Draft Contracts for Difference (Allocation) (Amendment) Regulations 2026
Michael Shanks Excerpts(1 day, 19 hours ago)
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The Minister for Energy (Michael Shanks)
I beg to move,
That the Committee has considered the draft Contracts for Difference (Allocation) (Amendment) Regulations 2026.
The draft regulations were laid before the House on 20 April. They make several minor and technical amendments to improve the operational efficiency of the contracts for difference scheme during the assessment of applications. Subject to the will of Parliament, the Government intend to introduce those targeted and practical measures in time for allocation round 8, which opens on 20 July.
For the interest of Committee members, the CfD scheme is the Government’s flagship policy for supporting new low-carbon electricity generation in Great Britain. CfDs are awarded through annual competitive auctions, with the lowest-priced bids being successful. In March, in response to events in the middle east, my right hon. Friend the Energy Secretary outlined a package of measures to go further and faster on clean power, including bringing forward the opening of AR8 to July to provide certainty for clean energy investors.
The most recent allocation round, AR7, alone secured 14.7 GW of clean, home-grown generating capacity across 201 new projects. AR7 built on the success of AR6—out in September 2024—which secured more than 7 GW of renewable capacity across Great Britain. AR7 was the most successful renewables auction in European history. The reforms we introduced for AR7 boosted competition and investor confidence, and secured renewable capacity at strike prices 40% lower than the cost of building and operating a new gas power plant. Such achievements show how the CfD scheme—our key path to deliver on our mission of clean power by 2030—strengthens Britain’s energy security.
The regulations that govern the scheme are kept under review to ensure that they remain fit for purpose. The draft regulations will make the following three targeted amendments to improve the future operation of the scheme. First, they will enable the National Energy System Operator to correct certain types of error it makes during the assessment of applications by issuing new or amended qualification decisions, where evidence supports that. NESO, in its role as the CfD delivery body, assesses applications against the eligibility criteria and determines whether applicants qualify to participate in the competitive allocation process. As the CfD scheme has grown in popularity, the volume of applications has increased significantly, with several hundred submitted in recent allocation rounds. Eligibility checks are always robust, but larger numbers of applications increase the risk of errors in assessment decisions. This amendment will ensure greater consistency and fairness in how the eligibility requirements are applied.
Secondly, the draft regulations will enable NESO to consider additional information or documentary evidence submitted by applicants when examining appeals from non-qualification decisions. That change will help to avoid projects being disqualified for minor or trivial omissions from their applications. It should streamline the process and ultimately increase the number of participants in the auction, which will help us by driving greater competition and better value for money for bill payers.
Thirdly, the regulations clarify how NESO is to treat applications where eligibility has not yet been decided by the point at which the regulations require NESO to proceed with the auction. In the light of operational experience from AR7, this amendment will remove some ambiguity in existing regulations.
Finally, the draft regulations provide for procedures or information relating to the implementation of several of the measures that I have just described to be set out in the contract allocation framework—a statutory document that contains the eligibility criteria and rules governing how NESO must allocate CfDs in an allocation round. The Government published a draft of the framework setting out the proposed requirements for AR8 on 1 June, and invited stakeholder views. The final version will be published in early July, before the round opens to applications.
These amendments received strong stakeholder support in a recent public consultation, which showed broad recognition that the changes will improve the experience of applicants during the assessment process, support more effective competition and secure better value for money for consumers. This approach reflects our continued close engagement with industry in the development of the CfD scheme. By building on the foundations that we laid in AR7, the draft regulations will strengthen the procedures and simplify the operation of the scheme, which will drive progress towards clean power by 2030, while of course helping us in our No. 1 mission of securing value for money for bill payers. I commend the draft regulations to the Committee.
Michael Shanks
I welcome the comments of both hon. Gentlemen, in particular those of the hon. Member for West Dorset, who spoke to the actual draft regulations. I thank him for his support. I also thank the official Opposition for their support for all that we do in energy policy, or so it seemed from the speech of the shadow Minister, the hon. Member for Mid Buckinghamshire.
The hon. Member for West Dorset spoke about increasing the CfD lifetime, but we did extend the CfD from 15 to 20 years. We recognised the impact on the cost of investment, which brought down—or played a part in bringing down—some of the bid prices into the auction. We will maintain those changes into AR8 before we open the round.
On the more general points that were made, I think that there is a moment here to reflect. AR7 was the most successful renewables auction that we have ever had. Crucially, however, it was an auction that brought in prices 40% lower than those for building and operating new gas. That was before the situation in the middle east arose. I do not have the actual figure for what the difference would be now, but we can all safely assume that with the price of gas where it is today, it would be a significantly higher saving now than it was then.
That is the truth of the hon. Member for Mid Buckinghamshire saying that he opposes forcing families to pay more; what he is proposing is to force families to pay for gas, which is significantly higher in price right now, and is often much higher. He is gambling that at some point in the future gas prices might come down, so everything will be okay. We are determined not to drive forward our energy system in that way. From an energy security point of view, there has never been a clearer argument than what we are facing right now. Only four years ago, we faced exactly the same question with Russia’s invasion of Ukraine. We have to learn the right lessons, not continue to make the same mistakes.
The last point that I would make—with your patience, Mr Stringer, because none of this is in the draft regulations—is on curtailment and storage. The hon. Gentleman is right to highlight the cost of building the grid, but as much as I would love to take credit for this Government for building the renewables projects that are generating clean power in this country, the truth is that most of them were built under the previous Conservative Government. I give the Conservatives credit for that, even if they do not wish to give it to themselves. What they did not do, however, was build the grid to connect those projects up. We were left with generation right across the country and a grid that was completely out of phase.
A lesson for us to learn from the 14 years of Conservative Government is to build the grid to connect the clean power to households, to connect the economic growth opportunities that we need badly, and to get us off the fossil fuel rollercoaster as fast as possible, so that we are not forcing families to pay sky-high prices for gas, which we can never control. That is what the draft regulations help us to achieve, and I commend them to the Committee.
Question put and agreed to.
