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The Northwest Development Agency manages all operations from its Headquarters at: PO Box 37 Renaissance House Centre Park Warrington WA1 1XB Tel: +44 (0)1925 400 100 Fax: +44 (0)1925 400 400 e-mail: information@nwda.co.uk

In addition, there are five area offices for the implementation of local activities as follows:

Greater Manchester Giants Basin Potato Wharf Castlefield Manchester M3 4NB Tel: +44 (0)161 817 7400 Fax: +44 (0)161 831 7051

Cumbria Gillan Way Penrith 40 Business Park Penrith Cumbria CA11 9BP Tel: +44 (0)1768 867 294 Fax: +44 (0)1768 895 477

Merseyside Station House Mercury Court Tithebarn Street Liverpool L2 2QP Tel: +44 (0)1925 400 100 Fax: +44 (0)151 236 3731

Lancashire 13 Winckley Street Preston Lancashire PR1 2AA Tel: +44 (0)1772 206 000 Fax: +44 (0)1772 200 049

Cheshire Brew House Wilderspool Park Greenalls Avenue Warrington WA4 6HL Tel: +44 (0)1925 644 220 Fax: +44 (0)1925 644 222 Visit: www.nwda.co.uk & www.englandsnorthwest.com

CL/11/03 Printed on revive silk 75% recycled content comprises 35% de-inked consumer waste and 40% pre-consumer waste, the remaining 25% content being mill broke and virgin fibres. Totally Chlorine Free (TCF).

A Summary of the Northwest Energy Sector December 2003


Contents Introduction

2

Board Members

3

Characteristics of the Northwest Energy Sector

4

Sub-Sector Analysis

5

Targeting the Priorities

6

Making it Happen

7

Introduction

Council Members

Energy is both central and vital to the Northwest. The energy sector contributes around 53,000 jobs, over £5 billion in output and £1.2 billion in exports to the regional economy. A secure, reliable and competitive energy supply is essential to every person and business in the region. As this sector will experience change at an unprecedented pace over the next 10 to 20 years, the Northwest Development Agency (NWDA) has realised the need to take a lead in developing an overall energy strategy and plan for the region. This is reinforced by the recognition in the Government’s White Paper of the importance of the regions and the Regional Development Agencies in the delivery of national energy policy objectives.

John Roberts (Chair) Chief Executive of United Utilities

Against this background the NWDA commissioned this project to map the existing energy supply chain and to examine the economic and environmental implications of the key drivers. This wide ranging study, undertaken by Enviros Consulting and UMIST, has consulted over 150 companies, organisations and individuals representing all aspects of the Northwest energy economy. It provides a basis for the development of the energy strategy and plan for the region and makes recommendations on the implementation of the plan. The project was started in the Autumn of 2002 and completed in July 2003. The Northwest Energy Council (NWEC) has been established in response to the recommendations in this report. It consists of senior representatives from leading companies involved in the energy sector in the region. Its mission is to:

Alan Turley Executive Director, Enterprise and Innovation Northwest Development Agency Keith S Anderson Director of Strategy and Planning, Scottish Power Neville Chamberlain Board Member, Northwest Development Agency Prof John Chesshire Chair, Energy Efficiency Partnership for Homes Doug Coleman Managing Director, United Utilities Green Energy Business Neil Cumberlidge Director, Environment and Rural Group, GONW Mark Edwards Chief Executive, Baxi Group Ltd Kenneth Green Energy Consultant Nick Jenkins Professor of Electrical Energy and Power Systems, UMIST Michael Parker Chief Executive, BNFL

Create jobs and wealth through the delivery of a secure, internationally competitive and environmentally sustainable energy system inclusive of the supply chain and energy use.

Eamon Chandler Oils Technology Manager, Shell UK Oil

The objectives of the NWEC are to:

Joe Flanagan Head of Energy, Northwest Development Agency

Pursue a coherent vision and strategy for energy in England’s Northwest

• • • •

Implement a well-defined action plan

The Joule Centre for Energy R&D A review of the energy science and technology base in the region identified several leading edge research groups and a wide range of departments involved in energy R&D. However, the resources are fragmented and there has been limited co-operation across the region. Following a series of meetings of interested parties, it was decided to establish the Joule Centre as a partnership between the Northwest universities and industry to increase the region’s research capacity in new sustainable energy technologies, energy efficiency and energy systems. Plans are currently being drawn up for the management and operation of the Joule Centre. The vision of the Joule Centre is to create an internationallyleading energy research centre in England’s North West which will significantly increase the region’s research capacity and activity in key areas of new sustainable energy technologies, supporting science and technology, energy efficiency and integrated assessment of the energy system. The key aims of the Joule Centre are to:

• •

Co-ordinate the involvement of regional stakeholders including academia, industry, NWEC, the Northwest Science Council and regional/local government

Facilitate and deliver the research necessary to underpin the region’s contribution to the UK national energy R&D agenda

Support regional energy policy and strategy development through the appointment of a new Chair in Energy Assessment and Modelling which will fill an important gap in the region’s R&D capabilities

Deliver tangible benefits to the regional economy associated with technology transfer and skills retention and development

Respond efficiently to the needs of the regional energy industry by providing technical advice and support services (e.g. testing)

Stimulate energy related investments in the region Improve co-ordination amongst stakeholders

The Council looks forward to working with the wide range of companies and organisations that are involved in the energy supply chain in the region to achieve these objectives.

