Contracts for Difference Scheme

Debate between Alistair Carmichael and Graham Stuart

Thursday 19th October 2023 Westminster Hall

[Graham Stuart]

Having been chided, my hon. Friend is of course—quite rightly, and characteristically—straining to justify his position, and I have a lot of sympathy with it. I have said that we would ideally have got the window in a way that better matched that reality. But there are reasons for having the annual auction. We always come up with a window that industry says is not enough. We have managed to bring down the costs by 70%. It is hard to overestimate the importance of this. This country, the CfD mechanism and, I have to say, this Government have transformed the economics of offshore wind—not just to the betterment of UK consumers, but to the benefit of the whole world. It is only because of what has happened here with this approach, which every year is in a state of tension with industry, that we have been able to show and reveal these prices. We are now able to export our expertise to the north-east of the United States, to the Gulf, to Taiwan—all over the world—as a result of this process.

I said that I wished we could have better attuned the window to the realities—they changed even after we set the prices in November. That was precisely why we decided on having an annual auction. To put it another way, if what someone offers is always accepted, they might want to consider whether they are overpaying. That is not to say that I in any way revel in the fact that we did not get offshore wind in that round, but I am glad that we had the foresight to move to an annual system and that we are able so swiftly to move on. It will just be the middle of next month when we set out the core parameters for the next round, which will happen next year.

[Mr Carmichael]

Will the Minister give way?

[Graham Stuart]

I will make a little more progress, if I may.

The CfD scheme is a major UK success story. It has secured more than 30 GW of capacity, including 20 GW of offshore wind, since 2014. It has driven down the price of offshore wind by about 70% in that time, helping to grow the industry and its supply chain both in the UK and globally, although as the hon. Member for Manchester, Withington says, I have previously publicly expressed the desire to do more. We are coming forward with non-price factors as a way of encouraging more of the supply chain to be in the UK. But have no doubt: this has been a phenomenal success for us, for British jobs, for British consumers and for the world. We have the four largest offshore wind farms in the world, with more than 14 GW already in operation and a further 77 GW in the pipeline. It is a pleasure for me that of course the largest offshore wind farm in the whole world is Hornsea 2, named after a small town in my constituency. The UK is a world leader in floating offshore wind, with one of the largest amounts of operational capacity anywhere in the world, at 80 MW to date.

The hon. Member for Strangford says that the results of allocation round 5, which concluded in September, were disappointing because the total capacity secured was less. As I have said, I do not accept the characterisation of that round, because it has in fact realised the highest amount, on an annualised basis, of any of the rounds we have ever run. It resulted, in fact, in more projects—95—than we have ever seen successfully done, even though it covered just a one-year window. The round delivered a combined total of 3.7 GW, which is enough to power the equivalent of 2 million homes. As I have said, there was more than double the number of onshore wind projects. We also secured—I have touched on this already—another good result for solar, and four times as many tidal stream projects as AR4 did.

I pay tribute to the right hon. Member for Orkney and Shetland (Mr Carmichael) for his doughty support for the sector. I did not realise that his involvement had stretched to 20 years, but when I visited his constituency he was there to characteristically champion the industry. For the first time in our CfD, we had success with geothermal. This vital new renewable capacity was procured in a competitive auction set against, as I say, a backdrop of highly challenging macroeconomic conditions.

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[Graham Stuart]

The hon. Gentleman always makes an extremely plausible and effective advocate for the ideas that he espouses. I—and the Government, I am sure—will remain open to discussions with those in Northern Ireland and with the hon. Gentleman to find solutions. We talked about some of the challenges of staying on the overall net zero pathway. Of the four Administrations, Northern Ireland is potentially the most off track, so there is a real need to find solutions and we always stand ready to work constructively to find the best way forward.

I continue to believe, however, that the development of a bespoke support scheme offers the best and quickest way for Northern Ireland to secure the investment in renewable electricity generation that it needs to achieve its net zero goals. I have not said it explicitly but, of course, energy is devolved, so we are looking to the institutions in Northern Ireland, on behalf of the people of Northern Ireland, to take this on. That is what we would profoundly like to see. I commend the work done by the hon. Gentleman and the Department for the Economy so far, and I encourage us all to support their efforts.

I will try—I hope reasonably briefly, with your permission, Dame Angela—to respond to a few of the other points that have been made. My hon. Friend the Member for Waveney chided me in return, to ensure that we do not rest on our laurels and that we respond appropriately to IRA and perhaps EU initiatives in the space. He talked about creating incentives, picking up on the supply chain development issues that many Members have touched on, and ensuring that seabed auctions are a good place to do that. As he knows, I set out the work that the Crown Estate is already doing to put conditions on at that stage, in addition to changes to the CfDs.

