Offshore Wind Contracts

To ask the Secretary of State for Energy Security and Net Zero if she will make a statement on the implications for offshore wind of contracts for difference allocation round 5.

The first annual contracts for difference auction—the first that we have ever done—was completed last week and delivered a total of 3.7 GW of renewable electricity, with contracts going to a record number of projects. The auction delivered significant quantities of new solar and onshore wind generation, as well as supporting 11 new tidal stream projects and, for the first time, geothermal projects. It was a competitive auction, set against a backdrop of highly challenging macroeconomic conditions that have impacted the sector globally. Given that this was our first annual round, it was to be expected that it would have a lower capacity than the previous biennial rounds, and, because last year’s round was the first for three years, a higher annual element than that record round.

The Government remain committed to offshore and floating offshore wind projects, and this round provides valuable learning for subsequent auctions. Work has already started on allocation round 6, incorporating the results of the recent round, and we look forward to a strong pipeline of technologies being able to participate. The move to annual auctions means that allocation round 6 will open in just six months’ time, in March 2024, which means that there could be minimal or indeed no delay in the deployment of new capacity through that round.

The Government also remain committed to our target of decarbonising the power system by 2035 and our ambitions for 50 GW of offshore wind, including up to 5 GW of floating offshore wind. Our trajectory for meeting these aims, as well as our legally binding carbon budget 6 targets, is not linear. The outcome for one technology in one auction does not prevent us from reaching those goals.

What a load of nonsense. No wonder the Secretary of State is in hiding.

This auction is an energy security disaster for Britain, and an act of economic self- harm on the part of the Government. No new offshore wind projects means that families’ energy bills will £2 billion higher and our energy security will be weakened. Worst of all, this was totally avoidable. Ministers were warned again and again about the impacts of higher inflation—in a letter from RenewableUK in March, and again in July—and offshore wind is so much cheaper than gas that they could have raised the price in the auction and it would still have saved billions of pounds for families, but they refused to listen.

First, will the Minister tell us why the Government ignored those repeated warnings? Secondly, he said on Friday that every country was in the same boat, but that is just wrong. Ireland listened to industry and adjusted its price, and had a successful auction in March 2023. Why did the Government not learn that lesson? Thirdly, is not the terrible truth that this episode reveals a much deeper flaw in their approach? For month after month this summer, they claimed that the answer to our energy crisis was more oil and gas, and this is the result. We will now be more dependent on expensive, insecure fossil fuels. We will be more exposed to the whims of petrostates and dictators. Every wind farm that we fail to build makes us more exposed to dictators like Putin, and he knows it.

Bills higher, security worse, jobs lost, climate failure—the Government have trashed offshore wind, the crown jewels of our energy system, raising bills, just as they trashed onshore wind by banning it, raising bills, and just as they trashed home insulation, raising bills. We have seen 13 years of failed energy policy, and all this fiasco shows is that the Conservatives are, quite simply, a party unfit to govern.

I was pleased to see the other day that the rumours of the right hon. Gentleman no longer being in his position were not true. It is perhaps understandable in that context that he is so passionate about this highly successful round that has seen 3.7 GW on an annualised basis. I think that is a record round. He was a member of the previous Labour Government who left this country with 6.7% of its electricity coming from renewables. In the first quarter of this year, 48% of our electricity was from renewables. It was this Government, with our contracts for difference system, who transformed the economics of offshore wind. We have 77 GW of offshore wind in the pipeline—more than enough. We have 7.5—[Interruption.] The right hon. Gentleman understandably, given the weakness of his arguments, wants to heckle at all times, knowing how easy it is to dismantle them. He asks me where that capacity is, and I can tell him that 7.5 GW is currently under construction.

As ever, the right hon. Gentleman fails to be on the side of consumers. We moved to an annualised auction precisely to ensure that we could learn the lessons from each round, add them to our industry insight and ensure that we could move forward. The projects take multiple years to be developed, and none of them has disappeared. I predict that, moving on from the triumph of 3.7 GW of renewables, which came through successfully on Friday, allocation round 6 will be more successful still. We will continue to build our reputation as the country that has cut emissions more than any other major economy and that has transformed our electricity generation. He mentioned insulation—how he has the gall, I do not know. We have moved from 14% of homes being properly insulated when he left power to over 50% by the end of this year.

