Wind is the new oil and the North Sea will be the new Gulf of Arabia. As the banking sector grinds to a halt and the real economy stutters gloomily towards recession, wind power is a rare beacon of optimism.
The UK has overtaken Denmark to become the world leader for offshore wind energy, the Prime Minister told the British Wind Energy Association (BWEA) conference in London yesterday. And the latest batch of turbines installed at the Whitelee onshore farm, being built by ScottishPower, has taken the UK's total installed capacity past three gigawatts (GW), enough to power 1.5 million homes.
"It is the coming of age of the renewables industry," Gordon Brown said. "We have known for a long time that Britain has the best wind and wave resources in Europe. Over the next 12 years, the North Sea will become to offshore wind what the Gulf of Arabia is to oil production."
Wind is central to green targets for renewable energy generation and ensuring security of supply. While nuclear power and clean technologies like carbon capture and storage will have a role to play, both are too long term to help meet the most immediate targets in 2010 and 2020. There are now enough wind farm developments on the stocks for 10 per cent of electricity to be generated from renewable resources by 2010 as planned, assuming building proceeds as intended. But the 2020 target for 15 per cent of all energy, or around one-third of UK electricity, to be renewable requires wind-power generation to soar by a factor of 10, from today's proud 3GW triumph.
The implications for the wind industry are enormous. Tom Delay, the chief executive of the Carbon Trust, said: "The UK has an amazing opportunity not just to lead the world but to be the dominant global player. By 2020 the UK market could represent almost half of the global market for offshore wind power."
The UK wind sector is already full of superlatives. Centrica's Lynn and Inner Dowsing development, off the coast of Skegness, Lincolnshire, is the biggest single offshore development anywhere in the world.
The proposed London Array is bigger still and once completed will generate enough electricity to power a quarter of the homes in Greater London. The pace of development is also accelerating. While the first GW of capacity took 14 years to come on stream, the nest two were up and running in just 20 months. There are 179 onshore farms online today, and another 34 under construction. Offshore, the UK has seven farms in operation, with another eight under construction. To help things along, the Carbon Trust has signed a £30m five-year deal with five international energy companies – RWE Innogy, Airtricity, ScottishPower Renewables, StatoilHydro and Dong Energy – to help tackle the rising cost of building offshore farms.
But, even with the Prime Minister's gushing support, there are major hurdles to expansion of the UK industry. One is the planning process. Centrica announced yesterday that its proposed Lincolnshire development – a 250MW scheme eight kilometres off the east coast – has been given the go-ahead. But such success is relatively rare.
Since January 2006, only 54 per cent of 167 applications to build onshore farms have received consent, a far cry from the 71 per cent approval rate for other major developments, such as housing, retail and general industrial. Even when successful, the process is long and slow. The average timespan from submission to decision is now pushing two years, and only 7 per cent of applications are determined within the statutory 16-week target, compared with 71 per cent overall.
Charles Anglin, from the BWEA, said: "It is not very sexy, but speeding up the planning process will make the difference to ensuring developments go ahead in the time needed." Another major issue is the UK's aging electricity grid system. Not only is the overall capacity insufficient – the network was designed to transmit 75GW of power, when by 2020 it will need to handle 120GW – but it is no longer appropriately configured. The existing infrastructure was built around large central power plants, rather than the North Scottish, Welsh and off shore locations favoured by the wind sector. The cost and complexity of building transmission capacity out to remote locations are significant, and can take up to 10 years.
Alongside the vagueries of the planning process, and the logistical issues of connecting to the grid, questions over long-term political support for the nascent sector are denting investor confidence and having a material impact on speed of development. When the current incentive system, centred on Renewables Obligations, was created in 2002, there was an immediate spike in wind farm development projects. But without a commitment to extend the scheme beyond 2027, the economic viability of such long-term infrastructure investments is less certain, and in 2007, planning applications were only half their 2004 level. Peter Osbaldstone, the manager of European gas and power research at Wood Mackenzie, said: "The incentive mechanism is a top priority for government. These are long-term investments and developers want a degree of certainty around their level of returns for up to 25 years."
Without certainty for investors, the UK will lose out to European rivals. "If the incentives are better elsewhere then major investors will not come to the UK," Mr Osbaldstone said.
Missing out British firms playing catch up
Wind power will become a major industry, worth tens of billions of pounds and employing tens of thousands of people, if the UK is to meet the Government's energy targets.
The Prime Minister predicted yesterday that the market for renewable energy sources would hit £100bn within a decade, creating up to 160,000 jobs. Bain & Company, an independent research group, estimates investment of £39bn in wind alone, with the creation of 60,000 jobs.
However, there is currently barely an industry at all. The wind sector employs only 5,000 people, and has only one turbine factory, on the Isle of Wight, run by Vestas, a Danish company. Not only do Germany, Denmark and Spain have a much higher installed capacity – accounting for 70 per cent of EU's 57GW total – but they have also created major industries, including industrial clusters for turbine manufacture, employing more than 133,000.
The North-east is touted as a good site for similar clusters. Great Yarmouth and Lowestoft, in Suffolk, are also possibilities. But, says Gordon Edge, from the British Wind Energy Association, the Government needs to take the lead, and work on bringing in the major international manufacturers.
The appetite amongst potential suppliers is already there. Clive Snowden, the chief executive of Umeco, which makes material for aircraft wings as well as turbine blades said: "Wind is a great market over the next 15-20 years and if it gets big enough there's a likelihood we would have our own manufacturing capacity here."