© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
November 20, 2012 8:50 pm
If there was a prize for the countries doing the most to wean themselves off fossil fuels and on to cleaner, greener energy, the UK would have to be a contender – at least on paper.
Under the previous Labour government, Britain introduced what it boasted was the world’s first long-term legally binding framework to tackle climate change – the 2008 Climate Change Act.
The act requires emissions to be reduced by at least 80 per cent by 2050, compared with 1990 levels.
In line with EU targets, the UK has also agreed to boost the amount of energy it produces from renewable sources such as wind power to 15 per cent by 2020, a figure that implies about 30 per cent of electricity will have to be generated from green sources.
That is a big jump given renewables’ share of electricity today is just under 10 per cent.
Big strides are already being made towards this goal in one particular area: offshore wind power, one of the most powerful forms of renewable energy so far invented.
Thanks to its shallow coastal waters, strong winds and – most importantly – relatively generous financial incentives, the UK has 2.7GW of offshore wind power capacity, more than the rest of the world combined.
That is well below its 5GW of onshore wind, and the total pales beside the 62GW of wind power China had at the end of last year, or the 47GW in the US, or the 29GW in Germany.
But it still amounts to a large amount of infrastructure investment. Offshore wind alone led to £1.5bn of investment in the 12 months to June 2012, according to RenewableUK, the wind industry trade body.
It says the UK’s total wind industry has expanded by a quarter over the past two years, and now provides direct full-time employment for 12,200 people. The question is, however, how long will the UK retain this position, and is it doing its best to exploit its natural advantages?
One man with a big interest in the answer to these questions is Ian Farquhar, offshore wind development director at David Brown Gear Systems, the engineering company.
The 152-year-old Huddersfield company started life building gears for northern textile mills and ended up putting them into submarines, tanks and nuclear power plants.
Three years ago, it started building them for the massive turbines that are used in offshore wind farms.
“Wind is a small but very fast growing segment of the business,” says Mr Farquhar. “So far, it’s been very successful.”
One of David Brown’s major customers is the South Korean industrial giant Samsung Heavy Industries, which has chosen the Huddersfield company’s gears for the enormous 7MW offshore wind turbine it plans to start testing in Fife.
This could be the world’s largest turbine once installed and there are hopes that Samsung will eventually do what no turbine maker is doing at the moment in the UK: build a turbine at a British manufacturing plant.
That would be a big boon for David Brown, and many of the other 80-odd UK companies scattered across the country.
But for this to occur, Samsung will need to be guaranteed enough turbine orders from offshore wind developers, and it is not clear when this will happen.
In fact, there has only been one order for offshore turbines in the UK this year by the three top offshore turbine companies: Germany’s Siemens; Denmark’s Vestas and REpower, a German subsidiary of India’s Suzlon.
Some in the industry say this is to be expected given the way the planning and consent system has been operating.
But some developers say there is an “investment freeze” because of uncertainties about the coalition government’s forthcoming energy market reforms.
These reforms are designed to replace the existing system of renewable energy subsidies with a new set of long-term contracts that will also be available to nuclear power generators.
But there is concern in the industry about how workable the contracts are going to be, coupled with anxiety that George Osborne, chancellor, is trying to water down the government’s green commitments at a time of economic difficulty.
Several of the world’s biggest wind turbine companies, including Vestas and Siemens, recently wrote to Ed Davey, the energy secretary, warning that confusion about the government’s policies “have caused us to reassess the level of political risk in the UK”, which could cost thousands of new jobs.
Amid such tension, it did not help when a junior energy minister, John Hayes, suddenly declared late last month he was going to try to tackle the “extraordinary” number of wind turbines “peppered” around the country.
Mr Hayes, who was quickly slapped down by his boss, Mr Davey, was referring to onshore wind farms. Offshore plants are much less politically sensitive because they block fewer views. But any hint of a reversal of government support for the industry makes investors fret.
“It does make you nervous,” said Andrew Norman, chief executive of JDR Cables, a Cambridgeshire-headquartered company that has made subsea cables for some of the UK’s biggest offshore wind farms, including the London Array in the outer Thames Estuary.
“When you see these things offshore slowly churning out energy with no pollution, no emissions ... in terms of providing clean and abundant energy to the UK it’s clearly a no-brainer,” he says.
“I understand not everyone wants one at the end of the garden but that’s a different story.”
Depending on how the industry grows, Mr Norman thinks his wind business could double.
At BGB Innovation in Lincolnshire, which makes components for both onshore and offshore turbines, the wind business is already helping to make business boom.
“We have been expanding by up to 40 per cent a year for the last five to eight years,” says David Holt, chairman.
But Mr Holt is already noticing a big difference in the industry.
“Our best customers used to be in Europe, now business is going to Asia,” he says. “You are getting the feeling the Chinese are going to pinch it all.”
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.