Fusion Energy Generation
Michael Shanks Excerpts(2 days, 19 hours ago)
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The Minister for Energy (Michael Shanks)
My hon. Friend Lord Vallance of Balham, Minister of State for Science, Research and Innovation has today made the following statement:
The Department for Energy Security and Net Zero is today publishing a draft national policy statement—NPS—for fusion energy generation (EN-8).
Fusion energy has the potential to play a key role in the UK future energy system, supporting long-term energy security, delivering an abundant source of zero-carbon energy and with the potential to export the technology globally. In the shorter term, it is helping to drive growth across the country, delivering high-skilled jobs, inward investment and supply chain development. As fusion technologies continue to advance and private investment accelerates globally, a clear and proportionate planning framework is essential to ensure the UK remains competitive and able to capitalise on the long-term economic opportunities that fusion energy presents.
Today a draft national policy statement for fusion energy infrastructure, EN-8, was laid before Parliament. This delivers on the Government’s commitments within both the UK’s modern industrial strategy and the UK fusion strategy to develop a fusion-specific NPS and publish a draft by summer 2026. Publishing this draft marks an important milestone in creating the conditions for fusion to move from research to commercial deployment in the UK. It will help to ensure that the planning system in England and Wales is ready to support future fusion energy projects. This will support the growth of the UK fusion industry, enable innovation and skills, and reinforce the UK’s position as a leading destination for fusion investment.
The draft EN-8 does not identify specific sites for fusion energy infrastructure and is technology-agnostic (it will apply to the different types of fusion energy technology, e.g. magnetic and inertial confinement), ensuring flexibility for developers and responsiveness to innovation in fusion design. This is consistent with the Government’s July 2025 response to a consultation on a new NPS for fusion energy. That Government response also set out 19 fusion-specific considerations, grouped into environmental, safety & security, operational and developmental themes. Draft EN-8 provides the detailed requirements for developers and the Planning Inspectorate in these areas, in addition to those that already exist in the overarching national policy statement for energy (EN-1). EN-8 has a scope different from EN-7, which is the national policy statement for nuclear (fission) energy generation.
Today marks the start of the formal parliamentary process to designate EN-8 and bring it into force under the Planning Act 2008. From today until 30 November, Parliament will have the opportunity to scrutinise the draft, raise questions and make recommendations. A public consultation on EN-8 will run alongside this stage of the parliamentary process, and officials will provide a summary of consultation responses to the relevant parliamentary Committees once all responses have been received.
Following consultation, EN-8 will be laid in Parliament in its final form for approval by resolution by the House of Commons, or by deemed consent by the House of Commons following a 21-sitting-day consideration period.
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Nuclear Decommissioning Authority and Nuclear Transport Solutions Project
Michael Shanks Excerpts(3 weeks, 6 days ago)
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The Minister for Energy (Michael Shanks)
My noble Friend Lord Vallance, Minister for Science, Innovation, Research and Nuclear, has today made the following statement:
I have laid before Parliament a departmental minute describing the contingent liability that allowed the Nuclear Decommissioning Authority and Nuclear Transport Solutions to carry out a project to remove and transport a quantity of legacy civil nuclear material to the US from Venezuela.
It is normal practice, when a Government Department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, for the Minister concerned to present a departmental minute to Parliament giving particulars of the liability created and explaining the circumstances.
Given the sensitivities associated with the project, the Department for Energy Security and Net Zero informed the chairs of the Public Accounts Committee and the Energy Security and Net Zero Committee in confidence of the Department’s intention to take on an indemnity to allow the Nuclear Decommissioning Authority and Nuclear Transport Solutions to deliver the project.
The indemnity was required to cover any residual risk that was left between commercial insurance and the United States of America’s Price-Anderson Act. The maximum potential liability was capped at £10 billion. The risk of this indemnity being relied upon was deemed to be very low. NTS operate a unique maritime transport capability and have done for half a century. They have had no significant safety incidents over that time.
The UK had received requests for assistance from both the United States and the International Atomic Energy Agency which had in turn received a request for assistance from the de facto authorities in Venezuela. The UK’s main contribution was the provision of a purpose-built vessel from Nuclear Transport Solutions to transport the material by sea. The arrival of the material in the US represents the conclusion of the UK assistance to this project.
The Treasury approved this proposal for the contingent liability in principle.
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Capacity Market Consultation Responses
Michael Shanks Excerpts(3 weeks, 6 days ago)
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The Minister for Energy (Michael Shanks)
I have tabled this statement to inform Members of the publication of four documents relating to the capacity market. They include:
The capacity market autumn consultation response;
The capacity market winter consultation response;
A summary of responses to the capacity market call for evidence on hydrogen-to-power and interconnectors; and
Updated technical adjustment methodology for de-rating interconnectors in the Capacity Market
The above documents support our objectives of delivering clean power by 2030 and accelerating progress towards net zero, while ensuring security of supply.
Since its introduction in 2014, the capacity market has acted to secure sufficient capacity to ensure consistent and reliable electricity generation in Great Britain. The funding provided through the capacity market incentivises investment in new and existing generation, interconnectors, batteries and consumer-led flexibility mechanisms to ensure that sufficient capacity is available to meet future demand when required. This capacity is acquired through competitive annual auctions held at intervals four years ahead and one year ahead of their respective delivery years. The Government regularly amend the framework underpinning the capacity market before auction cycles to ensure that it is cost-effective and meets broader strategic objectives such as clean power by 2030.
Following two consultations—the autumn consultation, published in October 2025; and the winter consultation, published in December 2025—and a call for evidence on hydrogen-to-power and interconnectors, the Government intend to publish Government responses to the consultations, a summary of responses to the call for evidence and an updated technical adjustment methodology for de-rating interconnectors.
The consultation responses that we are publishing today include reforms to the capacity market rules that aim to secure capacity adequacy to meet the reliability standard through at least the 2030s while keeping the impact on consumer bills as low as possible. These are consistent with achieving capacity adequacy objectives, strengthening delivery assurance, stimulating investor confidence in low-carbon technologies, and strengthening CM legislation to ensure effective scheme delivery.
