Floating Offshore Wind and Contracts for Difference — [Sir Philip Davies in the Chair]

– in Westminster Hall am 12:30 pm ar 23 Mai 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Selaine Saxby Selaine Saxby Ceidwadwyr, North Devon 12:30, 23 Mai 2024

I beg to move,

That this House
has considered floating offshore wind and Allocation Round 6 of the Contracts for Difference scheme.

It is a pleasure to serve under your chairmanship, Sir Philip. I thank the Backbench Business Committee for allowing time for the debate and the Minister for agreeing to continue it despite yesterday’s announcement. This topic will be ongoing, regardless of what happens over the summer. I also thank the Department, the Minister and the rest of the ministerial team for their ongoing engagement on the issue, and for increasing the administrative strike price for allocation round 6, which I will refer to as AR6.

The industry welcomed the administrative strike price for AR6, with the uplift of £60 from £116 per MWh to £176 per MWh, demonstrating that the Government have listened to the industry and signalled a policy change that acknowledges the changing economic landscape for developers. Following the Climate Change Committee’s recommendations, floating offshore wind, which I refer to as FLOW, is set to make up to 5 GW of our energy generation by 2030 and 50 GW by 2050. The UK is a leader in FLOW, having the largest pipeline of floating projects globally, with leases of 33 GW and two pioneer projects in Scotland—Kincardine and Hywind.

FLOW has the potential to bring 29,000 jobs and £43.5 billion in gross value added to the UK by 2050, a prospect that should fill us with optimism. We need to ensure that we are ahead of the curve and not just deploying this technology for energy generation, but harnessing its full potential by developing the manufacturing element. However, all that is technically feasible only if we develop FLOW at a large scale. To do so, we need port investment from FLOWMIS—the floating offshore wind manufacturing investment scheme—and, most importantly, a co-ordinated strategy with stepping-stone projects to make that happen.

As chair of the all-party parliamentary group for the Celtic sea, I will make a strong case for FLOW in that region. I have had significant input from Professor Deborah Greaves at the University of Plymouth and the team at RenewableUK. I thank them for their contribution to my speech.

FLOW in the Celtic sea offers unique advantages, allowing us to harness energy regardless of wind direction. Despite its previous neglect due to seabed depths, FLOW can now be deployed in waters deeper than 60 metres, unlocking 80% of our offshore wind resource. That technology presents a significant opportunity for the region’s economic growth and net zero benefits. In 2024, the Crown Estate launched the leasing round for up to 4.5 GW in the Celtic sea, a crucial component in the battle to mitigate climate change and to make progress to net zero greenhouse gas emissions. I am pleased that the Crown Estate is taking what steps it can to drive onshore benefits through its leasing round, but a tender process is only one mechanism for realising the opportunities arising from such projects.

A co-ordinated national infrastructure approach for the Celtic sea is crucial. Such an approach, ideally as a bespoke strategy, is necessary to overcome the ongoing delays and issues we are facing and to ensure the successful development of FLOW in the region. I am glad to hear that RenewableUK, the Crown Estate and others have published an industrial growth plan to co-ordinate the investments needed to realise the opportunity, including prioritising where those investments will have the most impact. Using the growth plan as a blueprint for an industrial strategy for the Celtic sea—to give clarity on how those private investments can co-ordinate with public investment in critical infrastructure such as ports—will provide other investors with the long-term certainty they need to ensure that allocation round 5 and future Celtic sea projects are as successful as possible.

The importance of AR6 cannot be understated. At the moment, investor confidence is low, partly due to the failure in 2023 of AR5 of the contracts for difference, or CfD, to secure any contracts for offshore wind. That has been compounded by international competition and the attractiveness of other markets, which are investing significantly in FLOW infrastructure. Competition, in my mind, is stopping the evolution of FLOW. Currently, four FLOW projects can bid into AR6, with a total capacity of 658 MW: Blyth, which is a 58 MW project in Northumberland and is presented by EDF Renewables UK and Ireland; Erebus by Blue Gem Wind, which is a 100 MW project in the Celtic sea and is backed by TotalEnergies and the Simply Blue Group; Pentland, which is a 100 MW project in Scotland and is backed by Copenhagen Infrastructure Partners; and one new innovation and targeted oil and gas project, Green Volt, which received consent in April and can bid 400 MW.

