Edward Davey – 2013 Speech to the Scottish Renewables Conference

Below is the text of the speech made by the Secretary of State for Energy and Climate Change, Ed Davey, at the Scottish Renewables Conference held in Edinburgh on 18th March 2013.

Introduction

It’s great to be here with you in Edinburgh.

Edinburgh is one of the great European cities.

Home to great artists, great thinkers, great inventors, great pioneers.

Capital city of a nation blessed by the talents of its people, and rich in natural resources.

And it is this combination of natural resources – the wind, the waves, the geology – coupled with its great human resources – the talents of the people, the work ethic, and determination to succeed…..

……it is these things that make Scotland one of the energy hubs of the world and a powerhouse of the new renewable energy industry.

People in Scotland have embraced renewable technology.

This chimes with my Department’s recent survey that showed overwhelming support for renewables, across the UK.

As you will see from the poll published later at today’s conference, the majority of Scots are more favourable towards renewables than other sources of energy.

Scottish renewables now account for 40% of the installed capacity of the whole of the UK – supporting thousands of jobs, green jobs that provide prosperity, and help cut dangerous emissions.

This really is truly a Scottish success story – made possible by the drive and determination of many of you here in this room.

Encouraged by successive Scottish Governments that have recognised the value of green growth.

And enabled by a United Kingdom Government committed to the vision of a low carbon future.

Committed to creating a market that incentivises clean energy.

And committed to going out and getting the capital investment required to build the infrastructure that we need to meet our shared ambition.

And what is that ambition?

A green, sustainable and prosperous future for the whole of the British Isles – and for the Europe we call home.

Playing a leading role internationally in tackling climate change.

So today I want to talk about how this drive for green growth will benefit people in Scotland – bringing green jobs and green investment.

I want to chart this Scottish success story in the context of the shape of the market reforms we are working through in Westminster and what they will mean for the future of renewables across the whole of the UK.

But I want to start by talking about the energy challenge we face together.

The challenge

I am the Secretary of State for Energy and Climate Change.

Not either/or.

I am charged with ensuring that we power our United Kingdom and protect the planet at the same time.

I need to meet both objectives when making decisions.

And this means recognising some realities – realities of the transition to our low carbon future.

Let me give you three.

Energy security, the continuing role of hydro-carbons, and the climate change threat.

First, collectively we face a huge infrastructure challenge, to keep the lights on.

With around a fifth of the UKs power stations due to close this decade, including some 2.5GW based here in Scotland, ensuring we have enough reliable capacity to meet demand now and in the future is my priority number one.

We need around £110bn of capital investment this decade alone to deal with that.

That is what I am concentrating on in Westminster – and I will come back to this theme later.

The second reality is that fossil fuels will remain part of the energy mix for some years to come – gas replacing coal, petrol and diesel fuelled transport, for example ahead of the development with low and zero carbon emission vehicles and their roll out to the mass market.

So, the resources in the North Sea have been and remain a boon to Scotland and the UK as a whole.

And it’s good to see investment in the North Sea rising.

It is also right that we investigate the potential that shale gas represents.

For we will need to continue maximising the recovery of indigenous hydrocarbon resources – on land and at sea.

Because these domestic resources enhance our energy security and they can be a driver of much needed growth – and they provide a valuable contribution to the balance of payments.

But let me be clear – these resources are unlikely to provide us with cheap energy bills as some would have us believe.

Even shale gas is not the silver bullet people think.

With increasing global demand for gas, the UK’s shale gas resources are highly unlikely to move global prices in any meaningful way.

Climate Change

And, of course, there is a third reality.

Climate Change.

Climate Change is a real and present danger.

The scientific evidence is overwhelming.

It is happening now and it will only get much worse if we don’t act.

And as our understanding of the changing climate grows, so does our understanding of what those risks might mean for our people.

An Earth which is hotter, more disaster-prone and more dangerous in the years to come means a more brutal environment for our citizens.

Just as it is this generation’s responsibility to pass on a healthy economy to the next.

So it is this generation’s responsibility to pass on a healthy environment to the next.

Therefore we can’t carry on using unabated fossil fuels at the rate we are now, decade after decade to come.

We have to reduce carbon emissions.

And with the Climate Change Act, this is not only a moral obligation, it is a legal one too.

So this is the energy and climate change challenge we face, together, in the UK.

Keeping the lights on, getting the investment we need into the system to provide the energy security we need.

While at the same time accelerating the transition to a low-carbon energy generation.

Increasing efficiency, reducing waste.

To achieve this we need to recognise one last reality.

I am not the Secretary of State for renewables – or for oil and gas or for nuclear – or for CCS or any other technology for that matter.