Maximise the region’s participation in UK, EU and international R&D funding programmes

Steve Machin Chief Executive, North West Regional Assembly

Identify local and global market opportunities for the Northwest supply chain

Stimulate interdisciplinary energy R&D in the region

The Joule Centre Steering Group has already been involved in coordinating the Northwest part of a bid to host the UK Energy Research Centre. This is one of the three which will be considered by the Research Councils in December 2003. The Joule Centre has also been involved in the research element of a major bid under the EU's 6th Framework programme.

John Roberts Chairman of the NWEC and Chief Executive of United Utilities plc

2

3


Sub-Sector Analysis

The Northwest energy sector is complex and diverse and although global and UK energy markets impact significantly on the supply chain, local issues are becoming more predominant. The diagram below illustrates the structure of the Northwest energy sector.

Energy Efficiency Products Services

Renewable Resources

Power Generation Power Transmission, Distribution & Storage

Renewable Nuclear Fuel

Nuclear Renewable Resources

Oil

Commercial Public Administration

Gas (CCGT)

Domestic CHP

Oil and Gas Exploration & Production

Energy Consumption Industrial

Coal Coal

Electrical Conversion Equipment

Gas Conversion Equipment

Gas Transmission, Distribution & Storage

Refining

Transport

Transport Fuels Distribution

Transport Equipment

SWOT of the Northwest Energy Sector Strengths

Opportunities

• • • • • • • •

• • • • • • •

A unified strategy for the region and a framework for support Growth in renewables and energy efficiency Flagship projects to demonstrate regional strengths Development of the supplier base Co-ordination of R&D (Joule Centre) Investment in the nuclear sector Investment in electricity distribution infrastructure

Weaknesses

Threats

• • • •

• • • • • • • •

• •

4

A world leading nuclear energy sector A major oil refinery Large-scale renewable energy resources Power distribution and systems Leading players in gas energy systems Energy from waste (EfW) Energy efficiency technologies and services Major Science & Technology(S&T) resources

Sector fragmentation and lack of a coherent vision Limited capacity in electricity transmission infrastructure Lack of local energy suppliers Low expertise in electrical energy conversion and transport technologies Skills shortage in manufacturing and services Fragmentation of R&D

Continued uncertainty in the nuclear sector Ageing power generation plant Strong competition from other regions Low public interest/awareness Lack of support and funding Planning constraints Growing energy consumption and CO2 emissions Impact of low carbon policies on energy costs

Building on the review of the Northwest and global markets, a full analysis of the economic growth, regeneration and infrastructure development opportunities has been undertaken. This maps opportunities against the regional strengths and is shown schematically in the bubble diagram opposite. This identifies the key energy sub-sectors where the most effort should be concentrated (top right of schematic). Note that the “bubble” size is proportional to employment in each sub-sector.

The Government’s Energy White Paper The central policy goal in the Energy White Paper of moving towards a 60% reduction in CO2 emissions by 2050 and the associated emphasis on renewable energy and energy efficiency plays to a number of regional strengths. The challenge will be to demonstrate that the Northwest can make real progress in achieving CO2 reductions by creating the conditions to stimulate renewable energy and energy efficiency investments and by building up a strong supplier base to reap the economic benefits. The White Paper stresses the need to develop the existing transmission and distribution networks to exploit both large-scale renewable resources and smaller generators. The Northwest is well placed to respond to this with its strengths, in both industry and its Universities, in power systems engineering and distributed generation including micro CHP. The nuclear option is kept open as a key means of reducing CO2 emissions in the event that the twin-track approach of renewables and energy efficiency fails to deliver results. This raises important implications for the future of the nuclear industry as a major contributor to the regional economy. A range of key future low carbon technologies have been identified for focus including offshore renewables, biomass and waste, PV, fuel cells and hydrogen. There will be increased funding for R&D in such areas and the establishment of a National Energy Research Centre (UKERC). The analysis of the region’s science and technology strengths shows that the Northwest is well placed in many of these areas. The establishment of the Joule Centre, to co-ordinate and consolidate the region’s R&D resources, will help to ensure that the Northwest benefits from the available support. The White Paper highlights the importance of working closely with the Regional Development Agencies, local authorities and other regional stakeholders to achieve its goals. The analysis shows that the Northwest is well positioned to respond to the White Paper and to develop and implement regional initiatives to deliver economic, environmental and security of supply benefits.

