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Offshore Wind Contracts
12 September 2023
Lead MP
Graham Stuart
Debate Type
Ministerial Statement
Tags
ClimateEnergy
Other Contributors: 25
At a Glance
Graham Stuart raised concerns about offshore wind contracts in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
The first ever annual CfD auction was completed last week, delivering a total of 3.7 GW of renewable electricity capacity to projects including solar and onshore wind generation as well as new tidal stream and geothermal projects. Despite the lower capacity compared to previous biennial rounds due to challenging macroeconomic conditions, the Government remains committed to offshore and floating offshore wind projects, with allocation round 6 opening in March 2024. The move to annual auctions allows valuable learning from each round, supporting the UK's target of decarbonising the power system by 2035 and achieving 50 GW of offshore wind capacity.
Ed Miliband
Lab
Doncaster North
Question
Critiques the auction's outcome as an economic self-harm, citing higher bills and weakened security. Also questions why warnings were ignored and if the government learned from Ireland’s successful auction.
Minister reply
Defends the round as highly successful, with 3.7 GW of renewables capacity achieved, despite Labour's past record on renewable energy. Emphasises that projects will proceed over multiple years and that the shift to annual auctions is for learning and improvement.
Question
Asks about steps being taken to ensure floating offshore wind projects bid in allocation round 6.
Minister reply
Acknowledges Saxby's championing of floating wind, noting the UK’s leading position with a 25 GW pipeline and upcoming Crown Estate leasing rounds. Confirms ongoing efforts to support industry development.
Dave Doogan
SNP
Angus and Perthshire Glens
Question
Questions why only 3.7 GW was achieved compared to previous rounds, and calls for urgent meetings with industry.
Minister reply
Defends the round's success, noting ongoing support for Scottish projects and commitment to continue as a world leader in these technologies.
Desmond Swayne
Con
New Forest West
Question
Asks if any completed wind capacity requires grid connection.
Minister reply
Explains that capacity needs construction before grid connection, and those not connected will need to be.
Question
Expresses concern about the supply chain impacts of the auction's outcome and questions projects built on CfD securities.
Minister reply
Offers to write back with further details regarding the second part of the question.
West Somerset
Question
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 (Selaine Saxby) can make sure that people are bidding in the next round?
Minister reply
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 industry warned us, as it does every year, that it wants us to pay more.
Brighton, Kemptown
Question
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?
Minister reply
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.
Peter Aldous
Con
Waveney
Question
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?
Minister reply
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.
Caroline Lucas
Green
Brighton, Pavilion
Question
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?
Minister reply
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.
Falmouth and Camborne
Question
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 (Selaine Saxby) 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?
Minister reply
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.
Olivia Blake
Lab
Sheffield Hallam
Question
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?
Minister reply
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.
Stephen Crabb
Con
Preseli Pembrokeshire
Question
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?
Minister reply
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.
Bath
Question
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.
Minister reply
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.
Mick Whitley
Con
Cannock Chase
Question
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?
Minister reply
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.
Alex Cunningham
Lab
Stockton North
Question
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?
Minister reply
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.
Sammy Wilson
DUP
East Antrim
Question
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.
Minister reply
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.
Question
Last week, the think-tank Common Wealth made the critical point that reliance on market coordination leaves the transition vulnerable to the demands of private capital.
Minister reply
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.
Question
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.
Minister reply
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.
Question
This setback to the Erebus project in south-west Wales is deeply disappointing.
Minister reply
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.
Alistair Carmichael
Lib Dem
Orkney and Shetland
Question
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.
Minister reply
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.
Nia Griffith
Lab
Llanelli
Question
Even with a higher price, offshore wind would help to slash bills.
Minister reply
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.
Richard Foord
Lib Dem
Honiton and Sidmouth
Question
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.
Minister reply
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.
Question
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.
Minister reply
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.
Jim Shannon
DUP
Strangford
Question
In light of the disappointing results of the CfD AR5 auction, will Government revisit the exclusion of Northern Ireland renewable projects from the scheme?
Minister reply
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.
Shadow Comment
Ed Miliband
Shadow Comment
The auction is an energy security disaster for Britain due to no new offshore wind projects, leading to higher bills and weakened security. Ministers were repeatedly warned about inflation's impact but ignored industry advice. Ireland successfully adjusted its price in March 2023; the UK did not learn this lesson. The episode highlights a deeper flaw in the government’s approach, increasing dependence on expensive fossil fuels and raising energy costs for families.
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