The budget for AR6 needs to be big enough to accommodate not only the projects that lost out in AR5, but those that would have bid into AR6, so as to not have a knock-on effect on future allocation rounds. I cannot stress enough the future benefits of getting the budget right in this round, and of getting as many viable projects out to sea as rapidly as possible.

The opportunity is to not only regain lost ground, but support FLOW’s growth into the future. That means that while a typical budget might accommodate one or two projects, this year’s budget needs to accommodate three or four. Without these stepping-stone projects, we run the risk of higher costs for future commercial-scale projects and of creating mixed signals for investors in projects, supply chains and ports. Every project that bids and has cleared the hurdles set by the Department should be able to progress, especially if projects are ready to float.

Historically, Celtic sea ports have not received the same investment that has helped their North sea counterparts to develop the supply chain and port capabilities necessary to deploy FLOW. It is indeed hugely disappointing that the only successful FLOW project in AR4—the Hexicon project in Cornwall—did not see its associated port, Falmouth, receiving any funding from FLOWMIS. The dislocation of these spending decisions is bewildering to those of us working with developers in the region.

As I said, investor confidence is low following the lack of bids into AR5, so we have to encourage external investment, but that is simply not the direction of travel we have seen in recent Government spending decisions. I understand that the budget is a matter for the Treasury—the future Treasury—and I have met the Exchequer Secretary to the Treasury to ask for a pot 2 budget big enough to accommodate multiple projects, so that we can maximise the number of winning projects and accommodate those that could not bid in AR5. That is essential to allow Celtic sea projects to move forward at the same pace as North sea projects.

The Celtic sea region of the south-west and Wales includes economically deprived areas, so there is a great opportunity for impact on the economy and society there, but there also needs to be huge innovation to fully commercialise the sector. With my Celtic sea hat on, effective routes to investment could include Celtic sea ringfenced CfD allocations—indeed, I would allow each region to have its own pot. We need these small test and demonstration sites to succeed before any business will invest the kind of money required to deliver the FLOW of the future that the country needs. I was told yesterday that developers are spending £50 million before they even get in their bid for their contract for difference, and that it costs £1 billion to build a stepping-stone project. We should also look to the past, as fixed offshore wind projects were not required to bid in this competitive way until 5 GW had already been secured.

We also need dedicated Celtic sea FLOWMIS allocations, place-based investment, regional co-ordination of public funds and proper net zero plans for the region. The CfD budget plays a vital role in supporting the development of FLOW in both the North sea and the Celtic sea, but it must be substantial enough to ensure the progress of multiple FLOW projects each year, thereby preventing a monopoly in the North sea and ensuring a fair distribution of resources.

On port investment, I am pleased that one Celtic sea port has been supported through Port Talbot in Wales, but I urge the Government to look at a multi-port strategy. We know that no single all-purpose port can accommodate the scale of FLOW development and the need to serve such a large area of ocean. An increase in budget requires more FLOWMIS funding rounds. The decision criteria for allocating grant funding should be reviewed to better apportion the budget to support multiple ports in the Celtic sea region, taking into consideration the stepping-stone nature of the Celtic sea FLOW projects.

I was, as I mentioned, hugely disappointed that no funding had been made available to Port Falmouth, given its partnership with Hexicon’s TwinHub. It had successfully bid for its CfD in AR4, and the TwinHub project is therefore far more advanced than others. However, the absence of FLOWMIS funding will now make it more challenging for those partners to deliver their project, and will almost certainly see all the onshore benefits of that vital project go overseas. The stepping-stone nature of the Celtic sea FLOW project seems to have been omitted from the decision criteria for FLOWMIS. The all-party parliamentary group will continue to seek to engage with Ministers to secure additional port funding for Falmouth and other ports around the Celtic sea as more projects secure a lease.

