Offshore Wind Developments

Julie Elliott Excerpts

Tuesday 6th January 2015 Westminster Hall

[Julie Elliott (Sunderland Central) (Lab)]

As ever, it is a pleasure to serve under your chairmanship, Mr Gray. I wish you and all colleagues a happy new year. I congratulate the hon. Member for Angus (Mr Weir) and the Backbench Business Committee on bringing forward this important debate.

This will come as no surprise to those taking part in the debate—we talk about such things a lot, and I too was on the Committee that considered the Energy Act 2013 and have gone over the arguments at length many times—but I am pleased to have the opportunity, at this early stage in the new year, to reaffirm Labour’s commitment to cutting our carbon emissions by encouraging investment in clean energy through the system of contracts for difference. I want to make a few comments on some of the speeches. As my right hon. Friend the Member for Delyn (Mr Hanson) said, there is a broad consensus—barring the views of the hon. Member for Christchurch (Mr Chope), who has a slightly different view from ours. I, like some other right hon. and hon. Members, am committed both to renewables and to nuclear, which will both have an important part to play in the energy mix. We need both of them to reach our carbon emissions targets and negate the problems arising from climate change.

Many of the issues that have been raised are of concern to us—particularly the question of investment and security, and knowing the way forward. That has been raised with me in my capacity as an MP representing an area on the north-east coast, where many of the issues that have been discussed today are relevant, and where there is potential to benefit from development of the industry. Investors tell me that they want certainty. They want to know where we are going, and that there is a long-term plan. The decision cannot be one for four or five years. There is broad consensus, and much of what I want to say concerns that, but there are some issues.

Scotland, as we know, plays an important role in the UK’s clean energy generation. It is blessed with significant clean energy resources, including onshore and offshore wind, and wave and tidal energy have significant potential. Scotland’s leadership in clean energy is borne out in the funding that it receives from central Government. This year, having travelled many times north of the border in the referendum campaign—it is not that far from where I live—I have seen, as I have driven up towards Glasgow, hundreds and hundreds of onshore wind turbines, which I think are quite beautiful and add to the scenery on the drive. They are clearly a significant part of the economy north of the border.

Scotland currently benefits from a system in which resources from across the UK are pooled. Scotland hosts 8.3% of the UK population and around 9% of the energy bill consumer base from which we fund clean energy projects via the levy control framework. In 2012-13, Scotland received nearly a third of all renewable obligation certificates supporting renewable energy. Furthermore, Scotland will receive a significant proportion of the support given through feed-in tariffs, which in 2014-15 is projected to reach £817 million.

As has been said, the UK is a world leader in offshore wind, with as much installed capacity as the rest of the world combined. I see that as a positive for us, not a negative as the hon. Member for Christchurch sees it. It is therefore critical that we get the right structures and funding in place so that the cost of offshore wind continues to fall. To ensure that that happens and that the contract for difference allocation works for offshore wind, we need to boost the investment that drives cost reductions. We have seen the massive cost reductions that investment can bring in both solar and onshore wind.

Although Labour—and most parties, as the hon. Member for Angus said in his contribution—supported the Energy Bill as it progressed through Parliament, there were significant areas in which we were convinced that it needed to go further. I do not intend to précis our “Powering Britain” Green Paper, as I am quite confident that most people here have read it cover to cover. However, what was missing from the Energy Bill, in addition to reform of the wholesale or retail markets through which energy is traded, were policies to encourage further investment in clean energy. Labour is committed to setting a 2030 power sector decarbonisation target, which is supported by organisations as varied as the Committee on Climate Change, energy developers such as Siemens and Dong Energy and companies such as Asda, Sky and PepsiCo as a crucial tool to provide certainty and clarity to drive investment.

Labour will establish an energy security board. My right hon. Friend the Member for Delyn and my hon. Friend the Member for Ynys Môn (Albert Owen) mentioned long-term security. An energy security board will plan for and deliver on our energy needs for the future. We will give the green investment bank powers to borrow and leverage new investment. We are focused on looking beyond parliamentary terms and changes in Government to give stability for investors in the energy market.

[David Mowat]

I was listening carefully to the hon. Lady developing her point on Scotland. I thought that she was going to complete the point by mentioning the potential impact of independence, had it happened, on an environment in which one third of all subsidies are currently cross-border. I was wondering—

[Mr James Gray (in the Chair)]

Order. That would, of course, be quite wide of the mark. The hon. Lady might restrict her comments to the effect of CfDs on the offshore wind market.

[Julie Elliott]

I take that guidance from the Chair, but I will say that we won the referendum.

Given this Government’s refusal to set a 2030 power sector decarbonisation target or allow the green investment bank to borrow, it is unsurprising that investment in renewable energy has fallen. Furthermore, according to the Environmental Audit Committee, investment in clean energy is running at half the level necessary if we are to meet our carbon emission reductions. It is also worth pointing out that the majority of renewable energy projects that have come online since May 2010 started under the last Labour Government.

The offshore wind industry certainly welcomed the increase in the budget for less established technologies from £155 million to £235 million, although it was somewhat tempered by the downward revision in the reference price. Can the Minister confirm that the downward revision will have a significant impact on how much capacity is feasible for the same amount of budget? Currently, approximately 5 GW of offshore wind is in operation or construction, and about another 3.2 GW has been given final investment decision contracts. Do the Government have a fixed ambition for offshore wind, either by 2020 or another date, and can it be assumed that that ambition has been reflected in the allocation funding pot? Does the Minister share the view of industry experts who have projected that the £235 million equates to approximately 800 MW, and is he satisfied with the Government’s ambition for offshore wind in this allocation round? Those questions reflect some of the concerns expressed by hon. Members in this debate.

This Government’s mixed messages and active hostility to onshore wind and solar PV, the cheapest large-scale clean energy technologies, have acted as significant blows to investment in all clean energy technologies. In the last few months, the UK slipped to seventh place on Ernst and Young’s attractiveness index for investment in renewable energy, and Ernst and Young labelled the Government’s

“policy tinkering and conflicting signals”

as

“too much for investors…to handle”.

Does the Minister accept that the Government’s mixed messages have damaged investment?

Although offshore wind remains an area in which the UK proudly leads the world, employing thousands of people and generating the clean energy that we need to meet our carbon emissions commitments, it is clear that costs will have to continue to fall, and allocation rounds should be designed to reflect that priority.