Marine Renewables: Government Support

Wera Hobhouse Excerpts

Wednesday 7th December 2022 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. Thank you for allowing me to be absent briefly from the debate. I was at an extraordinary meeting of the net zero all-party parliamentary group—I was needed to make sure that it was quorate.

The beauty of being called last is that one often repeats what has already been said, but I do not think it is necessarily bad that we all agree on many things. I congratulate my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) on bringing this very important debate to the Chamber. It is important that we say certain things again and again, because they need to be said again and again to put a bit of fire under this Government, who—although I believe we all agree on the targets—are not acting with the necessary pace of change that I would like to see.

Just to set the scene again, climate change is devastating the world. The abnormally hot and cold temperatures across the world contribute to as many as 5 million deaths a year. Limiting global warming to 1.5°C instead of 2°C could result in around 420 million fewer people being exposed to extreme heatwaves, yet too many politicians are still treating our vital climate net zero targets like a bus—if we miss one, we can catch another one. There will be no next time if we miss our net zero targets. Our reliance on fossil fuels is not only terrible for the planet, but bad for our energy security. Our constituents would not be paying the price for Putin’s war if the UK had moved towards renewables faster, harder and earlier.

The UK must rapidly diversify its energy through multiple forms of clean energy sources. Hydropower is a proven green technology. It can provide flexible storage to support the growth of wind and solar at scale. Hydropower is affordable and reliable, and can be ramped up at short notice when needed. Well-developed plans for tidal range projects on the west coast could mobilise and deliver at least 10 GW of net zero energy, with a construction time of five to seven years. The UK also has the potential to develop up to 11.5 GW of tidal stream by 2050, supporting over 14,000 jobs. I agree with everything that has been said today. We should support everything, including what the hon. Member for Gloucester (Richard Graham) said about tidal stream and lagoon energy.

The technologies are all there, but they could be developed much faster and more effectively if they did not always have to compete with fossil fuels or nuclear. The Minister knows that I am not a great supporter of nuclear, simply because it is a very expensive technology. If the nuclear industry had the same requirements for competitiveness as the renewables industry, it would not be able to compete in the same way. The renewable energy sector has to compete in a very competitive environment, which is good for our consumers—I get that—but let us apply the same rules to all energy sources, not just the renewable energy sector.

Committing to a target of 1 GW of marine energy by 2035 would send a powerful signal to investors that the UK is the best place to invest in tidal power. I continue to worry that the Government rely too much on fossil fuels. We are getting stuck in the transition. We are never getting out of it, and we will never end up in a net zero world. From 2016 to 2020, the Government provided £13.6 billion in support to the UK’s oil and gas industry. The Chancellor’s recent autumn statement confirmed that oil and gas giants will be allowed to continue offsetting taxes, while ordinary taxpayers foot the bill. Britain gives out the largest tax breaks in Europe to the oil and gas industry. Whose side are the Government on?

When I met the British Hydropower Association recently, it warned that weak grid capacity in some rural areas meant that not even one electric vehicle charging point could be installed. I agree that grid infrastructure is now the biggest issue holding back renewable energy developments in the UK. It must be prioritised. Where is the long-awaited reform of Ofgem’s remit?

[Richard Graham]

It is worth highlighting that the role of the all-party parliamentary group on marine energy—and the nature of this debate, which is on Government support for marine renewables—is to avoid an argument about which technology or type of energy is better than another. Our case is strongest when we focus on specific things that the Government can do. In this case, that is in the next round of the contracts for difference. A specific opportunity has been outlined for how the Government can help bring down the costs of our marine energy sector, where a lot of technologies are still in the early stages. We are not yet getting the advantages of scale from consolidating those technologies down to two or three that work really well that would make this as cheap and efficient as possible. The Government can help us do that. Does the hon. Lady agree that this is the right way forward for marine energy?

[Wera Hobhouse]

I absolutely agree, and I thank the hon. Gentleman for making that exact point. How can we make sure that renewable energy technologies get the same support that the Government are giving to other forms of energy? I like to think that we all agree on the need to accelerate and turbocharge our renewable energy sector. My criticism of the Government—and the Minister is aware of this—is that we are not prioritising getting away from fossil fuel energy as soon as possible. That is my point, and it needs to be made again and again. I make that point at every opportunity to ensure that the Government understand the urgency that the climate emergency requires.

