House of Commons Welsh Affairs Committee Inward Investment in Wales Eighth Report of Session 2010–12 Volume III Additional written evidence Ordered by the House of Commons to be published 31 January 2012 Published on 21 February 2012 by authority of the House of Commons London: The Stationery Office Limited The Welsh Affairs Committee The Welsh Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Office of the Secretary of State for Wales (including relations with the National Assembly for Wales). Current membership David T.C. Davies MP (Conservative, Monmouth) (Chair) Stuart Andrew MP (Conservative, Pudsey) Guto Bebb MP (Conservative, Aberconwy) Geraint Davies MP (Labour, Swansea West) Jonathan Edwards MP (Plaid Cymru, Carmarthen East and Dinefwr) Nia Griffith MP (Labour, Llanelli) Mrs Siân C. James MP (Labour, Swansea East) Susan Elan Jones MP (Labour, Clwyd South) Karen Lumley MP (Conservative, Redditch) Jessica Morden MP (Labour, Newport East) Mr Robin Walker MP (Conservative, Worcester) Mr Mark Williams MP (Liberal Democrat, Ceredigion) The following Members were members of the Committee during the Parliament: Alun Cairns MP (Conservative, Vale of Glamorgan) Glyn Davies MP (Conservative, Montgomeryshire) Owen Smith MP (Labour, Pontypridd) 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 Publications 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/welshcom The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in printed volumes. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee is Adrian Jenner (Clerk), Anwen Rees (Inquiry Manager), Jenny Nelson (Senior Committee Assistant), Dabinder Rai (Committee Assistant), Edward Bolton (Committee Support Assistant) and Jessica Bridges- Palmer (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Welsh Affairs Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 3264; and the Committee’s email address is [email protected] List of additional written evidence (published in Volume III on the Committee’s website www.parliament.uk/welshcom) 1 RWE npowerand RWE npower renewables Ev w1 2 Professor Robert Huggins and Professor David Brooksbank, University of Wales Institute, Cardiff Ev w3 3 Pingar LP Ev w8 4 General Dynamic UK Ev w9 5 Welsh Assembly Government Ev w11 6 German Industry UK Ev w15 7 South East Wales Economic Forum Ev w16 8 Professor David Blackaby, Dr Stephen Drinkwater, Professor Philip Murphy, and Dr Catherine Robinson, School of Business and Economics, Swansea University Ev w16 9 King Sturge Ev w26 10 Freight Transport Association Ev w32 11 Scottish Development International on behalf of joint venture partners: Scottish Government, Scottish Enterprise and Highlands and Islands Enterprise Ev w34 12 Associated British Ports Ev w47 13 Tata Steel Europe Ev w50 14 E.ON Ev w57 15 Renewable UK Cymru Ev w58 16 Professor Garel Rhys CBE, Cardiff University Business School Ev w61 17 Brazilian Embassy, London Ev w62 18 Nuon Renewables Ev w63 cobber Pack: U PL: CWE1 [SO] Processed: [15-02-2012 15:06] Job: 008852 Unit: PG01 Welsh Affairs Committee: Evidence Ev w1 Written evidence Written evidence submitted by RWE npower and RWE npower renewables 1. Summary — This submission is from RWE npower and RWE npower renewables, part of the RWE group, a German owned energy business, and one of the largest inward investors in Wales. — RWE npower and RWE npower renewables comprise our UK based generation and retail businesses. — We have a diverse portfolio of electricity generation sources, we sell gas, electricity and a range of energy related services. — To obtain investment capital from our parent company we need to demonstrate and deliver project returns that represent the best use of a limited resource. — This requires a predictable regulatory regime and projects that are delivered to plan. — Energy policy is not a devolved responsibility but the Welsh Assembly Government have a key role in facilitating delivery with responsibility for planning, economic development and the environment. — The additional complexity that devolution may sometimes bring must not be allowed to create barriers to investment. 2. Investment,Current andUnderDevelopment 2.1 RWE is a German integrated energy business, generating electricity and supplying gas, electricity and related services to customers across the UK through RWE npower and renewable energy through RWE npower renewables. We are one of the largest inward investors in Wales where our current portfolio comprises a large coal-fired power station, two combined heat and power plants and numerous renewable energy schemes including both onshore and offshore wind and hydro generation. 