Executive Summary
Between 2018 and 2030, more than £15bn will be invested in local energy projects across the three LEPs of the West Midlands, and £74bn will be spent on products and services (like cars and homes) where the quality of local energy systems will make the difference between global competitiveness and economic failure for our local industries, and between lives dominated by energy poverty or supported by comfortable and efficiently heated homes for our citizens. A further £80bn will be spent on fuel and power to drive our industry and to power those same homes and cars.
Vision
This strategy is about influencing these financial flows to deliver a vision for energy across the region by 2030 which includes:
- reducing energy costs for our strategic industrial sectors to at least match those of our international competitors;
- reducing the incidence of fuel poverty across our region by hitting current government targets for energy efficient housing five years ahead of schedule;
- delivering the West Midlands’ share of national and global carbon budgets by reducing regional carbon emissions;
- creating a regional energy infrastructure that adds £1bn to GVA by 2025 by putting the region at the leading edge of the global energy and transport systems transition.
Specific, measurable targets for each of these objectives are set out in section 5.
Innovative and selective delivery mechanisms
We will deliver these targets through highly selective investment of public and private capital, working through a framework of Energy Innovation Zones (EIZs) developed alongside this strategy.
EIZs create local partnerships which bring together the right stakeholders for each locality and are thus collectively able to manage energy investment risk efficiently (particularly when innovative technologies are being commercialised or require strategic infrastructure investment).
Unique regional ambitions and history
This idea was developed in the West Midlands and is designed to work for the particular diversity, strengths and heritage of our region. The West Midlands would simply not exist as a population and industrial centre if it were not for the world-class energy infrastructure and assets uniquely available here and matched to our industrial and innovative capabilities from 1750 onwards.
The West Midlands of today is very different from that of the 18th to 20th centuries, but energy remains critical to our key sectors and to our citizens. This energy strategy is a key element underpinning a local industrial strategy focused on the digital, health and life sciences, and clean growth opportunities of the future. It targets a massive global clean growth opportunity which is aligned with national industrial strategy and which this region is particularly well-positioned to exploit.
We have specific regional issues around fuel poverty (the quality of our housing stock); diversifying and creating new markets for our exceptional industrial and manufacturing base; and making best use of the imagination and creativity of our innovators and academic institutions. This strategy recognises and responds to all these issues.
Contributing to national challenges and needs
However, this strategy has been developed against the backdrop of a fundamental transition in global energy systems which is widely recognised and is creating challenges and opportunities at both global and national level. Effective regional leadership in energy is key to responding to these challenges. This strategy sees the West Midlands contributing constructively to changing the way energy is regulated and managed nationally, working with other devolved regions and authorities across the UK.
Financial implications and approach
Four pilot EIZs have been identified and preliminary investment cases developed for this strategy. These EIZs will act as a focus for energy systems investment of between £270M and £490M over the next 15 years and deliver the first £200M of the £1bn GVA target. The remaining £800M will be delivered through a range of initiatives including:
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additional Energy Innovation Zones;
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strategic infrastructure support for accelerated new market development of locally sourced products such as electric vehicles and smart connected and low carbon housing;
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seeking to establish a legacy bank to cover sunk costs of stranded and legacy energy infrastructure assets, using this to reduce energy costs for innovative and competitive manufacturers;
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energy efficiency programmes for manufacturing and residential sectors;
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simplifying access to and improving transparency of energy markets for business customers;
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more rigorous and targeted new build housing energy efficiency standards;
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large-scale retrofit programmes for fuel poor households and energy-inefficient housing;
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a focused cluster support programme including incubation of clean technology businesses and specialist energy support for established businesses, working with regional and international partners.
We propose to establish a £500M specialist regional investment fund to support these initiatives.
The strategy will be delivered through Energy Capital, established with a governance structure. Individual EIZs will be controlled and run by their local authorities.
Detailed delivery plans and timescales are set out in accompanying reports covering EIZs, including Energy as an Enabler of Industrial Strategy across the region. The immediate priorities are:
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To establish an initial Energy Capital executive team within the WMCA to support the Board and funding commitments made by partners. This will be done in two stages: an interim development team will be put in place for 2018-19, and permanent resource will be recruited into the WMCA from 2019-20 onwards.
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To follow through on the recommendations of the Regional Energy Policy Commission, particularly around working with government and regulators to detail the legal implications and requirements for EIZs.
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To work with regional and wider partners to develop a cross-sectoral and place-based ‘Deal’ for the West Midlands’ new energy economy1. This will act as the initial focus for securing the required investment funding.