While we are at it, I want to quickly mention one of my particular interests, which is community energy—

[Mr Philip Hollobone (in the Chair)]

Order. I have been generous in allowing the hon. Lady some breadth in her contribution, but this is a debate about marine renewables—I am struggling to see how community energy could possibly fit in. The hon. Lady might want to consider what she says next.

[Wera Hobhouse]

Thank you for your advice, Mr Hollobone.

I will wind up by saying one thing: I absolutely support the development of marine energy and welcome all the support the Government can give it. I look forward to the Minister’s response.

--- Later in debate ---

[Alan Brown]

I need to move on. However, if there are any blockages, I am happy to support streamlining. I know that Marine Scotland has massively increased its resource to try to speed things up in terms of its assessment and processing. However, if more needs to be done to streamline things, I support that. I remind the hon. Gentleman that, as I have said, the section 36 regulations are reserved to Westminster. However, I am happy to support any streamlining of the process to ensure we get deployment.

I congratulate the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) on her contribution. She rightly highlighted that these technologies encourage redevelopment and regeneration. Energy Island is a fantastic development that will move from fossil fuels to renewable energy. I support the call for an innovation report for CfDs and the call for the ability to group multiple technologies together, because that would facilitate the development of green hydrogen as well.

As always, the hon. Member for Strangford (Jim Shannon) made a fantastic contribution to the debate. He talked particularly about the developments for Strangford lough in his constituency. I liked what he said about helping to support the working poor in a drive for wages.

I completely agree with the hon. Member for Bath (Wera Hobhouse) that when it comes to nuclear, there is a lack of competition to bring costs down. I support her call for community energy. That has happened in Orkney through hydrogen development and the roll-out of electric vehicles; party of that community energy comes from marine energy.

[Wera Hobhouse]

Will the hon. Gentleman give way?

[Alan Brown]

Sorry, I need to go on.

It might have taken slightly longer to get to this point and there are good reasons for that, but Scotland leads the world in wave and tidal stream technology. The deployment of tidal stream to date has come about because of a combination of the tenacity and drive of the developers; Government support, particularly that of the devolved Administrations; and the presence and work of EMEC.

Of course, a big reason for our optimism about the future is the £20 million ring-fenced pot that was allocated in AR4. That sent a clear message to investors and allowed certainty for the market. The message is clear: continue this £20 million ring-fencing in AR5 and, as a minimum, do the same for AR6. However, what would really help industry is a long-term view of what funding could be available. Hopefully the Minister will confirm that AR5, which is due to be announced later this month, will contain some ring-fencing.

We know what happened with offshore wind, where pipelines of projects brought prices down dramatically and much quicker than was originally intended. That was a real success story and one that the UK Government are proud of. As we look to the future, there are some things that can be replicated with tidal stream. That can be as big a success, but one that is based on UK supply chains and that will lead to our exporting the technology and patents.

The UK has 11.5 GW of potential, which equates to 11% of the UK’s current electricity demand. It goes without saying that the flows of tides are entirely predictable, so if there is a belief in the need for so-called baseload, tidal stream can clearly be part of that.

Of course, it is the reliability and predictability of this green energy that is so important. As we have heard, it is also cost-efficient, particularly if given the right Government backing. The 40 MW allocation in AR4 will be delivered at £178 per MWh, which is already 15% below the administrative strike price and represents a 40% reduction in the levelised cost of energy since 2016. As we have heard, it could go as low as £78 per MWh by 2035 and below £50 per MWh by 2050. However, such cost reductions are possible only with continued Government backing.

As we have heard, those prices compare very favourably to the strike rate for Hinkley Point C, which is £92.50 per MWh, and, as I have said, that is a 35-year concession as opposed to a 15-year concession. If we work that 35-year concession backwards, tidal stream is already as cheap as nuclear, or cheaper, albeit not at the same scale, so I admit we are perhaps not comparing apples with applies in terms of output. Nevertheless, in that comparison, tidal stream is already cheaper than nuclear. Tidal stream does not have the backing of Sizewell C, which has just been allocated £700 million of taxpayers’ money just to get to the final investment stage. Again, what we are calling for is continued Government backing that will see tidal stream developed quicker and in a way that is much more beneficial to bill payers.

