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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
It is a pleasure to serve under you in the Chair this afternoon, Dame Angela. After quite an exciting political week, it is a pleasure to end with such an—on the whole—agreeable and positive debate in Westminster Hall. I think we all agree on the potential of floating offshore wind and the huge contribution it makes to the United Kingdom, our economy and our drive towards net zero, energy security and independence.
I congratulate my hon. Friend the Member for North Devon (Selaine Saxby)—she is a friend—on securing this important debate. She has been a vocal champion of floating offshore wind at all levels—from her constituency through to the wider Celtic sea region—in her role as chair of the all-party parliamentary group for the Celtic sea. She rightly highlighted the benefits that this new technology could bring to the United Kingdom as a whole.
Far be it from me to disagree with the shadow Minister, the hon. Member for Croydon Central (Sarah Jones), but the United Kingdom is actually one of the world leaders in floating offshore wind. The world’s first floating offshore wind farm was built in UK waters. Since then, we have built a strong base of new projects and development to grow our industry still further. Indeed, in the oil and gas industry, which has already been referenced by the hon. Member for Aberdeen North (Kirsty Blackman)— my constituency neighbour—and which surrounds our constituencies, there are opportunities for floating wind to play a crucial role in decarbonising North sea production, by accessing deeper waters and providing electricity to those platforms.
Our 80 MW of currently installed floating wind capacity builds on our world-leading status in fixed-bottom offshore wind deployment—not that anyone would know it, listening to the Labour party. We have over 14 GW of installed capacity—the most in Europe—with the first, second, third, fourth and fifth largest offshore wind farms in the world generating power right now. Contrary to the Labour party’s castigation of this Government’s record, we have gone from only 7% of renewable electricity on the grid in 2010—when Labour left office—to 48% in quarter 1 of last year. We have decarbonised faster than any other G7 nation, at the same time as growing the economy.
The opportunity for floating offshore wind is significant. The Global Wind Energy Council has said:
“The market is nascent, but could be huge: 80% of the world’s offshore wind resource potential lies in waters deeper than 60m.”
That is too deep for fixed-bottom wind. The UK’s Offshore Renewable Energy Catapult’s Floating Offshore Wind Centre of Excellence has estimated that floating offshore wind has
“the potential to deliver £43.6bn in UK gross value add…by 2050, creating more than 29,000 jobs in the process.”
Our 5 GW ambition recognises that and the potential for floating wind to play a key role in our energy mix as we move steadily towards net zero. We are committed to building on the UK’s position and to placing the UK at the forefront of the development of this exciting new sector. However, we know that 5 GW is a stretching ambition, and we are working hard to create the right environment for investment and to address barriers to deployment.
First, we recognise the crucial importance—raised today by every Member who contributed—of port infra- structure to floating offshore wind. That is why we launched the £160 million floating offshore wind manufacturing investment scheme—or FLOWMIS for short. That funding will help leverage the vital investment needed in port infrastructure to deploy floating offshore wind at large scale. FLOWMIS closed for applications on 27 August, and I can reassure Members that we are assessing all the bids we received.
Secondly, we recognise the importance of the right support mechanisms through the world-leading and envied contracts for difference scheme. The scheme is looked to worldwide as the model for how to support the deployment of renewables, and CfD auctions have so far awarded contracts totalling over 30 GW of new renewable capacity across all technologies, including around 20 GW of offshore wind. Last year’s allocation round, AR5, was a success story for many technologies, including marine energy and the first three geothermal projects.
However, we recognise the shortfall in fixed-bottom and floating offshore wind, and I acknowledge the concerns that my hon. Friend the Member for North Devon and others raised at the time and this afternoon. We reflected carefully on the results of AR5, and I trust that today’s announcement detailing the parameters for next year’s allocation round, AR6, demonstrates that we have listened and responded to concerns. The administrative strike price for floating offshore wind has increased from £116 to £176 per MWh—an increase of 52% in real terms from AR5—recognising the unprecedented upward pressure on project costs, which, as we have seen, have affected the industry worldwide. We hope today’s announcement will bring forward viable floating wind projects as we look to boost investment in the industry.
Thirdly, we recognise the importance of a long-term pipeline of projects to give investors the confidence that they need to take long-term decisions. The UK has the largest floating wind pipeline in the world, based on confirmed seabed exclusivity, with around 25 GW already agreed, including through the ScotWind leasing round referenced today and the INTOG process.
Selaine Saxby
Could my hon. Friend clarify something in today’s AR6 announcement? We all know that there were two projects ready to bid in AR5, and at this point there are two projects ready to bid. Now that the strike price seems to be acceptable to all concerned, is there any opportunity for us to accelerate the decision for these two projects and then effectively to have an AR7 for all the projects in the next pipeline, so that we can get these ones afloat?
Andrew Bowie
I understand very much why my hon. Friend wants that to be the case, but we must recognise that one reason for the success of renewables, including in this country, has been the predictable options we have had. Developers are already planning for AR6 in March next year, and bringing the round forward any further could jeopardise it, not amplify it, so we are reluctant to do that. However, I hope the confidence the industry will receive from today’s announcement means that AR6 will be a huge success. We all need it to be, and that is why we took that decision.