2.2 We are also investing in: — an option to build a new nuclear power station at Wylfa (circa £8 billion) through Horizon Nuclear Power, a joint venture between RWE and E.ON UK; — development of the Atlantic Array offshore wind farm (circa £4.5 billion); — construction of Gwynt y Mor offshore wind farm (circa £2 billion); — developing a new high efficiency gas fired power station at Pembroke (circa £1 billion); and — development of a demonstration array of tidal stream turbines off the Anglesey coast. 2.3 In total, our current Welsh capacity represents around a third of the electricity consumed in Wales and, equally importantly, our investments create local employment opportunities and community benefits. We currently have over 350 employees based in Wales and our policy is to recruit and train people from the local community where feasible. 2.4 We have a long history of investing in the development and operation of generation in Wales. Aberthaw power station was designed to burn local coal and contributes over £50 million to the Welsh economy each year. It is also the site for our new 3 MW pilot carbon capture plant which will be operational in 2011. 2.5 Our investment in a new nuclear power station on Anglesey through the Horizon joint venture will require a highly skilled workforce of up to 5,000 during the peak construction phase. It will bring investment and mean opportunities for jobs in Wales and we aim to retain and provide training for the local workforce. At Wylfa we want to: help create long-term education and training opportunities and develop a skilled Anglesey workforce; help establish a world-class supply chain; make improvements to the road infrastructure where required; work with and help develop the Isle of Anglesey County Council’s Energy Island programme; build a new visitor and education centre; and, ensure the demand for goods, services and employees benefits the local economy. 2.6 We are currently constructing a highly efficient 2,000MW gas-fired power station in Pembroke which, once operational, will be the largest combined cycle gas turbine (CCGT) power station in Europe. At the peak of construction, around 1,500 people will be employed at the site. The long-term operation of the power station has created approximately 80 long-term jobs and we have made every effort to recruit people from South Wales. The power station is a significant investment, costing around £1 billion to construct and it is estimated its operation will bring a long-term benefit to the local economy of around £10 million each year. 2.7 Our renewable energy business, npower renewables, has over 300 MW of operational wind and hydro capacity, a further 576 MW under construction and over 2000 MW under development, mainly offshore wind. We have 17 community benefit packages investing nearly £0.5 million each year with a further £1.8 million planned for new schemes. Around 90 staff (a third of total) are employed at five offices. cobber Pack: U PL: CWE1 [E] Processed: [15-02-2012 15:06] Job: 008852 Unit: PG01 Ev w2 Welsh Affairs Committee: Evidence 2.8 In Wales, RWE npower has already spent over £20 million supporting programmes for fuel poor households. This means that for every household that we supply in Wales with electricity or gas, we have spent at least £250. This includes energy efficiency measures, social tariffs, debt relief and the Warm Wales and Health through Warmth schemes. 3. The Role of theWelshAssemblyGovernment (WAG) and theRegulatoryRegime 3.1 A coherent UK Energy policy remains the responsibility of Westminster and WAG has a key role in the implementation of such policy in Wales. Essentially it is that policy framework that will establish the incentive to invest in the UK energy infrastructure. Where those investment opportunities to invest are located in Wales then WAG will have a key role in facilitating delivery and with its responsibility for planning, economic development and the environment there is significant scope for influence. 3.2 It is inevitable that devolution complicates the process of investing in Wales, with an increase in the number of government departments, regulatory bodies and NGOs involved. This additional complexity should not, however, be a barrier provided that there is sufficient co-operation throughout the process. Whilst we would agree that all bodies need to preserve a level of independence and transparency this should not detract from the ability to co-operate and avoid unnecessary workload, bureaucracy and delays. 3.3 We feel it is important to recognise that investment decisions in large companies like RWE have to balance investment resources against other factors such as the predictability and complexity of planning and regulatory frameworks.