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Andrew Davies, Minister for Economic Development

A major public debate is taking place on energy following publication of the Cabinet Office report - Energy 2050.  The Assembly Government has the opportunity to take part in this Review and I want to encourage all in Wales to take every opportunity to address the big issues raised. Our Economic Development Committee has already embarked on this process with the  launch of its consultation report on Renewable Energy last week.

At this stage, I want to put on record my initial reactions to the UK-wide Review and to identify some of the key issues and challenges for Wales on which we need to reflect further

Dealing with human-induced global warming will be one of the world’s biggest challenges of this century.

Reducing the emission of greenhouse gases therefore has a strong economic, humanitarian and moral imperative and must be the main focus of our energy policy.

Action must be world-wide.  But each country has to play its part. Wales’s geography, climate and manufacturing base, when combined with the Assembly’s sustainable development duty, provides us with the opportunity to play our full part. Our economic development strategy, “A Winning Wales”, shows the way against the background of our Plan for Wales and its global clean energy showcase ambitions.

The Way Forward

First, the opportunities presented by energy efficiency.

If we are to achieve significant targets such as those suggested by Energy 2050 - a 20% improvement in energy efficiency by 2010, and a further 20% by 2020 - we need a step change in the initiatives aimed at increasing the awareness of the importance of energy efficiency in all sectors of our society.  

There are also long-term opportunities for the large-scale commercial development of a wide range of domestic level technologies, such as micro-generation, combined heat and power and photovoltaic solar energy systems which will enable us to replace our central heating boilers and produce electricity in our own homes.

There are, however, complicated institutional, commercial, cultural and technological issues.  So, as a first step, we need to consider urgently the value of setting up, perhaps with Structural Funds support, a “low carbon technology” internet portal which will act as a focal point for debate in Wales.

In addition, we will continue to work closely with local authorities and other partners in our efforts to improve the energy efficiency of our housing stock.  We can do this through programmes such as the Home Energy Efficiency Scheme and achievement of the housing quality standard for social housing by 2012.

Second, we need to develop a clear framework for taking sensible decisions on further investment in renewables, recognising that important balances need to be struck and that difficult decisions will be needed.  We mustn’t flinch from taking them once we are confident that the framework is a robust one.  Because of global warming we cannot avoid our sustainable development duties.

I am conscious that of all the renewables, wind power is commercially viable but can have a visual impact on high quality landscape. Currently we have around 350 wind turbines and 12 major wind farms.   On the basis of this we are already punching well above our weight with about 40% of UK installed capacity being located in Wales.  

As I said when we debated wind energy in February we must proceed sensitively with on-shore developments in the least problematic locations, preferably with strong community support.  I would also like to see the possibility of repowering our existing windfarms with the latest largest turbines extensively explored; we shall shortly be commissioning work to look at this further.  

For off-shore installations, we welcome the progress which is being made for proposals in Wales and we must work with DTI to provide a favourable development framework.  

Biomass also has the potential to be of particular interest to Wales..   However, the way forward is not clear agriculturally, technologically or commercially.  This is why Carwyn Jones, Assembly Minister for Rural Affairs has set up the woodland development and biomass strategy group.   This team is due to report in the early summer and we look forward to it identifying beneficial and feasible ways of developing this sector for the benefit of the rural economies of Wales.

Our extensive coastline and estuaries, provides a wealth of potential for tidal stream, tidal barrage and possibly wave power technologies to be developed. at a price.   If the global need to bring these potential schemes on stream does develop, then Wales can provide the locations. This includes, in theory the River Severn with its potential to produce up to 8000MW of electricity if a major barrage were thought desirable. But we recognise that a great deal of in-depth reflection and consideration of the environmental and other major ramifications are associated with such a significant project.

As you are aware, we have held discussions with DTI on the possibility of transferring the legal power to the Assembly to consent large power stations (that is, above 50MW). These discussions are continuing;  but it is too early to give any indication of progress.

Third, we need to give serious weight to the views of our communities and to community solutions for generating clean energy on a human scale.

Our new planning policies and associated guidance reflect the importance of minimising global warming and other environmental consequences. But it must also enable the generation of clean energy in a way which is acceptable to the communities where the plants are located.  

Sue Essex, Minister for the Environment,  is very conscious of the importance of this issue.  She attaches particular importance to developing an integrated policy approach and gaining the benefits from better relationships between developers, local authorities, community groups and our economic development and environmental agencies.   The redrafting group for the technical guidance note on renewable energies (TAN8) is already demonstrating the greater willingness of these parties to engage in a stronger policy dialogue.

More needs to be done under our Structural  Funds programmes to ensure that strong clean energy projects get the support they deserve.  I also look forward to the new experimental European Innovative Actions Structural Fund programme in Wales providing considerable insight into new ways forward..

