Llyr Gruffydd argues for the devolution of energy powers to the National Assembly

February 8th, 2014

Wales was once a world leader in carbon-based energy and we have the potential to be a world leader again – we are well placed to thrive from the increasing global demand for renewable energy.

Currently, Wales generates over 27,000 GWh of electricity and consumes less than 16,000 GWh. So we are already net-exporters. However, only 7.9 per cent of the electricity we generate is currently from renewable sources. Increasing that figure has to be a priority.

The potential of the wind industry in Wales is well documented and as illustrated by the chart below, our potential is significant compared to large swathes of Europe.

 

 

 

 

 

 

 

 

 

A recent report Economic Opportunities for Wales from Future Onshore Wind Development, produced by Cardiff Business School for  by RenewableUK Cymru, estimates that the current pipeline of onshore wind projects will generate £2.3 billion of GVA and over 2,000 full-time equivalent jobs per year.

Moreover, our 1,200 kilometres of coastline, our deep sea ports and our University expertise in both the north and the south make Welsh waters particularly valuable to the marine energy industry. In their 2012 report Turning the Tide: the economic significance of the Tidal Lagoon Swansea Bay, Max Munday and Calivin Jones, of Cardiff Business School’s Welsh Economy Research Unit, estimated it to be worth up to £3.7 billion to the UK economy by 2020.

To what extent this potential is realised, and more importantly, to what extent the people of Wales benefit from that potential is largely dependent on control being devolved to Wales. That is why our proposal to the second part of the Silk Commission’s work called for the full devolution of energy and the crown estate.

In its 2013 policy statement Energy Wales: A Low Carbon Transition the Welsh Government states:

“…we want to maximise the long-term economic benefits, and in particular the job creation potential for Wales… we want to ensure that communities benefit from energy infrastructure developments…we want to carefully plan and manage the relationship between energy development and our natural resources” .

Compare this with the Scottish Government’s 2011 Renewables Policy statement:

“The First Minister wants renewable sources to generate the equivalent of 100 per cent of Scotland’s gross annual electricity consumption by 2020. Similarly, a target has been set for renewables sources to provide the equivalent of 11 per cent of Scotland’s heat demand by 2020… The Government wants targets to be exceeded rather than merely met, and not to be viewed as a cap on what renewables can deliver.”

The comparison is stark. The pale and vague rhetoric of the Welsh Government’s statement is lacking in targets let alone ambition while the Scottish Government aims to source 100 per cent of its gross annual electricity consumption from renewables by 2020. Whilst this is undoubtedly regrettable, it is not surprising.

The Welsh Government is severely restricted in its ability to influence Wales’ energy mix or the expansion of the renewables sector since all consents relating to developments generating greater than 50 MW are non-devolved. As is said by Friends of the Earth in their submission to Part 2 of the Silk Commission, “Whitehall could scarcely be less interested in the development of renewable energy in Wales”.

The UK Government’s Department for Energy and Climate Change (DECC) has responsibility for meeting the EU Energy Directive targets, failure in which would lead to significant fines. Therefore, its focus is on generating as much renewable energy as possible in the shortest amount of time. Primarily this means offshore wind farms off the east coast of England, as this chart from the Guardian illustrates – the larger circles indicate bigger wind farms:

Plaid Cymru has called for all consenting arrangements to be devolved to the National Assembly without imposing any arbitrary limits on the generating capacity of individual developments. This will enable whatever party is governing in Wales to develop targets and strategies on how they will be achieved.

A Plaid Cymru government in 2016 would develop ambitious targets leading to 2035. These would include a Routemap and Action Plan, together with sub-targets for 2020 and for every five years thereafter leading towards 2035. The Routemap would set targets for each individual source of renewable energy, with the corresponding Action Plan detailing how we intend to reach those targets.

A nation of only three million people and a wealth of resources such as ours should realistically aim to be self-sufficient in renewable electricity. We are already more than self-sufficient but currently rely on non-renewable sources. But with the right tools and the necessary will and ambition we can realistically aim to be fully self-sufficient in renewable electricity by 2035.

Wales is a country rich in natural resources. As stated above, the current pipeline of onshore wind projects are estimated to add £2.3 billion to the Welsh economy between now and 2050 and create 2,000 full-time equivalent jobs per year. The economic potential of marine energy has also been estimated by the Cardiff Business School and Regeneris on behalf of the Welsh Government. Their report estimates that should 1GW of capacity be developed in the next two decades, it could support a total of £840 million of GVA and 24,000 person years from construction and installation and £20 million in GVA per annum and 440 full-time equivalent jobs over the operational period.

