Edward Miliband (Doncaster North) (Lab) (Urgent Question) To ask
the Secretary of State for Energy Security and Net Zero if she will
make a statement on the implications for offshore wind of contracts
for difference allocation round 5. The Minister for Energy Security
and Net Zero (Graham Stuart) The first annual contracts for
difference auction—the first that we have ever done—was completed
last week and delivered a total of 3.7 GW of renewable electricity,
with...Request free trial
(Doncaster North) (Lab)
(Urgent Question)
To ask the Secretary of State for Energy Security and Net Zero if
she will make a statement on the implications for offshore wind
of contracts for difference allocation round 5.
The Minister for Energy Security and Net Zero ()
The first annual contracts for difference auction—the first that
we have ever done—was completed last week and delivered a total
of 3.7 GW of renewable electricity, with contracts going to a
record number of projects. The auction delivered significant
quantities of new solar and onshore wind generation, as well as
supporting 11 new tidal stream projects and, for the first time,
geothermal projects. It was a competitive auction, set against a
backdrop of highly challenging macroeconomic conditions that have
impacted the sector globally. Given that this was our first
annual round, it was to be expected that it would have a lower
capacity than the previous biennial rounds, and, because last
year’s round was the first for three years, a higher annual
element than that record round.
The Government remain committed to offshore and floating offshore
wind projects, and this round provides valuable learning for
subsequent auctions. Work has already started on allocation round
6, incorporating the results of the recent round, and we look
forward to a strong pipeline of technologies being able to
participate. The move to annual auctions means that allocation
round 6 will open in just six months’ time, in March 2024, which
means that there could be minimal or indeed no delay in the
deployment of new capacity through that round.
The Government also remain committed to our target of
decarbonising the power system by 2035 and our ambitions for 50
GW of offshore wind, including up to 5 GW of floating offshore
wind. Our trajectory for meeting these aims, as well as our
legally binding carbon budget 6 targets, is not linear. The
outcome for one technology in one auction does not prevent us
from reaching those goals.
What a load of nonsense. No wonder the Secretary of State is in
hiding.
This auction is an energy security disaster for Britain, and an
act of economic self- harm on the part of the Government. No new
offshore wind projects means that families’ energy bills will £2
billion higher and our energy security will be weakened. Worst of
all, this was totally avoidable. Ministers were warned again and
again about the impacts of higher inflation—in a letter from
RenewableUK in March, and again in July—and offshore wind is so
much cheaper than gas that they could have raised the price in
the auction and it would still have saved billions of pounds for
families, but they refused to listen.
First, will the Minister tell us why the Government ignored those
repeated warnings? Secondly, he said on Friday that every country
was in the same boat, but that is just wrong. Ireland listened to
industry and adjusted its price, and had a successful auction in
March 2023. Why did the Government not learn that lesson?
Thirdly, is not the terrible truth that this episode reveals a
much deeper flaw in their approach? For month after month this
summer, they claimed that the answer to our energy crisis was
more oil and gas, and this is the result. We will now be more
dependent on expensive, insecure fossil fuels. We will be more
exposed to the whims of petrostates and dictators. Every wind
farm that we fail to build makes us more exposed to dictators
like Putin, and he knows it.
Bills higher, security worse, jobs lost, climate failure—the
Government have trashed offshore wind, the crown jewels of our
energy system, raising bills, just as they trashed onshore wind
by banning it, raising bills, and just as they trashed home
insulation, raising bills. We have seen 13 years of failed energy
policy, and all this fiasco shows is that the Conservatives are,
quite simply, a party unfit to govern.
I was pleased to see the other day that the rumours of the right
hon. Gentleman no longer being in his position were not true. It
is perhaps understandable in that context that he is so
passionate about this highly successful round that has seen 3.7
GW on an annualised basis. I think that is a record round. He was
a member of the previous Labour Government who left this country
with 6.7% of its electricity coming from renewables. In the first
quarter of this year, 48% of our electricity was from renewables.
It was this Government, with our contracts for difference system,
who transformed the economics of offshore wind. We have 77 GW of
offshore wind in the pipeline—more than enough. We have
7.5—[Interruption.] The right hon. Gentleman understandably,
given the weakness of his arguments, wants to heckle at all
times, knowing how easy it is to dismantle them. He asks me where
that capacity is, and I can tell him that 7.5 GW is currently
under construction.
