example, whether the farms themselves might be connected on a grid that lands in the UK but also interconnects with farms and, perhaps, acts as an interconnector between the UK and countries on the continent, such as Germany and Holland? In the main, that would connect farms in the North sea and would facilitate the construction of deeper-water farms further out in the North sea, such as phase 3 allocations. Deeper-water farms could also be connected at a later date in the Irish sea and in the Atlantic on the edge of the continental shelf, and perhaps part of the Mediterranean, where there are wind hot spots.
The advantages of such a grid, if it were possible, are certainly clear. It would facilitate the development of much larger sustainable and clean energy than has hitherto been envisaged. It would facilitate the development of a real single energy market in Europe. It would use current technology. No breakthrough in technological development would be needed. The cable required is already in existence—it is about the size of a china plate, and no new technology would be required for developing and laying it. Most importantly, the output of such geographically dispersed offshore farms could be aggregated and smoothed. That would produce what is effectively a base load of energy from wind with minimal variability.
Given European weather patterns, essentially weather comes into Europe from the Atlantic. It is always blowing fairly hard somewhere in Europe, somewhere on the North sea. That is the situation pretty much all of the time.
I congratulate the hon. Gentleman on securing this important debate. Given that Britain has a world leadership position in the use of sub-sea technology and also in the construction of electricity grid systems, is there not an ideal opportunity to extend our world leadership role in both spheres?
I agree with the hon. Gentleman that we have a substantial lead. The development of such a grid system would not only cement that lead but, with the right arrangements, would provide, among other things, a substantial amount of future employment in the UK economy.
The variability of such an interconnected series of farms is important. It is stated in the energy review—or in the consultation document for the review, whose results we are shortly to hear—that:
“With large proportions of renewables on the system, additional backup (likely from coal, oil or gas) would tend to add to the cost and technical complexity of system management. The electricity system as a whole also requires a consistent ‘base-load’ of electricity. Because the potential for further large-scale hydro in the UK is limited, coal, gas and nuclear power are currently the major options for base-load in the UK”.
Given the development of new, deeper-water farms with an interconnector between them, there is a new candidate for that base load. Cost savings would result from easy connection to the grid and the interconnector, making offshore wind farms far more competitive in future. In addition, when fully developed, that system could be used as an auxiliary UK grid, allowing the electricity load to be transported from the north to the south. That is particularly important because, on current estimates, we need to spend several million pounds on grid reinforcements. If that funding is not forthcoming, it will be difficult to develop technologies that put power on the grid at nodes distant from the traditional spine and power station centres.
I hope that hon. Members accept that that is an interesting proposal. It is not, pure fantasy, as Airtricity, a large Irish-based renewable energy company, wishes to play a substantial role in the development of a supergrid, and has drawn up a detailed outline of the components of a supergrid and the way in which it would work. It proposes a time scale of five years, from 2010 to 2015, for a pilot programme to develop an interconnector and grid between the UK, Holland and Germany in the southern part of the North sea. That project would connect existing offshore programmes and encompass new deeper-water wind farms of 10GW—the equivalent of the generating capacity of 80 per cent. of our nuclear power plants—and it could make good the perceived gap in energy supply by 2020.
The foundation cost is about £1.3 billion for the grid and interconnector, together with the cost of the wind farms, which is about £1.3 million per megawatt of installed capacity. The capital investment costs are probably lower than the costs of new nuclear but, whatever my views on the advisability of new nuclear plant commissioning, I am not suggesting that such investment is a case of either/or. It is worth noting that the projected investment cost does not pertain to the introduction of untried or untested technology, nor is it likely to produce high cost overruns. The project can be financed entirely privately, without any fundamental changes to the regulatory regimes in the UK.
There are, however, issues that need to be considered. I have already mentioned the third phase of permissions in UK waters under the Energy Act. We must consider, too, the deregulation of European markets. EU commissioner Piebalgs has expressed interest in the proposals, as have a number of Members of the European Parliament, but will there be a level playing field if the trading of electricity becomes a reality through the medium of such an interconnector? The UK Government can take a lead on both issues. We can speed up the allocation of phase 3 sites and participate in deliberations at European level about how such an interconnector would operate on a level playing field for energy trading in Europe. That level playing field is vital for the long-term reliability of our existing gas interconnectors, which, at the height of the spike in wholesale gas prices in the UK last winter, were only half full of gas. Much higher prices were paid in the UK than in Europe. The market would suggest that the price would fuel the interconnector but, by and large, it did not do so.
The main hurdle to be cleared is one of imagination, but it is not as high a hurdle as may be thought. If, a relatively few years ago, someone had said that we would in a few years erect platforms in a number of locations, lay pipes across the North sea to connect them up, and establish shore-based facilities to receive their contents, it would have been easy to say that that could not be done, or that it would cost the people of UK an arm and a leg to make it happen. But it was done, and the North sea gas industry came of age.
Those facilities are still there as the gas industry declines, so why not a new phase for the North sea—at, incidentally, less cost than that of the first industry that developed those facilities in the North sea for the benefit of the United Kingdom? Why not a new phase in which the North sea once again provides energy security, reliability of supply and low-cost electricity in exactly the way that gas has done over past 30 years? In the context of our future energy planning, perhaps the question is not why, but why not?
