That this House has considered the level of public ownership in the offshore wind sector.
It is a pleasure to serve under your chairmanship, Mr Dowd. When a natural bounty is discovered, it is only right that a nation and its people should benefit from it, not simply corporations and investors. The fruits of land and sea should benefit all, not just the few. Scotland has been fortunate, blessed first with North sea oil and now renewable energy, in particular offshore wind, a further natural resource offering great opportunities and at such an extent that it should be transformative. A recent Prime Minister even used the phrase, the “Saudi Arabia of wind”.
Other nations have shown what can and should be done. Scotland discovered oil at the same time as Norway, but now Scots can look only with envy, not just at the standard of living of their Nordic counterparts but at the Norwegian oil fund. Now valued at $1.4 trillion, it is suggested that it owns, on average, 1.5% of every listed company in the world. The British National Oil Corporation was sold off, while Equinor, owned by the Norwegian state, goes from strength to strength. Funds that should have seen Scotland bloom were instead used by Thatcher to smash organised labour and by New Labour to wage illegal wars. That must not happen with offshore wind. The people of Scotland must benefit, not just multinationals.
Norway has shown what should be done with oil and gas. Denmark is showing what can be done with offshore wind by taking a 20% stake in every new offshore wind development—this is not North Korea, but a European democracy. It has not seen investors flee. This also shows that public ownership does not have to be just a state energy company operating sites, desirable as that is, but can include actions such as this, which ensure that people and their nation gain from their natural resources—benefits for the many, not exploitation by the few.
I thank the hon. Gentleman for securing the debate. The private sector will invest some £60.8 billion across the UK over the next five years in developing and operating offshore wind projects. Does the hon. Member agree—from the way he is talking, I think he does—that whether investment is public or private, all devolved nations of the United Kingdom of Great Britain and Northern Ireland must benefit from any potential funding and that that would ensure a boost in jobs and increased sustainability for the renewable energy sector?
Of course; this should benefit our people. As I said, it is not just down to state energy companies, desirable though that is. This has to be done through the private sector, but as Denmark and Norway have shown, the state can take a share and state companies can be involved. That should be happening here, but the UK Government remain wedded to a privatisation route that has created a dysfunctional energy sector that we are all now paying for.
A Scottish energy company was promised by the Scottish National party and then shamefully abandoned. It must be delivered. Publicly owned and state companies are operating in the UK and the Scottish offshore wind sector. The absurdity is that they are neither Scottish nor from the UK. They are foreign state firms operating in Scottish and UK waters, delivering profits not for Governments in Edinburgh or London, but furth of these shores and with the wealth benefiting lands far from here.
Let me narrate the situation at the Neart na Gaoithe offshore wind farm. Despite the Gaelic name, it is located in the firth of Forth, between my constituency and that of my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Neale Hanvey). Pillars and turbines are now visible, and the energy is coming ashore at Innerwick, just along from where I reside in Dunbar. That is all good, we might think, but who owns it? It is operated by two state-owned companies. One is EDF Energy, the French state-owned energy company that also happens to own Torness nuclear power station just along the road and adjacent to where the energy comes ashore. State ownership is not opposed, it seems, so long as it is someone else’s.
The other organisation is the Electricity Supply Board, or ESB, which is the majority publicly owned energy company of the Republic of Ireland. The Irish consul general in Edinburgh tells me that ESB’s investment in the firth of Forth is that state company’s largest ever investment outwith Ireland. We have the perversity that the wealth and profits that are generated will not come to Edinburgh or London and will not benefit Scottish or UK citizens. Instead, they will flow to Paris and Dublin, and the citizens of Ireland and France will reap the benefit that nature bestowed upon us.
Beth Winter (Cynon Valley) (Lab)
I congratulate the hon. Gentleman on securing this debate. I will make two points and then I would like to put a couple of questions to the Minister. Today’s debate is very—
Order. This is an intervention on the hon. Member for East Lothian (Kenny MacAskill), not on the Minister, and you will have to keep the intervention short as well.
Beth Winter
Okay. I will address the questions to the hon. Gentleman.
