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The Guardian - UK

Guardian roundtable: Can green energy power on?

When Chris Heaton-Harris wrote to David Cameron in February with 100 fellow Tory MPs calling for an end to subsidies for onshore wind power, he lit the touchpaper on a year of battling over the role green energy should play in the UK.

The feuding saw a summer fight over how much subsidies for wind should be cut by (won by Lib Dem energy secretary Ed Davey in wind's favour), warnings from the heads of renewable energy companies that political uncertainty is putting at risk millions in investment, and Cameron rejecting Heaton-Harris's demand.

The row culminated at the end of October in front-page newspaper stories with the newly installed Conservative energy minister, John Hayes, saying there was no need for more onshore turbines in the UK, and "enough is enough". Hours later, Davey admonished Hayes and said his views were not government policy, adding: "There are no targets – or caps – for individual renewable technologies such as onshore wind."

But behind the warring headlines, the renewable energy sector has quietly been getting on with business. Wind energy grew by 25% between June 2011 and September 2012, as long-planned windfarms came online, and the first phase of what is expected to become the world's biggest offshore windfarm – the London Array – started providing power to the grid at the end of October.

Against this backdrop, leading figures from industry, politics and campaigning came together recently for a roundtable organised by the Guardian, in association with E.ON, to debate whether renewable energy is "fit for the future". To encourage a frank discussion, the meeting took place under the Chatham House rule, allowing all participants to speak without attribution.

The need for a better story to tell about the benefits of renewables was high on attendees' minds. "It needs a narrative that is clear, that has an end point, a journey that we can all take and understand. Currently, it's about turbines in national parks," said one. "We cannot sell enough the big industrial story this industry has to deliver."

Government splits

Mixed messages from the coalition did not help that attempt to weave a positive narrative, added one. "I think the government needs to have a common position which they stand behind – which they don't have at the moment, obviously."

The split between Davey and Hayes was cited by several, as well as disagreements between the Treasury and Department of Energy and Climate Change (Decc). "I think it was a disaster that David Cameron put John Hayes into Decc," said one. "The signal that sends out to the investors and to the public at large about this being the future ... is massively conflicted in terms of messages."

One panellist disagreed, and said there had been attempts to get the message out on the benefits of renewable sources, such as energy security and fuel prices, but an unsympathetic right-wing press was the problem. "We have been working on a new narrative, people who are expert at formulating these messages. Our shortcoming as an industry isn't to do with the narrative, it's to do with the communication channels and the difficulty we face on getting those messages through."

However, there was near unanimous agreement that more long-term certainty from government – in terms of a unified message, policies and the regulatory environment – was crucial to bring more jobs to the UK, drive down the cost of renewable energy and bring energy customers along to share those savings.

"Fundamentally what we need is a long- term stable framework. We need that certainty," said one panellist. While the "big stuff" would hopefully be covered by the energy bill that was due to be published in parliament in late November, they said, certainty was also needed for the "small stuff" for the public, such as the renewable heat incentive – a plan to pay householders to generate heat from green sources including solar thermal systems on their roofs and biomass boilers running on wood.

"If you really want this industry to take off, it's looking for long-term certainty," said one attendee, who added that political certainty was essential for bringing down the cost of renewable energy for industry and consumers.

Currently, with the exception of onshore wind, renewable sources of electricity are generally more expensive than conventional fossil fuel ones. E.ON is one of the energy firms that believes it can cut costs, saying it aims to bring down the cost of offshore wind by 40% by 2015, despite one panellist saying that was unlikely due to "deeper water, bigger ships, bigger turbines".

It is not just the UK that needs to be clearer for the sector, said another. "Those messages about the need for clarity, and political messaging being unified, are just as important across the whole of Europe as well as UK. A lot of the complexity that we have to build into UK policy is a result of the fact we don't have an effective EU-wide policy."

All this, one expert said, added up to increasing risk for those looking at investing in renewable energy in the UK, noting the "uncertainty" created by possible political or regulatory changes. This ultimately makes renewable energy a complex investment compared to, say, private equity or the bond market, the expert added.

Echoing this point, another said: "People talk a lot about the need for something like more than £100bn investment in energy sectors over next decade to decarbonise the grid and keep the lights on ... That money is out there and a decent portion is going to be invested somewhere in the world in clean energy. The question is whether it's invested here [in the UK]. We need more clarity and certainty about policy."

One panellist, who called on Cameron to "reassert his authority on this agenda", said: "A massive amount is at stake, tens of billions of pounds of investment that is or is not going to flow into this country for renewables."

A letter to Davey and chancellor George Osborne in October, signed by the heads of companies including Alstom UK, Areva, Siemens and Vestas, warned that the lack of clarity and increasing "level of political risk in the UK" was causing them to reassess whether to invest hundreds of millions of pounds in the UK.

In June, Vestas scrapped plans to build a wind-turbine factory in Kent without citing why, though analysts highlighted uncertainty over the government's energy reforms. Other investments are going ahead, however, such as a Siemens wind turbine factory in Hull [see page one] and Spanish wind giant Gamesa's £125m offshore plant at the port of Leith.

One question hanging over the renewable sector's "fitness" was its ability to finance the thousands of new wind turbines due to be built in the UK in coming years. On this, most panellists were cautiously upbeat, though there was a feeling that the debate on financing was often absent or not sufficiently "focused" in the UK.

Finding investors

"We need new investors, we need new equity. We see the capital is out there. There is appetite for these sort of [renewable energy] projects. We have to develop the right sort of projects in terms of risk profile, so financial investors can buy into that," said one panellist.

But the panellist added: "There are only a few companies that have an A class [credit] rating left, many have BBB, which means you can't bring more debt to your balance sheet. If then you can't attract pension funds or sovereign funds, you will not be able to realise the pipeline of projects."

The UK government did receive some praise on financing, with one attendee saying: "You've [the UK] been quite proactive in engaging foreign investors. We've been invited to various things in the UK to attract us. That's positive."

But a government warring on energy policy through headlines also fed into the finance issue. "The challenge of getting money out of markets and not just off balance sheets is one of the reasons political will and mood music is so important," said one participant.

"Whenever a news story comes out, I get a UK CEO or director of UK relations saying 'I've been into see whatever government minister' and they say in private, 'Don't worry, we're going in the same direction.' But they then have to ring Paris or Mumbai, and they can't convince their head office."

Ultimately, more certainty is needed to help not just the renewable sector, but the British public, according to one of the panel. "We've got to get through to departments and MPs, every time you do a wobble, that's going to put another £10 on [householders'] bills."

Debate on policy

February 2012
101 Tory MPs write letter to David Cameron calling for end to onshore wind subsidies

Heads of wind companies including Vestas and GE warn investments could be put on hold

David Cameron defends plans for new windfarms

May
Government publishes draft energy ill, described as biggest energy market reforms in two decades

July
The Department of Energy an d Climate Change, led by Lib Dem energy secretary Ed Davey, triumphs over the Treasury in a row over how much to cut wind power subsidies – a 10% cut is instituted rather than the 25% the Treasury wants

September
Tory MP John Hayes, a vocal opponent of wind power, replaces the widely respected Charles Hendry as energy minister

Davey warns Tory "Tea Party tendency" is putting green jobs at risk

October
Hayes sparks bitter row by telling newspapers the UK needs no more onshore wind turbines as it is already "peppered" with them. Hayes was due to give the remarks in a speech but was vetoed by Davey, who later said Hayes's views were not government policy

November
Government published long-awaited energy bill, two years after launching consultation on reforms