Marine Renewables: Government Support for Commercial Roll-out

Kwasi Kwarteng Excerpts

Tuesday 8th December 2020 Westminster Hall

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

I am delighted to be able finally to respond to the debate. There have been some really interesting interventions, and it is a shame that we have only had half an hour for it. It is also a real pleasure to participate in this debate with you in the Chair, Mrs Cummins.

I will address the two points made by the right hon. Member for Orkney and Shetland (Mr Carmichael), and then I will address some of the wider concerns relating to economic opportunities and the levelling-up agenda. First, the right hon. Gentleman gave me two challenges: the first was to look at the pot structure of the CfD round; and the second was, as he put it, my bid for glory within the Government, by championing the cause of marine energy. He will know that I have a real interest in this subject. I have seen the APPG on marine energy and tidal lagoons and its chair, my hon. Friend the Member for Gloucester (Richard Graham), a number of times on this issue, and I have also attended APPG meetings that the right hon. Gentleman, my hon. Friend the Member for Gloucester and I have had the privilege of hosting here in Parliament.

To begin with, the right hon. Gentleman is absolutely right about the pot structure, and I pay tribute to him for actually attributing some degree of good policy on the part of the Government, because we split the offshore wind element—the offshore wind competition—into a separate pot, and we have allowed marine tidal projects and remote island wind projects, which may be of interest to him, to remain in pot 2.

The right hon. Gentleman said that the competition was unfair, but of course when we set up the pot structure we did not know that it was unfair, because we had not seen the progress in the development of offshore wind. And all I will say to him now on this issue is that I am very sympathetic to ideas, as he put it, of having a pot within a pot. That means that within pot 2 there would be a reserved quantum for marine projects, particularly tidal projects, to be able to compete for. I can assure him that that idea is being considered.

Having said all that, however, there is an issue, as the right hon. Gentleman will be aware, about the actual costs—the initial costs of marine technology and how we can support such technology. This is very much a chicken and egg situation, because people who are keen supporters of marine energy technology would say, “Well, if you don’t support it, how are you going to bring the costs down?”, and of course, our friends in the Government, including within the Department for Business, Energy and Industrial Strategy and, in particular, the Treasury, would say, “Well, if something is going to cost £250 per megawatt-hour and nuclear is at £92 per megawatt-hour, there is a discrepancy there.”

Obviously, public money must be well considered and looked after, and the challenge is very much on the industry, as I have said to industry players and champions on separate occasions. The challenge is for them to show how these costs can come down. If they can, then I am sure that the Government would be very willing to support the technology.

We have initiated a marine energy call for evidence. The right hon. Gentleman will remember that there was a whole debate about the Swansea Bay lagoon. When the development consent order for that lapsed, the Secretary of State said that we would have a call for evidence and we are engaged in that process. I fully recognise the economic opportunities for the coastal communities that he represents so ably, and I also pay tribute to the European Marine Energy Centre in Orkney, which, as he reminded us, is a world-beating centre. Of course, it initially enjoyed Government support, as he will well remember, because he was in government at the time. It is something that I would be very willing to engage with him on.

[Mr Carmichael]

First of all, I understand the point the Minister makes about the operation of CfDs. When I was in government in 2011 and 2012, when the CfDs were introduced by the Energy Acts, we did not really know how they would work, so we have learned from the experience. Every time there is a development pot, one technology emerges, which is why the ring-fencing is important. On the issue of the evidence, will the Minister look at the figures that I have given him today relating to the private sector investment that is primed and ready to go? Surely there could be no better indicator of technological ability than the willingness of the private sector to put its money into it.

[Kwasi Kwarteng]

The right hon. Gentleman raises a fair point. The private sector is willing to go, of course, provided it is supported initially by the Government. That is exactly the kind of conversation we should be having. He made some good points in his opening speech. One of the phrases that stuck in my mind was that we should “open the door” to private investment. That is exactly what the CfD round has done. That is exactly what we would hope to achieve, should we go down that route with regard to marine energy. No Government in the world can simply spend their way to creating the industry. The trick is to create the financial incentives, as we have done with offshore wind, to allow us to open the door to private investors.

I pay tribute not only to the right hon. Gentleman, but to the communities he represents and to my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb)—I am glad I got the constituency right; I knew it was not Ceredigion. He made the point well. He represents a community that has clearly been under a huge amount of economic pressure and even distress with covid, and the green industrial revolution represents a real answer and a real chance to build back better, to level up, and to increase and widen economic opportunity across the country. It is rare to see three constituent countries of the United Kingdom represented in debates in Westminster Hall. I do not think we have Scottish representatives here.

[Mr Carmichael]

All four are here.

[Kwasi Kwarteng]

Forgive me; I saw straight through the Scottish representative. In this debate, we have representatives from all four countries of the United Kingdom. That is significant, and points to the fact that the levelling-up agenda is geographically extremely diverse. The green industrial revolution and green energy topics engage all four of our constituent nations. It is an excellent debate for that reason.

The Government remain absolutely committed to renewable energy, and that was highlighted specifically by the Prime Minister’s 10-point plan. We believe that the only way we can get to net zero by 2050 is through innovation. Tidal technology is part of that innovation. The only caveat is that it cannot come at any cost.

My right hon. Friend the Member for Preseli Pembrokeshire referred to eternal waiting and eternal words and rhetoric. We must have this dialogue and we must at least show a pathway to reducing costs, and if we can do that—I am sure we will be able to do that—we will in the short term be able to put flesh on the bones and realise in fact some of the aspirational rhetoric exchanged across the House for many years.

[Richard Graham]

The Minister has been generous in his support for renewables in general, and for marine energy specifically. As referred to by the right hon. Member for Orkney and Shetland (Mr Carmichael), he has been willing to see representatives of the industry and hear ideas for the future auction. Will he, at the same time, try to find a few moments to look at the innovative purchasing agreement proposed by the industry, allowing a tax reduction basis but with nothing rewarded till it has been delivered, in terms of energy? Will he commend it to his friends at the Treasury?

[Kwasi Kwarteng]

I can absolutely assure my hon. Friend that that is something I will be looking into. With regard to my BEIS commitments specifically, we can potentially get some movement on the auction. I do not know, and it is part of a discussion. Once that is up and running, perhaps we could have a further debate and a further push on tax treatment in the way he describes. I would clearly be happy to raise that with Treasury colleagues, although the right hon. Member for Orkney and Shetland knows from his experience in Government how fraught some of those conversations can sometimes be. BEIS will certainly look at the auction seriously. We hope to push forward with that innovation.

Question put and agreed to.