Draft Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026
Debate between Kit Malthouse and Michael Shanks(1 week, 1 day ago)
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Michael Shanks
I will address a few things. There were some contradictory comments from different Members of the same party: on the one hand, we should support the supply chains, but on the other, the Government should do nothing to actually build them up. I will come to that point, because—
Michael Shanks
That is how we end up with absolutely no industry left in the country. That is what we are trying to rebuild after 14 years of it falling apart.
I will turn to the specific points. First of all, the shadow Minister, the hon. Member for West Aberdeenshire and Kincardine, made a good point about the strength of supply chains in the north-east of Scotland; I will be in Aberdeen again on Thursday. One of the key things that the North Sea Future Board has taken as a real priority is how we map those supply chains, not just over oil and gas but over what could come in terms of offshore wind, decommissioning, hydrogen and carbon capture. For too long, the pipeline of future projects that that supply chain could be redeployed on has not been clear enough. As a result, we have been losing out on contracts that could be dealt with here in the UK. We are determined to try to fix that, because there are significant supply-chain opportunities, but we need to make it easier for companies to take those up.
The shadow Minister and I always agree on new nuclear, although we slightly disagree on how much he achieved when he was the Nuclear Minister—but I will not mention that, because I want us to work co-operatively on nuclear. New nuclear is incredibly important. As he is right to say, the supply-chain benefits in the UK from nuclear are substantial: thousands and thousands of jobs in communities right across the country, not just in proximity to Sizewell or Hinkley, are contributing in different ways to building what are phenomenal engineering projects here in the UK.
The small modular reactor fleet that the Government not only consulted on but have actually delivered—and are delivering—will result in even more supply-chain jobs across the country as well. The shadow Minister and I also agree that we would like to see some of those SMR projects being built in Scotland, with even closer supply chains in Scotland as well, but we first need to change the Scottish Government in May; I am glad that he will be supporting a vote for Scottish Labour on 7 May to do that.
The shadow Minister also raised a number of other points about the supply chain that I think are right. It is absolutely right to say that floating offshore wind is an expensive technology, but we are at the cutting edge of its development. We have a real opportunity to do something differently on deep-sea wind, which we were not able to do on fixed-bottom wind, to have the supply chain here in the UK. We have the biggest pipeline anywhere in the world; we have one of the biggest projects in the world. That is an opportunity for us to deliver on that innovative supply chain, but it takes investment for that to happen.
The right hon. Member for North West Hampshire asked a number of genuine questions, which I appreciated. First, the regulations themselves very clearly set out the sunset clause as 31 December 2028. This will be eligible for the allocation rounds before that date; if we wanted to continue the scheme beyond that, we would have to come and update these regulations again, but it is not an unlimited fund.
On the projected budget for AR8, I cannot get into projected budgets because they are driven by the initial allocation that is set, and then by the bids that come in. In AR7, we reformed the process so that we could see the bid stack in order to see what projects were in that option round, although they were anonymised. That resulted in the budget getting us the output of offshore wind that we did, at a price that was 40% cheaper than new-build gas. That is what we should hold on to: the AR7 option round was cheaper for consumers than the equivalent would be.
I remind right hon. and hon. Members that there is no option to not build new energy infrastructure in this country. We have two choices: we either double down on gas, and the world as it stands right now is a reminder of why that would be a mistake; or we build renewables. There is no option to build nothing. There is a cost for consumers, regardless of what we choose to do. There is also a huge cost for consumers of building the grid that the previous Government failed to build for 14 years, which we are now determined to do.
On the fair work charter, there is no compulsion on any developers to bid into the clean industry bonus. If they want to participate in the contracts for difference auction, they are very welcome to do that. If they want to participate in the clean industry bonus and have public support for supply chains here in the UK, then they should conform to the requirements of that scheme. We think it is absolutely fair to say that if the hard-working people of this country are putting money into building those factories, fair work should be at the heart of it. I am surprised, frankly, that in 2026 anyone would think that fair work is something that we should not support by any means necessary.
Kit Malthouse
As I think I said, I agree that people should be treated with respect; my question was more about why it is being done through this particular route. For the Government to legally have grounds to include what we are discussing as part of, effectively, a procurement process, there has to be a statutory basis on which they are doing that; it cannot just be shoved through on a non-universal basis. I was asking for the authority on which it is included.
I am sorry if I misread the time limits regulation. Could the Minister confirm that, if the Government give notice before 31 December 2028 for 12, 15, 19 or 120 more rounds to come, they will then be able to continue post that deadline? So they can in fact manufacture a deadline.
Finally—rather than my having to intervene again; I hope you will bear with me, Ms Jardine—could the Minister confirm to colleagues what he said: we are being asked to vote today for higher energy bills for our constituents in perpetuity, or certainly for the next few years, as a result of this instrument? Just so everyone is clear: you are voting for higher bills.
Michael Shanks
I thank the right hon. Member for his second speech in the debate.
Michael Shanks
I understand the point. First of all, I have been really clear. This regulation, as it clearly sets out, comes to an end on 31 December 2028. We will come back to the Committee to update the regulations should we wish to continue the scheme. We have run AR7—it was a successful scheme. Obviously, we want to monitor what happens in AR8 and AR9. We may be able to devise other schemes. It may be that by then that our industrial strategy has delivered the supply-chain benefits across the UK and that that is not necessary, but supply chains do not come out of nowhere.
