Contribution
My Lords, I start by welcoming the noble Lord, Lord Moynihan, to his position, and I look forward to working with him.
On these Benches, we welcome the results of allocation round 7, which has secured a record 8.4 gigawatts of future offshore wind capacity, including 192.5 megawatts of innovative, floating offshore wind, and seen £22 billion in private investment. This marks an important step forward on our clean power journey and towards our future energy independence—enough clean energy to power the equivalent of some 12 million homes or roughly equivalent to 12% of national energy demand.
This shows that, when properly managed, Britain can lead the world in clean, secure and affordable energy. After the chaos of the previous Government’s failed allocation round 5, which delivered no offshore energy contracts at all, this progress is indeed an enormous relief. This auction confirms what my party has long argued—that offshore wind is the future backbone of our energy electricity system.
Projects such as Berwick Bank in Scotland—set to become the largest offshore wind farm in the world—and the one in Wales, the name of which literally means “sea breeze” and is the first major Welsh project in over a decade, show that progress is being made.
But this is not only about climate targets; it is about our future national energy security. In an increasingly unstable world, every turbine we build reduces our reliance on volatile fossil fuel markets. Securing Britain’s wind power means freeing ourselves from the price shocks of the global gas markets. We should recall that the Office for Budget Responsibility estimated that the UK’s energy support response for the war in Ukraine, driven by fossil fuel prices, cost us £78.2 billion over 2022-23 and 2023-24. In contrast, CBI figures show that the green economy grew by 10% in 2024, and AR7 secures an important future pipeline of continued and sustained green jobs and green British jobs.
The UK has some of the best wind resources in the world and, when we harness our renewables—wind, solar and tidal—we strengthen our energy independence. Despite what some may claim, wind power remains the most effective long-term way to bring down energy bills. The Energy and Climate Intelligence Unit reports that, in 2025 alone, wind generation reduced wholesale electricity prices by around one-third. The average strike price in this round, around £91 per megawatt hour, remains extremely competitive. By comparison, building and running a new gas power plant today would cost around £147 per megawatt hour, making wind power roughly 40% cheaper.
However, we must be candid about the challenges that the sector faces: rising bid prices, driven by global supply chain pressures; high interest rates; and soaring material costs, particularly for copper and steel. I therefore ask the Minister what steps the Government are taking to address these issues so that our 2030 onshore wind targets remain achievable.
The contracts for difference mechanism protects consumers and secures inward investment. It is a policy that has stood the test of time, but it can still be improved. Is the Minister considering extending CfD contract lengths from 20 to 25 years? This could provide greater certainty, lower financial costs and ultimately deliver cheaper electricity. Similarly, we think that moving older renewable projects from more expensive renewable obligation certificates to new CfD contracts could save typical households up to £200 a year.
More broadly, urgent action is needed to reduce energy costs by other means. Now that the Government have ruled out zonal pricing, I ask the Minister what alternative market reforms are being pursued to drive down energy bills. Despite rising renewable generation, gas still sets the market price around 97% of the time. Are proposals being assessed to move gas plants into a regulated asset base? As has been suggested, this could save some £5.1 billion a year by 2028, according to calculations done by Greenpeace. If we do not urgently upgrade and streamline our transmission systems, this record capacity will remain stuck in connection queues instead of reaching our homes and businesses. Does the Minister agree that a long-term, properly resourced spatial energy plan is now urgent and essential to ensure that these connections happen at speed?
The Liberal Democrats have a clear vision for 90% of the UK’s electricity to be generated from renewables by 2030. AR7 is indeed a welcome step on the road, but more must be done to ensure that we reach our targets, reduce the cost of energy bills and update our transmission systems.