Newsletters from No 10: 13 January 2010
Dear friends
May I wish you a very Happy New Year. I hope you had a good break over the holidays, and that it does not feel like a long time ago already.
My apologies that you have not heard anything from me for a while. The weeks before Christmas were dominated by the run up to Copenhagen and then the conference itself (and we also had a Pre-Budget Report). I am afraid there was just too much going on to find the time to write about it. Normal service will I hope now be resumed.
In the next few days I will send you an email about Copenhagen. I am conscious that there is still some uncertainty in many people's minds about what exactly happened at the conference (and why), what was agreed and where things go from here. I'd like the chance to convey the Prime Minister's and Government's view, which is optimistic both about the agreement itself and the progress that can be made this year.
Today however I wanted to focus on domestic policy. Last week saw a historic announcement on the development of offshore wind in the UK and I'd like to say something about that. The Government also launched our boiler scrappage scheme, and I will take the opportunity to cover the PBR and gas supplies as well.
OFFSHORE WIND: ROUND 3
On Friday the Prime Minister, Lord Mandelson and Ed Miliband joined the Crown Estate to announce the successful bidders for the nine 'Round 3' offshore wind zones. This is a very big deal indeed - the plans set out by the successful consortia would enable the generation of one quarter of the UK's total electricity needs, 32GW, by 2020. The UK already has more installed offshore wind capacity than any other country in the world, with windfarms currently operating or under construction taking this to over 1GW this year. A further 7GW is planned in Round 2; so up to 32GW from Round 3 represents a further huge expansion. It constitutes a total investment of around £75bn, with the installation of around 6,400 turbines, starting as early as 2014-15. Five of the nine sites are in the North Sea, with the others in the English Channel, Bristol Channel and Irish Sea. The consortia are a mix of UK-based and overseas firms. The full announcement, including the sites and consortia, is at http://www.decc.gov.uk/en/content/cms/news/pn10_004/pn10_004.aspx
At the launch event in London on Friday the PM was particularly gratified to hear the businesses belonging to the successful consortia, particularly the inward investors, praise the UK's policy framework for renewables, and for offshore wind in particular. The Government has worked hard to achieve this, with the extension of the Renewables Obligation, the 2 ROCs band for offshore wind introduced last year (until 2014), the introduction of the Planning Act and the reform of transmission access arrangements. But no-one in the Government is complacent about the need to continue work on all fronts.
Above all, as the PM said in his speech (http://tinyurl.com/yd4c8ze), the Government is determined to expand the UK-based supply chain for this industry. With Round 3, offshore wind has the potential to create 70,000 jobs in Britain by 2020. Based on Carbon Trust analysis, this includes around 14,000 jobs in the manufacture of the turbines themselves (not just the blades but components such as power converters, towers, gearboxes and cables); around 30,000 jobs in installation, operation and maintenance (including such things as foundations, cable laying, jack-up vessels, and substations); a further 25,000 in associated services (engineering consultancy, legal, financial, commercial operations, etc) and around 3,500 in research and development. In all these areas there are leading-edge British firms - examples include Converteam, Burntisland Fabrications, Welcon, Tees Alliance Group, JDR Cables, Skykon, PPG, David Brown, BGB Engineering, Subocean Group, Global Marine, CTC, Harland & Wolff, McNulty, PMSS and Garrad Hassan - winning contracts both in domestic and export markets, with tremendous prospects for expansion. Given that some of the commentary over the last week has focused on the current dominance of overseas-based wind turbine manufacturers, it's worth noting how successful British firms are already in this field. And the Government is putting a major effort into expanding this sector. Perhaps I can just set out some of what we're doing.