I am the Secretary of State for all of the above.

I need to make sure we are encouraging development in all these areas – making sure we have a wide mix of energy sources in order to ensure a secure and affordable energy supply.

But within that mix I am also clear, the cleaner the fuel the better, the greener the growth the better.

I will continue to look at the big picture to see how all sources of energy generation fit together in a market as we transition to the low-carbon future.

But that transition must happen – and that makes the generation of renewable energy an indispensible part of our strategy.

And it makes the renewables industry a top priority for investment.

So let me turn to the renewables industry and the success story it represents here in Scotland.

Green growth with Scottish renewables

And what a success story it is.

You all know the statistics.

Some 11,000 jobs supported by the renewable energy industry in Scotland.

Over 35% of electricity used here generated by renewables.

A massive source of inward investment.

Over the last 2 years alone Scotland has seen announcements of over £2.3bn of investment in renewables with the potential to support over 4,500 extra jobs.

Scotland already leads the UK in terms of installed capacity and there are billions of pounds of further investment in the pipeline.

Across the UK as a whole, the Renewable Energy Association estimate that by 2020, some 400,000 jobs could be supported by the renewables industry.

This is green growth.

These are green jobs.

Areva’s plans for a new offshore wind manufacturing plant in Scotland – 750 new green jobs.

Gamesa siting its new UK wind turbine manufacturing plant at the Port of Leith – 800 new green jobs.

Samsung Heavy Industries proposing to base its first European offshore wind project in Fife – 500 new green jobs.

The new Aikengall 2 windfarm – 100 new green jobs.

All these projects – based on green investment, creating green jobs, providing huge benefits to communities in Scotland.

And it’s not just the big companies.

It’s the small ones too.

From overseas and home grown.

Green growth reaching down through the supply chain, creating jobs, encouraging innovation.

Take some of the members of Scottish Renewables.

Natural Power – just 7 employees at the beginning of the new century – now with over 200.

Sgurr Energy – founded in Glasgow in 2002, now a global company.

Not just hiring in Scotland, but with offices in China, Brazil, India, the US.

Gaia Wind – the fastest growing private firm in Scotland.

When I was in Aberdeen earlier this month I visited ROVOP – a new hi-tech start up only a year old building remotely operated diving vehicles to work on offshore wind farms.

A healthy order book, growing rapidly, exporting too – generating 75% of its revenue internationally.

This is the future.

Because the world is not standing still to watch.

Here in Europe – strong renewables sectors in Ireland, Denmark, the Netherlands, Sweden, Germany.

In America, President Obama has issued a call to arms – seeing green technology as the path to “new jobs and new industries” that will maintain “economic vitality”.

In China, Australia, Japan, Brazil – targets to increase renewables.

This is a global boom market of £3.3 trillion, growing at 3.7% a year, with investment in renewables outpacing that in fossil fuels.

The International Energy Agency foresees some 6.4 trillion dollars of investment in renewables over the next two decades.

So this is a global race.

And in some areas – such as offshore wind – the UK has a head start.

But if we really want to thrive in this new environment of green growth, if we want to continue creating green jobs here in Scotland and in the rest of the UK, we will need to accelerate our own domestic drive to clean up our energy generation system and transition to a low-carbon economy.

So let me turn to what we are doing to create the framework for investment in renewables and green growth.

Electricity Market Reform

Of course, to meet the emissions reductions targets set out in the Climate Change Act we will need action in many sectors – transport, agriculture, waste management – and well as energy.

But energy is the largest producer of emissions.

Much can be done through energy efficiency.

And the £1.3bn Green Deal to help people improve their homes, save money on their bills, and cut their carbon footprint all at the same time, will be a driver of green growth.

But the centre-piece of the drive for green growth is the plan for electricity market reform now passing through the Westminster Parliament.

Our long-term vision is for a competitive market where low-carbon technologies, including renewables, participate on a level playing field.

Where people get value for money because the market is responsive to competition – not just to volatile international fossil fuel prices.

The current electricity market can’t deliver that.

First, because it is skewed to fossil fuel capacity.

And second because the current ways in which we bring on low carbon don’t deliver best value for consumers.

So it has to be reformed – but in a gradual way, that’s investment friendly, because we need investment now, while we are reforming.

So we will provide certainty in transition, and encourage investment in renewables and other forms of low-carbon generation, setting a new Carbon Price Floor and guaranteeing contract prices for low-carbon generators.

And because I recognise that more certainty is required right now for shovel-ready projects, I set out last week further detail on the Final Investment Decision Enabling Programme for renewables.

This will mean that developers of renewable electricity projects will be able to apply for support, and enable investors to make final investment decisions this year ahead of changes to the electricity market next year.

