Floating Offshore Wind and Contracts for Difference

(Limited Text - Ministerial Extracts only)

Thursday 23rd May 2024 Westminster Hall

[The Minister for Energy Security and Net Zero (Justin Tomlinson)]

It is a pleasure to serve under your chairmanship, Sir Philip. Normally, a Westminster Hall debate would have an overwhelming number of speakers. Heaven knows what has distracted our colleagues from what we can all agree is a very important debate. I pay tribute to my hon. Friend the Member for North Devon (Selaine Saxby) who could easily have been distracted herself today, but will never miss an opportunity to champion her community.

I will return to my wonderful hon. Friend shortly, but first I will take a slight deviation. As I was bounding up the steps with the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead), it dawned on me that this is his final contribution as he will sadly be retiring. He is held in high regard across both sides of the House. In the coming weeks, as we seek re-election, we will all be championing our local credentials, but the local candidate for Southampton, Test will be hard-pressed to beat the shadow Minister’s credentials. He has been the student union chairman at the University of Southampton and the leader of the council, no less. Not only has he been elected since ’97, but—God loves a trier—he also ran in ’83, ’87 and ’92. For colleagues who do not quite get the result they feel they deserve, just keep going and you will get here.

The shadow Minister has always conducted himself with a real passion for his areas of interest. His contributions are always backed up with thorough research, which is why he is held in the highest regard. As the newest member of the DESNZ team, I admire the way in which he has performed his various shadow roles since 2015. He will genuinely be a loss to this Parliament and it was a pleasure to listen to his final contribution, powerful as it was. Although he recognises that nobody can definitely say who the Government will be, he has had that one last opportunity to shape what happens going forward in this important area. Finally, we do share one interest, which is that we both played for the parliamentary football team. While he looks excellent for 73, having seen some of his performances over the years as a goalkeeper, I think there is still a chance for a late call-up now that he has a bit more time on his hands, and we all look forward to cheering him on in Portugal.

I congratulate my hon. Friend the Member for North Devon on securing this important debate, building on the Westminster Hall debate that she obtained last year. I feel that I am a cheerleader for her, because only this time last week when I was doing the ITV “West Country” programme and she appeared as one of the vox spokesmen, I heaped praise on her for her work on water quality. She is a tireless campaigner, and particularly a vocal champion of floating offshore wind, particularly through her role as chair of the all-party parliamentary group for the Celtic sea—how does she fit it all in?—and she rightly highlights the benefits that this new technology could bring to the UK.

The world’s first floating offshore wind farm was built in UK waters. Today we have 80 MW of installed capacity, making us a world leader in the sector. That builds on our world-leading status in fixed-bottom offshore wind deployment, where we have over 14 GW of installed capacity—more than any other European country. In 2010, just 0.8% of the UK’s annual electricity was generated by offshore wind. Last year it was 17.4%, which is a significant transformation. It plays an important part in our overall transformation from just 7% of power generated by renewables in 2010 to 47% currently, and it continues to expand rapidly.

Looking to the future, we are committed to furthering our position at the forefront of the sector. Our ambition is to install up to 50 GW of offshore wind by 2030, of which 5 GW will come from floating offshore wind. Based on seabed exclusivity, we have the largest pipeline of floating projects in the world, at 25 GW. The 5 GW is a stretching ambition, so we are working hard to create the right environment for investment and address barriers to deployment. I am a mere deputy today. The Minister for Nuclear and Renewables leads this work, and he is passionate that this is a key part of our overall strategy.

First, I will address the main point made by my hon. Friend the Member for North Devon on the contracts for difference mechanism and the budget for floating offshore wind. The CfD scheme is recognised worldwide as a model for supporting renewables deployment. Our CfD auctions have so far awarded contracts totalling around 30 GW of new renewable capacity, including around 20 GW of offshore wind. Last year’s allocation round was a success story for many technologies, including marine energy and the UK’s first three geothermal projects. But—we would not be having this debate if there were not a “but”—we recognise the shortfall of fixed-bottom and floating offshore wind, and I acknowledge the concerns that my hon. Friend voiced at the time.

