Offshore Wind

Statement

The following Statement was made in the House of Commons on Wednesday 14 January.

“With permission, I would like to make a Statement about the seventh contracts for difference allocation round and the results for offshore wind. Eighteen months ago, the Government set out on our mission to make Britain a clean energy superpower. That was a mission rooted in a simple argument: if we want to take back control of our energy from the petrostates and dictators, if we want to bring down bills for good, and if we want to create a new generation of secure, well-paid jobs, the right choice is to get off the rollercoaster of international fossil fuel markets, which caused the worst cost of living crisis in memory. For a year and a half, that mission has faced determined opposition from a well-funded band of doomsters and defeatists. Today, we publish the results of our latest offshore wind auction and with it we prove those doubters and naysayers wrong. Let me set out the results to the House.

On coming to office, we inherited the fiasco of the fifth allocation round—a failure of the Conservatives’ making which trashed the crown jewels of our energy system—in which not a single offshore wind project was secured. That is their legacy; that is the legacy of the right honourable Member for East Surrey (Claire Coutinho).

Our last auction round, allocation round 6, got the industry on its feet again. Today it roars back stronger than ever. We have secured 8.4 GW of offshore wind, enough to power the equivalent of more than 12 million homes. There are winning fixed offshore wind projects in every part of Great Britain: Dogger Bank South off the coast of Yorkshire and Vanguard off the coast of East Anglia, two of the largest offshore wind farms in the world; Berwick Bank in the North Sea, the first new Scottish project since 2022; and Awel y Môr, the first Welsh project to win a contract in more than a decade. On floating wind, the emerging technology of the future, we have successful projects in Wales and Scotland—the Erebus project in the Celtic Sea, and Pentland in Scotland—backed by pioneering investment from Great British Energy and the National Wealth Fund.

Taken together, that is a record-breaking amount of offshore wind capacity procured in a single auction. It is the most successful offshore wind auction in British history and the most successful ever to be carried out anywhere in Europe. That is what it means to deliver on the promise we made to the British people. Against the backdrop of the global headwinds facing the industry, this is a huge vote of confidence in Britain’s drive for energy sovereignty and abundance.

Let me explain why these results are so important for the country. First, they are a major step forward for our clean energy mission. Alongside our work driving ahead on onshore wind, solar, batteries and nuclear, they put us firmly on track to take back control of our energy and deliver clean power by 2030. We have only to look at events around the world to see that we live in increasingly unstable and uncertain times. Fossil fuel shocks have caused half of the UK’s recessions since 1970. Last year, wholesale gas prices spiked by 15% in a single week after global instability in the Middle East. We must also never forget the impact of Russia invading Ukraine; family finances, business finances and the public finances were wrecked as a result of our being left exposed to fossil fuels. This exposure leaves us incredibly vulnerable as a country, and we do not have a moment to waste in ending it. That is why our mission is so important.

Our record-breaking results show that our approach to building things again in this country is working. We are more secure in our energy system today than we were yesterday thanks to these results, and we look forward to building on this momentum as we look ahead to AR8, which we are on track to open later this year.

Secondly, on cost, the results show that offshore wind is cheaper to build and operate than new gas. Today we publish updated estimates of the levelised cost of electricity, the standard industry metric, which includes the cost of building and operating new gas-fired power stations—the same metric as was published under the previous Energy Secretary. These estimates show that the cost of building and operating a new gas-fired power station is £147 per megawatt-hour. By contrast, I can inform the House that the average price for fixed offshore wind in today’s auction was £90.91 per megawatt-hour; in other words, it is 40% cheaper than the cost of building and operating new gas, but do not take my word for it. This is what the head of Energy UK, which represents gas, nuclear and renewable generators, said of renewables this morning:

‘We need to invest in new power generation, and this is the cheapest form’.

I know that some people want to pull the wool over our eyes on this, but they can do so only by comparing the cost of building and operating new renewables with the cost of operating but not building new gas.

Here is the reality: faced with years of underinvestment in our energy system under the previous Government, and with power demand set to increase by at least 50% by 2035 and to more than double by 2050, there is no alternative to building new energy infrastructure in this country. We can choose to stop building renewables and just build new gas plants, as the Conservatives want to, but it is clear that offshore wind remains significantly cheaper to build and operate. Credible, independent research confirms that the renewables that we have already built are bearing down on wholesale electricity costs, having reduced wholesale prices by a quarter in 2024. Our mission is right: clean power is the route to bringing down energy bills for good.

Thirdly, today’s auction cements the offshore wind industry’s position as a jobs and growth engine for Britain. It is at the heart of our industrial strategy. These projects will unlock £22 billion in private investment and support at least 7,000 good jobs across the country, from the Scottish Highlands to the Suffolk coast. Members across the House know that so many people in our country ask where the good jobs of the future, for themselves and their children, will come from. Clean energy is central to the answer. The previous Government failed to act to ensure that offshore wind generated jobs and supply chains in this country. By contrast, we will use every tool at our disposal to ensure that turbines, foundations and cables are made and built in Britain, creating good, well-paid jobs with strong trade unions. That is why this auction, for the first time, included a clean industry bonus to reward investment in ports and factories in the areas that need it most.

I can inform the House that in this auction, the industry has responded with ambition. The clean industry bonus will crowd in billions of pounds of private investment and support thousands of jobs in supply chains across the country. We look forward to setting out the full results in due course, as we drive forward on the 100,000 offshore wind jobs that our mission will support by 2030.

Let me close by saying that Britain faces a choice over the coming years. We can seize the opportunities of clean, homegrown energy to cut bills and create jobs, or we can double down on our exposure to fossil fuels. In calling for us to cancel this auction, our opponents made their choice: they are setting their face against cheaper, clean, homegrown power; against 7,000 jobs supported today and thousands more to come; against taking back control of our energy sovereignty; and against action on the climate crisis to protect our children and grandchildren. This Government have made our choice: we choose energy security, lower bills, good jobs, and the climate. I commend this Statement to the House”.

