Offshore Wind Developments

Albert Owen Excerpts

Tuesday 6th January 2015 Westminster Hall

[Mr Weir]

We are in danger of having a debate within a debate. I will return to the points I was making on offshore wind, although nuclear power does come into this to some extent. If we are serious about the long-term development of offshore wind, we need clear targets and commitments for developers and we need to ensure that we give certainty to support supply chain investment and development. That would undoubtedly also involve providing the necessary conditions for competition, innovation and cost reduction, all of which are supposed to be the Government’s aims. Instead, there are mixed messages on energy policy and continuing uncertainty. Strike prices are set only to 2018-19 and the levy control framework is set only to 2020. There is no real commitment to a decarbonisation target. RenewableUK described the 2020 deadline as being like a cliff edge, because of the uncertainty on what comes after.

Those points were also raised in the Green Alliance report I mentioned, which concluded:

“The research has identified five actions the next government should take to realise the industrial and decarbonisation potential of offshore wind:

1. Set a 2030 carbon intensity target for the electricity sector of 50gCO2/kWh”—

given the Government’s previous response to that, I am not holding my breath—

“2. Confirm the scale of funding available to support delivery of low carbon energy infrastructure during the 2020s under the Levy Control Framework.

3. Provide more certainty for low carbon generators by confirming the timing of funding allocation rounds for the rest of this decade.

4. Stabilise the supply chain by committing to minimum levels of offshore wind deployment in the 2020s (dependent on generators meeting cost targets).

5. Draw on international experience to derisk UK offshore wind development and ensure a robust pipeline during the 2020s.”

The hon. Member for Upper Bann (David Simpson) made a point about the impact on the bill payer, which we also have to take into account. We cannot say that we will just pump money into any sort of development, irrespective of the impact on bill payers. It is not necessarily about putting more money into offshore wind. As I have said, by investing in offshore wind, we get more than just clean energy; we get industrial investment, jobs and the economic regeneration that many of us are looking for in our areas. It is about certainty and giving the industry a clear signal that the huge amounts of money it is putting into developing these projects will not be wasted and that there is a plan beyond 2020 to ensure that these developments will come on stream, produce energy and increase industrial investment.

[Albert Owen (Ynys Môn) (Lab)]

I congratulate the hon. Gentleman on securing this debate. Is another big issue not the cost to projects of connecting to the national grid? Many of these offshore wind developments need new infrastructure and the grid. The grid has a long-term forward plan. If we have short-term CfDs, short-term investment needed for consent and no guarantees of grid connection, the whole situation is even more uncertain than he is outlining.

[Mr Weir]

The hon. Gentleman makes a good point. I have spoken on many occasions about the difficulties that grid connections pose for many renewable generators, particularly in more remote areas such as the north of Scotland. There are a huge number of issues in relation to that. To be fair, efforts are being made to address some of those problems with the proposals for new lines down the east and west coast of Scotland and various other connections, but those are long-term projects. They will not be done quickly. The point is also that although many of these offshore wind projects are looking for consents now, it will be several years before they come on stream. I understand that from getting a CfD, it can be up to three years before the first turbines are operating or in place. There is a long-term aspect, but it is not beyond the wit of regulators to bring the two together.

[Albert Owen]

I understand what the hon. Gentleman is saying, but the point I am trying to make is that each of the individual projects will have to meet the cost of grid connection. It would be better to have the national infrastructure of the National Grid acting in the national interest by ensuring that the cost is spread across the country and not met just by the individual projects. A new grid connection costs hundreds of millions of pounds, which can in many cases make a bid uneconomic. That is my point.

[Mr Weir]

Again, I do not disagree with the hon. Gentleman. He tempts me into a discussion about the postage stamp model of transmission charges, which is a similar issue, but I shall not go there because I am coming to a close and other people want to speak.

The industry also raised concerns about the levy control framework and called on the Government to address the political uncertainty about whether 2020 is a budgetary cliff edge. Offshore projects have a four to five-year horizon from being awarded a contract for difference to the commissioning of the first turbines. The industry is concerned that there is no clear indication about what will be available post 2020.

The Minister may say that it is difficult to give a clear indication about the future—indeed, we cannot be certain about what the Government will look like in six months, never mind six years—but giving some indication of the projected budgets and the intended direction of travel would go some way to addressing the industry’s concerns. Ministers have not been so reticent about nuclear energy. They have, in principle, agreed with EDF a contract for difference at Hinkley Point at a strike price of almost double the current wholesale price of electricity. That contract will last for 35 years—more than double the length for renewables. There seems to be a willingness to do more for nuclear than for offshore renewables, which provide a much better platform for clean energy and for the industrial regeneration that is required in many areas of our country.

--- Later in debate ---

[Albert Owen (Ynys Môn) (Lab)]

Happy new year, Mr Gray. It is a pleasure to serve under your chairmanship. I thank the hon. Member for Angus (Mr Weir) and the Backbench Business Committee for this important debate.

