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Plans to build three new factories to make thousands of giant offshore wind turbines that would create an estimated 60,000 jobs are set to become the latest casualty of the spending review, it has emerged.
The previous government had pledged £60m to upgrade ports, mainly in the north-east, to enable them to handle the next generation of giant turbines for installation off the UK coast.
Siemens and General Electric have announced plans to invest £180m in two new manufacturing facilities in the UK, but say this is conditional on the necessary work on nearby ports. Mitsubishi is also interested in building a third factory.
But the Guardian has learned that the competition inviting ports to bid for the funds is likely to be scrapped. Officials at the Department of Energy and Climate Change (DECC), which is to provide half the £60m required, are still fighting for the funds. However, they have little support from the Department for Business, which would have to find the other half, or from the Treasury.
The energy secretary, Chris Huhne, is understood to be determined to set up a Green Investment Bank, which will have to take public funds for existing renewable and low-carbon schemes, such as the ports, to have sufficient capital.
The Guardian has also learned that the nuclear industry has successfully lobbied the government to safeguard the huge budget to decommission the UK’s old reactors, handled by the Nuclear Decommissioning Authority. This year, about 60% of the NDA’s budget – £1.7bn – came from taxpayers via the DECC, making up about 40% of the ministry’s entire spending.
In opposition, the Conservatives had wanted to cut about 25% of DECC’s funding to the NDA. But after the election, industry executives outlined to ministers the urgency of the clean-up of Britain’s nuclear sites, particularly Sellafield in Cumbria. One source said: “We succeeded in scaring David Cameron off.” The NDA, which is cutting its own operating budget, could even secure a slightly higher funding settlement than this year.
MPs will debate the ports programme in the House of Commons on Tuesday, with the trade body RenewableUK warning that 60,000 jobs are at stake. No final decision has been made either on the £60m ports plan or the NDA’s budget, with the funding settlement for DECC only expected to be formally agreed just before the Treasury’s publication of the spending review on 20 October. It is thought that the most that would be available would be funds to upgrade one port.
But the scrapping of the ports competition will sit uneasily with Cameron’s declaration that this “would be the greenest government ever”. It will also raise questions about the government’s commitment to help the economy grow out of recession, in particular by boosting hi-tech exporters. It has already axed an £80m government loan to the engineering firm Sheffield Forgemasters.
The new turbine factories would be used in the giant “round three” windfarm projects equivalent to more than a quarter of the total generating capacity currently in the UK. But energy companies privately think that such large windfarms so far out to sea are not yet realistic and officials believe it does not make sense to commit £60m of public funds now to new factories to supply them.
DECC is considering how to overhaul the UK energy market to make the billions of investment in such windfarms economic. Once a new long-term subsidy regime is in place – funded by household bills – and energy companies are prepared to invest, the plans to build the factories could be resurrected, possibly with some support from the Green Investment Bank. But this could take years.
A spokesman for RenewableUK said: “Keeping the ports fund is essential for attracting manufacturing ahead of the latest round of offshore wind developments. The sector could lead the recovery, and put the country in pole position in terms of technology, employment and cash benefits from renewable energy.”
Overall, DECC is expected to escape relatively lightly from the spending review. Funds for the £9bn clean-coal programme, which had been under threat, are understood to be have been secured, although the pilot projects may be delayed. But the solar feed-in tariff and the renewable heat incentive, subsidising biomass plants and CHP boilers, are likely to be scaled back.
A DECC spokesman said: “Funding for offshore wind ports infrastructure – as with other public spending – is being reviewed in the context of the spending review.”