As ever, the right hon. Gentleman fails to be on the side of
consumers. We moved to an annualised auction precisely to ensure
that we could learn the lessons from each round, add them to our
industry insight and ensure that we could move forward. The
projects take multiple years to be developed, and none of them
has disappeared. I predict that, moving on from the triumph of
3.7 GW of renewables, which came through successfully on Friday,
allocation round 6 will be more successful still. We will
continue to build our reputation as the country that has cut
emissions more than any other major economy and that has
transformed our electricity generation. He mentioned
insulation—how he has the gall, I do not know. We have moved from
14% of homes being properly insulated when he left power to over
50% by the end of this year.
(North Devon) (Con)
I thank the Minister for his engagement with this process,
particularly with the new technology of floating offshore wind.
Three floating offshore wind projects were due to bid in
allocation round 5 but none did, due to the low administrative
strike price. As chair of the all-party parliamentary group for
the Celtic sea, I have repeatedly been told that these projects
are part of our future energy supply. Can he outline what steps
he is taking to ensure that these projects will float in
allocation round 6 and to give confidence to developers in the
region?
I thank my hon. Friend, who is an absolute champion of floating
wind and the economic opportunities it offers for her area and
the rest of the UK. I was delighted to speak to her last week and
meet her yesterday, and I pay tribute to her efforts. We have the
largest floating wind pipeline in the world, based on confirmed
seabed exclusivity arrangements. We have around 25 GW already
identified, including through the ScotWind leasing round and
innovation and targeted oil and gas—INTOG—processes. As she, as a
great champion, knows, the Crown Estate is moving forward with
its leasing round 5 for up to 4 GW of capacity in the Celtic sea
this year. We have been the world leader on floating energy and
we are going to stay the world leader. Thanks to the efforts of
my hon. Friend, I know that we will have support across the
House.
Mr Speaker
I call the Scottish National party spokesperson.
(Angus) (SNP)
The Minister failed to point out that 3.7 GW is scarcely half of
what was achieved in auction round 5. He also failed to mention,
when he was heralding onshore wind, that 90% of that will be
found in Scotland. Since 2014, the four auction rounds have
yielded 1 GW, 2.5 GW, 5 GW and 7 GW, so a nil return is an utter
catastrophe.
The critical need for massive investment in offshore is patently
obvious for bills and for the climate, yet this ambition has been
thwarted by an incompetent previous Secretary of State and by the
Treasury, which knows the price of everything and the value of
nothing. Can the Minister assure us that the Department will get
round the table with industry as a matter of urgency to try to
repair this damage? Industry needs a strike price that reflects
the not-mutually-exclusive goals of lower bills, net zero, and
jobs and investment in Scotland and elsewhere. Can he confirm
whether a recovery group for auction round 5 will be convened by
him or the Secretary of State to try to get this catastrophe
resolved? And where is she?
The hon. Gentleman and his party never fail to trash this
country—[Interruption.] He can heckle all he wishes. I will be
meeting industry representatives this afternoon and, as I have
said, we will be announcing in two months’ time the price ceiling
for the next round—[Interruption.] I am getting heckling, not
least from His Majesty’s Opposition, who left us in that parlous
situation. We are the world leader in so many of these
technologies and we are going to continue to be. If the hon.
Member for Angus () were to recognise the need to
attract investment to this country and not talk it down, he might
find that Scottish jobs would be even stronger in the pipeline
than they are already.
(New Forest West) (Con)
If any, how much of the completed wind capacity still requires
connection to the national grid?
Until wind capacity is constructed, it is not normally connected
to the grid. That which has not been connected to the grid will
need to be connected to the grid.
Mr Speaker
I call the Chair of the Select Committee on Energy Security and
Net Zero.
(Na h-Eileanan an
Iar) (Ind)
The boom and bust of this fiasco will inevitably have knock-ons
for the supply chain. How concerned is the Minister about that?
Also, how concerned is he about projects that were built on CfD
securities but have not invoked the contracts and are now
literally raking in the windfall of that act?
I do not quite follow the second part of the hon. Gentleman’s
question, but I am happy to write to him on that topic.