Finally, while energy policy will include a focus on efficiency improvements; in stimulating  more combined heat and power systems, and developing the renewables option, we must not forget that now and for some considerable time, our main electricity needs will be supplied from gas, coal and nuclear power stations.  

At present renewable sources only supply around 2.5% of the electricity used in Wales. Even if for example, we had say a further 1000MW of intermittent renewables capacity in Wales, this is only equivalent to replacing a 300 or 400 MW conventional power station which operates continuously.

We have an installed capacity of around 1500MW of coal, 1000MW of nuclear, 2500MW of gas plants, as well as major pumped storage stations (capable of 2000MW of rapid power production) at  Dinorwic and Ffestiniog.   All these operations play a very important part in our economy, as do the two oil refineries in Milford Haven in respect of conventional transport fuels.   Therefore we must ensure that our short and medium term policies reflect the importance of this level of conventional baseload provision.

We consume about 50 Terrawatt hours per year of gas. We have initiatives such as Baglan Energy Park which is beginning to demonstrate the very positive interaction between the world’s highest efficiency gas power station and a dynamic industrial/business park.  

A gas transmission infrastructure covering all  Wales is increasing in importance. I want to see more attention paid to the possibilities of using Objective 1 funding to extend the current network.  

At the UK level, there is a growing need for alternative means of importing gas other than by pipeline.   In particular, liquefied natural gas  terminals seem to have good prospects. And, in Milford Haven, we have one of the UK’s best sites for such a project.

Security of supply is essential, and in the medium term, we could be at risk from an over dependence on gas. Coal is still a very important part of the South Wales economy.  But, if it is to play a significant part in our energy future, we must move to  cleaner ways of using this resource.   There would be global advantages in establishing clean coal technologies in Wales.  

In the short term, coal-burning power stations such as Aberthaw should consider investing in emissions-reducing  technologies such as flue gas desulpherisation and super-critical steam turbine equipment.  These technologies would also provide improved prospects for our coal extraction industry, including Tower Colliery, which is one of our entrepreneurial flagships.  

In the longer term, our history reminds us, that we sit on enormous reserves of coal, and trapped within that resource, copious quantities of methane.   Much more should be done to exploit disused coal mine methane and I suspect, in the longer-term, underground coal seam gasification could be a possibility.  

All coal projects, whether operating current stations, building new gasification stations or exploiting in-situ reserves, need to be taken forward in a way which takes account the long term possibility of underground carbon dioxide sequestration. But much more research needs to be carried out to assess properly the very long-term consequences of sequestration.

On nuclear, Energy 2050 suggests that the option for expanding electricity production from these sources should be kept open in case renewables do not live up to their potential.  But the Report recommends no major new initiatives at this time other than starting an informed public debate on the issues, including the important but difficult issue of handling radioactive waste materials and maintaining our skills base. Clearly the Assembly will need to participate fully in this debate, starting with the  consultation paper on radioactive waste management.

As for Transport, I echo Energy 2050’s call for step changes in vehicle efficiency, with targets for 20% improvement by 2010 and a further 20% in the following decade.  The transport sector is likely to remain oil-based until at least 2020, although prospective advances in vehicle technology hold out the possibility of significant reductions in fuel use.

The potential long term requirement for significant CO2 emissions reductions from the transport sector, combined with the possibility that oil will become scarcer, raise the need to develop alternative fuels.

The UK Government’s consultation paper “Powering Future Vehicles” sets out the issues well.  We are contributing directly to this debate to ensure that Welsh interests are reflected.  

Our transport and economic development policies will need to take account of the importance of transport fuel switching.  For the medium to long term there will be good prospects for hybrid and fuel cell vehicles, though the costs are currently high. In Wales, we want to play our part by supporting local demonstration and development projects, as we are already doing with initiatives such as Powershift – Gwynedd LPG.

Conclusion

The importance of energy to our way of life cannot be over stated.  

I, and my Cabinet colleagues are determined that the Assembly Government and its agencies will play their full part in rising to the challenge of a clean energy future, whether by finding innovative ways to promote energy efficiency or working in partnership with all parties to:

  • maximise acceptable on and off shore wind farm developments;
  • fully exploit biomass opportunities for  the benefit of our rural economy;
  •  ensure we become a world leader in marine  and fuel cell energy technologies with long term potential; and
  • seize mainstream gas and coal opportunities.

I urge us all to engage constructively in the massive consultation that will shortly be underway and to ensure that Wales’ voice is heard.  I am certain that the Economic Development Committee’s review of energy policy will help me and my Cabinet colleagues to contribute effectively to this debate.