Offshore Wind Developments

Baroness Ritchie of Downpatrick Excerpts

Tuesday 6th January 2015 Westminster Hall

[Mr Mike Weir (Angus) (SNP)]

I am pleased to have secured this debate and thank the Backbench Business Committee for recommending it.

Developing the United Kingdom’s offshore wind resource would provide a significant supply of clean, secure energy. Scotland, of course, has huge potential to provide a large proportion of energy from this source. There are proposals for a number of wind farms around our coastline, including three off the coast of my Angus constituency. Between them, the projects off the coast of Angus alone could supply more than 2 GW of electricity.

In addition, developing this resource could create a significant domestic manufacturing and export industry. RenewableUK has estimated that employment in the offshore renewable industry can grow from the current 13,000 jobs to over 44,000 by 2023. The Centre for Economics and Business Research has found that investment in offshore wind will deliver £8.4 billion of gross annual value added to the UK economy by 2020 and that the sector could boost exports by £18 billion a year by 2030.

This is not purely projection. As part of electricity market reform, the Department of Energy and Climate Change established a final investment decision enabling process—a bit of a mouthful, but never mind—which enabled a number of projects to move forward with investment decisions, having been awarded early contracts for difference. This enabled five offshore projects totalling nearly 3.2 GW of capacity to come forward. On the back of this, there was a significant boost to the offshore supply chain when Siemens, the dominant supplier of offshore turbines in Europe, confirmed that it would proceed with a major manufacturing facility in Hull for its new offshore turbines. This was a clear demonstration of the direct link between visibility of deployment at scale and securing wider investment in the supply chain, and it demonstrates that this is not just a Scottish issue; it applies also to the north of England.

If we are serious about the re-industrialisation of the UK, the “march of the makers”, or whatever slogan one wants to use, we need to ensure that we actually invest to get these industrial developments built and producing.

[Ms Margaret Ritchie (South Down) (SDLP)]

Is the hon. Gentleman aware that in Northern Ireland, there was an application to explore having offshore wind farms on the County Down coast, but that fell foul of electricity regulation rules and did not fulfil the time requirements? Does he agree that that was a lost opportunity for economic investment?

[Mr Weir]

I am not familiar with that case, but it sounds like it was. Offshore wind farms give the opportunity to provide not only clean energy, but employment. That is important for the hon. Lady’s area and mine, and for much of Scotland. That point was reinforced in a report from the think-tank Green Alliance, which found that CfDs form part of a strong new investment framework for offshore wind, but that a lack of clarity over post-2020 policy and funding

“is contributing to a shrinking of the offshore wind project pipeline”.

That seems to be the case in Northern Ireland, given what the hon. Lady said.

Clear decisions over future support for the sector will need to be taken in the early days of the next Parliament if the pipeline is to be sustained at levels necessary to support continued growth of the sector out to 2030. Specifically, the report finds that:

“The UK will need a minimum of 25GW of offshore wind by 2030, of which 10GW is projected to be in operation by 2020. Currently, 13GW of additional offshore wind projects are at an advanced stage of development, and a further 20GW have entered development.

Policy, regulation and funding challenges mean the pipeline is shrinking. 8.2GW of offshore wind projects were withdrawn in the 12 months to June 2014, with other projects since shelved. New projects must compete for government funding which will only be sufficient to deploy an additional 1.2GW in the five years up to 2020.

However greater policy stability could result in capital investment worth in the region of £1.8 billion a year between 2015-30 into the UK offshore wind supply chain, over three quarters of which is made up of small and medium sized UK companies.”

That shows the potential; at this stage, much of it is just potential.

Previously, of course, these developments were funded through the renewables obligation, under which developers built projects, gained accreditation and received a fixed sum on top of the market price. However, under the new system of contracts for difference introduced under the Energy Act 2013, projects must be developed to a point at which they have planning consent and a grid connection offer; then they can bid into a competitive allocation round to secure a contract for difference, which tops up the market price to a specified strike price.

I stress that this debate is not an attack on the change in the system. It is fair to say that most, if not all, parties in the House supported the change to contracts for difference.