(Bridgwater and West Somerset) (Con)
West Somerset, as the Minister knows, is ideal for offshore wind.
I am interested to know why people did not bid in this round.
What were their reasons? What can the Government do to learn the
lessons of this round so that people like my hon. Friend the
Member for North Devon () can make sure that people
are bidding in the next round?
We typically set out the key auction parameters in November, and
those include the ceiling of what we will pay for particular
technologies. We do that based on our analysis of supply chain
costs, and we also commission external analysis. The most
important data of all comes from individual auction rounds, and
it is on that basis that we set the price parameters. The
industry warned us, as it does every year, that it wants us to
pay more. We always have to make a judgment call between making
sure that we minimise—[Interruption.]It would be so much easier
to give my answer, Mr Speaker, if the right hon. Member for
Doncaster North () would stop—
Mr Speaker
Order. I think that, as a man who was always happy to heckle from
the Back Benches, the Minister deserves a little bit himself.
We set the prices, and we immediately learn from each auction.
One of the reasons for having an annual auction is that we can
quickly adjust and, as I said, projects can then come into the
next round with minimal delay.
(Brighton, Kemptown)
(Lab/Co-op)
The wind farm off Brighton has probably become as iconic as the
pier itself, but the reality is that the Government’s failure
will delay the construction of more of these beautiful
installations around our coast. Is this failure not also a
failure of the market-based private investment system that this
Government are determined to pursue, rather than a publicly owned
and co-ordinated building programme that can work alongside
private investment so that we no longer have this failure where
nobody bids?
I thank the hon. Gentleman for revealing the true face of where
the Labour party is going. We can go back to the days when we had
hardly any renewables, and we can allow Great British Energy, or
whatever Labour is going to call its creature, to squeeze out
private investment and destroy the most successful renewables
market in Europe, and to destroy this Government’s progress on
tackling the parlous position left behind by the right hon.
Member for Doncaster North and his friends. We will continue to
be the world leader in cutting emissions, but not if we move to
the state-run, left-wing obsessions of colleagues like the hon.
Member for Brighton, Kemptown ().
(Waveney) (Con)
Offshore wind plays, and will continue to play, a key strategic
role in enhancing energy security, achieving net zero and
revitalising coastal communities such as Lowestoft. To get back
on track, can my right hon. Friend confirm that the criteria
applying to round 6 will take account of current economic
realities, that appropriate fiscal measures are being considered
ahead of the autumn statement and that specific focus will be
given to enhancing local supply chains?
I thank my hon. Friend, who has been such a consistent champion
not only for the power of renewables to meet our environmental
challenges but for the economic benefits that come from them. He
is absolutely right that the nature of the CfD system is that it
learns from the previous auction round, which is the most real
data of all, and uses that learning to inform the next round.
That is why I am confident that, just as we had a success with
3.7 GW on Friday, AR6 promises to be more successful still.
(Brighton, Pavilion)
(Green)
I congratulate the Minister on turning complacency and chutzpah
into a new art form. The ineptitude of Tory Ministers means that
this latest CfD round saw the smallest auction return since
2015—a failing that was entirely avoidable. How will he ensure
that the UK delivers the 35 GW of new offshore wind capacity that
is needed in just six years? Why did Ministers yet again fail to
heed the warnings from industry and experts in advance?
We have to set the parameters based on the best information we
have. As I say, one reason for moving to an annual round is to
allow us quickly to learn the lessons of each round. We did not
get the wind on this occasion, which I regret, and we will put
the real-world prices and learnings from that into the next
round. That is the system we have, because we are always trying
to make sure that we get the parameters right so that we balance
the need to generate additional green energy with the cost to the
taxpayer. Understandably, given their carelessness with the
public finances and with consumers, the Opposition do not seem to
care about that. My job is to balance it, ensuring that we get
the generation, and we have 77 GW in the pipeline. We are in
position and on track to meet our ambitions, which lead
Europe—not that we would know that to listen to the hon.
Lady.
(Truro and Falmouth)
(Con)
I thank the Minister for including geothermal projects in
allocation round 5, as that is very welcome. However, I echo
everything my hon. Friend the Member for North Devon () says about the Celtic sea
projects. What will we do differently in round 6? What advice
would he give to those in the supply chains, specifically ports,
that are trying to submit applications for the FLOWMIS—floating
offshore wind manufacturing investment scheme—funding? What
conversations has he had about grid capacity, to ensure that all
of this eventually runs smoothly?