As my hon. Friend will know, the Crown Estate is also moving forward with its plans to launch leasing round 5, making available areas of seabed capable of supporting up to 4.5 GW of capacity in the Celtic sea. The Government fully support those plans, which represent the first opportunity for commercial-scale floating offshore wind projects in the region. We also recognise the importance of a long-term pipeline in the Celtic sea beyond leasing round 5. We will continue to work closely with the Crown Estate on that as we seek to realise the full potential and opportunities represented by floating offshore wind in the Celtic sea. The Crown Estate is due to make further announcements on its plans before the end of the year.
We recognise the importance of dialogue between industry and Government in driving progress. The floating offshore wind taskforce is co-chaired by industry and Government. Its first report, in March this year—“Industry Roadmap 2040”—has been highly informative in shaping our understanding of the specific demands on port infrastructure needed to support floating wind at scale. The taskforce is currently working on a vision to 2050, due for publication in quarter 2 next year, which will set out the potential prize that floating offshore wind could offer the UK.
We will continue to work closely with industry, through RenewableUK and the Offshore Wind Industry Council, to assess supply chain needs and opportunities for the UK and to develop an industrial growth plan—an IGP—to support the growth of sustainable supply chains.
Kirsty Blackman
On that issue, as I said, Scotland encouraged the conversation between developers and the supply chain. Are the Minister’s Government doing everything they can to ensure that those who are bidding, and winning the bids, are working with the supply chains to get them upskilled as quickly as possible, and to ensure that they can make investments in the confidence that they will be able to create widgets for offshore wind farms?
Andrew Bowie
Widgets being one of the specialties of our region. There is always more we could do, and we should absolutely seek to push the boundaries and work as closely as possible with the industry—in lockstep with it—to ensure that the supply chain in the UK grows, creating the jobs of the future and ensuring that the pieces, the widgets and everything else that is required to develop a successful floating offshore wind industry is created here in the UK, bringing benefit to communities up and down this country.
The floating offshore wind taskforce is an important part of that process, and we now have our industry road map as well. We are working closely with industry to deliver that, but of course there is more that we can, and will, do. The Government are open to any suggestions as to how we improve that relationship more to ensure that we get to the place we need to go.
I was about to address the comments the hon. Member for Aberdeen North made regarding skills. I agreed with every single thing she said, which is not very rare, but it is quite rare. Creating a workforce for the future, for all the energy projects we are embarking on right now, is a personal passion of mine. We need to get young people engaging in science, technology, engineering and mathematics subjects at school. We need to grow the capacity of our further and higher education institutions to deliver the courses and create the apprenticeships with industry that we will need if we are to get people into the growing energy industry in this country. We need to ensure that the right processes are in place, so that those people who want to transfer, upskill and reskill from existing technologies and industries into new and emerging technologies and industries can do so.
The passporting issue the hon. Lady raised is incredibly important to that journey. As the Nuclear Minister, I am delighted to have set up the nuclear skills taskforce between my Department and the Ministry of Defence, to see what we can do to grow that workforce. Similar work is going on in the renewables sphere, and I am keen to see what we can do to work with the existing oil and gas industry, for example, to transfer skills and make that transfer much easier.
We understand that cost is a challenge for nascent sectors such as floating wind. We are supporting the sector with £31 million of funding, matched by £30 million from industry, through the floating offshore wind demonstration programme to explore innovations to help reduce the cost of deploying floating offshore wind technology. As part of its 2050 vision, the floating offshore wind taskforce is also looking to identify the key enablers of cost reduction and recommend specific actions to address them.
Finally, given my role as the Networks Minister, it would be remiss of me not to mention the grid, networks and connections, which have rightly been raised by all Members present—not a day goes past when another connection issue is not brought to my desk in the Department. We know that these issues are a significant barrier to the deployment of many renewables projects, and a challenge for our energy infrastructure more widely. In July 2022, the Government appointed Nick Winser to the role of electricity networks commissioner, to advise the Government on how to reduce the timeline for transmission network delivery by half. The commissioner’s final recommendations were submitted to the Government and published on 4 August. We welcome his report and are committed to the direction of its recommendations. We have committed to publishing our response to those recommendations and an action plan imminently.
As my hon. Friend the Member for North Devon knows, community engagement, respect and thought-through, sympathetic planning of onshore infrastructure is something I take a keen interest in. For all the reasons I have suggested, decarbonising the grid and increasing capacity are important—in fact, they are vital—but they must be done with respect, sympathy and understanding of local communities and businesses. We must be willing to change, adapt and be flexible in those plans. My hon. Friend knows that, given the role of Ministers in the planning system in England and Wales, I cannot comment on specific projects, including the White Cross farm project that she referenced. However, the developers will have heard her loud and clear today and at other times. A response on community benefits, which she asked for, will also be published imminently.
I congratulate my hon. Friend on securing this timely and important debate.
Kirsty Blackman
I mentioned the fact that communication from the grid is not always up to scratch. Will the Minister ensure that he does what he can to put pressure on? I know he is working on the speed, but we also need to make sure that communication is improved, so that developers know what is happening and when it is happening—even just when they will hear an answer.
Andrew Bowie
Absolutely. I assure the hon. Lady that I am working hard on that.
I hope I have demonstrated that the Government not only understand the challenges faced by this exciting new sector, but that they are taking concrete action to address them. The opportunity is there for the UK to firmly establish itself as a world leader in floating offshore wind, and we are determined to see this vision and opportunity realised.