We reflected carefully on the results of allocation round 5 and, following a comprehensive review of the latest evidence, we raised the administrative strike price for floating offshore wind by 52% in real terms, recognising the unprecedented upward pressure on project costs. We also recognised the importance of the right support mechanisms for new technologies that may not yet be cost-competitive. That is why this year’s allocation round 6 pot 2, which is dedicated to emerging technologies such as floating offshore wind, has its biggest ever budget— £105 million. But for the announcement yesterday, which may have passed some people’s attention, I would have gone to view one of those in Norway next week. Unsurprisingly, I now will not be doing that, but there is always YouTube if hon. Members want to learn about new technologies, as I discovered when I learned about hydrogen. I assure my hon. Friend that the Secretary of State and the Minister for Nuclear and Renewables have met directly with eligible floating wind developers for allocation round 6 to understand their concerns.

I stress that there has to be a balance. The thrust of this debate has been about the need to be more generous to unlock more; I absolutely get that, because we have legally binding commitments and we need to expand our basket of renewable energy sources, but we also have to be held to account by the Public Accounts Committee. I served on the Committee for three years and I know that the current Chair, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier), will not let taxpayers’ money be wasted unnecessarily, so there is always a balance. If we are overly successful, perhaps we have overpaid, so we have to strike that balance. There are few colleagues more interested in making sure that we do not forget the impact on consumers’ bills.

The Government are proud of our record on tackling climate change, but we will never lose sight of the need to do so in a pragmatic way and to ensure that ultimately we deliver a cleaner and, crucially, more efficient energy system that leads to cheaper consumer bills. If we lose sight of that, we lose public support and endanger all the good will that collectively we are seeking to unlock.

Secondly, we recognise that port infrastructure and supply chains are critical to the long-term future of floating offshore wind in the UK. The floating offshore wind manufacturing investment scheme is worth up to £160 million and will support investment in port infrastructure for floating offshore wind deployment. The port of Cromarty Firth and Port Talbot have both been placed on the FLOWMIS primary list, meaning that we will take those projects to the next stage, which is due diligence. We are also supporting ports in the region through the Celtic freeport, backed by up to £26 million in UK Government funding. I acknowledge the concerns that my hon. Friend the Member for North Devon has raised about the FLOWMIS decision, and her letter to the Minister for Nuclear and Renewables about the issue. FLOWMIS is a competitive scheme, and I recognise that the results are disappointing for the port of Falmouth and for the port of Milford Haven.

My officials are engaged in the ports task and finish group, led by RenewableUK. The group is looking into the barriers to port investment and identifying the most appropriate levers to overcome them. There is no stronger champion than my hon. Friend to ensure no stone is left unturned so that her constituents and neighbouring constituents will not miss out in future.

We are taking significant action to support supply chains through the green industries growth accelerator, a fund of nearly £1.1 billion to support investment in manufacturing capability for clean energy sectors. That will enable the UK to seize growth opportunities from the transition to net zero by unlocking private investment and creating new jobs, for which we are the envy of the world.

Thirdly, my hon. Friend is right to highlight the potential of the Celtic sea region for floating offshore wind. I can assure her that the Government are determined to ensure that that potential is realised. As she will know, the Crown Estate has launched leasing round 5, making available areas of seabed that could support up to 4.5 GW of capacity in the Celtic sea. The Government worked closely with the Crown Estate to unlock that opportunity and will continue to do so as the sector grows. In last year’s autumn statement, we committed to bringing forward additional floating wind in the Celtic sea through the 2030s, which could see an additional 12 GW of generation deployed in that important region.

Britain’s geography makes it ideally suited to offshore wind, and floating offshore wind enables us to make the most of our natural resources by unlocking the potential out at sea. We are aware of the challenges involved and are taking actions to address them. We know that this technology is an enormous opportunity for our journey to net zero and for our economic growth. It is local communities such as those in the Celtic sea region that stand to gain the most from the economic growth and the highly skilled roles that will be created.

I look forward to working with my hon. Friend as we harness the enormous potential of offshore wind power. I am sure we will return to this issue in a matter of weeks.