Energy Bill [HL]
Wednesday 6th July 2022
(2 years, 4 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text
Energy Bill [HL]
Tuesday 19th July 2022
(2 years, 4 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I start by acknowledging the record temperatures that we have been experiencing over recent days. I hope your Lordships remain cool while in the Chamber—which is probably the best place to be at the moment, given the air conditioning—and of course while travelling to and from the Chamber. I recognise the wealth of knowledge on energy policy in your Lordships’ House, which will no doubt be on full display in today’s debate.
This landmark Bill comes at a critical time for our country. Record high gas prices, Russia’s illegal invasion of Ukraine and the challenge of climate change all come together to highlight why we need to boost Britain’s energy independence and security. To protect households from the full impact of rising prices, we are acting now with a £37 billion package of financial support this year. This includes the expansion of the energy bills support scheme so that households will get £400 of support with their energy bills.
Secure, clean and affordable energy for the long term depends on the transformation of our energy system. That is why we are bringing forward this Bill, the most significant piece of primary legislation for energy since 2013, delivering key commitments from the energy security strategy, the Prime Minister’s 10-point plan and the net zero strategy. The Bill will help to drive an unprecedented £100 billion of private sector investment by 2030 into new British industries and will help to support around 480,000 clean jobs by the end of the decade.
I turn to the main elements of the Bill. It has 12 parts, which it will be helpful to consider under three key pillars. The first pillar leverages investment in new technologies, securing clean, homegrown industries that can help to reduce our exposure to volatile gas prices in the longer term. The Government have continually demonstrated our commitment to maintaining the security and resilience of our energy system. Investment in clean technologies is an essential part of the system transformation.
Deploying carbon capture, usage and storage—CCUS—and low-carbon hydrogen production will create new industries, helping to transform our former industrial heartlands. The Bill will introduce state-of-the-art business models for CCUS and for hydrogen. That includes provisions to establish an economic regulation and licensing framework for CO2 transport and storage, and a new levy to fund hydrogen production. These will attract private investment by providing long-term revenue certainty to investors, putting the country on a path to grow these new clean industries and reindustrialise our economy.
The Bill will enable the delivery of a large village hydrogen heating trial by 2025, providing crucial evidence to inform decisions in 2026 on the role of hydrogen in heat decarbonisation. Building on policies such as the £450 million boiler upgrade scheme, the Bill includes provisions to scale up heat-pump installation, providing the powers to establish a market-based mechanism for the low-carbon heat industry to help build the market for heat pumps to 600,000 installations per year by 2028. Through the Bill, we will also make the UK the first country to address fusion in regulation, providing clarity on the regulatory regime for fusion energy facilities.
The second pillar in the Bill will allow for the necessary reform of our energy system. It will protect consumers from unfair pricing and decarbonise our energy system. By reforming the system, we will help to scale up the installation of key clean technologies for the future, ensuring that the system is more efficient in order to enable innovation and reduce the UK’s dependency on global fossil fuel markets.
The Bill will enhance our network security by establishing a new independent system operator and planner, which will support system reform and boost energy system resilience. Working across the electricity and gas systems, the independent system operator and planner will also ensure efficient energy planning, enhance energy security, minimise cost to consumers and promote innovation.
The Bill will reform energy code governance, overhauling the way that the technical and commercial rules of the energy system are overseen and kept up to date. This will make the system more agile, enable innovation and gear our system toward net zero.
In line with our manifesto commitment, we are legislating to extend the existing energy price cap beyond 2023 if necessary. The cap is the best safety net for 22 million households, preventing suppliers over- charging consumers. The Bill also contains provisions to enable competition in onshore electricity networks, delivering up to £1 billion worth of savings for consumers on projects tendered over the next 10 years.
The provisions in the Bill about mergers of energy network enterprises will protect consumers from increasing network prices in the event of energy network company mergers. They will enable the Competition and Markets Authority to consider the impact on Ofgem’s ability to carry out its role when reviewing energy network company mergers. We estimate that this could save energy consumers up to £420 million over 10 years.
The Bill will protect consumers and the grid from cyber threats, with new powers to regulate energy smart appliances. Provisions in the Bill will support continued delivery of the smart meter rollout, which will enable consumers to manage their energy use and cut their bills to help with the cost of living.
We will introduce multipurpose interconnectors as a licensable activity. The provisions will reduce the number of cabling points, landing points and substations. This will reduce the impact on local communities and the environment. It will also support the Government’s ambition for 50 gigawatts of offshore wind by 2030, as well as providing certainty to investors in and developers of multipurpose-interconnector projects.
In line with the 2021 smart systems and flexibility plan, we are legislating to clarify electricity storage as a distinct subset of electricity generation in the Electricity Act 1989. This will facilitate the deployment of electricity storage, such as batteries and pumped hydro storage, and remove obstacles to innovation in this area.
As we committed to in the energy White Paper, we are legislating to enable the removal of obligation thresholds under the energy company obligation scheme, commonly referred to as the ECO scheme. We will do so without creating significant financial and administrative burdens for small suppliers by enabling the Government to establish a buy-out mechanism under the scheme for suppliers.
Through the Bill, we will kickstart the development of heat networks. By enabling heat network zoning in England, we will overcome barriers to deployment by identifying areas where they provide the lowest-cost solution to heating buildings. We will also ensure that families living on heat networks are better protected, by appointing Ofgem as the new regulator for heat networks in Great Britain.
The Bill will provide a replacement power to enable the UK Government to amend the EU-derived energy performance of premises regime. This will ensure that the regime is fit for purpose and reflects the UK’s ambitions on climate change.
The third pillar in the Bill is about ensuring the safety, security and resilience of the UK’s energy system. The Bill follows the British energy security strategy announced earlier this year and puts into law measures to boost long-term energy independence and security. We are clear that nuclear energy has a vital role to play in reducing our reliance on fossil fuels and in our transition to net zero, as reconfirmed in the British energy security strategy. That is why this Bill will enable UK accession to the international Convention on Supplementary Compensation for Nuclear Damage. This will make greater compensation available to potential victims in the highly unlikely event of a nuclear incident and improve the investment climate for nuclear projects.
To build our nuclear future, we also need to clean up the past. Therefore, the Bill will facilitate the safe and cost-effective clean-up of the UK’s decommissioned nuclear sites. It will bring forward the final delicensing of nuclear sites, allowing more proportionate clean-up and earlier re-use of these sites. The Bill will also make it clear that geological disposal facilities located in or under the territorial sea require a licence and are regulated by the Office for Nuclear Regulation. The Bill introduces measures to enable the Civil Nuclear Constabulary to utilise its expertise in deterrence and armed response to support the security of other critical infrastructure sites, helping to keep those sites safe.
The continuity of core fuel supplies and energy resilience has never been more important. As such, the Bill contains measures for downstream oil security, which will apply to facilities such as oil terminals and filling stations. These measures will prevent fuel supply disruption and reduce the risk of emergencies affecting fuel supplies, such as disruption from industrial action or malicious protest and emergencies resulting from wider national security risks.
As we all know, our oil and gas sector plays an important role in our transition to a cleaner energy system. The Bill will enable existing legislation to be updated, ensuring that the offshore oil and gas environmental regulatory regime maintains high standards in respect of habitat protection and pollution response. It is important that we ensure that the UK’s oil and gas and carbon storage infrastructure remains in the hands of companies with the best ability to operate it. Therefore, the Bill will allow the North Sea Transition Authority to identify and prevent a potentially undesirable change of control before it happens.
In line with the polluter pays principle, and in order to protect taxpayers, the Bill introduces a provision on charging schemes for offshore oil and gas decommissioning. This means that the Government will be able to recover the costs of these activities more fully from the industry.
I also share with the House three amendments that we intend to bring forward in Committee. To meet commitments made in the British energy security strategy we will look to amend the Bill to include measures on offshore wind habitats regulations assessment and an offshore wind environmental improvement package. This measure will help to reduce the time it takes to get planning consent for offshore wind projects from up to four years down to just one year. We will also look to include a provision on the Energy Savings Opportunity Scheme, also known as ESOS. This measure will improve the quality of ESOS audits and provide powers to expand the scheme to include net-zero elements in audits and more businesses. Finally, we will look to amend the Bill to include provisions that will bring Nuclear Decommissioning Authority pensions in line with the majority of the rest of the public sector. The new scheme was agreed with unions, and includes provision for retirement on full pension before state pension age.
The Bill will benefit every part of the UK. Some measures of course touch on devolved matters. From the outset, the Government have sought to work closely with the devolved Administrations and are committed to the Sewel convention. Where the Government believe that the Bill is legislating in an area of devolved competence, they have, in good faith, highlighted these areas to the devolved Administrations ahead of their consideration of the Bill.
This is ambitious legislation and allows for the necessary reform of our energy system. We are charged with a great responsibility to ensure the security, affordability and decarbonisation of our energy supply for many generations to come. We are also presented with huge opportunities to leverage investments in new, clean technologies that will reinforce the UK’s position as a global leader in delivering net zero. I hope noble Lords will recognise the exciting opportunity that this Bill represents to facilitate the necessary reforms, boost investment in clean technologies and ensure the security of supply in the longer term. At the same time, it will stimulate economic growth and job creation in support of our levelling-up agenda. I beg to move.
Baroness Blake of Leeds (Lab)
My Lords, I am grateful for the opportunity to debate this Bill today. I look forward to the contributions that will be made from across the House, and in particular to the closing comments from my noble friend Lord Lennie.
As the Minister mentioned, it is hard to think of a more appropriate day than today to hold this debate. That, together with the illegal Russian invasion of Ukraine, now approaching the end of a fifth month, means this is a very important moment for us to consider the sheer scale of the task ahead of us. It is clear that the Energy Bill is needed, and in this regard it is very welcome. However, we will need to consider what is missing from the Bill.
For the millions of families facing the catastrophe of soaring energy bills, I am afraid the Bill is another missed opportunity as it does not tackle the scale of the issue. It is a missed opportunity to tackle the cost of living crisis; a missed opportunity to bring forward the emergency energy efficiency measure we so desperately need; and a missed opportunity to deliver the green energy sprint that could bring down bills while creating tens of thousands of skilled jobs for future generations if the necessary training programmes and supply chains are developed.
Long-term reform of the energy market is of course necessary, but it must come alongside urgent action to cut bills, strengthen our energy security and tackle the climate crisis now. This Bill will do nothing to buck the Government’s record of failure on these issues as it stands, but perhaps there is an even bigger issue at hand: the Government who presented this Bill already no longer exist. By the time the Bill is in Committee, they will have been entirely replaced. While the leadership selection is still weeks away, we have already heard candidates putting internal politics ahead of science, evidence and the future of the country, at the same time as we experience the dangerous impact of climate change first hand. The country needs to know urgently what their commitment to net zero, for example, really is. I am pleased that they have all finally, publicly committed to net zero, but I have to say that it took a very long time for some of them to get to that point. I cannot ask the Minister to commit to what a future Government will do, but it is important to make the point regardless.
A decade of failed energy policy has left energy bills too high and the UK’s energy system too weak. This Government simply cannot answer the biggest challenges our country faces. While there is a lot in the Bill—243 clauses, as we have heard, covering three pillars, much of which we welcome—what really stands out, as I have said, is what is missing. Where are the urgent measures to help families with soaring energy costs that the Government could be offering, such as delinking the low price of renewable energy from the high price of gas? Where are the desperately needed measures for a green energy sprint that can bring down bills over the years to come? Where is the end to the effective ban on onshore wind—the quickest, cheapest way to reduce reliance on insecure international gas supplies, so starkly exposed by the current crisis in Ukraine? Where is the much-needed extension and upgrade of the national grid?
Where is the long-term mission for home insulation, beginning with the insulation of 2 million homes this year? The UK’s record on energy efficiency in housing is woeful. We need changes to planning law and building regs brought in immediately to stop the building of substandard homes and start closing the gap between our performance and that of other European countries—where, I am afraid, we rank among the lowest.
The Bill is simply not up to the problem at hand. Clauses 1 to 111 and Schedules 1 to 5 address leveraging investments in clean technologies. This sounds great, until you realise that 97 of these clauses and all five schedules relate to carbon dioxide and hydrogen, and that only 14 relate to new technology. Of those 14, 10 clauses are dedicated to low-carbon heat schemes which the Secretary of State “may” make provision for. I am afraid this hardly feels like the sprint to green energy that is needed.
The next six parts of the Bill relate to a pick and mix of energy system reform. There are some welcome and interesting ideas here. The Future System Operator consultation, published earlier this year, set out what we already knew—that the current approach towards delivering net zero was lacking—so the establishment in Part 4 of an independent system operator and planner, ISOP, for the electricity and gas supply sectors is particularly welcome. An expert, impartial body with the duty of facilitating net zero is exactly what is needed. As the pre-existing electricity system operator, which is expected to be at the heart of this new body, has pointed out, it is vital to ensure that ISOP is independent and free from actual or perceived conflicts of interest. It is further welcome that it will be established as a public corporation with operational independence from the Government. Can the Minister expand on the scale and timeline for implementation?
Also found in the second pillar are small pushes in the right direction on the energy company obligation, smart meters and heat networks, but, as is the theme with the Bill, these positive steps are just too timid. We welcome the regulations introducing ECO4 just last week but they are little more than a small step in the right direction on efficiency, and a small step in the wrong direction on bill prices. The provisions expanding the powers in this Bill, while positive for smaller suppliers, appear to be even less significant. Where is the wholesale movement on efficiency that is needed?
As for smart meters, we have heard again and again how their rollout is being developed, facilitated or extended. The provisions in the Bill do not seem to change anything. This is a major consumer issue that could be fixed through the Bill, especially if proper attention is given to using gathered data effectively. That is exactly what we need right now. Why will the Government not mandate the rollout of this legislation, rather than continuing to dither?
The provisions on heat networks are the most welcome in this area. Heat network consumers are currently woefully unprotected; regulation offering much-needed safeguards to the 480,000 consumers who currently use them is long overdue. With the number of heat networks, and the number of consumers they will supply to, expected to grow significantly in our efforts to reach net zero, this is even more pertinent and so we welcome them. However, that perhaps makes the legislation even more disappointing, in a way. It does not encompass the reality and misses yet another opportunity. These systems are poorly funded and poorly maintained; they should be renewable but are not; and they are not covered by the price cap. The legislation fixes none of these much wider issues and it is hard to see this as anything but a failure in the grand scheme of things. Where is the overhaul that heat networks really need?
The third pillar of the Bill contains provisions on maintaining the safety, security and reliance of energy systems across the UK. At this time more than ever, any additional risk of fuel shortages would be most unwelcome. Ensuring that the Government can take steps to maintain or improve fuel supply resilience, if they are needed, is welcome. It is important, however, that any powers introduced are not overextended or misused. I note the factsheet response but would be keen to hear more from the Minister on how far the powers can go—an area I am sure we will discuss at later stages of the Bill’s passage.
There are other welcome provisions in this pillar. There are also a number of provisions in Part 12 on the civil nuclear sector, including on waste storage, decommissioning and more. I would be keen to hear more from the Minister on decommissioning, where I understand we will be reducing ONR regulation as set out under the 1965 Act, which is now deemed unnecessary. The benefits of this have been clearly set out and I understand aligning with international law but, given what is at stake, the more reassurance from the Minister on this being a safe move, the better.
Those are just a few of the areas that need to be addressed, and we will look to do so at later stages if the Government do not. However, I need to ask when a coherent, cross-cutting communication strategy will be ready and when the promised energy advice service will be up and running. Taking public opinion with us and delivering through local networks will be critical to achieving the changes in behaviour that will underpin progress. We have seen from earlier versions of the energy security strategy that agreement on a number of areas is possible, not least onshore wind and solar. We hope the new Prime Minister will not abandon the ambition to deliver.
I am grateful for the amendments that the Minister shared with us this morning. We will be looking at them in greater detail. But the point, running through the Bill, is about not abandoning ambition to deliver when that is exactly what is needed now—ambition and a real commitment to urgency. The scale of the challenge will not be met with anything less.
Lord Bruce of Bennachie (LD)
My Lords, I thank the Minister for his introduction and will comment briefly on his three pillars. The first, of leveraging investment, particularly in carbon capture and storage and in hydrogen, is in principle welcome but we have been talking about it for a long time. The question is whether the Bill will make a material difference and galvanise action and progress.
On the second pillar, of reform for pricing and decarbonisation, the Government must acknowledge that the price cap, essential as it is in the present crisis, is evidence of failure. A market that requires a price cap is clearly a dysfunctional market, yet the Government, right from the days of privatisation, have said throughout that competition would deliver efficiency and price competition. What it has actually done is encourage companies into the market that were not fit for purpose and have subsequently collapsed, leaving a few major players in the field—one of which has had to be wholly nationalised by its Government, as it was otherwise nearly bankrupt—so there are some issues there about how the Bill will change things for the better.
On the third issue of safety, security and resilience, a whole load of issues are of concern. The fact that the Government acknowledge that a cyberattack against the network is a very serious potential threat to the country is important, I guess, but we need to know that we have effective protection and countermeasures. The actual state of the network, speaking as somebody who has experienced it in the north of Scotland this year, is abysmal. We experienced four consecutive days without power and then, a month later, three consecutive days without it. There was no information, communication or telephones—clear evidence that the infrastructure was not fit for purpose and for a changing climate, so it is interesting that these things are all referred to in the Bill. As it progresses, I will look forward to seeing how the Government believe that this legislation will change things significantly, and for the better.
It is nearly 50 years since we experienced the first OPEC-led oil price crisis. I remember it because I was a young official with the local development authority in Aberdeen and it was the very early years of the oil boom. Although I was delighted that the UK had oil and gas reserves to develop, it was also clear to me that the world was far too dependent on fossil fuels and that we needed to use energy more efficiently and diversify our sources of energy. We also knew from a practical point of view that the quality of oil in the North Sea required it to be blended with oil from other regions; it was not usable in its raw or immediately refined state.
At that time, I wrote and co-wrote pamphlets advocating large-scale investment in energy efficiency— 50 years later and I think I am still waiting for that. I also advocated 50 years ago for investment in renewable energy, especially wind and solar but also wave and tidal. I remember there were two by-elections in Paisley in 1990 and we held a press conference with a model of a wind turbine which had been developed by shipyards in Glasgow. Our pitch was that Britain could lead the world in this technology. We did not win the by-election. We failed to persuade the Government, Denmark decided to do exactly that trick and we were left behind. It would also have transformed the workforce in many of the Scottish shipyards at a time when they were facing real difficulties.
On the issue of nuclear power, I am not viscerally opposed to it. However, it has always seemed very expensive and has a very challenging legacy of radioactive waste. I am certainly not comfortable with the idea of an undersea repository for such waste. The Government need to explain how that could be done safely, if at all.
Speaking, as we are, on a day of extreme heat—regardless of the intervention of the noble Lord, Lord Forsyth—is it impossible to deny the accelerating impact of climate change and the need to take action urgently. I think the noble Lord would be well advised to look at the graphs that have been produced of the global heat measures of 1976 and this year and see what a fundamental, radical change has taken place. I regret to say that, had the policies I have been talking about been applied 50, 40 or even 30 years ago, we would be much better placed to face the crisis we are facing now.
Faced with soaring oil prices, in the 1970s the Government stampeded into rapid development of the North Sea. That led to waste, inefficiency and, for a few years, limited opportunities for UK companies. However, 50 years on there is a strong UK involvement in the sector which has made a huge contribution to the economy over decades. This has taken the form of balance of payments benefits, high levels of consistent investment, hundreds of thousands of jobs, technical innovation by operators and over 1,000 companies in the supply chain. The challenges of the North Sea have made the UK current world leader in subsea technology.
The UK continental shelf nevertheless is a mature province. Regardless of the requirements of net zero, production and activity are declining and will continue to do so. I can tell the House that the local economy in Aberdeen experienced this only too clearly with a sharp downturn and a complete collapse of the local housing market. This has now been partially reversed by the increased oil price and the growth in investment in net-zero transition technologies.
Offshore Energies UK, the industry’s trade body, held its first parliamentary reception for two years on June 20 and made it clear that the industry was determined to be part of the solution and not just be demonised as the problem. I would like to pay tribute to Deirdre Michie, who will be standing down as the chief executive at the end of this year, almost eight years into the role. She is, of course, the daughter of a former Member of your Lordship’s House, the late Baroness Michie of Gallanach, who herself was a daughter of a former Member of this House, Lord Bannerman of Kildonan.
Deirdre and her predecessor Malcolm Webb have played a key role in promoting the importance and achievements of the industry and its supply chain over the decades, and the key role it must play in driving the transition to net zero. This is a really important point. Unsurprisingly, the reception here in Parliament was interrupted by a staged protest. Sadly, the protesters were not prepared to stay and debate or engage with us, which is a pity because the war in Ukraine has presented us with a dilemma. We need to move away from fossil fuels as fast as possible while recognising that switching the taps off now will increase the cost of living crisis and impose economically and politically unacceptable constraints.
I have reservations about windfall taxes, but no doubt the comments and actions of our two biggest oil and gas companies, Shell and BP, rather brought the roof down on themselves over that. It needs to be recognised that all plans of achieving net zero include continued, although declining, use of fossil fuels. We need to ensure that the capital and expertise of the industry is diverted to transition through investment in renewable energy, carbon capture and storage and developing hydrogen and alternative uses of C02.
All these things are being increasingly prioritised by the industry, but they need to be accelerated. Finding alternatives to Russian oil and gas means faster transition is needed. Will the Government allow such investment to be offset against the windfall tax as long as it is a genuine investment in transition and carbon reduction? The north-east of Scotland was extremely disappointed that the Acorn Project for carbon capture and storage did not get government fast-tracking in the first round, although it is government approved. If we are going to meet those targets, it should get backing sooner rather than later.
Pushing back against net zero targets is, frankly, irresponsible. I am concerned that some of those contending to become our Prime Minister seem to want to do just that; it is completely irresponsible. We need to intensify efforts to reduce carbon emissions both nationally and globally. Shutting down the UK offshore industry will not achieve that. We need to intensify the development of and the switch to hydrogen, the investment in renewable energy and increased energy efficiency.
Have we really grasped the nettle of retrofitting homes? Heat pumps alone will not do it. For many older houses, the cost of heat pumps will be far outstripped by the unaffordable cost of insulation. I had a neighbour in a Victorian granite house who asked for the cost. To get heat pumps installed and have a viable temperature inside the house, he would have to spend £10,000 to £15,000 on heat pumps, but £340,000 on insulating his house—which clearly was not viable. There are other houses which are much easier to insulate and which we could do a lot faster. That is surely what we should do.
At the same time, how quickly can we achieve the switch to electric cars? Will there be enough charging points, rapid charging for longer journeys and enough battery capacity globally to meet that requirement?
Parliament voted last year that we agreed that we are facing a climate emergency, yet the Government and their prospective leaders show no grasp of that urgency. Protesters who just try to disrupt the economy to force action seem to want to remove fossil fuels immediately. The danger of such drastic action in this direction is that it will drive counter-protests from people who may share the concern for our overheated planet and shrinking biodiversity, but cannot simply phase out their fossil fuel use without existing alternatives. Fossil fuels and their by-products are also essential feedstock for materials on which we have come to rely. We have to find carbon-free alternatives.
Facing these challenges will require the resources of money and expertise equivalent to about 100 moon or Mars projects or more. Much as I appreciate the lure of space travel, this is far more urgent. This planet needs saving before we conquer another one. Enabling measures in this Bill may make a small contribution but they do not come near to the sense of mission required. I do not see where the government action is going to come from in a party obsessed with tax and annoying the EU, rather than saving the planet and the consequential threat to our own islands.
I look forward to the debate, the Committee stage and hearing answers that might be convincing from the Government as to how this Bill is really going to be transformational.
Baroness Hayman (CB)
My Lords, I declare my interests as a co-chair of Peers for the Planet and a director of its aligned organisation. The Bill has been a long time coming, and its arrival is welcome. It provides, as the Minister very clearly delineated, many of the frameworks necessary to achieve the Government’s commitments set out in the energy security strategy: primarily, decarbonising our electricity system by 2035. As has been described already, we need to achieve that transition while ensuring security of supply and a price that people can afford. This is a task made much more urgent and challenging by the current energy price crisis and the conflict in Ukraine, issues which should have convinced even the most sceptical of the need to move away from expensive fossil fuels and to build up our renewables. Renewables are the cheapest form of energy; as well as increasing UK energy security, they would create high-skilled jobs and opportunities across the country. Therefore, the Bill is undoubtedly necessary, but even at some 360-odd pages it is not sufficient.
Both the Bill and the energy security strategy on which it is based lack the drive and focus—the mission that the noble Lord referred to—particularly on energy efficiency, where what we need is leadership and delivery. According to the CCC’s recent progress report to Parliament, the energy security strategy
“is almost entirely supply-focused and … There remains an urgent need for equivalent action to reduce demand for fossil fuels to reduce emissions and limit energy bills.”
It has been said that the cheapest form of energy is the energy that we do not use. Clear evidence that acting on both demand and energy efficiency brings positive outcomes, both short-term and long-term, is there for all to see. Providing funds for insulated properties would, alongside benefiting people and the planet, permanently lower bills and reduce the need for further subsidies in future. As the IFS has highlighted, it is simply not sustainable to continue this winter’s £17 billion energy support package year after year.
While the measures in the Bill that help to scale up the heat pump market are welcome, I fear that, without a clear strategy and delivery plan, and by not facing up to the issues that still remain in many properties, the market may not be able to deliver what is needed on its own. I hope that the Government will introduce a comprehensive energy efficiency and retrofit strategy, as well as a road map for getting there. We need long-term solutions to the problems of our cold, stifling or leaky homes, not short-term fixes. There have been calls for Ofgem to have its remit amended to include net zero, so that it can play its part in a comprehensive drive for progress. I hope that the Minister will say today that the Government will take that suggestion very seriously.
My second area of concern relates to the need for a clear vision for delivering more renewables. The Government’s ambitious target of 50 gigawatts of offshore wind by 2030 is extremely welcome, but despite the net-zero and energy security strategies recognising, on paper, that onshore wind has a key role to play in meeting net-zero targets, we do not currently have targets for onshore wind or other forms of renewables, such as solar. The Government have been urged by the industry to set a target for onshore wind of 30 gigawatts by 2030, with £45 billion of gross value added. This has strong public support; BEIS’s most recent Public Attitudes Tracker shows that 80% of the public support it.
The CCC highlighted in its progress report that:
“There remain further opportunities to reduce fossil fuel consumption on a timescale that will help people cope with current very high prices. These include a sustained push for both energy efficiency improvements and electrification, especially in the buildings sector, as well as deployment of onshore wind and solar, which can occur significantly quicker than offshore wind deployment.”
I ask again that the Government reconsider the 2015 ministerial Statement that has put an effective moratorium on onshore wind developments proceeding in England. This must be changed if we are to provide more of the cheap, renewable and homegrown energy we urgently need. If the Minister says in his reply that primary legislation is not necessary and that this does not need to be put in the Bill, I hope that he will commit today to altering the planning guidance to increase the contribution of onshore wind, therefore recognising both the need to put local communities in control and, more broadly—because I do not see it in the Bill—the crucial role of engaging and empowering local authorities if they are to bring their communities with them.
In their the energy security strategy, the Government committed to
“consult … on developing local partnerships for a limited number of supportive communities who wish to host new onshore wind infrastructure in return for benefits, including lower energy bills.”
It was hardly the wholehearted and comprehensive measure that I had hoped for, but it was something. I hope that the Minister can tell us when this consultation will commence and ensure that it aligns with planning guidance, so that communities who want onshore wind can start to access these benefits. We also need to ensure that we do not lose existing onshore wind capacity due to the current rules on the life extension of onshore wind farms. Again, a consultation has been promised: when will we see it?
A related issue raised by Power for People is the need to support community energy, so that people can purchase cheap, clean electricity direct from a local supply company or co-operative, instead of the current situation where local groups have to sell the power that they generate to large utilities that then sell it back to customers. It is asking for changes to be made to the energy market rules to make it affordable, proportionate and simpler for community energy schemes to sell their power directly to local customers. I hope that the Minister will consider including provisions within the Bill to enable these changes to be made by Ofgem.
I will speak very briefly about the use of hydrogen for home and workplace heating. It is clear that the Government view hydrogen as a key part of the future energy mix. While green hydrogen will undoubtedly have a role in some of the hard-to-decarbonise areas, such as fertiliser, cement and steel production, the question of pursuing a role for hydrogen in home heating is much more nuanced and debatable. There are alternatives readily available, and the proposals for a hydrogen levy could potentially bake in subsidies and higher bills for years to come. I hope the Government will look very carefully at the costs and environmental impacts of pursuing the strategy for the use of hydrogen in home heating.
Finally, I will pick up a theme that I have raised before: the current lack of comprehensive governance mechanisms to ensure that we deliver on net zero and, specifically, the need for a net-zero test to apply to decision-making across the Government, which we know from many reports is extremely patchy. Over the last 18 months, calls on the Government to build net zero into the structures and processes that govern departmental spending, prioritisation and decision-making have been raised by business organisations such as the CBI, the Climate Change Committee, the NAO, the Public Accounts Committee and the Environmental Audit Committee. Energy UK has recently highlighted this as a strategic issue which the Bill should address.
I must stress that no one is advocating some kind of bureaucratic tick-box exercise; energy companies and wider industry see such a test as an important mechanism for providing business certainty and clarity of direction from the Government. This sector, along with the others on which delivery of our decarbonisation goals depend, is asking for the Government to be clear, consistent and transparent in the way in which they take decisions not just within BEIS but across Whitehall. Developing a test will give them the confidence to invest, will help the Government to explain their decisions, and, by being transparent and clear, will help bring everyone, including the public, along with the Government, even when decisions are more difficult.
I hope that the Government will raise their ambitions for an energy system that is sustainable in every sense, and one that is based predominantly on homegrown, rapidly deployed renewables. This would be a system that weans us off costly fossil fuels—although I recognise the need for transition—lowers bills, provides warmer homes and improved health, and brings tens of thousands of high-skilled jobs in the energy efficiency and retrofit sector across the UK.
Lord Howell of Guildford (Con)
My Lords, I declare my interests as a former Secretary of State for Energy, former Minister of State for International Energy Security, ex-president of the Energy Industries Association and of the British Institute of Energy Economics, chair of the Windsor Energy Group, and an adviser to interested energy companies.
The stated aims of the Bill are to increase the resilience and reliability of our UK energy system, deliver commitments to climate change and reform the system in various ways. Since the first two of these three aims depend heavily on outside and international trends and conditions and on close co-operation with international partners, I was looking in the Bill for any powers, laws or strategies in the international arena, but they are quite hard to find. That makes it somewhat limited and, frankly, a little disappointing.
We are now in the midst of the worst energy crisis for half a century, with inflation being driven by stratospheric increases in all fossil fuels to dangerous levels in already fertile inflationary soil here in the UK—not the other way round, as the Governor of the Bank of England seems to think. Further disruption of Russian energy supplies to the European oil and gas markets, whether initiated by Russia or European states, will accelerate this inflation, invite recession, impose impossible further hardships on half the families in our nation, and force business shutdowns in large quantities. There is now talk of energy rationing this coming winter and possible supply interruptions, with the worst, we are told, yet likely to come.
This is not security; it is insecurity on a grand and cruel scale, begotten of dismal lack of preparedness and a stream of policy errors going back decades—not just in energy decisions but in economic and monetary responses. It is against this background that the Bill before us must be judged.
Before I come to what the Bill purports to achieve, let there be no doubt that well before the Ukraine invasion, the global energy system, of which we are and will remain an inextricable part, was under severe stress. Ukraine now pushes us into a new world energy order. We were, and are, engaged in a mission of global decarbonisation to prevent climate disasters, which requires, but frankly has completely lacked, the most careful synchronisation of evolving fuel supplies, needs and demands, and as great a transformation as in the Industrial Revolution of the end of the 18th century—in fact much greater, given that since then there has been a sevenfold increase in population in the world and in this country. That is what the Bill aims to assist now.
We have to ensure that creative policy-making in the present crisis can help rather than hinder tomorrow’s transition. One of the most depressing features of the current debate is the utter inability of many of those with the loudest voices to distinguish between the absolute necessity now of immediate relief measures and the long-term climate priorities. What does the Bill do to unravel this muddle and tangle? In the short term, I am afraid, very little. It is all very well to give powers to the system operator and planning office and to renew the energy cap, which the Bill does, but how does that avoid repeating the appalling policy mess which bankrupted numerous small gas suppliers at a cost of £3.2 billion? We talk about billions; that is £3,200 million, which all then had to be dumped on already overwhelmed consumers.
To start with the immediate—the here and now—we have to understand that the very frightening inflation is an energy-driven phenomenon. Being told in a resigned way, “Oh well, it’s external, it comes from the gods”—or, to quote a former Prime Minister whom I rather admired, Jim Callaghan, that we have been “blown off course”—and that there is not much to be done, except some cushioning of the impact, is never adequate in many people’s eyes and it is frankly not much comfort.
What has happened to our famed diplomacy and influence in managing and containing international crises of this kind? Rather, we are sitting here at home, struggling as we can, introducing this Bill but in fact not tackling the real international roots of the crisis. Was it not striking and chilling—I suspect it was to many watchers—that when last Friday’s panel of candidates was asked what more could be done to fend off the forecast of a “horrific” autumn that we have been promised, they all just sat there and were silent? They had nothing to add.
In fact, of course there is a great deal more we can do, but it is not much helped, I fear, by the Bill. It is meant to be about energy security, which starts now but projects into the future. If the name of the game is security of supply—not 10 years hence but now—and at affordable prices, a lot more can indeed be done. That is just what President Biden was trying to do over the weekend in Riyadh; obviously he found it a little awkward, but he was there aiming to meet essential needs and demand with more oil production. Far from staying silent, we should wish him good luck.
Whatever we do, oil and gas are going to be with us for decades. The International Energy Agency says that they will provide 28% of world energy in 2045. The focus on what are called “core fuels” in the Bill, on which there is a whole part, reminds us of this basic fact. Eventually, of course, the energy gap will largely be filled not by the wind blowing—which it does for 60% of the time in the winter, and 25% in the summer—but by stored green hydrogen and ammonia, about which the noble Baroness, Lady Hayman, has just spoken. The powers, incentives and regulations—although, please, not too many—in the Bill will one day help us to get there. We are not there yet, but this is good; it is the right way to go, and we should back it in every way we can.
In the meantime, there is a crisis at the forecourt spreading through transport costs and affecting the price of everything. How do we stop that happening again? How do we convince ourselves that we are providing the security of the future unless we can answer that question?
First, the Gulf-state members of OPEC, whom we often describe as our friends, could be induced by the right approach to pump at least another half a million barrels a day right now. Although they have at last moved a little way towards that, they could quite easily do a lot more with their remaining spare capacity, although some of them deny that it exists. Also, the gas producers could ship more gas.
Secondly, Iran could put another million barrels a day into the market, if only the US Congress would let up and move to the nuclear agreement we once had. Perhaps we should point that out to our American allies.
Thirdly, we must encourage a crash programme of refinery-capacity building and resetting, which I do not see all that much of in the Bill. This is often said to be holding up supplies of petrol and diesel products and pushing up oil prices. Powers to rebuild the gas storage that we once had and should never have been allowed to run down—I do not know why it was—are also one of the immediate needs, and the present Bill helps there a bit.
Fourthly, of course, as many others have said in many debates, we need a constant increase in user efficiency and home insulation and a decline in oil intensity—that is, using less oil per unit of output.
Our UK net-zero goal, which is very much in evidence in the Bill, is admirable but everyone knows that it is not nearly enough. It has to be asked whether we, the British, with all our skills, are making the best contribution in the right way to rescuing the situation. Is the prioritising of a rather modest 1% reduction in global emissions, which is what we would achieve if we got to net zero, anything like adequate? Of course it is not. We proclaim climate leadership, but this has to be through a vast uplift in carbon capture and recovery from the atmosphere to prevent the world boiling. This requires us to raise our sights from narrow insularity to accelerated international action everywhere we can, working with like-minded friendly nations.
Greenhouse gases will not stop at the white cliffs of Dover just because we have done quite well with our net zero so far. Somehow we must be at the forefront in off-setting the millions of tonnes of carbon which the thousands of coal-fired stations across Asia and Africa are continuing to puff into the atmosphere, with more stations being added and old ones renewed.
The twin challenges of security now and tomorrow and freedom from appalling and crushing volatility and inflation, and at the same time finding an honest and effective way forward on climate change—the path we are not now on—are right before us, staring us in the face, and they are inextricable; they cannot be separated. I agree that many proposals in this Bill are needed and overdue, from opening the way back to a realistic nuclear replacement programme, to encouraging heat networks—I think that is a grandchild of what we used to call combined heat and power, like on the famous Pimlico estate—and to halting the huge scams associated with carbon offsetting arrangements. Anything that speeds up heat pump installations and makes them cheaper is very welcome: at 600,000 houses a year, which is the proposed aim, it will take four decades to retrofit 24 million homes, and goodness knows how many hundreds of billions of pounds.
All this amounts to only a tiny fraction of what is needed. For example, the whole nuclear replacement programme is on very shaky foundations. The current proposal is to build eight more large-scale replicas of Hinkley, or similar. The one now being constructed by the French and Chinese at Hinkley is already 10 years behind time, well above budget and facing component problems to boot. I know about these sorts of initiatives and the inevitable decades-long delays which ensue, having myself launched, in the other place in 1979, a programme of eight new pressurised water reactors, of which only one ever got built, and that took 15 years. A secure nuclear future has got to rely on much smaller 300MW to 400MW reactors which can be built quickly and which are privately financeable, a prospect now made easier by the sensible EU decision to register nuclear and gas investment as ESG approved; that is, labelled as green energy sources. Does the Bill open up that pathway, or take account of the international dimension? The Bill has also given a helping hand to fusion, which is good, but of course that is still years ahead and is again a completely international project.
Finally, unless we embark on new initiatives in almost every area of our current energy and climate policies, I see insecurity and failure ahead on all three counts: failure of reliability and security; more failure of affordability than now, and we could not go much further than now; and failing to combat the much hotter, much colder and much wetter climate violence ahead. Instead, we should now be learning the lessons and building and adapting better, far better, for ourselves, for our children’s children and for the whole planet. That is what I would like to see a really focused energy security Bill do. This one, frankly, is only a start.
Lord Whitty (Lab)
My Lords, I begin by thanking the Minister for his cogent explanation of the Bill. I also very much appreciate following the very substantial intervention of the noble Lord, Lord Howell, where he really underlined the gravity of the short-term and long-term problems we face. The fact is that this is the first supposedly cross-sector Bill we have had for 10 years and it does not measure up. It follows detailed government statements on energy strategy, energy security and energy efficiency, on hydrogen, and also all the pronouncements on the path to carbon net zero, but the Bill, despite its size and its complexity, frankly, deals with only a small and limited part of those strategies.
It began life, of course, as an energy security Bill, but the “security” has been dropped and it now conveys, as I think the noble Lord, Lord Howell, was suggesting, very little sense of direction on energy security in either the national and global sense of energy self-sufficiency, nor in the domestic sense of affordability and reliability for the British economy, for households and for businesses here. I say to the Minister that, given the pressures on the legislative programme, it might have been better to have a more comprehensive Bill now; otherwise, we will be faced with further Bills in the next couple of years, dealing with the areas which this Bill, broadly speaking, omits. In default of a comprehensive Bill, perhaps he can give us an indication of what additional Bills, in both senses, we are expecting over the next couple of years. What is the programme of statutory instruments and policy statements that will be necessary to deliver the intentions of the Bill and the rest of the Government’s programme?
But let me give the Minister some comfort and say what I broadly approve of in the Bill first. I agree with the concept of a future systems operator and putting it on a new basis. We need some degree of operational controlling mind in the electricity and other markets, and I think this moves us in the right direction. We still need to see how this role is developed and precisely what its operation and structure will be. How will it relate to the existing National Grid functions and to the potentially extended role of Ofgem, which is implied by the Bill but not really spelled out in any great detail?
I also very much welcome the resurrection of a commitment to carbon capture and storage, and the provision for support for that sector. It has been a serious failure over the last 10 years: the failure to endorse the outcome of the first competition in this area and then to completely abandon the second competition in 2015. So, we have not been on the path we should have been. It is clear from what the Climate Change Committee says that we will need to have a very heavy contribution, particularly in the period up to 2035, of carbon capture and storage if we are to get anywhere near the path we have set ourselves in getting to net zero by 2050.
It is true that there has been little progress on carbon capture and storage in the rest of the world as well as here, but we need to make a new start, and the UK is probably one of the best places in the world, in that we are able to store carbon in abandoned oil and gas wells in the North Sea and the Irish Sea. Indeed, if we move away from the original idea of carbon capture and storage—that we would put it on the end of a large emitter or a power station—and look at it at the centre of or serving a hub of industries, then actually the economics work out and probably the complexity is much less. I think the commitment to carbon capture and storage is very important.