Hon. Members will agree that this debate is timely, following the confirmation last week that there were no bids for new offshore wind development in the latest auction round, which means that the Government are criminally behind the curve when it comes to reaching 50 GW of offshore wind power generation by 2023. That has resulted in delays for the Erebus wind farm in my country of Wales. First of all, does the hon. Gentleman agree that last week’s announcement demonstrated that—
Order. I am sorry—you will have to sit down, please. An intervention is made to ask a question of a Member; it should not be a small speech. It has to be very short, because the debate is only for half an hour. An intervention is not an alternative method of making a speech—it has to be a question.
Beth Winter
Okay. In terms of the future of wind energy and renewable energy in my country of Wales, does the hon. Gentleman agree that now is the time that the Crown Estate and its administration is devolved to Wales, as it is in Scotland, so that we can disburse the moneys as we see fit?
I think that where Scotland goes, Wales should follow. It is remiss that Wales does not have control over the money coming from the Crown Estate, and I certainly hope that Wales follows Scotland in that regard, as indeed the UK should in the establishment of a state energy company. The hon. Lady’s point is well made and correct.
I am concentrating on Scottish waters, where the Scottish Government’s ScotWind auction sold offshore wind farms at absurdly low prices, compounding the perversity of failing to deliver a state energy company, yet Scotland’s offshore wind resource has six state companies operating within it.
Along the A1 from Innerwick in Cockenzie, in my East Lothian constituency, energy will land from the Inchcape wind farm, which, again, is in the firth of Forth. Inchcape is owned by Red Rock Power, which is a European subsidiary of SDIC Power from Beijing. SDIC Power Holdings Co. Ltd is a listed company on the Shanghai stock exchange, but it is a state-controlled enterprise, with the Chinese Government holding more than 49% of its shares. The UK Government frown not just on public ownership, but on communism, yet it is fine for a state-owned company from communist China to benefit from Scotland’s offshore resource. You couldn’t make it up!
There are three more. Further north, Aberdeen offshore windfarm, off the Aberdeenshire coast, has 58 turbines turning and is owned by Vattenfall, thus generating wealth for the Swedish people. Vattenfall is 100% owned by the Swedish state. That shows that not just communist countries, but even ones with conservative Governments benefit from state ownership.
Sited further north of Peterhead is Hywind, a development in which Masdar holds a 25% stake, with 75% held by Equinor. Equinor is a Norwegian state energy company that benefits its people through the gas and oil resources in Norwegian waters, but adds to that through expansion into Scotland’s offshore wind. Again, Hywind is a joint enterprise, with two state-owned companies co-operating to exploit Scotland’s natural resource. Masdar, also known as the Abu Dhabi Future Energy Company, is a UAE Government-owned company, which is securing Abu Dhabi’s future, not Scotland’s.
It is a pleasure to serve under your—as ever—sartorially elegant chairmanship, Mr Dowd. I congratulate the hon. Member for East Lothian (Kenny MacAskill) on securing this important debate, and the hon. Members who have taken part in it.
The hon. Gentleman gave a well-constructed, well-researched and thoughtful speech from the particular political perspective from which he hails, and I thank him for it. He will be aware of the important role that offshore wind and other renewables play in delivering secure, domestically generated energy, and the boost that provides for economic growth across the UK. He is right that we must harness the opportunities of offshore wind for Scotland and maximise the benefits for our nations—whether that is Wales, Scotland, England or Northern Ireland.
Where the hon. Gentleman and I differ is on how best to exploit that opportunity from where we start. This Government believe that a state-owned model is not the best approach. I am sure that, if we had allowed some new state company to come in and dominate our offshore wind sector, we would never have seen the 70% reduction in the cost of offshore wind that we have seen over recent years. It was the contracts for difference framework that we created, which allowed companies from all over the world, state or non-state, to come in, that transformed the economics of offshore wind and opened up the potential for not only the UK but the whole world of this important technology in tackling net zero.
The UK market is open to offshore wind investment, whether from state-backed or privately owned developers, and it has been extremely effective. The success of CfD has been in leveraging private capital to support wider public benefits. Our market-friendly approach has transformed the economics, as I said.
The UK encouraged an estimated £50 billion of new investment in low-carbon sectors in 2021 and 2022 alone. We currently have 14.2 GW of installed offshore wind capacity, the most of any nation in Europe. The hon. Gentleman made many references to different countries, but we have more of it than anybody else, and we drove its changing economics by taking a competitive approach rather than a protectionist, state-run approach that would never have delivered such a transformation.
