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DTI Finance Conference

Investing in Renewable Energy

Energy Clinic April 26th

The DTI held a conference for the finance community as part of the "Its Only Natural" campaign. The following is the speech given by Marcus Rand BWEA CEO.

"Good Morning.

As Chief Executive of the British Wind Energy Association I’m delighted to be here at the aptly named Energy Bank for today’s discussions on renewables. Financing the renewable journey that the UK is now firmly committed to is key to delivering not just our national renewable targets but also our international climate commitments. I applaud the DTI for initiating today’s event as part of a concerted campaign to inform and educate the financial community of the £7 billion investment opportunity that renewables, and wind energy in particular, represents over the coming years.

For those of you who are unaware the BWEA is the UK’s largest renewable trade association with some 315 companies in membership. We have a full-time staff of twelve working across all areas of our industry. Founded shortly after the oil crises of the seventies we have been championing the UK wind industry, through rain and sun over the past twenty six years. As a result we have seen many Government’s, Ministers and even support mechanisms come and go. Over that period we have seen mainly fallow years with the UK’s wind resource being significantly under valued and under-developed.

However, as I’m sure you are aware over the past few years the current Government has approached the renewable agenda with a new belief, commitment and a set of positive policies that has created a new ‘can do’ attitude towards wind and other renewables. No longer are we discussing what could happen we have turned the corner and reached an important moment for us all – we have at long last reached the exciting point of delivery. As a result wind has moved from the fringes into the centre of discussions about future energy supply.

UK wind is now on the edge of significant take off and the next few years should see the UK wind industry catapulted into the fast lane.

I’d like to share a few statistics to give you an overview of the scale of the shift in activity that has occurred in our industry since the creation of the renewable obligation – the key financial driver for our expansion.

Over the eleven years from 1991, when the UK’s first wind farm was built at Delabole in Cornwall, to April 2002 when the Renewable Obligation became law the UK had installed just 550 MW of wind capacity.

On average the UK through the 90’s was installing 50 MW of projects a year. By contrast other nations, most notably Germany and Spain raced ahead of us with annual deployments some 60 times our national average – all this despite the UK having the best wind resource in Europe. As a result of significant build rates year on year Germany and Spain have developed not just significant amounts of wind capacity but also significant industrial activity and major employment benefits.

The good news for the UK is that with the creation of the RO we have witnessed a significant upsurge in new projects coming forward, both onshore and offshore. The RO has brought an eight fold increase in projects going into the onshore planning system. As a result we have seen over the past two years 1,100 MW of projects obtaining consents onshore and a further 1,200 MW offshore also achieving their consents. In the first three months of this year alone projects amounting to some 220 MW of onshore capacity have already been consented. As a result of the RO ‘effect’ I recently described the years 2002 and 2003 as the ‘years of consent’ – as in just twenty four months more than twice as much onshore wind capacity was consented than the industry had built throughout the whole of the 1990’s. If 2003 was the year of consents then 2004 will be the year that the industry finally begins to put its boots on and build at the scale that should provide confidence to the policy makers that targets can be met. BWEA recently produced a survey showing this year alone that 22 projects – 21 onshore and one offshore at Scroby Sands – are to be built this year with a total capacity of some 450 MW going under construction.

In fact in 2004 alone we are close to installing in twelve months what the industry struggled to achieve throughout the whole of the last decade. The projections for 2005 also look positive with several of our Round 1 offshore projects, as you will here next from Centrica, due to go in the water. Our conservative projection is for a further 550 MW of projects being built next year with around half of that capacity offshore.

In order to maintain this short-term confidence and market activity we believe that developments onshore and offshore will be necessary to build out the 2010 target. There is no doubt that our members are optimistic about long-term growth. In a recent survey of five major developers we found an average prediction that UK plc would have installed some 6.5GW of wind capacity by the turn of the decade. That figure was further echoed in the workings that lie behind the recent DTI Innovation Review. It is widely expected that development will grow steadily onshore to a market of some 500MW a year throughout the decade with the major offshore delivery cutting in at the back end of the decade from 2008 onwards. As a result our members and the Innovation Review see the possibility of the UK reaching a 1GW a year market by 2008.

However, we all know what happens tomorrow is dependent on what is done today. BWEA while confident that growth is there is realistic to know that we have a number of key moments, decisions and events ahead of us that will determine whether this growth fully materialises. Central to this will be the review of the Renewable Obligation scheduled for next year. Put simply the industry is well aware, and I believe Centrica will touch on this in the next presentation, that to finance the major Round 2 projects a positive outcome in the form of a further extension of the RO is a pre-requisite. However, ensuring a long-term stable market is not the only critical factor. Removal of as much uncertainty as possible in the whole development cycle, both onshore and offshore is critical. That means continuing the work on engagement with key stakeholders to drive forward solutions to potential project stoppers. BWEA recognise and welcome the significant shift in attitude being displayed over aviation and defence issues and remains confident that joined up government has arrived and will work constructively to find solutions over the next few years.

The maintenance of a healthy onshore market is key and work on ensuring that we achieve a steady flow of consents over the coming years ahead will also be critical. That means ensuring that new updated planning guidelines for England and Wales come into force and ensuring that key decision makers have the appropriate information to enable them to make well informed decisions. BWEA is taking the lead on this and with financial support from the DTI will be running a series of seminars and workshops for planners and councillors on wind energy that will incorporate visits to modern working wind farms.

Along with consented projects we also need the grid in the right place at the right time to take our clean product to market. Both onshore and offshore we believe the delivery of the grid will become a central and critical task if we are to deliver the growth many of us are predicting. It also means winning hearts and minds. It is clear to me the Government and the industry need to do more to dispel myths that are building up around our industry. Without giving too much away I can inform you that BWEA will be devoting significant resources to this and will be launching a campaign later this year. The Government, in my view, must also play its part and continue the work it has begun today to spread the important renewable message beyond the city and into the hearts and minds of the entire nation. I look forward to further announcements from the Minister on this in coming months.

To end I just wanted to reflect on why we are here today and what unites us all. Without doubt the threat represented by the continued mass burn of fossil fuels is the major policy driver for our industry. Indeed just last week the Government’s chief scientist Sir David King released results of new research that showed that if climate change is left unchallenged 4 million homes in the UK could be inundated. Small beer some might say compared to drought and the complete loss of low lying island states. However, it should bring home to policy makers and the public that the positive actions of the previous few years have been far sighted and correct. It should also provide a further urgent wake up call to further increase the momentum on not just wind but other renewables too.

The reality of climate change means we must seize this important moment and finally deliver the true promise and potential of our industry."