The Barriers Holding Back Renewable Energy in Wales

Energy & Environment , 30th July 2021

Funding gaps, skills shortages, grid constraints: Barriers holding back renewable energy in Wales must be urgently overcome if environmental targets are to be met.

Clearer plans for job creation and ensuring communities benefit from the growth generated by renewable energy development, as well as overcoming infrastructure issues such as grid capacity, will be needed if Wales is to meet its renewable energy potential and maximise the opportunities offered by the shift to net zero.

These are among the key conclusions of a new report published by the Welsh Affairs Committee.

Wales could be a leader in renewable energy, with strengths in onshore and offshore wind, solar, wave and tidal energy, and significant new potential emerging in floating offshore wind. Despite this, a clear strategy for the renewable energy sector is missing, causing the Committee to recommend a specific ‘Ten Point Plan’ for Wales be developed and published this year.

This should be developed in tandem with a partnership between the UK and Welsh Governments to advance renewable energy. This includes upskilling the current workforce, with work being undertaken in advance of COP26 in November, and for the UK Government to address grid capacity issues with Ofgem to facilitate future renewable energy generation. The Committee also identified port infrastructure as an area requiring the attention of UK and Welsh Governments to realise the full potential of offshore renewable opportunities.

With the seabed getting busier, The Crown Estate should develop a new approach to optimise the environmental and economical potential of the seabed, working closely with developers to ensure adequate leasing rounds be offered on a regular basis. The Committee argues this would be essential for the development of offshore wind and wave and tidal projects.

A current funding gap between innovation funding and the Contracts for Difference (CfD) scheme risks holding back wave and tidal energy projects. The Committee argues that failure to address this funding gap would risk impacting development for a sector which could generate £4 billion to the UK economy. Further, the UK Government should explore re-introducing generation tariffs to the Smart Export Guarantee, building on the success of Feed-in Tariffs which attracted investment to small-scale renewable electricity generation.

The Committee believes that if the barriers holding back renewable energy are overcome, then there is significant potential for an interconnector given the renewable strengths of Wales, with the nation exporting energy rather than curtailing it. This could not only export renewable energy to the rest of the UK, but also further afield.

Chair of the Welsh Affairs Committee, Rt Hon Stephen Crabb MP, said:

“With the UK hosting COP26 in November, there has never been a more important moment to recognise the potential that exists in Wales for much greater renewable energy output. It is clear there is no shortage of ambition within Wales but we need to see a clearer strategy from UK Government if Wales is to capture all the opportunities that are emerging.

“Our Committee has identified constraints ranging from skills gaps to grid connection issues, and seabed licensing to funding disparities. Overcoming these hurdles will require the UK Government to work closely with the Welsh Government with urgency and purpose.”

Recommendations

The Welsh Affairs Committee’s recommendations are:

The Crown Estate should continue to work proactively with developers to ensure that adequate seabed leasing rounds be offered on a regular basis in the future. There should be alignment between timeframes of The Crown Estate for its leasing rounds and the timeframes which underpin developers’ investment decisions.
The UK and Welsh governments should explore mechanisms for more effectively distributing wealth generation from renewable energy projects to communities in Wales.
The UK Government must address the funding gap for emerging marine technologies or risk negatively impacting their development. UK
Treasury ministers, with Welsh Government ministers, should meet with representatives from the marine energy sector to investigate the feasibility of introducing Innovation Power Purchase Agreements.
The UK Government should explore re-introducing generation tariffs to the Smart Export Guarantee in order to adequately support small-scale renewable energy generation. The UK Government should examine bringing back a fixed tariff to incentivise further small-scale energy generation.
The UK Government needs to work with business stakeholders and the Welsh Government to develop a comprehensive strategy for upskilling the current workforce, leveraging new opportunities and tackling the barriers, including grid constraints, that currently threaten to undermine the potential gains from the shift to a net-zero economy. The UK Government should convene, prior to COP26, a high-level panel of stakeholders to begin work on a reskilling strategy.
A Wales specific Ten Point Plan should be developed that provides a detailed route-map and aspirations, including in terms of job numbers.
Parliamentary time should be set aside for this Wales specific plan to be debated by MPs, and be published by the end of the year.
The UK Government should maintain a close working relationship with the Welsh Government, particularly in regard to major challenges such a grid capacity and port infrastructure. Where renewable energy projects in Wales are under consideration, Welsh Government ministers should be invited to participate in the Ministerial Delivery Group.
Further to the UK Government's recent collaboration with the EU on a potential North Sea grid, the UK Government should consider further export from the Celtic Sea to the continent and the creation of a Celtic Sea Economic Zone.
To mitigate the risk of grid constraints hindering renewable energy development and generation, the UK Government must work in collaboration with Ofgem to plan anticipatory investment in Wales, so that the significant uplift in renewables generation which is likely to occur is not handicapped by our currently severe grid constraints.
The UK Government should make clear the likelihood of further funding of ports infrastructure in Wales to support offshore wind. Further port investment should be encouraged for Welsh ports, particularly the Celtic Sea ports, in any future funding Contracts for Difference rounds.
We urge the UK and Welsh governments to reach agreement, as soon as possible, on the funding arrangements for a freeport in Wales. If these discussions can be unblocked, the bidding process for a Welsh Freeport should place a heavy emphasis on renewable and net-zero considerations.
The UK and Welsh governments, as well as port operators, and energy companies with developments in Wales, should learn the lessons from the North East of England, where a clear strategy, focus, and public and private sector investment have led to the Port of Blyth becoming a hub for renewable energy development and jobs.