Given that time is running on, I will sum up by reiterating what the key asks are for industry. We must maintain the tidal stream energy ringfence in future renewable options, which is worth at least £20 million in AR 5. We want the Government to set a 1 GW target for 2035 to send, again, that strong signal to investors. Small modular reactors at Sizewell C will not be able to achieve that target in that timeframe. We want to expedite the route to market for UK projects. That goes to the point other Members have touched on about the consenting process, which needs to be sped up.

Other contributors have also said that the UK needs to increase the pace and scale of its investment in its electricity grid. We should do an exercise where we ask, “What does 2050 look like in terms of where energy generation takes place?” From that, we can map out what grid upgrades there need to be, instead of continuing to incorporate constraints, in the way that short-term lookaheads for grid upgrades have done.

We ask that a renewables investment allowance be created. When we are trying to embrace a renewables revolution, it makes no sense to have an oil and gas investment allowance, which offsets the massive profits that oil and gas behemoths are making, but not to have an investment allowance that encourages them to invest in renewable energy, to divest and to pursue that long-term just transition to net zero.

There really is a fantastic opportunity for renewables as a whole in the UK and a fantastic opportunity for tidal stream technology to continue to be world leading, to be manufactured here and to be exported to the rest of the world. It just needs that continued support, and hopefully the Minister will tell us that that is what it will get.

--- Later in debate ---

[Kerry McCarthy]

The hon. Gentleman answered his own question earlier by flagging up the investment allowances attached to the windfall tax that are being given to the fossil fuel companies. That money should be directed towards this investment and not towards fossil fuels. It is not money for nuclear versus money for renewables; it is money for fossil fuels versus money for clean energy sources.

We have talked about the UK having the potential to develop around 1 GW of tidal stream by 2035 and up to 11.5 GW by 2050. National Grid’s future energy scenario models up to 3% of UK electricity demand being met by marine renewables by 2050, but we need to do more to release that potential. According to Energy Monitor, 14 GW of planned UK power capacity has been cancelled, is dormant or is stuck in the early stages of development but, as has been said, lack of investment and of a clear sense of direction are not the only barriers.

The grid has been talked about—it is a massive issue—and we have heard about the Welsh Affairs Committee report. The same issues come up time and again when I talk to people as part of my shadow role: long waits—sometimes of up to 10 years—to connect clean power sources to the grid, delays to projects and investors being deterred.

[Wera Hobhouse]

Will the hon. Lady give way briefly?

[Kerry McCarthy]

I am conscious of the fact that the Chair said I have only 10 minutes. I am already nine minutes in, so I think I need to crack on. I want to hear what the Minister has to say about what we are doing to sort out the problems with the grid. I am sure he is well aware of them.

We also need action across the board to simplify and streamline the planning system, not in the way proposed by the previous, short-lived Administration, who were all about scrapping vital environmental protections and riding roughshod over the wishes of local communities, but by ensuring we do not place unnecessary burdens on renewable energy developers that delay or even derail new projects.

Other Members have mentioned the UK Marine Energy Council’s suggestions for speeding up approval for tidal stream projects—for example, reducing baseline surveys, decreasing the regulatory review from nine months to three and so on. I look forward to hearing what the Minister has to say about that.

We hear good things from around the country—for example, what the Labour-led authority in Merseyside is doing. Labour has made a plea for certainty and clarity from the Government, and I hope the Minister is looking at what Labour has said about the drive for a clean power system by 2030, a national wealth fund and establishing Great British Energy to help give investors that certainty. GB Energy would have a remit to invest in marine and tidal power to harness the huge potential of this island nation. We would support new marine energy projects, and we need to see something similar from the Government that would give people a signal that those projects are very much on the radar, rather than coalmines and fossil fuel exploration.