I will take this opportunity to share the diverse mix of port facilities across the region, including Falmouth, which is ideal for deep-water logistics and fabrication; Appledore, which has shipbuilding, low-carbon vessel innovation and servicing; Plymouth and South Devon freeport, which has marine innovation, blue tech investment and the Smart Sound Plymouth autonomous vehicle test range; Portland port, which is a potential logistics hub; and Ilfracombe in my constituency, which is ideally located for ops and maintenance. In Wales, my right hon. Friend Stephen Crabb made me aware of the challenges with the port of Milford Haven. Although he could not be here today, he has worked closely with me as vice-chair of the APPG for the Celtic sea to ensure the Department’s support of the port of Milford Haven project.

The port of Milford Haven stands ready to create a new green energy terminal in Pembroke Dock. As the closest port to the Celtic sea development sites, the port of Milford Haven’s development ambitions at Criterion quay for a 400 MW test and demonstration phase and a fit-for-purpose site for integration and operations and maintenance activities are crucial to support future commercial-scale phases of FLOW in the Celtic sea.

The APPG’s main ask today is for subsequent rounds of FLOWMIS grants and an increase to the £160 million scheme budget. The Government’s support of Hexicon’s TwinHub project is crucial, especially as the sector has been battling a much-changed economic environment since its bid. With Falmouth port ready to match Government funding, this first stepping-stone project needs that vital FLOWMIS leg-up to see optimal onshore benefits alongside this innovative, leading offshore project. Funding decisions should be made on FLOWMIS as quickly as possible to allow our ports and supply chain to gear up for that huge opportunity to ensure that ports work collaboratively and optimise supply chain expertise.

Another issue that can pose a stumbling block for FLOW, which I am dealing with at first hand in my constituency of North Devon, is the National Grid and cable routes with the White Cross wind farm project. Since my election, I have championed floating offshore wind, and getting the Celtic sea projects right would create huge economic opportunities for the local economy in North Devon.

I have previously raised concerns about the White Cross wind farm because of the route submitted to planning, which would involve tunnelling through several miles of highly designated sand dunes and would severely disrupt several businesses for many years to come. Although some community engagement has been ongoing this week, the community benefit proposed for the project and the manner in which engagement has progressed has been severely lacking. Although local communities are hugely supportive of FLOW, there are environmental concerns with cable corridor routes, and certain developments risk undermining all the support that has been generated along the south-west coastline in particular.

Because of the scale of the project, the decision on whether it goes ahead now lies entirely with the Marine Management Organisation that approved the work to the shoreline and North Devon Council’s planning authority. Although I have no influence on that decision, I am pushing for the community to be properly recompensed for any associated disruption. The White Cross project is not yet through the planning process and is now blighted by an issue with bats. Bizarrely, there are now objections from Natural England, which was the main reason that that cable route was chosen in the first place, as well as nearly 1,000 objections on the North Devon Council planning portal.

The site has been leased from the Crown Estate, and apparently the only viable grid connection is at Yelland, which is a highly contentious site in its own right. Getting from the wind turbines to that connection will be hugely problematic, whichever company tries to develop it. I know that strategic work on the grid is ongoing, but we need to better link these huge infrastructure projects together, as the current piecemeal approach is causing unnecessary distress to communities and businesses and untold environmental damage as a result of a project that is designed to help to reduce our carbon footprint in the long term. Frankly, we need to follow Tim Pick’s strategy to deliver FLOW right around the coast effectively and efficiently.

My genuine fear is that if the budget is not increased adequately for AR6, the Celtic sea project, which we hope has bid, may not proceed, as Hexicon alone will not be a big enough step to the next project. As I have said countless times, for those doubters of wind, the wind blows the other way in the Celtic sea—to the north- east. We therefore optimise our wind resource and energy security by ensuring that all the regions are able to participate in FLOW. Again, I urge the Minister to hear the objectives of the APPG for the Celtic sea to co-ordinate a more strategic approach to this new region for offshore renewables to avoid some of the cabling issues we have already seen on the east coast. The National Grid also needs to work to minimise onshore disruption from that vital infrastructure.