The jobs plan
Under the Government's Low Carbon Industrial Strategy (http://tinyurl.com/nn5frc) and the £550m funding provided under it, the Government's support for the development of the UK offshore wind industry falls into four principal areas:
THE BOILER SCRAPPAGE SCHEME
Also last week the PM and Ed Miliband launched a national scheme to help 125,000 households upgrade their old and inefficient boilers. Adminstered by the Energy Saving Trust, the boiler scrappage scheme will provide a £400 voucher towards the cost of replacing a working G-rated boiler with either a modern A-rated one or a renewable heating system such as a biomass boiler or heat pump. Households which take advantage of the scheme will typically save £200 or more a year, and we estimate a total carbon saving of around 140,000 tCO2 pa. The scheme is expected to help secure around 250,000 jobs across tens of thousands of small businesses involved in boiler manufacture, sales and installation (most boilers installed in the UK are made in this country). The scheme has stimulated several of the energy companies and boiler manufacturers to add their own discounts on top of the Government's one, so the incentives to households are now even bigger. The EST has already had a huge number of calls enquiring about the scheme.
THE PRE-BUDGET REPORT
The Chancellor's pre-Budget Report on 10 December contained a number of significant low carbon measures (http://tinyurl.com/yjyjjkn):
In addition the Government took new measures to address fuel poverty and the needs of low income households, a particularly crucial part of our strategy:
GAS SUPPLIES
As you may have read, the National Grid has issued a number of Gas Balancing Alerts in the last two weeks. These ask suppliers both to provide more gas and to reduce demand in response to tight market conditions. The cause has been a combination of technical (weather-related) problems in some Norwegian fields with extremely high demand due to the cold weather. The market has responded well, supplying more gas as requested and increasing the use of coal-fired power (precisely why the Government is committed to ensuring new coal - with CCS - in the system). Contrary to some of the more alarmist claims being made, the market has plenty of gas (including in storage), as evidenced by the relatively small rise in gas prices even under these conditions. A very small number of companies with interruptible supplies had these cut off briefly last week, but this was due to the kind of contracts they had voluntarily entered into in return for lower prices; there was and is absolutely no threat to households or to the 99.99% of firms with standard contracts. The Government is of course working closely with National Grid and Ofgem to monitor the situation. And of course our low carbon strategy, including offshore wind and CCS, is designed to reduce the proportion of gas in our energy mix in the future.
FINALLY: IF THESE EMAILS ARE FORWARDED TO YOU…
…rather than coming direct from me, and you would like to be on the mailing list yourself, please do let me know (email Leon Martin at [email protected]). And of course I am always very pleased to receive reactions and responses from anyone.
With best wishes
Michael Jacobs
Michael Jacobs
Special Adviser to the Prime Minister
10 Downing St
London SW1A 2AA
May I wish you a very Happy New Year. I hope you had a good break over the holidays, and that it does not feel like a long time ago already.
My apologies that you have not heard anything from me for a while. The weeks before Christmas were dominated by the run up to Copenhagen and then the conference itself (and we also had a Pre-Budget Report). I am afraid there was just too much going on to find the time to write about it. Normal service will I hope now be resumed.
In the next few days I will send you an email about Copenhagen. I am conscious that there is still some uncertainty in many people's minds about what exactly happened at the conference (and why), what was agreed and where things go from here. I'd like the chance to convey the Prime Minister's and Government's view, which is optimistic both about the agreement itself and the progress that can be made this year.
Today however I wanted to focus on domestic policy. Last week saw a historic announcement on the development of offshore wind in the UK and I'd like to say something about that. The Government also launched our boiler scrappage scheme, and I will take the opportunity to cover the PBR and gas supplies as well.