As ever, my hon. Friend is well-informed. We are working on all
those fronts. FLOWMIS applications closed just two weeks ago, and
we are working flat out to analyse them. I hope that by the end
of the year we will have shortlisted to the primary list and
those schemes will move forward to due diligence, as we take
forward not only our floating wind deployment, but the supply
chain in the south-west, Wales, Scotland and around the rest of
the UK. We are working on all those fronts and are determined to
do that. As she rightly highlights, seeing our first geothermal
projects come through the CfD is fantastic, as are the 11 tidal
projects. I pay tribute to all colleagues who have worked so hard
to promote tidal energy and make sure that we continue to be a
world leader in that as well.
(Sheffield, Hallam) (Lab)
This is an embarrassment for the Government and shows that we are
falling further and further behind in the race for green jobs
internationally. We have the lowest growth in these industries
among the eight biggest economies. Should the Government not be
focusing much more on broadening and increasing the capacity of
offshore wind, rather than not listening to industry and making
fatal errors?
If the Labour party is not nationalising or creating some
state-owned behemoth, it wants just to hurl money in the
direction of business. Our judgment is to balance those things
and I am pleased to say that we have been successful; we have the
largest offshore wind sector in Europe. This country and this
Government, through the CfDs, transformed the economics from the
situation we inherited after the right hon. Member for Doncaster
North and his colleagues had been in power.
(Preseli Pembrokeshire)
(Con)
Delivering on the floating offshore wind project in the Celtic
sea is vital for our energy security and decarbonisation. Does
the Minister agree that we now need to bolster confidence in this
emerging industry? There are two things he can do. Does he agree
that a successful allocation of FLOWMIS money to the south Wales
ports in order to get this industry moving is vital? Does he also
agree that we need to ensure that the Crown Estate’s leasing
round at the end of the year is done successfully, but with more
than 4 GW of visibility, in order to send a strong market signal
to the industry to invest?
My right hon. Friend is also someone who, through thick and thin,
promotes that industry and sees the opportunity it offers Wales.
He makes a special bid for the Welsh ports, as I would expect him
to do, but he will understand that I can make no comment on that.
I entirely agree with him on the importance of the Crown Estate
round. Suffice it to say that across Government we have been
working flat out, with his and other colleagues’ support, to
support the Crown Estate to ensure that we maximise the
opportunity in the Celtic sea.
(Bath) (LD)
The Government’s obsession with oil and gas has left us in this
mess. The Department has prioritised new oil and gas licences
over support for wind power, which flies in the face of our
climate change commitments and our responsibilities to UK
citizens—our constituents—to keep energy prices low. Oil and gas
will always be more expensive than wind energy. When will the
Minister fill the gap of 5 GW of offshore wind that we have now
missed out on, which would have saved consumers £2 billion a
year? I am not talking about the sixth auction round—I am talking
about the fifth one, where we have missed out now.
The hon. Lady is completely mistaken. We are working flat out
both to reduce demand for fossil fuels in this country and to
build up our renewables. I would hope she would celebrate the
fact that we have the largest offshore wind sector in Europe.
(Birkenhead) (Lab)
The Government have long been warned that their focus on CfDs as
the primary mechanism for financing new renewables risks
undermining investor confidence in infrastructure assets with
long lifespans but significant up-front capital costs, such as
nuclear and tidal range generation. Following the Government’s
decision to employ a regulated asset base model to support the
development of new nuclear, will the Minister now commit to
looking urgently at the optimum financial model for new tidal
range projects, which could make a crucial contribution to the
future UK energy mix?
The CfD scheme is among the most successful, if not the most
successful, of its sort in the world. We always look at ways in
which we can improve it. We are looking at bringing in non-price
factors as we finesse it, but the Opposition party’s idea of some
state-run enterprise, squeezing out private investment, would
destroy the opportunities going forward. We need at least another
£100 billion to be invested by 2030 and if the Labour party ever
did threaten to come into power, it would put all that at
risk.
