The UK has recently led the world in the deployment of offshore wind farms as a source of renewable energy. It has committed substantial public resources to meeting international and national targets for increasing the proportion of energy derived from renewables.
Most renewable energy technologies require further innovation if they are to prove competitive. Regulatory policies must support this.
However, the Government demands that bidders for wind farm development must have approved supply chain plans, showing their local jobs and local content. LSE economist Dr Tony Hockley argues that this policy, intended to create jobs in offshore wind energy, may instead undermine the sector’s viability once current subsidies come to an end.
In his recent paper, Dr Hockley draws on his experience in tackling state aid and state protectionism in the airline industry to highlight the risks for such ‘techno-nationalism’ in industrial policy.
Offshore wind energy is an attractive option for the UK, but it must make dramatic cost reductions if it is to play a significant part in the long-term energy mix, once the current subsidies are removed. Current government policies send mixed messages that discourage the investments required to innovate and reduce costs.
The paper highlights potential arguments for a Government commitment to offshore wind energy beyond 2020, as a spur to private investment, and a new emphasis on a competitive, rather than a local, supply chain.
In the end the subsidised and protected flag carriers airlines had to shed jobs or close. But competition enabled cost reductions that increased the capacity for air travel. Employment growth came about because of competition. I would expect a similar result from a stable, transparent and open market in offshore wind energy. It is a young industry, with considerable potential for innovation free from well-intentioned but harmful techno-nationalism.
Would you like to commission consultancy or tailored training on this subject? Contact us using the form below to explore what we can offer.
