Christopher Chope
Main Page: Christopher Chope (Conservative - Christchurch)Wind Farm Subsidies (Abolition) Bill
Christopher Chope Excerpts
Matthew Hancock
My hon. Friend is an incredibly persuasive man, but this technical point is important enough to mean that we are still going to have to resist the Bill, while at the same time holding to our clear position of removing the subsidies for onshore wind in an organised and careful way.
Mr Christopher Chope (Christchurch) (Con)
My right hon. Friend talks about the importance of honouring existing commitments. How does that fit in with what we read in the press about the Government now insisting on having a golden share in the nuclear plant at Hinkley Point?
Matthew Hancock
The two subjects are slightly separate. On Hinkley Point, as my hon. Friend knows, we reached a strong heads of terms agreement on the price and many other details, which we then took to the European Commission and succeeded in achieving state aid clearance on 9 October. There are lots of details to be put in place, and we are working with EDF and other stakeholders to achieve that. I do not think that there is an issue of consistency there. I also do not think that there is a read-across to the point that I was making. Ensuring that we get the details right is an important part of landing any energy infrastructure project, whether related to nuclear or to onshore wind, to which the Bill refers.
The question of how we are reducing the subsidies has formed an important part of our debate today. In the case of large-scale onshore wind, we have already cut support rates under the renewables obligation by 10%, and the renewable obligation support for offshore wind projects will also drop by 10% by April next year. At the end of 2012, we introduced a cost control mechanism called contingent digression for the feed-in tariff, which is designed to reduce tariffs in line with falling costs and the level of deployment. Last year, tariffs for all wind turbines were reduced by 20%, and on 1 October 2014 by a further 10%. Clearly the subsidies are already coming down.
Our new support regime, involving contracts for difference, is designed precisely to get the best possible value for money for the available subsidy by introducing a market in the subsidy. My hon. Friends will not be surprised to hear that when we introduced a market mechanism for the available subsidy, we got better value for money and the price came down. Adam Smith would have been proud of the outcome of the CfD auction. Levels of support are therefore decreasing. Indeed, the market cleared at the much lower than expected price of around £80 per MWh for onshore wind, showing that markets work and increase value for money.
The other interesting outcome of the CfD auction was that onshore wind was not the cheapest form of renewable energy. Solar power came out of that auction as the cheapest. Compared with the £80 per MWh for onshore wind, some of the solar projects came through the auction at £50 per MWh, demonstrating clear evidence of a path to lower subsidies. Indeed, an exciting future will soon be within reach, in which the cost of solar will be compatible with the cost of fossil fuel generation. We have already seen instances around the world of lower-cost solar installations being achieved without subsidy and being cost-competitive with fossil fuels.
Part of getting the balance right involves ensuring that we get a broad mix in the CfD auction, and that we can drive down the costs to consumers of offshore wind as well. We are delivering up to £110 million less overall per year than we were doing in the absence of competition. As a result of the auction, we are offering two contracts to offshore wind farms: Neart na Gaoithe, a 448 MW site in the Forth estuary, and the 714 MW East Anglia ONE project. Together, those sites represent 1.2 GW of renewable capacity.
I shall turn now to the question of reaching grid parity and being able to deliver on the intention behind the Bill without the need to pass it, and to do so in an organised and careful way. Costs in the sector are falling, and we are achieving more economies of scale. In the longer term, that will mean that we can reach parity with other renewable and non-renewable forms of energy supply. Doing that in an organised way will allow us to keep investing in the UK. It is therefore vital to do this carefully and cautiously.
Matthew Hancock
It is certainly not a joint Conservative-Liberal Democrat commitment. Let me be absolutely clear about the distinction. The 10% projection for onshore wind by 2020 is a coalition Government figure—that is a fact on which this discussion can be based—but the commitment is a Conservative party commitment for a future Conservative Government, and we are absolutely clear about that. The distinction is important, but given that we are only a few weeks away from the Dissolution of this Parliament, the way I have been expressing it is that things that have happened in the past and up until now are coalition Government facts or positions, but those relating to the future are, of course, Conservative party positions. That is because we hope and expect to be governing as a single coalition—my goodness, that was a mistake: a single Conservative Government after the election. I hope I have made that precise distinction clear, and I am grateful to my hon. Friend for the opportunity to do so.