I also welcome, to some degree, the support for increased decentralisation through heat networks and district heating. In particular, I welcome the commitment to consumer protection regulations for users of district heating, because although I absolutely buy into the concept of district heating, and it will be part of any future energy system in this country, the fact is that consumers—the households that rely on district heating—are not able to switch or to change provider or in many cases to change the tariff and the way in which they are charged. We need some protection for those consumers built into any increase in district heating.
As to what is not in the Bill, we all know that energy efficiency needs to be in the Bill. I appreciate that the other day in the Moses Room, the Minister introduced some improvements in the ecosystem for delivery of that; they were very minimal, but I welcome them as far as they go. The commitment to energy efficiency needs to be much more structured and widespread, so that it is not all delivered through the ecosystem but is delivered by the kinds of schemes we used to have; the commitment from the Government and government-induced measures to improve energy efficiency has reduced by more than 80% over the last 10 years. That really needs a new approach. Some of the systems that are still in operation in Scotland and Wales would be helpful here.
Two other things need to happen, because we have had two disastrous attempts to introduce energy efficiency programmes for the able-to-pay sector, and we need to have one that actually works and ensures that the owner-occupiers, particularly those who can afford to do so, are attracted to increasing the energy efficiency of their own homes. That also requires an effective household advice scheme. The downgrading of the Energy Saving Trust over the past few years has been unreasonable and it needs to be revived in some sort of form, so that businesses, individual households and landlords can get the best advice on energy efficiency.
The long-term objective of energy policy must be pretty clear: to get away from fossil fuels. Here, I disagree with the noble Lord, Lord Howell, at least in the immediate term. The answer to the dependence on Russian oil and gas is not for Europe, Britain and the United States to switch to other gas and oil suppliers. Frankly, it is a bit sickening to see that the response of Johnson and Biden to get away from the dependency on Russian supplies because of its treatment of Ukraine is to go cap in hand to another dictator in Saudi Arabia, which has been bombing and committing war crimes against its own neighbour, Yemen, for several years.
Nor is the response of the climate sceptics—that we simply reopen North Sea oil and gas or start fracking here—right. The fact is that gas is a world market and the electricity market is still linked to that gas price. Hence, the huge hikes that we have seen in consumer prices here are caused by the world gas situation. We need to reduce global dependence on gas, not enhance it.
We need a system that will divert investment, and hence dependency, away from fossil fuels through lower carbon investment and fuel sources. Part of this legislation helps that, and part will help the transition. But I return to the carbon capture and storage provision because the large-scale carbon users, particularly those which supply the building industry with steel, glass, cement and so forth, are not going to get away from carbon use in production very easily or rapidly. We therefore need a proper system of carbon capture and storage, of the sort now being advocated.
That requires a change in approach, one which will encourage investment in that sector. The Government are now committed to it. One of the major propositions of this Bill is to support it, but the Minister will probably recognise that in order for that to happen and be delivered in practice, a support system is required similar to the one we gave to offshore wind after the last major energy Bill. We need a development programme, a clear timetable and a clear indication of the regulations and statutory instruments required to enforce the legislation which will be applied to carbon capture and storage.
I was at a very useful briefing the other day from the Carbon Capture and Storage Association. Its chair was there: my noble friend Lady Liddell. She would be here were it not for the heat of the day preventing safe transport from Scotland, and she would undoubtedly be participating in this debate. We are a point where we can turn around a failure to implement carbon capture and storage over the last 15 years. There is interest out there, nationally and internationally, and we need to ensure that we deliver that. That will require more than the bald provisions of the Bill and a follow-up from the Minister’s department to ensure it gets properly developed.
There are a few short paragraphs on hydrogen in the Bill. One of the difficulties with hydrogen is that it is touted as the solution to almost every sector’s problem —heavy transport, heavy industry, domestic heating—yet we do not yet have the ability to produce green hydrogen without serious problems. The Government have, of course, produced a hydrogen strategy but it gives rise to a number of questions that still have to be fully addressed.
I support many of the senses of direction of this Bill, but a lot more will be needed to deliver the outcomes the Government want. Here we are today on the hottest day of the year, with the temperature increase being the opposite of what we normally talk about, and which is required to transform the heating of homes in this country. We also need air cooling in our buildings and homes, and the technology exists to do that. To meet those kinds of challenges we need a very strong sense of direction from the Government. While the Bill goes some way in that direction, I fear that there will be many other Bills and we will require many other statutory instruments and policy statements from the Minister before the direction is properly set.
Baroness Sheehan (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Whitty; we agree on so very much. There may be some small differences of emphasis, not just with the noble Lord, Lord Whitty, but with others who have spoken today, that I hope I can add and bring to the debate.
I wanted to speak in this debate because I am concerned about what is happening to our planet. I do not believe the Government have seized the opportunity in the Bill to go to the nub of the issue. Before continuing, I register my interest as a director of Peers for the Planet. I think it is worth saying a few words at the outset about the fundamentals of climate change because that is the reason why many of the measures in this Bill have been brought forward. The question for me is: does the Bill move us in the right direction with a laser-like focus, at the speed needed to address climate change?
My noble friend Lord Bruce of Bennachie spoke about the mission of climate change, and that is what I really want to know: does this Bill address that mission? Energy is at the very nub of climate change, because the mass production of energy by burning fossil fuels to power the Industrial Revolution has led to the most rapid build-up of carbon dioxide in the atmosphere that our planet has ever experienced.
Today has seen the UK hit a temperature of over 40 degrees Celsius—imagine that—for the first time ever. What we need to do is to move the energy sector away from oil and gas and into the modern era. In May this year, the Mauna Loa Observatory in Hawaii recorded a concentration of carbon dioxide in the atmosphere of 421 parts per million. This is the highest ever recorded and has a direct bearing on the extreme weather events we see with increasing frequency.
For me, this figure has a particular relevance and significance. It was the last part of the discussion I had in 1989 with my fellow master’s degree students at Imperial College when we were doing a master’s in environmental technology. I will just put out there that I graduated with a distinction. The reason I bring this up is that, as a group of young scientists learning about the science behind climate change more than three decades ago—and in two decades’ time I will be able to stand here and say “five decades ago”, as my noble friend Lord Bruce did when speaking of his efforts to move forward energy efficiency—we were hugely concerned about the rise in carbon dioxide due to the Industrial Revolution. In the short period in geological time between 1850 and 1989, the concentration of carbon dioxide rose substantially: from 280 parts per million, its level for the previous many hundreds of thousands of years, to 350 parts per million—in the blink of a geological eye.
There was consensus that going over 400 parts per million would be a catastrophe and that mankind should do all it could to keep it under 400 parts per million. Well, that figure has been well and truly breached; the concentration of carbon dioxide is rising by 2 parts per million every year, and accelerating. We talk a lot about tipping points, but as we look at the extreme weather events we are witnessing, we can see that they are happening with greater and greater frequency and becoming more and more extreme. Who before last year had heard of the heat domes that engulfed north-west America, or atmospheric rivers? We really do need to sit up, take heed and realise that we have to act with speed. That is crucial. Are we doing that in this Bill?
It is important to dwell on why this Bill is a disappointment to so many of the people who really care about climate change, and raise their voices and act with conviction on it. It is a missed opportunity. As many previous speakers have said, it is a missed opportunity to tackle our demand for and waste of energy, as well as energy efficiency in households. Energy efficiency is universally acknowledged as an absolutely necessary first step in our fight to keep global warming to within 1.5 degrees centigrade. It must be absolutely essential given the temperature and weather extremes that we are already seeing; we have already reached a global climate rise of 1.1 degrees centigrade. It is our ambition to keep it to within 1.5 degrees centigrade, but even if all the promises made last year at COP 26 are realised and kept, we would still see a rise of 2.4 degrees centigrade by the end of the century. We are not doing enough; we have to do better.
I go back to energy efficiency. The Minister has said:
“The cheapest energy is that which we do not use.”
He is on board, but there is nothing in the Bill on energy efficiency. Perhaps I can put to the Minister the same question that I did in the debate on the IEA’s report, Net Zero by 2050:
“A 2015 report from the Association for Decentralised Energy states that 54% of energy of energy produced in this country is wasted, equivalent to more than half the average UK annual electricity bill, or about £592, in 2015. The report said that the amount wasted was equivalent to the power generated by 37 nuclear plants. Maybe the situation is better now than it was in 2015. If so, can the Minister update the House? If the data are not to hand, can he write to me and place the letter in the Library?”—[Official Report, 15/6/22; cols. 1657, 1646.]
I have not yet received a response to my question, but I hope that the Minister will take this further opportunity to reply and, if the data are still not to hand, write to me; that would be very welcome. Perhaps he could include information on how the reforms of the UK’s energy systems in the Bill will address this issue.
Can the Minister say whether there are any plans to incentivise the upgrading of owner-occupied properties, which have fallen woefully behind those in other sectors? Does he think that the minimum efficiency standards are enough?
I also want to ask about the local authority delivery scheme, which is coming to a close. Local authorities are going to play a central part in meeting our net-zero targets, and this is one small way in which they could do so. I am sure that they would welcome more information on how they can play their part.
A major barrier to retrofitting for energy efficiency is the lack of a skilled workforce. It is one of the reasons behind the failure of the green homes grant. I wonder whether addressing this shortfall in skilled labour will be a priority for the Government. We are going to need a skilled workforce, not just in retrofitting our homes but if we are to deliver a just transition. We speak so much about it, but we really need to give the people who work in fossil fuel industries and the oil and gas sector the opportunity to retrain so that they can transfer their skills to other energy sectors. Some polling has been done showing that this is what they want to do—they want to stay in the energy sector. They understand the energy sector and would like to be able to contribute further to energy provision.
I have dwelt on tackling energy waste and making homes more efficient because this is low-hanging fruit. Frankly, it is astonishing that so little has been done to date to tackle it. I hope that the Minister will work with those of us who want to rectify the situation. I am sure that he will; I know he thinks that energy efficiency is something that ought to be tackled.
The future technologies in carbon capture, usage and storage that the Government are focused on are unproven at scale. There is nowhere in the world where it is working. Denmark has some small projects but there is nowhere in the world that we can point to and say that that is what we want to do. Gas will of course be a transition fuel. No one is suggesting that we turn off the taps today. I challenge the Minister to find anywhere in Hansard where I have said that the taps must go off today. It is a transition fuel. We know that we have to move towards a fossil fuel-free future in a sensible way, but we must take hold of the opportunities that we have. We must look at what is working and at what our innovation and technology has already delivered: clean, green energy with zero pollution. These are the industries we ought to be looking at.
Presumably a vast proportion of the £100 billion investment that will be unleashed by this Bill will go towards carbon capture, usage and storage. However, we are misdirecting our efforts and incentivising the wrong industries. Carbon capture, usage and storage may be useful in mitigating the miniscule amount of fossil fuels that we will need as we transition to net zero, but that will be an ever-diminishing amount. I am not sure that the Bill in this form recognises that gas will not make up a vast amount of our energy needs—that is a fact. Perpetuating the future of fossil fuels by investing in big projects for carbon capture, usage and storage is not the right way to go and is very short-sighted.
I want to say something very quickly on stranded assets. Russia’s invasion of Ukraine has left us all reeling, but two wrongs do not make a right. It would be a mistake to use the short-term Russia-Britain gas issue to decelerate progress on the move away from fossil fuels. To use this as an excuse to invest billions in new fossil fuel infrastructure would be a crime, but this is what the Government are proposing to do—for example, by opening up a new round of licences for exploration in the North Sea this autumn. These new fields would not come online until long after the window to act to keep the global temperature rise within 1.5 degrees centigrade has passed. We are trying to limit global temperature rises to 1.5 degrees centigrade. How will the opening of new fields that come online after the date by which we need to do this has passed help? Much-needed investment in wind and sun will be diverted, and stranded assets would proliferate.
In the debate I tabled last month on the International Energy Agency’s report, Net Zero by 2050, the question of stranded assets was raised. The noble Lord, Lord Lilley, who I am sorry to say is not in his place, dismissed stranded assets, saying that the cost would be borne by those foolish enough to be saddled with them. Although I acknowledge that the noble Lord, Lord Lilley, is far more au fait with the workings of the fossil fuels sector than I, I am pleasantly surprised to hear he thinks it will be the investors in new fields who will be saddled with the losses. Can the Minister confirm that the costs of stranded assets will be picked up by those who seek to profit by them and not by the UK taxpayer?
The Lord Bishop of Carlisle
My Lords, I take many of the cogent and very well-informed points that have already been made in this debate, not least the one made by the noble Lord, Lord Howell, on the need for international co-operation. Even so, I welcome all three pillars of this Bill. Its stated direction could offer at least a step forward towards the goal of net-zero carbon.
I suggest in particular two rather domestic but, I hope, practical areas that could, in my view, do with further development in the Bill; namely, local renewable energy generation, as raised by the noble Baroness, Lady Hayman, and carbon capture, which has been addressed by the noble Lord, Lord Whitty, and the noble Baroness, Lady Sheehan.
In both cases, I hope noble Lords will forgive special reference to Cumbria, where I live. It is currently engulfed in a very contentious debate about the Woodhouse Colliery near Whitehaven that is not nearly as straightforward as it might first appear. Cumbria also has the “energy coast”—originally coal, then nuclear and now, increasingly, renewables. It has the Walney Extension offshore wind farm, which has more than 20% of the UK’s wind farm generating capacity. What is more, as a county, we have more than 50% of all the potential small-scale hydropower generation in the north-west.
I must declare an interest here, since my own diocese, the diocese of Carlisle, has developed two local hydro schemes: one at Rydal, which powers, among other things, our diocesan retreat and conference centre, and one at Scandale.
There has been little or no growth in community-led energy generation schemes over the last six years, and we need more of them. Such schemes currently provide about 0.5% of the UK’s electricity generation but, as we have been reminded by some of the many briefings that we have all received, no doubt, they have the potential to provide as much as 10% by 2030. The Church of England’s vision for net-zero carbon for its own buildings and operations by that date involves a very considerable increase in on-site renewable energy generation.
We need an enabling mechanism, such as that outlined in the previous Session’s Local Electricity Bill, which makes it possible for community energy schemes to sell power directly to local consumers. Current energy market rules make that very impractical at present. Those rules need to be changed. The benefits of more community schemes are considerable. They include a significant contribution to greenhouse gas reduction, greater energy security, more job creation opportunities, lower local energy bills, and better community ownership of the transition to net zero. Local involvement and empowerment really matter, as the noble Baroness, Lady Hayman, reminded us.
In Cumbria, community participation is already taking place through, for example, the Zero Carbon Cumbria Partnership and the Kendal Climate Change Citizens’ Jury. Of course, there is a cost to all this. In the Church of England, nationwide, as we encourage all our suitable church and school buildings to install on-site renewable energy generation, we need to mobilise both private and public investment, including public sector funding—we hope—in order to reduce our carbon emissions.
With regard to carbon capture—and much more briefly—there is no doubt that the Bill will enable much-needed further development of carbon capture, utilisation and storage, but perhaps it needs to be more clearly targeted in two areas in particular. One is that of industrial processes, such as the production of gravel and cement. The other, which again brings me back to Cumbria, involves reshaping agricultural subsidies to enhance natural capital through carbon storage in peat. In the Lake District, peatland already holds about 23 million tonnes of carbon. The intentional management of peatland across the country could make a valuable contribution to carbon capture and storage.
I look forward to the Bill’s further progress.
Lord Moylan (Con)
My Lords, it is a privilege to speak after the right reverend Prelate and to hear of the encouraging things happening in his diocese. We also heard him mention the fact that they have a cost. He is possibly the first speaker in this debate who has drawn attention to cost; I shall spend quite a lot of my time talking about exactly that.
This is a technical Bill but it has a simple purpose: to give effect to the British energy security policy. In my view, that means ensuring that energy is available abundantly and affordably to the British people and to British industry and businesses, and also that energy is, as far as possible, secure against external shocks. That is how we maintain and enhance our prosperity, and any other statement of the Government’s objective would appear to me to be traducing the obligations we have to the nation.
Net zero is not an energy strategy but a constraint on how we might achieve our energy strategy. Nobody seriously thinks that the UK’s commitment to achieve net zero by 2050 will have any significant effect on the heating of the planet, since we produce only 1% of global emissions. At best, it is setting an example to the world; its practical effect will be very small indeed. The core strategy for this Government has to remain abundant and affordable energy for the UK. If my noble friend on the Front Bench disagrees about that, I am sure he will say so when he winds up. The question is how the Bill and the energy strategy it effectuates measure up to that objective. It is a mixed bag and, like other speakers, in the interests of time I will be fairly selective about the parts of the Bill I choose to focus on at this stage.
One of the things the Bill does is encourage investment in wind power. Despite claims that the cost of wind power is constantly falling, that is simply not true. Although it has fallen from its early days, it is ceasing to fall; the fall is declining as a result of the maturity of the industry, as you would expect with any industry that matures. But even if the marginal cost of wind power can be brought down to something close to zero—in other words, that it is similar to nuclear power in that regard—none the less, the capital costs required would still require subsidies, in addition to the feed-in tariff, and these are very large indeed when it comes to offshore wind.
Moreover, despite providing in excess of 20% of our energy, there are many days when wind power falls close to zero, and much the same can be said of solar. This means that gas generation has to be available to take up the slack at those times. I heard the noble Baroness, Lady Sheehan, envisage a day when demand for gas would be zero. I do not understand what source of power she imagines will take up the slack when the wind is not blowing and the sun is not shining.
Baroness Sheehan (LD)
I challenge the noble Lord to say where I said that the need for gas would be zero. I said it would be minuscule.
Lord Moylan (Con)
I am happy to accept the correction from zero to minuscule because it does not change my argument in the slightest. I thought I had said close to zero, but either way I am more than happy to accept the word “minuscule”. I was hoping when the noble Baroness stood up that it would be to tell me what fuel it was that was going to take up the slack in the place of gas.
To make demand for gas intermittent in order to match the intermittency of wind power is, in the words of Professor Sir Dieter Helm,
“devastating to the economics of gas generation and for two reasons”.
First, it takes a much longer time to recover the capital costs, and, secondly, because the gas power is demanded only intermittently, the cost of producing that supply increases as well. So in addition to the high cost of wind generation, we have to take account of an inevitable increase in the cost of electricity generated by gas simply to match it and make up for the intermittency. Professor Helm is a great supporter and advocate of net zero. His complaint is that we are not being honest with the British public about the costs of it. My noble friend the Minister will be able to say whether he thinks the Government are being honest with the British public and that Professor Helm has got it wrong, but net zero is not cheap and the Government need to level with the public. They need to show that their energy strategy is affordable.
Then we come to the question of abundance. The noble Baroness, Lady Blake, referred, as did other speakers, to Russia’s illegal war in Ukraine. My worry was that she had not taken account of how radically that has changed our situation, but my worry on that score rather fell away when I heard my noble friend Lord Howell of Guildford. He explained very clearly that it is not some minor event; it is a radical change in the energy supply market, and it goes to the question of whether we are going to be able to maintain abundant supplies.
The noble Baroness called for three things to happen simultaneously as a result of the Bill: she wanted to cut bills, increase security and tackle climate change—I hope I have referred to her correctly. My point is that you cannot have all three. The second two require higher bills because the cost of them is largely borne by bill payers rather than taxpayers. Even if you take it out of the bills and put it on to the taxpayers, the taxpayers are of course the bill payers with a different hat on.
There are things in this Bill that I agree with. I was particularly pleased to see the reference to the promotion of nuclear fusion. It may be a very long way off—nuclear fusion as a solution has always been a long way off—and that makes one a bit sceptical, but I have confidence that something can be done. Nuclear fusion is of course an extremely clean form of energy, not like nuclear fission, and the UK Atomic Energy Authority is a leader in the field. At the moment there are half a dozen places throughout the country competing to be the home of the UK Atomic Energy Authority’s spherical tokamak, which is going to take forward Britain’s next step in developing the prospect of genuine nuclear fusion. If anything, I would encourage the Government to spend more money, as I am told that that would speed up the work; that is all very good. Nuclear fission will be core to providing our baseload, and I welcome the work the Government have done to promote that as well. But large amounts of gas will remain absolutely indispensable to our energy mix—all the more so the more we rely on wind and solar.
The gaping hole in this Bill and this strategy—not only the hole referred to by my noble friend Lord Howell of Guildford, in that we are not sufficiently encouraging increased oil production among the oil producers—is, as far as our domestic policy is concerned, its failure to put increased domestic production of gas at the heart of our energy strategy.
Viscount Hanworth (Lab)
My Lords, I am tempted to address some of the issues that the noble Lord, Lord Moylan, has raised, but I have other things to say. However, I welcome his support—if I understand him correctly—for a baseload of electricity generated by nuclear power. With regard to the recommendation that we should rely heavily on a revived supply of gas, I tend to agree with his critics.
As others have already observed, the Energy Bill is a massive document, spread across 330 pages of dense legalese. The Bill contains 243 clauses and 19 schedules which will deliver 26 separate measures of a very diverse nature. It is not possible at Second Reading to devote close attention to the details. Instead, it may be appropriate to discuss the wider context in which the Bill has arisen.
The harbingers of the Bill have been a flurry of White Papers emanating mainly from the Department for Business, Energy and Industrial Strategy. The most recent of these has been the British Energy Security Strategy, published in April 2022, which describes how Britain might generate:
“Secure, clean and affordable … energy for the long term.”
There should be no doubt about the enormity of the task facing this country in adapting to the realities of climate change and energy insecurity. Moreover, we are tardy in our preparation to meet these exigencies.
It is appropriate to compare our state of unpreparedness to that of the nation on the eve of the Second World War. In the previous decade, our politics had been dominated by a spirit of conservative laissez-faire, and during the crucial years from 1935 to 1937, the office of Prime Minister was occupied by Stanley Baldwin, who seemed to make a virtue of indolence. He was succeeded by Neville Chamberlain, who believed that the best way to ward off an increasing threat of warfare was by emollience and appeasement. We are facing threats to our prosperity, if not to our survival, with a similar lack of preparedness and concern.
What was remarkable about Britain’s response to the demands of waging war was its abandonment of the laissez-faire ideology in favour of a co-ordinated, strategic direction, accompanied by a broad national consensus on the purpose and necessity of the endeavour. Despite the absence of any precedent for this, the wartime Government sponsored two generations of innovative military technology, the second being the basis of the post-war aviation, civil nuclear and native computer industries. We should hope that a similar strength of purpose and national cohesion would arise to confront the current threats. However, we are a long way from achieving this and are obstructed by some powerful legacies.
The first of these is a legacy that comes from a prolonged era of material aspiration and amelioration. Over much of the post-war period, the citizens of the UK have experienced continuous material betterment, and they have aspired to see this process continue or even accelerate. Occasionally, their aspirations have been frustrated, and then rising anger has threatened social and economic dislocations. We are due to witness something of this sort in the near future in consequence of the cost of living crisis and the escalating price of energy. The anger that is arising will be exacerbated by the realisation that the increasing inequalities of our society have ensured that the distress will be felt to very different degrees among the rich and the poor.
The second inconvenient legacy is the economic doctrines of Margaret Thatcher that still dominate the minds of the incumbent Administration. These doctrines are averse to centralised strategic direction of the economy. Such nostrums discourage the Government from taking the initiatives that would most effectively address the emerging problems of energy insecurity. They have been largely responsible for our woeful lack of investment in our energy infrastructure. The ideology that led to the privatisation of our public utilities, including power and transport, has proposed that the private sector is best equipped to run and invest in such enterprises.
An adjunct of privatisation has been the creation of the economic regulators. According to a government document, their role is to monitor compliance with contractual obligations to the Government and users and to establish technical, safety and quality standards. This description of their role does not include ensuring that infrastructure services are delivered efficiently or that adequate investments are forthcoming. It is interesting to note that, in certain connections, the Energy Bill is proposing unprecedented interventions by agencies created by the Government. The proposed independent system operator and planner will have powers to raise levies to fund the hydrogen business model and to raise similar levies to support carbon capture and storage. These are minor departures from the true faith of conservative neoclassical economics.
The continued willingness to allow the private sector to determine the investments in energy infrastructure without significant central guidance has been largely a consequence of an experience that arose out of the privatisation of the electricity industry. This occurred at the time when the supply of North Sea gas was reaching a peak. The private electricity utilities were able to invest rapidly and cheaply in combined-cycle gas turbine generating plant, which displaced many of the ageing coal-fired power stations. This was a pre-existing technology that was easy to implement. The utilities have been able, subsequently, to invest in wind turbine generation, the technology of which has also been relatively undemanding, notwithstanding the progress that it has been making. The success of these episodes seemed to confirm the effectiveness of a policy of laissez-faire.
More recently, there has been a persuasive demonstration of the unwillingness of private industry to invest in infrastructure projects that cannot achieve immediate financial returns. This has been demonstrated by the successive failures of projects to build the much-needed nuclear power stations. For the purpose of constructing nuclear power stations, the Government are now hoping to mobilise the capital invested in pension funds. They intend to rely on a so-called regulated asset base that allows construction projects to impose levies on consumers of electricity during the course of construction. It is doubtful whether this will be a sufficient inducement to build nuclear power stations.
The first generation of civil nuclear power stations embodied a new technology, the development of which was fully supported by the Government, as were the costs of constructing the stations. The current Government have shown themselves unwilling to adopt such a role. They have been unwilling to offer more than a grudging modicum of support to assist the development of small modular nuclear reactors. Apart from the minor support that is hinted at in the Bill, the same is true of the development of the technology and infrastructure for hydrogen fuel, synthetic aviation fuel and carbon capture and storage.
There is no mention in the Bill of the technology that is required to be developed if we are to replace the use of fossil fuels in steel production, in manufacturing cement, glass and bricks, in surface transport and aviation, and in many other applications. It is assumed that this technology will arise automatically.
To meet the objectives of securing the nation’s energy and of staunching its emissions of carbon dioxide, the Government must engage fully in a technological and an economic revolution; otherwise, their plans are bound to fail. The Energy Bill is a bizarre document. It contains detailed provisions to meet contingencies within scenarios which will not transpire unless the Government act very differently—and unless they do, we will be destined for economic misery and social discord.
Lord Ravensdale (CB)
My Lords, I declare my interests as a director of Peers for the Planet and as a project director in the energy industry, working for Atkins. I really welcome the Bill. It comes at a time of unprecedented challenge for energy, as many other noble Lords have alluded to. Any modern economy requires copious amounts of energy at a price that people, industry and business can afford; that is the economy side of the energy trilemma. But added to this are the other two sides of the trilemma: sustainable supplies that are secure. When considering alternative energy options, it is essential to consider all aspects of the trilemma and it is the resulting complexity of the modern energy system that makes a controlling mind so vital to delivering it. The noble Lord, Lord Moylan, made an articulate case for the issues in balancing the three sides of that trilemma.
Following on from that, most of all I welcome the establishment in the Bill of the future systems operator to be that controlling mind. I have consistently argued in this House over the last three years for an independent architect to oversee and deliver, on a systems level, the net-zero energy system. I was delighted to listen to Sir Patrick Vallance speak at a briefing organised by Peers for the Planet and the Climate Change APPG last week. He strongly made the point at that briefing about the importance of a systems approach to net zero, stating:
“This is a systems-wide problem; it affects virtually every part of every department, and therefore you need a systems approach”.
The future systems operator is exactly what we need to implement that systems approach and deliver the energy system that we need.
However, there is really an elephant in the room regarding the energy system and the Bill: the build rate of new capacity. The noble Lord, Lord Howell, touched upon that in his powerful contribution. We have a world-leading target of decarbonising our electricity system by 2035 but my concern is about delivery. Atkins has undertaken a calculation of the build rate of new capacity required to hit that 2035 target. This is nothing complex; it looked simply at the total capacity required in the BEIS scenarios for 2035 and divided that by 12.5 years, allowing for an estimate of capacity that will need to be decommissioned over that timeframe. The results are eye-opening, to say the least.
From the BEIS scenarios, a minimum of an average of 12 gigawatts of annual installed capacity is needed every year between now and 2035 to hit the target. The next question is: what have we managed in recent years? In 2019, we managed 2.8 gigawatts; in 2020, we managed 1.1 gigawatts; in 2021, it was 1.6 gigawatts. If we go on like this, it is very hard to see how we are going to meet the 2035 target. A real step-change is required because the upshot is that to replace ageing power plants and ensure enough generation is built to meet the peak demand requirements, the UK needs to build a minimum of 159 gigawatts of new generating assets by 2035. That is the equivalent of building the UK’s entire electricity generation system one and a half times over, in under 13 years. That illustrates the real scale of the challenge.
So I ask the Minister: at what point will the Government publish a clear national plan for achieving that 2035 target and move to a large-scale programme of delivery on a fleet approach for proven technologies such as offshore wind and nuclear generation to speed up the build rate and maintain security of supply?
Continuing on the systems thinking theme, another area I have highlighted previously that needs more attention is the role of local authorities in delivering net zero, building on the remarks of the noble Baroness, Lady Hayman, and the right reverend Prelate the Bishop of Carlisle. Local authorities know their areas best and so will play a key role in areas such as the rollout of clean heat and energy efficiency. Searching through this vast Bill, I was somewhat disappointed to see the word “local” used only 10 times. This is very welcome in the context of heat networks, but we need to do much more.
For example, the Bill could be changed to widen the focus of zoning to cover not only heat networks but also heat pumps and urgent retrofit. The Government already accept that local authorities will be central to decarbonising heat and local area energy planning in particular, but until recently councils have had to competitively tender for funding in these areas. This favours those well-organised councils that have the means to bid for funding, and the result is a patchwork which does not address the overall need. If the Bill could also define clean-heat zones, this would start to address on a systems basis one of the biggest challenges we face in decarbonising our economy. So can the Minister state what plans the Government have to take a wider look at defining the role of local authorities and zoning beyond heat networks to cover heat pumps and urgent retrofit?
I would also like to continue discussions with the Minister on the inclusion of nuclear within the energy sources that are eligible for RTFO—renewable transport fuel obligation—support, placing it on an equal footing with other low-carbon sources. There remains an opportunity here to kick-start the UK hydrogen industry in the near term through Sizewell C’s construction. I look forward to exploring these and other issues in more detail when we return from the Recess.
Baroness Bennett of Manor Castle (GP)
My Lords, rising to speak at this point, I feel I need to respond directly to the noble Lord, Lord Moylan, who asked about what zero or a miniscule amount of fossil fuel in the global energy system or Britain’s energy system by 2050 would look like. I am not going to address this in great detail, but I will point the noble Lord to a study published in 2019 by LUT University in Finland and the Energy Watch Group in Germany.
It mapped out in great detail what a 100% global renewable—no fossil fuels and no nuclear—energy system would look like. It would be economically competitive with the current fossil fuel and nuclear system. Before the noble Lord leaps up, he made much of the issue of intermittency of renewable sources. I point out that in this study 23% of electricity demand and 26% of heat demand is provided from stored sources to meet the need when necessary.
I will also address the suggestion made by the noble Lord, Lord Moylan, that net zero was a constraint on energy policy. The practical reality is—we are reminded of this fact today, as many noble Lords have noted—that we are now globally at 1.1 or 1.2 degrees above pre-industrial levels of warming. This is what 1.1 or 1.2 degrees looks like; 1.5 degrees would be much worse and beyond 1.5 degrees, as the world collectively agreed in Paris at the climate talks, is unthinkable. To sum it up, this is not politics; it is physics. It is the limit we have to meet, and that means not burning fossil fuels.
Coming to my main remarks, I declare my position on the advisory panel of Peers for the Planet and my positions as vice-president of the Local Government Association and the National Association of Local Councils.
I am delighted to see that my noble friend Lady Jones of Moulsecoomb is foreshadowing the future: by occupying what might be a Front Bench wrap-up position on this debate, she will provide an overview of this Bill. A Green in that position is something that your Lordships’ House is clearly going to need more and more as the issues of the climate emergency and social justice, which are so central to Green political philosophy, become more and more pressing. She will be covering the utterly “inadequate and unlawful” state of government policies—these are not my words or those of my noble friend but the words of yesterday’s High Court judgment—and the solutions already on tap, including the Climate and Ecology Bill introduced by the noble Lord, Lord Redesdale, that had its Second Reading on Friday.
I will focus on some very specific elements of the Bill, and the ways in which we, as Greens, will be working with others to improve it. On improvements, I will begin by identifying some of the missing elements, which I am delighted to say have all been highlighted to varying degrees by other noble Lords.
First, we need enabling legislation to establish local energy supplies, aimed at reigniting the growth of community-run renewable energy schemes that were just taking off when the rug was pulled out from underneath them. The right reverend Prelate the Bishop of Carlisle, among others, has highlighted the importance of this. In the last Session of Parliament, we saw 308 MPs, including 120 Conservatives and 119 Labour MPs, supporting a local electricity Bill that would have created a local energy supply mechanism, enabling smaller-scale renewable generation schemes to sell their power directly to local people. This would have made many of these schemes more viable than they are now. I spoke about the rug being pulled out: we have seen hardly any growth in community energy schemes in the last six years. Those are not just six lost years in terms of cutting emissions but six lost years of local prosperity that could have been generated, particularly in those communities which are the subject of the Government’s levelling-up agenda. Money is being taken from the pockets of people who can ill afford it.
We have also seen the impact on so many small independent businesses and co-operatives; solar installers and small hydro scheme designers will certainly not accept that the Conservative Party is any sort of supporter of their sort of business. My understanding is that the Government have said that they will accept the aims of the Bill and that there have been preliminary meetings with the Energy Minister and BEIS officials. So I have direct question for the Minister: why is this not already in the Bill? This is something that is oven-ready, to use a popular phrase.
Secondly, another point that noble Lords have picked up, including the noble Lord, Lord Ravensdale, is the crucial role of local authorities and local communities in delivering net zero. The Climate Emergency UK website—which I checked this morning—shows that 409 councils have declared a climate emergency. Action is being taken locally, where it is acknowledged that this is of great importance, and there is huge potential for municipal energy and, crucially, for energy saving schemes. It is crucial for policy in the energy area, as in so many other areas, to get away from the deadening centralism of Westminster and to unleash the energy, enthusiasm and knowledge of democracy in local communities. As the noble Lord, Lord Ravensdale, set out, the money that has gone out to local communities is still being doled out on the decisions of central government, which is hanging on to the purse strings and handing over money only to those who will jump through the hoops that Westminster wants them to jump through.
This is something that is recognised on the global scale: I watched over several COPs as the Green councillor Andrew Cooper drove an acknowledgment of locally determined contributions into the international COP agreement. I am sure that all noble Lords in this debate have heard of nationally determined contributions as a part of COP, but locally determined contributions are also recognised, and we as a nation should be making much more of them.
Thirdly, in terms of missing areas, as several other noble Lords have already pointed to, we must end the barriers to new onshore wind. According to the Government’s own research, 80% of people in the UK now support onshore wind and only 4% oppose it. There is no relaxing of the planning rules around onshore wind in the recently published energy security strategy; the document says that the Government
“will consult this year on developing local partnerships”.
In his response, can the Minister tell me how that is going, and why there is nothing in the Bill for onshore wind?
It is clear that those three elements that I have identified as missing are all interrelated. In this Bill, we have the Government privileging the large corporates, the gigantic multinational corporations and the lobbying-driven interests of the financial sector over the empowering of communities, small businesses and co-operatives and the interests of the planet. It is the role of your Lordships’ House to turn that around.
I will briefly skip through some of the areas of the Bill and what could be improved. I very much agree with the noble Baroness, Lady Blake of Leeds, about the Bill’s strange balance towards carbon capture and storage and hydrogen, even if you look just at the sheer number of clauses and words.
The planet does not give us a “get out of jail free” card from the climate emergency, but all too often it seems that carbon capture and storage is treated as that card. The sums for continuing to treat this planet as a mine and a dumping ground are made to add up with this magic, expandable—and unproven and uncertain at scale—addition, rather than there being any acknowledgement of the need to live within the physical limits of this planet. The maths gets particularly magical when it comes to biomass carbon capture and storage, where the trees that might, if they survive, store carbon in 100 years are treated as though they are delivered and locked down today. Part 2 of the Bill needs close attention from your Lordships’ House.
Part 3 covers hydrogen, which no doubt has a place in our renewable energy future as a method of storage at times of high generation and for use in hard-to-decarbonise sectors such as ocean and land freight and steel production. But the Government have failed to clearly identify these as the place for hydrogen. The Bill seems to point towards its use in home heating, where it is grossly inefficient and definitely not the direction in which we should travel. Electrification is a more effective and far more energy-efficient method of displacing gas for most purposes.
I move on to another major part, Part 8 on energy-smart appliances and load control. We need to get away from thinking about the energy system as a tap that can carelessly be turned on and off at will. Indeed, we also need to think a great deal more about water conservation, addressing the ideas behind that metaphor. Energy use needs to be thoughtful. Is the energy we are using right now a good use of this scarce resource that, no matter how it is generated, will cause environmental damage? As many noble Lords have said, the best energy is the energy you do not need to use.
I will be interested to hear how many times we hear “world-leading” from the Minister, but where are the really simple measures in the Bill? I have talked about home energy efficiency and the energy efficiency of buildings so many other times, and I shall not run through that at length. In fact, with reference to Part 9 on the energy performance of new premises, all we need do is point to the healthy homes debate last Friday from the noble Lord, Lord Crisp. We could take that wholesale and put it into the Bill. Why do we have office buildings with nobody in them but lights blazing all night? Why do we have so many invasive, unpleasant video advertising screens blaring at us from every public space? Those are the kinds of things that other countries have acted to control, to reduce energy demand for things we do not need. We need to see that happening.
Finally, skipping through even faster, Chapter 3 of Part 3 is on fusion energy. Oh dear. As long as I have been a grown adult, it has been only 20 years away, and I have been a grown adult for quite a long while. It is a noticeable contrast that this is in the Bill and onshore wind is not.
Clause 162 is on electricity storage; it is extraordinarily brief and sketchy. As I said in commenting on the references made by the noble Lord, Lord Moylan, this is a crucial area, which surely needs more work. I invite noble Lords, people watching this debate, interested NGOs and campaign groups to contact me about what more we need to do in this area.
Finally—and I shall not major on this today, because the debates will also be held elsewhere—Part 12 addresses the civil nuclear sector and the whole idea of undersea nuclear waste storage. I ask the Minister how this squares with the 1972 Convention on the Prevention of Marine Pollution by Dumping of Wastes and other Matter—known, neatly enough, as the London convention —which acknowledges the limited capacity of the oceans to assimilate wastes and render them harmless and their limited ability to regenerate natural resources. Originally, it only covered high-level radioactive waste, but it was amended in 1992 to ban the dumping of low- level radioactive waste as well; that is known as the 1996 London protocol. I note the statement signed by the Minister on the front of the Bill about environmental law, so I ask him how this proposal squares with that convention.
Baroness McIntosh of Pickering (Con)
My Lords, I am delighted to follow the noble Baroness, who speaks with great knowledge and great passion. I refer to my interests on the register, in particular that I am president of National Energy Action.
I take this opportunity to welcome what is a significant Bill, about which our expectations are extremely high. We are looking to achieve security of supply with stable prices against the backdrop of the implications arising from the war in Ukraine. Clearly, the impact on households, families and businesses has been considerable, so I particularly welcome the package of measures to which my noble friend referred in introducing the Bill this afternoon.
I take this opportunity to ask my noble friend to what extent the Bill will encompass not necessarily new sources of energy but sources of energy that I believe we have not developed to the extent that we should. I am thinking in particular of energy from waste. The reason why I am firmly committed to energy from waste is that it solves two problems in one go. It not only takes waste that would otherwise go to landfill—in many instances, these sites are now full—or that cannot be reused or recycled, but it creates a new source of energy at the same time. One successful example is in North Yorkshire, in the heart of my old constituency of the Vale of York, at Flaxby. In that case, the energy that was created was fed into the national grid, which I think is a mistake. I believe that it should be fed to the local community, to enable it to feel the benefits from this locally sourced energy.
I believe that, as others have suggested this afternoon, we should learn from other countries. I am particularly pleased that just this week the EU has signed a memorandum of understanding with Azerbaijan, securing a more stable gas supply than from other unreliable and less dependable sources—let us face it, that means Russia. Gas imports from Azerbaijan will be doubled to 20 billion cubic metres by 2027. That has to be extremely welcome.
Others have referred to Denmark—and, being half Danish, it would be remiss of me not to refer to Denmark too. Denmark was completely caught out in 1973, in the original oil crisis. It did not have natural sources of oil or gas to the extent that Norway and other states did, but it turned that around in a short period and now relies almost totally on renewables, including distance warming and energy from waste. In Denmark, the local community benefits from the reduced cost of heating, energy and hot water in their homes. I believe that that immediately makes the community accept what in this country there can be huge resistance to, such as a chimney being part of a facility, as I found out to my cost.