--- Later in debate ---

[Graham Stuart]

The right hon. Lady is absolutely right. Since taking this job—about three months ago now—I have been seized with the centrality of that issue. For all the fascinating issues with the different forms of deployment, if we do not have the grid to bring it all together, we will not have a successful system. I am co-chairman of the offshore wind acceleration taskforce as we seek to move from 13 GW of offshore wind, or whatever it is today, to 50 GW by 2030. That is our ambition, and one of the biggest challenges to that is making sure that we have the grid in place to do it, and are carrying colleagues with us while we do so. I am meeting with a group of colleagues today from East Anglia to discuss the onshore impact of that technology.

[Wera Hobhouse]

Will the Minister give way?

[Graham Stuart]

I am still answering the question posed by the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts). The offshore wind acceleration taskforce has been working really hard with the regulators, including Scottish and other devolved regulators, because they have their own systems and agencies. We are trying to make sure that we streamline and avoid duplication, and that anything that can be done in parallel is done; we are looking to improve that.

In a sense, offshore wind has been an exemplar for the overall grid system—that is not really the focus of this debate, but we are absolutely focused on that. We have got something called the holistic network design, trying to look at this issue in a more joined-up way for the first time, rather than just linear connections for individual ones, with the grid responding. We are looking at more of a planned approach, and the second holistic network design will come out soon. Floating wind in the Celtic sea, for instance, will be included in that design.

[Graham Stuart]

I have a serious problem with the hon. Member for Strangford (Jim Shannon), which is that he is a very hard man to say no to—I do resent that. I will certainly try; I think other duties may take me to Northern Ireland, and perhaps that is something I could fit in. I will certainly try to do so if I possibly can.

Let me pick up on a few of the points that have been made. I want to say a bit more on EMEC.

[Wera Hobhouse]

Will the Minister give way?

[Graham Stuart]

I will not give way to the hon. Lady. We heard her generalised remarks earlier, and I think she had her opportunity.

There are two BEIS overseas funding streams that EMEC may be able to apply for in partnership with developers: the first is the £1 billion net zero innovation portfolio that provides support for research and development, and the second is the energy entrepreneurs fund, which provides small grants to developers of innovative energy technologies. In May this year, BEIS awarded a £5 million grant to a hydrogen technology developer based at EMEC. Two of the CfD AR4 projects are, of course, also based at EMEC, and will be paying lease fees to EMEC from 2026. There are a number of things there, but as I have said, I am happy to meet and discuss it.

Quite rightly, we talked extensively about export potential. We recognise the success of Nova Innovation and the supply of turbines to Canada, and note the support of UK Export Finance, for which I used to be the Minister responsible. I remember Nova coming over my desk and, notwithstanding some of the challenges, being keen to be involved. I remember saying, “If we can’t support someone like this, what are we here for?” I am pleased to see that UK Export Finance, our credit agency, has been able to support Nova.

With regard to further export potential, my officials have met their counterparts in Indonesia and the Philippines on the role of marine energy and what the UK can offer. We need a joined-up approach as we develop here. With the Department for International Trade and other colleagues, we are also reaching out across the world, to ensure that we can show that this is the place in which to develop these solutions and then export them.

I go back to the point about speeding up or expediting, as the hon. Member for Bristol East (Kerry McCarthy) referred to it. Government are working on reforming the planning and environmental consent system, to increase its efficiency and speed, while maintaining proper scrutiny of projects. That repeats what I have already said.

I thank my hon. Friend the Member for Gloucester, the chairman of the all-parliamentary group, for his kind words about my Department. I also thank the right hon. Member for Orkney and Shetland for his kind words about one of my predecessors, my right hon. Friend the Member for Spelthorne (Kwasi Kwarteng), and his interest in work here.

I look forward to receiving the paper in January. I have touched on the opportunities in Indonesia and the Philippines. I think I have dealt with the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) on the CfD delays. I have probably mispronounced her constituency, but I will keep trying—she can tutor me. On the issue of multiple technologies, there are provisions in the Energy Bill, which I am delighted to say we are pushing forward. We are hoping, with cross-party support, to push that through Parliament as quickly as possible. It has a lot of enabling facilities in it—