Lord Callanan (Con)
First, let me thank all noble Lords for their contributions to what I think has been an excellent, important and constructive debate. I will attempt to answer as many of the questions asked as possible, and of course, I look forward to debating many of these issues further as the Bill proceeds through Committee.
One of the most pressing issues facing many hard-working households and businesses today is the cost of living, particularly the cost of energy. Unsurprisingly, many noble Lords—including the noble Baronesses, Lady Blake and Lady Hayman, and my noble friend Lord Howell—asked how the Bill will address this issue. The Government are acting now to protect households from the full impact of rising prices with a package of financial support worth £37 billion.
However, the cost of living crisis is not just about providing support today. It is also about ensuring that we have an energy system that is affordable for many years to come. This Bill will create a more cost-efficient energy system by increasing innovation and competition, for example by introducing competition in onshore electricity networks and attracting investment in a strong, low-carbon energy sector. The Bill will also help to reduce our exposure to volatile gas prices.
My noble friends Lord Moylan and Lord Howell and the noble Baroness, Lady Sheehan, touched on the important issue of energy security. It is an absolute priority for this Government. Thankfully, Britain benefits from highly diverse and flexible sources of gas supply and a diverse electricity energy mix, which ensures that households, businesses and heavy industry can get the energy they need. I am happy to confirm that the UK is in no way dependent on Russian gas. We have highly diverse sources of gas supply, providing us with one of the largest liquified natural gas import infrastructures in Europe, for which, I am happy to say, the EU is particularly grateful at the moment, as we support it. Natural gas has an important ongoing role to play in future as the UK decarbonises its energy system. However, how natural gas is used will need to change to eliminate the CO2 associated with burning it.
In response to my noble friend Lord Moylan, affordability is of course absolutely key to delivering on our energy strategy. The value for money of the measures that we introduce is completely critical.
As many noble Lords have noted, this is a wide-ranging Bill. I welcome the many questions that were asked in the debate about the wider energy sector; most of them do not necessarily relate to the Bill but I will nevertheless attempt to address them anyway.
A number of noble Lords, including the noble Baronesses, Lady Blake and Lady Sheehan, and the noble Lords, Lord Bruce and Lord Whitty, raised the knotty subject of energy efficiency, which we have debated long and hard in this House. Let me say at the start that huge progress is already being made on the energy efficiency of UK homes. We are investing more than £.6.6 billion over this Parliament to improve energy efficiency. However, cost of living pressures mean that now is not the right time to bring in additional requirements for home owners regarding further regulations on minimum energy efficiency standards. However, we will bring forward measures at a more appropriate time.
The noble Lord, Lord Bruce, asked if the Government will introduce windfall taxes back into the oil and gas industry. The energy profits levy will raise around £5 billion in its first 12 months, which will go towards supporting people with the new cost of living measures announced by the previous Chancellor.
The noble Lord, Lord Whitty, asked about the programme of policy statements and secondary legislation. To implement the commitments in this Bill we will of course publish policy statements for the Lords Committee stage, helping your Lordships to understand the intention of the regulation-making powers in the Bill and the next steps which will follow that.
The noble Baronesses, Lady Hayman and Lady Bennett, and the noble Lord, Lord Lennie, asked about onshore wind. On consultation, we are going to introduce a clear route which enables local communities and authorities to work together to signal their support for onshore wind and for onshore wind developers to respond quickly to this. On planning guidance, while we will not introduce wholesale changes to current planning regulations for onshore wind in England, we have committed to developing local partnerships for a limited number of supportive communities which wish to host new onshore wind infrastructure in return for appropriate benefits, including, for example, lower energy bills.
The right reverend Prelate the Bishop of Carlisle, the noble Baroness, Lady Bennett, and my noble friend Lady McIntosh all spoke about community energy. Through the introduction of UK-wide growth funding schemes, the Government are enabling local areas to tackle net-zero goals in ways that best suit their particular community needs.
The noble Lord, Lord Bruce, asked if there would be enough electric vehicle charging points. We are committed to ensuring that an inclusively designed EV charging network is available that works for all consumers.
