Draft Contracts for Difference (Miscellaneous Amendments) Regulations 2024

Andrew Bowie Excerpts

Tuesday 3rd December 2024 General Committees

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I welcome the amendments that this statutory instrument brings to contracts for difference regulations, extending the existing CfD to offshore wind and permitting repowering projects to apply for CfDs. Contracts for difference is a scheme that the official Opposition are immensely proud of—delivering 29.4 GW of power in six rounds of allocation since 2014. Indeed, it was the Conservative Government under Lord Cameron of Chipping Norton that introduced the scheme, to combine the power of competition with certainty for investors for the strike price, to keep prices low while driving forward low-carbon energy projects. We are also proud of the consistency and certainty brought by annual licensing rounds, which we approved last year.

However, we have concerns about the direction of travel of the new Secretary of State for Energy and indeed that of the new Government. Their target for CfDs requires an almost hell-for-leather approach for which we worry that consumers and billpayers will shoulder the burden. In the Secretary of State’s attempts to rush to 60 GW of offshore wind capacity, he would need to secure 28 GW in the next two allocation rounds. That is more than in the last six rounds combined. That will inevitably require ditching the competitive element of the allocation rounds entirely. We worry that that will push up the strike price. Even The Guardian does not think the Secretary of State’s plans are realistic, claiming that his target of having 60 GW of installed offshore wind capacity by 2030 is

“still a long way from being credible”.

In the past, reasonable strike price mechanisms have enabled competition while encouraging new projects by providing certainty. However the new, ferociously ambitious targets will require a strike price which outstrips the reference price, meaning that the consumer is exposed to more of the burden. Industry knows that. The head of offshore development at RWE told a business conference that the

“consumer risks losing out”

under these plans. We must take very seriously his concerns that the rush to deliver by 2030 would

“create short-term resource constraints, spikes in prices”,

and that consumers will be the ones to bear the brunt.

It is no wonder, therefore, that the Government have backed down from claims of saving households £300 on their energy bills. It is clear that this rush for electricity decarbonisation by 2030 will see bills going up and up; the industry admits that. The signal to the market from the Secretary of State is “renewables at any price”—they will pay exorbitant amounts to create the capacity to achieve a hugely ambitious political target. We cannot be naive about the economic implications of that political choice.

We do support the amendments. However, I would like to put on record our concern about the implication of the Government’s politically motivated rush to the 2030 target, which it seems the Secretary of State will pursue at any cost.