Properly regulated markets that incentivise private capital—or indeed state capital—to invest in the energy system provide the best outcomes for consumers. Market competition is the most effective driver of efficiency, innovation and value. Private ownership of energy assets improves performance and reliability, and offers consumers greater choice and higher standards of products and services.
Our free market approach means that we have a highly competitive offshore wind market, which benefits from the expertise and experience of developers from all over the globe. It has enabled significant decarbonisation of our energy system, with dramatic drops in the cost of renewables. In 2010, when Labour left power, this country had a paltry 6.7% of its electricity coming from renewables. That was shameful. In the first quarter of this year, nearly 48% of our electricity came from renewables. Ten or 11 years ago, nearly 40% of our electricity came from coal. Next year, that will be zero, again because of our market-friendly policies, which would be at risk were His Majesty’s Opposition to have their ideas for state-run energy companies wrecking one of the most successful markets in the world. All over the country people are benefiting from the growth of the sector, and the cheap, secure, low-carbon electricity it produces.
Scotland has already benefited from the opportunities in offshore wind. It is a shame the hon. Member for East Lothian could not bring himself to recognise any of that. With its strong winds and plentiful coastline, it has made a significant contribution towards our offshore wind ambitions: so far, 3 GW is operational or under construction, and more than 40 GW of capacity is in the pipeline. The opportunity is enormous. The Scottish taxpayer already benefits from the Crown Estate Scotland seabed leasing. All net profit from offshore wind leasing rounds and rent is passed on to the Scottish Government for public spending.
To achieve our deployment ambitions and secure high-quality local jobs, we must continue to build a robust and competitive UK offshore wind supply chain. We are focused on maximising the economic opportunity arising from our transition to clean energy. Our significant strengths, including in wind energy and innovation, mean we have an essential role in building those supply chains, as demonstrated by this Government’s investment to date.
Through the offshore wind manufacturing investment scheme, the UK Government have made available funding to support investment in major port and manufacturing infrastructure. We have seen more than £500 million invested by SeAH Wind and JDR Cable Systems in manufacturing facilities, which will create or safeguard up to 1,200 jobs. I want to see similar investments in Scotland. That is why we continue to work with industry as it develops a long-term industrial growth plan for the sector, following the publication of Tim Pick’s recommendations.
Government backing attracts the private investment needed to deliver net zero. That includes research and development, where we are supporting innovation in floating wind technology through the floating offshore wind demonstration programme. That uses £31 million of Government funding, alongside £30 million from industry, to keep the UK at the cutting edge of offshore wind innovation. We are not stopping there. Just two weeks ago, applications closed for the Government’s floating offshore wind manufacturing investment scheme, which will provide up to £160 million to kick-start investment in port infrastructure projects needed to deliver our floating offshore wind ambitions.
The hon. Member for East Lothian gave a passionate speech effectively opposing the world’s investing in our renewable energy, and in offshore wind in particular. I caution him to think again, send out a more positive line to the world and recognise the huge investment opportunities here.
Does the Minister recognise that everything that he has said about private sector investment can and does happen in Denmark, but Denmark has taken a 20% stake on behalf of the Danish people, as Norway has done for oil and gas? None of what the Minister has suggested is impossible in Denmark, and it is happening. Does he accept that?
Denmark’s situation, size and industrial history are very different from the UK’s. What I am saying is that the UK is a European and, indeed, a world leader. We have decarbonised more than any other major economy on earth, and we believe that it is making us the best possible investment environment. We do not see the advantages of taking the state stakes that the hon. Gentleman suggests.
It remains essential that communities most affected by offshore wind and its associated infrastructure can benefit from its deployment. We recognise, for example, that regional distribution charges particularly impact the north of Scotland. That is why our cross-subsidy scheme provides more than £100 million annually to protect electricity consumers in the far north. It is worth £60 a year to every household in the north of Scotland.
We also want communities and individual families that are not involved directly in the industry to see benefits. That is why we have recently consulted on proposals for community benefits for transmission network infrastructure, including in Scotland, because we are essentially rewiring the whole UK economy as we make this transition. We must do it at speed, but in a way that has community support and in which we recognise the impact on host communities. Developing transmission infrastructure, particularly between Scotland and England, will be key for unlocking the full potential of renewable energy, and offshore wind in particular. It will mean that we can get electricity from where it is generated to where it is needed.