A 2011 report on Wales’ shale gas reserves has described them as potentially “colossal”. Another report, compiled by US consultants, RPS Group on behalf of Eden Energy  found that exploration licenses in south Wales alone could hold 34 trillion cubic feet of gas, of which 12.8 trillion cubic feet is classed as recoverable. The figure is more than twice that of previous estimates for shale gas anywhere in the United Kingdom and is estimated by the consultants to be worth up to £70 billion at 2011 market prices.

While Plaid Cymru has called for a moratorium on the practice of hydraulic fracturing or ‘fracking’ until it is proven to be safe, decisions on whether to grant exploitation rights to companies such as the Australian company, Eden Energy remain in the hands of Westminster politicians. We believe that Welsh resources should be in the hands of the people of Wales. Decisions on whether to exploit our resources should be made by those directly elected by the people of Wales and any profit made from that exploitation should benefit the people who live here.

The devolution of energy consenting would protect Wales from the unionist parties who are determined to exploit Wales’ resources once again with little benefit to the people of Wales. It would allow the governing party in the Senedd to include clauses in any awarded contracts obliging energy companies to commit to giving a proportion of the profit back to the Welsh Treasury.

Plaid Cymru has long called for community benefit clauses to be included in planning consents but the arbitrary 50MW limit on the Welsh Government’s competence, set by the Labour Party in the Government of Wales Act 2006, restricts the Welsh Government’s ability to do so on any contracts for projects of over 50MW.

Under a new Wales Act, with no upper limit on the Welsh Government’s competence over consenting, a Plaid Cymru government would enforce a robust system of community benefit clauses in contracts, ensuring local communities see direct benefit from energy projects in their area. Plaid Cymru’s autumn 2013 discussion paper An Energy Policy for Wales gave examples of good practice in this area, highlighting models of community ownership in Denmark where communities either pool resources to finance the purchasing, installation and maintenance of projects through loans or savings. Alternatively (and most commonly) individuals purchase shares in the project, with entitlement to a share of the annual revenue in proportion to their initial investment.

The latter model of cooperative ownership has also been adopted, to an extent, by the firm behind the tidal lagoon in Swansea Bay which has offered £2 million worth of shares to the local community. In Scotland, the Community and Renewable Energy Scheme set up by the Scottish Government enables communities to fund renewable energy projects and mitigates the risks involved with such projects by funding pre-planning costs. Loans would be repaid with interest but written off if the application is unsuccessful. Establishing a similar scheme in Wales would be a priority for a Plaid Cymru government.

Wales’ strengths lie in its resources. They are our most valuable assets but they are currently being exploited by private-sector companies in the interest of profit. Figures analysed by Plaid Cymru, and covered in the press in January revealed that energy bills have risen three times faster than wages since 2008. This follows recent announcements by the so-called ‘Big Six’ energy companies that they would be putting their prices up by an average 6.8 per cent.

Despite the Big Six blaming these price hikes on external factors such as wholesale prices and green levies, their profits rose 77 per cent last year to £1.2 billion. Estimates by Ofgem show that they are likely to rise again over 2013 to £2 billion. The average profit energy firms make from each household has more than tripled from £30 in 2011 to £105 in 2013. Considering that Wales, a country rich in resources and a net-exporter of electricity, is forced to pay more for the electricity it uses than England or Scotland, it is clear that situation is working against the interest of the people of Wales.

A Plaid Cymru government after 2016 would reform the energy sector, and re-build it around a new arm’s length, publicly-owned, not-for-distributable-profit energy company – Ynni Cymru.

State-controlled energy is not unfamiliar to the market or to the people of the United Kingdom and there are countless examples of state-controlled companies operating across the world. The most recognisable of which to Welsh consumers is the French company, EDF in which the French state holds an 85 per cent equity stake. There are a number of examples of wholly state-owned companies such as Vattenfall in Sweden, Statkraft in Norway and even Saudi Aramco in Saudi Arabia and Masdar in Abu Dhabi.

The company’s shareholders would be the people of Wales and any profits made by the company would be used either to subsidise bills for Welsh consumers or reinvested into Wales’ energy infrastructure to minimise leakage and maximise efficiency.

There is a growing need to upgrade Wales’ energy infrastructure and with the full devolution of the energy portfolio, a Plaid Cymru government would invest in a Welsh National Grid. The lack of a connection between the north and south of the country was highlighted in Plaid Cymru’s discussion paper, ‘An Energy Policy for Wales’ and Plaid Cymru would make connecting Wales a priority. Our 2035 Routemap will be no good if we are forced to export our electricity to other parts of the UK before we can use it ourselves. Welsh energy, generated from Welsh resources should be consumed by Welsh consumers first with any excess exported to other countries.