I take on board my hon. Friend’s points about the administrative strike price, and ensuring that we get it in the right place in order to balance keeping costs down for consumers with getting the generation that we want and need. We will set out the pot details in just a few weeks, so I will leave commenting on his appeal for a ringfenced pot for offshore wind. On his request for the pot to reflect the pipeline, that is the mechanism we use for the CfD. That is one of the reasons for setting out the core criteria in November and providing more details in March—precisely so that we can match the budget and the other elements that make up the CfD with a realistic assessment of the pipeline in place. His Majesty’s Treasury and the Chancellor will have heard my hon. Friend’s points on the issues that, sadly or otherwise, sit with the Treasury rather than my Department.

From the right hon. Member for Orkney and Shetland, I heard, as ever, his espousal and support for tidal, and he talked about setting a target for that. The Government remain open and we will continue to consider that, but we have not yet made a decision on whether it would be the right thing to do. It is about doing the right intervention at the right time, based on the stage of development of a particular technology. However, like him, I am proud of the fact that we have been able to see it come on, and see some of the developments in his constituency. The hope to see those operationalised and scaled up here in the UK, with a big and strong domestic supply chain, is one that gives real optimism for the future.

[Mr Carmichael]

I was minded to offer myself as a mediator between the Minister and the hon. Member for Waveney, but they seem to have found a better pitch since that stage in the debate.

On the point of the 1 gigabit target by 2035, does the Minister not take on board the fact that this is now the only technology that does not have such a target? It was sustainable to argue his position in AR4; it is more difficult in AR5, and with every round it will become more difficult still. I say to the Minister again that this is an opportunity to talk to the industry, and engage in a way that works to his advantage by restoring some of the damaged engagement credibility.

[Graham Stuart]

I can go no further than to say that the right hon. Gentleman, as so often, makes a very strong argument. We will continue to engage and will come forward with any decision on that in due course, if that was thought appropriate.

The Opposition spokesman, the hon. Member for Manchester, Withington, talked a little about being able to bring hope to oil and gas communities around the United Kingdom. That is ironic considering the ambition of any Labour Administration, were one to be elected, would be to strangle that industry. Even though, as of last year, we are the most decarbonised major economy on earth, we are still 77% dependent on oil and gas for our primary energy needs.

Over the coming years, due to the precipitous fall in production because of the maturity of the basin in oil and gas production from the North sea, and those expected falls in Norwegian production, our dependence on LNG imports and the like is expected to increase. Having seen the price spikes of the last two years and the risks and issues that arise from not having reliable and ideally domestic energy, the Opposition want to put at threat 200,000 jobs supported by the oil and gas industry —cheered on, bizarrely, by the fortunately ever less popular Scottish Nationalist Government—through wanting to stop any new licences. That is despite the fact that the only alternative realistically available is LNG, which the North Sea Transition Authority recently announced had embedded in it four times the production emissions of domestically produced gas. It is environmentally nonsensical and disastrous for 200,000 jobs. Just as a small addition, the industry is expected to bring in £50 billion of tax revenue over the next five years—goodbye to that as well.

It is absolutely crazy to have an Opposition spokesman saying he is here on the side of oil and gas communities—he absolutely is not. We have an integrated energy system encapsulated within a legal framework in the Climate Change Act 2008, which means we are making the transition. We are leading the world on making that transition, but we will not speed it or help it, but in fact weaken it, if we do not support new oil and gas licences in order to minimise the necessary inevitable reduction in oil and gas production in our waters. It is bad for jobs, for the environment, for the economy and for tax. On no front does it make any sense at all.

I have gone on long enough. I thank everyone for their contributions, not least the hon. Member for Strangford who led the debate. I am happy to keep engaging with him. I admire his tenacity. I recognise what drives him to want to find a solution in Northern Ireland and I entirely share that desire to see something happen. I am confident in our CfD system. It has been a world leader. AR5 was a success even though it did not deliver the way I would like it to have done in offshore wind. I am extremely confident about AR6, where we will again balance getting the generation we seek with ensuring that we look after the interests of consumers and the long-term interests of the United Kingdom.

Offshore Wind Contracts

Debate between Alistair Carmichael and Graham Stuart

Tuesday 12th September 2023 Commons Chamber

[Graham Stuart]

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. The most real economic data that we get is from an auction round. Moving to annual rounds, there will be ebb and flow as the right balance is sought between getting the generation that we require, set against our extremely ambitious deadlines, and not paying too much. That is the balance that we strike. We have 3.7 GW and I imagine that we will do even better next time.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

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, which is in relation to the development of marine renewables. The success of the auction for tidal stream development illustrates what would be possible for wave power if it were to be given the same opportunity in AR6. But for tidal stream, does the Minister agree that what is now needed is the 1 GW target for deployment? Will he work with me and other people in the House with an interest in this and the marine renewables sector itself to deliver that ahead of AR6?

