Danielle Lane, Head of Stakeholder & Regulatory Affairs at DONG Energy UK, outlines the shortcomings in the Energy Bill and explains how offshore wind could achieve price parity with gas and nuclear by 2020.
The UK energy industry can often feel confused over UK Government priorities. The confusion is borne out of the policy "trilemma" of cutting carbon, ensuring energy security and keeping energy prices as affordable as possible.
The Energy Bill, aimed at attracting £110 billion in low carbon investment by 2020, will help, by creating a more a stable, predictable and transparent investment framework But a number of specific concerns remain and need to be addressed.
Firstly, a post 2020 policy gap. The UK has ambitious renewable energy targets to meet by 2020 and legally binding carbon reduction commitments to 2050. These commitments are world-firsts and are welcomed. But beyond 2020 there are no near-term targets.
This is of real concern to offshore wind developers and those involved in the industry’s supply chain. There are potential opportunities for manufacturing and investment in skills and jobs as a result of the offshore wind programme, but these will only materialise if the industry is confident of a future market for its goods and services. Supply chain investment is key to delivering a competitive and robust sector.
To ensure investor confidence in the market beyond 2020, a strong policy signal from Government is required: a stepping stone that will help bridge the gap between delivering the 2020 targets and meeting the 2050 decarbonisation objectives. We support a 2030 decarbonisation target in the Energy Bill for this reason.
Secondly, there is the question of cost. We are committed to reducing the cost of offshore wind and have a clear strategy for cutting the cost of offshore wind to 100 EUR/MWh (£85/MWh) for investment decisions in 2020. This represents a cost reduction of up to 40% compared to today and would put us on par with technologies like nuclear. This is a challenging target that requires innovation in technology, through deployment of larger turbines, new transmission solutions and increased efficiency in building and operating offshore wind farms.
In order to deliver the cost reduction we need a strong pipeline of projects and a clear and stable policy framework. The Energy Bill is a step towards this but it is only a skeleton; much will depend on the secondary legislation, which we hope will provide the flesh on the bones. A key element will be ensuring open and transparent allocation of contracts under a constrained budget. The Government is to be welcomed in having secured funding for renewables to 2020 in the Levy Control Framework, but it is now important that this funding is allocated efficiently and fairly.
The final part of the trilemma is security of supply. Many commentators have proposed an "either/or" approach to technology for both cost and climate reasons. But we need a mix of renewable and non-renewable technologies in the medium and long term; providing solutions that will cover both the demand side management of electricity, energy efficiency and also a diverse mix of generation technologies.
That leaves one remaining question: will the Energy Bill deliver a strong enough package of solutions to encourage the investment needed to meet the trilemma? The answer should be yes – but there’s not much time left and still a lot to do before this is the case.