I will try to carry out the difficult job of being a bridge between the anti-nuclear and anti-wind brigades in the debate, because I consistently support both forms of generation. I am pro-nuclear, pro-wind and renewables, and pro-energy efficiency. I see no contradiction in supporting all three if we are to achieve the goals of a long-term low-carbon economy, which is the way forward. We must be honest with the public when we talk about support mechanisms and subsidies. Each sector receives subsidies. The anti brigade say “Isn’t it terrible that the others get subsidies?” However, many of the technologies need to be upgraded, and some are new technologies, so they need Government support.

As a member of the Select Committee on Energy and Climate Change and the Committee that considered the Energy Act 2013 I supported electricity market reform. Any party in government over the relevant period would have needed to make progress on that. I agree with my right hon. Friend the Member for Delyn (Mr Hanson) that we need continuity and consensus when we talk about energy and long-term planning. We had that when the Government first came to power; and we had a sensible Energy Minister—I welcome the Minister to his place—but he was replaced by someone who was less pro-wind. He said in the Chamber that he supported it, but outside said he did not, following the line of many of the popular newspapers of the day. That is no way to make Government policy, and I think that the uncertainty has affected the future of development.

I want progress with—I hope—a change of Government this year, but also with consensus on energy policy, so that investors see certainty. During the Committee inquiry on energy market reform we spoke privately to businesses. They said that uncertainty and short-termism put them off investing in the United Kingdom. Those multinational companies will take their money anywhere development will happen. Visitors to Texas, where they have shale gas, will also see wind development there. Most countries are investing both in renewables and in either oil and gas, as in America, or nuclear where there is progress towards low carbon. I welcome the fact that my near neighbours the Irish Government now say that they cannot rule anything out, and are talking about new nuclear for the future.

I have been working closely with Labour colleagues in north Wales on the development of a low-carbon economy, not just for energy security, which is important, but for manufacturing and regional economic benefits. I have seen those benefits. The United Kingdom is an island economy, and I represent an island constituency. I want the maritime benefits not only of manufacturing, but of research and development and links with nearby universities. The university of Bangor, in the neighbouring constituency, has its ocean sciences faculty on Anglesey, and its research and development goes hand in hand with the development of offshore technologies. We need to make those links to get good quality jobs in the various regions of the United Kingdom. I support what is happening in Scotland in developing wind, and what is happening in east Anglia and elsewhere.

The United Kingdom is a small island that competes internationally, and we need to harness our resources, including wind, tide and waves, to maximise future benefits. That is why we need long-term vision, and policies to aid and abet it, to bring about top quality jobs—and the jobs in such industries are of top quality. There is a shipping company in my constituency called Turbine Transfers. It is international, operating across the world, and now makes purpose-built vessels for the offshore industry. It needs the certainty I have spoken of, so that it can build vessels to be crewed and maintained around our shores; that is the importance of offshore energy. With the electrification of our domestic system of surface transport—cars and railways—we will need low-carbon energy, and we need to focus on the long term. We have benefited in north Wales from taking such difficult decisions. I supported Gwynt y Môr when the Conservatives, in opposition, opposed it; but that development, to which the previous Government gave consent, is now a flagship policy of the Conservative Government. Such uncertainty and policy change is the reason for our lack of long-term investment. We need to move forward and get the quality jobs I have spoken about.

Hitachi is developing a nuclear power station in my constituency, which I fully support. I do not think that there is an either/or decision to be made over nuclear or renewables; I think we should have both. I have seen what skills have been developed over generations, and I want them to be transferable between different types of energy production. That is why I have been promoting Anglesey as an energy island—so that we can have a focus of attention and a centre of excellence, with links to universities, schools and technical colleges, to get the right skills base for the future, and high quality jobs. The hon. Member for Waveney (Peter Aldous) mentioned the accents to be heard when he travels around the world; and Welsh accents can be heard in energy development in Canada and elsewhere. I want to hear those accents back home, in a forward-looking industry where young people have opportunities to develop. Offshore wind, like oil and gas, has provided great opportunities for people in the United Kingdom, and we should keep those sectors in our country. That is why I support nuclear as well as wind and renewable energy.

I am worried about contracts for difference and the small pot for maritime development and renewables such as wave and wind. In 2001 when I entered the House, I was always being told that wave and tidal energy were about five to eight years away, and I am still told that now. We did not have the policy certainty that we could take advantage of, and we need that. I have been to see research and development in the Orkney islands, but things are not moving forward.

Finally—and this is the main reason for my taking part in the debate—I have seen abandoned projects in my area. The Rhiannon project was going to supply between 2 and 3 GW of energy in round 3, and the application for the consents was made. Hundreds of millions of pounds were spent, but the project was abandoned because, in my opinion, of uncertainty about the future. Of course, there was talk of technical difficulties, and as the hon. Member for Banff and Buchan (Dr Whiteford) said, there will be difficulties in future in deeper waters; but we need to plan for those. In future, there will be bigger projects, further offshore, harnessing energy more efficiently for the future. We need to take decisions now.

It is not a question of either nuclear or renewables. We need both if we are to move forward as a world leader. Nor is it a question of either tourism or energy development; we need both. My constituency is one of the most beautiful areas in the world, and tourism there has grown. We have a nuclear power station, we had early onshore wind, and now we have offshore wind development plans. The issue is Britain looking after its own interests with energy security, and attracting the high skill levels that the people of my area deserve.