Asked by Lord Frost To ask His Majesty's Government what assessment
they have made of the overall cost-competitiveness of electricity
generated from recently commissioned offshore wind farms compared
to electricity generated from recently commissioned gas-fired power
stations at current gas prices. Lord Frost (Con) My Lords, I beg
leave to ask the Question standing in my name on the Order Paper,
and I draw attention to my relevant unpaid interests in
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Asked by
To ask His Majesty's Government what assessment they have made of
the overall cost-competitiveness of electricity generated from
recently commissioned offshore wind farms compared to electricity
generated from recently commissioned gas-fired power stations at
current gas prices.
(Con)
My Lords, I beg leave to ask the Question standing in my name on
the Order Paper, and I draw attention to my relevant unpaid
interests in the register.
The Parliamentary Under-Secretary of State, Department for Energy
Security and Net Zero () (Con)
My Lords, offshore wind is one of the cheapest generating
technologies in the UK and is comparable to or cheaper in cost
than fossil-fuel based alternatives. It is a vital technology
that will allow us to decarbonise the power sector by 2035 and
enhance the UK's energy independence. The department publishes
its cost estimates in the generation costs report.
(Con)
My Lords, I thank the Minister for that response, but I gently
suggest that perhaps he needs to look more carefully at the
plausibility of the assessment he has just given. If renewables
were as cheap as he asserts, it is hard to understand why bill
payers and taxpayers are having to pay about £12 billion per year
in subsidy, which is £600 for every family in the country. If
offshore wind can be produced for £50 per megawatt hour, as his
department asserts, it is hard to understand why the Government
have had to offer twice that this year to get anyone to take up a
contract. Would the Minister agree that it is better to be honest
and that pushing out these fantasy figures just makes it easier
for the proponents of net zero and the party opposite to indulge
in fantasy politics that the whole energy sector can be
decarbonised in just six years?
(Con)
I certainly agree that the Opposition's policy is fantasy
politics. However, I will give the noble Lord the costs in the
latest published analysis, which show that electricity from
offshore wind is 60% cheaper to build and operate than gas-fired
power. The levelised costs are £44 per megawatt hour for offshore
wind, versus £114 per megawatt hour for closed-cycle gas
turbines. The other key point is energy security. As the noble
Lord is well aware, the amount of gas coming from the North Sea
is declining year on year, and therefore we have to import
increasing amounts of gas. It makes no sense to make us dependent
on imported gas for the years to come. We can see the effects of
the Russian invasion of Ukraine on gas prices. With the current
turmoil in the Middle East, it makes even less sense.
(Lab)
My Lords, is it not the case that the only way we will address
this is by building new nuclear plants? The last Labour
Government identified sites and were developing a planning system
that would have pushed them through. Over nearly 14 years, what
have the Government been doing to create opportunities for more
nuclear power?
(Con)
The noble Lord is right and wrong at the same time. Of course, it
makes absolute sense to build more nuclear power, and we are
doing that. However, his reference to the last Labour Government
gives me the opportunity to state that, when they came to power
in 1997, they cancelled all our new nuclear generation.
(LD)
My Lords, the UK green economy grew by 9% last year, delivering
much needed green growth and green jobs for UK workers. Does the
Minister agree that investment in our world-leading offshore wind
capacity not only provides the UK with the long-term energy
security we require but is also good for UK energy bill payers
and our environmental futures? Will the Government consider
increasing the funding for AR6 to secure the future energy
capacity and security we require?
(Con)
We have allocated over £1 billion for AR6, and it is important to
procure newer capacity. It is also worth saying that we cannot
rely on offshore wind alone: we need to consider the whole
system. That is why we need nuclear, storage and technologies
such as tidal, which my noble friend is always asking me about.
We need a range of technologies, including interconnectors with
other parts of the world, because that is the best way to secure
a levelised grid that is secure and provides our energy
independence in the future.
of Leeds (Lab)
My Lords, the UK is well placed to become a global leader in
offshore wind, as we have heard, but a lack of capacity at UK
ports is limiting our potential and, therefore, the economic
growth, energy security and jobs that come with it. The chief
executive of RenewableUK said that
“to maximise investment in offshore wind manufacturing and
assembly facilities in the UK, the public and private sector are
going to have to come together to invest in our ports”.
What steps are the Government taking to bring relevant parties
together towards this end?
(Con)
My Lords, we are already a leader in the offshore wind sector: we
had the largest amount of offshore wind production in the world,
although we have now been overtaken by China. We have the first,
second, third and fourth-largest wind farms in the world already
operating in UK waters—but we have ambitions to go even further.