Capacity Market Autumn Consultation Response
Multiple Price Capacity Market (MPCM)
Having carefully considered the evidence and feedback received, the Government have decided not to proceed with introducing the MPCM and any related policy changes at this time. We will take more time to consider the concerns highlighted by stakeholders and will continue working with industry to address barriers facing dispatchable enduring technologies, while ensuring that the capacity market remains fit for a changing energy system.
Ensuring efficient bidding in capacity market auctions
The Government will raise the excess capacity rounding threshold from 1 GW to 3 GW and limit preauction information to a single rounded excess capacity figure to reduce opportunities for strategic bidding.
Consumer-led flexibility
The Government will streamline reporting for small demand-side response (DSR) components—below 30 kW —and introduce new DSR technology and customer type categorisation to support improved oversight and future methodology development.
Self-nomination of connection capacity for battery storage technologies
The Government will allow battery energy storage system capacity market units to self-nominate their connection capacity from pre-qualification 2026, with full capacity and energy data reporting required and a 50% minimum floor applied. This change reduces the risk of battery storage assets failing performance tests due to degradation.
Determining appropriate means for non fossil fuel generation to access low-carbon CM mechanisms
The Government will allow biomass generators that meet emissions limits and strengthened sustainability criteria to access low-carbon CM mechanisms. The Government will align CM rules to meet the common biomass sustainability framework when introduced. Energy from waste is not to be treated as low carbon under the CM.
Further improvements to capacity market administration and delivery assurance
The Government will introduce termination fees for where a capacity agreement is terminated for making false declarations in an application, confirm the suspension of payments immediately for insolvency termination events, clarify definitions, update the indicative auction timetable, update settlement rules so that they can align with market-wide half-hourly reforms when introduced, and allow pre-qualification extensions in the event of severe failure of the prequalification IT system.
Capacity Market Winter Consultation Response
Managing the transition of existing generating capacity market units into alternative schemes
The Government will amend regulations and CM rules to allow contracts for difference awarded because of a direction from the Secretary of State to pre-qualify for the CM, so long as there are no overlaps in the periods where the generating unit would be supported by both schemes and where this has been evidenced in the pre-qualification application.
Long-duration electricity storage cap and floor (LDES C&F)
The Government will introduce CM rules to provide clarity on how LDES projects participate in CM auctions. LDES C&F projects will assume price taker status as a default. An option to provide a price maker memorandum will remain. A director’s declaration will be required to confirm a project’s LDES C&F status to enable CM eligibility and enforcement.
Standardisation of termination fees and credit cover
The Government will implement a 30% increase in all termination fee rates and require credit cover to be held until a generating unit becomes eligible for payments with escalations at milestones, applying only to agreements awarded from 2027 onwards.
Clarifying rules around secondary trading
The Government will implement amendments to the CM rules to clarify eligibility for secondary trading entrant applications.
Summary of responses to the recent capacity market call for evidence on hydrogen-to-power and interconnectors
Most respondents supported enabling H2P participation using existing gas technology classes, although some noted potential unintended consequences—for example, hydrogen infrastructure reliability, supply chain constraints and impacts on carbon emissions.
Many stakeholders highlighted risks and operational uncertainties—including hydrogen availability, infrastructure readiness and blending impacts—emphasising the need for clear classifications, guidance and policy certainty.
For interconnectors, there was strong support for updating the technical adjustment methodology to the one proposed in the call for evidence, noting that the current method risked becoming outdated.
On the consideration of high-impact, low-probability events in this methodology, most respondents favoured including all outage events to better reflect system risks and maintain consistency with other CM technologies.
As a result of the CfE, Government will:
Adopt the updated technical adjustment methodology from summer 2026, include all outage events in this methodology, and publish a briefing note to detail the final methodology before CM pre-qualification 2026 to provide further transparency over the process.
As the capacity market remains Great Britain’s main mechanism for ensuring capacity adequacy, these publications consider actions to ensure that the scheme continues to meet its primary objective of ensuring security of supply. The proposals put forward seek to ensure that the scheme remains fit for purpose and continues to play a crucial role in achieving the clean power mission.
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Energy Markets: Middle East Conflict
Michael Shanks Excerpts(1 month, 1 week ago)
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The Minister for Energy (Michael Shanks)
The Government are working tirelessly with international partners to find a permanent solution to the current middle east conflict, and are playing a leading role in the international effort to support the free flow of shipping through the strait of Hormuz. While this work continues, traffic through the strait remains severely restricted, and the impact of recent events will be felt across global markets for some time to come.
Over the last two months, the Secretary of State for Energy Security and Net Zero, my right hon. Friend the Member for Doncaster North (Ed Miliband), and I have been in frequent contact with international partners, and the UK has acted alongside them to minimise disruption to energy markets, including contributing 14 million barrels of oil to the largest International Energy Agency stock release in history. I have engaged counterparts in Europe, including during a visit to Spain last week, and have just returned from Ukraine, whose energy sector the UK continues to support in the context of both ongoing Russian attacks and the wider international situation.
Alongside this international engagement, we are increasing domestic preparations to monitor and mitigate the potential knock-on impacts on families and businesses in the UK. The Prime Minister chaired a middle east response committee meeting yesterday to drive this work forward.
On energy bills, thanks to decisions we took in the Budget, the energy price cap fell by £117 a year at the start of this month, with savings locked in until the end of June. We also extended the £150 warm homes discount to around 6 million low-income households. At the start of this crisis, the Government took immediate action, announcing over £50 million of support for vulnerable heating oil customers particularly exposed to rising prices.
In line with the Government’s industrial strategy, the Chancellor also announced an expansion of the British industrial competitiveness scheme, cutting bills for thousands of energy-intensive businesses. We will continue to monitor impacts on bills and stand up for families and businesses.
On petrol and diesel, we are engaging closely with industry to help keep costs down for drivers. The 5p fuel duty cut has been extended until September and the Competition and Markets Authority has put industry on notice that it is monitoring prices closely. Our fuel finder tool supports transparency by helping drivers identify the cheapest fuel locally, with over 90% of petrol stations registered. The CMA will prioritise enforcement action against retailers identified by the data aggregator who are not signing up or reporting prices as they should. In terms of supply, the AA and Fuels Industry UK are clear that production and imports are continuing as usual. The UKproduces more petrol than it uses, making it a net exporter. Supplies remain resilient, and stations continue to be well stocked.
