Draft Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025

Nick Timothy Excerpts

Monday 30th June 2025 General Committees

[Nick Timothy (West Suffolk) (Con)]

It is a pleasure to serve under your chairmanship this sweltering evening, Mr Swayne.

[Kerry McCarthy]

It’s Sir Desmond!

[Nick Timothy]

Sir Desmond—I apologise; I will announce my resignation later this evening.

I am pleased to respond to the draft regulations for the Opposition. Under this legislation, the Secretary of State for Energy Security and Net Zero will be given new powers to view anonymised CfD bids before setting the budget for the next auction of contracts, due to take place later this year. That means that he will know ahead of time exactly how much will be procured if he sets the budget at a certain level, and therefore what the strike price will be. That poses questions about exactly how much the next round of CfD contracts—AR7—will end up costing the taxpayer.

Already, the process has been delayed. The previous allocation round was a record-breaking £1.5 billion, after the Secretary of State turned on the money machine. Everyone in industry—and, I suspect, Ministers too—believes that AR7 will be even more expensive. Ministers have made clear their intention to extend the CfD contracts to 20 years in an attempt to get strike prices down. Whether they succeed or fail in that respect, let us be clear about what it all means in the end: more expensive bills for the public—the very opposite of what the party promised before the election.

I note that the Minister, in her opening speech, talked again about the volatility of gas prices and repeated the soundbite about the rollercoaster of gas prices. I would appreciate it if, in her response to me, she explained why the Labour party has taken credit in its campaign materials for the reduction in bills caused by the fall in wholesale gas prices, when policy costs have actually increased.

Why are Ministers having to pump so much more money into CfD contracts? It is because of the Government’s ideological rush to decarbonise the grid within five years. That requires a massive expansion in wind power over the next two auctions, and the result will be higher prices forced on to households and businesses. We know that not just from experience and an understanding of how renewable technologies work, but because it has come from the horse’s mouth, too. Behind closed doors, a senior RWE executive has admitted that there would be “spikes in prices” and predicted that the “consumer risks losing out”. In other words, bills are going up. It would be nice if we could have such honesty from the Government.

This is the reality of net zero. Last January, a combination of dark skies and low wind—what has now become known as Dunkelflaute—brought Britain to the brink of blackouts. That was avoided only thanks to our remaining gas fleets, which the Government say they want to run down. The Prime Minister has promised categorically that decarbonising the grid by 2030 will not cause any power shortages, blackouts or energy rationing, yet unreliable solar contributed to a lack of inertia in the Iberian grid that could have prevented their power outages. In Britain, customers have paid over half a billion pounds already this year for power generated by wind, with which the grid cannot cope.

The OBR says that the costs of all these subsidies, and the hidden costs of renewables, will rise by 60% over the course of this Parliament. Wind is more expensive and highly unreliable, but the Government want more of it, instead of more reliable energy sources, such as gas and nuclear. I hope the Minister can take this opportunity today to explain in clear terms what this legislation will mean for the future of our energy system. Can she provide a date for when the allocation round 7 administrative strike prices will be published? Can she confirm that the budget will be kept as low as possible to keep strike prices as low as possible?

How will Ministers ensure value for money when they are trying to procure record capacity? Can the Minister tell us now that strike prices for offshore wind will be lower than those in AR6, and can she confirm that strike prices will be lower than the price of gas-powered electricity last year? If she cannot answer those questions, how can she possibly say that this legislation will cut bills? The public deserve the truth about how the Government are using their money to chase the ideological and the unachievable. Pushing policy to run faster than technology will allow, which is exactly what this Government are doing, will only lead us further away from genuine energy abundance, and leave our country not only poorer but less secure.

--- Later in debate ---

[Kerry McCarthy]

We have nuclear production in this country—[Interruption.] We have nuclear power as part of the mix. Obviously, the investment we have just announced does not come into effect for a while, but we have that as part of the mix. We have said that there will be 95% clean power with gas as a back-up if needed. We are not putting all our eggs in one basket by any means whatsoever.

[Nick Timothy]

One of the questions I asked was, why, given that the Minister and other Ministers keep talking about the rollercoaster of volatile fossil fuel prices, when wholesale costs fell, causing the price cap to fall, did the Labour party put out posters saying, “£129 off your bills delivered by Labour”? Will the Minister confirm that that reduction reflects the reduction in wholesale prices and has nothing to do with what the Government have done with policy?

[Kerry McCarthy]

I am not aware of that announcement, not least because I am not the Energy Minister—he is in the Chamber, making a statement about the oil refinery. But we are doing all we can to bring down consumer bills, and I think we deserve some credit for our efforts.

To conclude, meeting the Government’s commitment to the clean energy superpower mission, including clean power by 2030, will require a rapid and sustained scale-up of low carbon electricity. That will entail working with the private sector to radically increase the deployment of low carbon electricity, while at the same time protecting consumers. The instrument under discussion—in the loosest possible sense of the word, given how the debate has ranged over a number of other topics—is a step forward in achieving those ambitions; it supports the delivery of a clean power system, which shields families from volatile gas prices.

By amending the contract budget publication process and allowing the Secretary of State access to anonymised bid information, we will ensure that the previous underspend risks seen for fixed-bottom offshore wind are minimised, and the Government having greater certainty of outcome in the auction to procure more fixed-bottom offshore wind will allow us to make an informed decision on balancing capacity with costs to consumers.

The UK is a world leader in offshore wind, with 15.9 GW generating electricity. We have the highest deployment in Europe and are second in the world only to China. This policy intervention is another strong signal of the Government’s commitment to scale up deployment of fixed-bottom offshore wind to the benefit of businesses, bill payers and local communities. The instrument will build on the success of the CFD scheme—I will be polite and not mention how AR5 went under the previous Government compared with AR6 under us—adapting it in line with market and technological developments, and contributing to the UK’s crucial net zero targets and 2030 clean power mission. I commend the draft regulations to the Committee.

Question put and agreed to.