In a bid to woo new large institutional investors to the country, the UK’s Deputy Prime Minister Nick Clegg and Energy Secretary Ed Davey teamed up to insist the country’s Coalition Government is not “riddled with debate and division" with regard to greening the economy.
“This Coalition Government is unreservedly committed to helping our low carbon sector thrive - no ifs; no buts,” Clegg told delegates at the Global Business Summit on Energy, organised to coincide with the London Olympics. “When we say we want green growth, that is not flimsy, political rhetoric: It is a very real aim, driven by very real economic needs.” He stressed: “I think it's important to put that up in lights.”
Clegg, who is also the leader of the Liberal Democrat party, was adamant that media reports portraying the Coalition “as if it is riddled with debate and division with regard to greening the economy” are wrong. “That isn't the case. Yes, there will be internal discussions and debates on the balance and sequencing of different policies - that's the nature of any government - and energy policies will evolve over time as costs come down,” he said.
Clegg pointed out that the UK leads the world in offshore wind, stressing “our total installed capacity is as much as the rest of the world put together”. He hailed the country’s “enviable natural resources” which make its “one of the biggest players in marine and tidal energy too”. And he insisted: “We offer political stability, legal certainty.”
While the UK’s low carbon sector has grown an average of 4.4% a year since 2008, Clegg acknowledged that “the biggest, savviest economies are crowding in”. He was referring to China, Germany, Korea, Brazil. “So the UK is upping our game exploiting our competitive edge,” he said. “Big ticket reforms. World firsts. Policy that looks decades ahead.”
Davey added that in less than ten years, “We have to find 20 gigawatts of generating capacity and £110bn of investment in electricity generation”. The UK hopes to build as much as 18GW of offshore wind by 2020, “if costs come down”, and 16GW of new nuclear power by 2025, he continued, while also supporting development of carbon capture and storage and “seeing new gas come online to ensure we can meet demand as we decarbonise”.
The challenge for the Coalition, Clegg said, is giving investors as much certainty as possible. “We know that's what you crave; we know it keeps your costs down,” he said. “Understandably, you place a big premium on predictability. We hear that loud and clear.”
Davey agreed. “Existing players don’t have the capacity to invest [at the kind of scale needed]. We need new players, including institutional investors, who have the muscle to make big investments in technologies with high capital costs,” the energy secretary said. “That means doing everything we can to take the risk out of investing in the UK’s energy markets. From a government perspective, that means making sure we keep political risk to a minimum.”
The UK’s emissions and renewable targets provide an overall policy framework while the government has provided consistency in its decision-making, both men said.
“No surprises; no rabbits out of hats. We set out what we're going to do - then we do it,” Clegg insisted. “Look, for example, at how we take decisions on things like our renewable obligations banding. We review it every four years, like clockwork. So, every four years, we consult with industry on the subsidy levels, we listen to the evidence you provide, and then we set the bands. And because everyone gets a sense of what's coming, companies can plan and prepare.
“That's why, since announcing the new levels just a few weeks ago, we've already seen signs of progress on around £3.5bn worth of investments. Today, for example, shovels will hit the ground in Tees Valley, where Air Products is building a renewable energy plant that will power 55,000 homes and create 700 construction jobs.” Two Spanish solar firms also announced new investments in the UK at the business summit too, while Clegg announced government funding totalling £100mn for non-domestic energy efficiency infrastructure projects.
Meantime, Davey also pointed out that under the Electricity Market Reform a feed-in tariff with contracts for difference, providing a guaranteed price, will “unlock low-carbon investment”. From an investor perspective, “this delivers clear and predictable revenue streams, making sure we have an active and liquid wholesale market, and giving new investors enough certainty to enter”, he said. “As a package, this reform will enable large-scale investment in low-carbon generation capacity in the UK in a cost-effective way.
And again referring to the critical media reports surrounding the delays to the government’s announcement on banding reviews, Davey insisted: “When it comes to cost-effectiveness, we are absolutely determined to follow the evidence, even if it means taking a little bit more time to get the details absolutely right.”