My Lords, I note that this SI has not been the subject of any report by the Secondary Legislation Scrutiny Committee. On these Benches, we broadly welcome the SI and its intention to grow the green economy. The UK is one of the best-placed countries in the world for developing and deploying offshore wind to help to provide energy security and meet our net-zero commitments. In 2023, a record 49 terawatt hours, 17% of the UK’s total electricity generation, was produced by offshore wind energy. The UK is aiming to triple its offshore wind capacity in the next six years and desperately needs a successful wind auction this year after the failure to attract any bids from offshore wind developers for the last round of contractual auctions.
The green economy in the UK grew by 6% last year and is crucial to delivering economic growth, the just transition and our climate goals. There are worries about the level of support for future investment in the UK offshore wind sector, and this SI is broadly welcomed on these Benches for recognising this and aiming to improve the situation.
This SI applies contracts for difference sustainable industry rewards—SIRs—which, it is said
“will help to address recent supply chain challenges that could otherwise hinder the deployment of offshore wind (OFW) and floating offshore wind (FOW). They will do so by providing additional revenue support to OFW and FOW developers, through a series of lump-sum payments in addition to their regular CfD payments, should they invest in the economic, social, and environmental sustainability of their supply chains”.
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The SIRs scheme is a direct recognition from the Government that grant funding alone is not sufficient to increase investment capacity at the speed and scale that is desired to meet our climate commitments. The SIRs here work within a contract for difference scheme and reward companies which invest in shorter supply chains in the UK’s deprived areas and/or
“more sustainable means of production”
here in the UK or anywhere else in the world. What is the budget for the SIR and, again, how will value for money in each round be assessed and reported back to Parliament?
The SI allows for performance-related adjustments if the applicant is not at fault and for an SIR statement to be amended in relation to evidence-based material changes. Again, similar to the previous SIs, can the Minister confirm that there is a dispute resolution mechanism prior to any legal proceedings, in case of difficulties here?
As I said, we welcome that this SI is seeking investment in deprived areas of the UK. However, how are “deprived areas” defined and how does this relate to other potentially competing demands, particularly the need for shorter supply chains? Can the Minister also say a word on what
“more sustainable means of production”
looks like for the Government? It is well known that these offshore wind turbines’ blades cannot be recycled, as they are made of carbon fibre, so is there an attempt here—or do the Government see it as possible—at some point in the future to have greater use of recycled materials within the industry? Is that one of the intentions here?
As the Minister, the SI will apply only to allocations rounds 7, 8 and 9, when a full review is expected, and new legislation will have to be laid if this policy is to be continued. Are the Government confident that this policy is sufficient to secure the inward investment that we need, at scale and at speed, to meet our future commitments? He spoke of specific market failures: I assume that those relate to the war in Ukraine, Covid and supply issues. I guess there is just a question of whether these measures, in that three-year timeframe, will really be sufficient to take this industry forward to meet the expected demand, when other countries are also expanding their offshore wind at the exact same time, and we are dependent on multinational companies to deliver these big infrastructure projects for us.
Finally, what is the earliest proposed date that the policy could be extended by new legislation, if that was a desired outcome for this Government or the next one? Will the need for new legislation be hampered by any lack of statutory review included in these regulations? For example, if there were a change of Government, would the fact that there is no statutory review impact on any incoming Government’s ability to bring forward new legislation? While I welcome this SI and its intentions, I am not certain that the powers that it delivers will alone be enough to deliver the desired policy outcomes that the Government seek to achieve.