Floating Offshore Wind and Contracts for Difference

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.

We come then to the question of how we actually get at least 5 GW of FLOW installed by 2030. As the hon. Member for Glenrothes (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.

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 ITV “West 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, the hon. Member for Hackney South and Shoreditch (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.