This should help construction on a number of projects to start sooner rather than later.

Looking out to 2020, we have trebled support under the Levy Control Framework to £7.6 billion – sending a strong clear signal that there is plenty of funding for low-carbon investment.

This will help increase the amount of electricity coming from renewables from 11% today to around 30% by 2020, as well as supporting new nuclear power and carbon capture and storage.

Here in Scotland, the Scottish Government has a target for renewables to generate the equivalent of 100% of gross annual electricity consumption by 2020.

I fully support this ambition, but achieving it will be a daunting task.

The Climate Change Committee estimates that to meet this target installed capacity will need to treble.

The best way that I, as Secretary of State at the UK level, can help achieve this is to make sure that electricity market reform is successful in incentivising investment in renewables.

And that is what I am doing.

I will do everything I can to get capital into the pipeline.

In my Department, and across Government, working closely with devolved administration, including here in Scotland, my fellow ministers and I are beginning an aggressive campaign to attract global financial investors.

And this is a powerful pitch.

Contracts for Difference will give investors a stable and predictable income – not just for a couple of years, but for over a decade.

As the Prime Minister has said: “What other industry or business anywhere in the world has got that sort of certainty?”

The United Kingdom offers a uniquely attractive stable, transparent and supportive environment for investment in low-carbon generation.

Stronger together

And this brings me to my final point today.

The future of Scottish renewables is more secure with Scotland as part of the United Kingdom.

Look – as an Englishman, I feel a little uncomfortable about coming to Scotland and talking about the approaching referendum on independence.

But as Scotland’s decision will affect all of us in the UK, and as a Liberal Democrat who has long championed devolution, even when it was unfashionable to do so, I feel I have the right to speak up.

And as the UK Secretary of State for Energy and Climate Change – representing the interests of all parts of the UK – I feel I have a duty to do so.

I have spoken about this before and at length, and no doubt I will do so again before too long.

So today I want to restrict myself to one simple point on this.

And that is, I guess, about self-interest – Scottish self-interest.

As part of the Great Britain energy market, Scotland and its energy industry, as net exporters of energy, have unhindered access to a market of over 23 million households and the integrated energy networks that deliver to them.

And Scottish renewables benefit from the ability to spread investment costs across the whole of the UK consumer base.

I have no doubt that if people in Scotland opt to leave the UK, an independent Scottish Government would be committed to giving the Scottish energy industry the support that it needs.

But commitment and ability to deliver are two different things.

My point is this.

An independent Scotland will be just that – independent.

Treated by the UK as just one of a number of countries it could buy renewables from.

We are pursuing a number of interconnection projects with our European neighbours, including Norway and Ireland.

For an independent Scotland, this would potentially represent serious competition.

If the UK were to look beyond its borders for renewable energy, we would need to consider which sources provide the cheapest and most reliable options for our people.

Now that could be from Scotland, but it could also be from Ireland, from Norway or elsewhere.

I am not absolutely saying that Scotland will not be able to compete.

But it will be much harder for a nation potentially having to spread the costs of investment in renewables across just two and a half million households to keep prices competitive.

I am sure that an independent Scottish Government would champion its national industries, but the economic reality is that Scottish energy industry would lose the benefit of the UK’s international clout when promoting Scottish products and industries – instead it would be in direct competition to the UK.

These are the uncertainties that independence will bring.

We shouldn’t just take for granted critical features like this when deciding our future together.

It is an easy matter to assert that the Single Energy Market would continue as it is –but independence is independence.

Divergence isn’t just possible – it is likely.

Devolution is working for Scottish renewables.

As part of the UK, Scottish renewables are thriving – with two governments working and collaborating to realise its potential, constitutionally required to do so..

Allowing tailored support for projects at a local level by the Scottish Government and Scottish Enterprise.

And, as part of the family of the United Kingdom, retaining unimpeded access to the consumer and tax base to underpin the economics.

Together we have the best of both worlds.

I believe wholeheartedly that Scotland is stronger as part of the United Kingdom, and the UK is stronger with Scotland in it.

And the future for Scottish renewables more secure in the UK that outside it.

Conclusion

So let me conclude ladies and gentlemen with this.

In the UK as a whole, we are embarking on the most ambitious reform of our energy system in generations.

Working together we can attract the investment, build the infrastructure and develop the technology we need to move towards the secure, affordable low carbon future that we have collectively committed to.

And with this drive comes growth and jobs.

Green growth and green jobs.

Scotland has been showing the way.

You have been showing the way.

So, lets, together, continue to Lead the new green renewable energy revolution.

Powering the United Kingdom, and protecting our planet.