Contracts for Difference Scheme

Steven Bonnar Excerpts

Thursday 19th October 2023 Westminster Hall

[Steven Bonnar (Coatbridge, Chryston and Bellshill) (SNP)]

It is always a pleasure to see you in the Chair, Dame Angela. I should say at the outset that I am here as a substitute for our energy spokesperson, my hon. Friend the Member for Angus (Dave Doogan). Members from all parties will be aware of the Met Office red warning for weather, the centre of which will be over Angus today. I know that all hon. Members will wish the people of Angus well over the coming days of extreme weather.

I rise to speak in this debate in the wake of the disastrous fifth round of contract for difference allocations. It was a tragedy for the climate, for bill payers and for industry, especially in Scotland, where we face the harshest weather and the highest bills, and where, of course, we lead the renewable transition throughout these islands. I should thank the hon. Member for Strangford (Jim Shannon) for securing the debate. He is without question my favourite Unionist.

In this policy area, as in every other, the Westminster Government are failing to implement effective policy to ensure that climate targets are met and households are protected. Ambitious climate policies are needed to attract and sustain investment, promote innovation and meet our climate commitments—priorities that are clearly now beyond the will, or perhaps the ability, of this Government.

At a time when households across these islands are dealing with soaring energy bills, it is ludicrous that the Westminster Government failed to listen to the warnings of industry ahead of auction round 5. There were clarion calls from industry that the administrative strike price for offshore wind was just not going to cut it. As a result, shovel-ready offshore projects that could have powered 8 million homes are now not being developed.

Generation developers are now begging their supply chain partners not to abandon the United Kingdom market while this Westminster Government pretend that everything is just fine. It is not just fine: it is a calamity. Projects will now not be developed, or will be delayed substantially, that would have saved consumers up to £2 billion a year compared with the cost of the gas generation that will fill the gaps.

The failure to secure any offshore wind projects risks putting Scotland’s energy security and our net zero targets at risk, and prolongs our dependence on fossil fuels. Among the projects that were not secured because of developers being unable to bid because of the unfeasibly low strike price was the super-project at Berwick Bank, which SSE noted

“could play a crucial role in closing the gap between where we are now and where we need to be by 2030.”

This disaster was preventable but the Westminster Government chose to put their head in the sand and hope for the best. They failed, and they did so spectacularly. The overall budget for AR5 was £50 million less than that for AR4. On top of that, the industry leaders warned the Westminster Government to consider

“inflationary costs and supply chain squeeze”

in the auction prices, but the UK Government again chose not to listen.

Offshore wind generates more power per megawatt of installed capacity than any other renewable source, and the UK’s unique wind resource and shallow seas mean it has been the central technology in the plans to end the UK’s reliance on fossil fuels for electricity. Offshore wind remains the UK’s cheapest option for large-scale power, so the slowing of development will leave consumers exposed to volatile global gas markets for longer, and it will cost the country more in the long term.

Despite the benefits that offshore wind production offers in terms of reliability, predictability and value, the funds available for renewable energy projects are being cut, while the Government continue to write blank cheques for nuclear programmes. The change in pot structures, down from three in AR4 to two in AR5, means that offshore wind is now competing with other established technologies for less funding, and it is not as though everything was going well before the crisis in AR5. The Westminster Government have thus far secured only 27 GW of their target of 50 GW of offshore wind by 2030.

To ensure that the funding available for offshore wind is sufficient, Energy UK is calling for offshore wind to be returned to a separate pot, and we back that call. If the contracts for difference scheme is to succeed, sufficient funds must be made available to provide adequate price incentives for further efforts needed to encourage innovation in emerging technologies and offshore wind.

I hope that the Minister will answer three questions. What steps will the Department take to recover the failure of AR5 for offshore wind? What does he believe the net loss in offshore capacity will be as a result of their failure in AR5? Will he apply just a tiny wee fraction of the esteem and admiration that he has for the French nuclear industry to the Scottish renewables sector?

[Dame Angela Eagle (in the Chair)]

I call the shadow Minister.

--- Later in debate ---

[Dame Angela Eagle (in the Chair)]

The hon. Member for Coatbridge, Chryston and Bellshill came in at short notice to deal with an issue, and the Minister ought to be more sensitive to that in his remarks.

[Steven Bonnar]

Thank you for that intervention, Dame Angela. Listen, the Minister has every right to say what he says—

[Dame Angela Eagle (in the Chair)]

Is the hon. Member making a point of order?

[Steven Bonnar]

On a point of order, Dame Angela. I appreciate the intervention you made. This is what we expect from the Conservative party and Government Ministers. I thank you for putting that on the record, Dame Angela.