Time and Tide – Renewable Energy and the Post-Covid Recovery

During his campaign speeches in 1959 and 1960, John F Kennedy would underline the positive nature of his approach by pointing out that in Chinese the word for ‘crisis’ comprises two characters – one representing ‘danger’ and the other ‘opportunity’. 

Though incorrect, it subsequently become a popular trope in Western culture and oft-cited to encourage the endeavour to find or create positive outcomes from adverse circumstances. 

In reality, the character misidentified as ‘opportunity’ actually means something more like ‘change point’ and there is a growing consensus that the Covid-19 pandemic represents a change point for our economy and society.

Over the past few months, as the UK Government has been focusing on the immediate response to the crisis, Parliamentary Committees have been calling for evidence on the post-Covid recovery.  This includes The Business, Energy and Industrial Strategy Committee’s Post-Pandemic Economic Growth inquiry  (submission deadline 1 September) and the Environmental Audit Committee’s Greening the Post-Covid Recovery inquiry (submission deadline 14 August).

There is no specific focus on the issue of renewable energy, but the broad scope of these inquiries provide an opportunity for submissions focusing on this sector – and there is certainly reason to do so. 

In a joint letter to the Chancellor of the Exchequer on 26 June, the Committee Chairs stated that both the inquiries “will look at how to align our post-pandemic economic stimulus package with the UK’s climate and environment goals.” Further, whilst renewable energy has often been conceived of as primarily being driven by an environmental imperative, the Covid-19 pandemic has – according to Dr Charles Donovan (Executive Director of the Centre for Climate Finance and Investment at London’s Imperial College Business School) – given it an added economic imperative. 

Dr Donovan’s observations were reported in aForbes article by David Vetter, published in March. In it, he contends that reliance on fossil fuels has left countries more exposed to the economic shock of global crises like coronavirus, and that governments should look to renewable energy as a means of reducing such risk.

Dr Donovan states: “We are now seeing the downsides of the choices we’ve made about the kind of energy economy that we have.” 

He contends that sustainable energy sources such as wind, solar, and tidal power ought to be more attractive to investors and policy makers on a purely economic basis. Guarding against further risks requires not just short-term cash injections but ‘joined-up thinking’.   

“This is about building an energy infrastructure that creates resilience.” 

Of course, it could be argued that the issue of climate change and sustainable and efficient energy production is already high on the public and governmental agenda. However, whilst significant progress has been made, in relation to proportion of energy generated from renewable sources the UK ranked 24th out of the 28 Member States in the EU in 2018. There is clearly a strong case to be made that the UK needs to reinvigorate its focus on renewable energy – and consideration around post-covid strategy provides an ideal opportunity.

Through the prism of environment, economy and resilience there is a clear need for a review of strategy – and tidal energy needs to be an essential part of that consideration. 

Given the UK energy sector’s engineering expertise and abundance of tidal resource it is reasonable to wonder why we are not taking a leading role in tidal energy to the same extent we have done in offshore wind.  

In fact, the UK has played a significant role in the development of tidal technology and with the right investment strategy and long-term commitment could potentially be a world leader – but as an article published by the Institute of Mechanical Engineers UK missing opportunity as it swims against tidal energy (https://www.imeche.org/news/news-article/feature-uk-missing-opportunity-as-it-swims-against-tidal-energy) contends, that opportunity is slipping away. 

It is, as one would suspect, in part about funding. Until 2016, 100MW of energy capacity was ring-fenced for more expensive but less developed resources such as tidal or wave. But that approach ended and the main UK government renewables funding mechanism – Contract for Difference (CfD) – commenced awarding all contracts on the basis of cost. Tidal energy projects could not compete with offshore wind energy projects on price. 

As my colleague Ian Lucas, former Minister for Business and Regulatory Reform from 2009-2010, observes , there is an irony to the fact that tidal energy schemes are struggling against offshore wind projects for funding, as a decade ago offshore wind was itself perceived as a relatively new, untested and relatively expensive technology – but he wanted to explore ways in which it could be fostered.  

Ten years later, offshore wind is a UK success story, approaching a 10% share of energy generation, helping to meet environmental and climate commitments, creating skilled jobs, and with a dedicated Sector Deal between industry and government.  

Ian suggests there needs to be a similar longer term view taken of the potential for tidal projects, including an examination of the approaches to supporting the offshore wind technologies to see what policies and support mechanisms might be usefully replicated, and an assessment of how energy suppliers might work jointly with producers to create long-term solutions.  

There have been demands from the sector, as well as some MPs, to reform the funding mechanism, including calls for a dedicated pot for wave and tidal projects  In March 2020 the Department for Business, Energy and Industrial Strategy issued a consultation on proposed amendments to CfD – including a proposal to create a separate pot 3 for offshore wind, providing the opportunity for tidal and other technologies to compete against each other in pot 2. 

Responses to the consultation are still being assessed, and the outcome will no doubt also be informed by the long-awaited Energy White Paper. 

However, in addition to funding, what tidal energy also needs is a clear policy commitment – as Andrew Scott of Orbital Marine Power says in the Institute of Mechanical Engineers article “Long-term strategic initiatives will require huge investments from supply-chain private-sector companies, and in that context consistency of signal from government and regulators is very, very important.” 

The International Energy Agency’s Energy Technology Perspective forecast that the global market for ocean energy technology will be worth £76 billion by 2050.  Notwithstanding the environmental and economic resilience cases, the UK Government may also be encouraged to consider whether part of its post-Covid recovery strategy will be to place the UK renewable energy sector in a prime position to lead this market. 

We are at a ‘change point’, and the UK tidal energy sector needs to grasp this opportunity to make its case.