[Graham Stuart]

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. I am personally determined to ensure that tidal stream continues to grow. We maintain our global leadership, with a very high percentage UK supply chain as a further positive to it. He tempts me to get ahead of myself on policy, but I cannot do that. However, what we are doing and what our dedicated pot this year did is further strengthen that so that we can get in a position where that might be a realistic policy position to take.

Oral Answers to Questions

Debate between Alistair Carmichael and Graham Stuart

Tuesday 23rd May 2023 Commons Chamber

[Graham Stuart]

It is quite simple. We are reducing demand for fossil fuels, but we are net importers of them. Producing them here and destruction of demand have to be our focus and that is what the Government are doing. We are getting rid of the power stations burning coal. In 2012, nearly 40% of our electricity came from coal, the most polluting of fossil fuels—that was the legacy of the right hon. Member for Doncaster North (Edward Miliband)—but by next year it will be zero. We have moved from 7% to well over 40% with renewables, as the Secretary of State has said. It is economic insanity for us not to produce the oil and gas that we will need for decades to come when we are a net importer.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

9. What recent assessment he has made of the potential role of North sea oil and gas infrastructure in developing carbon capture and underground storage capacity.

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[Graham Stuart]

I thank my hon. Friend for separately sharing his detailed thoughts on REMA and its reform. This is a complex area with multiple interrelated mechanisms; it requires careful consideration to unlock the £280 billion or perhaps £400 billion of investment in generation and flexible assets that could be needed by 2035. While I share his impatience and desire to move fast, it is more important still that we get it right. I aim to publish a second REMA consultation in the autumn, which will narrow the options for reform and detail the direction of travel.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

T4. Directors at Ofgem are on the record as saying they are already doing everything that needs to be done to meet the country’s net zero targets. I do not know anyone outside Ofgem who sees that as anything other than dangerously complacent. Is it not now time for the Minister to give a direct mandate to Ofgem to include meeting net zero as part of its remit?

Powering Up Britain

Debate between Alistair Carmichael and Graham Stuart

Thursday 30th March 2023 Commons Chamber

[Graham Stuart]

My right hon. Friend is, of course, absolutely right. The hon. Member for Leeds East (Richard Burgon) talked about growing our oil and gas. We are net importers of oil and gas, and production in the mature basin of the North sea is falling. Only new investment can unlock the greening and electrification of production, with even lower emissions in sight from the North sea than from tankered gas coming in from abroad. My right hon. Friend is absolutely right. If we did as the leader of the Labour party, the right hon. and learned Member for Holborn and St Pancras (Keir Starmer), said at Davos and had no new oil and gas licences, we would not stop using gas; we would just import more of it from abroad with higher emissions attached, with no jobs, no tax and no long-term benefit to the United Kingdom. That is not a tenable policy. I hope that, apart from their far-left colleagues on the far Labour Back Benches, everyone else in the Labour party recognises that is a crazy position and it needs to change.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I take the Minister’s recent comments to be a notification that I will be having a constituency visit from him. I look forward to that.

However, can I take him back to the question of energy security and just remind him that there is more to energy security than what we produce and where? It is also about the protection of infrastructure and the assets around it. All this week, we have had a Russian tug, the Nikolay Chiker, steaming up and down to the east of Shetland in the vicinity of the pipeline servicing Brent and Ninian. This morning, the tug has gone around to the north-west of Shetland and is now doing the same thing in the vicinity of the pipeline servicing the Laggan field to the west of Shetland. It is a merchant vessel, but we know that the Russian military often purpose merchant vessels in this way. Will the Minister speak to his colleagues in the Ministry of Defence to see, first, if they know what is going on? Secondly, if they do not, will they find out? Thirdly, what will we be doing in the long term to protect these vital national assets?

[Graham Stuart]

I thank the right hon. Gentleman for his question. Perhaps we can follow up offline on that. As appropriate, I would certainly be happy to engage with my colleagues in the MOD. As a Minister for energy security, I keep all that under advisement. We will formally notify him of my intention to come to his constituency and, whether next week or another time, we can discuss this matter further and make sure I can reassure him on what are very well expressed concerns.