(Stockton North) (Lab)
On Teesside, we have been promised thousands of jobs in the
offshore wind industry, but investors are getting a little
nervous as a direct result of Government failures to provide the
right business environment. What will the Minister do to get the
business environment right to deliver the jobs we have been
promised, which are being put in jeopardy by Government
failures?
We are getting that balance right and we will continue to do so.
Making sure that we look after the consumer is always my guiding
light, and we balance that with getting the generation we need.
We have seen companies such as SeAH investing in Teesside and
Sumitomo looking at investing in Scotland—
They are getting nervous—
As the hon. Gentleman decries this and talks both the area and
the nation down, he then tells me that investors are getting
nervous. If he were to champion all the successes we have had
instead of decrying them, he might find that he would give
investors even more confidence still.
(East Antrim) (DUP)
I do not agree with the policy that the Minister pursues. His net
zero policy is disastrous and has been costly in terms of
electricity prices and future planning. However, I feel some
sympathy for him today. He is being criticised by those who have
highlighted high energy prices for not offering inflated prices
to the wind industry, which claims that producing wind energy is
getting cheaper but of course wants higher prices. As it was not
offered that, it would not bid in the auction. Is the real reason
for this not that for the first time he has refused to allow
those who bid to walk away from their CfD agreements, to price
electricity at whatever price they want and therefore to have
inflated profits? Does that not indicate to him that the wind
industry knows it cannot produce electricity cheaply and wants
the system balanced in its favour?
The right hon. Gentleman and I do not see eye to eye on net zero
or on the economic benefits of the wind industry. It does offer
cost-effectiveness. It has been amazing to see how as it is
scaled, it has been able to bring the price down. It was not
obvious when we went out into the North sea that we would be able
to bring the price crashing down, yet this country led the world
in doing that. If he looks at the numbers, I hope he will find
that the whole of this House can agree on one thing: offshore
wind is an economic way of producing energy, and one that all of
us should support.
(Cynon Valley) (Lab)
Last week, the think-tank Common Wealth made the critical
point:
“Reliance on market coordination leaves the transition vulnerable
to the demands of private capital”.
It is abundantly clear that private capital cannot deliver what
is urgently required to stem the climate crisis. In Wales, the
Welsh Government know that, which is why, over the summer, they
launched the community-owned renewable energy company, Ynni
Cymru. Does the Minister agree that that is what is required, and
what action is he taking to address this?
I thank the hon. Lady for pulling back the veil on Labour’s real
policy, which is that it hates private capital, it hates private
investment and it would destroy the phenomenal success of this
country in generating that. [Interruption.] The Front Benchers
can heckle all they like, but that is what their Back Benchers
want. That is the policy that threatens the British people and
threatens our path to net zero. We must make sure that people
such as the hon. Lady never have power in this country.
(Edinburgh South West)
(SNP)
Scottish Renewables has said that the results are a major blow to
the renewables sector in Scotland and should serve as an
indication that urgent reform is needed. Scottish Renewables, not
a political party but part of the industry, has also said that
these disastrous results are bad for Scotland’s energy supply
chain, which desperately needs a steady stream of projects to
make its own investments in skilling up and in new technology.
Will the Minister acknowledge that his and his Department’s
failure to listen to warnings from the industry is holding back
Scotland’s renewable sector?
I thank the hon. and learned Lady for her question. Industry
always asks to be paid more money. Our job is to make the right
judgment call on getting the balance right.
(Arfon) (PC)
I saw in the newspapers yesterday that astronomers have
discovered a water-covered planet in a far away galaxy. I have to
disappoint these excited scientists that, from his answers today,
the Minister appears to have got there before them.
[Interruption.] On another planet, yes.
Seriously though, this setback to the Erebus project in
south-west Wales is deeply disappointing. It was the first of its
kind in Wales and was supposed to pave the way to a developing
industry. I hope the Minister can reassure me that he is taking
steps to make sure that, in AR6, projects such as Erebus are
enabled to compete successfully and to lead the way for this
industry in Wales.
I thank the hon. Gentleman, not least for his attempt at a gag. I
can tell him that what he says is the whole basis of the
system—that it learns from each round. The most real economic
data that we get is from an auction round. Moving to annual
rounds, there will be ebb and flow as the right balance is sought
between getting the generation that we require, set against our
extremely ambitious deadlines, and not paying too much. That is
the balance that we strike. We have 3.7 GW and I imagine that we
will do even better next time.