I thank the Minister for his engagement with this process, particularly with the new technology of floating offshore wind. Three floating offshore wind projects were due to bid in allocation round 5 but none did, due to the low administrative strike price. As chair of the all-party parliamentary group for the Celtic sea, I have repeatedly been told that these projects are part of our future energy supply. Can he outline what steps he is taking to ensure that these projects will float in allocation round 6 and to give confidence to developers in the region?

I thank my hon. Friend, who is an absolute champion of floating wind and the economic opportunities it offers for her area and the rest of the UK. I was delighted to speak to her last week and meet her yesterday, and I pay tribute to her efforts. We have the largest floating wind pipeline in the world, based on confirmed seabed exclusivity arrangements. We have around 25 GW already identified, including through the ScotWind leasing round and innovation and targeted oil and gas—INTOG—processes. As she, as a great champion, knows, the Crown Estate is moving forward with its leasing round 5 for up to 4 GW of capacity in the Celtic sea this year. We have been the world leader on floating energy and we are going to stay the world leader. Thanks to the efforts of my hon. Friend, I know that we will have support across the House.

I call the Scottish National party spokesperson.

The Minister failed to point out that 3.7 GW is scarcely half of what was achieved in auction round 5. He also failed to mention, when he was heralding onshore wind, that 90% of that will be found in Scotland. Since 2014, the four auction rounds have yielded 1 GW, 2.5 GW, 5 GW and 7 GW, so a nil return is an utter catastrophe.

The critical need for massive investment in offshore is patently obvious for bills and for the climate, yet this ambition has been thwarted by an incompetent previous Secretary of State and by the Treasury, which knows the price of everything and the value of nothing. Can the Minister assure us that the Department will get round the table with industry as a matter of urgency to try to repair this damage? Industry needs a strike price that reflects the not-mutually-exclusive goals of lower bills, net zero, and jobs and investment in Scotland and elsewhere. Can he confirm whether a recovery group for auction round 5 will be convened by him or the Secretary of State to try to get this catastrophe resolved? And where is she?

The hon. Gentleman and his party never fail to trash this country—[Interruption.] He can heckle all he wishes. I will be meeting industry representatives this afternoon and, as I have said, we will be announcing in two months’ time the price ceiling for the next round—[Interruption.] I am getting heckling, not least from His Majesty’s Opposition, who left us in that parlous situation. We are the world leader in so many of these technologies and we are going to continue to be. If the hon. Member for Angus (Dave Doogan) were to recognise the need to attract investment to this country and not talk it down, he might find that Scottish jobs would be even stronger in the pipeline than they are already.

If any, how much of the completed wind capacity still requires connection to the national grid?

Until wind capacity is constructed, it is not normally connected to the grid. That which has not been connected to the grid will need to be connected to the grid.

I call the Chair of the Select Committee on Energy Security and Net Zero.

The boom and bust of this fiasco will inevitably have knock-ons for the supply chain. How concerned is the Minister about that? Also, how concerned is he about projects that were built on CfD securities but have not invoked the contracts and are now literally raking in the windfall of that act?

I do not quite follow the second part of the hon. Gentleman’s question, but I am happy to write to him on that topic.

West Somerset, as the Minister knows, is ideal for offshore wind. I am interested to know why people did not bid in this round. What were their reasons? What can the Government do to learn the lessons of this round so that people like my hon. Friend the Member for North Devon (Selaine Saxby) can make sure that people are bidding in the next round?

We typically set out the key auction parameters in November, and those include the ceiling of what we will pay for particular technologies. We do that based on our analysis of supply chain costs, and we also commission external analysis. The most important data of all comes from individual auction rounds, and it is on that basis that we set the price parameters. The industry warned us, as it does every year, that it wants us to pay more. We always have to make a judgment call between making sure that we minimise—[Interruption.] It would be so much easier to give my answer, Mr Speaker, if the right hon. Member for Doncaster North (Edward Miliband) would stop—

Order. I think that, as a man who was always happy to heckle from the Back Benches, the Minister deserves a little bit himself.