I would like to take this opportunity to ask my noble friend the Minister a number of questions that arise from a first reading—on this occasion, a Second Reading—of the Bill, if I may. He referred to the part of the Bill that talks about offshore wind. What research has been done on the impact of offshore wind farms on marine mammals and wildlife? In its latter days, the Energy and Environment Sub-Committee took evidence in which we heard various academics state that they estimated the damage to marine mammals and wildlife to be considerable. I suggest that, before we consider having any further offshore wind farms, we consider what research lends itself to the damage that can be done.
I take issue with what the noble Baroness, Lady Hayman, said with regard to onshore wind farms. One of the dangers of both offshore and onshore wind farms that we are not necessarily told about when planning permission is first sought—I hope that, on a different occasion, there will be an opportunity to amend this in the levelling-up Bill—is that, once an offshore farm reaches shore and when an onshore farm is onshore, each relies on ghastly overhead wires and pylons to transmit the electricity to the national grid or, in the case of North Yorkshire, to some distant southern part. We must accept that 30% of the electricity is lost in transmission; it is utterly wasted. We have to look carefully at why we still rely on the overhead transmission of electricity. I remind your Lordships of the damage caused by Storm Arwen, when thousands of houses lost their electricity—for six days in some cases—last autumn. To a large extent, that was because we in the north are completely dependent on transmission via overheard wires.
On the role of Ofgem, my noble friend the Minister referred to it being appointed to regulate the heat networks. For what reason does the Bill not give heat network customers equal market protections as would apply to gas and electricity customers? For example, the Bill should include a price cap and rules to regulate customers fairly to ensure that debt is collected at a rate that is affordable to customers. If it is in the Bill and I have missed it, perhaps my noble friend could explain to me where it is.
As I am sure all noble Lords have, I have received a number of helpful briefings for this afternoon. I refer to one of them, from the Association of Convenience Stores. It points to the part of the Bill—Part 10, I think—on fuel retailers without a wetstock management system. Can my noble friend the Minister confirm that they will be requested to provide information on their fuel stock levels only in emergency circumstances? I remind him that the association includes more than 7,000 convenience stores that trade from fuel sites, which provide 88,000 jobs across the UK.
I also want to look at how the Bill seeks to empower the raising of new levies on customer bills, in particular the new levy on gas bills to fund hydrogen. Will my noble friend give the House an assurance today that these new costs will not be put on the standing charge? As he will recall from the statutory instrument that we debated in Grand Committee last week, I believe that standing charges have already been increased by too high a level and that any further increase should be seriously considered before being imposed on a standing charge.
I am delighted to see that Ofgem has raised an investigation into potentially unjustified increases in the direct debits of households by six energy companies. I am struggling to think which the other companies are—I thought we were down to about six major energy companies—so I look forward to the outcome of that investigation with great interest. With those few remarks and those few questions, I give the Bill, for the most part, a very warm welcome this afternoon.
Lord Haworth (Lab)
My Lords, this Bill, referred to as the energy security Bill in the Queen’s Speech, must be one of the biggest pieces of legislation introduced in your Lordships’ House in a very long time, if not the biggest. It comprises 13 parts, 25 chapters and 19 schedules and runs to 328 pages, not counting the 14 pages merely listing the contents, and weighs in at 1 kilogram on my bathroom scales. Will it make much difference?
The Bill’s stated aim is to
“Make provision about energy production and security and the regulation of the energy market, including provision about the licensing of carbon dioxide transport and storage; about commercial arrangements for industrial carbon capture and storage and for hydrogen production; about new technology, including low-carbon heat schemes and hydrogen grid trials; about the Independent System Operator and Planner; about gas and electricity industry codes; about heat networks; about energy smart appliances and load control; about the energy performance of premises; about the resilience of the core fuel sector; about offshore energy production, including environmental protection, licensing and decommissioning; about the civil nuclear sector, including the Civil Nuclear Constabulary; and for connected purposes.”
In addition to all this, it is worth noting that the accompanying Delegated Powers Memorandum, which clarifies and justifies the necessary powers and which has been prepared to assist the Delegated Powers and Regulatory Reform Committee in its scrutiny of the Bill, runs to a further 189 pages. This is truly a mammoth piece of legislation, and the above description was not complete, as there are three further sets of provisions to be added during the passage of the Bill, as the Minister mentioned in his opening speech.
It is the first major energy Bill for many years and has been long in gestation, though an added impetus to its scope and comprehensiveness has been given by the COP 26 commitments, which the Government have so far been keen to support, and the sharpened realisation of the vulnerability of our energy security in light of the Russian invasion of Ukraine and the ongoing war. The fact that it is deemed suitable for starting its passage in the Lords suggests that the Bill will not be seen as highly controversial, notwithstanding that it has now appeared as the Energy Bill, a much shorter title than the previous one: this must be the only thing that is shorter.
The Secretary of State and the Minister of State wrote to all Peers on 6 July, setting out the rationale for this “landmark legislation”. The letter helpfully sought to simplify the description of the overall approach under three headings or pillars. To recap, pillar 1 is leveraging in private investment in clean technologies and building a homegrown energy system. Pillar 2 is reforming our energy system to protect consumers from unfair pricing. Pillar 3 is ensuring the safety, security and resilience of the UK’s energy system. It is the provisions under this third pillar that I wish to briefly comment on and broadly welcome.
It has long been a feature of our energy system, and the effect of privatisation all those years ago, that it moved from being one that was nationalised and under central control to one in which the hidden hand of the market would be central. That was the whole point. Those who did not share the enthusiasm for this ideological approach tended to point out that trusting to luck and hoping for the best was not an adequate policy, but the zeitgeist of that era was dogmatic. Adam Smith’s hidden hand must be allowed to prevail, and so it has for over 30 years, albeit, as the Minister is keen to emphasis, in a regulated market.
It was because of the Prime Minister’s clear statement in the British Energy Security Strategy White Paper in April this year, saying that action would be taken to drive future energy policy rather than leaving it to market forces, that I welcomed the Bill in the debate on the Queen’s Speech. Prime Minister Johnson committed in that document to establishing the “Great British Nuclear Vehicle”. I have searched the Bill high and low and cannot find any mention of this very Johnsonian concept. What has happened to it?
The Bill does provide for the establishing of an independent system operator, apparently hitherto known as the future system operator. This is to be
“an independent, first of a kind body, acting as a trusted voice at the heart of the energy sector.”
If that means what I think it means, there will at last be a strategic planning mechanism, and then I would be wholly in favour of it. The background briefing notes note that this body will provide strategic oversight across electricity and gas systems, though with no particular mention of nuclear. It will drive progress towards net zero, energy security and minimising consumer costs.
Confusing changes in terminology and the seeming disappearance of “Great British Nuclear”, whatever it was, do need a fuller explanation. Nevertheless, I welcome this Bill and look forward to the Minister’s response and to the on-going passage of this landmark —we hope—legislation.
Baroness Boycott (CB)
My Lords, it is a great pleasure to follow the noble Lord, Lord Haworth. I think everyone will agree this is a very substantial Bill indeed. Like most noble Lords, I welcome it; anything that will make the energy sector make provisions towards net zero and a stable future has to be welcomed. There are areas, as I say, where we can agree, but there are some conspicuous absences and some need for massive improvement.
There have been, as many noble Lords have pointed out, a lot of mentions of hydrogen. While everyone agrees that it will have a key role to play in decarbonising certain hard-to-abate sectors, the thought of having hydrogen pumped into people’s homes seems at best really inefficient and at worse plainly dangerous. Would noble Lords want hydrogen pumped into their homes? This Bill will allow for a hydrogen village trial to be built, and the fact sheet states that:
“Low carbon hydrogen could be a key option for decarbonising heat in buildings”.
However, 18 independent studies—and that includes the IPCC’s and IEA’s—have ruled out hydrogen as playing a major role in the heating of buildings. It is expensive, inefficient and it is high carbon. Research by the Hydrogen Science Coalition shows that delivering one unit of heat with green hydrogen requires six times more renewable electricity, which will also be hard to practically deliver, as we have heard from many noble Lords this afternoon, and is significantly less energy efficient compared to heat pumps. There is also a risk that, due to insufficient green hydrogen, blue hydrogen—that comes from natural gas with carbon capture and storage, emits methane and will lead to increased gas sales—could be used instead. This would maintain the use of the fossil fuel network into the future.
Just before I go on, I would like to make a point, as a journalist, about the use of green hydrogen, blue hydrogen and “natural” gas—there is no such thing. Natural gas might be natural, but we are not talking here about a safe, organic product. The fossil fuel industry has done a brilliant job with all these labels. We all, quite niftily, say “natural gas” as if, in some way, that is a perfectly okay thing to have around us.
As others have said, most notably the noble Baroness, Lady Sheehan, carbon capture is not working at scale, may never work at scale and we cannot plan an energy system on the basis that it will come to our rescue like a knight in shining armour. It sounds slightly as if the Government’s policy on hydrogen is actually the oil and gas sector’s future wish list for how it will stay relevant in our decarbonising world. The main reason, however, that noble Lords should be against this is the sheer cost. It is a cost that this Bill will put on consumers’ bills via a levy. This is so not the time to add any additional costs to any household bills.
On the subject of unproven carbon capture and vast subsidies, I want to turn to electricity generation from biomass, which I have talked about before, which weirdly gets no mention in the Bill. I welcome that as it is a very controversial means of extracting energy. I understand that the Government are shortly going to publish their biomass strategy which will set out beyond 2027, when the current contracts lapse, and will say what kind of investment is going to go into the future. BECCS, which stands for “bio-energy carbon capture and storage” is entirely dependent on a technology that does not yet work at scale. Even if it did work perfectly, and all the trees that were planted to make the bioenergy carbon neutral did grow tall and were not encumbered by rising temperatures, like today, or disease, it would, according to briefings that we all had last week, take 140 years to become carbon neutral. We need to take into account the life cycle of emissions from biomass when we consider deploying it, as we do not have 140 years to play with. We barely have 30 years. There are many measures which seem to me to kick the can down the road, which we have been doing for ever anyway, and we must stop.
I shall focus on a couple of areas that I think are missing. The most glaring omission is taxing demand. There is a technology we have in abundance and know how to work: insulation. The Minister admitted last week during a debate on the energy company obligation that if the Government had spent the money that they will spend this winter to help households cope with the extra cost of gas, it might have been much more efficient in the long run. That makes the omission of something along the lines of a national retrofit strategy all the more puzzling, and it begs the question of whether the Government are able to learn from their mistakes. We are having this debate on what has already turned out to be the hottest day we have ever experienced, so it would be amiss not to remind noble Lords that, beyond this Bill, on the adaptation and mitigation measures we need to carry out to address climate change, if we do not pay for them now it will be far more expensive later. Noble Lords do not need to take my word for it; they can take the word of the ONS, the OBR or the CPC—they have all said it. If we do not act now, we will be in the position we are in with energy in the future, only it would be our entire economy.
On the specifics of the Bill, can the Minister enlighten me about why Clause 163, which will allow energy companies to buy out their ECO payments, is part of the Bill? We know that the ECO scheme has been a success. Energy UK told us that it has saved households £17.5 billion on their energy bills since 2013 and that, due to the high price of gas this autumn, an EPC C grade home will save £900 compared to an EPC D grade home. Can the Minister provide an assurance that this buy-out will not be set at a level that would have been lower than the money that the companies would have had to spend on upgrades? The Secretary of State can set the buy-out price, and I understand that we do not want to put a figure on it in the Bill, as it would become out of date, but is there something more that we could do to index-link it so that it cannot fall below the level it would otherwise be?
Finally, I reiterate the points made by my noble friends Lady Hayman and Lord Ravensdale on the need for local energy. I think that at the next stage of the Bill I will back amendments that allow local communities to generate their own electricity as people know this goes way beyond energy security, builds community cohesion and is good for all of us.
Baroness Jones of Moulsecoomb (GP)
My Lords, it is a pleasure to follow the noble Baroness, Lady Boycott. I agree with everything she said. My noble friend Lady Bennett of Manor Castle suggested that I would sum up other people, but she has done a better job of it than I could, so I am just going to rant about the Bill.
The Minister said in his opening remarks something about the weather. Of course, this is an extraordinary day for us to be debating this Energy Bill. The temperature when I came into the Chamber was 40.2 degrees at Heathrow, and it is quite possibly higher now. It is highest UK temperature ever recorded, and possibly not the highest this year or in many years to come. The roads are melting, outdoor workers cannot do their jobs and London is on fire. I do not know whether the Minister has seen pictures of the fires in London that the fire brigade is tackling at the moment.
Then there are the buses that our Prime Minister, Boris Johnson, put on the roads, which I said at the time were inadequate. They have terrible ventilation, and now they are stifling ovens. I invite noble Lords opposite to go and test one today and see what they think about them. They will find them extremely unpleasant.
Yesterday, the High Court ruled that, as many of us have said for so long, the Government’s climate plans are barely worth the paper they are written on. The High Court ruled that the strategy was “inadequate and unlawful”. That is quite strong language. What were the Tory leadership hopefuls promising until Alok Sharma, bless him, forced them to acknowledge previous government commitments? They were promising to rip up our net-zero targets so that we can cut taxes for the rich. It is incredible that they think that that will win them the general election at some point.
Clearly, the 2050 net-zero target is too little too late to keep the 1.5 degrees centigrade goal alive, and even then, the Government look set to miss it. The Bill could have been an opportunity to correct course and get the country on track to meet the targets, but the Government miss the mark again and again. We must limit our greenhouse gas emissions to no more than the UK’s proportionate share of the global carbon budget. This emissions reduction has to be done as rapidly as possible. Yes, there are costs, but they are nothing compared to the costs of inaction and delay.
This transition must include an end to exploration, extraction and the trade in fossil fuels. As other noble Lords have mentioned, the Government talk of gas as a transition fuel. Although I reject this argument, if the Government truly believe it, they should put this transition status in the Bill, with a legally binding pathway to phase out gas entirely. However, they have plans for new UK oil, gas and even coal extraction. None of this is sustainable; none of it is transitionary. It is all damaging, destructive, and dooms any hope of keeping 1.5 alive.
Then there is the other energy source that is described as a panacea, as the future: nuclear. We hear of small nuclear reactors, thorium reactors, nuclear fusion; a never-ending wish list of science-fiction solutions to the very real crises that we face. I call it science fiction; my noble friend called it magical maths—I think I prefer that. Magical maths: that is what the Government keep trying to do. Of course, as with magic, it is not real—let us face it. Today we heard about “jet zero”. I give it 10 out of 10 for the label, but minus 10 out of 10 for the concept of making aviation net zero.
The noble Baroness, Lady McIntosh, mentioned energy from waste. I am sympathetic to that, but we have found that when we have incinerators, recycling rates go down. The councils have a commitment to deliver a certain amount of waste to the incinerator companies, but they cannot supply all that waste because people are reducing—
Baroness Jones of Moulsecoomb (GP)
I will not take any interventions. I am so sorry; we are all tired and we want to get going, but I am happy to chat to the noble Baroness outside.
Perhaps the most objectionable part of the Bill is the Government’s quiet plan to bury nuclear waste under the sea—it is not quiet any more, of course. It is yet another example of passing on the burden of our terrible decisions to future generations. We will not solve the climate crisis by passing on a nuclear waste crisis instead.
As other noble Lords have said, insulation and energy efficiency are key to solving the crisis by significantly reducing our energy usage, but what does the Bill provide? A new energy performance certificate and a power—not even a duty—to make regulations about the energy efficiency of new buildings. It is inexcusable that new buildings are not meeting the very highest standards of energy efficiency.
One of this Government’s worst legacies will be the hundreds of thousands of leaky new-build homes that were built in the years since they scrapped the zero-carbon homes policy in 2015. Since then, we have had five years of inadequate homes being built, almost all of which will require expensive retrofitting as a result of this Government’s short-sightedness. This legislation should fix that mess, ensure that all new-build homes are zero carbon and set out a workable plan for deep retrofit of the entire UK housing stock, beginning with the communities that are struggling most in this cost-of-living crisis.
The Bill also misses the crucial role that local authorities and community energy must play in reaching net zero. Local government can be unleashed with new powers, new duties and the corresponding funding and fundraising ability to deliver. When the Minister comes back at Committee, will he table an amendment on community energy schemes? We can actually encourage people to go from “not in my backyard” to “let’s have it in our area”. That is a direct request to the Minister. It would be a real gesture of understanding what we need for the future.
The Bill has also missed the opportunity to align the UK’s emissions reductions target and strategy to the all-important 1.5 degrees centigrade threshold. Also, as others have mentioned, there is another catastrophic legacy from David Cameron’s tenure as Prime Minister: the whole issue of onshore wind. Perhaps the Minister could also table an amendment on that as a gesture towards all those in this House who care so much about that issue.
Of course, the Energy Bill should also ensure that any proposed solutions to the climate crisis as far as possible minimise damage to ecosystems, food and water availability and human health. I do not believe for one minute that this Government can rise to that challenge—but I live in hope—and nor, it seems, does the High Court.
Your Lordships’ House will work diligently, spending countless hours through countless days improving this legislation; then the Government will take it down the Corridor, as they always do, to undo all our hard work, whipping their MPs to do the wrong thing, no matter how obviously wrong it is. It is deeply disheartening and I can only plead to your Lordships that we put our collective foot down and insist on a realistic pathway to achieve that net-zero climate target.
However, luckily for the Government, who seem short of ideas at the moment, there are two Private Members’ Bills going through Parliament at this very moment that will fix their problem and fix it for the rest of us. They supply all the ideas necessary to actually get towards a carbon-neutral future. There is the Climate and Ecology Bill, which would make up for the gaps in the Energy Bill and ensure that the UK plays its full role in the global effort towards achieving 1.5 degrees centigrade, with its science-led target that we emit no more than our fair share of the remaining global carbon budget. It addresses the full extent of the climate and nature crisis, in line with the most up-to-date science. It will ensure a comprehensive and joined up approach. The Bill was written by scientists, experts and campaigners, was first introduced in Parliament by Caroline Lucas MP in September 2020 and has just been introduced in this House by the noble Lord, Lord Redesdale, who is not in his place.
Baroness Jones of Moulsecoomb (GP)
I am so sorry; my side vision was not working.
Secondly, there is my clean air Bill, which is a great piece of legislation and would aid the health of people and the planet by reducing fossil fuel pollution. Before there is any of this “whataboutery” that we hear so much of when we are outside this House about China and India doing their share and so on, we Brits rampaged and pillaged around the globe for a couple of hundred years as the British Empire and snatched what we could. It is time to give back. It is time to do our duty as British people and give back to the rest of the world. I really hope that on this issue we do our best.
Lord Teverson (LD)
My Lords, it is always a real pleasure to follow the noble Baroness, Lady Jones of Moulsecoomb, because of her rather special style in this House, which I think we genuinely welcome, and her plain speaking.
I must declare a couple of interests. I chair a company called Aldustria Ltd, which is into energy storage—I say to the noble Lord, Lord Moylan, that that is actually one of the answers to variability on renewables—and I am a trustee of the Green Purposes Company, which holds the green share in the Green Investment Bank.
I want to go back into history, not as far as the noble Viscount, Lord Hanworth, did, to Baldwin and Chamberlain, nor to the OPEC crisis that my noble friend Lord Bruce mentioned, but to 2013 and the last major energy Act, which was presented and introduced by Ed Davey as the Liberal Democrat coalition Secretary of State. It did a number of things but there were two key measures. First, it introduced contracts for difference, which were a major step forward at the time. Again referring to the noble Lord, Lord Moylan, to some degree, CfDs now produce money for both the contract company and, effectively, the Treasury; the present reference price is much higher than the strike price, so the taxpayer does really well at the moment in that area. We do not have to worry about levies on producers because it is a self-balancing mechanism that comes back to the taxpayer when energy prices are high. The second thing introduced by that Act was the capacity market; it had its issues, particularly with diesel generators, but a lot of that has been solved now.
The 2013 Act changed the way that the energy market worked in this country and it has been very successful. The Bill before us does not change that but is an evolution of it. The noble Lord, Lord Haworth, talked about the weight of the Bill. It might be a thick book but it is not a blockbuster in what it is trying to achieve. It does a number of things and it is a bit of a Christmas tree Bill; I hope we will not have thousands of amendments as we go through eight days of Committee, but there are a lot of areas where we can add things in.
I have referred a couple of times to the noble Lord, Lord Moylan, but I liked seeing decarbonisation and net zero as a constraint. That is an interesting way of looking at this issue and I do not disagree; it is an objective that we are dynamically moving towards but it is a constraint in how we move on energy.
We are looking at energy security, which is particularly important at the moment; decarbonisation of the economy; and, particularly at this time, the cost of energy and the effects that that has. Those of us who were involved in the 2013 Act remember that the big issue we were trying to solve was the energy trilemma of security versus price versus decarbonisation. Amazingly, over the nine years since then, there has been a convergence of those needs. It seems, practically and evidentially, that we can solve all three of them. By decarbonisation and the additional use of renewables and other technologies, we can solve security and decarbonisation, and help to bring down prices, literally, against the fossil fuel crisis at the same time. We have that ability.
We on these Benches welcome the Bill. It has a number of good parts, including on hydrogen—although I entirely agree that its use will be highly constrained. I was interested that the experiment involves gas heating, which is maybe not one of the best areas in which to do it. I shall come to the future system operator later, but it is much more of a strategic look, and I welcome that. On heat networks, heat pumps and carbon capture, storage and usage, I am somewhat sceptical about their overuse but it is good that we move them forward. I also welcome the fact that we are going to continue our interest in fusion.
Let me talk about energy security. One thing that surprises me goes back to a point made by the noble Lord, Lord Howell. Part 10 talks about resilience and the core fuels. I went through that part of the Bill and—the Minister may correct me—it relates only to petrol and oil; it does not refer anywhere to gas. So we still have a resilience problem in an area of energy policy that is very important at the minute. Exactly as the noble Lord, Lord Howell, pointed out, in 2017 we effectively stopped gas storage in this country when the Rough storage facility was closed. To give the Government Benches their due, the cry went up from that side of the House asking why this was happening. I understand that there are now negotiations to try to reopen that facility. I would be interested to hear from the Minister how they are progressing and whether that will happen.
On the speed of transition, let us remind ourselves that we have a target to decarbonise electricity by 2035, which is only 13 years away, and the Prime Minister has said that we should have 40 gigawatts of offshore wind in eight years’ time. That is really quite something. How do we go about meeting that? One of my criticisms is that there is nothing in the Bill to reduce gestation timescales—an offshore wind farm can take 10 years to go from start to finish. I am interested that the Minister said that one of the areas of amendment to the Bill is around trying to reduce approvals from four years, which was optimistic, to one year because of the change of environmental rules. I would be the first to say that the way that environmental regulation works around offshore wind is probably not the best way it could go. We will want to look at what those regulations will become to achieve that sort of level in timescale.
As other Members have mentioned, the objectives of the regulators get in the way on transition—partly the North Sea Transition Authority, but particularly Ofgem not having a zero-carbon objective. I know the Government feel that that is already covered in the remit but it is not, and it gets in the way. That is one area which it is important to change in the Bill.
The other area is the system operator, or ISOP. I read that long section through. The ISOP is called an independent operator, but there is nothing in the Bill guaranteeing its independence or how that regulator—or planner or operator—is appointed. I see no reason why it should have any real authority. It is unfortunate that this detail is not there. I think back to when the Labour Government put in the Strategic Rail Authority, which in the end did not manage to achieve anything because it did not have any real authority, and so it was abolished. I would like to understand how the ISOP will work and have authority, and not be just an animal of BEIS or the Treasury. I was going ask, “Is ISOP a fable?”, but I decided that it would not work in the House.
A number of noble Lords have mentioned onshore wind. From my house in Cornwall I can see 35 wind turbines. That is fantastic. When I go out on my bike I can tell, as they move, whether I will be cycling against the wind or with it. Most people think that they add character to the countryside. The Government are just not brave enough in that area.
One of the areas completely missing in terms of transition, which I see as vital, is electric vehicle charging. We do not have the infrastructure to support the revolution which is happening through market forces as much as anything else. I know that is for the Department for Transport but, if we really want to transition, the Bill needs to achieve it, so let us not get too much into silos.
In terms of grid investment, we have had the announcement that National Grid is going to spend some £54 billion bringing offshore electricity to the mainland, but what about the money required to upgrade the grid in Great Britain? When it comes to getting access to the grid, whether for storage or renewable energy, we are running out of capacity.
I was speaking to one of the DNOs today, and of its 8 million households, only 2 million have smart meters—an appalling ratio. I am sorry, but that is what a DNO told me this morning on the figures for its area. If you include SMETS 1, the figure rises to 3 million. That is a fact.
I will talk about bringing costs down. Clearly this Bill does not deal with immediate issues, but it could be about the near-medium term. Demand reduction—particularly through energy efficiency, as many have mentioned—is really important.
The price cap is still an imperfect mechanism. It may have served its purpose to a degree, but should we not now be moving to something such as perhaps a social tariff? I would be interested to hear from the Minister about what the Government are looking at post the energy cap.
Many have mentioned local authorities and communities. I word-searched the Bill as well, and local authorities are mentioned in regard to heat networks, as obviously you can hardly do these at all without local authorities. They, and local communities, must be involved. Only through these means can we bring costs down in this industry in the medium term. Yet what have we got? We have already passed this year the Nuclear Energy (Financing) Act, which actually puts up energy prices for households. The new Prime Minister might consider scrapping that for a start.
As I said, the Bill is important, and there are many parts that I and these Benches support. It is not a blockbuster, but it is a big Bill. Let us make sure that the really important areas, such as energy efficiency and the systems operator being able to ensure we have a full and proper strategic view into the future, are actually achieved. There is a lot to do.
Lord Lennie (Lab)
My Lords, I thank the Minister for his detailed introduction and for the meeting we had yesterday about the Bill. I also thank all other noble Lords who have taken part in the debate.
We began with the noble Lord, Lord Bruce, who gave us a bit of a personal history. It is unusual to find a Scot who has not been elected opposing oil and gas in Scotland these days—that is the way it is. The noble Baroness, Lady Hayman, talked about onshore wind, Ofgem having a net-zero remit and the local community generation of fuels, which we would certainly support.
We had a warning from the noble Lord, Lord Howell. With his international experience, he was disappointed in the Bill, warning of worse to come and the way in which renewables are seen to replace fossil fuels. The noble Lord, Lord Whitty, spoke of the gravity of the situation and of the Bill not standing up to that, while welcoming the ISOP and CCUS; and the noble Baroness, Lady Sheehan, talked of CCUS not working at scale and being insufficient to deal with the carbon capture issue.
The right reverend Prelate the Bishop of Carlisle welcomed the Bill—he was a bit of a sore thumb among those who spoke—and all three pillars of it, which is good news. He also talked about local generation and carbon capture. The noble Lord, Lord Moylan, reminded us that he is a big advocate for the gas industry, based on cost. I do not know about the detail of his analysis, but he warned that renewables will be more expensive and unaffordable. My noble friend Lord Hanworth predicted social unrest because of the price of fuel and energy costs. The noble Lord, Lord Ravensdale, talked about the trilemma he is in between the three parts of the Bill. The noble Baroness, Lady Bennett, warned about local suppliers, onshore wind, efficiency and fusion.
The noble Baroness, Lady McIntosh, talked about local sources of waste energy, generating for local use and transmission. She criticised the use of overhead lines for the transmission of electricity and the 30% waste it produces. My noble friend Lord Haworth reminded us of the Bill’s size, expressed disappointment at its overall effect but welcomed the ISOP. The noble Baroness, Lady Boycott, welcomed the Bill but with a lot of reservations about the effects it will have and the high costs. She was very much anti-hydrogen, although the hydrogen pilot has yet to be gone into in detail. The noble Baroness, Lady Jones, gave us a rant: we are doomed, there is no support and there is nothing on onshore wind. Then we finished with the noble Lord, Lord Teverson, who thanked the former Energy Minister from the Liberal party, Ed Davey—what happened to him?—for giving us the 2030 Bill, and welcomed certain aspects of the Bill in his presentation.
The Bill has been a year in the creation so we welcome its publication, but despite its length—300-plus pages, 243 clauses, 13 parts and 19 schedules—it represents a bit of a missed opportunity to address the catastrophe facing millions of ordinary, hard-working families who face soaring energy bills. It does not meet the scale of the crisis. Having taken a year, it is a bit of a disappointment and misses the target of the cost of living crisis. The Bill does not go far enough in establishing new green energy sources, nor in its energy-efficiency measures, which are at best not a leap from where we are now.
The Bill should have had achieving net zero woven into every measure it proposes, not run away from it. One of the leadership candidates described net zero as “unilateral economic disarmament”. I think she is no longer a candidate, but I do not know whether she has revised her view of net zero more in line with what policy should be.
The Bill is a missed opportunity to bring forward energy-efficiency measures, which are desperately needed and should be the starting point of the Bill. Never mind the green energy sprint towards net zero and helping with the cost of living crisis that my noble friend Lady Blake referred to in her opening speech—that sprint seems to be more of a gentle walk and the crisis merely a blip. A decade of failed energy policy has left energy bills too high and our energy system too weak.
What is remarkable in this long Bill, divided into three key pillars, is what is missing. It will not be a surprise to the Minister that this is how we feel, as these matters have been raised continuously over the recent past. Where is the urgent help needed to help with soaring energy costs, including the delinking of low-price renewables from the high price of gas? Where is any mention of onshore wind, the cheapest and most efficient form of our potential new energy sources? Where is the encouragement for a green energy sprint to help keep costs down? Where is the long-overdue upgrade to the national grid, as referred to by other contributors? Where are the simple efficiency measures for home insulation? How many more times will the Government assert that smart meters can play a crucial role in helping to bring down costs but then fail to make them mandatory?
There are some welcome initiatives, of course. The introduction of the independent system operator and planner for electricity and gas suppliers is very welcome and should help to facilitate delivering net zero. However, the key to becoming a successful ISOP will be establishing true independence from government. The unprotected heat networks, with their half a million customers, will benefit from being regulated by Ofgem, especially as that number is due to grow significantly as we move towards net zero.
As I asked at the beginning, what is missing? The Labour Party will concentrate its efforts on the next stages of the Bill. What measures should the Government bring forward to relieve customers from the immediate cost of living crisis? Why is there no mention of onshore wind farms in the Bill? How reliable is net zero, given the uncertainty about the leadership of the Conservatives and the country? The next leader must have a plan, as Alok Sharma said, or they will be off too. Unless the Government propose amendments of their own, the Labour Party will support and propose amendments on energy efficiency, onshore wind and solar, and seek to establish that net zero 2050 means net zero 2050—if not earlier.
I look forward to the Minister’s response.
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.
Baroness Sheehan (LD)
Will the Minister address the point made by the noble Lord, Lord Whitty, as well as by me, that the gas we produce in the North Sea no longer belongs to us? It is a global commodity and has to be traded as a global commodity.
Lord Callanan (Con)
It is produced by private sector companies under regulation, and there are interconnectors connecting us to the continent. I am sure that the noble Baroness would want us to support the EU in its time of need at the moment. With our energy terminals, those interconnectors play a crucial role in helping our EU friends with their current difficulties. It is of course a global commodity and the price is set globally. However, if the noble Baroness’s question is about carbon intensity, the carbon intensity of domestically produced resources is much lower than imported LNG. As I have pointed out a number of times before, I fail to see why it is, in her view, more sensible to import gas through LNG rather than getting it from our own North Sea resources. I am sure we will have that debate many times again in future.
Finally, I will deal with the challenge from the noble Lord, Lord Teverson, regarding smart meters. I can tell the noble Lord that we have now installed 27 million smart meters in the UK, and the vast majority of SMETS1 meters have now been upgraded with software upgrades to SMETS2 standards, so that they operate exactly the same as SMETS2 meters and provide full smart meter functionality. Only this morning, I met the DCC to review the progress on that upgrade and was told that the number of meters still to be migrated is tiny—a few tens of thousands of early meters that the DCC will continue to attempt to migrate; if that does not work, they eventually may be upgraded to full SMETS2 meters.
I have addressed most of the points raised by noble Lords. I am sure that noble Lords will say if I have not covered all their points, but we will debate these matters further in Committee. Many of the points made were things that noble Peers would like to see happen separately and outside the provisions in the Bill. However, I think that most of the measures received a wide degree of support in your Lordships’ House. I look forward to continuing this constructive engagement and detailed scrutiny as the Bill progresses through Committee.
Energy Bill [HL]
Monday 5th September 2022
(2 years, 2 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-II Second marshalled list for Committee - (5 Sep 2022)
Lord Lennie
“Part A1Purpose and strategy and policy statementPurpose (1) The principal purpose of this Act is—(a) to increase the resilience and reliability of energy systems across the United Kingdom,(b) to support the delivery of the United Kingdom’s climate change commitments, and(c) to reform the United Kingdom’s energy system while minimising costs to consumers and protecting them from unfair pricing. (2) In performing functions under this Act, the relevant persons and bodies must have regard to—(a) the principal purpose set out in subsection (1),(b) the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets) and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change,(c) the desirability of reducing costs to consumers and alleviating fuel poverty, and(d) the desirability of securing a diverse and viable long-term energy supply. (3) In this section “the relevant persons and bodies” means—(a) the Secretary of State;(b) any public authority.”Member's explanatory statement
This amendment, along with other new clauses before Clause 1, add a new Part setting out the purpose of the Bill and a requirement for a Strategy and Policy Statement in line with this Act.
Lord Lennie (Lab)
My Lords, Amendments 1 to 4 and 245, along with other new clauses before Clause 1, add a new part setting out the purpose of the Bill and a requirement for a strategy and policy statement in line with the purpose of the Act.
The context for this is threefold. First is the cost of living crisis: the energy cap has risen to £3,549 a year for an average household, and National Energy Action, of which the noble Baroness, Lady McIntosh, is chair, predicts that the number of households in fuel poverty will rise to 8.9 million.
The second is net zero: the Conservative leadership candidates—including Liz Truss, the new Prime Minister—ran away from this during the recent campaign. The High Court found that the net-zero climate strategy is inadequate, and the Climate Change Committee found that credible plans existed for only 39% of emissions, citing “major policy failures” and scant evidence of delivery. The 2021 International Energy Agency report found that the current commitments will not achieve net zero on schedule as they fall well short of what is needed to reach net zero by 2050.
The third is energy security: gas prices are expected to surge to record highs this week after the Nord Stream pipeline shut down. They could reach 800p a therm, and on Friday of last week they were 320p. European prices have risen by nearly 400% over the past year already, and the UK relies on gas for approximately 40% of its power generation—even more on the coldest days when demand increases and wind generation is low. The 2017 BEIS report included a scenario of the complete cut-off of Russian gas and concluded that the UK could see significant unmet demand if the cut was prolonged and continental European countries paid whatever was necessary to keep gas flowing. In the most extreme scenario, this could result in 28% of demand being unmet and lead to cut-offs or rotations of supply.
The Bill, as we said at Second Reading, is a pick and mix of things thrown together; it lacks ambition and an overarching theme designed to tackle these issues. There is no reason to believe that the current energy crisis will not happen again as the impact of global warming is a long-term issue.
Consequently, our amendments would, first, set out a purpose for the Bill by increasing resilience and reliability of energy systems across the UK; support the delivery of the UK’s climate change commitments; and reform the energy system. Secondly, they would bind the Secretary of State and the public authorities to these purposes, to our international commitments on climate change, and to the desirability of reducing costs and alleviating fuel poverty and securing a diverse and viable long-term energy supply. They would require the Secretary of State to designate a statement as a strategy and policy statement with regards to the purpose of the Act and require the Secretary of State to review both the strategy and the policy on a five-yearly basis. This would, in turn, force successive Governments into long term thinking, widen the impact and ambition of the Bill to address both short- and long-term issues, and help to ensure that, for the future, action does not come either too late or too little to solve a crisis.
I turn briefly to the other amendments in this group. Amendment 5 in the name of the noble Lord, Lord Moylan, adds a new clause requiring an assessment of the cost of achieving net zero and contrasting this with achieving net zero by later dates. Not achieving net zero by 2050 would be a breach of our international agreements and would be hugely damaging to health, livelihoods and human security, as well as our reputation on the global stage. The cost feasibility of not acting by 2050 and leaving net zero until 2065 or 2080 would be incomparable.
Amendment 6 in the name of the noble Baroness, Lady McIntosh, makes energy security the primary objective of the Bill, and while we agree with the importance of this objective, we would point to the wider focus our amendments require of the Bill. Amendment 7 in the name of the noble Lord, Lord Ravensdale, focuses on increasing the resilience and reliability of energy systems, supporting the UK’s climate change commitments, and reform of the UK energy system while minimising costs to consumers—protecting them from unfair pricing—and requires the Secretary of State to report annually to Parliament on these matters. This links in well with our amendments.
Amendment 231 in the name of the noble Lord, Lord Moylan, probes the intentions behind the Government’s proposal to alter the current pricing system of wholesale electricity based of the marginal cost of the last source of supply. I would be interested to see what lies behind the Government’s rationale for this change. Amendment 242 in the name of the noble Lord, Lord Ravensdale, sets out a national electrification and power plan; this links in with opposition thinking.
According to McKinsey, renewables could produce more than half of the world’s electricity by 2035 at lower prices than fossil fuel generation. On 18 May 2022, the EU presented the REPowerEU plan to end its dependence on Russian fossil fuels and tackle the climate crisis through energy savings, diversification of energy supply and accelerated rollout replacement of fossil fuels in homes, industry and power generation by renewable energy sources. The EU plan includes a massive scaling up and speeding up of renewables—solar, heat pumps, hydrogen, biomethane—which is not present in the Bill, and the EU plan suggests that replacing coal, oil and natural gas in industrial processes will reduce greenhouse gas emissions and strengthen security and competitiveness. Energy savings, efficiency, fuel substitution, electrification and an enhanced uptake of renewable hydrogen, biogas and biomethane could save up to 35 bcm of natural gas by 2030 on top of what is predicted under the Fit for 55 proposals. The UK must not be left behind. We must scale up our ambition. I beg to move.
Lord Moylan (Con)
My Lords, I rise to speak to Amendment 5 in my name, and thank the noble Lord, Lord West of Spithead, and my noble friend Lord Frost for their support, and to speak to Amendment 231, also in my name. Before doing so, I should say that since I joined your Lordships’ House, my entry in the register of interests has shown my membership of the advisory board of Stirling Infrastructure Partners, a relatively new corporate advisory boutique. Stirling Infrastructure seeks business with a wide array of major corporations, some engaged in the energy field, and it struck me after speaking at Second Reading that I should perhaps have specifically drawn the House’s attention to my registered interest at that point. I have not received any remuneration during my time on the advisory board, and I have since then terminated the interest.
I congratulate the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie, for bringing forward Amendments 1 to 4 as a matter of general principle, because they are right that a Bill which seeks to articulate and implement our energy strategy, particularly our energy security strategy, should have a preamble that is strategic in character and should provide a setting so that we know where the Bill is heading and what it is trying to achieve. My difficulty with their amendments is that they are rather general in character and not entirely strategic. I hesitate to say this, conscious as I am that the noble Lord, Lord West of Spithead, may choose to speak, but simply aiming to win the war is not a strategy. A strategy requires something on resources, a plan and a general conception of how you are going to do it. If we are to achieve net zero, there are certain knotty issues that the Government need to be clear about so that we understand exactly what their strategy is at the level of detail appropriate to strategy. I, for one, am rather confused about the whole thing.
The purpose of my Amendment 5, which I have to admit is drafted in a rather convoluted way, for today’s debate is to elicit from my noble friend on the Front Bench some answers to three particular knotty questions. The first is the cost of net zero by 2050. One would have thought that we knew what the cost was going to be, but my understanding is that the only estimate the Government have had available to rely on was produced by the Climate Change Committee, which estimates that it will be in the order of 1% of GDP a year.
I do not have an objection to dedicating government expenditure on the basis of a certain percentage of GDP. If the Government want to say that they will spend 2% or some other percentage of GDP on defence, or they will spend 0.7% or 0.5% on international aid, for example, that is perfectly legitimate. But, of course, the figure of 1% a year from the Climate Change Committee is not of that character. We are pledging to spend not 1% a year but whatever it takes to deliver net zero by 2050, and 1% a year is an estimate. Moreover, it is an estimate that relies to a high degree on certain built-in assumptions, particularly that things are going to get cheaper—that the various inputs will fall in price over time. While that might be true of some, there is no reason to think it is going to be true of all. Part of the purpose of this amendment is therefore to call for the Government to commission an independent assessment of the cost of meeting net zero by 2050.
