Offshore Wind Developments

Eilidh Whiteford Excerpts

Tuesday 6th January 2015 Westminster Hall

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Happy new year to you, Mr Gray. I am pleased to have the opportunity to contribute to the debate. I am also grateful to the Backbench Business Committee for giving us time this morning to debate offshore renewables.

Like other hon. Members, I have a strong constituency interest in the development of offshore wind energy, in that one of the projects bidding for support in the first allocation round of contract for difference is based in the Moray firth, off the northern coast of Banffshire. Several of the ports along the Moray firth could benefit from the development of offshore renewables, with significant potential spin-offs for a wider supply chain bringing much-needed economic development to the area. I am sure other coastal communities also have the potential to benefit from such economic diversification, which is key to the future prosperity of such communities. In the north-east, there is also an understanding that the skills utilised in the offshore oil and gas sector are eminently transferrable to the offshore renewables industry, as well as a sense that we should grasp the opportunities to develop new and innovative technologies on our doorstep by building on our existing strengths.

Today’s debate takes place in the context of energy market reform. We should always remember that that is not only about keeping the lights on, bringing consumer prices under control and repairing a broken system, but about climate change and the need to reduce our greenhouse gas emissions and to mitigate, or adapt to, the effects of climate change that are already manifest.

I read recently that 2014 was the hottest year on record. We do not always notice that in Banff and Buchan, which is pretty cold, but we undoubtedly see the impact of a slightly warmer, slightly wetter climate and the effect of changing sea temperatures on our marine environment, with coastal erosion and increased landslips. And who could fail to notice the problems associated with increased flooding right across the UK? If we abdicate our responsibility to reduce emissions or pretend we can ignore climate change indefinitely—or at least for another decade or two—we are burying our heads in the sand. Environmental campaigners are fond of pointing out that the climate does not negotiate, and they are not wrong.

That is primarily why we need cleaner energy. However, we are also in the fortunate position of being able to take economic advantage of the opportunities renewable energy presents. Being in the vanguard of new technologies has the potentia1 to strengthen our manufacturing, our exports and our research base.

[Mr Chope]

The hon. Lady’s argument is surely an argument in favour of investing in adaptations to ensure that the impact of climate change is not felt so severely—for example, on the coast. If we have coastal defences, we can defend ourselves better against the consequences of climate change.

[Dr Whiteford]

The hon. Gentleman’s views on these issues are well articulated and well known, but we have to be a lot more ambitious. I do not want be shoring up our coastline—I would rather be preventing it from falling down in the first place. One way we can do that, and gain economic advantage, is by developing new, innovative technologies, which will have tremendous commercial potential if we develop them properly.

In that light, I am deeply disappointed that no decarbonisation target has been set for 2030. That is a real missed opportunity, and it undermines confidence in the Government’s commitment to the offshore renewables sector. The Government initially seemed much more ambitious about the development of offshore wind, and that raised a lot of expectations, leading to considerable investment from industry. Companies were actively encouraged to make bids for offshore developments, and they have invested hundreds of millions of pounds in bringing projects to consent.

However, the smoke signals from the Government have changed, and the goalposts have shifted somewhat since Ministers embarked on this journey. The budget announced last October for contract for difference bids was substantially lower than expected. The £235 million allocated for group 2 will support an estimated 700 to 800 MW of offshore wind capacity, which is a lot less even than some of the individual projects aim to generate.

I am not questioning the principle of a competitive element to the process, but the money available will, realistically, support only one—and possibly only part of one—of the seven projects in the frame. Given that companies will each have invested tens of millions of pounds just to get to this stage, the support on offer simply does not present sufficient incentives or prospects of success to encourage further development in the sector. I fear that the prospect of offshore wind on the Scottish coast is in real danger of withering on the vine.

It is important to point out that, under contract for difference, offshore projects will compete against not just each other, but other renewables projects, including more evolved technologies, such as onshore wind on the islands, which are now much cheaper and lower risk. Again, that is likely to jeopardise the development of a strong domestic renewables sector and supply chain.

I am concerned that the shifting goalposts, the mixed signals and the interminable delays that have characterised energy market reform are doing the UK considerable reputational damage in international markets, which will deter future investment. Those who feel they may have been led up the garden path this time will be reluctant to venture into our orbit again, which is not where we need to be in attracting investment. The Government need to send a signal that they remain committed to the offshore wind sector—if they are—and to let the sector know that there will be future allocations under contract for difference to make further investment viable.

[David Mowat]

Will the hon. Lady give way?

[Dr Whiteford]

I will not, because I am conscious of the time, and I want to make a couple of points before I conclude.

I well recall how the Government made the same short-sighted mistakes in the 1980s, when early, first-generation renewable energy technologies being developed in Scottish universities were starved of funding. That simply meant that the research moved to Europe and beyond and that other countries created the manufacturing jobs that could and should have benefited our economy.

There is a grave danger that if we pull the rug out from under the fledgling UK industry before it has had a chance to establish itself, the chance we have will pass us by. Others will harness the technology and steal a march on us. We need not to be content with what we have, but to realise that there is more wind to be harnessed if we go out into deeper waters. However, that takes investment, and it means risk, and we need to take that seriously.

I represent an area that still has a lot of manufacturing, and we are keen to benefit from what is happening. That would have long-term benefits in terms of creating a stronger, more stable and more resilient economy.

There has been some mention of the Government’s direction of travel—the enthusiasm for fracking and the rush towards new nuclear. Others have spoken about the costs at Hinkley Point, but it is worth pointing out that EU experts have said that those costs are actually much higher—about £25 billion. Professor Peter Strachan of Robert Gordon university points out:

“The deal involves paying twice the current price for electricity, with UK taxpayers and electricity consumers locked into a binding contract for an extraordinary 35 years.”

If we also consider the massive decommissioning costs involved, those figures put into context the £235 million available for offshore wind through contract for difference in the current round. Offshore wind developers seem to be scrabbling around for the crumbs.

If it is possible to make a 35-year commitment to support the nuclear industry, it seems short-sighted to have the offshore renewables sector lurching from year to year and round to round. Obviously, we are not comparing like with like, but we simply will not have a renewables sector if we do not give it more certainty and security to develop these ambitious technologies. I would like the Minister to use this opportunity to indicate the Government’s ongoing commitment to the sector.

Renewable energy is an important part of our energy mix, but we need to think long term if we are to realise its full potential. The cost of new technologies is likely to reduce over time. Contract for difference helps to encourage that investment, but we will achieve the added benefits only if we remain in the vanguard. The point has been made already, but it is worth saying again that a native renewables industry is critical to our long-term energy security.

Several Members have said that we lead on offshore renewables. If we want to stay in the lead, we need to harness the stronger winds further offshore. Let us not abandon our initial ambition, and let us ensure that we give our offshore wind energy sector the kick-start it needs to achieve real economic benefits for us.