The shadow Minister, the hon. Member for West Aberdeenshire and Kincardine, made one other point that I wanted to come back to. When we left Government, two supply chain companies were building solar in this country. When we took back Government in 2024, there were none. If we want to have supply chains in the UK, we have to support and invest in them. That is not just a cost. It also delivers good jobs across the country, and our energy security.
On the question about raising bills, the right hon. Member for North West Hampshire is quite wrong. The outcome of building the clean power system is that we will bring down bills, but we have to be able to build it and that means supply chains here in the UK as well, because the rest of the world is also in a race to build clean energy infrastructure.
Michael Shanks
It is a no, because the counterfactual, of relying on gas, as his party is so determined to do, would put up everyone’s bills significantly. We are the ones bringing down bills, and on 1 April all our constituents will see that the decisions this Government have made will reduce their bills by 7%.
There are a number of points in this statutory instrument that I could go over again; in the interests of everyone’s time, I will not. I reinforce the point that we believe that if we are building an energy system for the future here, we should deliver the good jobs and industrial benefits that come with that. That should not be a controversial argument, but it seems that it still is. If we want to have an industrial strategy, we cannot be agnostic, sit on the sidelines and hope that someone else will do it—we have to drive it forward. If we want our constituents to have good, well paid jobs across the country, helping build the energy system, we have to do something about it. This Government are doing that, and I commend the regulations to the Committee.
Kit Malthouse
On a point of order, Ms Jardine. I do not mean to be difficult, but the Minister has not answered all the questions I posed—not least about the assumptions of the 16:1 leverage, which is apparently the big bonus coming in. I also do not know whether it is appropriate for us to vote on what is effectively an open-ended budget. Fundamentally, the impact I am most worried about is the one on my constituents—that I am not going to be able to tell them how much this will cost them; that is quite a significant hole in the Government’s argument. I am not aware of other statutory instruments where we vote for an open-ended budgetary allocation that our constituents will have to pay for, whether they like it or not.
I have time this afternoon. If you, Ms Jardine, want to suspend the sitting while the Minister goes and finds the answers to those questions, I am quite happy for that to happen. It seems to me disrespectful for us to rattle through something that will have an impact quite soon on people’s electricity bills.
Onshore Wind and Solar Generation
Debate between Kit Malthouse and Michael Shanks(11 months, 3 weeks ago)
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Michael Shanks
We really are stretching this debate, but I am very happy to discuss this matter. The point has been raised on a number of occasions, and the answer is always the same: it is not delivering energy security at the moment. We have said very clearly that oil and gas plays a crucial role in our energy mix now, and it will continue to play a role for decades to come, but the North sea is already in transition. The reality of the past 10 years under the Conservatives was that more than 70,000 jobs were lost, with no plan for how to deal with it. We are determined to deliver on the transition and on energy security, which will get us off the rollercoaster of fossil fuel prices that we are all still riding.
Michael Shanks
I will make a little progress and come back to the right hon. Gentleman. Although we have 90 minutes, I am conscious of time.
This instrument is about making sure that onshore wind projects in England that offer capacity of over 100 MW will be eligible to be consented under the regime. It reflects advances in turbine technology over the last decade, with modern turbines being larger and more powerful. Reintroducing onshore wind into the NSIP regime will provide an appropriate route for nationally significant projects seeking planning consent where they are of a certain scale and complexity, so that local impacts can be carefully balanced against national benefits and the need to meet the UK’s wider decarbonisation goals. This will provide greater confidence for developers and grow the pipeline of potential projects in England once again.
Kit Malthouse
I am extremely grateful to the Minister for giving way. He talks about national impact. I wonder what provision there is under this legislation for protected national landscapes. Many of the windiest places in the UK are among our most beautiful, whether it is the hills and mountains of our national parks or the downs of our national landscapes, like the North Wessex downs in my constituency, which was an area of outstanding national beauty but is now a national landscape. Many of my residents are concerned, because the Minister is quite right that the turbines that are now being developed are huge. It is likely to mean that for most of our lifetimes we will lose the landscape to these new developments. Will this system still encompass consideration of protected landscape and make sure that it stays as it is for future generations?
Michael Shanks
The right hon. Gentleman raises an important point. As I have always said from the Dispatch Box in this role, there is a balance to be struck here. We need to build nationally important infrastructure, and that does mean much more onshore wind in England to match the significant amount of onshore wind that has been built in Scotland over the past few years, including not far from my constituency. But the balance must be struck with protecting land as well. Even if we build the significant number of projects that are needed, there will still be protections for land in the areas he mentions. The planning system allows for those considerations to be taken into account.
The NSIP regime already includes nuclear and solar. We are saying that the ban on onshore wind introduced by the Conservatives was not a rational decision, so we are bringing it back into this process. [Interruption.] The shadow Minister says that it was absolutely rational, but his party’s former Energy Minister, the right hon. Member for Beverley and Holderness (Graham Stuart), said that it was “always mad”. I think we should remember that not everybody in the Conservative party agreed with it, including, I suspect, the shadow Minister himself.
Let me come to the second part of the statutory instrument: the question of solar. Solar has been subject to a 50 MW NSIP threshold since it was originally set out in the Planning Act 2008. However, much like onshore wind, solar panel technology has seen significant advances in efficiency, enabling a greater megawatt yield per site. Evidence suggests that the 50 MW threshold is now causing a market distortion. With modern technology, mid-sized generating stations have a generating capacity greater than 50 MW and therefore fall within the NSIP regime. That is likely to be disproportionate to their size, scale and impact. That has resulted in a large amount of ground-mounted solar projects entering the planning system artificially capping their capacity just below the 50 MW threshold, leading to a potentially inefficient use of sites and grid connections.