Then, we come to the question of affordability. Achieving it by a certain date—the date set in statute—doubtless has one cost attached to it. This amendment also calls on the Government to consider as part of that assessment what it would cost to achieve it. Would it be cheaper—more affordable—especially in the current crisis we are facing, if the terminal date were not 2050 but later? I put in two particular dates but if the Government choose others, I would be happy to go with those. The issue is the principle of whether achieving net zero over a longer period would be more affordable for the people of this country.
That is the first thing this amendment is trying to elicit the Government’s views on: do they have a reliable cost for achieving net zero by 2050, and would it be affordable if we took longer over it? As I said at Second Reading, bearing in mind that this country contributes a very small fraction of global emissions, the idea that achieving it by 2065 or 2050 will save the planet is simply self-delusion. We are doing this principally for exemplary purposes, rather than because of its practical effect.
Secondly, I do not wish to cause the slightest difficulty or embarrassment for my noble friend on the Front Bench, but I find the Government’s existing strategy, particularly the energy security strategy, the 10-point plan and so forth, rather weak in terms of strategic content and cost assessment. What are they going to cost? Also, implementation dates are largely lacking. We also need to know the relative contribution that each of the Government’s proposed measures will make to achieving net zero. Some might be very significant and others not, but we do not understand that from the documentation. That is the second purpose of this amendment. It is an important strategic question and I hope my noble friend will be able to say something about it.
The third point concerns the crucial issue, which I raised at Second Reading, of the intermittency of renewable sources. What do you do when the wind is not blowing or the sun is not shining? An obvious source to use to make up for that at the moment is gas, and that is largely what we do. Will we continue to use gas? That is one option. At Second Reading I quoted Professor Sir Dieter Helm saying that that makes the gas expensive in itself, because switching it on and off all the time is very inefficient and increases costs. However, is that the strategy? When I said that at Second Reading, the noble Baroness, Lady Bennett of Manor Castle, drew my attention to a recent report from a Finnish university that said that intermittency can be dealt with without recourse to gas. Afterwards, she kindly gave me a link to it, and I have studied it. The solution suggested—it is not unique to that university; it is fairly widespread—is that intermittency should be dealt with by way of battery power. When the wind is blowing and you do not need the electricity, you charge up the batteries, and when it stops blowing—it is the same for solar—you take the electricity out. That seems plausible at one level, and maybe it is the solution the Government are coming to; there is stuff about batteries in the Bill. However, it raises questions about the environmental consequences of extracting the minerals needed for the batteries, and about their disposal, siting and so forth. Can the Government tell us what role they see for batteries—if it is to be batteries; maybe it is not—in dealing with intermittency?
The third suggestion I have heard is that pumped water should be used. This involves using surplus electricity to pump water up so that, when you need it, it falls down again. I believe that some installations do that—indeed, one of them is hidden inside a mountain in Snowdonia—and that a couple are to be built in Scotland shortly. My understanding is that they produce very little power. They are an interesting idea. Is it the Government’s intention to roll them out at scale? What is the cost? Where are they to be sited? These are the things on which we should have some indication before we give the Government these powers. I note that there is stuff in the Bill on exactly this.
Finally, I have heard that we should use surplus power to produce hydrogen, but that assumes that there is a distribution network to take the hydrogen where it is needed when the wind is not blowing. So there are serious potential solutions to this problem. All of them have costs, both financial and environmental. Which do the Government prefer?
I have spoken quite long enough so I will come to Amendment 231 in my name, which asks a question that has been on many people’s lips over the past few weeks: how do we price wholesale electricity? At the moment, as I think noble Lords are aware, the price paid to generators is the price of the highest input needed to achieve the demand that exists in the system in a particular half-hour period. In recent weeks and months, that has become gas. Whatever they use to produce electricity—be it wind, solar or whatever—everybody is receiving the same price as for gas.
To be perfectly clear, though, not everybody is receiving the same price because many of those producers will have entered into a contract for the difference—a swap arrangement—with a government-owned company. Effectively, this means that they have a guaranteed price, and it does not matter what the price is in the pool. At the moment, this is something that the European Union is looking aggressively at in terms of whether it should be changed, whether we should have a different system and whether there should be two separate pools, with one for carbon and one for renewables.
These are all things that I would like to hear the Minister say something on. I sympathise with him because today is the last day of the current Administration. Tomorrow, there will be a new Prime Minister. It may be that the Minister does not have the answers to all these questions at his fingertips in the way we would all like to hear at the moment, so an answer in due course as Committee goes on would be extremely welcome.
Baroness McIntosh of Pickering (Con)
My Lords, I will speak to Amendment 6 in this group; I am grateful to the noble Lord, Lord Lennie, for his reference to it. It is intended as a probing amendment. I like to think that it is short and perfectly formed; I am grateful to the clerks for their assistance in drafting it. I remind the Committee that I am the president of National Energy Action. As the noble Lord, Lord Lennie, referred to, there are worries about households that have already fallen into fuel poverty and the strong likelihood that, by October this year or January next year, 1.5 million more households may be at risk.
Some further background to this amendment is my concern that most of the talk in the White Paper and the British energy security strategy from April, most of the talk in the recent leadership election campaign and most of the concentration of the press and media seem to focus on household fuel bills and the price cap relating to them. We must not lose sight of the impact of fuel and energy costs on small, medium and large businesses. Many have recently cited the instance of launderettes, which may not be big employers but serve a particularly useful function and are obviously highly intensive users of energy.
However, there are many others. In what was previously the Vale of York constituency, there is the York brick company, which has kilns to make its clay bricks on the go for probably two-thirds of each day—often over weekends, I imagine, if it is trying to complete an order. If we lose many such small and medium-sized companies, this especially will have a grave impact on the UK economy going forward.
Baroness Bloomfield of Hinton Waldrist (Con)
Before we continue, I remind noble Lords that the Companion asks noble Lords to make their speeches directly relevant to the amendments they are proposing and—please—to keep those comments as short as they possibly can. Thank you.
Lord Ravensdale (CB)
My Lords, I shall speak to Amendments 7 and 242. I declare my interests as a project director working for Atkins, which is in the energy industry, and as a director of Peers for the Planet. I thank the noble Baroness, Lady Worthington, who I have worked with to develop these amendments.
Amendment 7 has similar objectives to Amendment 1 in the name of the noble Baroness, Lady Blake, and spoken to by the noble Lord, Lord Lennie. I concur with his comments on the necessity of clearly setting out the purpose of the Bill and legislating for a strategy and policy statement on its implementation. Amendment 7 brings out two specific aspects that are further detailed in Amendment 242. These are the importance of a plan for delivering against the 2035 target to decarbonise our electricity system and for the electrification of energy use in the UK.
The reason that electrification is so important stems from the second law of thermodynamics. As my favourite physicist, Richard Feynman, said in his superb analysis of the “Challenger” disaster in 1986, “Nature cannot be fooled”. Whatever options we come up with for decarbonising our energy system, and whatever laws and policies we make, we run up against fundamental constraints from the laws of thermodynamics. For example, using hydrogen to fuel road transport will always be much less efficient and use far more energy than electrification, no matter what technical advances are made in hydrogen production. Similarly, using electricity to heat homes via a heat pump will always be more efficient than producing hydrogen for the same purpose. This is not to say that hydrogen production should not be pursued as a matter of urgency, as it will be vital in some areas, but its use should be focused on areas that are absolutely necessary. The efficiency gains and the reductions in primary energy use from electrification mean that this is a vital metric to consider as our energy system evolves.
The enabler of all of this is a decarbonised electricity system. We have a world-leading target to decarbonise our electricity system by 2035, but I worry about delivery. Atkins has undertaken a calculation of the rate of new capacity required to hit the 2035 target. This is not anything complex: it simply divides the capacity in the BEIS scenarios by 12 and a half years, allowing for an estimate of the capacity that will be decommissioned over that timeframe.
As I stated at Second Reading, this calculation results in a minimum of an average of 12 gigawatts of annual installed capacity being needed every year between now and 2035 to hit that target, so the next question is, with a baseline of 12 gigawatts, what have we managed in recent years? In 2019 we managed 2.8 gigawatts of new installed capacity. In 2020 we managed 1.1 gigawatts and in 2021 we managed 1.6. If we go on like this, it is very hard to see how we will meet the 2035 target. The upshot is that to replace ageing power plants and ensure that enough generation is built to meet peak demand requirements, the UK needs to build a minimum of 159 gigawatts of new generating capacity by 2035—the equivalent of building the UK’s entire electricity generation system one and a half times over in slightly more than 12 years. It is not only generating capacity but all the grid infrastructure to support it, as well as energy storage and data management.
This says to me that there is a significant risk that the Government will not be able to meet their 2035 target. I work on the coalface, as it were—I am not sure that is the best analogy. The industry has a long way to go to gear up for this pace of delivery, so alongside the 2035 target we urgently need a strategy for delivery. This reflects one of the priority recommendations from the CCC’s 2022 progress report: we need a delivery plan to provide visibility and confidence for private sector investors, to reduce costs and to build up supply chains. There is a key gap here in comparison to other sectors. We have the Heat and Buildings Strategy and the transport decarbonisation plan, but we do not have a plan for electricity decarbonisation, despite it being so important as an enabler for those other plans. I would be grateful if the Minister could, in summing up, state that the Government will bring forward such a delivery plan for electricity system decarbonisation.
Amendment 242 details our approach to legislating for this strategy. The noble Baroness, Lady Worthington, pointed out to me that we already have a toolkit to approach this via the Energy Act 2013—the mechanism of a decarbonisation target range and decarbonisation orders. If we take these existing powers and modify them, we can set a range for carbon intensity of electricity production in the UK each year and targets for electrification of the energy system. The report must also include the expected volumes of installed capacity and energy produced by electricity energy source for each calendar year to 2035. This rigorous approach will deliver the required strategy and plan to give industry and investors a clear road map to 2035, which, lest we forget, is only slightly more than 12 years away.
There is a great opportunity in this Bill for the Government to legislate for a strategy to give industry and investors the confidence they need to reduce costs and build up supply chains for 2035, significantly reducing delivery risk, with efficiency and minimising primary energy consumption at the forefront. I strongly support the Government in their ambitions for 2035 and the target that they have set, but there is much to do in a short time, and I hope the Government will take this opportunity to ensure that there will be a clear plan for delivery to ensure the success of their ambitions.
Lord West of Spithead (Lab)
My Lords, I stand to support the rather convoluted, as was stated, Amendment 5 in the name of the noble Lord, Lord Moylan. Sadly, we have shied away from a national energy strategy for some decades. As head of the National Security Forum in 2009, I pushed to produce a national energy strategy but was stopped and shot down in flames by the Cabinet Office—and indeed the Cabinet—as the Government were unwilling to identify all the various things that were needed to achieve that.
Now we are moving slowly towards a policy, but the devil is in the detail and broad, sweeping statements of commitment based on no solid evidence of cost and impact are highly dangerous. The aim of this amendment is to quantify the cost and risk of achievement and to monitor and assess performance as the plans move forward. Too often there is a willingness to move ahead hoping for the best rather than forensically analysing what is, can be and has been achieved and what the true costs are—both financial and in terms of their impact—on other policies and commitments.
I feel particularly strongly about analysing the shortfalls in electricity generated by renewable sources. Our nation has a clear demand for a constant base loading of electrical supply and needs to manage intermittency of supply from wind and solar. I am clear that only nuclear power can ensure that need in a clean way.
I will be very interested to hear the Minister’s views on this requirement to monitor and quantify the measures being enacted.
Lord Howell of Guildford (Con)
My Lords, I shall speak to Amendments 1, 2, 3 and 4, as well as Amendment 5, on which my noble friend Lord Moylan made an extremely interesting speech, as were the speeches just made by the noble Lords, Lord Ravensdale and Lord West. I declare my interest in energy matters as an adviser to Mitsubishi Corporation—one of the world’s largest producers of heat pumps, as well as of all connectors and the switching stations associated with them, both here and overseas—and the Kuwait Investment Office, with which the linkage, through its oil and gas production, is obvious.
I am afraid this sounds suspiciously like a Second Reading debate rather than a Committee debate. That is perhaps inevitable, given that we are in the midst of a first-class energy crisis—the biggest certainly in my active lifetime. Naturally, your Lordships are taking any opportunity—as we are entitled to do—to relate remarks on this enormous Bill to the very difficult dilemmas that the nation now faces, with no obvious way out, a cacophony of new views about what should be done, an absence of views about the international dimension, which I will mention in a moment, and a general bewilderment that, somehow or other, we will have to borrow a great deal more money to prevent real suffering, collapse and bankruptcy across a large part of the enterprise and small business sector, and so on.
I am not going to support Amendments 1, 2, 3 and 4 because they do not add much to the purposes, or indeed deficiencies, of the Bill. If they did, I would say let us support them, but that is not what they do.
I want to comment in passing on my noble friend Lord Moylan’s remarks on pump storage. He mentioned the Dinorwig installation in north Wales. I had the honour and pleasure of authorising not the original installation itself but the expansion in the early 1980s. One interesting fact for your Lordships is that it was capable then of delivering within 12 minutes 2 gigawatts into the system. The remarkable fact is that it never needs to work at all to be an enormous addition to our generating system and an enormous saving. Why? It is because the fact of what it can do enables the rest of the power system and all the power stations to operate at slightly higher capacities, with lower safety margins, than they otherwise would—in the knowledge that this extra is always there. So we have the extraordinary situation of a vast installation that never need actually operate to make substantial savings. That is one of the anomalies of the national energy system that we have to familiarise ourselves with.
As for the amendments—to a Bill that, frankly, does not leave me totally happy anyway—first, I am unhappy about the lack of any address in the amendments, let alone in the Bill, to the international dimension; at most, they very slightly address it. I admit there is a section on interconnectors, and that is very important. In fact, the interconnector element in our future diversity of supply is going to increase substantially; I think the Bill mentions 18 gigawatts of interconnectors. I understand that Morocco is thinking of adding an enormous 3 gigawatts of clean energy—solar energy using linked cabling from Morocco all the way to the UK—and there will be many similar sources. They all raise very complicated issues since they have to be managed under direct current, because you cannot put alternative current underwater; they have to have amazingly extensive energy transformations from direct current back to the AC that we can use inside our system.
The truth is that the resilience and security of our system is going to depend not less but more on the international environment, international supply and the sorts of issues that have been raised by the horrors of Ukraine and Russia’s determination to distort to the maximum the entire energy system of western Europe—and that includes us physically. All these issues need addressing in intense detail, but I do not see that detail mobilised in the Bill.
Secondly, the amendments talk, as does the Bill, about our climate commitments. Obviously our climate commitment in law, in the Climate Change Act, is to achieve net zero by 2050, but what actually are our climate commitments? I would like to hear from the Minister what new thinking is going on in this respect. Surely the aim of our endeavours in our climate commitments is to limit global emissions and greenhouse gases. The question that we have to ask ourselves, again and again, as we struggle towards net zero, is not only whether we can afford it—and many people say it is going to cost a lot of money—but whether, when we have got there, it will have any effective impact on curbing the growth of global emissions, getting to the Paris targets and halting greenhouse gases. There seems to be an assumption that the greenhouse gases will stop at the white cliffs of Dover if we can achieve net zero. It does not work like that. I am afraid the world is integrated, in the sense that greenhouse gases are increasing very rapidly, and our efforts and contribution need to be rethought again and again in order to make a serious impact on that.
Achieving net zero by 2050 with clean power and electricity requires a multiplication by about seven or eight times of our existing clean power sector—that is, wind, solar and now of course nuclear, which is recognised by the European Union as part of the ESG group and therefore clean energy. That needs to be multiplied by six or seven times, including a vast increase in wind power and solar power, as well as in our nuclear power. That would mean several new nuclear power stations, but they are not being built and are not going to be. No one is planning on building them. We are building one now but it is in considerable difficulties. The ex-Prime Minister said in his outgoing speech that he wanted to build a lot more, but that would be 10 or 15 years away, and the chances of the system working and doing so efficiently, if it is a replication of Hinkley C, are very slight indeed.
All that is just to get to net zero. Beyond that, we must have legislation—and understanding in that legislation—to achieve a genuine contribution to climate change curbing. That is not going to be done. Adaptation is going to be needed on a massive scale to prevent really bad heat in summer, really cold winters and enormous flooding that will affect us as well as many others. That is the element that is not in the Bill, and the amendments would not add very much to it.
As to minimising costs, which the amendment mentions—it is also mentioned in the Bill itself and in the explanatory documents for it—how is this to be done? We will not minimise costs by trying to build, very rapidly, these enormously expensive new, large-scale nuclear stations. We will not minimise costs unless we remain totally integrated into the world energy supply system or unless we deal, day by day, on a sensitive basis, with our Norwegian suppliers of natural gas and electricity. If we take our mind off that for a moment, that gas will probably go elsewhere, as is happening now as Germany tries to fill up its strategic gas storage tanks, as are many other countries. All this is creating not stability, resilience or security but the opposite.
I therefore ask the Minister that when he turns down this amendment, as he no doubt will—he is quite right to do so, because it is unnecessary and adds nothing—he gives us a little assurance that in this new and changing situation, this long-term future which we have to build on and in which, by failing to build on that of 40 years ago, we have now plunged ourselves into this terrible crisis, these things are being addressed and will be taken account of. Perhaps as we go through the Bill clause by clause, we will hear something from him about how the new situation is to be addressed. I do not think this amendment does it; nor, frankly, does the Bill.
Viscount Trenchard (Con)
My Lords, I must declare my interest as a member of the advisory board of Penultimate Power UK Ltd. By the Government’s own admission, the Bill introduces 26 separate measures, based roughly on three pillars, which aim to give the Bill a modicum of coherence. Many of the amendments in this group, however, seem also to be intended to serve as a kind of preamble to the Bill, which, as my noble friend Lord Moylan and others have said, would improve it.
Amendment 1, as eloquently spoken to by the noble Lord, Lord Lennie, seeks to add a principal purpose to the Bill. Amendment 7, spoken to by the noble Lord, Lord Ravensdale, aims to do the same thing. However, these amendments would add not one principal purpose but three. Furthermore, I consider that principal purposes (a) and (b) in Amendment 1 are in conflict with each other, in the sense that while delivery of the country’s climate change commitments is obviously highly desirable, it conflicts with purpose (a) in that resilience and reliability are not served, at least in the short term, by abandoning natural gas as a source of energy with unnecessary haste. Actually, purpose (b) is also in conflict with purpose (c), because it is hard to argue that maintenance of the climate levy helps to minimise costs to consumers or protects them from unfair pricing.
I therefore urge my noble friend the Minister not to accept this amendment, or indeed Amendments 2, 3 and 4 in this group in the names of the noble Baroness, Lady Blake of Leeds, and the noble Lord, Lord Lennie. I understand why they want to introduce a requirement for a strategy and policy statement in line with the Bill, but I regret that the Bill does not cover the whole of the country’s energy strategy or policy. Furthermore, these amendments give a higher priority to meeting climate change commitments than they do to developing reliable sources of energy, which protect the consumer against the risks of intermittency.
That is why I support Amendment 5 in the name of my noble friends Lord Moylan and Lord Frost, and the noble Lord, Lord West of Spithead. This amendment recognises that the Government must have regard to the Ten Point Plan for a Green Industrial Revolution, the Net Zero Strategy, the British Energy Security Strategy and all the other strategies; but that, crucially, they need to compensate for the huge reliance on wind and solar energy contained in those strategies by ensuring that we will have electric power to replace that generated by renewable sources, which are subject to intermittency.
As my noble friend Lord Moylan pointed out, it is necessary for the Government and the public to understand how much achieving the objectives of net zero by 2050 will actually cost. The Government have been, and continue to be, far too cautious in their policy towards nuclear power, but Amendment 5 will require the Government to support nuclear to a far greater extent than they have done so far, because nuclear is completely reliable and not subject to intermittency. One of the points in the 10-point plan covers the delivery of new and advanced nuclear power, while the subsequently published strategies increasingly recognise its greater importance.
Much has been made of the Prime Minister’s commitment in May that we will build one new nuclear power station every year, instead of one every decade. But he did not clarify whether he was talking about a new power station such as Hinkley Point C, with two large reactors each generating 1.6 gigawatts of electricity, or perhaps a bank of NuScale reactors, producing 77 megawatts, or of U-Battery reactors delivering 4 megawatts each. Could the Minister clarify how much new nuclear capacity the Government expect to commission every decade or year?
Baroness Worthington (CB)
My Lords, I will speak to Amendment 7, to which I have added my name. I declare my interest as a co-chair of Peers for the Planet. I apologise for not being present at Second Reading; I wrote to the Minister, and I am grateful for his detailed response to some of my points. I will endeavour to be brief, as this is Committee, and will simply explain why we consider that Amendments 7 and 242, together, bridge the divide that is evident between the two sides of the House, as witnessed in this debate.
The noble Lord, Lord Moylan, was absolutely right that you cannot simply declare that you want to win a war; you need to have tactics and a strategy for winning it. Our Amendment 7, complemented by Amendment 242, provides that strategy, which is, as the noble Lord, Lord Ravensdale, eloquently articulated, fundamentally underpinned by physics. Energy is a question of physics and, if we understand that, we will know that we are not struggling towards net zero but in fact doing very well on that path.
The clarity with which I now see industry communicating on this issue is far greater than it has been over the last decade. It is saying: “Electrify everything that can be electrified and use our abundant resources of clean electricity to decarbonise.” That is how you square the three principal objectives of energy policy: affordability, cleanliness, and resilience and security. That pathway is so clear now that the Bill could be hugely enhanced by having this set out at the front.
I support the Government’s intentions. They seek to address the trilemma of those three objectives, which are fundamental to winning this war against climate change and against the energy crisis that we currently face. That very energy crisis is an interesting reason why we are powering towards net zero faster than ever before: it is absolutely clear that the volatility of gas and oil underpins it, and we cannot forget that. What is the Government’s current policy? It is to reduce our reliance on those volatile commodities, which would serve everyone’s needs: it would help us reduce bills and would give the consumer a reliable source of energy.
The Bill has many measures which we will come on to debate that will help us along that path. But it lacks an overarching statement of objective. We now need to revisit the debates we had on the Energy Act 2013 about the need for a decarbonisation target to provide clarity over this direction of travel. We all sat there—many noble Lords here today were there—and had debates on why knowing our way towards that target was needed for investor and stakeholder confidence. It is now very clear that it is needed because, as the noble Lord, Lord Ravensdale, pointed out, simple mathematics shows that we still have a lot of technology that needs to be put into place to become operational, and we need a plan that monitors progress towards that.
Subsequently, we have added an extra dimension to this: electrification. As I said, physics tells us that electrification is fundamentally more efficient; you will get six to seven times more usable energy from an electricity-based system than if you rely on fossil fuels or hydrogen. Six to seven times fewer wind turbines will be needed to provide the same benefit in terms of heat or transport. That should be of interest to everybody; it saves costs and helps make the system more secure.
So I hope that the Minister will look at our amendment carefully. It adds an extra dimension to this Bill, which will give it so much clarity so that everybody will have a clear sense of the path that we are on. As I have said, the UK should be very proud of the efforts it has taken to date. We are not as exposed to the energy crisis as other countries, because of investments we have made over the last two decades and because we have taken seriously this objective of making our system more resilient and fit for the future. There is an international dimension—I am sure we will come on to talk about this in other parts of the Bill—but it is absolutely clear that the thing that we can do best at the moment is continue on the path of decarbonising our electricity system using technologies that locate cheap power on our shores, to rid ourselves of the insecurity and volatility of gas prices and to move forward to an efficient system that converts primary energy into heat, transport and work. If we can do that, we will show the world how it should be done: do not pick winners but instead create a system that is sensible and will provide the right guardrails for capital investment so that money will flow and we will all benefit. I look forward to the Minister’s response to our amendment.
Lord Teverson (LD)
My Lords, it is always a great pleasure to follow the noble Baroness, Lady Worthington, and although we do not always agree on absolutely everything, I reckon that I agree with about 99.5% of her speech.
First, I declare my interest as chair and director of Aldustria Ltd, an energy storage company; I will try to avoid too much discussion of that area. On these amendments, I very much thank the noble Lord, Lord Lennie, for having opened our debate today. I very much agree with the principle of what the Opposition Front Bench is trying to achieve here. What this Bill does not have—the noble Lord, Lord Moylan, put it very well indeed—is great focus or coherence. It would be good to start trying to improve that through a type of preamble that puts context, including strategic context, at the beginning of the Bill. I hope that we can refine that more on Report; it may not be perfect, but perhaps we can find a way of doing that between us.
I also agree with the noble Lord, Lord Moylan, about the pricing of electricity and how that works. As he says, our European colleagues are looking at that very strongly now. There must be a better way of doing this; it cannot make sense to the public that we charge and price our main energy sources on the marginal cost of the last producer. Clearly, that does not make sense, and it does not do the reputation of the fossil fuel industry any good either. Yes, they might use their money to give back to shareholders—hopefully they will use it for different types of investment and diversification—but it besmirches the whole sector, and we need to find a way around that.
Where I would disagree very strongly with the noble Lord, Lord Moylan, is around trying to game or look at alternative dates for net zero. It seems to me that in September 1939 the Cabinet probably did not look at whether to declare war on Germany this month or two years later or four years later. We may criticise Neville Chamberlain for all sorts of things in retrospect, but I guess that is not one of them. It was an absolute threat to our future security, and we made a decision. If we think of the costs to this country, and to us and consumers, of our right stand on Ukraine, I guess that we have not done those calculations either—because we know that Putin’s war has to fail and that, for European security and our long-term security, we in the western world need to pursue the tactics that we have.
I thank the noble Baroness, Lady McIntosh of Pickering, for her amendments, particularly in mentioning rural aspects of oil—my own household is on oil, and we are not covered by a price cap—and in particular business. In all the media coverage that we have had on this very real energy crisis over the past months, it is funny how business has very much taken second place to households and consumers. Clearly, households and consumers are ultimately the most important, but business is completely fundamental to our economic performance and being able to solve this crisis in the long term.
I am not absolutely sure about energy from waste plants. Clearly, it does not make sense to export it, but the real challenge there is in starting to raise recycling again, or even AD in terms of other parts of household waste. I was so impressed by the forensic look by the noble Lord, Lord Ravensdale, at investment need and the scale of the challenge, and also at how we need to measure that and put proper planning into how we meet it.
The one other area that I would like to mention comes back to 2013 and the then Energy Bill, mentioned by the noble Baroness, Lady Worthington. At that time, one big thing that we discussed was the energy trilemma of security, cost and decarbonisation. The noble Viscount, Lord Trenchard, brought that back up again. But what this crisis, and the almost a decade between these two Bills, has shown, is that it is no longer a trilemma—they all work in exactly the same direction. Renewables are now cheaper than fossil fuels, as we know—it is why we have the huge price increases that we do. Our security is reinforced by having much more renewable generation on our own seas and our own land—and, as a result, we have lower costs and a decarbonised energy system as well. We have moved on since that time.
We need to have a focus in this Bill, and I support the amendments. We need to move on in this debate, but I am absolutely sure that we will need that coherence when we get to Report.
Baroness Jones of Moulsecoomb (GP)
My Lords, the whip, the noble Baroness, Lady Bloomfield, has spoiled a lot of my fun today, because I was going to tell the Government exactly what they needed to do if they were going to produce an Energy Bill that deals with the crises that we are facing. We are facing three immense crises at the moment, and one of them is, of course, the climate crisis. There are strong whiffs of climate denialism in your Lordships’ House, which I find absolutely staggering, considering that the science is so very clear on it. However, it is a bit last century, that sort of attitude, so I understand why it might exist here in your Lordships’ House. But we have those crises—the climate emergency, the ecological crisis and the cost of living crisis—and this Energy Bill is so topical. It is exactly the sort of thing that we need to bring forward so that we can deal with all these crises, and I guess make life better for millions of people in Britain and the rest of the world.
I agree with a lot of what the noble Lord, Lord Howell, said. He made the point that this does not do the job. Also, I am very sympathetic to Labour’s initial amendments. I understand why they are in there, but it reads a lot more like the sort of issues that a Labour Government would bring forward—hopefully not too long in the future.
I am concerned that our time is going to be wasted on this Bill, because we have a new Prime Minister—a climate-wrecking ideologue who will make it incredibly difficult for us to get the sort of issues into this Bill that we need. The noble Lord, Lord Howell, and other noble Lords also mentioned nuclear. We have to get real on the fact that nuclear is not the answer. Nuclear power stations take a long time to come online. There will be all sorts of problems even getting them started, so they are not the answer. We have to think faster than that; they just will not work.
Baroness Hayman (CB)
My Lords, I declare my interest as co-chair of Peers for the Planet. I will speak very briefly to the amendments. I have amendments of my own later in the Bill on energy demand reduction and the regulator’s responsibilities.
I support the amendments in the name of the noble Lord, Lord Ravensdale. It is important that this Bill is specific about the implementation of the aspirations that we hear from government. We have not had enough detail about the plans to implement the strategies, and we have not had enough detail in the strategy. For that reason, I have some sympathy with the amendment of the noble Lord, Lord Moylan. He raises important issues about putting flesh on the bones of the aspirations, but I disagree with him about changing the timetable. I also disagree with the noble Viscount, Lord Trenchard, on the question of whether, because our contribution to global emissions is low, we should go ahead with the contribution we can make in innovation and leadership, which completely ratchets up the effect of this country’s own policies on a global scale.
One serious point I want to make about the noble Lord’s amendment is that I am extremely worried about the suggestion that the Secretary of State should commission and publish “an independent assessment” of the costs, the implementation dates and the risks of the net zero strategy. We have the Climate Change Committee, which is admired for its work throughout the world. It is an important and respected body and it is independent of government. It would be ridiculous to try to get different independent advice: if we go down that road, we are in “anyone’s view is the best view” territory. We have an independent adviser for government. We have the Office for Budget Responsibility; we have lots of people who can comment on the advice it gives, but it would be quite wrong to put in this legislation anything that undermined its position.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
Let me say first what a pleasure it is to open for the Government in today’s discussions: I am sure we will have lots more as we go through the Bill. I thank the noble Lords, Lord Lennie, Lord Ravensdale and Lord West, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friends Lord Frost, Lord Moylan and Lady McIntosh, for their amendments, which seek to address the purpose and strategic aims of the Bill and of course the Government’s energy policy more generally. That allowed us to have a debate with more of the flavour of a Second Reading debate, rather than addressing the specifics of the Bill, but that is understandable given the nature of the amendments.
I turn first to Amendments 1, 6 and 7 from the noble Lords, Lord Lennie and Lord Ravensdale, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friend Lady McIntosh. These amendments all seek to address the fundamental purpose of the Bill. While they are well-intentioned, it is my strong contention that these amendments are not necessary as the Bill already has a clear purpose. Provisions in the Bill as drafted not only have regard to the outcomes those noble Lords seek, but they are actually designed with those outcomes in mind. For example, a number of measures in the Bill will contribute to the resilience of the UK’s energy system—most obviously, those powers related to the ensuring the security of the core fuel sector. I am happy to give the assurance that my noble friend Lady McIntosh sought today: that energy security is of paramount importance to this Government.
Amendment 245 would give effect to Clause 1 once the Act is passed and, for the reasons I described, I do not believe that it is necessary. On Amendment 5, from my noble friends Lord Moylan and Lord Frost, and the noble Lord, Lord West of Spithead, relating to energy strategy statements, I reassure them that the Energy Bill is to a significant extent an expression of the Government’s strategic intent as set out in the 10-point plan, the energy White Paper, the net-zero strategy and the various sector-specific policy papers we have published. Furthermore, government policy evolves over time and strategies do not always neatly replace others. Some aspects may remain government policy, and some are updated in response to a changing landscape—of course, we have seen that very recently with the Ukrainian invasion. I submit that, rather than prescribing policy intent in primary legislation, it makes more sense to allow Ministers to exercise discretion in these matters and respond to a changing policy environment and international environment.
I move on to the requirement to publish a strategy
“for managing intermittency of electricity supply”.
Intermittency is an important issue, but the National Grid Electricity System Operator is responsible for balancing electricity supply and demand, because while production is intermittent, so is demand. The Government remain confident that they have all the tools needed to operate the electricity system reliably. We can call on a wide range of technology types to do this, some of which were mentioned in the debate today, including emergency gas-fired generation, interconnectors and, crucially, demand-side responses such as insulation, retrofit measures, et cetera.
The capacity market is the Government’s main mechanism for ensuring the security of electricity supply. It has done a great job and we have already secured the majority of Great Britain’s capacity needs to meet future peak electricity demand out to 2025-26. The Government have also committed to ensuring a flexible system which involves the use of a wide range of technologies—again, a number of them were mentioned in the debate today—including battery storage and pumped storage, which I was really interested to hear my noble friend Lord Howell talk about. In my electrical engineering degree many years ago, we studied that particular development; for those who have not been able to see it, it is an incredible feat of engineering.
This amendment also has a requirement to commission assessments of the 10-point plan and of the costs of achieving net zero. My noble friend Lord Moylan raised concerns that progressing towards net zero is a “constraint” to achieving affordable and abundant energy in the UK. I reassure him that, as we transform the energy system, the Government are committed to pursuing the most cost-effective solutions, which, at the moment, are offshore and onshore wind. Ensuring security of supply and decarbonisation, and affordability to the consumer and the Exchequer, are of critical importance. While there will be costs, the costs of inaction in this sector, as we have seen through the invasion of Ukraine, are much greater. Had we not acted over the last decade or so to secure the second-largest supply of offshore wind in the world, the costs we would be facing now would be much greater and our security of supply would be at much greater peril.
As set out in the Net Zero Strategy, we estimate that the net cost to achieving net zero, excluding air quality and emissions-savings benefits, will be the equivalent of 1% to 2% of GDP in 2050. That strategy was informed by the Treasury’s 2021 Net Zero Review, which looked at the potential costs and benefits to businesses and consumers of the transition to a net-zero economy.
Furthermore, several mechanisms already exist to analyse the path towards net zero, as mentioned by my noble friend. For example, the Government’s approach to net zero is already subject to independent scrutiny by the Climate Change Committee, whose 2022 progress report included an analysis of the economic impact of decarbonisation. Much of this work already takes place.
I turn to Amendments 2, 3 and 4, tabled by the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie. The Energy Act 2013 introduced the power for the designation of a strategy and policy statement that sets out the Government’s strategic priorities for energy policy, the roles and responsibilities of those implementing such a policy and the policy outcomes to be achieved. The Government have committed to laying a strategy and policy statement for energy policy later this year and a statement at the earliest appropriate time. Designation of a strategy and policy statement will ultimately be a decision for Parliament, not the Secretary of State. Therefore, I submit that these amendments are duplicative and unnecessary.
I thank my noble friend Lord Moylan for submitting Amendment 231. He raises an important point; splitting the wholesale market into two—namely, creating one market for variable renewables and another for firm generation—is already being considered as part of the review of electricity market arrangements, or REMA. An initial consultation, which included exactly this proposal, was published in July. Splitting the market is one of many options being considered within REMA. My department is currently assessing the viability of implementing a split market and the potential costs and benefits associated with doing so.
Based on stakeholder responses to the consultation and based on further policy developments, we will publish a second consultation in 2023 to set out any feasible options in more detail. Legislative proposals on how to implement recommended reforms will then follow. Adding a clause into the Bill that commits the Secretary of State to publishing legislative proposals on splitting the market by a specific point in time would, I submit, prejudge the outcomes of both the consultation and the review.
Lord Moylan (Con)
My Lords, did I hear my noble friend say 2023? Did I hear that correctly?
Lord Callanan (Con)
Yes, it is a complicated area that requires proper and detailed policy analysis, but that work is under way, and we will do so.
Splitting the wholesale market would a necessitate a fundamental and irreversible design of our electricity market arrangements, and without the appropriate consideration of the potential costs and any potential benefits and without sufficient stakeholder input, it could well lead to higher bills for consumers, and it would create an investment hiatus which would jeopardise our ambitions for decarbonising the power sector by 2035—which is exactly the point I was making to my noble friend. So, this is an important issue, but it is one that needs to be looked at thoroughly, properly and professionally. I hope that my noble friend is assured that the issue is being closely examined and will therefore feel able to withdraw his amendment.
Baroness Worthington (CB)
My Lords, would the Minister care to comment on the fact that—and this has been mooted as a potential solution in the short term during these unprecedented times where we see such high prices and so many people suffering—there is surely a logic to take a power now, to use it in extremis and then to continue with the longer-term conversation? I think the nation wants to see some action quite quickly and we have an Energy Bill.
Lord Callanan (Con)
I do not think it is important to do that at this stage; we have published the consultation, we are closely analysing responses, as the noble Baroness will understand. It is a difficult area, it is a complicated area, there are a number of potential ramifications, and we think it is worthy of consideration. If we took a power now, that might have a very destabilising effect on the market and on the amount of investment that is flowing into many of the sectors, so the Government’s position at the moment is that we do not think that is necessary or desirable.
I reassure noble Lords that the addition of electrification to the Energy Bill is also unnecessary. The net-zero strategy sets out the Government’s view on how electrification can enable cost-effective decarbonisation in transport, in heating and in industry—to that extent, I agree with the noble Baroness, Lady Worthington, and the points that she made—along with our approach to deliver reliable, affordable and low-carbon power. The energy security strategy accelerated, as I am sure the noble Baroness is aware, our ambitions for the deployment of renewables for nuclear and for hydrogen. I can assure noble Lords that the Government will never compromise our security of supply: that remains our primary consideration. But our understanding of what the future energy system will look like and the level of the demand that we will need to meet through electrification will essentially and inevitably evolve over time. So, we are not targeting a particular solution, but we rely on competition to spur investment in the different technologies and new ways of working, and new technologies such as more efficient batteries et cetera are coming onstream every day. We will closely take all these matters under consideration. We take the view that the Government’s role is to ensure the market framework is there and that encourages effective competition and, at the same time, delivers a secure and reliable system.
Finally, let me thank the noble Lords, Lord Howell and Lord Teverson, the noble Viscount, Lord Trenchard, and the noble Baronesses, Lady Jones and Lady Hayman, for their valuable contributions to the debate. I assure my noble friend Lord Howell that we are working internationally with the US, with the EU and with our other partners to produce a secure and reliable energy system together. In response to the noble Viscount, Lord Trenchard, I am sure he will be pleased to hear that through the £385 million advanced nuclear funds, we are providing funding to support research and development for precisely the small modular reactor designs that the noble Viscount wishes to see, and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest. Therefore, with the reassurances that I have been able to provide, I hope that noble Lords will not press their amendments.
Lord Lennie (Lab)
My Lords, first, I apologise for not thanking the Minister for meeting us earlier today; that was helpful. To answer one or two points, the noble Viscount, Lord Trenchard, asked about what Boris Johnson said when he was Prime Minister—up to yesterday, or today. He raised questions about power stations being built and the figure of one a year for however many years necessary, and not being sure what power stations there were. The PM was never really good on detail and I think this proves that point. That does require some clarification.
The bigger point raised by the noble Lord, Lord Howell, and the Minister was in relation to the preambles. They asked: why these preambles? They are a combination, if you like, of the preambles to the climate change and sustainability Act and the Energy Act 2013, as the Minister pointed out. They seek to give some definition, some guidance, to what the Bill is intended to achieve, as opposed to its rather rambling, ongoing, imprecise nature. It is not so much that the Bill is objectionable; it is just not adequate to achieve what it intends.
We will look at this before Report. With those few comments, I beg leave to withdraw my amendment.
Lord Foulkes of Cumnock
Member’s explanatory statement
This amendment requires there to be an actual impact or likelihood of an impact on the consumers whose interests are being protected, whilst retaining discretion for the Secretary of State and the economic regulator to exercise their judgement. This would enable Ofgem to better justify and evidence decisions enabling strategic anticipatory investment.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, it is my responsibility and pleasure to move Amendment 8 and to speak to Amendments 9, 14 and 16 in the unavoidable absence of the noble Baroness, Lady Liddell, who will be with us from Wednesday onwards. She sends her apologies but I am pleased to speak on her behalf, and my own, and to thank the Carbon Capture and Storage Association for its excellent briefing about this issue and the implications involved and the help it has given us with drafting these amendments.
I have two points before I go on to the detail of the amendments. As others have said, the UK has one of the largest potential carbon dioxide storage capacities in Europe. This is a very important issue that we are dealing with today, and it should not be underplayed and underestimated. It extends throughout the whole United Kingdom—Scotland, England, Wales and Northern Ireland. Also, as I understand it, it will support 50,000 jobs—a not insignificant number, given the current situation.
Turning first to Amendments 8 and 9, these deal with the importance of a net-zero principal duty to enable rapid network expansion. If we in the UK are to meet our emission reduction targets, carbon capture and storage will need to be rolled out rapidly across the UK during the rest of this decade. To capture and store 30 million tonnes a year by 2030, as the Net Zero Strategy says, we will need to go from nothing to building significant CO2 infrastructure in a short space of time. It is therefore vital that the regime set out in the Bill enables initial oversizing of CO2 pipelines, increasing their size, which will allow for the subsequent rapid network expansion to connect more capture sites to the growing suite of storage sites.