Energy Bills: Self-disconnection

Debate between Alistair Carmichael and Graham Stuart

Wednesday 25th January 2023 Commons Chamber

[Graham Stuart]

The decision was made yesterday and I was able to brief colleagues, including the hon. Gentleman—I thank him for attending the meeting—yesterday afternoon, so I have tried to move as quickly as possible. Of course, until a decision is made, Government policy stays as it is until it is changed, and that explains the letter. I certainly hope that the hon. Member for Twickenham (Munira Wilson) would accept that I was not being disingenuous. We moved to communicate as quickly as possible once the decision had been made.

The payment will go through local authorities. Much as I would love to give a define date, it depends when people apply. We will be encouraging people to apply from 27 February—if that is when the scheme launches—and then local authorities will be carrying out their verification. We will triage that first, to minimise the imposition on local authorities, but they will have to go through a process to get the payment out. That means I cannot give a definitive date, much as I would like to, and much as the hon. Member for Cardiff South and Penarth (Stephen Doughty) is right to suggest that it would benefit people to know when they will get the support to which they are entitled. I hope he understands that, administratively, if I gave a date there would be a risk that I would be back before the House again to explain why, in some cases, it was not delivered. We will do it as quickly as we can but, having talked to the pilot local authorities, they feel that we are taking the most robust approach with the best chance of getting the payment out as quickly as possible.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

For those who are getting support for alternative fuels, what reach does the Minister expect the scheme to have for those whom the Government have identified as relying on alternative fuels, and how long does he expect it will take for the remainder to get their money?

[Graham Stuart]

Following this urgent question, I will seek an answer for those on alternative fuels who are in the majority group; it might be where we are at in our data development, but I have not seen a number on that. If I can access that, I will write to the right hon. Gentleman, and I will seek a way of sharing it with the House. Most people will be paid automatically with a credit to their energy bill, which will be ready at the beginning of February. I suppose that may not appear on the bill until March, but we will have that up and running automatically for those with an energy bill. We hope to use the same portal that is being used for the EBSS £400 alternative fuel payment, and to open it very shortly after the opening of the EBSS alternative portal. When I have further specific dates that I can share, I will do so.

Prepayment Meters

Debate between Alistair Carmichael and Graham Stuart

Monday 23rd January 2023 Commons Chamber

[Graham Stuart]

I have explained that the system that Ofgem enforces, and has long enforced, is strictly based on the cost of delivery. We will look at that again to make sure of that. We have to ensure that the existing conditions on compliance on which Ofgem works with suppliers are right, but we also need a future system that learns from current pressures.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

In Orkney and Shetland, we have the highest rates of fuel poverty anywhere in the country. The premium paid by the poorest people in my constituency takes the advance situation and risks making it catastrophic. We have another problem on top of that, as we cannot get any energy company to install meters in new-build houses in the northern isles. When the Minister next speaks to the energy companies, and when he has stopped them installing meters that people do not want in the rest of the country, can he ask them to send some engineers to the northern isles to install the meters that new house owners need?

[Graham Stuart]

The right hon. Gentleman has raised this with me. There are issues, and the Government have intervened to make sure that the distribution costs in the far north of Scotland and the islands are not fully reflected in the price, so a special exemption has been made. However, he is right—I have heard about the difficulty for builders of getting a meter installed, and it should not be beyond the wit of man for people to align and work together to make sure that the system runs efficiently and people get a meter when they should. I share his frustration.

Strangford Lough: Tidal Wave Energy

Debate between Alistair Carmichael and Graham Stuart

Tuesday 10th January 2023 Commons Chamber

[Graham Stuart]

That leads me naturally on to our system. What we try to do across all technologies, places and companies is to create an architecture that is fair, transparent and predictable—as much as that is possible. It therefore does not depend on me being sold on any particular company or solution, but allows, through decent mechanisms, the best to rise to the top. That is very much our aim.

Much of the success of tidal stream to date is down to contracts for difference, which the Government have produced and which I am delighted about. This is our flagship mechanism for supporting the cost-effective delivery of renewable energy, ensuring that the nation’s tidal stream innovators have the opportunity to bring down the costs of the technology and learn the lessons from being the first in the world to deploy it at scale. I am sure that Members were, like me, delighted that last year the Government established a ringfenced budget of £20 million for tidal stream developments in pot 2 of the fourth contracts for difference allocation round. This saw four tidal stream projects win contracts totalling 40 MW at a strike price of £178.54 per MWh. To put that into perspective, only 36 MW of tidal stream was deployed worldwide between 2010 and 2020. This is the first time that tidal stream power has been procured at this scale.

