Re-Energising Wales: Thinking differently about the Welsh economy

“It is time for the country to take a clear-eyed look at how ambitious it wants to be for its economic future and what sort of changes would be required to achieve its ambitions. There is no point espousing unrealistic targets and no point in specifying any target whatsoever without a strategy that might achieve it.”

‘An economic strategy for Wales?’ (IWA, 2015)

Since devolution many have questioned the dividend to Wales in terms of economic performance. In 1999 our GVA was 72.4%. In 2013 it was 72.2%. This demonstrates a failure of Wales to grow in comparison with the rest of the UK. Parts of Wales are amongst some of the poorest in Europe.

2016 has brought further worrying news for the Welsh economy. The first few months of this year were characterised by the threat of Tata selling off its UK operations, including its plants in Port Talbot and Llanelli, a ‘strategic disaster’ for Wales according to First Minister Carwyn Jones. Then came the referendum on Europe. The day after the referendum the value of the pound plummeted. At the time of writing in mid October the value of the pound has shed 5% in less than seven trading days. Questions are being raised about the certainty of funding previously guaranteed for Wales. A National Assembly for Wales Research Service report recently summarised that ‘Wales is anticipated to receive around €5bn of EU funding during 2014-2020. Leaving the EU is likely to see access to most if not all of this money disappear in the future.’

If there was ever a need for an answer to Wales’ economic problems it is now. As the IWA’s 2015 report ‘An economic strategy for Wales?’ stated, we urgently need to create an ambitious strategy for the future. Over the past six months we’ve been working on a project which aims to do just that.

‘Re-energising Wales’  looks to create a blueprint, which could be adopted by decision makers, to make Wales a net exporter of renewable energy by 2035. There is no hiding away from the fact that this project is challenging, but there’s also no hiding away from the fact that we need to have a clear strategy and vision for Wales’ economic future.

The project won’t only address the economic challenges Wales faces, but will present options to meet challenging environmental and decarbonisation targets and include potential solutions to address the looming energy gap facing the UK following moves to stop unabated coal-fired power generation by 2025 and the phasing out of ageing nuclear reactors.

The political climate also raises both opportunities and challenges. We are in the early days of this assembly, a prime time to influence the policies of each party. The project itself is set to run for three years and we anticipate the outcomes will be ready for manifestos at the next assembly election. Yet Brexit has dominated the political agenda in the last few months. If the Welsh ‘Programme for Government’ is anything to go by, the fact that energy is hardly mentioned and there is a complete omission of any mention of ‘energy efficiency’ doesn’t bode well for the Government’s priorities over the next five years.  It will be a task to persuade decision makers to focus on the potential of energy for Wales, while hours of debating time is being devoted to the specific implications of leaving the EU.

So, how are we going to convince the Brexit-obsessed Government and Assembly that energy policy could be the answer to both our economic and environmental woes?

Firstly, we’ve assembled Wales’ leading thinkers on the economy and energy to take part in this project. Chaired by Gareth Wyn Jones, the project’s steering group boasts representatives from the academic, policy and practitioner’s fields as well as many of the energy network operator companies themselves. We’ve spent a long time planning this project to ensure it achieves its potential and have broken the project down into six specific work packages.

The project’s first work priority, which is due to be delivered in the first year of the project, focuses on energy demand and energy efficiency.  The project held a workshop in July to highlight and debate current demand and supply data and assess where current gaps exist. On the back of this workshop, the plan for this work package is to undertake an initial analysis of energy use in Wales focusing on the domestic, commercial, industrial and transport sectors.  We will then use this data and analysis to develop a programme for energy saving, that – if implemented – could increase efficiency and reduce demand across Wales. The way we currently consume energy – largely generated by fossil fuels – is inefficient and any move to increase renewable energy needs to address this first.

This year we will also be undertaking work using the Swansea Bay City Region as a case study. The study will project how future demand could be met by the increase of renewable energy projects and what kind of projects would be needed to do this. Given the current discussion around the Swansea Bay Tidal Lagoon and the challenges still facing Tata in Port Talbot and Llanelli, Swansea is the ideal starting point for showing how renewables could transform a local economy.  Far from the current centralised energy model, which relies on a national grid and energy usually produced far away from where it is used, the project will explore the potential for a decentralised energy model, where energy is produced close to where it is used.

These are just our priorities for the next few months and the years that will follow seek to undertake the kind of work that can genuinely get us thinking differently about the Welsh economy. Putting our eggs into the renewable energy basket is genuinely ambitious, but if we carry on with no strategy and the current sticking plaster solutions to our economic problems then Wales’ future as a thriving nation looks in doubt. Let’s not just think differently but do things differently and then we really might be able to have the kind of strategy that will deliver a devolution dividend for Wales.