The National Infrastructure Commission’s 2019 regulation review, Strategic Investment and Public Confidence, recommended that the economic regulators’ duties be updated to facilitate long-term investment in networks. It recommended implementing updated duties that will enable network operators to deliver the best results for the public by building and investing in networks that are resilient and fit to deliver net zero while also providing value to current and future users of those networks.
The Government should be commended—it is unusual for me to commend them—for proposing that the duties of the economic regulators include consideration of the needs of existing and future users, but this seems a missed opportunity to include a duty to deliver net zero by 2050, to help the regulators to effectively balance these two equally important factors.
It should be noted, however, that outside the regulators’ core duties, the Bill includes a further requirement for the regulator to support the Secretary of State in having regard to the Climate Change Act 2008, and the new CCUS strategy and policy statement should go some way to addressing this. However, in practice, these mechanisms are not as strong as the regulators’ own duties.
This amendment is therefore essential to give the regulator the necessary powers to make decisions that enable the required strategic anticipatory investment on the network. Ofgem will need to be empowered to make well-justified decisions that balance the interests of current and future transport and storage network users with delivering net zero.
That deals with Amendments 8 and 9. I now come to Amendments 14 and 16, which would ensure that all types of permanent storage are included. Of course, geological storage is not the only type of permanent storage of CO2. This can also be achieved by types of usage where the carbon dioxide is used in a way that it is chemically bound in a product and not intended to re-enter the atmosphere. As currently written, this clause allows only for geological storage, so this amendment is intended to recognise that there are other methods of permanent storage. However, it is important to qualify in this drafting that only carbon capture and usage where it is intended to be permanent—and therefore subject to monitoring and verification—can qualify for this.
It is worth noting that in other areas of the Bill a wider definition of storage is used, and the question could be asked: why are there different definitions for each clause of the Bill? Perhaps the Minister could explain that in his reply. This amendment aligns with Clause 63(8), where the Bill defines “storage” as
“any storage with a view to the permanent containment of carbon dioxide.”
Would it therefore be possible to have a common definition of storage used throughout the Bill?
I hope that the Minister will give a positive response to these amendments and I beg to move.
Baroness Worthington (CB)
My Lords, I will speak very briefly in support of Amendment 14 and reiterate the question of why there may be inconsistent definitions of storage in the Bill.
In my time exploring carbon capture and storage over the years, I have become somewhat cynical about its ability to scale. The sheer cost of it and the presence of alternatives that may be cheaper and more secure mean that its role will be relatively limited. I am sure that it will play a role, but only if we enable it to be pursued in its widest possible senses. It is absolutely the case that you can store large volumes of carbon dioxide underground; we have aquifers and other underground storage facilities that could be used for this, including in the North Sea and on land, and we should explore those where they make sense. However, there are other mechanisms through which you can enable the use of other stored forms of carbon. Novel techniques are coming to market now involving plasma torches, which, applied to natural gas streams, deliver pure streams of hydrogen plus black carbon. That black carbon can then be used as a manufacturing commodity. Therefore, it would be foolish of us not to include that as a potential option. Similarly, CO2 is used as a binding agent in the production of building materials. In fact, currently the CO2 has to be bought at an extortionate rate, so using pure waste streams of CO2 for the production of building materials will again be a permanent form of storage and it should be supported in the Bill. I fully support this amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, I want briefly to reinforce the comments that have already been made. I wish to speak particularly in favour of Amendment 9, on the duty to assist in delivering net zero, and to Amendments 14, 15, 16 and 19; as has been argued clearly, having a consistent definition of storage throughout the Bill makes total sense.
Like the noble Baroness, Lady Worthington, I am very sceptical about the claims made about carbon capture and storage. Often, we see it used as a “get out of jail free” card: “We’ve got all the numbers and they don’t add up. We’ll just throw in a figure for carbon capture and storage to allow us to continue as we are”. That is clearly unviable. None the less, it makes a lot of sense to grab carbon emissions wherever they occur and use them in a constructive way.
Lord Teverson (LD)
My Lords, I wish to speak to my Amendment 10. First, let me say that I very much agree with the drift of the debate so far, in that carbon capture, usage and storage has got a lot more real in the past few years—I give the Government credit as well—in terms of clusters and using carbon capture, primarily for industrial processes. What we should not be using it for is gas power stations that are CS-ready and which through carbon capture become much less efficient in their energy production. Clearly, we should be substituting gas and not using it in that way. The same absolutely goes for usage, where possible. I am sure that a lot of fizzy drinks and other such things use it as well.
In my Amendment 10, I am concerned that there should be in the Bill a duty for the Secretary of State. We should have transparency in the sector. What we are trying to do here is stop cross-subsidy between networks and network users. In many ways, this is a probing amendment. I would be interested to hear the Minister’s reaction on how we can keep these networks and markets transparent so that we can assess users, sectors and networks in their own right and avoid transfer charging or subsidy from one to the other without understanding whether there is a case for it.
Lord Hutton of Furness (Lab)
My Lords, I want briefly to speak in support of my noble friends’ Amendments 8 and 9, which touch on some important issues that we ought to debate in this House.
To their credit, the Government have brought forward legislation that imposes significant duties on the Secretary of State and the economic regulator. I am sure that we all welcome those duties. However, when it comes to parts of the Bill that create general overriding obligations and purposes, it is important for the legislation to be drafted correctly and coherently, otherwise we create a rod for our own backs—not just for this Government but for future Governments as well. There is always a general case to be made for as much clarity as possible around how those duties and responsibilities are defined. My noble friends’ amendments will certainly help to do that.
I have a specific point to raise with the Minister, and I hope that he will be in a position to respond to it. Having looked at Clause 1 as a whole, the provisions that concern me the most are those in Clause 1(3). One of the duties that we are imposing on the Secretary of State and the regulator is to promote at all times a culture of competition between providers in this sector.
I want to raise a concern with the Minister. Carbon capture, storage and utilisation are huge process engineering challenges for British industry to rise to. I welcome very much the direction of travel that the Government have set out for testing and developing business models for CCUS projects; it is an incredibly important step. My only concern is that, although I am generally a very strong supporter of competition in markets, we can take that ideology too far and apply it in a context which probably will not secure the objectives that we have in mind. Over the next few years, I want to see a mobilisation of British industry, particularly the engineering companies in this country, so that they can come together and work on these projects. It will take that sort of collaborative approach, rather than an approach based purely on competition. If we can pursue that path, it will deliver more of a result over a shorter period than pursuing a purely orthodox, competition-based approach would.
I know that there is no specific amendment tabled to Clause 1(3) today, but I want to put a marker down because this is a general issue of principle. The question is simply this: how are we best placed to mobilise all of the amazing engineering resources that we will need in this country to meet our carbon capture, utilisation and storage targets if it is to be driven purely by competition as opposed to collaboration? If we pursue purely the competitive approach, I suspect that quite a lot of the jobs that the Government have talked about in the Explanatory Memorandum will not come to UK companies; they will go to Finland, Poland, Germany and other countries that are slightly further ahead of us in developing and applying some of the technologies that we will need. There is a general issue here that needs to be raised.
I should have declared an interest at the beginning of my remarks. I am the chairman of Energy UK, which represents the energy companies in the UK, and of Make UK, which represents all the engineering companies.
Lord Lennie (Lab)
My Lords, Amendments 11,12 and 13 in my name would all strengthen the relationship between Ministers and the economic regulator by insisting that the Secretary of State and the economic regulator are bound by the listed regulatory principles and the need to contribute to achieving sustainable development rather than just having regard to them. Further, they would oblige a Minister to be bound by their duties as a Minister, as opposed to just having regard for them. They would also require the economic regulator to be bound by the need to assist the Secretary of State, compliant with its duties and targets. It is not sufficient to have regard to these matters; it is important to be bound by them. Can the Minister say what “have regard to” means if not to be bound by them?
Amendments 15 and 16 espouse that the Bill does not specifically include carbon capture usage. To add to the example given by the noble Baroness, Lady Worthington, in January 2021, the major US oil company Chevron announced that it had made investments in the San Jose-based corporation Blue Planet Systems—then a start-up—which manufactures and develops carbon aggregates and carbon capture technology intended to reduce the carbon intensity of industrial operations. Blue Planet Systems manufactures carbon-based building aggregate from flue-gas-captured CO2. These amendments aim to encourage the use of captured carbon as opposed to its storage.
Lord Callanan (Con)
My Lords, I thank everyone who has contributed to this short debate. Addressing the amendments in turn, I will start with Amendment 8, tabled by the noble Baroness, Lady Liddell, and my old friend the noble Lord, Lord Foulkes, who is very conciliatory today—I am suspicious; something has happened to him over the summer, but I am sure that we will get the old noble Lord, Lord Foulkes, back before we get much further into the debate.
This amendment seeks to amend the principal objective applying to the Secretary of State and the Gas and Electricity Markets Authority in respect of consumer protections. Under the current drafting of this principal objective, it is for the Secretary of State or the economic regulator to protect the interests of consumers who they consider may be affected by regulatory decisions. This drafting is intended to ensure that the economic regulator and Secretary of State have discretion as to the consumer impacts that are taken into account. While the noble Lord’s and the noble Baroness’s amendment is intended to ensure that only actual or likely impacts are taken into account, we consider that the existing drafting already provides for this. Therefore, I submit that the amendment is unnecessary.
I turn next to Amendment 9, which is also in the name of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, joined on this occasion by the noble Baroness, Lady Bennett. The amendment as drafted would place an additional principal objective on the Secretary of State and the economic regulator to assist in the delivery of the net-zero objective. I know that we have had this discussion on a number of Bills, but I will reiterate that, under the Climate Change Act 2008, the Secretary of State is already bound by law to ensure that the targets to reduce greenhouse gas emissions are met.
Under Clause 1(6), the economic regulator is required to have regard to the need to assist the Secretary of State in complying with his duties to achieve carbon emissions reduction targets and to have regard to these targets in each of the devolved Administrations. I therefore submit that the economic regulator is already required to take these net-zero targets into account in its regulatory determinations.
Next, I turn to Amendment 10, proposed by the noble Lord, Lord Teverson. This amendment seeks to ensure that cross-subsidy of carbon dioxide transport and storage activities, from users of other networks, is avoided. Clause 1 of the Bill establishes the Gas and Electricity Markets Authority as the economic regulator of carbon dioxide transport and storage. It also establishes the principal objectives and general duties for the Secretary of State and the economic regulator in the exercise of their respective functions in relation to the economic regulation of carbon dioxide transport and storage.
The principal objectives in Clause 1 include protecting the interests of current and future users of the network and those of consumers. In relation to the regulation of gas and electricity, the Secretary of State and the Gas and Electricity Markets Authority remain bound by the principal objectives to, respectively, protect the interests of current and future consumers in relation to gas conveyed through pipes, and in relation to electricity conveyed by distribution systems. Different principal objectives are appropriate to reflect that the objectives for carbon dioxide transport and storage networks are different from those of the gas and electricity networks.
Under the provisions in the Bill, the economic regulator should be able to take into account, in its decision-making in relation to CO2 transport and storage activities, any impacts on users of gas and electricity networks that may arise from those decisions. I hope that the noble Lord is sufficiently reassured on this point.
I move on to Amendment 11, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. This seeks to ensure that the Secretary of State and the Gas and Electricity Markets Authority are bound by the principles of regulatory best practice and the need to contribute to the achievement of sustainable development. Clause 1 sets out the principal objectives and general duties of the Secretary of State and the economic regulator. The principal objectives are complemented by statutory duties on the Secretary of State and the economic regulator to have regard to certain matters. This includes having regard to principles of regulatory best practice and the need to contribute to the achievement of sustainable development. To have regard to these matters means that the Secretary of State or the economic regulator, as the case may be, must give genuine attention and thought to these matters.
In a complex sector with varying objectives that can sometimes conflict, it is important that the regulator’s duties strike the right balance between setting out all relevant issues and considerations, while giving some necessary discretion to the regulator to balance those considerations in its decision-making process and to have sufficient authority and independence in that decision-making. I hope that explains the point for the benefit of the noble Lord, Lord Lennie.
The formulation of the statutory duty as proposed by the noble Lord and the noble Baroness in our view risks compromising what is quite a delicate balance. The greater the number of statutory duties, and the more binding their nature, the more difficult the act of balancing the different, possibly conflicting, duties becomes. I hope that provides sufficient reassurance.
Amendments 12 and 13, again from the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, also seek to amend the statutory duties applying to the Secretary of State and the Gas and Electricity Markets Authority to ensure that the greenhouse gas emissions reduction targets under the Climate Change Act 2008 are a binding consideration in regulatory determinations. In relation to Amendment 12, as I have already set out, under the Climate Change Act the Secretary of State is already bound by law to ensure that the targets to reduce emissions are met. We therefore do not consider that this amendment is necessary.
Baroness Worthington (CB)
I have a point of clarification. Are the definitions different because regulation over transportation is not needed or is the Minister saying, “We have picked a winner. It is going to be storage through this mechanism and we are not interested in the innovation that is coming through in these other sources of permanent storage.”? If it is the latter, I would find that very hard to understand in a Bill that is seeking to support new technologies.
I think it is the case—the noble Baroness, Lady Bennett, mentioned it—that there is a company in the UK already doing this, with limited support from government. It can scale. It is not a silver bullet by any means but there is not a single operational carbon capture and storage facility in the UK apart from that one, and yet the Bill does not seem interested in supporting it. I would like to understand: if the Government is interested in supporting new technologies, can we make that as broad as possible?
Lord Callanan (Con)
The Bill is intended to establish an economic means of support for geological formation. Of course, I commend the company referred to by the noble Baroness, which is managing to find ways of—I hope—permanently storing carbon dioxide in a form other than geological formation; indeed, there are other potential support mechanisms that could be deployed towards that. There is lots of research and development funding through UKRI and there is a whole range of other advanced technologies that we are supporting. In this case, in relation to economic regulation, the market mechanism that we want to set up on CCUS is dedicated principally towards geological long-term storage; we think that is the area that needs support under this system. That would provide the vast majority of storage that we can envisage at the moment but, of course, we are always willing to consider other methods. If this company is proving to be a success, that is great and I would be very happy to look at alternative ways of supporting it.
Lord Foulkes of Cumnock (Lab Co-op)
I hope the Minister does not think I have gone soft—heaven forbid. It may be that I am not putting my foot on the pedal at the moment because of the reshuffle that is under way. I would like to see the Minister back so that we can re-engage in our usual hostilities, which we both enjoy. His reply has been very full but it needs careful consideration, looking at what he said in more detail in Hansard and discussing it among ourselves; I will discuss it with my noble friend Lady Liddell. The noble Baroness, Lady Worthington, has made some very good points that need to be taken account of. I hope that the Minister will continue discussions with the Carbon Capture and Storage Association about the points that it has been making. In view of the further discussions that might take place, I am willing to withdraw my amendment.
Lord Foulkes of Cumnock
Member’s explanatory statement
This amendment ensures consistency with the existing regulatory regime, namely the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010, which provides for the granting of geological storage licences by the Oil and Gas Authority (now the North Sea Transition Authority). This amendment would enable private operators to develop merchant models to transport and store carbon dioxide in the longer term. This will also enable cross-border transport and geological storage of carbon dioxide to develop in time, without having to rely on exemptions being granted to allow private networks to develop.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, it is me again. In moving Amendment 17, I shall speak also to Amendments 18, 20 and 26.
Amendment 17 would create a licensing regime fit for the future because it would ensure that there was the necessary consistency with the existing regulatory regime—the granting of geological storage licences by the Oil and Gas Authority, now the North Sea Transition Authority, under the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010—and that it did not operate in isolation.
The amendment would future-proof the regulatory system by enabling private operators to develop merchant models to transport and store carbon dioxide in the longer term. That would enable cross-border transport and geological storage of carbon dioxide to develop in time without having to rely on exemptions being granted to allow private networks to develop.
Designing a new licensing regime to develop successful at-scale transport and storage networks for CCUS is challenging, and the industry welcomes the Government’s rapid work to develop that in the Bill. As we have seen in other regulated industries, the first licences awarded are likely to be very different from those awarded a few years down the line, and the economics of the technology and market drivers will change too. Ofgem, as the economic regulator, will therefore need to amend and refine licences as necessary and collaborate with other regulators, such as the NSTA, which is already able to award licences to operators to store CO2 under the Energy Act 2008.
If a merchant arrangement developed where a CO2 store was run privately outside of the regulated network, would that not be something to encourage, provided that the safety of the CO2 stored was regulated as it is presently by the NSTA? It would be sensible for the legislative framework to be sufficiently flexible to facilitate that.
The United Kingdom has significant geological assets, with one-third of Europe’s entire offshore CO2 storage potential. That is equal to that of all the other EU states combined; in Europe, only Norway has more. This enormous potential to offer CO2 storage services to European and other countries presents the opportunity for the UK to become a global leader in CCUS, as it should be, and accelerate the global efforts to prevent CO2 emissions. The legislative framework should avoid any future barriers to cross-border transportation of CO2.
Amendment 18 would ensure that all types of permanent storage were included in the Bill. As with Amendments 14 and 16, I repeat that geological storage is not the only type of permanent storage of CO2. As the noble Baronesses, Lady Worthington and Lady Bennett of Manor Castle, said, it can also be achieved by types of usage where the carbon dioxide is chemically bound in a product and not intended to re-enter the atmosphere. The Bill as it is currently written allows only for geological storage, so the amendment is intended to recognise that there are other methods of permanent storage. However, it is important to qualify in this drafting that it applies only to carbon capture and usage where it is intended to be permanent and therefore subject to monitoring and verification.
Amendment 20 specifically includes other modes of transporting carbon dioxide, such as shipping. The pipeline will be the primary form of transporting CO2 but other modes of transport, including ship and rail, are already being developed in the UK and in other jurisdictions. The Bill must therefore be designed in such a way as to not limit future modes of CO2 transportation. CO2 transport by ship is almost certain to be part of the Scottish and south Wales clusters—the noble Lord, Lord Wigley, is here today—and subsequent phases of other CCUS clusters.
The amendment would ensure that transportation by ship and all other means of transport were included in the Bill rather than leaving their inclusion to regulations. That would send a strong and positive signal to the investment community that there were no barriers to the UK’s development as a global CO2 shipping hub.
Amendment 26 is a point of clarification to ensure that if a licence termination event has arisen, the Secretary of State has the discretion to revoke the licence, as opposed to the current wording, which suggests that it would happen automatically. New regimes need a wee bit of flexibility, particularly when they are bedding down. The right—rather than the obligation—to terminate is a useful formulation when facing first-of-a-kind situations. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise briefly, having attached my name to Amendment 23 in the names of the noble Lord, Lord Lennie—who, of course, by the nature of these structures has not yet spoken on it—and the noble Baroness, Lady Blake of Leeds. I attached my name only to Amendment 23 but Amendments 27 and 35 form something of a package; they all express concern about requiring regulation so that licences must be only
“granted to fit and proper persons”.
As I was contemplating these amendments, I thought of the Oral Question earlier today in which my noble friend Lady Jones of Moulsecoomb took part, which looked at the situation we have now with the water companies in the UK. There is an obvious parallel with the crucial nature of the water companies and their fit and proper behaviour—and, without reopening that debate, their use of resources et cetera. If we are to go forward with carbon capture and storage at scale, it is obviously crucial that it is absolutely trustworthy and reliable, including in financial terms. We are talking about long-term investments for which we need real stability and certainty. The other parallel that occurred to me in contemplating this group was what happened with carbon offsetting—a phrase that has a bad odour in many parts of the world where we have seen a great deal of cowboy behaviour and many problems occurring.
Putting in this explicit “fit and proper persons” test, which, as the noble Lord, Lord Lennie, explained, is drawn from the National Security and Investment Act, is a very good parallel. If we are to securely store this carbon for the long term, in a manner that means the state does not have to step in to try to clean up a mess left by a private company, this is one way of attempting to ensure that that happens.
Baroness Blake of Leeds (Lab)
My Lords, it gives me great pleasure to contribute on this set of amendments. I add my admiration and support for my noble friend Lord Foulkes, who has stepped into the breach admirably in the unfortunate absence of my noble friend Lady Liddell. I very much look forward to her return. I also add my thanks to the Minister for giving us time today to discuss this very important Bill; I think all of us recognise its significance at this time. Without reopening the debate from Second Reading, it is clear to us all that there are gaps. We need to take the opportunity to fill those gaps, given the state of crisis that the country is entering.
I want to speak to the amendments in the name of my noble friend Lord Lennie, starting with Amendments 21 and 22. They seek to make it clear that a licence can be granted for transportation or storage, or both if wanted, but that a licence need not be granted for everything. The activities that Clause 7 relates to are
“(a) operating a site for the disposal of carbon dioxide by way of geological storage; (b) providing a service of transporting carbon dioxide by a licensable means of transportation”.
We have to acknowledge the importance of this section of the Bill. Indeed, the Climate Change Committee has referred to all of this area as a necessity, not an option, particularly as we move forward and technologies improve. As drafted, the Bill provides a single licence for both but, given that they are separate activities, we see no reason why individual licences could not be provided for each activity—even if it may be the case that most of the persons carrying out these activities carry out both.
A broad portfolio of technologies is needed to achieve deep emissions reductions, practically and cost effectively; carbon capture and storage is just one of them. In the International Energy Agency’s sustainable development scenario, in which
“global CO2 emissions from the energy sector fall to zero on a net basis by 2070”
carbon capture and storage
“accounts for nearly 15% of the cumulative reduction in emissions, compared with the Stated Policies Scenario. The contribution grows over time as the technology improves, costs fall and cheaper abatement options in some sectors are exhausted. In 2070, 10.4 Gt of CO2 is captured from across the energy sector”.
This would provide more flexibility for a developing market, with the intention of driving down price within it.
We have already heard just how expensive carbon capture is and how, despite its importance for achieving clean energy, it has been rather slow to take off. According to the IEA, there were only around 20 commercial operations worldwide midway through last year. Commentators often cite carbon capture as being too expensive and unable to compete with wind and solar, given their falling costs over the last decade, but to dismiss the technology on cost grounds would be to ignore its unique strengths, its competitiveness in key sectors and its potential to enter the mainstream of low-carbon solutions. I am pleased that the Government have not done this. However, as we have made clear, we feel that not enough attention has been given to solar and onshore wind, in particular. It is important that we take whatever steps we can to make the market as attractive as possible and encourage licensing from fit and proper persons.
The noble Baroness, Lady Bennett, has already spoken to the next set of amendments, particularly Amendment 23. We feel that the phrase “fit and proper”, having already had a usage in the National Security and Investment Act, is something that we should take very seriously. The aim of these amendments is to put the responsibility on the Secretary of State to personally deem the individual fit and proper.
Perhaps the greatest concern that we have to acknowledge is the environmental risk associated with long-term storage of captured CO2, as any gradual or catastrophic leakage would likely negate the initial environmental benefits of capturing and storing CO2 emissions. It is worth itemising those key risks, just so that we have them on record. First, there are technical hazards: we know that the construction of plants needed to capture and process CO2 can be complex. Whether for new facilities or retrofitting and enabling the separation of CO2 from other gases, there are inherent technical exposures in the CO2 separation process relating to the compression and cooling of gases flying through pipes and the use of chemical solvents, for instance.
Secondly, on fire and explosion, as we know, there are lifting, handling and accidental damage risks at carbon capture plants, as is the case at any construction site. When carbon-capture technology is retrofitted to operate in industrial plants or facilities in typically high-hazard locations such as power stations, the risk of accidental damage and subsequent fire and explosion risks to existing assets might be enhanced. As I have stated, the risk of leakage must clearly be the subject of much consideration as we go forward.
Business interruption is another risk that we have to acknowledge in the failure to meet the carbon goals as they are laid out. Pure carbon dioxide gas can be compressed so that it reaches its dense and supercritical phase. In some cases, it can instead be cooled, which transforms it into a liquid state. Mechanical failures or breakdowns affecting this stage of the process could lead to lengthy business interruptions for clients. If the captured CO2 cannot be transported, this may affect the emissions targets and carbon credits committed to by clients. Therefore, the need to look at all proper precautions is absolutely vital, and the persons tasked with doing this need to have the confidence of the whole sector.
Amendment 24, in the name of my noble friend Lord Lennie, would make regulations related to carbon dioxide transport and storage licence applications subject to the affirmative procedure. Surely it is sensible that Parliament has a full say in any regulations to ensure that licensing is done both to encourage carbon capture and storage and to ensure that it is properly safeguarded.
We have to see this in the context of an enormous possibility to create significant numbers of jobs—the estimate is 50,000 by as soon as 2030—across industry, power, transport and storage networks. It is absolutely essential that the confidence is there and that all the people who will be engaged in the work we intend to do are properly protected wherever possible.
Lord Callanan (Con)
My Lords, this group of amendments considers the licensing of carbon dioxide transport and storage, and I thank everyone for their contributions. I will speak to Amendment 25, in my name, which relates to the definition of “decommissioning costs”. Carbon dioxide transport and storage licence holders will be expected to establish decommissioning funds for each of their transport and storage networks. These funds will accrue money over the operational life of the network to pay for the expected offshore decommissioning and post-closure costs associated with the network.
As originally drafted, the Bill enables the Secretary of State to make regulations about the provision of security for decommissioning in relation to carbon storage installations. This is to ensure that regulations could require relevant persons to provide security for costs that reflect the full range of decommissioning obligations that arise in relation to carbon transportation and storage activities.
Regulations will provide the framework for how the decommissioning funds are to ensure that the funding is secure and available when it is required to pay for the decommissioning and post-closure obligations. The costs are likely to be those associated with the obligations that the licence holder will have under the permit, which could include costs associated with preparatory works between closure and the commencement of decommissioning activities and post-closure monitoring.
As noble Lords will be aware, a series of amendments has been tabled relating to the financing of the decommissioning of carbon storage assets, and I look forward to the forthcoming debate on those amendments. Should our amendments be accepted to apply these decommissioning fund powers to the new defined term “decommissioning costs”, explained in Amendment 70, the previous definition of “decommissioning and legacy costs” becomes redundant and should therefore be omitted from Clause 11.
I will move on to the amendments tabled by noble Lords in this group. Amendment 17, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, seeks to amend the scope of the prohibition on operating a CO2 transport and storage network without an economically regulated licence. Although there is an existing framework for the licensing of carbon dioxide storage activities, established under the Energy Act 2008, that Act provides for technical regulation to ensure the secure geological storage of carbon dioxide. It therefore does not provide any powers in relation to economic regulation.
Baroness Bennett of Manor Castle (GP)
Perhaps I may come back to Amendment 27 and the associated amendments about a “fit and proper person”. Throughout his response, the Minister referred to the granting and awarding of licences at the initial point. However, Amendment 27 is concerned in particular with the transferring of licences. I drew a parallel with our water companies. Most of those have been through multiple ownerships, including hedge funds and companies based in overseas tax havens, et cetera. These companies have a similar nature and have been operated through continual financial transactions and financialisation. Could the Minister comment, either now or in writing, on how the Government see that ongoing process? Okay, you have checked out the person and granted a licence, but then, in a year or two’s time, the company might be bought by someone else and then again by someone else, including companies that may be very unclear. How will the Government keep control?
Lord Callanan (Con)
If the licence is transferred to another body, it will also have to be approved under the same process. You cannot just wake up in the morning and decide to transfer your legal obligations to somebody else who is not an appropriate, fit and proper person. So, of course, that will be taken into consideration.
I must say that the noble Baroness is wrong to provide the parallel with the existing water companies. I do not think that anybody is arguing that people who hold those licences are not fit and proper to do the job. There is a legitimate argument about levels of investment and how that money is being spent, et cetera. However, no one is arguing about their competence; the noble Baroness is trying to draw a very bad parallel there.
Lord Teverson (LD)
My Lords, I hope the Minister will forgive me for not understanding some of this, because it has raised a number of questions in my mind. If the CO2 is put, say, under the sea—as we have been talking about—who actually owns the CO2 once it has gone there? Who is liable for it and who has the legal right to the storage area itself? Given that most of these are created from the oil and gas that has been extracted, does that belong to the lease of the fossil fuel company that extracted them and does that last for ever? I do not understand how this works and where the liabilities land.
As the noble Baroness, Lady Bennett, said, if an organisation says, “I don’t want to do this any more”, there is no obligation for anybody else to take it on—so there will be a legal limbo. Perhaps the Minister could explain how this licensing works within that context. It seems to me that the Crown Estate will come into this somewhere, but maybe the Minister could enlighten me. I apologise again, because I should know the answer to all of these questions.
Lord Callanan (Con)
I am happy to confirm the legal detail of the system to the noble Lord in writing, but my understanding is that the operator of the site would bear the responsibility. That is precisely why we have built in the relative decommissioning costs. The fund will have to be established and the operator will have to show that the ability is there to decommission the relevant pipe work, et cetera. I assume that that assurance and other long-term effects will also be built into that condition, but I will be very happy to confirm that in writing to the noble Lord.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I say first of all that I agree with every word that my noble friend Lady Blake said in her excellent speech, particularly that she is looking forward to the return of my noble friend Lady Liddell—so am I. After all, on this issue she is the master and I am the apprentice, as has been fairly obvious today.
The Minister has again given us a very detailed and helpful reply. However, what worries me slightly is that I still think it strange that those involved in the commercial operation of this—the CCSA members and the CCSA itself—have different interpretations of the draft of the Bill from the officials advising the Minister. I hope that, between now and Report, there can be some discussions to see whether all those in the industry accept the Minister’s explanations today. Otherwise, we can look forward to further amendments on Report. In the meantime, I withdraw my amendment.
Lord Callanan
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 72, line 25.
Lord Foulkes of Cumnock
Member's explanatory statement
This amendment is to correct a misspelling of SEPA’s name.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, noble Lords will be glad to hear that this is my last contribution today. I hope fervently that the Minister will at last accept one amendment that I have proposed—Amendment 28, which I now move. In reference to SEPA, the Bill says “Environmental”, but in fact that is a typographical error and it should say “Environment”. We should get the name of SEPA right. If the Minister does not accept that, I shall be astonished, disappointed and upset in every way.
Amendments 29 to 31 and 37 are more substantial. They deal with the protection of commercially sensitive information. It is important to establish a framework for the licence holder to seek to protect commercially sensitive information, which may be monitored, gathered or requested by the regulator. Amendment 29 seeks to allow CO2 transport and storage licence holders to raise concerns regarding protecting potentially commercially sensitive information to be shared with the regulator. It is of particular importance given the long list of persons included in Clause 26(2), as well as the unspecified group of persons under Clause 26(2)(m), which refers to
“any other person the economic regulator considers appropriate who has powers or duties conferred by or by virtue of primary legislation which the economic regulator considers relevant to the exercise of the economic regulator’s functions relating to the regulation of licensable activities.”
That is a big catch-all clause.
Amendment 30, along with Amendment 28, relates to information held by the regulator and seeks to establish a framework for the licence holder to seek to protect commercially sensitive information, which may be monitored, gathered or requested by the regulator or the Secretary of State. The amendment proposes that the Secretary of State will be able to determine that commercially sensitive information can be excepted from the duty to disclose under the power of the Secretary of State to require information in Clause 27.
Amendment 31 mirrors the same protection on information required by the regulator as outlined for the Secretary of State in the legislation, with regard to the licensing of CO2 transport and storage networks. In addition, a new subsection is proposed to establish a framework for the licence holder to protect its commercially sensitive information, as proposed in the previous amendments.
Amendment 32 is relevant to the regulator’s duty to carry out an impact assessment. It ensures that the regulator must act reasonably when determining that it is not necessary to carry out an impact assessment due to reasons of impracticability or inappropriateness. This is important, as a definition of “urgently” is not provided—nor of “impracticability” or “inappropriateness”. Naturally, there would be a presumption that the regulator would act reasonably. However, inclusion of the word here should provide comfort in this regard.
Amendment 37 seeks to establish a framework for the licence holder to seek to protect commercially sensitive information. As I have previously stated, that is of particular importance, given the long list of persons included in the clause to which I referred earlier. I beg to move Amendment 28.
Lord Callanan (Con)
My Lords, the noble Lord will know that I hate to disappoint him on any occasion, so I shall say something unprecedented, which, as far as I am aware, has never been said in this House before: on this specific and limited occasion, the noble Lord is right on this point. I can say with the full force of the Government behind me that we are prepared to accept his Amendment 28, and I thank the noble Lord for pointing out this typographical error.
I move on to the noble Lord’s more substantial amendments, Amendment 29 to 31 and 37, for which I thank him and the noble Baroness, Lady Liddell. These amendments aim to set out further detail on the economic licence for the transport and storage of carbon dioxide. In particular, they concern the protection of a licence holder’s commercially sensitive information from certain disclosure requirements contained in Parts 1 and 2 of the Bill. These provisions, as drafted, enable the Secretary of State and the economic regulator to access information that is necessary for the conduct of their functions. It may be appropriate in some cases for the economic regulator to provide such information to relevant regulatory bodies or entities on which powers or duties have been conferred by legislation, such as the counterparty to the emitter contracts, or to obtain relevant information from those entities to ensure that decision-making is robust and takes into account all relevant considerations. Meanwhile, provision has been made in Clauses 26 and 27 to confirm that appropriate data protection requirements would continue to apply.
The noble Lord can be reassured, I hope, that these provisions were not drafted to facilitate any widespread publication of commercially sensitive information but to enable robust, informed decision-making. Further, the powers limit information requests to those which the economic regulator or Secretary of State consider necessary to facilitate the proper exercise of their functions.
Amendment 32, again tabled by the noble Lord, Lord Foulkes, seeks to ensure that the economic regulator must reasonably consider whether the urgency of a matter makes it impracticable or inappropriate to carry out and publish an impact assessment for major proposals, or to make a statement as to why it is unnecessary for it to do so. Under current drafting of the Bill, it is where the economic regulator is minded to pursue a proposal which could have a significant impact on licence holders, persons engaged in activities associated with licensable activities, or on the general public or the environment. In such instances, the economic regulator is required to carry out and publish an assessment of the likely impact of implementing the proposal, or to confirm that it considers it unnecessary to carry out an assessment, with the reasons being given for this conclusion. This requirement does not apply if it appears to the economic regulator that it would be impractical or inappropriate, given the urgency of the matter to which the proposal relates.
In some situations, the urgency of the proposal would make it impractical for the economic regulator either to conduct the impact assessment before implementing a proposal or to publish a statement explaining why an assessment would be unnecessary. We think that it is important that the economic regulator is empowered to act swiftly without the need to produce such documentation in the unlikely event that that need arises.
I hope that I have been able to offer sufficient reassurance to the noble Lord in respect of the requirement for the economic regulator to conduct an impact assessment where required before implementing a major proposal, except in the limited situation of potential urgency or emergency. Therefore, with the reassurances that I have provided him, I hope that the noble Lord will feel able to withdraw or not press all his amendments, except for Amendment 28, which we accept.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I am most grateful to the Minister for accepting and agreeing to Amendment 28. I can assure him that I will not let that go to my head, but I will keep on trying with other amendments. I listened carefully to his explanation in relation to the other amendments. I understand what he is saying and I think it is right, so I will not pursue them.
Lord Callanan
Member's explanatory statement
This amendment, the amendment in the name of Lord Callanan at page 30, line 28, and New Schedule (Enforcement of obligations of licence holders) provide for the enforcement of obligations of licence holders and accordingly omit the powers in clause 32 to make corresponding provision by regulations.
Lord Callanan (Con)
My Lords, in moving Amendment 33 I will also speak to Amendments 34 and 36 standing in my name. These amendments seek to amend Clause 32, concerning the enforcement of obligations of licence holders in the carbon dioxide transport and storage sector.
Clause 32, as drafted at introduction, establishes a delegated power for the Secretary of State to make, by regulations, the conditions of a carbon dioxide transport and storage licence enforceable by the economic regulator. In particular, this clause as originally drafted stipulates that regulations may provide that both the conditions within licences and notices served on the licence holder to provide information to the economic regulator may be enforced in the manner provided for in Section 25 of the Electricity Act 1989. However, Amendments 33, 34 and 36 would instead provide for the necessary enforcement measures in the Bill.
The powers available to the economic regulator to enforce licensable carbon dioxide transport and storage activities are intended to align broadly with enforcement powers in the gas and electricity sectors. However, in our view, setting out these powers in the primary legislation, which establishes the new economic regulation and licensing framework for carbon dioxide transport and storage, provides greater clarity for both the regulator and those who are to be regulated. This will remove any potential for debate regarding the different principal objectives and general duties that the economic regulator would be subject to when exercising these powers and the territorial extent of such powers.
I hope that noble Lords will agree that this further clarity and separation will serve to effectively enable the economic regulator to take appropriate action against any breach of the CO2 transport and storage licence conditions and in the event of non-compliance with information requests. Appropriate enforcement powers are essential to ensure that the licensing framework operates as intended, to ensure that licence conditions are adhered to and to prevent anti-competitive behaviour. This amendment to provide the economic regulator with complete powers for enforcement would therefore further secure its ability to support the establishment of the UK’s CCUS industry. I beg to move.
Lord Teverson (LD)
My Lords, I welcome very much that we have moved on to the area of enforcement because, if there is one thing that is true in anything to do with the environment, we make legislation—very effectively, often—but our enforcement does not work, because of either lack of will or lack of resources.
I would like assurance from the Minister, if possible, that the regulator will be resourced enough—I would be interested to know what conversations have taken place over this—to make sure that enforcement does take place. Of course, for enforcement to happen, particularly in physical facilities, there needs to be inspection. I would be interested in understanding who will be inspecting and what the resource level is likely to be.
I come back to a very good point made by the noble Baroness, Lady Blake of Leeds, on safety, which was not answered by the Minister earlier. CO2, although not toxic like carbon monoxide, is a gas that, if exposed, can be suffocating. I would like to understand how enforcement on subsea storage facilities can take place.
Enforcement is good, but my questions are these: how will it be resourced, what is the programme for it and can it happen sufficiently to ensure safety?
Lord Lennie (Lab)
My Lords, the government amendments appear to correct an oversight in the Bill. If noble Lords are confused then so am I. I am not entirely sure what the Minister was saying, but it appears to me that there was a stage missing in the original drafting of this Bill and the attempt now is to put in that stage—which is, in effect, a final warning to licence holders to act in specific ways in order to become compliant. If that is right, then I understand it and I do not oppose it, but I want to make sure that I understand correctly what the Government are trying to do. If I am right then, other than to point out the original omission, we do not oppose these measures; we just want clarification of what is being put into the Bill.
Lord Callanan (Con)
I am happy to provide the reassurance that the noble Lord, Lord Lennie, asks for. It was simply a matter where, originally, we intended to take a power to do this through secondary legislation but, as we got to a later stage of drafting on the Bill, we thought that it would be more appropriate to put it in primary legislation. That is normally something that the House asks us to do. We were, on this occasion, trying to pre-empt some of the points that may be made by Peers to say that we should not do so much under powers and secondary legislation and should put it in the Bill—that is in fact what we are doing.
With regard to the point made by the noble Lord, Lord Teverson, on resourcing, it is very early days—we have not even set up the regulator yet—so I cannot give him any specific figures on what resourcing the regulator will have. The Treasury will no doubt want to have considerable input into this, but we will want to make sure that it is appropriately resourced and that we have the appropriate technical abilities, technical inspectors and so on to make sure that this activity is appropriately licensed and enforced and, of course, is safe for operators, personnel and the public.
Lord Callanan
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 30, line 25.