Since the closure of the strait, we have been closely monitoring UK jet fuel stocks and working with airlines, airports, fuel suppliers and international counterparts. UK airlines typically buy fuel months in advance, and aviation fuel suppliers hold bunkered stocks. The UK imports jet fuel supplies from a range of countries not reliant on the strait, including the United States. Airlines UK has stated that UK airlines continue to operate normally and are not experiencing issues with jet fuel supply. The Government continue to work with partners to monitor and mitigate potential disruptions.
The Government continue to plan for a range of contingencies to increase flexibility on jet fuel supply. We have asked UK refineries to maximise jet fuel supply. Airport Co-ordination Ltd has updated its guidance to allow airlines to apply for slot alleviation, providing greater flexibility to plan flights. I encourage all passengers to check their rights before travelling, and in the first instance to contact their airline, travel agent or tour operator, where they have concerns. We have published a fact sheet on www.gov.uk that will be kept updated, alongside Foreign, Commonwealth and Development Office travel advice.
We are determined to draw the right long-term lessons for the UK’s energy security. Four years on from Russia’s invasion of Ukraine, recent events have again highlighted the risks of exposure to volatile international fossil fuel markets. Last week I attended WindEurope, where I heard from the Spanish Prime Minister and others about how EU countries are responding by accelerating their transitions to clean energy.
In the UK, the Energy Secretary set out last Tuesday how we are going further and faster on our clean energy mission through three strands of direct action:
Firstly, accelerating delivery of clean, homegrown power that we control. In the first weeks of the war, we announced that we would bring forward the next renewables auction to July and speed ahead on new nuclear power. That work is being stepped up through a cross-Government sprint to unlock the potential for renewables on public land, alongside measures to deliver the grid infrastructure we need, including changes to land access rules and to the consenting process for networks.
Second, accelerating electrification across the economy. Technologies such as solar, batteries, heat pumps, and electric vehicles can cut bills and help shield households and businesses from international fossil fuel price shocks. The £15 billion warm homes plan is the largest public investment in home upgrades in British history and is being accelerated to support as many households as possible ahead of winter.
Third, taking clear action to reduce the extent to which gas prices set electricity prices, which can compound the impact of shocks like this. Plans are being brought forward to move legacy low-carbon generators, which provide about a third of the UK’s power today, on to fixed-price arrangements. We have also announced that the electricity generator levy will increase from 45% to 55% and be extended beyond 2028.
Together, these measures will strengthen incentives to move on to fixed contracts and make funds available to support families and businesses with cost of living impacts.
The Government will continue to act to minimise the impact of events in the middle east on families and businesses and safeguard the UK’s energy security, while learning the right long-term lessons for our country.
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Ground-mounted Solar Panels: Alternatives
Michael Shanks Excerpts(1 month, 3 weeks ago)
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The Minister for Energy (Michael Shanks)
It is a pleasure to speak in this debate. I congratulate the hon. and gallant Member for Spelthorne (Lincoln Jopp) on securing it, particularly because I unfortunately missed his Adjournment debate, which I heard was one of the most enthusiastic Adjournment debates we have ever had on this topic. I was delighted to hear him repeat much of that same speech, because I did of course read it in Hansard. The map joke was there in the Adjournment debate, and it was there again today. We appreciated it all the same, and it was great to hear it in person. I thank him for securing the debate, and I genuinely thank him for the enthusiasm he has shown for floating solar. I will come back to that in a moment.
I was also pleased to hear the hon. and gallant Member say that he believes in climate change. That should not be breaking news to anyone, but when we hear Conservative Members stand up and confirm that science is in fact science, it is none the less a relief to me. I was delighted to hear that. However, the challenge—and I will come back to this point—is that, as much as there is a recognition that climate change is a threat, there is also a distancing from any of the actions that would help us to tackle it, and that is simply not a sustainable position for anyone to hold.
If we think about food security, water security and national security, all of them would be put at huge risk by not tackling the climate crisis. This is a very real challenge for us to deal with at the moment. That more dangerous and insecure world is exactly why we are embarking on the clean power mission.
Sir John Hayes
While the Minister is on the subject of science, would he turn his attention to agronomy? He will know that only around 15% of the land in the United Kingdom is grade 1 and 2. Much of that is in the east of England and, indeed, in my constituency in Lincolnshire. Lincolnshire has been targeted by solar developers, with countless large solar plans in the offing. Will the Minister recognise that those two things cannot be squared? We cannot have the most productive and versatile land being used up for solar at the cost of our food security.
Michael Shanks
I was going to come to the trading of statistics later in my speech, but let me do it now, because there is a fundamental point around the disingenuous trading of statistics on land use. My hon. Friend the Member for Bournemouth East (Tom Hayes) made a valiant effort at trying to correct that, but let me give Members some sense of this. At the end of 2024, ground-mounted solar panels covered an estimated 0.1% of the total land area of the UK. Even if we achieve the ambitious targets that we have set out in the clean power action plan, they will be expected to cover 0.4% of the total land area and 0.6% of agricultural land. That is if we achieve our hugely ambitious targets.
The arguments that I will make in this speech are exactly those that the previous Government made when they spoke from the Dispatch Box. There was a bright-eyed and bushy-tailed Energy Minister who spoke about the dramatic rise in global energy prices following the invasion of Ukraine, the urgency of building a renewables-based system, and how critical it is for us to meet our 70 GW target for solar in the UK by 2025— the previous Government’s target was a fivefold increase.
The now shadow Minister, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), pretends that that was not the Conservatives policy for 14 years, and we now hear a litany of ideas—roadside solar, rail solar, floating solar—but none of them was driven forward in the 14 years that they were in government. Forgive me if I think that it is a little bit rich for them to be oppositionist, not having driven any of it forward when they were in government.
Dr Caroline Johnson
The Minister is talking about using a very small proportion of the United Kingdom. I understand his point, but when all of that small proportion falls on the best bits of agricultural land, that is not sensible. If one were looking at a strategic framework and desiring to use 0.1% or 0.2% of the country for solar, one would look at the least useful land for food security for doing that, not the best.
