The governments spending review brought fears of big cuts- and even of the demise of DECC! But in the end DECC survived and the energy sector generally got off very lightly.
Predictably the 40% of DECCs budget that goes to nuclear clean up work was left untouched, and DECC was just asked to reduce resource spending related to the remainder of its activities by 18% in real terms over the next for years, with capital spending actually being allowed to grow by 41% in real terms. Specific commitments included:
• Up to £1 billion of investment to create one of the world’s first commercial-scale carbon capture and storage demonstration plants- ‘strengthening the UK’s position as a world leader in cleaner fossil fuel technology’. That’s less than hoped and there is no mention of the levy arrangment that Labour managed to get on the statute books, for but is does indicated the fact that CCS is near the top of the political agenda
• £860m funding for the Renewable Heat Incentive (RHI) to be introduced in 2011-12. ‘This will drive a more-than-tenfold increase of renewable heat over the coming decade, shifting renewable heat from a fringe industry firmly into the mainstream. The Government will not be taking forward the previous administration’s plans of funding this scheme through an overly complex Renewable Heat levy’. But there will be a two month delayed start, until June 2010. There had been much concern that the RHI would be shelved – and its still not clear how it will work- who pays and how?
• £200m for low-carbon technologies including offshore wind and manufacturing infrastructure at port sites- so the £60m promised by Labour for ports will go ahead.
The Department will also refocus some if its spending:
• Revenue raised (~£1bn pa) from the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme will be used to support the public finances, rather than recycled to participants. Clever- a stealth tax on companies in effect!
• Feed-In Tariffs will be refocused on the most cost-effective technologies saving £40m in 2014-15. ‘The changes will be implemented at the first scheduled review of tariffs unless higher than expected deployment requires an early review’ (presumably of high cost PV solar).
In parallel the Dept of Business Innovation and Skills will, ‘lead the creation of a UK-wide Green Investment Bank that will be capitalised initially with a £1bn spending allocation with additional significant proceeds from the sale of Government-owned assets, to catalyse additional investment in green infrastructure’. That’s less that the £3-4bn thought to be needed and the £2bn initially proposed, but it’s a start.
So it’s not all bad news...
The ports money is definitely welcome and should help draw new investment from other sources e.g: Tag Energy Solutions has secured £20m to build an offshore wind turbine manufacturing plant at Haverton Hill, Billingham. It said 400 jobs would eventually be created once the factory had been completed. The plant will specialise in building foundations for offshore wind farms. Steel producer Corus earlier announced a similar plan. It said it is to build a £31.5m offshore foundation plant in Redcar, Teeside, which will produce monopiles for the foundations of offshore wind turbines. The company believes the facility will create around 220 jobs. In July, plans were also unveiled to build a £400m UK offshore development centre near Immingham. Developer Able UK said the site could eventually create 27,000 jobs and help build the numerous North Sea projects lined up for development.
And after the Spending Review announcement , Siemens and General Electric confirmed their plans to develop UK offshore wind turbine manufacturing facilities last year that it would make £60m available for improving UK port infrastructure. Siemens plan investments of £80 million wind turbine production facility, while General Electric (GE) aim to invest £100 million to develop offshore wind turbine manufacturing base in the UK, in a move is expected to create 1,900 jobs in the UK by 2020, both in terms of direct employment and through associated manufacturers of towers, blades, nacelles and other offshore wind technology. And Spanish wind energy firm Gamesa has announced plans to make the UK the centre of its worldwide offshore wind business and invest £133.7 million by 2014.
Losers
There were however some losers. The Government is to abolish or downgrade many quangos (non-departmental public bodies) including the Sustainable Development Commission, and the long established Royal Commission on Environmental Pollution, along (less worryingly) with the Infrastructure Planning Commission. The full list of 200 or so includes British Nuclear Fuels, NESTA, the Design Council and crucially the Renewables Advisory Board, the Renewable Fuels Agency, and even the Regional Development Agencies- who have been strong in backing renewables locally. Still evidently under review (although not necessarily for abolition, just reorganisation) are the Environment Agency, the Carbon Trust, the Energy Saving Trust, and, perish the thought, the UK Atomic Energy Authority.
Some of this was just sabre (or rather axe) rattling, and some of the agencies were pretty defunct shells- e.g. most of the UKEAs work has been privatised, as has BNFLs. But some, like the SDC, RECP, RAB, and the (so far untouched) EST and Carbon Trust, might be seen as crucial to the proper development of a sustainable future- although some rationalisation could be merited.
And finally, the government ruled out public funding for the controversial Severn tidal barrage, which it says could cost £34bn. It also saw smaller barrages or lagoons as not viable.
The DECC/SWRD/WAG ‘Severn Tidal Power Feasibility Study: Conclusions and Summary Report’ does seem to finish off tidal range projects in the UK, at least for the moment. Although it did say that the results for other locations around the UK might be different, it is hard to see how they could do better than the Severn - the best site by far in terms of tidal range. Given that most environmental groups strongly opposed large barrages, the government decision not to provide support did not lead to complains from them about ‘ignoring green options’
The report says ‘the Cardiff-Weston barrage is the largest scheme considered by the study to be potentially feasible and has the lowest cost of energy of any of the schemes studied. As such it offers the best value for money, despite its high capital cost which the study estimated to be £34.3 billion including correction for optimism bias. However this option would also have the greatest impact on habitats and bird populations and the estuary ports.’
It went on ‘a lagoon across Bridgwater Bay (£17.7bn estimated capital cost) is also considered potentially feasible, as is the smaller Shoots barrage (£7bn). The Bridgwater Bay lagoon could produce a substantial energy yield and has lower environmental impacts than barrage options. It also offers the larger net gains in terms of employment’. By contrast ‘the Beachley Barrage and Welsh Grounds Lagoon are no longer considered to be feasible. The estimated costs of these options have risen substantially on investigation over the course of the study’ It added ‘combinations of smaller schemes do not offer cost or energy yield advantages over a single larger scheme between Cardiff and Weston’.
It noted that, in addition, the study funded further work on 3 proposals using innovative and immature technologies (the Severn Embryonic Technologies study). It said ‘Of these, a tidal bar and a spectral marine energy converter showed promise for future deployment within the Severn estuary - with potentially lower costs and environmental impacts than either lagoons or barrages. However these proposals are a long way from technical maturity and have much higher risks than the more conventional schemes the study has considered. Much more work would be required to develop them to the point where they could be properly assessed.’
So tidal range seems to been written out of the story for some while. Which leaves tidal current turbines - a much less invasive and rapidly developing approach. But it will interesting to see if the traditionalist large engineering companies and institutions who backed the large barrage can regroup: some are trying: see www.corlanhafren.co.uk.
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