Lord Callanan
“ScheduleEnforcement of obligations of licence holdersOrders for securing compliance with certain provisions
(1) Where the economic regulator is satisfied that a licence holder is contravening, or is likely to contravene, any relevant condition or requirement, the economic regulator must make an order (a “final order”) containing such provision as appears to the economic regulator to be necessary for the purpose of securing compliance with that condition or requirement (but this sub-paragraph does not apply if the economic regulator is required to by sub-paragraph (2) to make a provisional order in respect of the contravention or likely contravention).(2) Where it appears to the economic regulator—(a) that a licence holder is contravening, or is likely to contravene, any relevant condition or requirement, and(b) that it is appropriate to make an order under this sub-paragraph,the economic regulator must (instead of taking steps towards the making of final order) make an order (a “provisional order”) containing such provision as appears to the economic regulator to be necessary for the purpose of securing compliance with that condition or requirement.(3) In determining for the purposes of sub-paragraph (2)(b) whether it is appropriate to make a provisional order, the economic regulator must have regard, in particular, to the extent to which any person is likely to sustain loss or damage in consequence of anything that is likely to be done (or omitted to be done) in contravention of the relevant condition or requirement before a final order may be made.(4) The economic regulator must confirm a provisional order, with or without modifications, if—(a) the economic regulator is satisfied that the licence holder is contravening, or is likely to contravene, any relevant condition or requirement, and(b) the provision made by the order (with any modifications) is necessary for the purpose of securing compliance with that condition or requirement.(5) If a provisional order is not previously confirmed under sub-paragraph (4), it is to cease to have effect at the end of such period (not exceeding three months) as is determined by or under the order.(6) Sub-paragraphs (1) to (4) are subject to sub-paragraphs (7) to (9) and paragraph 2. (7) The economic regulator—(a) must, before making a final order or making or confirming a provisional order, consider whether it would be more appropriate to proceed under the Competition Act 1998 (see section 37);(b) must not make a final order, or make or confirm a provisional order, if the economic regulator considers that it would be more appropriate to proceed under that Act.(8) The economic regulator may not make a final order or make or confirm a provisional order if the economic regulator is satisfied that the duties imposed on the economic regulator by section 1 preclude the making or, as the case may be, the confirmation of the order.(9) The economic regulator is not required to make a final order or make or confirm a provisional order if it is satisfied—(a) that the licence holder has agreed to take and is taking all such steps as appear to the economic regulator to be for the time being appropriate for the purpose of securing or facilitating compliance with the condition or requirement in question, or(b) that the contraventions were, or the apprehended contraventions are, of a trivial nature.(10) Where the economic regulator decides that it would be more appropriate to proceed under the Competition Act 1998 or is satisfied as mentioned in sub-paragraphs (8) and (9), the economic regulator must—(a) give notice to the licence holder that the economic regulator has so decided or is so satisfied, and(b) publish a copy of the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them.(11) A final or provisional order—(a) must require the licence holder (according to the circumstances of the case) to do, or not to do, such things as are specified in the order or are of a description so specified,(b) must take effect at such time as is determined by or under the order, which must be the earliest practicable time, and(c) may be revoked at any time by the economic regulator.(12) In this Schedule—“final order” means an order under sub-paragraph (1);“provisional order” means an order under sub-paragraph (2);“relevant condition” , in relation to a licence holder, means any condition of any licence (as defined in section 7) held by that person;“relevant requirement” , in relation to a licence holder, means any requirement imposed on the licence holder by or under this Part.Procedural requirements
2 (1) Before making a final order or confirming a provisional order, the economic regulator must give notice—(a) stating that the economic regulator proposes to make or confirm the order and setting out its effect,(b) stating—(i) the relevant condition or requirement,(ii) the acts or omissions which, in the economic regulator’s opinion, constitute or would constitute contraventions of it, and (iii) the other facts which, in the economic regulator’s opinion, justify the making or confirmation of the order, and(c) specifying the time (which must not be less than 21 days from the date of publication of the notice) within which representations or objections to the proposed order or confirmation of the order may be made,and must consider any representations or objections which are duly made and not withdrawn.(2) A notice under sub-paragraph (1) is given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by sending a copy of the notice, and a copy of the proposed order or of the order proposed to be confirmed, to the licence holder.(3) The economic regulator must not make a final order with modifications, or confirm a provisional order with modifications, except with the consent of the licence holder or after complying with the requirements of sub-paragraph (4).(4) The requirements are that the economic regulator must—(a) give to the licence holder such notice as the economic regulator considers necessary of the economic regulator’s proposal to make or confirm the order with modifications,(b) specify the time (which must not be less than 21 days from the date of the service of the notice) within which representations or objections to the proposed modifications may be made, and(c) consider any representations or objections which are duly made and not withdrawn.(5) Where the economic regulator decides to proceed under the Competition Act 1998 in a case falling within paragraph 1(7)(b), the economic regulator must—(a) inform the licence holder concerned of that decision, and(b) publish the notice in a manner that the economic regulator thinks appropriate for bringing the notice to the attention of persons likely to be affected by the decision.(6) Before revoking a final order or a provisional order which has been confirmed, the economic regulator must give notice—(a) stating that the economic regulator proposes to revoke the order and setting out its effect, and(b) specifying the time (which must not be less than 28 days) from the date of publication of the notice within which representations or objections to the proposed revocation may be made,and must consider any representations or objections which are duly made and not withdrawn.(7) A notice under sub-paragraph (6) is given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by sending a copy of the notice to the licence holder.(8) As soon as practicable after a final order is made or a provisional order is made or confirmed, the economic regulator must— (a) serve a copy of the order on the licence holder, and(b) publish such a copy in such manner as the economic regulator considers appropriate for the purpose of bringing the order to the attention of persons likely to be affected by it.Validity and effect of orders
(1) If the licence holder is aggrieved by a final or provisional order and wishes to question its validity on the ground that the making or confirmation of it was not within the powers of paragraph 1, or that any of the requirements of paragraph 2 have not been complied with in relation to it, the licence holder may within 42 days from the date of service on the licence holder of a copy of the order make an application to the court under this paragraph.(2) On any such application the court, if satisfied that the making or confirmation of the order was not within those powers or that the interests of the licence holder have been substantially prejudiced by a failure to comply with those requirements, may quash the order or any provision of the order.(3) Except as provided by this paragraph, the validity of a final or provisional order may not be questioned by any legal proceedings whatever.(4) The obligation to comply with a final or provisional order is a duty owed to any person who may be affected by a contravention of it.(5) Where a duty is owed by virtue of sub-paragraph (4) to any person any breach of the duty which causes that person to sustain loss or damage is to be actionable at the suit or instance of that person.(6) In any proceedings brought against any person in pursuance of sub-paragraph (5), it is a defence for the person to prove that they took all reasonable steps and exercised all due diligence to avoid contravening the order.(7) Without prejudice to any right which any person may have by virtue of sub-paragraph (5) to bring civil proceedings in respect of any contravention or apprehended contravention of a final or provisional order, compliance with any such order is to be enforceable by civil proceedings by the economic regulator for an injunction or interdict or for any other appropriate relief.(8) In this paragraph “the court” means—(a) in relation to England and Wales and Northern Ireland, the High Court;(b) in relation to Scotland, the Court of Session.Penalties
(1) Where the economic regulator is satisfied that a licence holder has contravened or is contravening any relevant condition or requirement, the economic regulator may, subject to paragraph 6, impose on the licence holder a penalty of such amount as is reasonable in all the circumstances of the case.(2) Before imposing a penalty on a licence holder under sub-paragraph (1), the economic regulator must consider whether it would be more appropriate to proceed under the Competition Act 1998.(3) The economic regulator must not impose a penalty on a licence holder under sub-paragraph (1) if it considers that it would be more appropriate to proceed under the Competition Act 1998.(4) Before imposing a penalty on a licence holder under sub-paragraph (1) the economic regulator must give notice—(a) stating that it proposes to impose a penalty and the amount of the penalty proposed to be imposed,(b) setting out the relevant condition or requirement, (c) specifying the acts or omissions which, in the opinion of the economic regulator, constitute the contravention in question and the other facts which, in the opinion of the economic regulator, justify the imposition of a penalty and the amount of the penalty proposed, and(d) specifying the period (which must not be less than 21 days from the date of publication of the notice) within which representations or objections with respect to the proposed penalty may be made,and must consider any representations or objections which are duly made and not withdrawn.(5) Before varying any proposal stated in a notice under sub-paragraph (4)(a) the economic regulator must give notice—(a) setting out the proposed variation and the reasons for it, and(b) specifying the period (which must be at least 21 days from the date of publication of the notice) within which representations or objections with respect to the proposed variation may be made,and must consider any representations or objections which are duly made and not withdrawn.(6) As soon as practicable after imposing a penalty, the economic regulator must give notice—(a) stating that it has imposed a penalty on the licence holder and its amount,(b) setting out the relevant condition or requirement in question,(c) specifying the acts or omissions which, in the opinion of the economic regulator, constitute the contravention in question and the other facts which, in the opinion of the economic regulator, justify the imposition of the penalty and its amount, and(d) specifying a date, no earlier than the end of the period of 42 days from the date of service of the notice on the licence holder, by which the penalty is required to be paid.(7) The licence holder may, within 21 days of the date of service on the licence holder of a notice under sub-paragraph (6), make an application to the economic regulator for it to specify different dates by which different portions of the penalty are to be paid.(8) Any notice required to be given under this paragraph must be given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by serving a copy of the notice on the licence holder.(9) This paragraph is subject to paragraph 10 (maximum amount of penalty that may be imposed).(10) Any sums received by the economic regulator by way of penalty under this paragraph must be paid into the Consolidated Fund.Statement of policy with respect to penalties
5 (1) The economic regulator must prepare and publish a statement of policy with respect to the imposition of penalties and the determination of their amount.(2) In deciding whether to impose a penalty, and in determining the amount of any penalty, in respect of a contravention the economic regulator must have regard to its statement of policy most recently published at the time when the contravention occurred. (3) The economic regulator may revise its statement of policy and where it does so must publish the revised statement.(4) Publication under this paragraph must be in such manner as the economic regulator considers appropriate for the purpose of bringing the matters contained in the statement of policy to the attention of persons likely to be affected by them.(5) The economic regulator must undertake such consultation as it considers appropriate when preparing or revising its statement of policy.Time limits on the imposition of penalties
6 (1) Where no final or provisional order has been made in relation to a contravention, the economic regulator may not impose a penalty in respect of the contravention later than the end of the period of five years from the time of the contravention, unless before the end of that period—(a) the notice under paragraph 4(4) relating to the penalty is served on the licence holder under paragraph 4(8), or(b) a notice under section 29(2)(b) is served on the licence holder which specifies that the notice is served in connection with a concern on the part of the economic regulator that the licence holder may be contravening, or may have contravened, a relevant condition or requirement.(2) Where a final or provisional order has been made in relation to a contravention, the economic regulator may not impose a penalty in respect of the contravention unless the notice relating to the penalty under paragraph 4(4) was served on the licence holder under paragraph 4(8)—(a) within three months from the confirmation of the provisional order or the making of the final order, or(b) where the provisional order is not confirmed, within six months from the making of the provisional order.Interest and payment of instalments
7 (1) If the whole or any part of a penalty is not paid by the date by which it is required to be paid, the unpaid balance from time to time is to carry interest at the rate for the time being specified in section 17 of the Judgments Act 1838.(2) If an application is made under paragraph 4(7) in relation to a penalty, the penalty is not required to be paid until the application has been determined.(3) If the economic regulator grants an application under that sub-paragraph in relation to a penalty but any portion of the penalty is not paid by the date specified in relation to it by the economic regulator under that sub-paragraph, the economic regulator may where it considers it appropriate require so much of the penalty as has not already been paid to be paid immediately.Appeals against penalties
8 (1) If the licence holder on whom a penalty is imposed is aggrieved by—(a) the imposition of the penalty,(b) the amount of the penalty, or(c) the date by which the penalty is required to be paid, or the different dates by which different portions of the penalty are required to be paid,the licence holder may make an application to the court under this paragraph.(2) An application under sub-paragraph (1) must be made— (a) within 42 days from the date of service on the licence holder of a notice under paragraph 4(6), or(b) where the application relates to a decision of the economic regulator on an application by the licence holder under paragraph 4(7), within 42 days from the date the licence holder is notified of the decision.(3) On any such application, where the court considers it appropriate to do so in all the circumstances of the case and is satisfied of one or more of the grounds falling within sub-paragraph (4), the court—(a) may quash the penalty,(b) may substitute a penalty of such lesser amount as the court considers appropriate in all the circumstances of the case, or(c) in the case of an application under sub-paragraph (1)(c), may substitute for the date or dates imposed by the economic regulator an alternative date or dates.(4) The grounds falling within this sub-paragraph are—(a) that the imposition of the penalty was not within the power of the economic regulator under paragraph 4,(b) that any of the requirements of sub-paragraphs (4) to (6) or (8) of paragraph 4 have not been complied with in relation to the imposition of the penalty and the interests of the licence holder have been substantially prejudiced by the non-compliance, or(c) that it was unreasonable of the economic regulator to require the penalty imposed, or any portion of it, to be paid by the date or dates by which it was required to be paid.(5) If an application is made under this paragraph in relation to a penalty, the penalty is not required to be paid until the application has been determined.(6) Where the court substitutes a penalty of a lesser amount it may require the payment of interest on the substituted penalty at such rate, and from such date, as it considers just and equitable.(7) Where the court specifies, as a date by which the penalty or a portion of the penalty is to be paid, a date before the determination of the application under this paragraph it may require the payment of interest on the penalty, or portion, from that date at such rate as it considers just and equitable.(8) Except as provided by this paragraph, the validity of a penalty is not to be questioned by any legal proceedings whatever.(9) In this paragraph “the court” means—(a) in relation to England and Wales or Northern Ireland, the High Court, and(b) in relation to Scotland, the Court of Session.Recovery of penalties
9 Where a penalty imposed under paragraph 4(1), or any portion of it, has not been paid by the date on which it is required to be paid and—(a) no application relating to the penalty has been made under paragraph 8 during the period within which such an application can be made, or(b) an application has been made under that paragraph and determined,the economic regulator may recover from the licence holder, as a civil debt due to it, any of the penalty and any interest which has not been paid.Maximum amount of penalty
10 (1) The maximum amount of penalty that may be imposed on a licence holder in respect of a contravention may not exceed 10 per cent of the licence holder's turnover.(2) The Secretary of State may by regulations provide for how a person's turnover is to be determined for the purposes of this paragraph.(3) Regulations under sub-paragraph (2) are subject to the affirmative procedure.(4) In this paragraph “penalty” means a penalty imposed on a licence holder under paragraph 4.”Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 30, line 25.
Lord Teverson
“(1A) When making regulations under this section the Secretary of State must also publish an explanation of how revenue support mechanisms deliver in line with the CCUS Strategy and Policy Statement and the overall Strategy and Policy Statement, and how milestones relate to net zero pathways set out by the Climate Change Committee.”Member's explanatory statement
This amendment seeks to ensure that policy processes are aligned with the Government’s Strategy and Policy Statement.
Lord Teverson (LD)
I asked specifically that all these amendments be grouped together because they have one aim: to make sure that there is a coherence between policy measures and the net zero pathway that is the Government’s own aim. Of course, the Government have undertaken to produce a government strategy and policy statement and the Bill requires a statement focusing on CCUS to be produced as well. However, our contention is that there is no current requirement for policy and infrastructure planning processes to be based on a consistent set of assumptions about the future. That means, in practice, that two projects could get a green light despite being justified by incompatible visions of system need, ensuring that one would ultimately be left stranded. Of course, that does not lead to confidence in this area. So there could be incompatible visions.
For instance, hydrogen electrification visions of the future involve very different supporting infrastructure, and a lack of coherence could create expensive infrastructure which, at the end of the day, is unusable or redundant. The strategy provides an opportunity to set out the latest set of assumptions, projections and decision methodology and I am sure that is what the Government want to do to underpin their policy, to which other processes should align. What we are really trying to do in these amendments is to make sure, practically, that the actions that arise from the Bill are coherent and tie in with the policy statements of the Government. It seems absolutely straightforward to me: it is that missing link, if you like, that pushes together intent in these various areas and makes sure that the strategy is coherent in its delivery. It is as simple as that and I hope the Government and the Minister will look favourably on that approach. I beg to move.
Baroness Blake of Leeds (Lab)
I do not have an enormous amount to add to the comments of the noble Lord, Lord Teverson. I highlight again the significance of linking strategy and policy: that is crucial. We will discuss in future debates the issues around the role of the ISOP and its independence, and, particularly in the context of this afternoon’s debate, look at long-term thinking, making sure that we get all the checks and balances in place. We are in a very fast-moving environment and need to make sure that we are absolutely on top of all the changes that are taking place. The noble Lord, Lord Teverson, highlighted the risk of lack of coherence: we need to make sure that everything is nailed down, line by line, and I am sure we will have further discussion on these areas as we go through different aspects of the Bill. I look forward to the Minister’s conclusions on this group of amendments.
Lord Callanan (Con)
I thank the noble Lord, Lord Teverson, for his amendments, beginning with Amendments 38 and 112. The Bill provides that the Secretary of State may designate a CCUS strategy and policy statement to set out the strategic priorities of the Government in formulating their CCUS policy. This would also need to take account of any statement designated under Section 131 of the Energy Act 2013. The Secretary of State must carry out their functions under this part in the manner they consider is best to further deliver the policy outcomes set out in the statement. In addition, parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement before it can be designated, as is provided for by Clause 91(10). Setting out in a strategic policy statement possible scenarios for policy change would start to introduce considerable uncertainty for both investors and the regulator which would, in my view, hamper the stability of the sector.
Amendment 120 to Clause 98 would require that, when making regulations establishing or adjusting a low-carbon heat scheme, the Secretary of State must publish a statement demonstrating how the scheme would deliver in line with both the carbon capture usage and storage strategy and policy statement and any overall strategy and policy statement provided for by the Energy Act 2013. Of course, I agree with the noble Lord in his principle that policy-making should be aligned with the broader strategy and the latest science: that is why all policy on heat and building decarbonisation is and will continue to be developed in line with wider government energy and decarbonisation strategy. As we said in a recent government response to a consultation, the plan to introduce, for instance, the market-based low-carbon heat scheme is aligned with the aim to expand the deployment of heat pumps towards 600,000 installations per year by 2028. I am afraid I do not agree with the noble Lord, and therefore do not believe that requiring another series of publications each time new regulations are made is ultimately necessary. I therefore hope he will feel able to withdraw his amendment.
Turning to Amendment 128, Clauses 108 and 109 will enable the safe and effective delivery of a village-scale hydrogen heating trial to gather vital evidence to help make decisions on the potential role of hydrogen in heat decarbonisation. I reassure the noble Lord that trial development is already following the latest science. This amendment would delay the introduction of new regulations which are focused on the protection of consumers until two strategy and policy statements are published. The exact contents of these documents would also need to be properly consulted on before they are issued.
Lord Teverson (LD)
I thank the Minister for his response and reassurances. Obviously, I am fairly disappointed with the overall reply. On the principles of coherence and delivery, I will read what he has said and think about coming back to this issue on Report. I thank him for going through the Government’s feelings on this issue in detail and may respond fully later during the passage of the Bill. In the meantime, I beg leave to withdraw my amendment.
Energy Bill [HL]
Wednesday 7th September 2022
(2 years, 2 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-II(a) Amendments for Committee (Supplementary to the Second Marshalled List) - (7 Sep 2022)
Lord Lennie
“(d) a carbon capture use revenue support contract.”Member's explanatory statement
See the explanatory statement for the amendment at page 3, line 11.
Lord Lennie (Lab)
My Lords, my amendment in this group is a re-run of part of the Committee’s discussion on Monday, and it refers to Clauses 57 and 63. It is all about the “U” in “CCUS”. More precisely, it is about the exclusion of carbon usage from the listed regulated activities in the Bill. Clauses 57 and 63 are concerned with revenue support contracts and the designation of carbon capture counterparties. Under Clause 57, regulations would explicitly set out
“a transport and storage revenue support contract … a hydrogen production revenue support contract … or … a carbon capture revenue support contract”.
There is nothing about a carbon usage revenue support contract. Similarly, in Clause 63, this Government restrict themselves to “carbon capture”, and there is nothing covering carbon usage. So I would welcome an explanation of these apparent omissions from the Minister when he responds.
I turn briefly to the amendment in the name of my noble friend Lady Liddell. She is right to seek to have direct air-sourced carbon covered by the Bill. Direct air capture is not in itself new, but what is new is the likelihood of a massive expansion in the years ahead, as we move towards achieving net zero. The International Energy Agency website is hugely informative on this, and I recommend it to all noble Lords who are interested.
Direct air capture removes CO2 from the atmosphere, thereby offering a solution for legacy emissions. The first large-scale direct air-capture plant is set to begin operating in the United States by the middle of this decade, and Europe and Canada are set to follow. Direct air capture provides part of the solution to a strategy that sees a balancing of emissions being released with emissions being removed. It is not restricted simply to the removal of carbon from the atmosphere; its application ranges from beverages, with which we are all familiar, to future aviation fuels, helping to reduce emissions from travelling across and between continents. DAC is not the same as traditional carbon capture and storage, with which we are familiar. It is genuinely innovative and requires the attention of this Energy Bill, as my noble friend Lady Liddell will explain.
Baroness Liddell of Coatdyke (Lab)
My Lords, I support Amendment 49 and the introduction given by my noble friend. First, I apologise for not being around on Monday; being here was outwith my control. But I watched the debate, and my noble friend Lord Foulkes did a wonderful job. I first did a double act with him in the September of 1974, when we educated the Scottish public about devolution. Since that point, I have been lost in awe of him, not just for his knowledge but for his energy. I was recently at a significant birthday party, and the amount that that man can do is quite amazing. However, I am here today to address the carbon capture and storage issues.
I should declare an interest: I am the honorary president of the Carbon Capture and Storage Association, and I have been involved in the interest in carbon capture and storage since it was called “clean coal technology”—which gives my age away now as well.
As my noble friend Lord Foulkes pointed out, the Carbon Capture and Storage Association has been very helpful to us in drafting some of these amendments. One of the reasons why it is important to take it into account is that although an awful lot of us have been around carbon capture and storage for a long time, I do not think that most people realise the extent to which the Carbon Capture and Storage Association has changed. In the past year, there has been an exponential growth in membership, and it is coming from a lot of companies that are at the cutting edge of technology.
Our concern addressed in Amendment 49 is that Clause 63 is restrictive. We have been helped very much by the Minister’s department in looking at where we can go from this stage onwards, and it is unfortunate that the way this clause has been drafted means that the shortlisted projects that can be available during phase 2 are limited to industrial power generation and hydrogen. However, there are UK companies now developing engineered greenhouse gas removal technologies —GGRs—which are keen to connect to the CO2 transport and storage network. At lot of these are small companies that are moving, and there is uncertainty. Many noble Lords in the Chamber today have been around carbon capture for quite some time but do not realise the extent to which new people are coming into the field. The carbon emissions committee made the point that carbon capture and storage is now a necessity, not an option.
We are waiting for the business model for these new companies to be developed; they want to join in the process in due course. It is that ability to see them join the process that is behind this amendment. It is not nit-picking; it is seeking to find a route that allows them to move forward. These technologies currently include bioenergy with carbon capture and storage, and direct air capture, which would be excluded from the process if we did not have an amendment such as this.
This will prepare the Bill for the future. It ensures that we are future-proofing and that we have the ability to move rapidly in a way that would allow the inclusive use of all technologies that can remove CO2 from the atmosphere, not just those which capture from a commercial or industrial source. I commend Amendment 49, and make no apology for saying that we will come back at fairly regular intervals with amendments—probably small in size—which seek to take into account the new companies that are looking to enter into carbon capture and storage.
Lord Howell of Guildford (Con)
My Lords, I am very pleased that the mover and seconder of this amendment have mentioned direct air capture, because sometimes there is confusion between carbon capture and storage and the actual absorption of carbon out of the atmosphere on an enormous scale. Frankly, this is where the big impact will be made in future.
I know that we have made efforts with carbon capture and storage on and off over the years. There is a theoretical idea that finding a way to cheaply cap every chimney of the 9,000 coal-fired stations across Asia and Africa and pipe away the carbon might solve some problems and make a small impact on the overall rising greenhouse gases. However, the most sizeable absorption of carbon that is already in the atmosphere is through direct air capture and climate recovery.
Schemes are already being developed with the input and encouragement of Imperial College and other sources—and in other countries—for developing direct air capture on an absolutely enormous scale. Of course, we cannot do this alone; this is part of an international rescue, if you like, in a way that really begins to give some hope that emissions can be offset so that we can start getting some leverage and control on the overall carbon in the atmosphere. Without this, we will undoubtedly miss all the Paris targets and everyone throughout the world will face very dramatic and increased climate violence, very cold winters and very hot summers.
So I hope that the Minister will indicate that this area is in the Government’s mind and that the development of huge carbon sinks can commence—for instance, in deserts across the world that have already been designated as uninhabited areas. Carbon can be sunk into gigantic lakes the size of Wales or Dubai, or four times the size of London. These vast new developments would offset the overacidity of the ocean. These things can be done. Carbon can be captured and used. CO2 is a fantastic promoter and fertiliser of food on a colossal scale, and if we are moving into an era of world food shortage, covered areas fed by carbon from huge carbon sinks will really begin to make some impact on the scene.
The other development for carbon sinks is that we could just plant a lot of trees, but that is not very good. Trees are moderate absorbers of carbon although, of course, if they go up in flames they put all the carbon back into the atmosphere straightaway. The real development comes from mangrove groves, which are 16 times more absorbent of CO2 than other trees. They can be promoted along with saltwater and freshwater lakes in areas where there is a lot of sun and where electricity is therefore virtually costless. Of course, this is at or near the equator. These are the schemes that will save us all and which our Government should be leading in developing by thinking about and backing the necessary legislation. Please, can we have a little more thought on this excellent amendment and the ideas behind it?
Viscount Hanworth (Lab)
I wish to express my support for Amendments 39 and 49. I have been looking for a place to make my interjection, which ought to have been encapsulated in an amendment, but perhaps I should propose an amendment at Report. However, now is as good a time as any to air my suggestions.
Aviation contributes significantly to emissions of carbon dioxide. These emissions do not approach the level attributable to road transport but, nevertheless, they must be eliminated. It may be possible to replace short-haul aircraft with aircraft that depend on battery power, but long-haul aviation cannot be electrified. It will continue to depend on liquid fuels. It has been suggested that the fuel could be liquefied hydrogen, but this seems be impractical. Conventional hydrocarbon fuels have an energy density that greatly exceeds that of hydrogen, which is difficult to store in a liquid state and demands considerable storage space. Jet engines that burn hydrogen have not yet been developed.
It seems that hydrocarbon fuels must continue to be used in long-haul aviation. Eventually, this will be acceptable only if the carbon element of these fuels can be sequestered from the atmosphere and the hydrogen element of the fuels becomes green hydrogen. When such fuels are burned, their carbon element will be returned to the atmosphere. Moreover, the use of green hydrogen, as opposed to the so-called blue hydrogen derived from the steam reformation of methane, will mean that no emissions of carbon dioxide will come from this source. To manufacture aviation fuels derived from the direct air capture of carbon and from hydrogen generated by electrolysis will require a huge input of energy. Sufficient energy would be available only if we were able to depend on nuclear reactors to provide it. Such synthetic fuels will be costly to produce; unless they are subsidised, they will be unable to compete with petroleum-based fuels or fuels derived from biological feedstocks. However, biofuels have a high opportunity cost, since the production of their feedstock is liable to pre-empt the use of valuable agricultural land. They are therefore best avoided.
We need to support the development of carbon-neutral synthetic aviation fuels. I propose therefore that, in the first instance, they should be allowed to incorporate green hydrogen as well as carbon not derived from direct air capture but captured from fossil-fuel emissions. In time, both these allowances would be abolished.
Baroness Jones of Moulsecoomb (GP)
I have always been very sceptical about carbon capture and storage and direct capture of carbon dioxide from the air, because they are basically unproven technologies. I could say that I am even quite sneery about them, because people constantly use them as justification for not adopting the tried-and-tested solutions of energy reduction, energy efficiency and renewable energy. We are often distracted by shiny technofixes, which give an excuse not to make the tested and sustained reductions in carbon emissions that have to take place. As far as I am concerned, the best carbon capture and storage is coal—we should just leave it in the ground.
That said, I am quite swayed by the argument of the noble Baroness, Lady Liddell, about future-proofing. That is very valid and I am very pragmatic in saying that we need to pursue all solutions to the climate emergency. If carbon capture works and can compete on cost with other carbon reduction measures without creating additional harm or risks, it should absolutely be eligible to compete for revenue support contracts. Of course, it could also help my clean air Bill, which tries to emphasise not polluting the air in the first place. Failing that, if we want clean air—which is incredibly important for all of us and a human right, according to the UN—we have to take every opportunity we can to clean it up.
Lord Teverson (LD)
My Lords, I am slightly sympathetic to the Government on certain of these amendments in certain ways; I expect the Minister will not immediately accept them. First, I re-emphasise my interests in energy storage, as declared in the register. I welcome the noble Baroness, Lady Liddell, back into the conversation. She and the noble Lord, Lord Foulkes, are quite a powerful duo and I am just thankful that they are not both here together—it might be just a little too much, but we might get some movement from the Government if they were.
On carbon use, I have no disagreement with the amendment; it would be positive to include it. In a way, I follow the Minister’s hesitation from Monday in saying that if we have carbon use, we have to make very sure that that use is long-term rather than short-term. I am not sure we have got to that point yet in the amendment. I will say that one obvious area where we should be doing this is in building and construction, where we use wood rather than concrete and steel. Many other economies and housing markets across Europe and other parts of the world use those technologies: they are there, they are strong and they capture the carbon in wood for probably a century or more—however long these buildings last. I would be interested in the Minister’s—maybe positive—response about how we can make sure that that carbon use sequesters the carbon for a long period.
As for the idea of air capture, I very much agree with the spirit of the noble Lord, Lord Howell. What concerns me, though, is exactly the point that the noble Baroness, Lady Jones of Moulsecoomb, made. Not in this Chamber, clearly, and not among the Members present, but problem with air capture of carbon is that it gives a free ticket out for climate sceptics who say, “Don’t worry about any of this stuff because technology is going to solve it. We don’t have to worry about energy efficiency and renewables because technology will find a way forward”. I very much hope that it will, and there are good signs of that, but the other thing about it—which is why it is not the priority on the scale, if you like—is that it will take out 0.4% of the atmosphere that you have to process. Whereas, if you, as a power station, are using carbon capture, that concentration is hugely greater, so it is a much more efficient process to deal with in the first place. Again, my heart is there in terms of future-proofing, but to me it sends out dangerous signals to the market.
The much bigger issue, which seems to have been forgotten since COP 26, is methane. That is the gas that we need to get out of the atmosphere quickly and effectively. Ever since COP 26, where the Government were very supportive of initiatives to take methane out, science has shown that methane emissions globally are much higher than we expected and very little action has taken place on that since. I see that as a priority, but I will be very interested in the Minister’s response.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I too welcome the noble Baroness, Lady Liddell, back to these Benches. I look forward to any parties hosted by her and the noble Lord, Lord Foulkes, in future—they sound great fun.
I first turn to Amendment 39 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, which seeks explicitly to include the use of carbon dioxide, given that the Bill refers to carbon capture, usage and storage, or CCUS. The carbon capture revenue support contracts are intended to support the deployment of carbon capture technologies in industrial and commercial activities where there is no viable alternative to achieve deep decarbonisation.
The Bill allows for carbon capture revenue support contracts to be entered into with eligible carbon capture entities. Broadly, a carbon capture entity is a person who carries on activities of capturing carbon dioxide that has been produced by commercial or industrial activities with a view to the storage of carbon dioxide—that is, storage with a view to the permanent containment of carbon dioxide. It is important to emphasise that the provisions in the Bill may therefore allow for support of a broad range of carbon capture applications, including those carbon capture entities that utilise the carbon dioxide resulting in the storage of carbon dioxide with a view to its permanent containment. Decisions as to which carbon capture entities are eligible for support are to be made on a case-by-case basis. Prioritising support for carbon storage is considered essential to help deliver our decarbonisation targets.
I turn now to Amendment 49 in the names of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, which seeks to ensure that techniques such as direct air carbon capture and storage are included in scope of carbon capture revenue support contracts. I thank my noble friend Lord Howell of Guildford for his remarks in this regard. As part of the Net Zero Strategy published last year, the Government set out an ambition to deploy at least 5 megatonnes of carbon dioxide emissions per year of engineered greenhouse gas removal methods, such as direct air capture, by 2030.
We recognise that greenhouse gas removal technologies, commonly referred to as GGRs, such as direct air carbon capture and storage, are considered important for making progress towards net zero. That is why in July we published a GGR business model consultation that sets out the Government’s initial views on the design of a business model to attract private investment and enable engineered GGR projects to deploy at scale from the mid-to-late 2020s. The consultation is due to close on 27 September. How direct air carbon capture and storage might be supported by any such business model is still subject to ongoing policy development and consideration. Once we have further developed the policy thinking on this, we can then consider what the appropriate mechanics might be and whether there are any available. We are exploring how early GGR projects could be connected also to the transport and storage network in CCUS clusters and will publish further information in due course.
The questions of the noble Viscount, Lord Hanworth, on carbon-neutral air fuels are not directly covered by my speaking notes, so I shall write to him with more details in due course. It overlaps with another department, so I will write to him and copy it to all Members of the Committee.
I hope that on the basis of my reassurances noble Lords will not press their amendments.
Lord Lennie (Lab)
I thank the Minister for her response. First, on what my noble friend Lady Liddell had to say, it is what she did not say about what happened at the party that we want to know. If she gets the opportunity, perhaps she could enlighten us more.
In response to the noble Lord, Lord Teverson, I say that we certainly do not intend direct air capture to be a way of screening climate change sceptics; rather, it is an acceleration of addressing our climate needs. However, I understand that there will be sceptics who would hide behind it.
The Minister’s response to my amendment seemed to be that the Government would take things on a case-by-case basis as and when they arise and make a judgment on the inclusion or not of carbon usage. She said that DAC was under consideration for the future. Well, the point of the amendment is to try to future-proof this piece of legislation for the mid to long term and I would have thought that including it would be quite within the Bill’s remit. With those comments, I beg leave to withdraw my amendment.
Member’s explanatory statement
This amendment is to ensure powers are appropriately delegated.
Baroness Liddell of Coatdyke (Lab)
Thank you very much. This is another one on future-proofing. The amendment says,
“leave out ‘function on any’ and insert ‘relevant function on any relevant’”
person. The reason is that these delegation powers could be interpreted as being broad and non-specific, and it would be some comfort to insert this language to ensure it is clear that the Bill is referring only to the powers relating to revenue support regulations, and that these will be appropriately delegated to a person with the right capabilities. It seems to open a door that makes us feel a little bit uncomfortable and I think it would be a very sound way to go forward to accept the terms of this Amendment 40. I beg to move.
Baroness Blake of Leeds (Lab)
I add my welcome to my noble friend Lady Liddell and I am certain that my noble friend Lord Foulkes will be thinking of organising a party to celebrate her return to Westminster.
I cannot add to the comments she made on her amendment. I completely support what she said. I feel that there is a bit of déjà vu here and that we are going over ground we covered in our first session on Monday, but I think it is really important that we emphasise again, through the amendments that my noble friend Lord Lennie and I have put down, how important it is that we have clarity in all aspects of the Bill. I want to emphasise again the need to ensure that all aspects are future-proofed, thereby giving all parties the confidence that matters of probity, security and appropriate appointments are always taken into account in key positions. It is unfortunate that we need to emphasise this aspect, but I think experience will tell us that it is a very necessary part of all the processes that we bring in place.
To recap briefly, in Amendment 42 we would like to insert the phrase “fit and proper”. As we have said before, this is not the first time this has been used—it was used in the National Security and Investment Bill. Through this amendment we make sure that it is the responsibility of the Secretary of State personally to deem the individual as fit and proper.
Amendment 44 specifically refers to the need for the hydrogen counterparty to be
“a fit and proper person”.
The aim is to make sure that responsibility is very clearly accounted to the Secretary of State.
The explanatory statement for Amendment 64 says:
“If the Secretary of State needs to find a new counterparty, this amendment requires that they must ensure they are a fit and proper person, as with previous amendments in our names”.
I do not think that at this point in the state of affairs we can emphasise enough just how important it is to have accountability, clarity and the ability to have straight- forward lines of communication.
Lord Teverson (LD)
I did not like to address the amendments tabled by the noble Baroness before she had addressed them herself. I welcome the amendment tabled by the noble Baroness, Lady Liddell; I think it adds clarity. I absolutely agree with the amendment that the noble Baroness, Lady Blake, has just gone through. I think “fit and proper” is used many times throughout certainly financial services secondary legislation, and when it comes to hydrogen production it seems to me that this is something that is really key. I look forward to the Minister arguing that people in this position should not be fit and proper people, and I pass over to him.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
I thank the noble Lord, Lord Teverson, for his kind invitation to address noble Lords on this subject, and I thank others who have contributed to the debate.
Let me start with Amendment 40, tabled by the formidable Scottish duo of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes. He is sadly not with us today, which is a shame: he always adds to the jollity of the proceedings, but I am sure he will be back with us soon. This amendment seeks to ensure that the conferral of functions on persons by revenue support regulations is appropriately delegated.
Clause 57 sets out the Secretary of State’s power to make provision in regulations about revenue support contracts, including the funding of liabilities and costs in relation to such contracts. These are referred to as, as has been said, as the revenue support regulations. Clause 57(7) states that
“revenue support regulations may confer any function on any person.”
This is intended to enable persons other than a revenue support counterparty, allocation body or a hydrogen levy administrator to take on a role in the delivery of revenue support contracts and related funding. As with revenue support regulations, such functions would be limited to those about revenue support contracts, including the funding of liabilities and costs in relation to such contracts.
Let me make it clear to the House that Clause 57(7) absolutely does not provide the Secretary of State with a general power to confer any function on any person, outside of the scope of revenue support regulations. It is also worth noting that the selection by the Government of any person to undertake such functions would be subject to principles of public decision-making. The Government are, of course, duty bound to take only relevant considerations into account when making a decision.
I move on to Amendments 42, 44 and 64, from the noble Lord, Lord Lennie, and the noble Baroness, Baroness Blake, and spoken to by the noble Lord, Lord Teverson. These amendments seek to ensure propriety when conducting the designation exercise and when transferring any relevant property, rights and liabilities. Of course, it goes without saying that I too support ensuring the upmost standards for those wishing to fulfil the role of hydrogen production counter- party.
The Government anticipate that the Low Carbon Contracts Company Ltd, or LCCC, which is the existing counterparty for contracts for difference and the planned counterparty for the dispatchable power agreement, will in fact be the counterparty for the low-carbon hydrogen agreement, subject of course to successful completion of administrative and legislative arrangements. That is also the case for the industrial carbon capture contracts. In taking the decision to proceed with the LCCC as the counterparty to the low-carbon hydrogen agreement, the Secretary of State considered, among other things, its ability to deliver the required functions and experience and track record in contract management. These considerations would of course be made on any future decisions, which would also be subject, as I have said, to the normal principles of public decision-making.
It is worth pointing out—I suppose that this is the Government declaring an interest—that the LCCC is wholly owned by the Secretary of State for BEIS and is governed by its articles of association and a framework document setting out the relationship with the Secretary of State and its guiding principle.
The justification of the noble Lord and the noble Baroness for the inclusion of “fit and proper” was its apparent precedent in what was the National Security and Investment Bill, yet this phrasing does not in fact appear in the Act as made. Therefore, with the reassurances and information that I have been able to provide to noble Lords, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Liddell of Coatdyke (Lab)
Given that explanation, I am prepared to withdraw the amendment.
The Deputy Chairman of Committees (Lord Geddes) (Con)
We come to Amendment 41. Lord Callanan?
Lord Callanan (Con)
You just can’t get the Whips to support you properly nowadays, can you?
Lord Callanan (Con)
I am only joking. My noble friend is brilliant at the job.
Amendment 41
Lord Callanan
Member's explanatory statement
This amendment provides for regulations under new clause (Enforcement) to be subject to the affirmative procedure.
Lord Callanan (Con)
I will speak to government Amendments 41 and 63 standing in my name. Amendment 63 will enable the Gas and Electricity Markets Authority and the Northern Ireland Authority for Utility Regulation to enforce hydrogen levy requirements imposed on relevant Great Britain and Northern Ireland market participants respectively.
The existing enforcement provisions in the Bill enable regulations to make provision for the levy administrator to, for example, issue notices and charge interest on late payments in respect of market participants who default on levy payments. Amendment 63 complements the existing enforcement provisions. Crucially, it ensures that regulations can make provisions for more robust forms of enforcement and enables enforcement under the terms of the licences held by market participants obliged to pay the levy, such as the possibility of licence revocation. It is critical that the levy is supported by a suite of enforcement measures. This will help reduce the risk of defaults on levy payments and help ensure that the levy administrator can collect the money required to fund the hydrogen business model and cover related costs.
Amendment 41 ensures that regulations made under this new clause will be subject to the affirmative resolution procedure, to ensure sufficient parliamentary scrutiny of these more robust enforcement arrangements. Therefore, I hope they will be acceptable to the House. I beg to move.
Lord Lennie (Lab)
My Lords, these government amendments are evidence of the rather chaotic state of the Bill as it has come to us. It is long—300-plus pages, 13 parts, et cetera—and missing this from the original drafting is an oversight by the Government that needs some explanation. Having said that, the amendments allow for an enforcement provision under the new regulations and for these to be subject to the affirmative procedure. We welcome that scrutiny and the ability to enforce regulations that are made. These amendments will also allow revenue support regulators to make provision for the relevant requirements found in the pre-existing enforcement regimes win the Gas Act 1986 and the Electricity Act 1989, as well as, as the Minister said, regulations regarding Northern Ireland. I would be interested to know when the existence of these pre-existing requirements was discovered. I look forward to his response.
