Floating Offshore Wind and Contracts for Difference

Peter Grant Excerpts

Thursday 23rd May 2024 Westminster Hall

[Peter Grant (Glenrothes) (SNP)]

It is a slightly strange experience to realise that the summing-up of the debate could well go on for quite a bit longer than the debate itself. I thank the hon. Member for North Devon (Selaine Saxby) for securing the debate and commend her on the quality of her speech, which she has clearly put a great deal of time into researching.

It seems to me that the byword for a future energy security strategy has to be diversity, or variability. We should be looking at every opportunity out there for us to secure renewable energy; we should not be turning anything down just now. Offshore wind has been recognised for some time, and given that the technology now allows us to float wind turbines rather than trying to anchor them to the sea massively increases how much of our waters can potentially be tapped for wind. As the hon. Lady pointed out, having installations around different parts of the UK also increases the chances that the wind will be blowing in the right direction somewhere.

The Government set a target of 50 GW of offshore wind by 2030—that is not that long ahead now—and they hope that 5 GW will come from floating offshore wind. At the moment we probably have less than 100 MW, so we are nowhere near where we need to be. That is about a 50th of what the Government are looking for. As has been mentioned, there was welcome news in November when the Government increased the strike prices for both floating and fixed offshore wind, but the announcement of how much the budget would be was not nearly so welcome. My concern is that if the Government—whichever Government we have in a few weeks’ time—do not listen again to the industry, we could have a rerun of the calamity that was AR5, where nobody put in a bid for offshore wind.

We have to view round 6 against the backdrop of two previous failures. In allocation round 4, almost 3 GW did not come into fruition, and as we have mentioned, in round 5 there was no interest at all. In round 5, the Government managed to set the strike price for offshore wind energy so low that not a single wind producer could afford to sign up for it. That should not have surprised anybody, because industry leaders had been telling the Government for some time before the official auction that they would have to increase the strike price. The Government decided that they knew better, and as a result, there were no bids at all in round 5. That has put us seriously behind where we need to be and where the Government want to be.

If the Government are now aiming to reach their 2030 target of 50 GW, they need to secure another 21 GW over the next two allocation rounds, as there is unlikely to be time for a round 8. That means that round 6 and round 7 both need to average about 10.5 GW each. To put that into context, that is almost double the highest figure achieved in any single previous round. We have already left ourselves in a position where we have to increase massively the pace of build and increase the scale or number of projects that we fund. We cannot continue to fund only one project with each round.

Energy UK has forecast that, based on the current budget, round 6 is likely to deliver between 3 GW and 5 GW of offshore wind capacity. That will leave us looking for 16 GW from round 7—an almost impossible task when we consider how little we have produced over the previous rounds. When the budget was set, it was set at a level that the industry is telling us was too low. Okay, businesses are there to make a profit and they are good at telling the Government they need more money when they do not, but they were not crying wolf last time. They were not crying wolf in round 5, and I do not think that they are crying wolf in round 6. The disaster and humiliation that was round 5 was completely preventable, and the current jeopardy facing round 6 is preventable as well. If the Government are really serious about supporting innovation and the development of new renewable energy technologies, such as floating offshore wind, they need to be prepared to invest in it. As has already been mentioned, other people are; they are going to take the lead from us.

We are—and certainly should be—a leader in this technology. Scotland is a world leader in a number of renewable energy technologies. Floating offshore wind, as has been mentioned, gives creative flexibility. About 80% of Europe’s offshore wind resource is estimated to be in waters that are more than 60 metres deep, which is too deep for a fixed wind turbine but is very exploitable for floating turbines. In Scotland, we know that we are an energy-rich country. We already produce significantly more energy than we need. We are a world leader in a lot of renewable energy technologies, including offshore wind and hydrogen, which is being developed—as Members will know—in my constituency, along the coast in Methil and Buckhaven. We have the capacity, the world-leading technology and the expertise, but what is holding us back is a lack of enthusiasm and a lack of visible commitment from a succession of Governments. We have a long history in Scotland of developing floating systems to use in the oil and gas sector. That technology is adaptable, and we have the people with the ability to adapt that expertise, in the same way as they adapted the previous expertise in fixed drilling installations for oil and gas. That was used in the design of the earlier generations of wind turbines.

It is maybe hard to believe now, but when the contracts for difference model was originally set up, it was hailed as the gold standard. It was one of the best ways of securing renewable energy investment that anyone had ever come up with, and it has achieved quite a lot. However, one of the lessons of the failure of allocation round 5 is that, while other countries and economies have continued to push forward at pace, the UK has started to fall back. In recent years, while successive allocation rounds in the UK have failed, we have seen the implementation of, for example, inflation reduction in the US and the green deal in the European Union. That means that, when green energy companies are looking for somewhere to invest—and a lot of those people will invest anywhere—they see tax credits in America and subsidies in the European Union, but all too often they see what looks to them like half-hearted commitment from the United Kingdom. If that continues, we will start to lose that investment.

The UK Government should be doing what they can to make sure that Scotland, and indeed the rest of the UK, retains its world-leading position at the front of the green energy transition revolution. We can do that by increasing funding to green energy programmes, including floating offshore wind and fixed onshore wind. It is estimated that between 8 GW and 12 GW of offshore wind projects around the UK already have planning consent—they are ready to go if somebody would just provide some of the investment they need. They are already there. If the contracts for difference had the capacity, they could all be brought on stream much more quickly. They are ready to start building to produce the clean, reliable and cheap energy we know we will need to meet our net zero climate change targets.

The SNP will continue to call on whoever is in government after the election to introduce a comprehensive industrial strategy that includes identification of where our longer-term energy needs will be met. They should be aiming to match the Scottish Government’s just transition fund, and invest at least £28 billion a year into green transition. The potential Government in waiting have ditched their promises; I hope they will reinstate them in their election manifesto.

The renewable energy industry is an essential component of Scotland’s long-term growth strategy. We can be world leaders—we are already world leaders. We want to maintain that position. We cannot allow a UK Government of any persuasion to hold Scotland back in the 2020s in the same way they did back in the 1970s and 1980s.