Wind Farm Subsidies (Abolition) Bill — House of Commons, 2015-03-06
Topic: Energy
Matthew John David Hancock (Conservative, Centre-right): The two subjects are slightly separate. On Hinkley Point, as my hon. Friend knows, we reached a strong heads of terms agreement on the price and many other details, which we then took to the European Commission and succeeded in achieving state aid clearance on 9 October. There are lots of details to be put in place, and we are working with EDF and other stakeholders to achieve that. I do not think that there is an issue of consistency there. I also do not think that there is a read-across to the point that I was making. Ensuring that we get the details right is an important part of landing any energy infrastructure project, whether related to nuclear or to onshore wind, to which the Bill refers The question of how we are reducing the subsidies has formed an important part of our debate today. In the case of large-scale onshore wind, we have already cut support rates under the renewables obligation by 10%, and the renewable obligation support for offshore wind projects will also drop by 10% by April next year. At the end of 2012, we introduced a cost control mechanism called contingent digression for the feed-in tariff, which is designed to reduce tariffs in line with falling costs and the level of deployment. Last year, tariffs for all wind turbines were reduced by 20%, and on 1 October 2014 by a further 10%. Clearly the subsidies are already coming down Our new support regime, involving contracts for difference, is designed precisely to get the best possible value for money for the available subsidy by introducing a market in the subsidy. My hon. Friends will not be surprised to hear that when we introduced a market mechanism for the available subsidy, we got better value for money and the price came down. Adam Smith would have been proud of the outcome of the CfD auction. Levels of support are therefore decreasing. Indeed, the market cleared at the much lower than expected price of around £80 per MWh for onshore wind, showing that markets work and increase value for money The other interesting outcome of the CfD auction was that onshore wind was not the cheapest form of renewable energy. Solar power came out of that auction as the cheapest. Compared with the £80 per MWh for onshore wind, some of the solar projects came through the auction at £50 per MWh, demonstrating clear evidence of a path to lower subsidies. Indeed, an exciting future will soon be within reach, in which the cost of solar will be compatible with the cost of fossil fuel generation. We have already seen instances around the world of lower-cost solar installations being achieved without subsidy and being cost-competitive with fossil fuels Part of getting the balance right involves ensuring that we get a broad mix in the CfD auction, and that we can drive down the costs to consumers of offshore wind as well. We are delivering up to £110 million less overall per year than we were doing in the absence of competition. As a result of the auction, we are offering two contracts to offshore wind farms: Neart na Gaoithe, a 448 MW site in the Forth estuary, and the 714 MW East Anglia ONE project. Together, those sites represent 1.2 GW of renewable capacity I shall turn now to the question of reaching grid parity and being able to deliver on the intention behind the Bill without the need to pass it, and to do so in an organised and careful way. Costs in the sector are falling, and we are achieving more economies of scale. In the longer term, that will mean that we can reach parity with other renewable and non-renewable forms of energy supply. Doing that in an organised way will allow us to keep investing in the UK. It is therefore vital to do this carefully and cautiously.