Lord Callanan (Con)
The noble Lord is correct that a lot of drafting work went in. There is always limited OPC drafting time in government. It is regrettable that these clauses have had to be added, but I hope that I have provided sufficient explanation for them. The detailed levy design is pending, of course, but they include the enforcement arrangements for the levy. It is crucial that we allow for regulations to make provision for a range of enforcement measures. This provision simply allows regulations to enable the Gas and Electricity Markets Authority and the utility regulator to use their existing enforcement powers to ensure that relevant market participants comply with the obligation to pay the levy. Participants in the energy market are already very familiar with these arrangements.
Member’s explanatory statement
Regulations must have regard to the Low Carbon Hydrogen Standard in setting objective criteria against which to assess the eligibility of low carbon hydrogen production.
Baroness Liddell of Coatdyke (Lab)
I will speak to Amendments 43, 45, 48 and 58. Again, they are trying to cope with some of the wide definitions that are contained within the Bill. I am most impressed with the fact that the Government have defined a UK Low Carbon Hydrogen Standard, which was updated in July of this year. It includes guidance and a calculator tool for hydrogen producers to use for greenhouse gas emissions reporting and sustainability criteria. That standard has been designed to demonstrate that low-carbon hydrogen production methods can meet a greenhouse gas emissions test and threshold, and these amendments require the regulations to have regard to that standard when assessing the eligibility of low-carbon hydrogen production. It goes back to what I said beforehand. We are not necessarily nitpicking here; we are seeking to get an amendment into place that allows us to have due regard to low-carbon hydrogen standards in setting objective criteria against which to assess the eligibility of low-carbon hydrogen production. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, I will speak to Amendment 46 in my name. As the noble Baroness, Lady Liddell of Coatdyke, clearly set out, this group of amendments is trying to implement something that the Government themselves have established: the UK Low Carbon Hydrogen Standard: Guidance on Greenhouse Gas Emissions Reporting and Sustainability Criteria, which I believe dates originally to April and was updated in July. I find myself in the unusual position of saying that I want to enforce something that the Government have established. Experts in this area tell me that the conditions set out in these standards are: the greenhouse gas emissions intensity of hydrogen for it to be considered low carbon; the emissions being considered up to the point of production; and, very importantly, the risk mitigation plan for fugitive hydrogen emissions. There is perhaps not much public awareness of the risk of that, but we need to share and understand it. The criteria are set out there.
I am not particularly attached to the way this is done in my amendment; I was simply trying to put Amendment 46 down to say that, for the subsidies to be available, it must meet the Government’s own standard. That seems the simplest way, but I am very happy to be convinced that there are various other ways; other amendments are going in the same direction. I am happy should we still need to get to this on Report to talk to people about what the best way of doing it is, but surely the Government want to enforce their own standards.
Baroness Worthington (CB)
My Lords, I will speak to Amendment 47 in my name. I find myself in the unusual position of being more environmentally ambitious than the noble Baroness, Lady Bennett of Manor Castle, in that the standard that my amendment would introduce on hydrogen would be more stringent and would ensure that we are investing in this form of clean energy only if it is truly clean.
It is a not well understood fact that hydrogen actually has a global warming potential which is not insignificant. When released into the atmosphere, it has the effect of inhibiting the breakdown of methane, which we all know is a powerful greenhouse gas. The latest papers to come out that the Government have produced themselves indicate that, over a 100-year timescale, hydrogen has a global warming potential of 11 times that of CO2. That is over 100 years, but we are probably concerned about the next 20 years, in which case that rises to it having 33 times as powerful a greenhouse gas effect as CO2.
When it comes to hydrogen, I know it is often touted as the great white hope and the great solution—in fact, we have had adverts plastered all over Westminster telling us that hydrogen is the answer. However, it has to be considered carefully in context. It is very difficult to produce and to transport, and it is very dangerous to have around the house. In fact, studies have shown that it is potentially between three to four times more likely that someone will be injured from a hydrogen explosion in the home compared to natural gas. Already, natural gas has an unhappily high number of accidents and injuries from its use in the home.
Lord Oates (LD)
My Lords, I declare my interest as a member of the UK Hydrogen Policy Commission. I do not disagree with any of the amendments, and having a stringent green hydrogen standard is important. However, it is also important to stress that hydrogen is for use not only in home heating—I share some of the noble Baroness’s scepticism about that—and there are very significant uses of hydrogen at present in the chemical industry and as a feedstock in fertilisers. They must clearly be the priority, and we certainly need green hydrogen for that, which is a lot of green hydrogen. Although I absolutely share the ambition on tight standards for green hydrogen, we will definitely need it there, and in some of those hard-to-decarbonise areas such as steel production and the building industry. We should absolutely use it for purposes where electricity is not an easy solution, but let us not talk it down or talk about it as if it is a solution only to home heating, where I agree it probably is not practical.
Baroness Blake of Leeds (Lab)
Just to add to that list of uses, I am interested in the development of the hydrogen village, as outlined in the Bill, which is a really interesting example. There are also other uses in transport, for example, which are very well advanced, and we very much look forward to the outcome of those debates.
I do not want to prolong the debate, but the obvious question to me is that a standard has been established and had extensive public consultation and multiple engagement sessions with experts by stakeholder groups, as I understand it. I just wonder why we would want to undermine all that work and complicate the situation by suggesting that the Secretary of State could override the standard. Perhaps the Minister could, in his summing up, give us a very clear explanation of how any changes to the standard and protection might be achieved, to ensure that stakeholders and the public are kept informed, as this is, as we have heard, an area of both enthusiastic response and concern.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, for their amendments in this group.
Amendments 43, 45 and 48 seek to ensure that the question of who is an eligible low-carbon hydrogen producer is determined solely by regulations that set objective criteria against which to assess eligibility, and in doing so must reference the low-carbon hydrogen standard.
Amendment 58 seeks to clarify that a low-carbon hydrogen producer must be eligible to receive support, which the other amendments would ensure means that they are compliant with the low-carbon hydrogen standard. Amendment 46 has a similar purpose; I thank the noble Baroness, Lady Bennett, for it and for her encouraging comments about the policy.
Amendment 47 seeks to introduce an emissions standard for low-carbon hydrogen production and would require the Government to target support at areas that cannot benefit from other cleaner, more efficient or cost-effective decarbonisation processes. I thank the noble Baroness, Lady Worthington, for this amendment.
A low-carbon hydrogen producer is defined in Clause 61(8) as
“a person who carries on (or is to carry on) activities of producing hydrogen which in the opinion of the Secretary of State will contribute to a reduction in emissions of greenhouse gases”.
The intention of this definition is to ensure that support under hydrogen production revenue support contracts may be provided only in respect of low-carbon hydrogen production that contributes to our decarbonisation ambitions.
Clause 61(3) places a duty on the Secretary of State to make provision in regulations for determining the meaning of “eligible” in relation to a low-carbon hydrogen producer. This approach to defining eligibility in regulations is similar to that taken for low-carbon contracts for difference in the Energy Act 2013. The regulations that define the term “eligible generator” for low-carbon contracts for difference have themselves been updated since they were introduced in 2014 as the industry and technologies have evolved; this has proved a flexible and enduring approach since 2014.
This duty is required as the Secretary of State is only able to direct a hydrogen production counterparty to offer to contract with an eligible low-carbon hydrogen producer. An allocation body will also be able only to give a notification to a hydrogen production counterparty specifying an eligible low-carbon hydrogen producer to offer to contract with. It is not practical to define an eligible low-carbon hydrogen producer in the Bill because eligibility may change over time as the industry and technologies evolve. The Government plan to consult on these regulations by early 2023.
The Government consulted on a UK low-carbon hydrogen standard last year, and a government response was published in April this year. This world-leading standard sets out a greenhouse gas emissions threshold as well as other criteria for hydrogen production to be considered low carbon, and sets out in detail the methodology for calculating the emissions associated with hydrogen production. This includes the steps that producers are expected to take to prove that the hydrogen they produce is compliant.
The standard was developed following a public consultation and multiple engagement sessions with industry and academic experts, including the Hydrogen Advisory Council and its low-carbon hydrogen standard working group. As set out in the response to the consultation on a low-carbon hydrogen business model, published in April this year, we are proceeding with our proposal to require volumes of hydrogen produced to meet the UK low-carbon hydrogen standard in order to qualify for and receive funding under the business model. The low-carbon hydrogen standard is set out in guidance and we expect it to be updated over time to ensure that it remains fit for purpose and reflects our growing understanding of how new technologies work in practice, including how hydrogen production interacts with the broader energy system. I hope that gives some comfort to the noble Lord, Lord Oates, and the noble Baroness, Lady Blake, that the standard may well change over time as our understanding of the practice grows.
With a focus on investor confidence, our current approach gives a significant degree of certainty about eligibility, which will provide prospective investors and developers with the clarity and transparency that they need to bring projects forward. While the low-carbon hydrogen standard is an integral part of the low-carbon hydrogen regime, direct reference to an emissions standard in this legislation would undermine both the need for the standard to be capable of evolving over time and the need for the legislation to be certain. The approach currently set out in the clause makes best use of regulations for setting eligibility and guidance that can be more responsive to the evolving nature of the low- carbon hydrogen standard.
Amendment 58 seeks to insert “eligible” in Clause 70(1)(b). We do not consider this necessary, as the reference to
“that low carbon hydrogen producer”
in subsection (1)(b) is referring back to the
“eligible low carbon hydrogen producer”
in subsection (1)(a).
The noble Baroness, Lady Worthington, mentioned the production of methane and it being an unhealthy by-product of hydrogen, and that a green hydrogen lobby group which I was not aware had been consulted. I will certainly take that back to the department. We have numbers on the rate of hydrogen per kilogram of greenhouse gas emissions compared with the low-carbon hydrogen standard, but I will be delighted to write to her, rather than befuddle everybody with the science here.
I therefore ask that the noble Baronesses and noble Lords withdraw and not press Amendments 43, 45, 46, 47, 48 and 58, but thank them for helping to test the robustness of the Government’s decarbonisation ambitions.
Baroness Bennett of Manor Castle (GP)
I am not a lawyer, and nor is the Minister, so I will understand if she wants to write to me. However, my understanding is that, if the Bill says that it complies with the UK low-carbon hydrogen standard, and then that standard was updated, the legal binding would be updated. Maybe we need wording to say that it complies with the UK low-carbon hydrogen standard as presently exists and is updated in the future. I am not sure what the wording should be, but surely if you have a standard that is being updated, saying in the Bill that you will meet that standard does not mean that the 2022 figures are fixed in stone.
Baroness Bloomfield of Hinton Waldrist (Con)
I need to take that question back to the department and then write to the noble Baroness.
Baroness Liddell of Coatdyke (Lab)
I thank the Minister very much for that very full response. The noble Baroness, Lady Worthington, raised some interesting points that I was not aware of. It would be useful to explore those further as we get towards Report. However, I am content to beg leave to withdraw my amendment.
Lord Oates
“Designation of a long duration energy storage counterparty(1) The Secretary of State may by notice given to a person designate the person to be a counterparty for long duration energy storage revenue support contracts.(2) A “long duration energy storage revenue support contract” is a contract in relation to which both the following paragraphs apply—(a) the contract is between a long duration energy storage counterparty and the holder of a licence under section 7;(b) the contract was entered into by a long duration energy storage counterparty in pursuance of a direction given to it under section 60(1).(3) A person designated under subsection (1) is referred to in this Chapter as a “long duration energy storage counterparty”.(4) A designation may be made only with the consent of the person designated (except where that person is the Secretary of State).(5) The Secretary of State may exercise the power to designate so that more than one designation has effect under subsection (1), but only if the Secretary of State considers it necessary for the purposes of ensuring that—(a) liabilities under a long duration energy storage revenue support contract are met,(b) arrangements entered into for purposes connected to a long duration energy storage revenue support contract continue to operate, or(c) directions given to a long duration energy storage counterparty continue to have effect.(6) As soon as reasonably practicable after a designation ceases to have effect, the Secretary of State must make one or more transfer schemes under section 79 to ensure the transfer of all rights and liabilities under any transport and storage revenue support contract to which the person who has ceased to be a transport and storage counterparty was a party.”
Lord Oates (LD)
My Lords, I will speak to Amendments 50 and 51. These are probing amendments to press the Government on their position on revenue support models for long-duration energy storage and the degree to which they recognise the urgency of determining this.
In Committee on Monday, the noble Lords, Lord Moylan and Lord Howell of Guildford, raised this issue of energy storage. Indeed, the noble Lord, Lord Howell, spoke of the Dinorwig pumped-storage plant in Wales, which I believe he opened—or at least he opened its increased capacity—when he was the relevant Minister. He made the point, quite rightly, that it not only provides support when the system needs it—rapidly bringing power on—but even when it is not operating it is saving money because it reduces the margin that is required to be kept on hand to be on call.
Lord Moylan (Con)
My Lords, I have some sympathy with what the noble Lord, Lord Oates, has just said. My concern is perhaps even a little more profound than his because I do not understand what role the Government see for pumped storage in addressing the problem of intermittency of renewables. The noble Lord focused on the funding mechanism, but what role is it going to have? How large a part do the Government intend that it should play?
However, that is not my purpose in rising. My purpose is to speak to Amendment 225, which relates rather to gas, which is also there to be used to some extent to address the problem of intermittency. I am grateful for the support of the noble Lord, Lord West of Spithead, and my noble friends Lady McIntosh of Pickering and Lord Frost. The House had a Question on gas storage earlier today and the Minister made some helpful and informative comments in response, but it was largely a backwards-looking Question. It looked at decisions taken in the past, whereas this amendment is intended to look a little more forward. It would require the Government to provide gas storage onshore or under our waters equivalent to 25% of forecast annual demand. However, in a sense, the real purpose is to give the Government an opportunity and to elicit from them some sense of their plans for addressing this question. In the past few months, we have all seen on the television news and in the newspapers, and been gripped by it, that while Germany has been busily filling up its capacious gas storage facilities, we have none whatever, so I think the Committee and the public will be interested to know what the Government intend, if the Minister is capable of giving us an indication today.
I shall make just two points about the amendment. To those who say that we are phasing gas out, I say that the amendment is worded to require 25% of forecast demand, so if the demand comes down, the amendment still works and the amount stored can be adjusted. I think I am a correct in saying—this emerged at Second Reading—that nobody in the House believes that demand for gas is going to fall to zero, even if it is to fall to quite low or even miniscule levels, so the amendment still works and, planning over the long term and looking forward a number of years, it should be possible to make this workable.
Secondly, I put in 25% as a placeholder as much as anything else. I am very open to the Government making a case for why that number should be higher or lower and why government policy should not be 25% but more or less. I am even open to an argument that the number should be 0%. Indeed, reviewing what the Minister said today, he made the valid point that, unlike Germany, we already have a store, so to speak, of gas in our control; it just happens to be under the sea. I understand that there is a point there.
I think back to the United States in the 1970s, when the oil shock arrived. The United States decided that what it needed was a large oil reserve, so it started pumping oil into specially prepared caverns in the earth. Then I think it struck the US that it was pumping oil out of one bit of the earth and then pumping it into another, and that perhaps this was not as sensible as it might have been, so the policy was gradually abandoned.
The Minister may want to make a similar and parallel point in respect of our own gas reserves. He may say that zero is a perfectly reasonable amount for us to store. If the answer from the Government were zero, it would at least be a decision and a policy. We would be able to scrutinise it and understand the arguments for it. As I say, setting the number at 25 is very much a placeholder. I am not being in any sense dogmatic about what the number should be, but I do feel that the Government should have a number in mind, should be able to justify it—even if it is zero—and should be able, I hope, to tell us what it is.
Lord Foster of Bath (LD)
My Lords, I fully support the amendments in the name of my noble friend Lord Oates and that in the name of the noble Lord, Lord Moylan, and others. They seek, in effect, to get more information from the Government about their plans in relation to energy storage.
My Amendment 240 is also about storage but, in this case, the storage of solar energy, the use of which is growing at an incredibly rapid pace. There are already something like a million domestic solar systems installed around the UK, and residential solar deployment is at a record subsidy-free level according to Solar Energy UK, which represents many of the UK’s solar firms. This is perhaps unsurprising given the benefits of generating your own electricity at home. This is also good news for the Government since, if we are to meet our net-zero target by 2050, we need as many of the 29 million homes in UK as possible to decarbonise. Solar is of course part of that solution.
At this point I should draw attention to my interests. I recently installed solar panels on the roof of my home, together with one battery; it is the battery element that is relevant to my amendment. It was great news when, in the Spring Statement delivered on 23 March, the then Chancellor, Rishi Sunak, made the very welcome announcement that certain energy-saving materials would be eligible for zero-rate VAT on both labour and parts. This change was effected through the Value Added Tax (Installation of Energy-Saving Materials) Order 2022, which added a list of energy-saving products eligible for the zero rate to Schedule 8 to the Value Added Tax Act 1994, which is relevant, as noble Lords will see in a second.
Solar panels are the only solar-related items specifically included in this list. Batteries that store the energy from solar panels when it is not needed, and which can be used at a time when it is needed or to supply energy back to the grid, are not listed. However, the energy-saving materials and heating equipment VAT notice 708/6, which relates to the earlier Act, states:
“The installation of certain specified energy-saving materials with ancillary supplies is zero-rated in Great Britain.”
I can find no reference to “ancillary supplies” in the Value Added Tax Act 1994, which the Chancellor’s Spring Statement amended. However, HMRC has said that, in certain circumstances, batteries are in fact included. It has said that, when batteries are sold as part of the installation of a solar array, they are to be treated as an ancillary supply and so also qualify for zero-rate VAT. However—this is the crucial point—they would not qualify if installed separately at a later date.
A neighbour of mine, Mr Geoff Makepeace, installed a solar array with batteries a while ago; it was before the Spring Statement, so he did not benefit from the zero rate of VAT announced in it. However, keen to get increased benefit from his solar system, he sought advice: should he increase the number of solar panels or the number of batteries? The advice was to install another battery. He followed that advice but was subsequently surprised that his bill included £567 for VAT at 20%.
The Deputy Chairman of Committees (Lord Geddes) (Con)
I must counsel the noble Lord, Lord Foster, that he cannot move his amendment at this stage but only when the Committee comes to it sequentially.
Lord West of Spithead (Lab)
My Lords, I support the amendment in the name of the noble Lord, Lord Moylan, which relates to resilience. We are very bad at spending money on resilience. The Treasury hates to spend money on resilience, as I know from my time as a Minister.
Lord West of Spithead (Lab)
Well, yes, it hates to spend money full stop, but especially on resilience. Whether it is the loss of our GPS system and how we would counter that or PNT, there is a whole raft of areas where it is really unwilling to move and spend money even though these things are crucial. In this case, it is extremely important that we have the ability to store gas as we move into the future. I agree totally with the noble Lord, Lord Moylan, that the amount we have to store may vary quite dramatically.
Earlier, the Minister spoke about how we have infrastructure built to bring LNG into this country. We certainly do—I was heavily involved in ensuring that we got the right ships from the North Dome in Qatar to Milford Haven and setting up the infrastructure there. It was meant to provide 15% to 30% of our LNG. That was fine when people were not outbidding us for that LNG. That is the problem now; we cannot guarantee that that LNG will come to us, so we need some form of resilience. I believe that resilience should be our having some gas storage capability.
I have to get a naval thing in. It is interesting that, between the two wars, we forced the Treasury to ensure that our then 850-ship Navy—it is a bit smaller now—had sufficient fuel stored in this country to fight at war rates for six months. Someone in government had calculated it. We have to have a calculation; 25% might be wrong, but there is a requirement for some storage. We need to think very hard and the Government need to come up with a view from their experts on how much that should be. It may dwindle in time, but we certainly need it in the near term as quickly as possible. I very strongly support Amendment 225.
Baroness McIntosh of Pickering (Con)
I join the noble Lord in his support for my noble friend Lord Moylan’s Amendment 225. I have been minded to table something similar, so I was delighted when my noble friend was able to fill the gap. I believe that the amendment seeks to address not just resilience but security of supply, and I am delighted that it is in the form of a probing amendment and that we leave open the amount of storage that we seek.
My concern, which we touched on in Oral Questions, is the woeful shortage of gas storage at this time. I understand the reasons why Centrica closed its gas storage, which I understand was in Yorkshire, in 2017. But, as my noble friend Lord Callanan said in response to the Question today, the circumstances then were very different from today. I understand that, currently, the facility could possibly store between 10 and 12 days at full capacity. I understand that talks are ongoing in this regard; what status are they at? If they are successful and Centrica, or indeed another operator, was minded to open or reopen these facilities, what is the optimum number of days of storage? I prefer to talk about this in days of storage rather domestic consumption, but I will leave that to those more expert than me. What is the current capacity for gas storage? Back in March, I understood that Germany had something like 120 days’ storage and we had only a possible maximum of 30, which may even have been an overestimate of the capacity.
What percentage of gas is currently being supplied to this country by interconnectors from Norway and perhaps other suppliers? Also, what is the percentage being delivered by tankers? For the reasons of resilience and security of supply, and given that there are European countries that are more dependent on Russian sources of gas than we are, can we be absolutely sure about the threat that the current supplies to this country through interconnectors and tankers might be diverted to other European countries if the situation in Russia were to deteriorate further? I understand that this is a source of some concern. Germany is one of the countries most dependent on Russia for current gas supply. I understand that it reached its target for days of gas storage ahead of schedule. It has also stored underground just over a fifth of the gas used in the whole of last year, 2021.
Finally, the flip side of gas storage and the potential cap on spending, which we might learn of tomorrow, is trying to encourage all of us to use less of the finite resource of electricity and energy. Could my noble friend shed some light on that? Will we hear more tomorrow?
Baroness Neville-Rolfe (Con)
My Lords, I support Amendment 225 in the names of my noble friend Lord Moylan and others. The noble Lord, Lord Oates, raised some good questions in this area. Gas storage is not only important; it can also be a thing of beauty, as I know from my days watching cricket at the Oval, with its famous gas-holder backdrop. Perhaps it can be revived—I say rather fancifully.
This year’s crisis has shown how vulnerable we are with gas. When I was Energy Minister, I often emphasised the importance of energy security, which was very unfashionable then, as energy was plentiful and prices were low. I used to say that, if I or anyone else in that role became the Minister of Blackouts, it would be terminal in career terms. I would like to understand how much of a risk there is with gas now, and indeed how quickly top-ups could be accessed from the North Sea, if that is another possibility. In any event, I urge my noble friend Lord Callanan to make our gas supply less volatile, increase physical storage if possible and/or encourage allies like the Norwegians to do so as well.
Viscount Trenchard (Con)
My Lords, I strongly support Amendment 225, which seeks to introduce a requirement to construct gas storage facilities to hold 25% of forecast consumption by 2025. I understand that past Governments have not believed that the country has any particular need for gas storage facilities, given that we have extracted large amounts of gas from the North Sea. I am sceptical that we will find it possible, or indeed necessary, to reduce our reliance on gas as quickly as the Government’s net-zero policy currently requires.
However, the extreme volatility in the price of natural gas on the international markets means that British consumers are much more exposed to massive and rapid price increases than consumers in countries that maintain much more significant gas storage facilities, such as Germany. Even if the Government accelerate the development and commercial deployment of more new nuclear reactors than they have planned so far, we will still need large amounts of reliable energy that is not subject to intermittency. Increasing gas storage facilities as an urgent priority will mitigate the risks we face today, and I hope that the Minister will support this.
My noble friend Lord Moylan explained why he selected 25% as the proportion of forecast demand each year beyond 2025. My noble friend Lady McIntosh suggested that this should be defined in days—I think it would be 91 days at 25%, as an average, but surely we use much more gas in winter than summer. I doubt that our consumption of gas will steadily decline in the years beyond 2025 but, so far as it does, I am not saying that it is not a good thing. If the Government are correct and reduced demand in 2028 or 2030 is realised, storage facilities holding 25% of forecast demand may hold 30% or 35%. I look forward to hearing the Minister’s thoughts on this very useful amendment.
Baroness Worthington (CB)
My Lords, I will briefly speak to this group of amendments. It is clear that the resilience of our energy system is absolutely crucial. As recent events have shown, a non-resilient system poses great threats, in both rising costs and vulnerable people suffering.
I will ask about the best approach to delivering the enhancement of gas storage that I think we all agree on. It seems clear to me that, in Clause 10, the Government are considering making an intervention into energy markets to guarantee a certain volume of fuel supply, because of the perceived worry that investment into these sectors is slowing—quite rightly in my view, because they have a limited lifespan. The fossil fuel industry will have to quickly adapt to a rapidly electrifying energy system in which its product will be less needed. So, in time, we will see a diminishing market, in part because of government policy—and that is completely correct, as we move away from polluting forms of energy. But this opens up the risk that there will be a gap between private sector investment and our needs, as we will still rely on these fuels during the transition. It seems to me that the Government have convinced themselves that an intervention on core fuels for transport is necessary for this reason—the fear that a gap will open.
Has a similar analysis been done on the gas market in light of recent events? Would it not therefore make sense to consider some kind of holistic intervention into the market for energy security purposes, rather than a piecemeal, fuel-by-fuel approach? Does that complement, or supplement, the approach of the noble Lord, Lord Moylan, providing some way through this that we can perhaps discuss during Committee and then come back to on Report?
I support Amendment 240, but would the VAT exemption apply to larger systems, like schools and other buildings, or is it just for personal home use? It seems to be sensible to try to level this up so that people can make use of it.
Lord Foster of Bath (LD)
To be absolutely clear, it would apply to all batteries that receive their supply from solar panels.
Baroness Worthington (CB)
In which case, I am even more supportive, because it is absolutely clear that installing solar panels is a fast way to reduce demand for fossil fuels and to increase resilience. If it can then be stored, even more resilience will be added to the system. So this would seem to be a very sensible amendment, and I thank the noble Lord for his meticulous detail in spotting this.
The Earl of Kinnoull (CB)
My Lords, I rise with my European Affairs Committee hat on. I see these as enabling amendments for the storage of energy. The first Parliamentary Partnership Assembly, which took place in May, had a specific session on energy security. The mood was clear: the 70 politicians—35 from Westminster and 35 from the European Parliament—felt that, in a difficult security environment, energy was a European-level matter and that we should think about it as such. Interestingly, I was at a European security conference on Monday and the exact same theme came through. Yesterday, we were settling the agenda for the second Parliamentary Partnership Assembly, and this theme will be on the agenda again.
Many of the speeches and thinking this evening have been from the United Kingdom view of the world. However, we should be enabling ourselves to consider this from a European perspective. As we might be storing gas for others, such as the Germans, anything in these amendments which would allow a future Secretary of State the flexibility to do that would be a good thing from a European context. Therefore, they would be good from a European affairs point of view.
Baroness Bennett of Manor Castle (GP)
My Lords, in the interests of time, I will comment only on Amendment 240, in the name of the noble Lord, Lord Foster of Bath, and offer strong support for it—alongside some potential improvements or broadening-out suggestions at this stage.
It is interesting that, in 2015, Steve Holliday, the then CEO of National Grid, said that the idea of baseload relying on coal-fired or nuclear power stations was “outdated”:
“From a consumer’s point of view, the solar on the rooftop is going to be the baseload.”
This would obviously need to rely on batteries for it to work 24/7. Mostly since that time, 3.3% of British homes have installed solar panels, but many of them were installed before batteries were a viable option. Those home owners should not pay the high levels of VAT to enhance the system for the benefit of both themselves and the whole of society.
I have later amendments talking about community energy schemes. I can think of numerous ones that I have visited over the years where solar panels were put on cricket pavilions, community halls et cetera. We have been talking mostly about domestic settings, but there are also many community settings in which the addition of batteries may now be a practical option.
We will be talking a lot in later groups about the issue of energy efficiency and improving energy security by reducing our demand. My understanding of the information from the Consumer Protection Association —and I stand to be corrected if I am wrong—is that double, triple and secondary glazing are not currently covered by the VAT concession. It seems to me that this could possibly be included in this amendment; perhaps it is something we can work on.
Lord Teverson (LD)
My Lords, I begin by making it quite clear that my energy storage interests are not around long-term storage or retail storage.
I absolutely support the amendments put forward by my noble friends, but I will not talk about them. Instead, I will follow up on the amendment tabled by the noble Lord, Lord Moylan, and relate it to some of the discussion that took place earlier today in the House around storage, because gas storage is really important at this present time, and it will continue to be in future. I like the way—through a percentage or whatever we use—that we can see a relevant ratchet downwards, as we would expect. However, what alarmed me earlier today was that, in terms of current storage, we appear to be in the hands of independent directors of independent companies that have responsibility to their shareholders under the law, but not to the energy security of the country. That was very clearly stated by the Minister in terms of the decision to turn off the Rough facility in 2017. As I said at the time, if that was the case then, I see no reason why that is not also the case in future; there seemed to be no proposal by the Government to change that situation. I am interested to hear the Minister’s response to that part of my original question.
I will also go back to what the noble Baroness, Lady McIntosh of Pickering, said, because part of the Minster’s earlier answer was that our storage is the gas we have in the North Sea. But we all know that that store is going down, and I certainly would not, from these Benches, resist trying to increase that in the short term during the energy crisis to ensure that our energy is there—the situation would be different in the medium and long terms. That flow is going down and our imports are going up. I do not know if these two years were particularly representative, but the last figures from the Minister’s department said that, in 2020, we imported £5 billion-worth of gas. A year later, that went up to £20 billion-worth of imports of gas—a quadrupling. That was not all because of a price increase at that time, most of which has happened in 2022.
Another statistic reveals that, while we think we have multiple sources, 75% of imports came from one country, which is Norway. Norway is a dependable friend of the United Kingdom; we would not argue otherwise. But we must be clear that Norway’s bigger customer is Germany. Germany and the other European countries which import gas from Norway are probably more desperate—this is likely not the right phrase to use—for that resource than we are. As I said, I very much support the outline of the amendment tabled by the noble Lord, Lord Moylan, and ask the Minister what security we actually have, and for how long, over our supplies—that is, the 75% of imports that we have from Norway. What is our legal entitlement to that flow into the future?
Lord Lennie (Lab)
My Lords, the amendments from the noble Lord, Lord Oates, are very welcome and they plug a gap in the Energy Bill. Amendment 50 facilitates the changes proposed by allowing the Secretary of State to
“designate the person to be a counterparty for long duration energy storage revenue support contracts.”
Amendment 51 introduces a new clause which allows the Secretary of State to
“direct a long duration energy storage counterparty to offer to contract with an eligible person”.
Clauses 59, 61 and 63 already allow designation of counterparties for transport and storage, hydrogen production and carbon capture revenue support contracts, and Amendment 50 simply replicates this for long duration energy storage. Similarly, Clauses 60, 62 and 64 already allow the Secretary of State to direct counterparties to offer to contract, and Amendment 51 replicates this for long duration energy storage.
The amendments define long-duration energy storage revenue support contracts as being
“between a long duration energy storage counterparty and the holder of a licence under section 7”
and, as ones
“entered into by a long duration energy storage counterparty in pursuance of a direction given to it under section 60(1).”
This fills a big gap for long-duration energy storage. According to the Government, longer-duration storage—access across days, weeks and months—could help to reduce the cost of meeting net zero by storing excess low-carbon generation for longer periods of time, thereby helping to manage variation in generation, such as extended periods of low wind. This in turn could reduce the amount of fossil-fuel and low-carbon generation that would otherwise be needed to optimise the energy output from renewables.
Long-duration energy storage includes pumped storage as well as a range of innovative new technologies that can store electricity for four hours to supply firm, flexible and fast energy that is valuable for managing high-renewables systems. Introducing long-duration energy storage in large quantities in Britain by 2035 can reduce carbon emissions by 10 megatonnes of CO2 per annum, reduce systems costs by £1.13 billion per annum and reduce reliance on gas by 50 TWh per annum. That seems to me worth consideration in this Bill.
Amendment 225 in the name of the noble Lord, Lord Moylan, which has general support around the House, requires the Government to produce a strategy for the storage of gas for domestic consumption. This would see the construction and operation of gas storage facilities capable of holding 25%, although it could be more—it could be 100%—of forecast domestic consumption each year beyond 2025. While agreeing that UK gas storage is currently small, which may have left us exposed to higher prices and shortages thus far, is it the solution to the long-term energy supply problems that we may face? It may well be that we need an immediate expansion of gas, but whether it is the long-term solution to our energy supply is open to some question. The UK currently stores enough gas to meet demand over four or five winter days, which is clearly not enough. But the new Chancellor said, when he was the Business Secretary, that the answer to mitigating a quadrupling of the gas price in four months was to get more diverse sources of supply, and more diverse sources of electricity, through non-carbon sources. So there is some doubt about the long-term viability of increasing gas storage.
Amendment 240 from the noble Lord, Lord Foster, would establish a new clause to store energy generated by solar panels in the list of energy-saving materials that are subject to zero-rate VAT. He had the example of his friend in the south-west. Modelling from Cornwall Insight’s view of the GB power market out to 2030 has shown that between 2025 and 2030 the Government must spend almost one-fifth of their total energy technologies investment, which includes solar, wind, nuclear and carbon capture and storage, on energy storage batteries, if we are to meet renewable targets and stabilise the energy market. Latest data estimates that almost 10% of grid capacity will be provided by battery storage by 2030, at an estimated cost of £20 billion. So, considering both the need and the cost of this, the amendment seems a sensible proposal to encourage the market to take up some of the burden.
Lord Callanan (Con)
I thank all noble Lords for participating in what has been a fascinating debate on an important subject, very much building on the discussion that we had earlier this afternoon. I shall come on to the issue of gas storage—a popular topic of the day—a bit later.
I start with Amendments 50 and 51, tabled by the noble Lord, Lord Oates. Long-duration energy storage covers a wide range of technologies, and the Government are looking at the need for revenue support for these separately, as they all face different challenges and solve different problems. While I commend the noble Lord’s intentions, I put it to him that these amendments are premature at this stage.
In the case of electricity storage, I reassure the noble Lord that we are committed to developing policy enabling investment for large-scale, long-duration electricity storage by 2024, as we have set out in our response to the call for evidence. As noted by the noble Lord, Lord Oates, we recognise that these technologies face significant barriers to deployment under the current market framework, due to their long build times, the high upfront costs, and the lack of forecastable revenue streams. Similarly, in the case of hydrogen storage, the 2021 UK hydrogen strategy set out our ambitions in this area.
More recently, and in recognition of the important role that hydrogen storage is expected to play in the hydrogen economy, we committed in the 2022 British energy security strategy to design hydrogen transport and storage business models by 2025. Indeed, we published a consultation on these matters in August. It is my contention that adding these clauses to the Bill now would prejudge the outcomes of the policy development which, as I hope noble Lords recognise, is already well under way.
Lord Teverson (LD)
That is moving back from what I understood. I understood there had been an agreement, or is it just that the facility has been licensed? Is that how far it has got, and so a commercial agreement has still to be made? Is that where we are?
Lord Callanan (Con)
As I said at OQs this afternoon, licences have been granted by Ofgem, by the regulatory bodies, because the safety and security of the facility is important. Centrica has taken a commercial decision to open part of the storage facility for this winter, and it has submitted other plans for our consideration, which we are doing. I apologise to the noble Lord, but I can go no further than that at the moment. As soon I have further information, and we expect progress in the near future, I will inform the noble Lord and the rest of the Committee.
Lord Teverson (LD)
I thank the Minister for that information, but it sounds to me like Centrica is conducting a very hard negotiation with the Government, maybe at the security expense of the country—I do not know.
Lord Callanan (Con)
I will leave that as a comment; there is nothing I can reply to on it. When I have further information, I will update the Committee.
The commitment proposed by my noble friend Lord Moylan to have in storage gas equivalent to 25% of forecast domestic consumption by 2025 is extremely ambitious. It is also horrendously expensive to do and, I submit to the Committee, unnecessary. The Government fully recognise the importance of gas storage, as I said, and officials continue to work on the future role that it can play in the clean energy landscape, particularly as gas production, as a number of noble Lords have said, can start to decline. But, of course, the fact that we get 45% of our production from our own continental shelf is, in effect, a giant gas storage facility and that is why we have traditionally had much less than continental countries which do not have those advantages. There is an integrated market—that is correct—and both sides benefit from it. As I said, the interconnectors over this year have been operating massively in the direction of the rest of continental Europe from the UK.
I think I have answered all the questions that were raised about gas storage facilities.
Baroness McIntosh of Pickering (Con)
I am sure it is on the departmental website, but do we know how much gas is supplied by interconnectors from Norway, and how much is supplied by tankers from Dubai and other countries in the overall scheme of things?
Lord Callanan (Con)
When my noble friend says “tankers”, I take it she means LNG tankers. I forget the exact figure, but we get 45% from our own domestic capacity and about 3% to 4% through interconnectors, so I guess the rest will be made up from LNG shipments. We have three LNG gasification terminals in the UK. Those figures are off the top of my head; I will correct them if they are not right.
Turning to the amendment in the name of the noble Lord, Lord Foster, I am sure he expects the reply that he is going to get. As he will be well aware, changes to tax policy are considered as part of the Budget process. As Treasury officials are always very keen to tell me whenever I put forward such proposals, they have lots of proposals from people for exemptions from various taxes but not many proposals for how to make up the revenue that would be lost from them. I am sure that the Chancellor will want to take that fully into consideration in the context of the Government’s wider fiscal position. I fully take on board the points that the noble Lord made. The Government keep all taxes under review and always, the Treasury tells me, welcome representations to help inform future decisions on tax policy.
Baroness Worthington (CB)
In case there are any Treasury officials listening or, indeed, reading Hansard, I suggest that one form of new tax would be on the trading of fossil fuel commodities. This is a huge source of revenue to the suppliers of fossil fuels into the market, and the commodity trading markets is a very good place to look for taxation revenue.
Lord Callanan (Con)
I thank the noble Baroness for her suggestion. The Treasury is not normally shy in coming forward with proposals for extra taxes if it thinks it can get away with it. Of course, we have already imposed the excess profits levy on a number of producers in the UK; indeed, those producers already pay increased rates of corporation tax. We must be careful that we do not disincentivise investment. Putting aside the wider politics of it, which we all understand, I am sure that everybody is aware that we need tens of billions of pounds of investment into existing oil and gas facilities. I welcome the support of the noble Lord, Lord Teverson, for the continued production of UK gas; it is an important transition fuel and I hope he will manage to convince some of his Liberal Democrat colleagues to support us in this. We do need gas in the short term, but many of those same companies are investing many billions of pounds also in offshore wind and other renewable energy infrastructure, so we want to be careful not to disincentive them too much from that. I am sure the Treasury will want to take into account all these helpful considerations as to how it can increase its tax base.
In conclusion, I am grateful to noble Lords for their amendments on these topics. I hope I have been able to provide at least some reassurance to some people on their amendments and that they will therefore feel able not to press them.
Lord Oates (LD)
I thank the Minister for his reply. On the tax treatment of batteries for solar power, I heard the Prime Minister at Prime Minister’s Questions today say on a number of occasions, “What I am about is cutting tax”, so perhaps he could suggest to her that this is one of the first tax cuts she could make.
On long-duration storage, the Minister made the point that there is a wide range of technologies, some of which are innovative, and the Government need to consider them. As I said in moving my amendment, that is acknowledged, but there are some that are not innovative: they are proven and effective and we need to get on with them. I hope the Minister can find a way of addressing this, because we will come back to it. The Government need to find a way, whether it is through specific pathfinder pilots or whatever it is, to get on with some of the things that need to happen now. The Minister said that it was premature at this stage to come forward with this stuff. If he talked to the project managers of Coire Glas, I think they would tell him it is not premature at all; in fact, it is desperately needed. They have a project ready to go, but they have no revenue model. We know we need it, the Government acknowledge in their consultation on long-duration storage that we need to massively ramp this up, so we really need to get on with it. I am afraid the Minister did not really address that.
I have one final question for the Minister. He said we will have the solution “by 2024”. Can he confirm that that means we will have the revenue models by 1 January 2024? There is a big difference between “by 2024” and during 2024. The industry is very worried that, when it has pressed the department on this, it has been given no assurance that it actually means “by 2024” and that it could be by the end of 2024. Can the Minister clarify that, in writing perhaps, to me and other Members of the Committee? These are critical things. We just have to get on with doing the things that we know how to do. There are lots of things that we do not know how to do. I beg leave to withdraw my amendment.
Baroness Blake of Leeds
Member’s explanatory statement
This amendment means the Secretary of State may put a levy on gas shippers, but may not put it on gas or electricity suppliers, thus taking responsibility away from levies to households.