Let me restate the asks. We need dedicated Celtic sea funding and an integrated port and infrastructure strategy, working across the Celtic sea region to derive maximum benefit from FLOW developments and ideally treating the entire region as one national infrastructure project. That could also include establishing sector-based working groups that engage developers, the Crown Estate, National Grid, ports and regional stakeholders to ensure strategically phased developments to support supply chain engagement and prioritisation of infrastructure spend in the region.

Future CfDs need to support multiple FLOW projects a year to ensure their progress and to make up for lost ground in AR5. The individual support for the Celtic sea’s first FLOW project, TwinHub, with recognition of its stepping-stone nature, is vital to ensuring the development of the supply chain. We need to remove the barriers to FLOW and although I know the Celtic sea is a different kettle of fish to FLOW elsewhere, there is one thing in common and that is the barriers to planning and applications.

The barriers to delivering FLOW must be removed to ensure lasting benefits. Streamlining the planning and consenting process and increasing co-operation between Government Departments—from the Department for Energy Security and Net Zero and the Department for Environment, Food and Rural Affairs to the Department for Transport and others, taking a whole systems approach—could be transformational. For the Celtic sea, the APPG preference throughout has been that a single cable corridor to Devon and Cornwall and one to south Wales should be established to reduce sea floor damage and cabling onshore, as the bigger projects go out to sea. A strategic view taken on cable corridors might also reduce costs.

At a deeper level, there is also a skills piece that interlinks with our FLOW projects. The Crown Estate estimates that up to £1.4 billion could be generated for the UK economy, with up to 5,300 new jobs created within the supply chain. The creation of a skills taskforce to strategically bring together sector developers and education providers will unlock the workforce needed to deliver and ensure that local people, particularly those in economically deprived areas, develop career opportunities for now and for future generations. Getting that right has financial implications, so I know some of the decisions will involve the Treasury.

I will continue to lobby for a budget big enough to maximise the number of winning projects and accommodate those who could not bid into AR5. One part of my six-point plan for North Devon is to ensure we fully benefit from the green economy. I am doing that today because, if fully recognised, FLOW will create high-value jobs and strengthen local economies, while bolstering research and development within the industry so that the UK can become a world leader and exporter of FLOW.

Photo of Peter Grant Peter Grant Shadow SNP Spokesperson (Europe) 12:47, 23 Mai 2024

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 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.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Climate Change and Net Zero) 12:56, 23 Mai 2024

I congratulate Selaine Saxby on securing this debate. It is sad, but understandable, that there are not more Members present in the Chamber to take part in or listen to it. I have to say that if more hon. Members had been present, they would have heard a comprehensive and substantive contribution from the hon. Member in support of floating offshore wind, as she has given on so many occasions. I could not disagree with much of what she had to say, and I and the Labour party could strongly support a great deal of it.

The potential of floating wind is now pretty much undisputed. It is a technology that can go where other offshore wind cannot. It is particularly adaptable for deeper waters, more difficult circumstances, and parts of the UK that otherwise would not have much in the way of floating offshore. Floating offshore’s ability to take the offshore wind revolution to its next stage is manifest in the Celtic sea, Scotland and the north-east of England. It will ensure that we take advantage of the wind speeds around the UK, which are such a national and international asset for our country, wherever we can.

Labour want to see at least 5 GW of floating offshore wind—I emphasise “at least”—deployed by 2030. Not only that, but we want to see the arrangements in place to properly support that deployment. We envisage Great British Energy playing a substantial role, taking stakes in future flow as it goes forward and supporting it all the way. We also propose establishing a national wealth fund. That fund will play a substantial role, along with other bodies such as the Crown Estate, in developing the necessary future infrastructure for FLOW.

