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The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I think, Mr Betts, that as they have given us quite a bit of time, I am happy to let the Member speak.
Mr Clive Betts (in the Chair)
The rules of the House are that if a Member wishes to speak in a 30-minute debate, they should inform both the mover and the Minister in advance and then I should be notified. Nevertheless, it is all sorted out now.
The Minister of State, Department for Business, Energy and Industrial Strategy (Greg Hands)
I begin by congratulating the hon. Member for East Lothian (Kenny MacAskill) on securing this important debate.
We know that renewable electricity generation is essential to the decarbonisation of the power sector and the UK’s efforts to reduce greenhouse gas emissions and reach net zero, which was recently discussed in Scotland at COP26 in Glasgow, which I was delighted to attend on behalf of the UK Government. Offshore wind will be a vitally important tool in creating the low-cost, net zero energy system of the future.
We can be enormously proud that the UK offshore wind industry has already made great strides, in terms of both the production of major turbine components and their deployment, moving from installing about one turbine every week to about one every single day. Turbine sizes have grown by 700%, from 2 MW to 15 MW. Alongside this, the costs of offshore wind have fallen dramatically since 2015. The first contract for difference allocation round cleared at around £114 per megawatt-hour. In the last round, in 2019, that fell to less than £40 per megawatt-hour. That is a reduction of around two thirds to 70% in the cost of offshore wind. It has been a resounding success, and we expect both the increasing scale of turbines and cost reduction to continue.
I agree with the hon. Member for East Lothian that it is absolutely right that local communities should benefit economically from major new manufacturing infrastructure projects. We want to see thousands of people all over the country working in new green, high-quality jobs in our renewables sector. Therefore, the Government are investing heavily to support the offshore wind sector, from innovation to the manufacture of major wind turbine components, all the way through to the deployment and connection to the grid.
Let me deal with a few of the points raised. I will first stress that these decisions taken by the UK Government have brought huge benefits. When I was at the Treasury in 2015, a lot of the decision making behind contracts for difference was controversial. Working with the Department for Business, Innovation and Skills, as it then was, we thought that the CfD regime would lead to a big boost in the UK’s renewable energy and, by scaling up, would reduce costs, both of the energy produced and that of building the infrastructure. We turned out to be right on that.
There was also investment brought in by the UK Government. When I was at the Department for International Trade, for four or five years, I was going around getting investment into the UK offshore wind sector, particularly from European countries, such as Spain and Denmark, and companies looking to invest in this country. A key part of that has been to ensure that the supply chain also benefits the United Kingdom overall, including Scotland. About 60% or more of the supply chain is based in the UK. A lot of the key decisions have been the right ones taken by the UK Government.
The hon. Member for East Lothian raised a point about Wick harbour. We have seen that harbour revitalised by the development of the Beatrice offshore wind project. As more projects are developed north of the border, we expect similar benefits to be realised for other harbours. We heard from the hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey), who provided a long history—a tour de force—that started with Ted Heath, moved through Margaret Thatcher and John Major, and ended with him describing the Scottish Government as a “supine devolved Government”. The hon. Gentleman mentioned the word “grievance” and said it was not one, but I think he is lumping grievance on to grievance. His latest grievance is with the Scottish Government, not just that of the UK.
Offshore wind has a central role in the Government’s decarbonisation and levelling-up ambitions. Developing the economic benefits that the UK derives from offshore wind took prime position in the Prime Minister’s 10-point plan for a green industrial revolution, published this time last year. The 10-point plan also includes a target to deploy 1 GW of floating wind in the UK by 2030, as a stepping-stone to further growth through the 2030s and beyond.
The hon. Gentleman for East Lothian mentioned the potential of the sector, but it is not just the potential; it is the reality. The UK has the world’s largest installed offshore wind capacity—we are No. 1. As the Prime Minister says, we are the Saudi Arabia of wind. It is not just potential but a realised thing that is happening every day. We are not content with just 10 GW; we have a commitment to quadruple that over the next decade, to 40 GW. Scotland will play a massive role in that commitment.
Last month the Prime Minister announced up to £160 million in new funding to support the development of large-scale floating offshore wind ports and factories all over the UK. That follows on from the success of the offshore wind manufacturing investment support scheme, which has so far this year enabled the announcement of two major port hubs, and six offshore wind manufacturing investments, representing £1.5 billion in public and private sector investment, and set to support up to 3,600 jobs in deprived areas of the UK by 2030.
Scotland, as we know, has a very rich industrial heritage, and I am confident that the skills already present in Scotland, proven over the decades in the oil and gas sector, will be transferred into a world-leading capability in manufacturing for the offshore wind sector— a key part of our North sea transition deal. Yesterday I chaired the North Sea Transition Forum with the industry, Oil & Gas UK, the Oil and Gas Authority and the Scottish Government.
The point is that to make that transition means recognising the fantastic skillset. One of my first visits in this role was to Aberdeen, where I saw that skillset at first hand, working with a lot of the incredible universities—I visited Robert Gordon University, for example, whose transition unit is working on how we transfer the skills that have been vital for the UK as a whole and Scotland in particular for the past 50 years over to sectors such as offshore wind. The answer is that there is a lot of overlap between offshore hydrocarbons and offshore wind, but making that transition is a key part, and there are many people helping to deliver that.
That is why the North sea transition deal announced in March contains key commitments on skills, including a commitment from the oil and gas sector to develop an integrated people and skills plan by March 2022, to support the sector’s transition and diversification. Both Government and the sector have also committed to supporting the work of the Energy Skills Alliance. Its work will address, among other things, future skills demands of new energy sectors, all-energy training and standards and all-energy apprenticeships.
In particular, Scotland could benefit greatly from nascent technologies on the horizon. I mention floating offshore wind again, but just last week we announced a £20 million ring-fenced contract for difference fund for tidal. There is huge potential for Scotland to take advantage of its excellent geography. The same extends to parts of Wales and the Isle of Wight and other particular parts of the UK that have excellent tidal resources. We announced a ring-fenced pot within the next CfD auction for tidal energy.
Greg Hands
I do not think I have time—I am afraid I only have one minute, and the hon. Gentleman got a pretty fair crack of the whip earlier, to be frank.
Floating offshore wind is an area that has already inspired huge interest from developers in Scotland—hardly surprising, given the rich deep-water resource and manufacturing capability in Scotland. It is no coincidence that the world’s two largest floating offshore wind arrays, Hywind and Kincardine, have been developed in Scottish waters. The Celtic sea is also a major development opportunity.
Decisions on how specific projects can deliver local benefits are generally a matter for developers—a point raised by the hon. Member for East Lothian. However, we want developers and operators to provide community benefits consistent with relevant guidance and good practice principles, building on experience in other renewables sectors.
This debate is testament to the strong cross-party agreement that we want to leverage the UK’s world-leading offshore wind sector, to maximise the economic benefits enjoyed by our coastal communities across the UK, including in Scotland. I close by thanking the hon. Gentleman again for securing this enlightening and important debate.
Motion lapsed (Standing Order No. 10(6)).