House of Commons Energy and Climate Change Committee The Future of Marine Renewables in the UK Eleventh Report of Session 2010–12 Volume I Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/ecc Ordered by the House of Commons to be printed 7 February 2012 HC 1624 Published on 19 February 2012 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Energy and Climate Change Committee The Energy and Climate Change Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Energy and Climate Change and associated public bodies. Current membership Mr Tim Yeo MP (Conservative, South Suffolk) (Chair) Dan Byles MP (Conservative, North Warwickshire) Barry Gardiner MP (Labour, Brent North) Ian Lavery MP (Labour, Wansbeck) Dr Phillip Lee MP (Conservative, Bracknell) Albert Owen MP (Labour, Ynys Môn) Christopher Pincher MP (Conservative, Tamworth) John Robertson MP (Labour, Glasgow North West) Laura Sandys MP (Conservative, South Thanet) Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine) Dr Alan Whitehead MP (Labour, Southampton Test) The following members were also members of the committee during the parliament: Gemma Doyle MP (Labour/Co-operative, West Dunbartonshire) Tom Greatrex MP (Labour, Rutherglen and Hamilton West) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/ecc. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Report of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Sarah Hartwell-Naguib (Clerk), Dr Richard Benwell (Second Clerk), Dr Michael H. O’Brien (Committee Specialist), Jenny Bird (Committee Specialist), Francene Graham (Senior Committee Assistant), Jonathan Olivier Wright (Committee Assistant), Julie Evans (Committee Support Assistant) and Nick Davies (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Energy and Climate Change Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2569; the Committee’s email address is [email protected] The Future of Marine Renewables in the UK 1 Contents Report Page Summary 3 1 Introduction 5 Structure of this report 6 2 Potential benefits of wave and tidal power 7 A large domestic resource 7 Energy security 7 Carbon savings 8 Economic benefits 8 3 Attracting investment 10 Types of investor 10 Increasing investor confidence 10 4 Strategy and policy direction 12 Low-carbon technologies 12 Reducing the cost of wave and tidal energy 13 Deployment targets 14 Coordination between strategic funding bodies 15 5 Financing 18 Capital support 18 Revenue support 21 6 Other barriers to the development of marine renewables 24 Grid 24 Planning and consenting 25 Environmental monitoring requirements 26 Skills 27 Public acceptability 27 7 Conclusion 30 Annex 1: Note of the visit to Orkney 34 Recommendations 31 Formal Minutes 35 Witnesses 36 List of printed written evidence 36 2 The Future of Marine Renewables in the UK 2 List of additional written evidence 37 List of Reports from the Committee during the current Parliament 38 The Future of Marine Renewables in the UK 3 Summary Wave and tidal stream energy (marine renewables) have the potential to benefit the UK: there is an abundance of resource (potentially enough to supply 20% of current electricity demand); they can provide a more reliable and predictable source of energy than some other types of renewables; they could help cut carbon emissions; and they could provide new jobs and industries. As the current world leader in the development of marine renewables, the UK could also benefit by exporting goods and skills as other markets begin to emerge around the world. The UK should follow the example set by Denmark in the 1980s in establishing a domestic wind power industry. Adopting a similar vision for a marine industry in the UK could help to accelerate development in the sector and to secure benefits for the UK. Attracting investment will be key to the development of marine renewables technologies. Investors want a stable and consistent policy regime to give them confidence to invest. They also need to have confidence that there is a long-term, viable market for the technology that they are backing. Market signals through revenue support schemes like the Renewables Obligation are one way of providing this. Investors are unwilling to take on excessive risks. Splitting the costs between the private and public sectors may help to reduce risks, as could addressing practical barriers (such as a lack of grid connections). Marine renewables are part of a much larger landscape of low-carbon energy technologies, which includes nuclear and carbon capture and storage as well as other types of renewables, they could play an important role as part of a low-carbon energy mix in the future. But their very high cost at their present state of development means they are unlikely to make much, if any, contribution before 2020. The priority over the next decade must be to focus on reducing the cost of marine renewables. The Government should clearly set out its expectations of industry in this regard so that progress can be monitored. If cost reductions are delivered successfully, more ambitious plans for the deployment of marine renewables can then be adopted. Potential obstacles fall into three categories: bureaucratic, financial and practical. Many organisations are involved in providing funding and support to the sector. A more streamlined approach may reduce duplication and inefficiency in funding schemes. The formation of the Low Carbon Innovation Group is a step in the right direction, but we would like to see further action to simplify the funding landscape. We also hope that the Department will minimise bureaucracy for applicants to the £20m fund that is available for testing arrays, potentially by developing a joint pre- qualification process with the £18m fund that is available from the Scottish Government. The proposal to increase revenue support to five Renewables Obligation Certificates (ROCs) per MWh has been widely welcomed by the industry and it will encourage investors. However, there is still a great deal of uncertainty about the level of revenue support that will be provided beyond 2017 and how levels are likely to change over time. The Department must provide clarity on these matters as soon as possible. It must also consider how to prevent costs to consumers beyond 2017 from becoming excessive. Practical obstacles include access to grid connections, the planning and consenting 4 The Future of Marine Renewables in the UK process and accessing a suitably skilled workforce. It is important to address these issues now to ensure that the development of the sector is not blocked in the future. Gaining acceptance from members of the public is also important . Although it is still early days for marine renewables, the potential longer-term benefits associated with developing a thriving wave and tidal industry in the UK are significant. An overly cautious approach may allow other countries to steal the UK’s lead. It is vital that DECC continues to support the development of these technologies so that the UK can retain its leadership position. The Future of Marine Renewables in the UK 5 1 Introduction 1. The seas and oceans represent a large potential source of renewable energy but, unlike wind turbines and solar panels, technologies that can achieve the Holy grail and “turn sea water into electricity” are still in their infancy1. If captured effectively, the energy contained in waves and the flow of the tides could provide a clean and reliable source of electricity. With the largest wave and tidal resource in Europe, the UK could gain substantial benefits from marine renewables. 2. The UK is currently the world leader in the development of wave and tidal stream technologies.2 Of the eight full-scale prototype devices installed worldwide, seven are in the UK.3 This success is the result of a number of factors: an abundant natural resource, a long history of academic research on wave and tidal power, world-class testing facilities and a strong skills base in other maritime industries.4 3. Our inquiry was prompted by DECC’s decision to close the £50m Marine Renewables Deployment Fund and to replace it with a £20m innovation fund but it has not been limited to it. We have also examined the opportunities for the UK in developing wave and tidal energy and assessed the effectiveness of the Government’s broader policy measures in this area. 4. In this report, we use the phrase “tidal energy” to refer to tidal stream energy (unless otherwise stated). While we recognise that tidal range technologies (such as tidal barrages and tidal lagoons) could also make a significant contribution to the UK’s energy system, we have not looked in detail at this family of technologies. This is because this group of technologies is more mature (La Rance tidal barrage in France has been operational since 19665) and therefore faces a very different set of challenges around deployment and support than those faced by nascent technologies such as wave and tidal stream.