My noble friend Lord Moylan asked what will take up the slack when the wind is not blowing and the sun is not shining, which is an important question. The Government’s long-term ambition is to increase our plans for the deployment of civil nuclear power up to 24 gigawatts by 2050, which would be around 25% of our projected 2050 electricity demand.
The noble Baroness, Lady Boycott, and my noble friend Lady McIntosh asked about the use of waste for energy. I can inform both that the forthcoming biomass strategy will consider evidence on the likely support for and sustainability of biomass feedstocks and the best use of biomass across the economy to help us achieve net zero.
I turn to some of the points made about measures in the Bill, starting with pillar 1. The noble Baroness, Lady Hayman, and the noble Lord, Lord Bruce, mentioned the cost and viability of heat pumps—a matter dear to my own heart. With the low-carbon heat scheme and other policies, we are confident that the instalment cost of heat pumps will come down significantly over the coming years as the market scales up, making heat pumps an increasingly attractive and affordable option for more and more UK households.
The noble Baroness, Lady Hayman, also questioned whether hydrogen was the appropriate technology for heating homes. Indeed, that is a very good question to pose. It has the potential to make a contribution to fully decarbonising heat by offering consumers a future heating option that works in a very similar way to natural gas, but without the carbon emissions. However, it is important to point out that hydrogen for heat is not yet an established technology. Much further work is required to assess the feasibility, costs and potential benefits. As part of that, a neighbourhood trial will start next year, with a hydrogen village expected to go live in 2025. This is all part of the plan to work out the feasibility of the wide scale use of hydrogen for home heating.
The noble Baroness, Lady Sheehan, the noble Lord, Lord Whitty, and the noble Baroness, Lady Bennett, all questioned whether CCS was an appropriate technology for the UK. The Climate Change Committee has described carbon capture usage and storage—CCUS—as
“a necessity, not an option”
for the transition to net zero, which will enable the UK to deliver upon its global climate commitments. Contrary to what some noble Lords said, CCUS is a proven technology with CCUS projects operating safely globally, in countries such as Norway, the US and Canada. CO2 storage is a mature and safe technology.
The noble Lords, Lord Bruce and Lord Whitty, spoke of the need to accelerate CCUS delivery and have a clear deployment plan. I agree with them; we remain committed to industrial decarbonisation across all nations and regions of the UK. As we work towards net zero, we are clear that CCUS will continue to play a key role in the process. In April 2022, the British Energy Security Strategy restated our commitment to support the deployment of four CCUS clusters by 2030. Following on from a process to select the first CCUS track 1 clusters to be deployed by the mid-2020s, we intend to bring forth further details on the outcome of phase 2 emitter projects in due course.
My noble friend Lady McIntosh and the noble Baroness, Lady Boycott, asked about the hydrogen levy. The detailed design of the levy is ongoing, including decisions on where it will be placed in the energy value chain. The levy design will reflect wider government priorities and policies to ensure that consumer energy bills are, of course, affordable and that the costs are distributed fairly. We anticipate some public engagement on options for the detailed levy design in early 2023.
I move on to some points that were raised on pillar 2 of the Bill. I thank the noble Baroness, Lady Blake, and the noble Lord, Lord Ravensdale, for their positive stance on the independent system operator. We are also seeing that across the energy sector. I was asked about the timeline for implementation. BEIS and Ofgem are currently working with National Grid and the electricity system operator on the next steps. Depending on several factors, including the passage of legislation and continued discussion with key parties, the ISOP could be established by or in 2024.
The noble Lord, Lord Whitty, asked about the interaction with Ofgem and National Grid. The Bill actually provides a power to set out a strategy and policy statement for the ISOP; that is where the Secretary of State will set out their direction for Ofgem and ISOP. The Bill also provides for Ofgem to license and regulate the ISOP, overseeing its activities in its capacity as the independent regulator.