My Lords, I declare my interests. I am chair of Amey UK Ltd, Acteon and Buckthorn Partners LLP. As this is the first time that I have spoken to a Statement on an energy debate from the Front Bench since I was Minister for Energy, I inform the House that I have spent my working life in the energy sector. I was also Minister for Energy in the Margaret Thatcher and John Major Governments and aimed to maximise a low-cost oil and gas province in the UKCS, always emphasising production with the highest importance attached to the environmental impact of all offshore activity, while in 1990 simultaneously launching the non-fossil fuel obligation, the renewable support framework and establishing the UK renewable energy advisory group. I place that on record because that political experience informs the contributions that I intend to make and the questions that I will be asking.

It is axiomatic that we should judge the Statement against the principles of creating greater energy security; increased affordability to all consumers, both industrial and domestic; strengthening the base of low-cost, firm power in the grid; and moving towards cleaner energy. Every decision we take should be addressed against fuel poverty. How can this be so when the order promises the highest prices for intermittent offshore wind in over a decade? How can it be affordable to the UK industry when this order is still more expensive than the £80 per megawatt for gas—which goes down to £55 if you deduct the government-imposed carbon taxes? How can it be when the overall price of contract extension is 24% higher than last year? Why are the Government using the levelised cost of energy matrix when we should be using the only true cost comparator, a full systems cost? As it is intermittent power, do the Government acknowledge that we need more firm gas power plants anyway? Is it not the case that the Government told NESO that there need to be 40 gigawatts of backup generating capacity?

Let us look at what is happening this evening. At a time when the wind is hardly blowing, is it not the case that we are here, this evening, generating nearly 60% of our power from firm gas and only 18% throughout the whole of the United Kingdom from intermittent wind? Worse still, is it not the case that we are importing gas from an increasingly unstable global economy and burning more CO₂ through imported LNG than we would if we developed our own resources to the full, while this minute continuing to burn biomass in Drax, which is more polluting than coal and comes, at this point in time, to only 50% of the total wind generation throughout the whole of the United Kingdom?

My Lords, I start by welcoming the noble Lord, Lord Moynihan, to his position, and I look forward to working with him.

On these Benches, we welcome the results of allocation round 7, which has secured a record 8.4 gigawatts of future offshore wind capacity, including 192.5 megawatts of innovative, floating offshore wind, and seen £22 billion in private investment. This marks an important step forward on our clean power journey and towards our future energy independence—enough clean energy to power the equivalent of some 12 million homes or roughly equivalent to 12% of national energy demand.

This shows that, when properly managed, Britain can lead the world in clean, secure and affordable energy. After the chaos of the previous Government’s failed allocation round 5, which delivered no offshore energy contracts at all, this progress is indeed an enormous relief. This auction confirms what my party has long argued—that offshore wind is the future backbone of our energy electricity system.

Projects such as Berwick Bank in Scotland—set to become the largest offshore wind farm in the world—and the one in Wales, the name of which literally means “sea breeze” and is the first major Welsh project in over a decade, show that progress is being made.

But this is not only about climate targets; it is about our future national energy security. In an increasingly unstable world, every turbine we build reduces our reliance on volatile fossil fuel markets. Securing Britain’s wind power means freeing ourselves from the price shocks of the global gas markets. We should recall that the Office for Budget Responsibility estimated that the UK’s energy support response for the war in Ukraine, driven by fossil fuel prices, cost us £78.2 billion over 2022-23 and 2023-24. In contrast, CBI figures show that the green economy grew by 10% in 2024, and AR7 secures an important future pipeline of continued and sustained green jobs and green British jobs.

I thank the noble Lords for their contributions this evening. They were deeply contrasting in both tone and content: one I substantially agree with; the other I do not at all. We need no guesses as to which is which. I am particularly disappointed by the contribution from the Opposition Benches and the noble Lord, Lord Moynihan. I think I have already welcomed him to his place in Questions, but this may be the first time we have sat across the Benches for a Statement or other debate, so a further welcome would not go amiss. I hope this, as it is shaping up to be, will be the beginning of a good debate between us in the House.

It is worth just reiterating what actually happened in AR7 for the House to judge whether this was the miserable failure that the Opposition Benches appear to suggest it was or the great success that I and, I think, the noble Earl, Lord Russell, think it was.

In AR7, we procured 8.4 gigawatts of new, clean, low-carbon power for this country. That is new capacity over and above what we have at the moment and, indeed, represents no less than 40% of the installed capacity of offshore wind so far. In one round, the amount of wind capacity we have has leapt. That is at a clearing price 20% below the administrative ceiling price—a very competitive auction was undertaken—and that is within the bounds of present energy market prices. In the likely future that we see, it is not only below or around market prices; it is also a stable cost. Whereas, of course, we do not know where gas and other energy prices are going because of the extreme volatility in the world, and of gas prices over the last five years.

Interestingly, between this Statement being read in another place and repeated now, gas prices have leapt by nearly 40%. We are in a volatile gas market. Do not forget, prices went up as high as 600p per therm in the period just after the invasion of Ukraine. Compare the volatile price of gas fuels if we go down the energy route suggested by the Opposition—more purchases of unabated gas-fired power stations. Do not forget that this is not only an auction about energy prices and capacity; it is an auction about low-carbon energy prices and capacity. Among other things, if the Opposition had their way, we would apparently invest in a huge number of unabated natural gas power stations. That means we would be locked into that high-carbon system of generating power for perhaps another 30 to 40 years, which would be completely insupportable in terms of anybody’s energy ambitions.