Electricity: Cost-competitiveness

Lord Frost Excerpts

Thursday 16th May 2024 Lords Chamber

Asked by

[Lord Frost]

To ask His Majesty’s Government what assessment they have made of the overall cost-competitiveness of electricity generated from recently commissioned offshore wind farms compared to electricity generated from recently commissioned gas-fired power stations at current gas prices.

[Lord Frost (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I draw attention to my relevant unpaid interests in the register.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, offshore wind is one of the cheapest generating technologies in the UK and is comparable to or cheaper in cost than fossil-fuel based alternatives. It is a vital technology that will allow us to decarbonise the power sector by 2035 and enhance the UK’s energy independence. The department publishes its cost estimates in the generation costs report.

[Lord Frost (Con)]

My Lords, I thank the Minister for that response, but I gently suggest that perhaps he needs to look more carefully at the plausibility of the assessment he has just given. If renewables were as cheap as he asserts, it is hard to understand why bill payers and taxpayers are having to pay about £12 billion per year in subsidy, which is £600 for every family in the country. If offshore wind can be produced for £50 per megawatt hour, as his department asserts, it is hard to understand why the Government have had to offer twice that this year to get anyone to take up a contract. Would the Minister agree that it is better to be honest and that pushing out these fantasy figures just makes it easier for the proponents of net zero and the party opposite to indulge in fantasy politics that the whole energy sector can be decarbonised in just six years?

[Lord Callanan (Con)]

I certainly agree that the Opposition’s policy is fantasy politics. However, I will give the noble Lord the costs in the latest published analysis, which show that electricity from offshore wind is 60% cheaper to build and operate than gas-fired power. The levelised costs are £44 per megawatt hour for offshore wind, versus £114 per megawatt hour for closed-cycle gas turbines. The other key point is energy security. As the noble Lord is well aware, the amount of gas coming from the North Sea is declining year on year, and therefore we have to import increasing amounts of gas. It makes no sense to make us dependent on imported gas for the years to come. We can see the effects of the Russian invasion of Ukraine on gas prices. With the current turmoil in the Middle East, it makes even less sense.