Edward Morello
The hon. Member for Sleaford and North Hykeham (Dr Johnson) suggests that we should utilise the least useful land going. My understanding, according to the numbers I have looked at, is that at least 2% of the UK is covered in golf courses, which are ecological wastelands. At the risk of alienating all the golfing voters out there, I wonder whether the Minister would like to use that land.
Michael Shanks
I will not be drawn on golf course membership, because I do not know how many of my constituents are members of golf courses; I can imagine how many Conservative Members are.
I come back to the point about land use, because we absolutely recognise the importance of having a framework for how we use land across the country. That is why the Department for Environment, Food and Rural Affairs published the first-ever land use framework in March— I recommend a read of it. It is a vision for all of England’s land use, using the latest data on how much we need for housing, energy and all sorts of things to ensure that we are making the best use of land. Both that and the strategic spatial approach to planning the energy system could have been done in those 14 years, but they were not. That is why we have ended up with a haphazard approach to strategic planning, and why we are now building the grid to connect the renewables that were built all over the country without that spatial plan. It is important that we strategically plan that, and it was not done previously, so we are moving forward to do it.
Robbie Moore
I have read the land use framework. The Minister has hit the nail on the head, because its sole beneficiary is his Department—the Department for Energy Security and Net Zero—and not our farmers or our food security. Can he specifically address the issue of land quality? If we are putting ground-mounted solar on agricultural land, will he at least recognise that that will degrade the quality of the soil health, given the amount of time that those solar panels will be in situ?
Michael Shanks
I will not be able to go into the detail of everyone’s points, but the hon. Member is wrong about the land use framework. Perhaps he should read it again, because it details quite clearly the different land uses across the country. There is always tension about land use—of course there is. That has been true throughout history, and that is why we are strategically planning it.
We are clear that the planning system recognises best use. Every application is considered on its merits; I am not going to be drawn on individual applications, but we have clearly said that ground-mounted solar should be used, wherever possible, not on the best-used land.
Michael Shanks
I am not going to give way to the hon. Lady again because I want to come to floating solar, which the hon. and gallant Member for Spelthorne eloquently made the case for. I completely agree that it is a hugely exciting technology that we should be expanding, and I also agree that there are none of the trade-offs that there often are in other deployments and that there are huge benefits. He and I have both visited the project at the Queen Elizabeth II reservoir near his constituency. It is a fantastic example of floating solar, which has the benefits of generating clean electricity and retaining water in the reservoir. We want to see how we can also utilise that power to reduce the local demand so that there are some real benefits for local communities.
We are taking forward a number of actions. I am sorry if the hon. and gallant Member thinks that floating solar was not given a prominent enough position in the solar road map, but I assure him it has a prominent enough position on my to-do list. We are driving those key actions forward because there is no reason why we should not be doing that more quickly. There are projects in the pipeline that we will try to support wherever we can.
On the argument that there is a trade-off between that and covering rooftops, reservoirs, motorways or any other space that people can come up with, I am open to all of those ideas. I agree that we should be doing much more on rooftops. The hon. Member for South Northamptonshire made the point about some of the complexities with landlords and tenants. It is complex, but it is not impossible and we need to work our way through dealing with that.
It is important that we recognise the scale of the challenge. The scale of our electricity demand means that we need to see more ground-mounted solar as well; it is not either/or. Rooftop solar is important in our mission, and floating solar will be important, but the deployment of ground-mounted solar will also be important in communities across the country. We want those communities to get a genuine a benefit from it, so the points around locally owned power are critical.
In closing, I recognise that at this moment in particular, the lessons we have to take from the crisis in the middle east is that we need to move further and faster away from reliance on fossil fuels, but we have to take communities with us on that journey as well. That is why I want to see communities owning more of this infrastructure and benefiting from it. We also need to make the argument to everyone in our constituencies that the reason they have been exposed time and again to sky-high energy bills is because of our exposure to a fossil fuel market that we cannot control. There is no shortcut to building a system that protects us from that and there is no option to simply build another system somewhere else. At some point, infrastructure has to be built somewhere, and it is simply not a reasonable argument to say, “I’m in favour of this, but please don’t build it anywhere near me.” We will not embark on that.
The hon. Member for South Northamptonshire kindly referenced the size of my constituency—I do not think I have ever heard the exact number of hectares. The previous Government built one of the biggest onshore wind farms right next to my constituency. I support that; it is the right thing to do for our energy security. If it was right under that Government, it is also right that we build the infrastructure that we need now, bringing communities with us but also being clear that it is the right path for the country and our energy security.
Offshore Wind Investment
Michael Shanks Excerpts(2 months, 2 weeks ago)
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The Minister for Energy (Michael Shanks)
Today I am setting out the Government’s position on the supply of offshore wind turbines from MingYang, a Chinese turbine supplier. This has followed offshore wind developers seeking the Government view on the use of MingYang smart energy turbines in British waters and in our energy system.
After careful consideration, the Government’s view is that we cannot support the use of them in UK offshore wind projects. We have informed offshore wind developers of this.
We will always act to protect our national security, and we are committed to strengthening and prioritising resilient and sustainable offshore wind supply chains.
We welcome investment from China where it is in our national interest, as demonstrated through the announcement of significant inward investment during the Prime Minister’s visit to Beijing early in the year. We will continue to take a long-term and strategic approach to managing relations with China, co-operating where we can, while being clear-eyed to any risks and ensuring security and resilience.
The UK continues to be a world leader in offshore wind, which provides secure, domestically generated electricity, and will play a key role in achieving clean power by 2030 and net zero, and attract investment, creating thousands of new jobs around the country.
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Draft Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026
Michael Shanks Excerpts(2 months, 3 weeks ago)
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The Minister for Energy (Michael Shanks)
I beg to move,
That the Committee has considered the draft Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026.