Before bringing things to a close, I want to set out why we need to do this in a measured way. The decision by Siemens and Associated British Ports to invest £310 million in offshore wind turbine manufacturing in Hull will create 1,000 direct jobs. It was a significant event for that region last year and it will provide an anchor for building the UK-based supply chain, as well as much-needed skilled jobs in one of the most deprived parts of the UK. To a large extent, that decision was based on the expected size of the UK market, but of course there will be the ability to export overseas. Offshore wind is one area where we have a dedicated industrial strategy, created and delivered by a partnership between government and industry, to ensure that we have the right conditions for UK companies to take advantage of this investment. I wish to pay tribute to and highlight the work of the Offshore Wind Investment Organisation—
Mr Chope
The Minister is drifting on to offshore wind but this Bill deals with onshore wind. In so doing, he is alarming me: is he saying that because the subsidies are being withdrawn from onshore wind we are going to carry on with the subsidy bonanza to all the subsidy junkies who are engaged in the offshore wind business?
Matthew Hancock
The commitment I gave is absolutely about onshore wind. I know that my hon. Friend has concerns about offshore wind, especially off Christchurch, and I understand that. We have had exchanges in this House and discussions about it. We are bearing down on the offshore wind subsidy, as the cost is reducing and industry is reducing its costs. There are links in respect of why we have chosen to resist this Bill, despite there being so much in it we agree with, because we want to make sure that we adopt a planned and careful approach, sticking to commitments that the Government have given and that this House has given to industry, which is developing already.
I also wish to discuss the noise produced by wind farms, because I know it is a significant concern to my hon. Friend the Member for Wellingborough, he raised it and it is important to address the point. Again, this is an area where the Government have taken action. The method of assessing the noise impact of a wind farm is described in ETSU-R-97. That requires the likely impact of wind turbines on local residents and those working in the vicinity to be considered in relation to existing background noise levels, taking into account the characteristics of particular locations. Hayes McKenzie reviewed ETSU-R-97, finding that it is fit for purpose but identifying inconsistencies in the way it was being used in practice to measure and predict the impact of noise. In May 2013, the Institute of Acoustics published good practice guidance which addressed the issues Hayes McKenzie identified. The guide, which was endorsed by the Department of Energy and Climate Change, will help to improve the consistency of the application of ETSU-R-97 in the consideration of wind farm projects. I hope my hon. Friend will see that good work is being done by DECC there, and perhaps it will temper his desire to abolish me—it—at the next opportunity with his next private Member’s Bill.
As my hon. Friend will doubtless be aware, we also recently announced a review of the available evidence on amplitude modulation—AM—noise produced by wind turbines. The aerodynamic noise—the noise produced by the rotating wind turbine blades—includes a steady component, as well as, in some circumstances, a periodically fluctuating, or amplitude modulated, component. One form of AM, commonly referred to as “blade swish”, is an inherent feature of the operation of all wind turbines and can be explained by well-understood mechanisms. It is therefore often called “normal amplitude modulation”—NAM. Some AM, however, exhibits characteristics that fall outside those expected of NAM and can potentially give rise to increased annoyance. Such characteristics include a greater depth of modulation or a changed noise character. For that reason, it is sometimes called excessive amplitude modulation. Research suggests that that form of AM is caused by sudden variations in the direction and speed of the wind, which mean that the wind hits different parts of the turbine blade at different speeds, causing it to stall momentarily. The stalling can then produce a whooshing sound that some people find irritating. The evidence to date indicates that the incidence of AM from wind turbines in the UK is low, but we are committed to increasing our knowledge and understanding of the potential impacts of wind turbines and therefore we keep our evidence base up to date.