Hon. Members will have seen that the first annual contracts for difference auction completed last week. I am delighted that it delivered a total of 3.7 GW of renewable electricity. Contracts have gone to geothermal projects for the first time. There are record numbers of tidal stream projects, in which Scotland is a major player; I was delighted to visit the European Marine Energy Centre in Orkney and see so much of the significant work going on there. We also saw a doubling of onshore wind from last year’s record auction, and new solar. We hoped that offshore wind would be successful in this round, but we recognise that the challenging macroeconomic pressures felt by the industry around the world impacted its ability to come through the round successfully.
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Of course, big energy multinationals are also involved: SSE, Scottish Power, which in fact is owned by Iberdrola from Spain, and BP, among many others. However, state-owned firms from other lands are also there and many of them are significantly bigger than the Irish Electricity Supply Board—I do not intend to denigrate ESB—which has done well to provide for Ireland’s people. It is a lesson that Scotland must learn. As in so many other aspects, our Irish cousins, although blessed with less, have delivered so much more.
Neart na Gaoithe is not alone in this charade, where a Government opposed to state-owned energy companies allows foreign state-owned energy companies to profit and perhaps even plunder with abandon. It is a dereliction of duty and the price is paid not just in the loss of profits, but in the scandalously high prices paid by struggling families who are trying to power their homes. Many of them live in places where they can see the turbines off their shores or where they are in the lea of those turbines that operate on the land—energy-rich Scotland, fuel-poor Scots, indeed.
It is not only France and Ireland that receive a warm welcome, despite the Government’s political antipathy towards a nationalised energy sector. Research by the House of Commons Library has disclosed that in UK offshore waters, the state-controlled Danish company Ørsted and the Norwegian state operator Equinor own the largest shares of UK offshore wind, at 20.4% and 9.2% respectively. UK public entities own 0.03%.
In those fields—some already operating and others being developed—we have the absurdity of foreign state ownership of Scotland’s natural resource, and it is costing us. The organisation Common Wealth, in its paper “Power to the People: The Case for a Publicly Owned Generation Company” noted in 2021 that
“our energy bills combined with Contracts for Difference payments contributed £2.56 billion in payments to offshore wind generators owned by foreign state entities.”
Meanwhile, we are told that ownership does not matter, although it matters to the Governments of Sweden, Norway, France, Ireland, China and the UAE. They seem to see the benefit of not just managing their but our natural resource. Why? Because it underpins energy security, provides affordable energy for households and businesses, supports a just transition from fossil fuel to renewables, and allows for investment in technologies. All that helps hard-pressed households, boosts indigenous business and creates a more vibrant and competitive economy. It need not be outright ownership, welcome though that would be; as Denmark shows, a stake can be taken, allowing the nation and its people to benefit and prosper from their natural bounty.
It is about not just slippage of profits and wealth to foreign shores, but loss of control and influence over our natural resource. The evidence shows that we are losing out in more ways than simply the profit. Scotland is losing the turbine manufacturing. A few turbines are to be built at Nigg, but meanwhile hundreds of commissioned orders are going elsewhere. Yards such as Arnish and BiFab lie empty, even when proximate to the site. Not one turbine for a Forth field will be constructed in Scotland. Assembly is a poor substitute for manufacture, seeing lower profit and requiring less skilled labour. Every firth in Scotland should be manufacturing turbines and expanding to meet growing need, yet other than at Nigg, they lie idle and our folk face unemployment and our land a loss of skills.
Benefits from the supply chain is a mantra from the UK Government, shamefully echoed by their Scottish counterparts, but it is not borne out in practice. In my constituency, where the turbines offshore are visible and the horizon will change irrevocably, no work is being generated. What should benefit current and future generations instead sees folk unable to heat their homes and youngsters struggling to access skilled employment. Local business have not benefited and new businesses in the sector are not being created, either to deal with the offshore work, or to provide onshore opportunities through long duration battery storage or hydrogen production.
Let us look one of the sites owned by foreign state companies to confirm that. Neart na Gaoithe, which is owned by EDF from France and ESB from Ireland, is seeing the work go elsewhere. The turbines are being produced at Siemens in Humberside, albeit assembled in Dundee, with the foundations laid by Saipem from Italy. They are being taken out to the field by Fred. Olsen Renewables, and the cabling is being done by DEME Offshore from Belgium. Where are the contracts for Scottish businesses and the work for local folk?