OFFSHORE WIND: ROUND 3
On Friday the Prime Minister, Lord Mandelson and Ed Miliband joined the Crown Estate to announce the successful bidders for the nine 'Round 3' offshore wind zones. This is a very big deal indeed - the plans set out by the successful consortia would enable the generation of one quarter of the UK's total electricity needs, 32GW, by 2020. The UK already has more installed offshore wind capacity than any other country in the world, with windfarms currently operating or under construction taking this to over 1GW this year. A further 7GW is planned in Round 2; so up to 32GW from Round 3 represents a further huge expansion. It constitutes a total investment of around £75bn, with the installation of around 6,400 turbines, starting as early as 2014-15. Five of the nine sites are in the North Sea, with the others in the English Channel, Bristol Channel and Irish Sea. The consortia are a mix of UK-based and overseas firms. The full announcement, including the sites and consortia, is at http://www.decc.gov.uk/en/content/cms/news/pn10_004/pn10_004.aspx
At the launch event in London on Friday the PM was particularly gratified to hear the businesses belonging to the successful consortia, particularly the inward investors, praise the UK's policy framework for renewables, and for offshore wind in particular. The Government has worked hard to achieve this, with the extension of the Renewables Obligation, the 2 ROCs band for offshore wind introduced last year (until 2014), the introduction of the Planning Act and the reform of transmission access arrangements. But no-one in the Government is complacent about the need to continue work on all fronts.
Above all, as the PM said in his speech (http://tinyurl.com/yd4c8ze), the Government is determined to expand the UK-based supply chain for this industry. With Round 3, offshore wind has the potential to create 70,000 jobs in Britain by 2020. Based on Carbon Trust analysis, this includes around 14,000 jobs in the manufacture of the turbines themselves (not just the blades but components such as power converters, towers, gearboxes and cables); around 30,000 jobs in installation, operation and maintenance (including such things as foundations, cable laying, jack-up vessels, and substations); a further 25,000 in associated services (engineering consultancy, legal, financial, commercial operations, etc) and around 3,500 in research and development. In all these areas there are leading-edge British firms - examples include Converteam, Burntisland Fabrications, Welcon, Tees Alliance Group, JDR Cables, Skykon, PPG, David Brown, BGB Engineering, Subocean Group, Global Marine, CTC, Harland & Wolff, McNulty, PMSS and Garrad Hassan - winning contracts both in domestic and export markets, with tremendous prospects for expansion. Given that some of the commentary over the last week has focused on the current dominance of overseas-based wind turbine manufacturers, it's worth noting how successful British firms are already in this field. And the Government is putting a major effort into expanding this sector. Perhaps I can just set out some of what we're doing.
The jobs plan
Under the Government's Low Carbon Industrial Strategy (http://tinyurl.com/nn5frc) and the £550m funding provided under it, the Government's support for the development of the UK offshore wind industry falls into four principal areas:
- Up to £170m has been set aside to support the development of manufacturing capacity, with a major focus on inward investment. The sheer scale of UK ambition for offshore wind should make the UK a very attractive location for turbine and associated component manufacturing and the Government is in active discussion with a range of potential manufacturers from around the world, as well as British-based companies. Major efforts have gone into developing the UK's port facilities, which will be critical.
- We've placed a strong emphasis on supporting technological development. Over the last year we've awarded £15m of grants under the Low Carbon Energy Demonstration scheme to companies such as Clipper Windpower, Vestas (on the Isle of Wight), Siemens and Artemis Intelligent Power. Clipper for example are developing a new 10MW offshore wind turbine with the potential for 1500 manufacturing jobs in the North East. Two new awards were made on Friday, to Burntisland Fabrications for a new manufacturing process for turbine foundations (creating around 300 jobs in Fife), and Tees Alliance Group for the development of a state of the art tubular steel production facility (creating around 200 jobs on Teesside). At the same time the Government and the One North East RDA are funding a new £15m wind turbine blade test facility at the New and Renewable Energy Centre. This will be the largest of its kind in the world, enabling developers to test prototype blades up to 100m long.
- The Government is working with the Crown Estates and RDAs to encourage UK companies into the supply chain, holding a series of events around the country raising awareness of the business opportunities and seeking to tackle supply bottlenecks. In promoting a UK supply chain our new Office for Renewable Energy Deployment is drawing specifically on the lessons both of onshore wind and of the successful creation of a North Sea oil and gas industry.