It is a pleasure to serve under your chairship, Ms Jardine, and it is wonderful to see so many Scots reunited for this debate. The draft regulations were laid before the House on 5 February; I should say from the outset that they still carry the legacy name of this policy, although it is now known as the clean industry bonus. I will briefly set out three things: first, the purpose and direction of the clean industry bonus; secondly, how the draft regulations help us to evolve the contracts for difference scheme; and thirdly, why funding under the scheme is now conditional on applicants adhering to the fair work charter, which I will come to in a moment.
First, the purpose of the statutory instrument is to amend regulations governing the clean industry bonus ahead of allocation round 8. As I am sure Members are aware, the contracts for difference scheme is our main renewable energy support mechanism. The clean industry bonus offers additional CfD revenue to offshore wind developers who invest in UK factories and ports needed to deliver offshore wind, driving investment in our industrial heartlands. Offshore wind developers have rightly prioritised reducing costs, but the CfD scheme was missing a mechanism to ensure that investments went back into the UK, and to cleaner factories, so that consumers got both clean power and local jobs. That goes to the heart of this Government’s mission to deliver not only clean power but our industrial strategy.
Funding under the clean industry bonus is allocated through a competitive process that is run ahead of the main CfD round, with awards given out for the best value investments in the UK or for cleaner supply chains. Payments are released only on delivery of those commitments.
In the most recent allocation round 7, £204 million was allocated through the clean industry bonus, which crowded in £3.4 billion of private investment—that is £204 million for £3.4 billion of private investment into supply chains and ports in the UK, delivering a strong return on public investment. The scale of private investment leveraged by the clean industry bonus represents an unprecedented vote of confidence in the UK’s supply chains, compared with previous allocation rounds.
Let me set out the direction of travel in the draft regulations. The aim is to make targeted, practical improvements to the operation of the scheme for allocation round 8, such as simplifying the application process and clarifying how budgets and delivery rules operate. The draft regulations also provide a legislative basis for making the subsidy conditional on fair work, ensuring that investments come with a commitment to good-quality jobs. The aim of the scheme’s operational improvements is to speed up the process and reduce the administrative burden by diminishing the volume of paperwork required, as well as clarifying budgets and rules, such as if events outside an applicant’s control derail their project. The draft regulations also set a sunset clause on the scheme, meaning that no CIB can run after 31 December 2028 without further parliamentary scrutiny.
In the coming allocation round, we are also thinking beyond just offshore wind; the scheme will be extended to onshore wind projects in allocation round 9, and the regulations have been amended to make that possible. The period before introduction will give industry a small amount of lead-in time to get ready. Taken together, these changes improve and widen the scheme, as we speed up the delivery of renewables.
Thirdly, on fair work and skills, the most significant change in allocation round 8 is that clean industry bonus applicants will need to sign up to the offshore wind fair work charter, which is a series of commitments to improve worker voice and representation and health and safety in the offshore wind industry. If an applicant wants to apply for the subsidy, they will have to sign the charter. This was designed by industry and trade union representatives, and it reflects their constructive engagement. I thank the representatives from both the industry and the trade unions, who engaged constructively in pulling this together.
The purpose is very simple: if we are going to give public money, it should help to improve the quality and security of jobs in the offshore wind industry. It will mean that workers and communities across the country reap the rewards of offshore wind and that the sector becomes an even more attractive place to work amid fierce competition for skills. The charter builds on forthcoming commitments in the Employment Rights Act 2025, in particular by asking that the offshore wind sector proactively implement voluntary access agreements for trade unions. It also includes a commitment to strive for best practice health and safety standards that go beyond the legal minimum.
Our commitment to good jobs through the clean industry bonus does not stop at the fair work charter. We are pressing ahead with a skills investment fund that will help develop the skills needed for the clean energy transition. The idea is that offshore wind developers pool together skills funding and initiatives, rather than relying on individual projects trying to address particular short-term needs. The Government and the offshore wind industry have agreed that they will work together to set that up by 2027; that will be funded by existing developer contributions to the supply chain, not by any new money. Once that skills and investment fund is up and running, developers may be asked to contribute to it as a condition for taking part in the CIB and CfD schemes. That way, the bonus can drive improvements in how the offshore wind sector addresses fair work and skills, while continuing to fund UK industrial heartlands.
As I have set out, the regulations build on the strong foundations achieved in allocation round 7. They ensure that the clean industry bonus continues to drive supply chain growth in support of clean home-grown power. They make targeted improvements to the operation of the scheme and, crucially, ask that public funding supports public goods such as fair work and investment in skills. Taken together, the measures support the Government’s mission to make Britain a clean energy superpower, to lead in producing affordable clean energy and to support the creation of good jobs right across the country. I commend the regulations to the Committee.
Michael Shanks
I will address a few things. There were some contradictory comments from different Members of the same party: on the one hand, we should support the supply chains, but on the other, the Government should do nothing to actually build them up. I will come to that point, because—
Michael Shanks
That is how we end up with absolutely no industry left in the country. That is what we are trying to rebuild after 14 years of it falling apart.
I will turn to the specific points. First of all, the shadow Minister, the hon. Member for West Aberdeenshire and Kincardine, made a good point about the strength of supply chains in the north-east of Scotland; I will be in Aberdeen again on Thursday. One of the key things that the North Sea Future Board has taken as a real priority is how we map those supply chains, not just over oil and gas but over what could come in terms of offshore wind, decommissioning, hydrogen and carbon capture. For too long, the pipeline of future projects that that supply chain could be redeployed on has not been clear enough. As a result, we have been losing out on contracts that could be dealt with here in the UK. We are determined to try to fix that, because there are significant supply-chain opportunities, but we need to make it easier for companies to take those up.
The shadow Minister and I always agree on new nuclear, although we slightly disagree on how much he achieved when he was the Nuclear Minister—but I will not mention that, because I want us to work co-operatively on nuclear. New nuclear is incredibly important. As he is right to say, the supply-chain benefits in the UK from nuclear are substantial: thousands and thousands of jobs in communities right across the country, not just in proximity to Sizewell or Hinkley, are contributing in different ways to building what are phenomenal engineering projects here in the UK.
