Wind energy companies fear government’s commitment is cooling
Credit: Fiona Harvey and Terry Macalister, www.guardian.co.uk 26 February 2012 ~~
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Wind power firms express concern over future policy and reveal how investment in the UK’s energy infrastructure is on hold
Billions of pounds’ worth of investment in Britain’s energy infrastructure is on hold or uncertain because of concerns over the government’s commitment to wind energy.
In an exclusive survey, the heads of some of the world’s biggest wind companies, which have been considering setting up factories, research facilities and other developments in the UK, have told the Guardian they are reviewing their investments or seeking clarification and reassurances from ministers on future energy policy in the wake of growing political opposition to wind energy that culminated in this month’s unprecedented attack on the government’s policies in a letter signed by more than 100 Tory MPs.
General Electric (GE) Energy’s managing director, Magued Eldaief, told the Guardian his company’s proposed wind manufacturing investment – amounting to at least £100m directly but worth much more in its knock-on effect to the economy – was “on hold” pending ministers’ decisions on future reforms to the energy market.
“Our investment is on hold until we have certainty and clarity regarding the policy environment that we are in,” Eldaief said. “One of the most important things for us is political certainty, so we can justify the business and investment case for a facility in the UK. But we think there are some [political] headwinds which do not help, especially in terms of the subsidies discussion.”
He added that the recent anti-wind activity was “certainly a concern”. He said: “It’s something we’re watching very closely. We would like clarity and we would like it as quickly as possible.”
Vestas, the world’s biggest wind turbine maker, said it was waiting to see whether its customers were able to sign orders before committing itself to build a proposed turbine factory in Kent that would create about 2,000 jobs. Mitsubishi, Gamesa and Siemens – all potential investors in offshore wind to the tune of hundreds of millions of pounds – also expressed concerns that an anti-wind power backlash was building up in UK politics, after the MPs’ letter to the prime minister called for subsidies to be slashed and cast doubt on the value of wind energy.
Ditlev Engel, chief executive of Vestas, warned that if the political mood shifted against wind, the company would be forced to rethink its UK proposals. He said: “If things should change, my customers will not be able to sign orders – and that is a prerequisite. We will only go ahead if we have firm, unconditional orders – we will only get orders from our customers if they are sure that the development [of windfarms] can go ahead.
“The most important issue that our customers have is a long-term policy framework – that is required to put in these investments, which are huge … [But] we have not had reassurance from the government.”
Matthew Chinn, managing director of Siemens Energy for the UK and north-west Europe, whose company is planning a £210m factory that would employ 700 people in Hull, on top of its £500m in existing investments, said the firm saw a perceived lack of enthusiasm for wind power as “very significant”, although it wanted to push ahead with its plans.
Akio Fukui, chief executive of Mitsubishi Power Systems Europe, which is mulling an investment of more than £30m in research and development in Britain, said: “Commitment from the government to proceed is vital. If the government commits, then investors will come.”
Jorge Calvet, chief executive of turbine company Gamesa, also a potential large investor, called for the industry to rally round in public support of wind projects. Calvet said: “Supporters of wind should be a bit more vocal. The regulatory framework is the most important thing [for wind investors].”
Jim Smith, chief executive of SSE Renewables, said the political furore surrounding wind was unhelpful at a time when billions in foreign funds were needed to build clean technology schemes. “Clearly what the industry needs is clear, consistent government policy and anything that potentially upsets that is not good for the industry,” he said.
While most companies said they wanted to push ahead with their investment plans, some investment bankers also expressed concerns. Simon Brooks, vice-president of the European Investment Bank, which provides backing for some UK wind farms, said the letter to Cameron “injects a bit of uncertainty”, which was bad for investment.
Matthew Clayton, a fund manager at Triodos Investment Management, added: “It worries me from the level of understanding of MPs who are running the country. The arguments [put forward] about costs never seem to factor in an expected rising price of oil and gas and the fact that wind, once installed, provides almost free electricity.”
Clayton said that, under some measurements, onshore wind was within 7% of oil and gas costs – even taking into account subsidies for turbines but not taking into account the tax breaks given to the fossil fuels industry. “I don’t really think this [opposition] is about economics. It is largely about the aesthetics of wind and its impact on the countryside,” he said. “We need to have a more honest debate about this.”
Keith Anderson, chief corporate officer at Scottish Power, contrasted the situation with that in Scotland, where top politicians, the media and the public tend to advocate more wind power. Much of the company’s planned £1bn investment will go to Scotland.
He warned politicians that massive new investment would be needed in the UK’s energy infrastructure “despite the political noise” against wind. “We’ve been living off [energy generation] assets that are 40, 50 or 60 years old,” he said. “We need £150bn to £100bn investment in the next 10 years. That is a serious issue.”
Several potential investors also pointed to particular problems with the UK’s infrastructure that must be resolved, such as the ageing electricity grid, which must be upgraded to cope with a massive influx of intermittent wind energy. Engel said: “A long-term grid plan is very important.”
Ports are another key issue. While the government has promised £60m for a port upgrade on the east coast, the potential boost has not yet been detailed. Eldaief said: “From an industry perspective, that [funding] may not be adequate.” Fukui added that the UK’s east coast ports needed “more space than under the current plan” to cope with offshore wind.
The government should also look to skills, said Chinn. “There is a huge lack of basic engineering resources and skills in the UK,” he warned.
The energy secretary, Ed Davey, said yesterday: “A responsible energy policy for this country is one that rules in all of the key low carbon technologies to help us keep the lights on and emissions down. Ruling any of them out would be folly.”
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