As we know, at present the infrastructure is sorely lacking, as the hon. Member for North Devon mentioned. The assembly, erection and future servicing of floating platforms all require substantial upgrading of the port facilities. While it is a little bit encouraging that the FLOWMIS programme allocated some funding for port development, it is clearly by no means enough to get the infrastructure properly under way. As RenewableUK recently said, we need at least 11 ports to support floating offshore wind, not just Port Talbot and the port in Scotland supported by FLOWMIS.

We come then to the question of how we actually get at least 5 GW of FLOW installed by 2030. As Peter Grant pointed out, if we do the sums on our ambitions for offshore generally and FLOW in particular, we have to move ahead far more quickly in allocation rounds than we have done in the past and are anticipated to do in the immediate future. That is against the backdrop of pretty total failure to fund and support either FLOW or offshore fixed wind in the most recent allocation round, and to a considerable extent in the allocation before that.

The figures for how much we must put in place per allocation round, in both fixed and floating offshore wind, over the next several rounds are compelling. We have to move far faster and far more extensively to secure those arrangements for the future.

For FLOW, moving into AR6, the prognosis appears pretty bleak. It looks like perhaps just one FLOW project will actually fit in the pot 2 budget—the budget FLOW sits in—despite, as the hon. Member for North Devon said, there being at least four shovel-ready projects, ready to go right now, that could easily fit within that allocation were it made available. I do not think that includes the Hexicon project—a really important project which needs enormous support, because it has twin-turbine capacity, which is a further step forward in FLOW technology and can take the whole FLOW arrangement forward.

We have the beginnings of a real breakthrough as far as FLOW is concerned, but it is probably directly hampered by what AR6 has in store for us. That should not be allowed to stand. Of course, we are in rather different circumstances than we were in yesterday morning. I might have been standing here today asking the Government to do various things over the summer to sort out some of the problems; what I will be doing is asking the next Government, whoever they are, to get on with it quickly, particularly because AR6 is already well through its various design iterations and there is a limited window for changing anything in it before the tendering for the various projects. Whatever party comes in after the election, this issue will pretty immediately land on the desk of the Government, and by “pretty immediately” I mean that the new Government will have to get AR6 and floating offshore wind right possibly within a month.

The problem for FLOW is not the uplift in administrative strike price. The Government actually did not do a bad job of looking at where the price was and where it should be for AR6. The problem is the budget that has been allocated to this particular pot. Were there to be a reasonable uplift in that budget, it is highly likely that a number of the shovel-ready projects would be successful in AR6 pot 2. Of course, I cannot specify what a new Government are likely to do, but the case for early action to put that right is compelling. Even today, I hope that the Minister will commit himself to getting that action under way in his Department, as far as he has any capacity in the few days before we all pack up and start knocking on doors—if he has not already.

This is a looming loss of opportunity for floating offshore wind, and there is a wider prospect that a technology in which we are world leader will almost immediately start falling away. As the hon. Member for North Devon said, if we do not get the projects under way early, there will be a chain reaction: people lose confidence in the investment, they take their investment elsewhere, the projects do not progress, the appetite for investment in infrastructure starts to fall away and the whole thing starts to disintegrate. We are at a vital juncture. In their last few days, I hope that the Government can grasp the opportunity of making investment in FLOW right.

Photo of Justin Tomlinson Justin Tomlinson Minister of State (Department for Energy Security and Net Zero) 1:09, 23 Mai 2024

It is a pleasure to serve under your chairmanship, Sir Philip. Normally, a Westminster Hall debate would have an overwhelming number of speakers. Heaven knows what has distracted our colleagues from what we can all agree is a very important debate. I pay tribute to my hon. Friend Selaine Saxby who could easily have been distracted herself today, but will never miss an opportunity to champion her community.

I will return to my wonderful hon. Friend shortly, but first I will take a slight deviation. As I was bounding up the steps with the shadow Minister, Dr Whitehead, it dawned on me that this is his final contribution as he will sadly be retiring. He is held in high regard across both sides of the House. In the coming weeks, as we seek re-election, we will all be championing our local credentials, but the local candidate for Southampton, Test will be hard-pressed to beat the shadow Minister’s credentials. He has been the student union chairman at the University of Southampton and the leader of the council, no less. Not only has he been elected since ’97, but—God loves a trier—he also ran in ’83, ’87 and ’92. For colleagues who do not quite get the result they feel they deserve, just keep going and you will get here.