My noble friend Lady McIntosh raised the important point about why heat network customers do not get protection equal to that of gas and electricity consumers. That is because heat networks typically buy their energy through commercial contracts, which are not covered by the existing default tariff price cap. However, I am pleased to confirm to my noble friend that the legislation provides the BEIS Secretary of State with powers to introduce a price cap, should it be necessary to protect consumers.
The noble Baroness, Lady Blake, asked whether the Bill provides the overhaul needed for the heat networks sector. I very much believe that it does. To address her points on poor design and maintenance, about which I agree, the Bill will include minimum technical standards. It will also introduce powers to regulate decarbonisation; as mentioned, it will also enable powers to set price caps.
The noble Lord, Lord Ravensdale, asked whether zoning, which will of course be run by local authorities as the most appropriate bodies, can be extended beyond heat networks. Our strategic approach in the Heat and Buildings Strategy follows, in our view, the grain of the market. Our policy levers are aligned to certain points of action; for example, when people are replacing their heating systems. Extending zoning to other technologies in our view risks removing choice for households and businesses when consumer choice over heating technology will be best for the transition.
The noble Lord, Lord Bruce, asked about the effectiveness of the price cap. That is a valid question. The price cap remains, of course, a temporary measure until competition in the market improves. BEIS is currently considering what reforms are needed for energy retail market regulation to ensure that the market is resilient and sustainable and continues to protect consumers.
On the points raised that come under pillar 3 of the Bill, the noble Baroness, Lady Blake, asked for more detail on the nuclear decommissioning measures. The proposals do not result in any relaxation in the standards for public protection. Former nuclear sites will continue to be regulated by the relevant environmental agency and the Health and Safety Executive, rather than the Office for Nuclear Regulation, which will regulate health and safety at work activities. She also questioned the reach of the Bill’s core fuel resilience powers. These measures, also raised by the noble Lord, Lord Teverson, are intended to be used in a light-touch way to complement the additional voluntary approach. The Government will use these powers in a proportionate way, including providing for certain rights of appeal and consultation requirements.
The noble Lord, Lord Bruce of Bennachie, and the noble Baroness, Lady Bennett, raised a question in relation to the disposal of nuclear waste. The Bill makes provision in relation to geological disposal facilities which will encapsulate and isolate radioactive waste at great depths. Nuclear Waste Services, the developer of the geological disposal facility, is confident it can meet the additional requirements from new nuclear as set out in the British Energy Security Strategy.
Moving to the point raised by the noble Baronesses, Lady Bennett and Lady Jones, in their double act, about dumping radioactive waste in the sea, of course, disposal of radioactive waste in the sea is banned by international conventions and let me be absolutely clear that no part of a geological disposal facility will be in the sea. The waste will be isolated deep underground, within multiple barriers, to ensure that no harmful quantities of radioactivity reach anywhere near the surface environment.
My noble friend Lord Howell and the noble Viscount, Lord Hanworth, both asked about small modular reactors. Through the nuclear fund, we are providing funding to support research and development for a small modular reactor design and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest.
The noble Lord, Lord Ravensdale, asked whether the Government could make sure that nuclear power is eligible for the renewable transport fuel obligation, including hydrogen produced from nuclear power. I know this is something we have had exchanges on in the past. We believe this would be complex and would require firmer, further evidence for industry to understand how exactly it might be compatible with wider RTFO eligibility criteria.
I welcome my noble friend Lord Moylan’s support for the promotion of nuclear fusion, and I also welcome the support from the noble Lord, Lord Bruce of Bennachie, for the continuation of North Sea oil and gas production. Perhaps he would like to have a word with his noble friend, the noble Baroness, Lady Sheehan, about this important point, although I welcome her confirmation that she is now apparently in favour of gas as a continuity fuel. My point, which I keep making to the noble Baroness, is that since we produce only about 40% of our own gas in the North Sea and we still import considerable quantities of LNG to be used as a transition fuel, it makes eminent good sense, in my view, to obtain those reserves from our own resources in the North Sea, which of course is of much lower carbon intensity than LNG. I am sure we will continue to have these debates going forward.