I am grateful to my hon. Friend the Member for Southampton, Test (Dr. Whitehead) for raising the profile of the interesting proposal for an offshore European supergrid, and for the opportunity to set out what the Government are already doing to promote offshore wind and connect offshore projects to the onshore electricity grid in Great Britain.
Let me set the scene. In 2005, around 3.8 per cent. of the UK’s electricity supply came from renewables obligation eligible sources of energy. That compares with just 1.5 per cent. in 2001, before the renewables obligation was introduced. The growth in installed wind capacity has been even more significant. In January 2006, we had some 1,300 MW of installed wind capacity, compared with just 321 MW back in 1997.
Although most of the new capacity so far is onshore, offshore wind also has a valuable contribution to make to our 2010 target of deriving 10 per cent. of our electricity from renewable sources, and to our longer-term aspiration that that figure should be 20 per cent. Helped by Department of Trade and Industry capital grants, three large-scale offshore wind farms are already constructed and operating, and a further one at Barrow will start operating soon. These projects are part of the first round of offshore wind farms. Round 2 has the potential to make an even more significant impact, with individual projects that could contribute around 1 per cent. of total electricity supply. Rounds 1 and 2 offshore wind have the potential to contribute more than 8 GW to the UK’s generation capacity in total.
The energy review to which my hon. Friend referred is examining the potential for emerging low-carbon technologies, and how best to bring them forward. The first outcomes from the review will be published later in the summer, so I do not want to say more at this stage. However, I am convinced that offshore wind has the potential to make a significant contribution to the capacity gap that we will face here in the UK. The challenge for industry and the Government is to turn that great potential into a reality.
The potential for emerging technologies and the development of a European grid is also being considered at the European level. On 8 March this year the Commission published a Green Paper on a European strategy for sustainable, competitive and secure energy. The Government will be responding to the Green Paper. The UK firmly believes that the development of a competitive single market for energy should be the framework within which we approach our European energy policy. Projects such as offshore wind complement that strategy.
The higher cost of developing offshore wind remains an issue, and the cost of connection to the electricity grid is a part of that. Grid connections are likely to form 10 to 15 per cent. of capital costs for the round 2 wind farms, given the considerable cable lengths involved. Certainty about how the grid connection costs will be funded and the regulation that controls them is therefore a key factor that developers need in preparing their business models.
I was pleased to announce back in March that for offshore projects in UK waters, the Government have decided to extend the existing onshore model of regulation of transmission links. Following a joint consultation with Ofgem, I have concluded that this approach has a number of clear advantages for offshore projects—first, extending the regulated price control approach offshore will ensure consistency with the regulatory arrangements onshore. Secondly, it will provide a financial benefit to offshore developers, by spreading over a number of years the costs that they face to connect to the onshore electricity system. Finally, it will also mean that the responsibility for developing the offshore transmission network will be shared by the system operator and the transmission asset owners, who can bring their existing expertise to bear. I believe that that will provide a significant cost benefit to the industry, and that it demonstrates the Government’s continued commitment to the development of offshore renewables.
It is expected that most of the grid connections for round 2 projects will be direct connections to shore in Great Britain, either connecting single offshore projects or by joint connections shared by several offshore projects. The European supergrid proposal is an idea for the longer term, possibly connecting up future rounds of offshore wind projects to interconnectors between different member states. As such, the ideas behind the proposal very much support two of the Government’s key energy policy objectives: first, to cut CO2 emissions, which the proposal supports through the ambitious suggestion for significantly more renewable development offshore; and secondly, to promote competitive markets in Great Britain and beyond by putting in place more physical connections between member states, thereby providing the opportunity for cross-border trade.
As we have heard, the UK has some of the best wind resource in Europe. The challenges of climate change and the need to ensure security of supply through diversity of supply sources means that we will need to consider the utilisation of resources in areas not currently marked out for exploitation. While there are currently no further plans to develop offshore wind beyond the current round 1 and 2 projects, that is not to say that the Government do not believe that further rounds may be needed if we are to meet our longer-term aspirations for offshore wind.
Any such moves to further offshore rounds will require careful consideration, as we need to work with stakeholders to understand how offshore renewables can successfully coexist with other marine industries and be developed with the environmental impacts minimised. The Government intend to introduce marine spatial planning through a marine Bill, which is currently the subject of consultation. When it is taken forward, it will provide the opportunity to introduce strategic management of sea use. The supergrid proposal for more offshore wind projects in the North sea shows the industry’s appetite for further development.
The UK also believes that the liberalisation of the internal EU electricity and gas market is essential to EU economic reform. To progress greater liberalisation, Europe needs to remove barriers to cross-border trade to create more integrated markets, and in some cases to put in place the infrastructure to connect those markets physically. The supergrid proposal to link member states offshore is therefore very much in line with our goal of integrating national EU energy markets by removing barriers to the freer flow of energy around Europe.
Question put and agreed to.
Adjourned accordingly at three minutes to Three o’clock.