Andrew Davison, head of the Muckle LLP Energy Group, takes a look at the North East’s renewables market and calls on the Government to clarify its energy policy to ensure future investment and technological advances.
With rising energy demand outstripping domestic supply and increasing energy usage set to continue against a background of a restricted energy infrastructure, there is no doubt that the country needs to take control and maximise the use of its energy sources.
In coming years, we will need to address our growing reliance on imported energy (over 20%, 2008 figures) for financial, as well as security, reasons.
The Kyoto protocol sets worldwide targets for the reduction of COÂ² emissions up until 2012. The EU Renewables Directive sets legally binding targets for renewable energy use within each member state; as a result, the UK will have to generate 15% of all energy from renewables by 2020. This implies that we will need to produce more than 30% of all the electricity we use from renewable sources by 2020 (7.3%, provisional 2010 figures). This is clearly a long way to go â€“ both in managing consumption and in increasing the use of renewable sources of generation.
But itâ€™s not just about legal obligations – the new and renewable energy industry has the potential to generate billions of pounds for the North East economy over the next 20 years. It could truly transform our region.
The energy regulator, Ofgem, is talking about some Â£200bn investment being required to meet the requirements for renewable energy generation in the UK. On a visit to the region earlier this year, the Energy Minister Charles Hendry urged North East businesses to seize the opportunity. To put this Â£200bn figure into perspective, the total value of contracts for the Olympics is only about Â£8bn. So the renewables industry represents an opportunity for potentially huge prosperity for our region but we need to step up and earn our right to it.
The North East is ideally placed to take advantage of this revolution. It already has world-class businesses and universities undertaking groundbreaking projects and research in a range of relevant technologies including offshore and inshore wind power, biofuels and biomass, gasification, hydrogen fuel cells, COÂ² capture and tidal power.
We are perfectly placed to provide the fabrication, installation and servicing of the proposed massive offshore wind farm at Dogger Bank and have all of the necessary skills in the region as a result of our engineering and ship building heritage. The Port of Tyne already boasts Europeâ€™s largest dedicated biomass handling facility, feeding Drax power station and there has been talk of the building of new biomass power stations in our region.
With anaerobic digestion and gasification technologies, it is becoming increasingly viable to turn our waste into electricity and heat, potentially transforming our concept of waste far beyond simple recycling.
We have two centres of excellence leading the way on testing and process technologies. The National Renewable Energy Centre (Narec) offers world-class testing facilities for a range of projects in wind and tidal power, as well as involvement in university research on advanced solar PV technology. The Centre for Process Innovation at Wilton in the Tees Valley undertakes cutting edge R&D projects in biofuels, anaerobic digesters and fuel cells.
The supply chain is itself beginning to skill up, with the likes of Dr Tony Trapp (the Entrepreneursâ€™ Forum Entrepreneur of the Year 2008) and others setting up new engineering companies to help service offshore wind farms. Fabrication companies, such as TAG Energy Solutions, have invested in specialist equipment to help build the offshore wind farms. Companies with a tradition in mining, such as Banks Group, have become successful onshore wind farm developers. It seems that there is no business in the region that cannot find new work somewhere in the sector.
Because the UK is leading the world in the timing of seeking to exploit its offshore wind and tidal energy reserves, solutions to the technical problems encountered are likely to become the industry standard as they are rolled out around the world. However, even the most cutting-edge and forward- thinking businesses need both support and investment to continue their work.
With many renewable resources being more expensive per megawatt hour of energy produced than traditional carbon- based forms of energy, at present, the whole transformation to renewable energy is dependent on subsidy. Where that subsidy is applied, and what the levels of subsidy are, will determine (in the short term) which technologies develop.
Over a year into the new government and we still do not have a clear policy on energy and electricity generation. The Government must come off the fence. While it is taking time to consider the situation, it is delaying potential investment in the sector and, ultimately, job creation and economic growth.
It may even risk loss of competitive advantage to countries such as Germany and Denmark.
At the time of writing, we still havenâ€™t seen the Governmentâ€™s long-awaited white paper on the Electricity Market Reform. It is my firm belief that the Government needs to clarify its position, and quickly, so that financiers will have the certainty they need to invest in businesses which are seeking to develop the UK renewables market and fuel the energy revolution. Then the North East region will be able to capitalise on its achievements to date and continue to spearhead technological advances.
Muckle LLP has considerable experience in the energy sector, which extends from biomass, bio-fuels and hydro to solar, waste and wind power, assisting with everything from commercial services and contracting to property, banking, construction and engineering. We also operate a discussion forum â€“ Energy Forum North East â€“ on www.Linkedin.com, which allows businesses to share knowledge and understanding, especially on renewable energy.
For more information on how Muckle LLP can help your business, call Andrew Davison on 0191 211 7950 or visit www.muckle-llp.com