[Mr Carmichael]

I was beyond delighted. I am on the record as having congratulated the Government many times on the commitment in AR4. We are seeing not just public money going into tidal stream, but private finance, and that really is the proof of the pudding. What we need now, though—I think the Minister knows where I am going with this—is a commitment to continue that in AR5. He has seen already what is possible with that ringfenced pot, but we need to keep it going.

[Graham Stuart]

Further information—we released some information before Christmas—for AR5 will come out shortly ahead of the launch of AR5, which of course has now been moved on to an annual basis, giving further confidence, I hope, to the market.

The energy transition must involve each and every part of our United Kingdom. As an integral part of the UK, that of course means Northern Ireland where, energy being a devolved matter, contracts for difference do not actually operate. However, in the Northern Ireland energy strategy, Northern Ireland set out a path to net zero energy and to meet 70% of electricity consumption from a diverse mix of renewable sources by 2030. The Government are committed to supporting Northern Ireland to succeed in that. If we are to get it right, places like Strangford lough will be critical.

I thank the hon. Member for Strangford and all those involved for their support in making the pilot project a success. Strangford lough is a world first: a commercial-scale tidal energy project that by September 2012 had produced 5 GWh of tidal power since its commissioning in 2008—equivalent to the annual power consumption of 1,500 households.

Strangford shows that tidal can work; it was a major demonstrator in that sense. It shows that it is safe, too: I am delighted that Strangford lough has had no major impact on marine life, for instance. That is why we have provided it with £5.2 million of funding, in addition to £500,000 from Northern Ireland Electricity under its Smart scheme. In 2011, the project qualified to benefit from the marine renewables deployment fund, after passing the UK Government’s operating performance criteria.

It is not just Strangford lough; we continue to invest in renewable energy across Northern Ireland. Through UK Research and Innovation, we have provided Artemis Technologies with £33 million from the Strength in Places fund to drive the decarbonisation of maritime transport. Last year, Wrightbus secured an £11.2 million investment from the Department for Business, Energy and Industrial Strategy to develop a low-cost hydrogen fuel cell technology and create a hydrogen centre of excellence—all part of a £54 million package.

In conclusion, it is clear that this Government are taking action on all elements of energy in Northern Ireland. We are bringing energy bills down right now, and we are harnessing the power of clean, secure, affordable energy to build an economy that is fit for the future. That includes a sound track record of supporting the tidal stream industry, where we are on the cusp of commercialisation. With excellent export potential, we are ready to lead the world, and I am confident that the tidal stream industry will continue to develop across every corner of the United Kingdom as we work together to bring green growth to each one of our countries.

In the seconds that remain, I want to go back to the questions that the hon. Gentleman asked. One was about the tidal taskforce, which I am happy to discuss further with him. Having a taskforce for everything is not necessarily the right thing; I want to make sure that we have the right architecture. We will see what happens with the CfDs and make an announcement in due course, but assuming that we get the broad architecture right, given the state of tidal stream—I will leave leadership for the moment—I am hopeful for the future.

The hon. Gentleman mentioned a visit. I would be delighted to accept, in due course—

Oral Answers to Questions

Debate between Alistair Carmichael and Graham Stuart

Tuesday 29th November 2022 Commons Chamber

[Graham Stuart]

We will update the House as soon as we have announcements to make.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

Community energy schemes such as Hoy Energy Ltd in Orkney perform a really important role in the community by reinvesting their profits in local schemes and projects. Will the Minister assure me that when it comes to devising regulations under section 16 of the Energy Prices Act 2022, there will be exemptions for such companies to ensure that they can continue to put the profits that they generate back into the community?

[Graham Stuart]

The provisions in the Energy Prices Act have been superseded by the announcements made by the Chancellor in the autumn statement, and therefore I do not think that they strictly apply any longer, as the right hon. Gentleman has suggested.

Oral Answers to Questions

Debate between Alistair Carmichael and Graham Stuart

Thursday 8th October 2020 Commons Chamber

[Graham Stuart]

First, let me praise my hon. Friend. If the allocation of free ports was based purely on the championing of their case by Members of Parliament, it would be a certainty that he would have one in his area. Yesterday, Her Majesty’s Treasury published the response to the consultation on free ports, which outlined how free ports will help to level up the UK economy, bring in new investment, create high-skilled jobs, and provide new opportunities in ports and the areas around them. Although it will be an open, fair, and transparent process, I have no doubt that the advocacy of my hon. Friend will set a precedent for others and, I hope, lead to a successful outcome for him.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

On Monday, farmers from across the whole United Kingdom will be demonstrating in Parliament Square to make the point that, to them, future food standards and animal welfare provisions are essential. Will the Secretary of State join me in meeting them to hear from them at first hand the importance of this?