Leadsom and Rudd call for offshore wind wealth funds

Two Tory former energy secretaries have backed calls for offshore windfarm operators to pay compensation to communities scarred by the new transmission infrastructure required to deliver their projects.

Dame Andrea Leadsom and Amber Rudd have penned a foreword for a new paper from the Policy Exchange thinktank, which explores ways to mitigate the impact of the onshore infrastructure associated with the UK’s burgeoning offshore wind sector.

The report’s suite of recommendations includes a proposal for “Offshore Wind Wealth Funds” levied on operators of all new offshore windfarms.

This levy would be used to pay local communities that host the new underground cables, substations, power lines and pylons required to bring the electricity generated offshore onto land.

Establishing such a fund should be a condition for receiving support in future Contracts for Difference auctions, the report recommends.

The sums, levied at a rate of around 50p per MwH, could then be ploughed into community facilities, improving local skills and to providing enhanced local services.

The paper, entitled Crossed Wires, estimates that a 1GW offshore wind farm would pay around £2 million per year to local projects for the first 15 years of operation.

In the short term, the report proposes that the government should pay this compensation rather than offshore wind developers, because it would be “unreasonable” to levy a charge on offshore wind projects that have already secured support via a Contracts for Difference auction.

In the foreword, Leadsom and Rudd write: “Where new onshore infrastructure is needed, we should compensate local communities through new ‘Offshore Wind Wealth Funds’.

“We already do this for onshore windfarms and we were planning something similar for fracking. It’s absolutely right that coastal and rural communities should be compensated for hosting new large-scale infrastructure that provides national benefits but has local negative impacts.”

The report also urges the government to revise its Strategy and Policy Statement for Ofgem, last updated in 2014, to reduce disruption to coastal and rural communities by backing the establishment coordinated offshore network.

This guidance could provide Ofgem with “political cover” to approve greater anticipatory investment in the network, including a “ring main” linking new offshore windfarms.

To beef up network planning, the report backs the establishment of an independent system operator to take over the current operational and planning duties of the National Grid ESO. The new ISO’s remit could be expanded to include responsibility for the planning and operation of electricity distribution networks and elements of the gas system.

In the short term, the report says the government should focus on improving co-ordination of network planning in East Anglia region, where six new offshore windfarms are seeking to connect to the onshore electricity network in the mid-2020s.

Unless network planning is reformed, Leadsom and Rudd warn that increasing local opposition could imperil the government’s target to roll out 40GW of offshore wind by 2030.

Rudd was the last secretary of state at the Department for Energy and Climate Change before its abolition in 2016. Leadsom was minister of state for energy at the same department before a brief spell as secretary of state at BEIS from 2019 to 2020.