That includes investing in ports, and we have the offshore wind
manufacturing investment scheme and the floating offshore wind
investment scheme, bringing together government and business to
make sure that we develop these new technologies and, more
importantly, locate the supply chains for them in the United
Kingdom.
(Non-Afl)
My Lords, the leading expert in the field is probably Professor
Dieter Helm of the University of Oxford, who has been arguing for
a long time that the true cost of wind power has been greatly
understated in government publications, not least because they do
not take full account of the intermittency of wind power and its
effects on gas generation, which in turn has to be turned on and
off at considerable extra cost. As he has identified, this is one
of the major hidden costs of net zero. Can the Government now
review their estimates of intermittency thoroughly and
fundamentally, using some of Professor Helm's work, and come back
to us with what they think are the most considered estimates?
(Con)
We already have considered estimates—work on this is going on all
the time. It is a constantly evolving picture, and we take into
account the views of all experts. It is undoubtedly true that
renewables are intermittent: we had huge amounts of solar earlier
this week, but, looking at the weather outside, I think we will
not have quite so much today. That is why we need a diversified
supply—nuclear, long-term storage and intermittent storage—to
take account of the fact, which we know is true, that renewables
are cheap, effective and quick to deploy, but they are
intermittent, which is why we need a variety of technologies.
(Con)
My Lords, following that last question, do the costs that the
Minister gave include all the grid and system costs, as well as
everything that has been referred to? Will the Minister agree
that it is important to get these different costs right if we are
going to gain public consent for the various incentives, taxes
and charges that will be necessary to guide the system forward?
As for gas, which is also mentioned in the Question, is it not
the position that, in the long term, it will continue to have a
substantial place, particularly in generating electricity? Is it
the position that we need to ensure that its carbon emissions are
handled by carbon capture and storage schemes, two of which are
currently beginning? Should we not be giving a lot more attention
to this area if we want a net-zero world?
(Con)
The costs that I quoted are what are called the levelised costs,
which are an industry standard, and they take account of other
system costs. But, as I said, we will of course need back-up and
storage. What the noble Lord said is true: gas will play an
increasingly marginal role, but it will play a role in ensuring
that we have energy security going forward. The estimates are
that we will have about 7% of gas generation by about 2035.
(Non-Afl)
My Lords—
(LD)
My Lords—
(Con)
My Lords, shall we hear from the noble Lord, , and then the noble Baroness,
Lady Fox?
(LD)
My Lords, a battery plant is being built in Somerset and electric
arc steel is being put into Wales. It would benefit the country
if offshore wind were built on the west side of it as well as the
east. So can the Government explain what is happening to
encourage offshore wind in the Celtic Sea and its environs?
(Con)
There is already some wind generation, but of course the waters
are deeper, which is one reason why we are developing floating
offshore wind, which I referred to earlier.
(Non-Afl)
On the hidden costs of harnessing wind power, which seems to be a
theme, will the Minister acknowledge that, in any wind turbine,
there is a huge amount of steel, fibreglass, resin, plastic,
copper, aluminium, iron and cast iron? Therefore, does the
Minister acknowledge that, for decades to come, these materials
will be extracted and manufactured only with the help of fossil
fuels? As is often the case, fossil fuels are invaluable, but
that is never part of the public discussion.
(Con)
My Lords, I am happy to acknowledge the noble Baroness's point,
but, if she is attempting to say that other forms of
generation—gas-fired power plants, nuclear power plants or
whatever—do not have many of those materials, she would be
wrong.
(Lab)
My Lords, the Minister mentioned China. Why are some of the
offshore wind farm components, especially the huge structures and
blades, being manufactured in China rather than in Britain?
(Con)
The noble Lord makes an important point. Actually, relatively few
components are manufactured in China, although some are. Many of
them are manufactured in other parts of Europe, and increasingly
many are manufactured in the UK. If the noble Lord had been in
the Grand Committee earlier this week, he would have heard us
debate a new regulation designed precisely to overcome that
problem. This is to make sure that there are extra payments to
some of the developers to make sure that we locate more of the
supply chains in the UK, because we want to see the benefits
spread throughout the country, particularly Wales and northern
parts of the UK, which already have many of these supply chain
companies. We need to become increasingly successful at that. The
rest of the world is proceeding to copy us and develop offshore
wind, so there are massive export opportunities if we can locate
those supply chains in the UK.
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