The small modular reactor fleet that the Government not only consulted on but have actually delivered—and are delivering—will result in even more supply-chain jobs across the country as well. The shadow Minister and I also agree that we would like to see some of those SMR projects being built in Scotland, with even closer supply chains in Scotland as well, but we first need to change the Scottish Government in May; I am glad that he will be supporting a vote for Scottish Labour on 7 May to do that.
The shadow Minister also raised a number of other points about the supply chain that I think are right. It is absolutely right to say that floating offshore wind is an expensive technology, but we are at the cutting edge of its development. We have a real opportunity to do something differently on deep-sea wind, which we were not able to do on fixed-bottom wind, to have the supply chain here in the UK. We have the biggest pipeline anywhere in the world; we have one of the biggest projects in the world. That is an opportunity for us to deliver on that innovative supply chain, but it takes investment for that to happen.
The right hon. Member for North West Hampshire asked a number of genuine questions, which I appreciated. First, the regulations themselves very clearly set out the sunset clause as 31 December 2028. This will be eligible for the allocation rounds before that date; if we wanted to continue the scheme beyond that, we would have to come and update these regulations again, but it is not an unlimited fund.
On the projected budget for AR8, I cannot get into projected budgets because they are driven by the initial allocation that is set, and then by the bids that come in. In AR7, we reformed the process so that we could see the bid stack in order to see what projects were in that option round, although they were anonymised. That resulted in the budget getting us the output of offshore wind that we did, at a price that was 40% cheaper than new-build gas. That is what we should hold on to: the AR7 option round was cheaper for consumers than the equivalent would be.
I remind right hon. and hon. Members that there is no option to not build new energy infrastructure in this country. We have two choices: we either double down on gas, and the world as it stands right now is a reminder of why that would be a mistake; or we build renewables. There is no option to build nothing. There is a cost for consumers, regardless of what we choose to do. There is also a huge cost for consumers of building the grid that the previous Government failed to build for 14 years, which we are now determined to do.
On the fair work charter, there is no compulsion on any developers to bid into the clean industry bonus. If they want to participate in the contracts for difference auction, they are very welcome to do that. If they want to participate in the clean industry bonus and have public support for supply chains here in the UK, then they should conform to the requirements of that scheme. We think it is absolutely fair to say that if the hard-working people of this country are putting money into building those factories, fair work should be at the heart of it. I am surprised, frankly, that in 2026 anyone would think that fair work is something that we should not support by any means necessary.
Kit Malthouse
As I think I said, I agree that people should be treated with respect; my question was more about why it is being done through this particular route. For the Government to legally have grounds to include what we are discussing as part of, effectively, a procurement process, there has to be a statutory basis on which they are doing that; it cannot just be shoved through on a non-universal basis. I was asking for the authority on which it is included.
I am sorry if I misread the time limits regulation. Could the Minister confirm that, if the Government give notice before 31 December 2028 for 12, 15, 19 or 120 more rounds to come, they will then be able to continue post that deadline? So they can in fact manufacture a deadline.
Finally—rather than my having to intervene again; I hope you will bear with me, Ms Jardine—could the Minister confirm to colleagues what he said: we are being asked to vote today for higher energy bills for our constituents in perpetuity, or certainly for the next few years, as a result of this instrument? Just so everyone is clear: you are voting for higher bills.
Kit Malthouse
I was trying to save time; I can intervene more if the Minister wants.
Michael Shanks
I understand the point. First of all, I have been really clear. This regulation, as it clearly sets out, comes to an end on 31 December 2028. We will come back to the Committee to update the regulations should we wish to continue the scheme. We have run AR7—it was a successful scheme. Obviously, we want to monitor what happens in AR8 and AR9. We may be able to devise other schemes. It may be that by then that our industrial strategy has delivered the supply-chain benefits across the UK and that that is not necessary, but supply chains do not come out of nowhere.
The shadow Minister, the hon. Member for West Aberdeenshire and Kincardine, made one other point that I wanted to come back to. When we left Government, two supply chain companies were building solar in this country. When we took back Government in 2024, there were none. If we want to have supply chains in the UK, we have to support and invest in them. That is not just a cost. It also delivers good jobs across the country, and our energy security.
On the question about raising bills, the right hon. Member for North West Hampshire is quite wrong. The outcome of building the clean power system is that we will bring down bills, but we have to be able to build it and that means supply chains here in the UK as well, because the rest of the world is also in a race to build clean energy infrastructure.
Michael Shanks
It is a no, because the counterfactual, of relying on gas, as his party is so determined to do, would put up everyone’s bills significantly. We are the ones bringing down bills, and on 1 April all our constituents will see that the decisions this Government have made will reduce their bills by 7%.
There are a number of points in this statutory instrument that I could go over again; in the interests of everyone’s time, I will not. I reinforce the point that we believe that if we are building an energy system for the future here, we should deliver the good jobs and industrial benefits that come with that. That should not be a controversial argument, but it seems that it still is. If we want to have an industrial strategy, we cannot be agnostic, sit on the sidelines and hope that someone else will do it—we have to drive it forward. If we want our constituents to have good, well paid jobs across the country, helping build the energy system, we have to do something about it. This Government are doing that, and I commend the regulations to the Committee.
Kit Malthouse
On a point of order, Ms Jardine. I do not mean to be difficult, but the Minister has not answered all the questions I posed—not least about the assumptions of the 16:1 leverage, which is apparently the big bonus coming in. I also do not know whether it is appropriate for us to vote on what is effectively an open-ended budget. Fundamentally, the impact I am most worried about is the one on my constituents—that I am not going to be able to tell them how much this will cost them; that is quite a significant hole in the Government’s argument. I am not aware of other statutory instruments where we vote for an open-ended budgetary allocation that our constituents will have to pay for, whether they like it or not.
I have time this afternoon. If you, Ms Jardine, want to suspend the sitting while the Minister goes and finds the answers to those questions, I am quite happy for that to happen. It seems to me disrespectful for us to rattle through something that will have an impact quite soon on people’s electricity bills.
Fusion Strategy
Michael Shanks Excerpts(2 months, 3 weeks ago)
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The Minister for Energy (Michael Shanks)
The Department for Energy Security and Net Zero is today publishing “A New Energy Revolution: The UK’s Plan for Delivering Fusion Energy”.