There should be a Scottish state energy company and it should operate and take a share in all the fields that are being developed. Other nations do it and, as I have shown, are doing it in our waters. Denmark, with both its company and its public stake, is showing what can be done, just as Norway showed what could be achieved with an oil and gas bounty. Scotland has lost out on the former but must not do so with the latter. The bounty from the energy off our shores must benefit our people, not just corporations or even state companies from other lands.
The great Scottish comedian Billy Connolly penned a song, “Sergeant, Where’s Mine?”, describing the plight of a soldier with life-changing wounds reflecting on the prospectus the recruiting sergeant had first given him. Lying in his hospital bed he says:
“Oh Sergeant, is this the adventure you meant
When I put my name down on the line
All that talk of computers and sunshine and skis
Oh, I’m askin’ you, Sergeant, where’s mine”.
Well, all I’m askin’ you Minister, where’s ours? All that talk of the “Saudi Arabia of wind” and the work and the jobs, where are they? And when other nations, whether they are Ireland or France, Denmark, Sweden, Norway or China, have a share of our natural bounty, oh Minister, where’s ours?
I conclude by asking the Minister to confirm that his Government will neither oppose a state energy company nor Scotland seeking to take a share in its natural wealth. The absurdity of an energy-rich Scotland yet fuel-poor Scots must end. We demand a share and a stake in our natural bounty.
We are committed to our ambition of reaching 50 GW by 2030, including up to 5 GW of floating offshore wind. We have not only the world’s largest operational wind farm project—Hornsea 2 off the Yorkshire coast, which is named after a town in my constituency—but the second, third and fourth largest projects.
We welcomed the recent announcement of a potential £200 million investment in high-voltage direct current manufacturing in the highlands by Sumitomo of Japan, which could create up to 150 jobs. The offshore wind industry has also supported the revitalisation of ports from Wick to Dundee. A huge range of diverse companies in Scotland already benefit from the offshore wind industry’s growth: crane manufacturers, consultants, underwater operations experts, turbine maintenance specialists and more. We know that opportunity will only expand as we grow the industry further.
The UK, as I have said, leads the world in floating offshore wind, a new technology that opens up access to new, deeper areas of seabed. The Hywind Scotland project was the world’s first floating windfarm. Combined with the Kincardine project, also in Scotland, it has given the UK one of the largest amounts of operational floating capacity anywhere in the world, at 80 MW. The UK has the world’s largest floating wind pipeline, with around 25 GW already identified, including through the ScotWind leasing round and INTOG processes. That represents a huge opportunity for the Scottish economy, especially from installation and lifetime maintenance activities, which are best undertaken locally.
I suggest to the hon. Member for East Lothian that, if he is as passionately committed as he suggests to jobs and benefits for Scotland, he should not be sending a message that we want to deter foreign investment, but signalling that we welcome it.
We are reflecting carefully on the results of allocation round 5 so that we make appropriate adjustments for AR6. That is how it works: we get data by trying to understand supply chain costs and commissioning research, but the most valuable data of all is actual behaviour in real auctions. That information will come into adjustments for AR6 to ensure that our evidence base reflects the true market environment. At the same time, value for money for the consumer through a competitive process remains an important feature of the CfD scheme, and I make no apology for always prioritising protecting the consumer. With annual auctions now in place, the allocation round is due to open in about six months, meaning that there is an opportunity to gain a contract with minimal delay to deployment for projects that were not successful this time.
This Government have made real progress in delivering the ambitions set out in the British energy security strategy and our “Powering up Britain” plan. We are committed to achieving our ambition of 50 GW of offshore wind by 2030. It has a vital role to play in delivering a decarbonised power system by 2035, subject to security of supply, and achieving our legally binding 2050 net zero commitments. We need to celebrate what we have done to date and recognise that most of the growth is not in the past, but in the future. The opportunities for Scotland, Wales, Northern Ireland and England are immense, and we should work collectively to ensure that we attract investment and create as many jobs as possible in this country supporting the transformation of our energy system and our spearheading of the global move to net zero, which is so important to us and future generations.