The shadow Minister has always conducted himself with a real passion for his areas of interest. His contributions are always backed up with thorough research, which is why he is held in the highest regard. As the newest member of the DESNZ team, I admire the way in which he has performed his various shadow roles since 2015. He will genuinely be a loss to this Parliament and it was a pleasure to listen to his final contribution, powerful as it was. Although he recognises that nobody can definitely say who the Government will be, he has had that one last opportunity to shape what happens going forward in this important area. Finally, we do share one interest, which is that we both played for the parliamentary football team. While he looks excellent for 73, having seen some of his performances over the years as a goalkeeper, I think there is still a chance for a late call-up now that he has a bit more time on his hands, and we all look forward to cheering him on in Portugal.

I congratulate my hon. Friend the Member for North Devon on securing this important debate, building on the Westminster Hall debate that she obtained last year. I feel that I am a cheerleader for her, because only this time last week when I was doing the ITVWest Country” programme and she appeared as one of the vox spokesmen, I heaped praise on her for her work on water quality. She is a tireless campaigner, and particularly a vocal champion of floating offshore wind, particularly through her role as chair of the all-party parliamentary group for the Celtic sea—how does she fit it all in?—and she rightly highlights the benefits that this new technology could bring to the UK.

The world’s first floating offshore wind farm was built in UK waters. Today we have 80 MW of installed capacity, making us a world leader in the sector. That builds on our world-leading status in fixed-bottom offshore wind deployment, where we have over 14 GW of installed capacity—more than any other European country. In 2010, just 0.8% of the UK’s annual electricity was generated by offshore wind. Last year it was 17.4%, which is a significant transformation. It plays an important part in our overall transformation from just 7% of power generated by renewables in 2010 to 47% currently, and it continues to expand rapidly.

Looking to the future, we are committed to furthering our position at the forefront of the sector. Our ambition is to install up to 50 GW of offshore wind by 2030, of which 5 GW will come from floating offshore wind. Based on seabed exclusivity, we have the largest pipeline of floating projects in the world, at 25 GW. The 5 GW is a stretching ambition, so we are working hard to create the right environment for investment and address barriers to deployment. I am a mere deputy today. The Minister for Nuclear and Renewables leads this work, and he is passionate that this is a key part of our overall strategy.

First, I will address the main point made by my hon. Friend the Member for North Devon on the contracts for difference mechanism and the budget for floating offshore wind. The CfD scheme is recognised worldwide as a model for supporting renewables deployment. Our CfD auctions have so far awarded contracts totalling around 30 GW of new renewable capacity, including around 20 GW of offshore wind. Last year’s allocation round was a success story for many technologies, including marine energy and the UK’s first three geothermal projects. But—we would not be having this debate if there were not a “but”—we recognise the shortfall of fixed-bottom and floating offshore wind, and I acknowledge the concerns that my hon. Friend voiced at the time.

We reflected carefully on the results of allocation round 5 and, following a comprehensive review of the latest evidence, we raised the administrative strike price for floating offshore wind by 52% in real terms, recognising the unprecedented upward pressure on project costs. We also recognised the importance of the right support mechanisms for new technologies that may not yet be cost-competitive. That is why this year’s allocation round 6 pot 2, which is dedicated to emerging technologies such as floating offshore wind, has its biggest ever budget— £105 million. But for the announcement yesterday, which may have passed some people’s attention, I would have gone to view one of those in Norway next week. Unsurprisingly, I now will not be doing that, but there is always YouTube if hon. Members want to learn about new technologies, as I discovered when I learned about hydrogen. I assure my hon. Friend that the Secretary of State and the Minister for Nuclear and Renewables have met directly with eligible floating wind developers for allocation round 6 to understand their concerns.