This strategy builds on the Government’s record £2.5 billion investment in fusion research and development secured at the spending review, supporting the UK’s growing fusion industry and reaffirming Britain’s leading position in the global race for fusion energy. We are turning the promise of abundant fusion energy into a reality, as we take long-term decisions while delivering tangible benefits now; for example, we are supporting over 10,000 UK jobs by 2030, driving inward investment, and giving industry the confidence to take fusion from the lab to the grid.
In support of this strategy, UK Industrial Fusion Solutions, to become UK Fusion Energy Ltd, has announced details of the STEP—spherical tokamak for energy production—construction partner that will build the world-leading fusion energy plant on the site of a former coal plant in West Burton in Nottinghamshire. Large-scale construction is expected to start by the end of the decade, with jobs supported in the near term through the building of research and development test facilities for key technologies and site preparation.
We are also harnessing the power of artificial intelligence to accelerate fusion design, modelling, and operations. The Government are investing £45 million to fund the world’s most powerful fusion-dedicated AI supercomputer, developed in collaboration between UK Atomic Energy Authority and the University of Cambridge.
We will drive progress towards fusion deployment by making the UK the first to offer a market framework for fusion energy, giving support and certainty to fusion developers as they make capital-intensive investments in new technology. We will work with industry, consumer groups and others to develop options to provide confidence to investors and ensure a fair deal for consumers.
I fully intend for the UK to be the home of fusion skills and innovation, backed by £50 million for skills development to train over 2,000 people in fusion-related disciplines, from apprentices to postdoctoral fellows, ensuring a comprehensive fusion skills pipeline to supply the sector at all levels.
This strategy underscores the UK’s role as a global player in fusion energy, and we intend to develop that further, anchoring a supply chain in the UK that can serve a global industry, as well as attract inward investment. Our forthcoming investment prospectus will set out exactly where opportunities lie for investors, developers and the wider fusion sector, and what capabilities, skills, companies and support they can draw on. As a signal of confidence in the UK fusion programme, the strategy is accompanied by a set of wider announcements, including UKAEA and Eni agreeing to establish a joint venture to advance fusion energy technologies. This new strategy also sets out for the first time how the Government’s record-breaking investment into fusion of over £2.5 billion will be spent.
Together, this package represents the UK’s clean energy superpower mission in action. It demonstrates that the Government are taking a bold and practical approach, addressing the asks of industry, creating the conditions for a globally leading UK fusion sector, and maintaining the UK’s position at the forefront of global fusion commercialisation.
I will place a copy of the fusion strategy in the Libraries of the House.
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Nuclear Regulatory Review 2025: Government Response
Michael Shanks Excerpts(2 months, 3 weeks ago)
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The Minister for Energy (Michael Shanks)
On Friday, the Government set out their response to the nuclear regulatory review 2025. The review found that while the United Kingdom has a strong safety culture, the current system for nuclear regulation and delivery is fragmented, slow, and overly cautious. The Government accept this assessment and shall modernise the system so that it is faster, clearer and predictable, while at all times maintaining high standards of safety and environmental protection. This is needed to deliver on the ambition we have for both for our civil and defence nuclear sectors.
The response we are publishing today addresses all of the review’s 47 recommendations and sets out a coherent and ambitious plan to streamline nuclear delivery in Britain.
We will simplify regulation. Projects that involve multiple regulators will have a single co-ordinating point of contact through a lead regulator model, with the Office for Nuclear Regulation as the default lead for nuclear fission. We will legislate to establish a commission on nuclear regulation to resolve cross-cutting issues and reduce duplication.
We will restore proportionality in decision making. Government will convene an independent expert panel to review how the tolerability of risk framework is interpreted, to guide regulators and industry in nuclear. Regulators will revise guidance, so that it supports proportionate, evidence-based decisions. We will clarify how proportionality, in nuclear, should be applied under the Health and Safety at Work etc Act 1974, without reducing protections for workers or the public.
We will strengthen culture, skills and digital capability. We will go further with the nuclear skills plan, and launch a nuclear digital programme to drive the adoption of new tools, such as artificial intelligence and digital twins, across design, regulation, and delivery.
We will speed up the wider planning and environmental system to support nuclear delivery. We will use the nature restoration fund and environmental delivery plans to provide clearer routes for meeting obligations, resulting in better outcomes for nature. For defence nuclear, the Government will bring forward an alternative pathway for compliance with the habitats regulations, where this is necessary in the interests of national security. We will introduce a proportionate biodiversity net gain framework for nationally significant infrastructure, and will legislate to constrain the duty for national parks and national landscapes. We will improve our nuclear siting policy by updating the national policy statement for nuclear, EN-7, to support fleet deployment, and will revise the semi-urban population criterion in a way that maintains public safety while expanding the range of viable sites.
We will make the planning pathway faster and clearer. We will streamline the pre-application phase for development consent orders, and strengthen the initial assessment of principal issues, so that examinations focus on what matters. We will also ensure that the geological disposal facility programme has the powers that it needs, including on land access and bespoke permitted development rights.
International co-operation remains important. The ONR is deepening work with partner regulators, including through recent agreements with the United States and Canada, and we will support a joint international strategy to reduce duplication and share effort. Implementation of these reforms will be overseen by a nuclear regulatory implementation panel, made up of senior figures from Government, regulators and industry, which will report regularly to the Chief Secretary to the Prime Minister and relevant Secretaries of State.
Delay has a cost, so we are already working on some of the reforms, and aim to complete implementation by the end of 2027, subject to legislative timelines. To ensure that live projects like Sizewell C and the small modular reactors programme can benefit, we will begin updating processes, and will issue interim guidance immediately, so that improvements can start now, while we wait to take through legislation.
I want to thank John Fingleton and the taskforce for their work in bringing these issues to the fore, and I make the commitment to all that through this programme, we will cut duplication, strengthen safety by focusing on outcomes, and give investors and developers the confidence to proceed. We are delivering on these recommendations already. Taking these steps is vital for securing our energy future and sustaining the sovereign capabilities that keep our country safe.
[HCWS1398]