Peter Aldous highlights the success of offshore wind over the past decade and calls for an urgent review of the regulatory and policy frameworks to ensure the UK industry can maintain its premier position.
Peter Aldous (Waveney) (Con)
My right hon. Friend the Member for Kingswood (Chris Skidmore) and his team are to be congratulated on carrying out the herculean and timely task of reviewing the UK’s legal commitment to net zero greenhouse gas emissions by 2050. Generally, I agree with his findings and recommendations, and I urge the Government to consider them carefully and to respond to them proactively. This must not be a document that gathers dust on a bookshelf, or to which occasional reference is made in preparation for debates such as this. Instead, it must mark a sea change in how we set about ensuring that the UK realises the full potential of the growth opportunities that net zero presents.
My right hon. Friend’s review calls for action on the “key 25 for 2025 recommendations”. Each of these proposals warrants a debate of its own, but what I shall briefly do is home in on one subject that is not only very important to delivering net zero, but already bringing significant job opportunities to areas such as Waveney and Lowestoft and, with the right policy framework, can deliver even more. What I am talking about is the offshore wind industry.
Offshore wind has come a long way in the past decade. At the outset, 10 years ago, there were many Doubting Thomases questioning whether the industry had a future, saying that, as a technology, it was way too expensive. However, the industry, working with Government, has proved them wrong. It is now an undoubted British success story, with everyone wanting a slice of the action. As a result, the Government have set very ambitious targets for 2030 and 2050 for the amount of electricity that offshore wind will generate.
The industry has brought significant benefits to East Anglia, with half of the nation’s offshore wind fleet anchored off the Suffolk and Norfolk coast. Its construction is being project managed from ports such as Lowestoft, where ScottishPower Renewables and SSE Renewables also have their operations and maintenance bases, and where Associated British Ports has obtained planning permission and is designing its Lowestoft Eastern Energy facility.
This success can be attributed to a combination of the ingenuity of business and the foresight of Government, who, in the Energy Act 2013, set down a policy framework that has been an undoubted success. However, times change. In many respects, offshore wind is a victim of its own success. The scale of the Government’s vision for the future of the industry means that a more strategic approach to its future development is now required. The Russian invasion of Ukraine and the ensuing global gas crisis mean that other nations, in particular the US with its Inflation Reduction Act 2022, are upping their game in developing their own renewable energy strategies. All of a sudden, the UK, which is still the No. 1 world leader in offshore wind, is at risk of being an also-ran. Energy is a globally footloose industry, and it is vital that we respond to ensure that the UK retains its pole and premier position.
I shall briefly outline how I believe this can be done. First, there is a need to streamline the planning process. A more co-ordinated and efficient planning system is required if we are to achieve the 50 GW 2030 target. The establishment of the offshore wind acceleration taskforce will help achieve that, but its reforming work does need to take place at a greater pace.
Secondly, and in the same vein, we need to speed up the development of the grid system, so that offshore wind projects can be delivered more rapidly. We require a new model of grid development where critical investments are accelerated by Ofgem and the transmission owners. To deliver this step change in grid development, the Government should reform the remit of Ofgem through an amendment to the Energy Bill, as recommended by my right hon. Friend the Member for Kingswood and his team.
Thirdly, there is a need for a stable and attractive fiscal framework that enables businesses to make what are enormous investment decisions with confidence. It would be wrong to get into a bidding war with the US, the EU and other nations, but we do need a taxation regime that encourages investment through a compelling range of capital allowances. I urge my right hon. Friend the Chancellor to introduce these in the forthcoming spring statement.
Fourthly, although the framework set down in the Energy Act 2013 has served us very well, it does need considered reform to take account of the harsh new global economic reality. Due to inflation and supply chain constraints, it is necessary for Government to adjust the parameters for future contracts for difference auctions, both with regard to their overall budget and the strike prices that are set. In the longer term, it is necessary to reform the contracts for difference allocation process so as to better balance price and supply chain considerations. In doing so, we will be able to maximise the opportunities that offshore wind presents for economic regeneration and job creation in places such as Lowestoft.
Wera Hobhouse
Does the hon. Member agree that one of the biggest problems that we encounter is not so much the CfDs, but the delay that is caused by grid access? The National Grid cannot develop new grid infra- structure until projects have come on board.
Peter Aldous
I agree with the hon. Lady. The industry faces a whole range of challenges. The contracts for difference one is very important at the moment, with developers putting forward their bids, but the grid is an important issue. As I have said, the industry has been a victim of its own success. The point-to-point approach to making connections into the grid, which we have had up until now, is, I fear, no longer sustainable and we need to move on to that more strategic approach.
My fifth and final point is that it is important that the Government act as a catalyst for investment in key infrastructure, particularly in ports. That is vital in order not to deflect investment overseas. Such leveraging could include revenue guarantee support for investors for a limited period, to overcome the risk gap at the time of final investment decisions, and looking to see what the UK Infrastructure Bank can do to crowd in private investment.
In conclusion, as I mentioned at the outset, offshore wind has come a long way over the past decade. In many respects it is now the UK’s star player in mission zero. It provides hope and opportunity for communities all around the UK. The existing partnership between business and Government, which culminated in the sector deal signed in Lowestoft nearly four years ago, has served us well. However, the regulatory and policy frameworks now urgently need reviewing if the UK industry is to retain its premier position. If we do not do that—my apologies for this metaphor, Madam Deputy Speaker—there is a risk that we will have blown it.