I stress that there has to be a balance. The thrust of this debate has been about the need to be more generous to unlock more; I absolutely get that, because we have legally binding commitments and we need to expand our basket of renewable energy sources, but we also have to be held to account by the Public Accounts Committee. I served on the Committee for three years and I know that the current Chair, Dame Meg Hillier, will not let taxpayers’ money be wasted unnecessarily, so there is always a balance. If we are overly successful, perhaps we have overpaid, so we have to strike that balance. There are few colleagues more interested in making sure that we do not forget the impact on consumers’ bills.

The Government are proud of our record on tackling climate change, but we will never lose sight of the need to do so in a pragmatic way and to ensure that ultimately we deliver a cleaner and, crucially, more efficient energy system that leads to cheaper consumer bills. If we lose sight of that, we lose public support and endanger all the good will that collectively we are seeking to unlock.

Secondly, we recognise that port infrastructure and supply chains are critical to the long-term future of floating offshore wind in the UK. The floating offshore wind manufacturing investment scheme is worth up to £160 million and will support investment in port infrastructure for floating offshore wind deployment. The port of Cromarty Firth and Port Talbot have both been placed on the FLOWMIS primary list, meaning that we will take those projects to the next stage, which is due diligence. We are also supporting ports in the region through the Celtic freeport, backed by up to £26 million in UK Government funding. I acknowledge the concerns that my hon. Friend the Member for North Devon has raised about the FLOWMIS decision, and her letter to the Minister for Nuclear and Renewables about the issue. FLOWMIS is a competitive scheme, and I recognise that the results are disappointing for the port of Falmouth and for the port of Milford Haven.

My officials are engaged in the ports task and finish group, led by RenewableUK. The group is looking into the barriers to port investment and identifying the most appropriate levers to overcome them. There is no stronger champion than my hon. Friend to ensure no stone is left unturned so that her constituents and neighbouring constituents will not miss out in future.

We are taking significant action to support supply chains through the green industries growth accelerator, a fund of nearly £1.1 billion to support investment in manufacturing capability for clean energy sectors. That will enable the UK to seize growth opportunities from the transition to net zero by unlocking private investment and creating new jobs, for which we are the envy of the world.

Thirdly, my hon. Friend is right to highlight the potential of the Celtic sea region for floating offshore wind. I can assure her that the Government are determined to ensure that that potential is realised. As she will know, the Crown Estate has launched leasing round 5, making available areas of seabed that could support up to 4.5 GW of capacity in the Celtic sea. The Government worked closely with the Crown Estate to unlock that opportunity and will continue to do so as the sector grows. In last year’s autumn statement, we committed to bringing forward additional floating wind in the Celtic sea through the 2030s, which could see an additional 12 GW of generation deployed in that important region.

Britain’s geography makes it ideally suited to offshore wind, and floating offshore wind enables us to make the most of our natural resources by unlocking the potential out at sea. We are aware of the challenges involved and are taking actions to address them. We know that this technology is an enormous opportunity for our journey to net zero and for our economic growth. It is local communities such as those in the Celtic sea region that stand to gain the most from the economic growth and the highly skilled roles that will be created.

I look forward to working with my hon. Friend as we harness the enormous potential of offshore wind power. I am sure we will return to this issue in a matter of weeks.

Photo of Selaine Saxby Selaine Saxby Ceidwadwyr, North Devon 1:19, 23 Mai 2024

I thank all hon. Members for their contributions. I echo the Minister’s comments about the shadow Minister, Dr Whitehead: I wish him all the best.

This debate has been small but perfectly formed. We very much agreed, as has been the case for all Celtic FLOW debates and projects that I have worked on. Whatever happens over the next few weeks, I very much hope that that cross-party consensus continues. Having been with developers and the Crown Estate this week, I know that there is a huge drive for it to succeed. It is about how we get those projects over the line in a pragmatic manner to bring bills down in the longer term. We need to get these things moving; otherwise, we will not get there in the end. I thank everyone for their contributions to the final Westminster Hall debate of this Parliament.

Question put and agreed to.


That this House
has considered floating offshore wind and Allocation Round 6 of the Contracts for Difference scheme.

Sitting adjourned.