- DECC and BIS are working with the businesses and Skills Councils to ensure that the training routes are in place to provide the skilled workers required for this industry - such as through the proposed new National Skills Academy for Power led by the electricity industry.
THE BOILER SCRAPPAGE SCHEME
Also last week the PM and Ed Miliband launched a national scheme to help 125,000 households upgrade their old and inefficient boilers. Adminstered by the Energy Saving Trust, the boiler scrappage scheme will provide a £400 voucher towards the cost of replacing a working G-rated boiler with either a modern A-rated one or a renewable heating system such as a biomass boiler or heat pump. Households which take advantage of the scheme will typically save £200 or more a year, and we estimate a total carbon saving of around 140,000 tCO2 pa. The scheme is expected to help secure around 250,000 jobs across tens of thousands of small businesses involved in boiler manufacture, sales and installation (most boilers installed in the UK are made in this country). The scheme has stimulated several of the energy companies and boiler manufacturers to add their own discounts on top of the Government's one, so the incentives to households are now even bigger. The EST has already had a huge number of calls enquiring about the scheme.
THE PRE-BUDGET REPORT
The Chancellor's pre-Budget Report on 10 December contained a number of significant low carbon measures (http://tinyurl.com/yjyjjkn):
- Confirmation that the Government would support four CCS demonstrations plants, not just the two previously decided. The next steps in the Government's CCS strategy are the anouncement of the successful bidders under the demonstration competition and the launch of our CCS industrial strategy, expected next month. The Energy Bill providing for the incentive scheme is now in Parliament.
- An additional £150m in support of the Low Carbon Industrial Strategy, taking the total spend on business growth in low carbon manufacturing and services to £550m.
- £90m put into a European Investment Bank fund to catalyse key low-carbon and energy infrastructure investments.
- Implementation of energy efficiency measures to cut energy bills in hospitals, schools, police forces and local and central government by 10% by 2012-13, saving £300m pa. The estimated total carbon saving over the lifetime of the measures is 4 million tCO2.
- Exempting those taking advantage of feed-in tariffs for microgeneration from income tax on any income earned. This provides an additional incentive of for example around £180pa for a household installing solar PV.
In addition the Government took new measures to address fuel poverty and the needs of low income households, a particularly crucial part of our strategy:
- Increasing the total value of the social price support which energy companies will be required to introduce under the Energy Bill from the present £150m to £300m by 2013-14 - which will give one million more vulnerable households discounts on their energy bills.
- An additional £150m for the Warm Front programme to help provide low-income and pensioner households with insulation and heating systems.
GAS SUPPLIES
As you may have read, the National Grid has issued a number of Gas Balancing Alerts in the last two weeks. These ask suppliers both to provide more gas and to reduce demand in response to tight market conditions. The cause has been a combination of technical (weather-related) problems in some Norwegian fields with extremely high demand due to the cold weather. The market has responded well, supplying more gas as requested and increasing the use of coal-fired power (precisely why the Government is committed to ensuring new coal - with CCS - in the system). Contrary to some of the more alarmist claims being made, the market has plenty of gas (including in storage), as evidenced by the relatively small rise in gas prices even under these conditions. A very small number of companies with interruptible supplies had these cut off briefly last week, but this was due to the kind of contracts they had voluntarily entered into in return for lower prices; there was and is absolutely no threat to households or to the 99.99% of firms with standard contracts. The Government is of course working closely with National Grid and Ofgem to monitor the situation. And of course our low carbon strategy, including offshore wind and CCS, is designed to reduce the proportion of gas in our energy mix in the future.
FINALLY: IF THESE EMAILS ARE FORWARDED TO YOU…
…rather than coming direct from me, and you would like to be on the mailing list yourself, please do let me know (email Leon Martin at [email protected]). And of course I am always very pleased to receive reactions and responses from anyone.
With best wishes
Michael Jacobs
Michael Jacobs
Special Adviser to the Prime Minister
10 Downing St
London SW1A 2AA
