Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/689907
14 | 10TH - 16TH JUNE 2016 | UTILITY WEEK Policy & Regulation Market view A lmost two years ago, chancellor George Osborne sparked much fanfare and ambition among regional stake- holders with the announcement of an excit- ing new concept, the Northern Powerhouse. While the exact meaning of it has been sub- ject to some debate, the essential purpose is clear: creating a grouping of the northern economic centres capable of continuing the regeneration of the post-industrial north and looking to rebalance the economy away from the South East. Although the focus was across a broad range of initiatives including transport, inno- vation, science and education, these were all underpinned by the need to have sufficient energy available to power this regeneration. And the necessary move away from fossil fuel-fired power stations inevitably requires the development of clean forms of energy. The North's Energy Heritage The North has long been known for having market-leading energy production facili- ties. Yorkshire's Drax facility has the largest energy production capacity of any power sta- tion in western Europe and provides around 7 per cent of the UK's electricity supply. Again, innovation is helping Drax stay ahead of the game with three of its six units now running on wood pellet biomass fuel. More controversially, Cumbria's Sella- field site has been host to nuclear energy production since 1954 and continues to be a sector-leading facility with a final invest- ment decision on Nugen's Moorside project expected in 2018. Offshore wind has become a major part of the development of renewable energy at either end of the M62 motorway and up the coasts of both the northwest and northeast of England. Huge investment in the Humber region from Siemens and Dong Energy will see the area elevated to a market-leading position, both in terms of the experience and skills of the UK offshore wind workforce, and the manufacturing capability and operation and maintenance supply chain that will be present in the region. Similarly, in Liver- pool Bay, the Irish Sea and up the Cumbrian coast, there are some windfarms that are already operational and others at various stages of development. The powerhouse can only benefit from the jobs, skills, investment and profile that such development will bring. Energy production is not just a key sector in the North's economy, it is a necessity. The northwest and Yorkshire/Humber regions still continue to house much of the UK's heavy industry and consume more energy for industrial processes than anywhere else in the country. The local production of energy, particularly from renewable sources such as offshore wind, will be crucial to ensure that the supply and cost of energy remains at a level that allows the industries within the Northern Powerhouse to prosper. The last Budget saw extensive cuts to renewable subsidies generally, and will likely stop investment in biomass and onshore wind in its tracks. But offshore wind, crucially, retains governmental sup- port with the vast majority of the £730 mil- lion allocated to be spent on increasing the UK's offshore wind capacity. Much of this work will be focused on the North, and it is widely recognised that offshore wind will be a key ingredient for the UK to meet its cli- mate change obligations. Indeed, the installed capacity of offshore wind turbines in the UK is already over two times greater than any other country. And with current levels of growth and pipeline projects, this capacity is expected to dou- ble by 2020. With this relatively mature offshore wind market, the UK boasts a far more developed regulatory framework than its European competitors such as the Neth- erlands, Germany and Denmark. Further afield, although nascent markets such as Japan and the US will undoubtedly develop quickly through the 2020s, they are currently far behind the curve. This experience and stability is a key fac- tor in the UK's position as the most attractive market for investors in offshore wind glob- ally, and recent government changes should do little to detract from this. Even the threat of Brexit has done little to shake investor confidence. As recently as January, Dong Energy confirmed that a leave vote would not spark any change in its offshore wind invest- ment plans, including the huge Hornsea site off the coast of Yorkshire, and that pipeline projects to 2020 would remain unaffected. Regeneration Not only has the offshore wind industry seen large investment in the Humber and Mersey regions, it also offers the promise of creat- ing employment and developing skills, and the economic benefits this will bring to the region and the powerhouse as a whole can- not be disputed. Take a look at Siemens' Green Port facil- ity in Hull, which is set to create 1,000 jobs directly related to offshore wind. This is a huge figure for just one place, particularly when compared with the fact that, in 2013, only 7,900 people were employed directly in such jobs across the whole country. Moreover, the wider cluster of associated businesses in supply chain, operations, and maintenance means that the economic impact of the development will extend far beyond the initial jobs boost. The investment has also seen the incep- tion of a number of apprenticeships and training courses to develop a core skilled engineering workforce across the region. The existence of a skilled workforce will attract businesses outside the offshore wind sector and there is optimism that the investment in offshore wind in the Humber and Mersey regions will drive broader regeneration and economic development. Offshore wind in the Northern Power- house is now a market-leading industry pro- viding crucial jobs and skills to the region. As the sector develops globally, the region is perfectly positioned to export its expertise and this, in turn, will help the Powerhouse realise its aim of becoming an internation- ally significant economic centre. Andrew Symms, head of energy and industrials, DWF Offshore wind in the North George Osborne's Northern Powerhouse will need a ready source of energy and it has one in offshore wind, a sector in which the North already has plenty of experience and expertise. By Andrew Symms.