(Orkney and Shetland)
(LD)
I feel as if I am almost taking my life in my hands, but I do
want to commend the Minister for one small piece of good news in
this round, which is in relation to the development of marine
renewables. The success of the auction for tidal stream
development illustrates what would be possible for wave power if
it were to be given the same opportunity in AR6. But for tidal
stream, does the Minister agree that what is now needed is the 1
GW target for deployment? Will he work with me and other people
in the House with an interest in this and the marine renewables
sector itself to deliver that ahead of AR6?
May I pay tribute to the right hon. Gentleman? I met him in his
constituency when I visited the European Marine Energy Centre and
saw for myself some of the projects in the water. I am personally
determined to ensure that tidal stream continues to grow. We
maintain our global leadership, with a very high percentage UK
supply chain as a further positive to it. He tempts me to get
ahead of myself on policy, but I cannot do that. However, what we
are doing and what our dedicated pot this year did is further
strengthen that so that we can get in a position where that might
be a realistic policy position to take.
Dame (Llanelli) (Lab)
Even with a higher price, offshore wind would help to slash
bills. When the Minister saw the Irish Government recognise
inflation, up the price and proceed to a successful auction, what
discussions did he have with the industry and with Treasury
colleagues about the price to be set?
I thank the hon. Lady for her question, which is a good one.
Obviously, we did look at whether intervention, given that prices
continue to change after they are set, was the right thing to do.
We think that the CfD mechanism—the way that it is operated—is
sound and that the best thing to do is to allow that to pass for
the year. One reason for having the annual auction was precisely
to allow us quickly to adjust, and, as I say, as soon as
November, we will be setting the parameters for the next
year.
(Tiverton and Honiton)
(LD)
Last November, the Government paid up to £700 million to China
General Nuclear Corporation to buy out China’s state-owned
nuclear power enterprise from Sizewell C, and we spent the best
part of 2022 freeing ourselves from our reliance on Russian oil
and gas. Given the failure of this Government to sell offshore
wind projects in the latest round, can the Minister please
comment on how energy independence from authoritarian states was
served by this inability to run an auction?
We are now running these auctions every year, and every year, we
will be seeking to get the generation that we require at the
lowest possible cost to the consumer. I make no apology for doing
that. The fact that we have the most successful system, not only
in Europe, but globally, is something that should be applauded
and recognised.
(Carmarthen East and
Dinefwr) (Ind)
The Windsor report last month provides a sobering analysis about
the scale of new electricity transmission infrastructure required
to serve increased renewable generation and consumer demand in a
very short space of time. However, as the report finds, there is
considerable resistance locally to pylon development, as we are
finding out in my constituency. Competence for such development
is with the Welsh Government, but will the Minister pull together
a working group of Ministers from across the UK and experts to
consider the Windsor report, and in particular the advantages of
cable ploughing technology, which would underground those cables
at a comparable cost to overhead pylons without the visual
damage?
I thank the hon. Gentleman for his constructive and effective
question. He is absolutely right to highlight the challenges of
making sure that we have the right transmission and connection
infrastructure to facilitate offshore wind. We have to do that in
a way that minimises negative impacts on communities, that
rewards them for hosting it, and that looks at new technologies
and innovations, just as we do in other areas, in order to
facilitate that effective connection with minimal negative impact
on communities that host.
(Strangford) (DUP)
In light of the disappointing results of the CfD AR5 auction and
given that I am always trying to be constructive in my
contributions in this House, will Government revisit the
exclusion of Northern Ireland renewable projects from the scheme,
especially in light of the significant increase in onshore wind
and tidal stream projects supported by the AR5? Northern Ireland
is perfectly positioned for onshore wind and tidal stream to make
a major contribution to energy security and net zero from AR6 and
beyond. Will the Minister commit to enable Northern Ireland to be
part of AR6?
I suggest that it is the hon. Gentleman and his colleagues who
need to commit to facilitating that in Northern Ireland. Energy
is devolved and it is up to them to get the devolved Assembly up
and running. If they get devolved government going in Northern
Ireland, they will unleash these opportunities. It is not for
this Department, which is not responsible for energy in Northern
Ireland.
Mr Speaker
That completes the urgent question.
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