5

Sector Attractiveness

Characteristics of the Northwest Energy Sector

4 3 2 1 0

0

1

2

3 4 Northwest Position

5

Elec Equipment

EfW

Gas Equipment

Gas T&D

Renewable Energy

Power T&D

Oil & Gas

Energy Efficiency

Nuclear

6

Conventional Power Generation

Energy White Paper Quotes “We expect more than half the emissions reductions… to come from energy efficiency.” “Renewable energy will play a vital part... we are likely to need renewables, by 2050, to contribute at least 30 - 40% of our electricity generation.” “...we can also expect to see far more micro-CHP in homes as well as businesses.” “Technological innovation will have a key part to play in underpinning all our goals and in delivering a low carbon economy cost-effectively.” “We strongly encourage RDAs to play a key role in the delivery of energy policy objectives at the regional level.”

5


Targeting the Priorities

The Vision

After thorough consultation on the results of this analysis, including hosting consultation events with the key stakeholders, the following sectors have been identified as having the most potential for the Northwest economy.

It is recommended that a vision for the energy sector is developed which embodies and is driven by the following key principles:

Priority Sector

Sub-Sector Focus

Rationale for Northwest Focus

Key UK Market Drivers

Energy efficiency

Gas combustion and heating equipment

Strong supply chain and major growth area

Kyoto targets

Renewable energy

Insulation products/services

White paper goals

Controls/software

Climate Change Levy

Energy services

Grants

Consultancy

Energy Efficiency Commitment (EEC)

Offshore and onshore wind Biomass Solar/PV

Large renewable resource, Renewables Northwest, and major growth area

Kyoto targets White Paper goals Renewables obligation Grants

Power transmission & distribution

Distribution systems Advanced power systems engineering

S & T base, strong supply chain and major UK player

White Paper OFGEM initiative Technology developments

Combined Heat & Power

Domestic and small scale Combined Heat & Power (CHP)

S & T base, strong supply chain and major growth area

Government targets

Nuclear

Decommissioning

Leading global capability

Kyoto/White Paper

Waste management

Legacy issues

New generation nuclear power

Supply diversity

Economic development in the form of wealth creation and jobs

Achievement of a greater diversity and security of energy supply

Establishing a leading position in the field of environmental improvements

Making it Happen The energy sector in the Northwest is currently fragmented. The NWDA is helping to encourage strong private sector involvement through the appointment of a Head of Energy with strong support from industry “champions”. The Northwest Energy Council consists of senior representatives from the energy sector in the region, and will provide guidance and weight to the energy vision and strategy. Implementation should be achieved as far as possible through existing regional bodies and initiatives with facilitation and co-ordination from the Northwest Energy Council and a Management Group. An important aim should be to consolidate resources where possible to reduce fragmentation in the support infrastructure. A recommended action plan covers the following objectives:

• Energy-from-waste

Landfill and sewage gas systems Gasification and pyrolysis

Strong supply chain and export opportunities

Landfill directive Energy recovery targets

Digestion/bio-gas production Oil & gas

Global market opportunities for NW suppliers

Strong supply chain and diversification opportunities

Potential for NW suppliers to diversify into renewable and other clean energy technologies Research & Development

Power systems engineering Wave/tidal power Micro generators Energy efficiency

Maturity of the UK continental shelf Growth in developing countries New technology growth

S&T strengths in the higher education institutions and private sector

Increased funding for energy R&D

Joule Centre

Northwest Science Strategy

To establish the Northwest Energy Council and to organise a regional conference to launch the Council and its Energy Strategy and Plan

To create wealth through the development of the supplier base in the priority sectors

To invest in the energy transmission and distribution infrastructure

To achieve ambitious but realistic targets for renewable energy supply

To achieve big carbon reductions through energy efficiency in the domestic, business and public sectors

To address the replacement of the region’s ageing power stations

Innovation of energy technologies and systems to deliver a future low carbon economy cost-effectively

To improve public awareness and attitudes towards energy

To address energy sector skills shortages and training needs

Progress has already been made in a number of the above action areas including the development of some major initiatives covering domestic CHP demonstration, and the establishment of the Joule Centre.

Impacts It is estimated that implementation of the Action Plan will deliver the following benefits over the next 10 years:

• •

The creation of 7,600 new direct jobs

• •

Additional investment of over £5 billion

A growth in sales of regional suppliers of nearly £800 million per annum

A reduction in CO2 emission of around 5 million tonnes (1.4 MtC) per annum

Plans for National Energy Research Centre and Network (UKERC)

Built environment Fuel cells and hydrogen Assessment and modelling

Information and How to Get Involved A copy of the full report (PDF version) is available on the NWDA website: www.nwda.co.uk/energy If you wish to make any comments on the report or discuss how you can get involved in this initiative, please contact: Joe Flanagan, Head of Energy at the Northwest Development Agency 01925 400 100 6

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http://www.nwda.co.uk/pdf/NWEnergySector