Ultimately, Ynni Cymru would form a new foundation for Wales’ energy sector. The tier of profits would be taken out of consumers’ energy bills, reducing the cost of energy to Welsh consumers, or be used to facilitate the expansion and development of Wales’ energy infrastructure while also making Wales an attractive and economic place to do business.

Wales is a country rich in natural resources but the current lack of powers restricts the Welsh Government from exploiting them to their full potential. The arbitrary limit on the Welsh Government’s competence, set by the previous Labour UK Government at 50MW, has severely hampered the Welsh Government’s manoeuvrability and ability to form a long-term vision for Wales.

Crucially, it has held Wales back in pursuing the ambition of becoming a world leader in renewable energy and has allowed Scotland to storm ahead, developing itself as a beacon of success in the wind sector and it is imperative that we do not allow ourselves to fall behind once again in the marine and other sectors.

The opportunity exists for Wales to lead the way in marine technology with our University expertise and our wind and tide rich coastlines. To be able to realise the full economic potential of these assets, the Welsh Government must be given the necessary powers. Early development of technology will allow us to build supply chains. These would enable us to maximise the economic potential of our own resources, and also benefit from other countries seeking our expertise.

Our resources also present opportunities to fundamentally change the way we consume energy. Bills need not be so high. Our publicly-owned energy model is well-recognised across Europe and the world and could offer a sustainable solution to high energy prices. It could also facilitate the expansion of our energy infrastructure, connecting all corners of Wales, allowing Welsh energy to be used by Welsh consumers before it is transported to other countries.

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Llyr Gruffydd is AM for North Wales and Plaid Cymru Shadow Minister for Energy.

3 Responses to:“Wales needs its own company to promote renewables”

  1. Colin Miles says:

    Until an efficient means of storing energy is developed there is no way in which any country can be 100% renewable, or anywhere near it. Apart from this there are big questions over the long-term reliability of wind turbines and the cost of maintenance. And the recent proposals in Spain regarding the withdrawals of subsidies is also likely to have a significant effect in the attitudes and costs in other countries as well.

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  2. Keith Jones says:

    I agree we need to remove this arbitrary 50MW hurdle and also to look at a better community benefit schemes on those areas directly impacted by infrastructure but also wider areas. Small communities who are currently gaining huge incomes for wind energy and don’t know what to do with the windfall and there are many. meanwhile neighbouring communities fall deeper and deeper into fuel poverty…its a bit silly!
    As for centralisation. I am not a fan when the government play at commercial development. “they don’t do it very well in the UK inc Wales” What is needed is a root and branch shift. In Scotland yes they do have a strategy which is good but actually their big success is in their enabling role.
    Even at <50MW developing energy in Wales it is a protracted, frustrating, expensive undertaking. The governments own agencies and local authorities of every colour are not talking to each other and creating confusion. It would be good to simply have a transparent efficient system at below 50MW which could then grow. Strategy, enabling structures, coordination, resources…its not there at small to medium energy systems and then we are talking of GW!. Yes have Ynni Cymru but let it sort the mess we are in now or we are in danger of building our renewable energy power station on sand. There are also plenty of examples of this role out in the world! We were leaders in energy but this did not come about through centralised ownership. We have some stunning companies which could grow in this sector but not with the current culture of control in Wales. The irony is that these companies are opening offices in Scotland and not because Scotland have extra powers but its easier to do business there because of clarity or purpose with all their agencies and associated organisations.

    I work in renewable energy development across all technologies and also work outside Wales. Things are easier over the border I'm afraid. The irony is that all the expertise for development is in Cymru already but the oil in the machine (Gov agencies and others) is full of grit.

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  3. Nic Wheeler says:

    Kieth is quite right. I remember promoting tidal energy 12 years ago through the Sustainable Development Fund with theoretical and practical demonstration projects in the Haven here in Pembs – the WDA didn’t want to know, and WG was as bad – the company concerned had to go outside Wales to Scotland to develop the project, and now, ten years later, they are back with a trial array in Ramsey Sound! A wasted decade when Wales could have been in the forefront of both UK and European technology, with manufacturing spin offs, and power already being delivered. Mind you, we still haven’t cracked how to feed significant amounts of power into the main grid from dispersed generating sources – the current line to Ramsey Sound is 11kv single phase!

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