Baroness Blake of Leeds (Lab)
I shall speak also to Amendments 54 and 62, tabled in my name and that of my noble friend Lord Lennie. Clauses 66 and 67 set out a series of powers to raise a levy or levies to fund the hydrogen business model. Detailed design of these will be subject to further consultation, which I hope and assume will take place thoroughly and may indeed reach similar conclusions to those put forward in this group of amendments.
Baroness Worthington (CB)
My Lords, I will speak to Amendments 55, 56 and 57 to Clause 66, which are in my name. As has been eloquently expressed by the noble Baroness, Lady Blake of Leeds, we absolutely need to put at the forefront of our attention the need to minimise adding costs to consumers at this time. Please excuse my coarse language, but it feels to me that the Government are in danger of moving from “cutting the green crap” to forcing us to take on crap green. That is essentially what we are doing here.
It is an adding of potentially unlimited expense for a commodity which will play a role—I am not completely against the use of hydrogen for certain applications—but the idea that it will be used at scale for homes is completely ludicrous. It is therefore absolutely right that we limit the levy to the people who will benefit from its use. That will not be consumers and certainly not electricity bills. What we want is cheaper electricity. I am confident that electricity will soften as we get off fossil fuels and rely more on more predictable and stable forms of electricity generation, such as nuclear, offshore wind and a whole panoply of ways of making electricity that we can control more easily than relying on imported gas. Those costs will soften, and we want to keep them cheap because that will enable us to electrify whole other segments of the economy.
So I absolutely support limiting this levy to gas, whether that is by saying it should be gas shippers or removing the reference to electricity, as my Amendment 55 does—I am completely agnostic on that, but the issue is fundamental. I will quote from a briefing that some of us may have received from E.ON, a big provider of energy which quite cleverly split itself into a clean electricity part and a not-so-clean one. The clean part says clearly that “recovering the costs of these new technologies through electricity bills is regressive and difficult to justify considering the soaring cost of living and the potential benefits of these technologies to individual consumers are uncertain. It is damaging that the Bill allows the Government to recover the costs of hydrogen revenue through electricity suppliers and, therefore, electricity consumers.” I fully support that and I have to say that my amendment was tabled before I read the briefing.
I considered striking out the whole levy with a clause stand part debate, but I thought that might be more the approach of the noble Baroness, Lady Bennett, so in Amendment 56 I am simply saying that there should be a sunrise to delay us rushing into adding more costs. The amendment proposes that the regulations should not be brought in until 6 April 2026. Amendment 57 simply states that a financial impact assessment must be made available if and when this levy starts to be added to bills.
My guess is that the use of hydrogen will be limited. It will be very expensive and it is very inefficient, so the costs should not and will not be borne in time. But I am worried that in this Bill we seem to be diverting towards a distraction and risking an illogical transition which will slow us down and add costs unnecessarily. That is damaging to the net-zero cause and to people’s confidence in this transition. We should therefore be very circumspect on this levy provision; we should be narrowing its application and slowing it down. I hope that the Government will consider this, because I am sure they have read the science and understand the physics as well as everybody else. It really ought to be limited.
Lord Teverson (LD)
My Lords, I think we are all trying to achieve the same thing here. As the noble Baroness, Lady Blake, said, maybe we need to take this forward as a way to do it. The cost to consumers is absolutely central at the moment, and this is not a short-term thing—it is at least medium term. Later we will come to an amendment which says we should repeal the Nuclear Energy (Financing) Act, which was all about raising costs to consumers in the short term and has nothing to do with nuclear power otherwise.
In my amendment, I am trying to do something very similar to what has already been debated: if we are going to accept this levy—we know levies are always very contentious when implemented in terms of who has to pay for them and who gets the benefits from them, which leads to a lot of argument—it is quite clear that for hydrogen there is only a very limited sector of organisations, people and population who will actually benefit from it. In its own way, my amendment seeks to prevent other consumers who are not benefiting from hydrogen having to pay for that investment.
It is very much in line with other Members’ amendments and it is absolutely fundamental to the messages that we as a Parliament, and the Government, are putting out at the moment to consumers and company users of energy. Let us make sure that, if we have this levy, it is kept to those who benefit from hydrogen rather than those outside who do not.
Lord Callanan (Con)
I thank the noble Lords, Lord Lennie and Lord Teverson, and the noble Baronesses, Lady Worthington and Lady Blake, for their amendments relating to the hydrogen levy provision. Before turning to the amendments, let me make the general point that these provisions in the Energy Bill will not, as all noble Lords are aware, immediately introduce this levy; they will only enable government to introduce the levy later through secondary legislation.
I will start with Amendments 52, 54 and 62 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. Amendments 52 and 54 seek to limit the energy market participants that could be obliged to pay any future hydrogen levy to gas shippers only. The Government intend that the levy would initially be placed on energy suppliers, and it will operate in a similar way to the existing levy schemes, where revenue support is funded through energy supplier obligations, such as the supplier obligation that funds the current contracts for difference regime. That is because these funding mechanisms are well understood by the private sector and have been extremely successful. The Government consider that establishing a similar levy would provide investors and developers with confidence to invest in low-carbon hydrogen production projects.
The option to levy gas shippers has been included with the intention to allow for a greater range of options for future levy design. The Government anticipate that the costs of any future levy on gas shippers would be passed through the energy supply chain and ultimately on to energy users, in a similar way to existing supplier obligations. It is unlikely therefore that these amendments would have the effect of preventing costs associated with the levy being passed on to households.
I turn to Amendment 62, which seeks to guarantee the return of overpayments of the levy to energy customers. The Government’s intention, and our expectation, would be that, in the event of overpayment by relevant market participants, those sums would be returned to market participants, who in turn should then pass them on to their customers.
Amendment 53, tabled by the noble Lord, Lord Teverson, seeks to ensure than an obligation to pay a hydrogen levy would, where possible, be placed only on those who would directly benefit from the low-carbon hydrogen production funded by the levy. Low-carbon hydrogen could support decarbonisation across the economy, which could benefit gas and electricity customers generally.
The powers that we have in the Bill provide options for where a hydrogen levy might be placed in the energy value chain, enabling future regulations to make provisions requiring one or more descriptions of gas suppliers, electricity suppliers and/or gas shippers to pay the levy. The Government have not yet reached a decision regarding which types of market participants will be obliged to pay the levy. That decision will be taken in due course and will no doubt be discussed in our Lordships’ House during the course of the secondary legislation that would be required to implement it. The decision will take into account a wide range of considerations, including but not limited to considerations related to fairness, which I know are the focus of the amendments tabled by the noble Lords. Given the Government’s approach to policy development on this levy, I hope that noble Lords recognise the amendment is unnecessary.
I turn to Amendments 55, 56 and 57, tabled by the noble Baroness, Lady Worthington. Amendment 55 seeks to ensure that an obligation to pay a hydrogen levy administrator could not be placed on electricity suppliers. I would contend that it is crucial that the provisions in the Bill allow for a range of options for where the levy might be placed to help enable the Government to future-proof the levy over the longer term and accommodate changes to the wider energy market.
As I alluded to earlier, we expect low-carbon hydrogen to play an important role in decarbonising the electricity sector. This provides support to the case for including electricity suppliers as a possible point of obligation for the levy. I understand the concern expressed by the noble Baroness and, if she will allow me, I will take this away and possibly revisit it at Report, but I hope she will not press her amendment.
Baroness Worthington (CB)
I am grateful for the Minister’s response. I have no doubt that hydrogen will have a role to play, but it is more likely to go into fertiliser production or long-distance fuels for shipping and aviation. The provisions being taken here do not allow for it to be applied to the sectors that consume fossil fuels—gas obviously covers fertilised gas. This needs to be thought through in relation to where hydrogen will most likely be needed. It will play a tiny role in decarbonising electricity, if at all, because there are so many other ways of doing it more cheaply and more efficiently.
Lord Callanan (Con)
I understand the point made by the noble Baroness. I have also seen the models of where it is most likely that hydrogen would be used, and I have considerable sympathy for many of the points that she made. As to the where it will be used, it will clearly be in industrial processes and heavy-goods transportation. These would be more likely uses than home heating or decarbonisation, but it would possibly play a role. Nevertheless, as I said, I have taken note of what has been said in the Committee and understand the points that have been made. If the noble Baroness allows me, I will take them away to look at, and possibly revisit them at Report.
Amendment 56 seeks to impose restrictions on when the hydrogen levy can be introduced to fund the hydrogen business model. This will help to unlock potentially billions of pounds worth of investment in hydrogen that we need across the UK. The Government are committed to ensuring that long-term funding is provided through the hydrogen business model, and the provisions in the Bill do not require the Government to introduce the levy by a particular date. We do not expect the levy to be introduced any time before 2025, and so we do not expect it to have any impact on consumer bills before then, at the earliest. Decisions regarding when to introduce the levy will take into account wider government policies and priorities, including considerations related to energy bill affordability, which is always at the forefront of our considerations.
The first set of regulations under Clause 66, establishing the levy, will also be subject to the affirmative resolution procedure, so we would fully expect Parliament to exercise its role, and particularly your Lordships’ House to scrutinise how the Government intend to exercise those powers.
Amendment 56 would, in my view, introduce restrictions that are unnecessary, given the Government’s approach to decisions related to when to introduce the levy and the parliamentary scrutiny requirements that would be associated with any relevant secondary legislation.
Amendment 57 seeks to protect consumers by introducing a requirement for the Secretary of State to publish a specific consumer impact report before making regulations under Clause 66, establishing a hydrogen levy. As I mentioned, the parliamentary procedure for the first set of regulations that establish the levy will help ensure that the levy receives sufficient scrutiny from Parliament. Crucially, I can tell the Committee that it is already the Government’s intention to publish an impact assessment alongside the draft regulations made under Clause 66. I hope noble Lords will recognise that the amendment is unnecessary and feel able to not press their amendments.
Baroness Blake of Leeds (Lab)
I thank the noble Lord for his comments and welcome, as we all do, the commitment to revisit one of the amendments from the noble Baroness, Lady Worthington. We look forward with interest to that. However, on some of the other aspects, there will be conversations between now and Report, and I am fairly confident that we will come back to discuss what is, in our view, a really important area. With those comments, I beg leave to withdraw the amendment.
Baroness Worthington
Member's explanatory statement
This amendment makes the signing of a revenue support contract or contract for difference (CFD) mandatory for a firm which has successfully bid for it.
Baroness Worthington (CB)
I shall move Amendment 59 and speak to Amendments 60 and 61, in my name and that of the noble Lord, Lord Howell of Guildford, who sends his apologies. He had a diary clash, but assures me that he is fully supportive of this discussion. In fact, he informed he that he was around when the very first CfDs were used as private contracts, a long time ago, and is very keen that they remain a trusted and respected form of investment, hence he was keen to lend his name.
These are obviously probing amendments, designed to start a discussion about the need to preserve integrity in the CfD mechanism. The UK deserves huge credit for having introduced this mechanism, which is seen as investable and a dependable way of getting large investment into decarbonised infrastructure—something we all need.
It is regrettable that there is now a set of circumstances whereby contracts, once awarded, are not being taken up. The reason they are not being taken up is that market prices are currently so high that if you took on your contract for difference, you would be required to pay back into the fund anything above your strike price. Some of these contracts have been awarded at around £55, £59 or £60 per megawatt hour—market prices are way above that—so people are choosing not to take up the contract and to delay.
Now, I am aware of three wind farms that have currently delayed this for these reasons. It makes perfect sense for them: they are representing shareholder value and possibly could not do otherwise, because of the existence of a loophole, which is that there is no requirement to take up the contract once it is awarded. What we want to try to do is close that loophole and, if possible, do something about it in the current time. Amendments 59, 60 and 61 all seek to do that.
It is important to note that these three wind farms—I do not want to overblow this; it is not everybody—are all in foreign ownership. Ørsted, RWE and EDP Renewables in Spain own these sites. It is public money that they are essentially not giving back, having got this contract. It feels very wrong, at the time of a cost of living crisis, when we need every penny, for hundreds of millions of pounds to be lost to these companies and their shareholders as a result of this loophole in how the contracts are drafted and can then be delayed.
I am sure that the Government are working hard to try to address this too. It strikes me that we have an Energy Bill and can therefore get this right for future contracts, but if we can also do something about current contracts, that would be enormously beneficial. I thank Carbon Brief for helping me understand how many wind farms are involved in this: they are Hornsea Two, Triton Knoll and Moray East, I am told by an article in the Times, just to get that on the record in Hansard. If the Government know differently, and if they can tell us exactly the extent of the problem, that would be super helpful, because we have not been able to find it from official sources. This is, as I say, from research by Carbon Brief. If the noble Lord, Lord Howell, were here, I am sure he would say how keen he is for this to be resolved. I look forward to the Minister’s response.
Lord Teverson (LD)
The history of contracts for difference is longer than I thought; I thank the noble Baroness for mentioning that. They became a big thing in the last Energy Act during the coalition Government and have been amazingly successful. I have to admit that I did not realise that this issue was quite so significant, but it is interesting that, given the financial investment required for offshore wind farms and the time they often take to implement and build, this is a case where the risk goes up for the financial investor, as opposed to a low-risk contract for difference. I am therefore also interested to understand from the Minister whether these businesses are just delaying until they see the lay of the land and whether they still have those options, because there is that risk-reward ratio.
I very much support the intention of this amendment, but the energy industry has also talked about contracts for difference being a way forward even in the fossil fuel industry, and a way that we could decouple power prices from gas prices. It may be that the Government are not doing anything in that area, but I am interested to understand whether that is something the department is investigating as a way forward on that decoupling.
Contracts for difference are a fantastic invention. As the Minister said, at the moment they are bringing good money back into the public sector—technically into the counterparty company, but effectively into the public finances. I very much support the motivation of this amendment.
Lord Lennie (Lab)
My Lords, we are also very supportive of contracts for difference and of this attempt to ensure that contracts entered into are adhered to. I was not quite sure whether the noble Baroness, Lady Worthington, had the total number of these failures to enter the contracts, other than the three she cited, which is probably enough. Maybe the Minister could help with that if she does not have that information.
The only thing that concerns me is that, although I cannot think of what it could be, there might be some reasonable exemption for not signing up. However, apart from that, it seems to me entirely sensible to tighten this obligation.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Baroness, Lady Worthington, and the noble Lord, Lord Howell, for their amendments. I say at the outset that the CfD model will remain an important tool in the armoury of financing options to encourage investment in green energy, although I understand that the point of these amendments is to preserve its integrity.
Amendment 61 seeks to make the signing of a contract for difference—known as a CfD—mandatory for a renewable electricity project that has successfully bid for one in a competitive CfD allocation round. I point out, however, that the Energy Act 2013 already contains, in Section 14(2)(d), powers very similar in effect to the amendment. Section 14(1) of the 2013 Act provides for a CfD counterparty, acting in accordance with provisions made by regulations, to offer to contract with an eligible CfD generator. Section 14(2) of the Act allows for regulations to be made that make further provision about an offer to contract, including, at Section 14(2)(d), provision about what is to happen if the eligible generator does not enter into a CfD as a result of a contract offer. Successful applicants for a renewable electricity CfD are expected to enter into a contract with the Low Carbon Contracts Company if offered one following a CfD auction. Those who do not are excluded under Regulation 14 of the Contracts for Difference (Allocation) Regulations 2014, as amended, from submitting an application at the same site for a specified number of future CfD allocation rounds—an “excluded site”. The 2014 regulations were made under the powers in Section 14 of the Energy Act 2013.
Lord Teverson (LD)
I hope I am not pre-empting the noble Baroness, but are the Government then going to use those powers?
Baroness Bloomfield of Hinton Waldrist (Con)
In law, the Government have the power to use them. I am afraid I am not able to comment on what action we might take on the three specific cases which the noble Baroness, Lady Worthington, mentioned, but as I said, I will take that back to the department and write to noble Lords to set out whatever action is being proposed.
Lord Lennie (Lab)
Does the Minister know of any further cases, other than the three that have been cited? What total caseload are we talking about?
Baroness Bloomfield of Hinton Waldrist (Con)
My briefing suggests that only three small projects totalling 41 megawatts have refused to sign a CfD contract, but that does not sound like a big enough totality to incorporate three large wind farms. I am afraid I do not have any further details on that at this moment.
Amendments 59 and 60 similarly seek to make the signing of a revenue support contract mandatory for a firm which has successfully bid for it through an allocation process put in place under Clauses 68 to 74. Clause 72 provides for a hydrogen production counterparty and carbon capture counterparty, acting in accordance with provision made by regulations, to offer to contract with an eligible low-carbon hydrogen producer or eligible carbon capture entity respectively in specified circumstances. Clause 72(3) provides the Secretary of State with a power to make further provision in regulations about an offer to contract made under this clause. Subsection 3(d) sets out that this may include provision about
“what is to happen if the eligible low carbon hydrogen producer or eligible carbon capture entity does not enter into such a contract as a result of the offer.”
As I have explained, a similar power in the Energy Act 2013 has been exercised to introduce the non-delivery disincentive for the CfD regime, which has been very effective in discouraging non-compliance across the four CfD allocation rounds.
We are considering how to evolve our approach towards more competitive allocation processes under Clauses 68 to 74 for the industrial carbon capture business models. Work is under way to develop the possible design of a more competitive allocation process for the hydrogen business model, including the offer to contract process. I therefore ask the noble Baroness and the noble Lord not to press Amendments 59 and 60, but again thank them for helping to test the robustness of the Government’s decarbonisation ambitions.
I hope I have been able to reassure noble Lords and that, with the offer to write with further details on the wind farms, they feel able to withdraw their amendment.
Baroness Worthington (CB)
I thank the Minister for her reply. I have not been clear enough; it is entirely my fault. These are not non-delivery instances. These are instances in which a wind farm is completed, has a CfD and then delays the actual mechanic of the strike price by a certain number of months or years. In doing so, they are ensuring that they can sell at merchant value now and then take up the strike price when the prices fall. Essentially, they have de-risked completely, so that we are carrying all the downside risk and they are taking all the upside risk. That is not how a CfD works. Three of them are doing this, so my fear is that this has almost become quite a clever standard practice. If it persists, this is hundreds of millions of pounds that could be coming back. It completely undermines the integrity of the whole process. So it is not the non-delivery or refusal to sign—I understand that all those provisions are there—it is the delaying out. There is nothing government or the LCCC can use to compel them to take it up at the point of signing. It is on that that I would love to receive a note.
We are obviously going to come back to this. It is all in the interests of getting value for money, keeping up the reputation of this sector and making it as full of integrity as we can. I will withdraw the amendment, but I look forward to continuing the conversation.
Lord Teverson (LD)
This is something that I suspect we all hold the same view on. Could the Minister write to us to clarify the situation before Report? That would be very useful. It seems to me that we are all on the same side on this.
Lord Callanan
“Enforcement
Enforcement(1) Revenue support regulations may make provision—(a) for requirements imposed under the regulations on—(i) a gas supplier who holds a licence under section 7A(1) of the Gas Act 1986, or(ii) a person who holds a licence under section 7A(2) of that Act (gas shipper),to be enforceable by the Gas and Electricity Markets Authority as if they were relevant requirements within the meaning of sections 28 to 30O of that Act;(b) for requirements imposed under the regulations on an electricity supplier who holds a licence under section 6(1)(d) of the Electricity Act 1989 to be enforceable by the Gas and Electricity Markets Authority as if they were relevant requirements within the meaning of Part 1 of that Act;(c) for requirements imposed under the regulations on—(i) an electricity supplier who holds a licence under Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)), or(ii) a gas supplier who holds a licence under Article 8(1)(c) of the Gas (Northern Ireland) Order 1996 (S.I. 1996/275 (N.I. 2)),to be enforceable by the Northern Ireland Authority for Utility Regulation as if they were relevant requirements within the meaning of Part 6 of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)).(2) References in subsection (1) to enforcement include enforcement under the terms of a licence mentioned in any of paragraphs (a) to (c) of that subsection.”Member's explanatory statement
This amendment enables revenue support regulations to make provision about the enforcement of requirements imposed by the regulations.
Lord Callanan
Modifications of licences etc
(1) The Secretary of State may modify—
(a) a condition of a particular licence under section 6(1)(b) of the Electricity Act 1989 (transmission licences);
(b) the standard conditions incorporated in licences under section 6(1)(b) of the Electricity Act 1989 by virtue of section 8A of that Act;
(c) a document maintained in accordance with the conditions of licences under section 6(1)(b) of the Electricity Act 1989, or an agreement that gives effect to a document so maintained.
(2) The Secretary of State may modify—
(a) a condition of a particular licence under section 7 of the Gas Act 1986 (licensing of gas transporters);
(b) the standard conditions incorporated in licences under section 7 of the Gas Act 1986 by virtue of section 8 of that Act;
(c) a document maintained in accordance with the conditions of licences under section 7 of the Gas Act 1986, or an agreement that gives effect to a document so maintained.
(3) The Secretary of State may modify—
(a) a condition of a particular licence under Article 10(1)(b), (bb) or (d) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)) (transmission, distribution or SEM operator licences);
(b) the standard conditions of licences under Article 10(1)(b), (bb) or (d) of that Order;
(c) a document maintained in accordance with the conditions of licences under Article 10(1)(b), (bb) or (d) of that Order, or an agreement that gives effect to a document so maintained.
(4) The Secretary of State may modify—
(a) a condition of a particular licence under Article 8(1)(a) of the Gas (Northern Ireland) Order 1996 (S.I. 1996/275 (N.I. 2)) (licences to convey gas);
(b) the standard conditions of licences under Article 8(1)(a) of that Order;
(c) a document maintained in accordance with the conditions of licences under Article 8(1)(a) of that Order, or an agreement that gives effect to a document so maintained.
(5) The powers conferred by subsections (1) to (4) may be exercised only for the purpose of facilitating or supporting enforcement of, and administration in connection with, obligations under regulations within section 66 (including facilitation and support by way of allowing or requiring the provision of services).
(6) Provision included in a licence, or in a document or agreement relating to licences, by virtue of any power under subsections (1) to (4) may in particular include provision of a kind that may be included in revenue support regulations.
(7) If under subsection (1) or (2) the Secretary of State makes modifications of the standard conditions of a licence, the GEMA must—
(a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and
(b) publish the modification.
(8) If under subsection (3) or (4) the Secretary of State makes modifications of the standard conditions of a licence, the Northern Ireland Authority for Utility Regulation must—
(a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and
(b) publish the modification.
(9) Before making a modification under this section, the Secretary of State must consult—
(a) the holder of any licence being modified, and
(b) such other persons as the Secretary of State considers it appropriate to consult.
(10) Subsection (9) may be satisfied by consultation before, as well as by consultation after, the passing of this Act.
Member’s explanatory statement
This new clause and new clause (Section (Modifications of licences etc): supplementary) confer power to modify certain licence conditions, industry codes etc for purposes related to the enforcement of the hydrogen levy.
Lord Callanan (Con)
My Lords, in moving Amendment 65 I shall speak also to Amendments 66, 147, 149 and 190 standing in my name. These amendments will allow the Secretary of State to modify the licences of certain gas and electricity market participants in Great Britain and Northern Ireland. They will also allow the Secretary of State to modify documents maintained in accordance with these licences, such as industry codes, or agreements that give effect to such documents. The Secretary of State will be able to make such modifications only for the purpose of facilitating or supporting enforcement of, and administration in connection with, hydrogen levy obligations.
As I have said, decisions on the detailed design of the levy are pending. However, it is likely that persons other than the levy administrator will need to perform functions, provide services, and/or provide information and advice that support and facilitate the administration and enforcement of the levy. This power is required in order that the Secretary of State can modify relevant licences and codes to support and facilitate the administration and enforcement of the levy. In particular, it is required so that the Secretary of State may make modifications to support or facilitate persons who are parties to relevant industry codes to take on roles related to the levy’s administration and enforcement.
I can tell the Committee that there is precedent for this type of provision, with similar powers contained in the Energy Act 2013 and the recent Nuclear Energy (Financing) Act 2022. Provisions in the Energy Act 2013 were used to make licence and code modifications in relation to the contracts for difference regime. This power will help future-proof the levy, enabling the Secretary of State to implement licence or code modifications in order to accommodate any future changes to the levy design.
I can reassure your Lordships that these amendments of course include a requirement for the Secretary of State to consult the holder of any licence being modified and such other persons as the Secretary of State considers it appropriate to consult before making any modification. This will help ensure that relevant bodies are engaged in any potential modifications.
In addition, before making modifications under this power, the Secretary of State must lay a draft of the modifications before Parliament, where they will be subject to a procedure analogous to the draft negative resolution procedure used for statutory instruments. This also allows for additional scrutiny for any proposed modifications under this power. I beg to move.
Baroness Blake of Leeds (Lab)
Briefly, I thank the Minister for that explanation. I am sure, looking back at comments made earlier this afternoon, that the team opposite cannot be happy with the number of government amendments that are coming through on the Bill at this stage—I hope that will be taken up on a serious note on this and other Bills that have come forward.
The only slight question I have is that we talk about consultation as though everyone understands exactly how it happens and everyone is happy with the way it is done. Is it possible to be slightly more specific about who else might be consulted apart from the owner of the licence? I would also like some reassurance around the openness and transparency of a process to make sure that all parties are aware of any changes made in the future.
Lord Callanan (Con)
I am happy to reassure the noble Baroness that the relevant consultations will of course take place on any changes made.
Lord Callanan
“Section (Modifications of licences etc): supplementary(1) In this section “relevant power” means a power conferred by any of subsections (1) to (4) of section (Modifications of licences etc).(2) Before making modifications under a relevant power, the Secretary of State must lay a draft of the modifications before Parliament.(3) If, within the 40-day period, either House of Parliament resolves not to approve the draft, the Secretary of State may not take any further steps in relation to the proposed modifications.(4) If no such resolution is made within that period, the Secretary of State may make the modifications in the form of the draft.(5) Subsection (3) does not prevent a new draft of proposed modifications being laid before Parliament.(6) In this section “40-day period”, in relation to a draft of proposed modifications, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House of Parliament on the same day, the later of the 2 days on which it is laid).(7) For the purposes of calculating the 40-day period, no account is to be taken of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days.(8) A relevant power—(a) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied);(b) may be exercised differently in different cases or circumstances;(c) includes a power to make incidental, supplementary, consequential or transitional modifications.(9) Provision included in a licence, or in a document or agreement relating to licences, by virtue of a relevant power—(a) may make different provision for different cases;(b) need not relate to the activities authorised by the licence.(10) The Secretary of State must publish details of any modifications made under a relevant power as soon as reasonably practicable after they are made.(11) A modification made under a relevant power of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986, Part 1 of the Electricity Act 1989, the Electricity (Northern Ireland) Order 1992 or the Gas (Northern Ireland) Order 1996. (12) The power conferred by a relevant power to “modify” (in relation to licence conditions or a document) includes a power to amend, add to or remove, and references to modifications are to be construed accordingly.(13) In section 81 of the Utilities Act 2000 (standard conditions of gas licences), in subsection (2), after “Smart Meters Act 2018” insert “or under section (Modifications of licences etc) or sections 193 to 195 of the Energy Act 2022”.(14) In section 137 of the Energy Act 2004 (new standard conditions for transmission licences), in subsection (3)—(a) omit the “or” after paragraph (f);(b) after paragraph (g) insert—“(h) under section (Modifications of licences etc) of the Energy Act 2022,”Member's explanatory statement
See the explanatory statement for new clause (Modifications of licences etc).
The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
We come to Amendment 67. Lord Callanan?
The Lord Privy Seal (Lord True) (Con)
Don’t worry, Martin—we’re counting it against you.
Amendment 67
Lord Callanan
“(1) The Secretary of State may by regulations make provision for requiring relevant persons to provide security for the performance of obligations relating to the future abandonment or decommissioning of carbon dioxide-related sites, pipelines or installations.(1A) For the purposes of subsection (1) an installation, site or pipeline is “carbon dioxide-related” if it is, or is to be, used for a purpose related to the geological storage, or transportation, of carbon dioxide.(1B) In this section references to an installation, site or pipeline include one that is located in, under or over—(a) the territorial sea adjacent to the United Kingdom, or(b) waters in a Gas Importation and Storage Zone (within the meaning given by section 1 of the Energy Act 2008).”Member's explanatory statement
This amendment and the amendments in the name of Lord Callanan at page 71, line 34 and page 71, line 38 revise the scope of the power in subsection (1) so that it is defined in terms of the provision of security for the performance of certain obligations, rather than by reference to the provision of security in respect of specific kinds of costs.
Lord Callanan (Con)
I apologise to the House for the delay. It is typical that I should do that when the new Leader has just arrived and when my possible reappointment is still under consideration.
Amendment 67 ensures that regulations requiring provision of security for decommissioning can capture obligations relating to “carbon dioxide related” installations, sites and pipelines. It also clarifies that the power extends to both onshore and offshore assets.
Amendment 69 expands the class of people who may be required to provide security in respect of their carbon capture usage and storage decommissioning obligations. This includes an economic licence holder under Clause 7, or someone to whom a notice has been, or may be, given for the preparation of an abandonment programme under the Petroleum Act 1998. Amendment 68 amends the label to “relevant person” so it is more consistent with this revised definition. Amendments 73, 77 and 85 are consequential to those amendments.
Amendment 70 introduces a broader definition of decommissioning costs. This is to ensure that the regulations requiring provision of security reflect the full range of decommissioning obligations. These obligations include such things as the decommissioning of infrastructure and the post-closure monitoring obligations as set out in the Government’s 2021 consultation. Amendments 71, 72, 74, 83 and 89 are consequential.
Lord Teverson (LD)
I thank the Minister for that. When I read the Bill, I looked at Chapter 2, entitled “Decommissioning of carbon storage installations”. My first question was: is not carbon storage all about being permanent? How the heck do you decommission a big hole under the North Sea and move all the carbon dioxide somewhere else? I do not want to understand the detail of this—if the Minister wants to accuse me of being thick or stupid about this, I can take it—but what installations for carbon capture and storage will be decommissioned and where the carbon will go. I should like to understand the scenarios so that I can understand how this part of the Bill works.
Lord Lennie (Lab)
I should also be interested to know that. First, may I say to the new Leader of the House that I would strongly recommend the reappointment of the noble Lord, Lord Callanan. That probably does him no favours at all, but that is just how it is. Secondly, I was going to set out a hypothetical situation about an oil and gas plant—
The Lord Privy Seal (Lord True) (Con)
If I may, I should like to say that I said earlier in the House that I would value good relations across the House, but the noble Lord must not take it too far by damning my Ministers with praise from the Labour Party.
Lord Lennie (Lab)
Okay, do not reappoint him. What can I say? I was going to set out a hypothetical situation about an oil and gas plant that had been decommissioned, but not fully, and was to be recommissioned and transferred to CCUS usage. I do not know whether that will never be possible, but who knows? It is a complicated situation and I wanted to know where the Minister thought responsibility would lie. However, I am pleased to say that he has pointed us towards the 1998 Act, the 2008 Act and some other Acts, so somewhere in there lies an answer. It would seem sensible to draw together whatever is the answer to the question and put it in the Bill, to update it. The Minister can come back on that and to the question of the noble Lord, Lord Teverson, about whether that will ever be the situation.
As for the other government amendments to the Bill, I have again to make the point that this Bill of 350-plus pages, three parts and however many clauses is surely sufficient to cover the energy circumstance. As I said in my introduction yesterday, the Bill is a mix of all sorts of things without a coherent theme. If it had a coherent theme, it might well have covered these matters in the first place, but that is really for then, not for now.
Lord Callanan (Con)
I thank noble Lords, and let me apologise to the Committee for the number of government amendments. They are quite technical, and the Bill is obviously very large. It was drafted at pace, and it was not possible with the resource we had available to get all the details finalised, which is why there are a number of technical amendments.
The answer to the question of the noble Lord, Lord Teverson, which is a very good one at first sight, is that, of course, when the storage facilities are full, the storage facilities themselves are not decommissioned. They are used, but all the storage infrastructure—pipework and all the associated engineering, platforms, injection facilities, et cetera—will need to be decommissioned. I am sure the Liberal Democrats fully support the “polluter pays” principle, whereby someone who has benefited from a facility should be made to bear the costs of decommissioning it, which is why we are setting up a fund to do that. I reassure him that we do not decommission the actual sites—as he said, it would be quite difficult to extract the carbon dioxide from them to put it somewhere else—but they require monitoring, and the associated infrastructure will need to be decommissioned, which is why the fund is being established.
Lord Callanan
Member's explanatory statement
This amendment and the amendment in the name of Lord Callanan at page 71, line 29 enable regulations under clause 81(1) to apply to a person falling within paragraph (a) or (b) of subsection (3).
Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 71, line 28.
“(a) require relevant persons to provide the Secretary of State with estimates of costs that are likely to be incurred in connection with obligations such as are mentioned in subsection (1) (“decommissioning costs”);”Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 71, line 22.
Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 71, line 22.
Member's explanatory statement
This amendment is consequential on the amendments in the name of Lord Callanan at page 71, line 22 and page 71, line 28.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 28.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 22.
“(a) requiring that security for the discharge of liabilities in respect of decommissioning costs must be provided by way of a fund (a “decommissioning fund”);” Member's explanatory statement
This amendment introduces the expression “decommissioning fund” and removes a requirement that regulations must specify the arrangements under which such funds are to be held.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 72, line 25.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 28.
Member's explanatory statement
This amendment and the amendment in the name of Lord Callanan at page 73, line 25 enable certain functions to be conferred on the Oil and Gas Authority (in addition to the Secretary of State and the economic regulator).
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 72, line 25.
“(8) Regulations under subsection (1) may require the Secretary of State to publish guidance about—(a) estimates of decommissioning costs (including factors which it may be appropriate to consider in deciding whether or not to approve estimates of such costs);(b) the structure, accrual and management of decommissioning funds.”Member's explanatory statement
This amendment and the amendment in the name of Lord Callanan at page 73, line 7 replace the duty to publish guidance with a power to require the Secretary of State to publish guidance and make other changes to the provision about guidance.
Lord Callanan
Member's explanatory statement
See the amendment in the name of Lord Callanan at page 72, line 42.
““decommissioning costs” is to be interpreted in accordance with subsection (4)(a);“decommissioning fund” is to be interpreted in accordance with subsection (6)(a);”Member's explanatory statement
This amendment omits and inserts definitions in consequence of other amendments of clause 82 in the name of Lord Callanan.
““geological storage” has the same meaning as in Part 1 (see section 55);“relevant authority” means the Secretary of State, the economic regulator or the Oil and Gas Authority.”Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 72, line 36.
Lord Callanan
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 28.
Lord Callanan
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 28.
(d) the Storage of Carbon Dioxide (Licensing etc) Regulations (Northern Ireland) (S.R. (N.I.) 2015 No. 387),”
Lord Callanan
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 34.
Energy Bill [HL]
Monday 12th December 2022
(1 year, 11 months ago)
Grand CommitteeRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-IV Fourth marshalled list for Grand Committee - (12 Dec 2022)
Lord Callanan
Member’s explanatory statement
This amendment and the amendment in the name of Lord Callanan at page 75, line 31 are consequential on the amendment in the name of Lord Callanan at page 71, line 34.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, it is a great pleasure to be back in Committee once again, debating the Energy Bill. I thank noble Lords for their patience during the interregnum. Noble Lords will recall that the Bill was necessarily paused following the death of Her Majesty the Queen. However, we have always been clear that the Bill represents a landmark piece of legislation to provide for a cleaner, more affordable and more secure energy system that is fit for the future, so I am very happy to be debating it again.
Clause 84 makes changes to Section 30 of the Energy Act 2008, which in turn enables modifications to Part IV of the Petroleum Act 1998. Amendments 90 and 91 make consequential changes to definitions in Clause 84 in response to government Amendment 70.
The next set of amendments relate to Clause 85. Amendments 92, 93, 101 and 102 update the heading, labels and definitions in Section 30A of the Energy Act 2008, as amended by this Bill, to avoid inconsistencies with existing definitions in the 2008 Act. Amendment 103 makes a consequential change due to the changes in definitions.
Moving to Amendments 94 and 95, the existing Section 30A of the Energy Act 2008 includes a carve-out in subsections (2) and (3). This prevents the Secretary of State designating an installation as eligible for change of use relief if it is to be used as part of a CCUS project that is in Scotland or is licensed by Scottish Ministers. However, the Scottish Parliament is also unable to legislate to confer such a designation power on Scottish Ministers because oil and gas is a reserved matter. It is important that change of use relief is available to oil and gas assets in Scottish territorial waters to create a consistent application of this policy. Amendment 94 removes this carve-out from Section 30A of the Energy Act 2008. Amendment 95 then updates a cross reference as a result of the proposed Amendment 94.
The process for issuing change of use relief first requires that an asset is designated as eligible. Only after this can the asset then qualify for that relief. Amendment 97 makes clear what conditions must be satisfied for an installation already designated as eligible for change of use relief by the Secretary of State actually to qualify for that relief. The first condition is that the Secretary of State has issued a carbon capture and storage-related abandonment notice under Section 29 of the Petroleum Act 1998 on a person for that installation. The second is that the trigger event has been satisfied.
Amendment 98 describes the trigger event that must occur for the relief to take effect. The trigger event requires that, first, a decommissioning fund must have been established for the relevant asset. Secondly, an appropriate amount must have been paid into this fund to reflect the decommissioning liability that the previous owner is being relieved of. This amendment would also give the Secretary of State power to make regulations on the required amount that must be paid into the decommissioning fund, and who may make such a payment, to qualify for change of use relief.
The Secretary of State must also approve that the amount paid into the fund is sufficient. Amendment 96 imposes a requirement on the Secretary of State to consult the Oil and Gas Authority before certifying that the amount is sufficient. Amendment 104 makes consequential changes to defined terms in Clause 85 as a result of Amendment 97.
I now turn to the other amendments tabled by noble Lords in this group. Amendments 99 and 100, tabled by the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, seek to enable the Secretary of State to accept financial security from the previous owner, rather than requiring the amount to be paid in cash into the decommissioning fund. The Government acknowledge the point made by noble Lords regarding the value-for-money considerations when requesting funds to be set aside for decommissioning. The costs of decommissioning a repurposed asset are likely to be incurred at the end of the carbon storage asset’s life, which may be many years after the establishment of the decommissioning fund. However, the purpose of this trigger event for the issuance of change of use relief is to help protect the taxpayer from the decommissioning liability by having funds available to decommission repurposed assets. The requirement for a cash deposit looks to ensure that funds are available should the carbon storage asset close early and decommissioning of the existing infrastructure is required. This reduces the risk that the burden of decommissioning is left completely to the taxpayer. It is also intended that decommissioning funds will be invested to allow the fund to retain its value over time until decommissioning is required. This is another reason why it is important for the previous oil and gas owner to contribute money into the decommissioning fund.
More generally, the policy intent of change of use relief is to provide previous oil and gas owners with greater certainty over their liabilities, to incentivise the repurposing of assets. In return, however, the taxpayer should equally expect assurance that the oil and gas owners’ liability will be met, in accordance with the obligations that the owners agreed to undertake on commencement of their oil and gas activities. The Government judge that this can be provided only through a cash deposit, and not through a promise of funding, potentially decades into the future. This is the principle on which the policy was proposed in the Government’s consultation in August 2021 and with which, at the time, respondents broadly agreed. Therefore, I beg to move the amendment in my name and ask the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, not to move their amendments.
Lord Teverson (LD)
My Lords, I welcome the Bill’s return to Committee; I am very pleased that that is the case. I have no comments to make on the amendments, but I note that during that interregnum, as the Minister described it, the Government gave planning permission for a coal mine. Although we are not going to debate it here today, that is a hugely retrograde decision which flies in the face of the Bill and the general way in which it looks forward. However, I have no comments on the amendments that the Minister has tabled.
Lord Lennie (Lab)
My Lords, I am also delighted to be debating the Energy Bill again. I am delighted that the noble Lord is still the Minister so that we at least have continuity on the Bill; it remains much the same as it was before we left it some three months ago.
As the Minister said, the amendments refer to Clauses 84 and 85 of Chapter 2 of Part 2 on “Decommissioning of carbon storage installations”. This gives the Secretary of State a power to make regulations regarding the financing and provision of security for decommissioning and legacy costs associated with carbon capture utilisation and storage. The decommissioning of offshore installations and pipelines used for carbon dioxide storage purposes is modified by Section 30 of the Energy Act 2008, which modified Part 4 of the Petroleum Act. Clause 84 enables further modifications to the modified Part 4 in relation to the definition of carbon storage installation, and the establishment of decommissioning funds and legacy costs as set out in Clause 82, “Financing of costs of decommissioning etc”.
Clause 85 relates to Sections 30A and 30B of the Energy Act 2008, which make provision for a person to qualify for change of use relief on installations and submarine pipelines converted for CCS demonstration projects—as defined by Energy Act 2010. This relief removes the ability for the Secretary of State, in some circumstances, to take steps under the modified Part 4. This clause makes amendments to Section 30A of the Energy Act 2008 by broadening the scope of change of use relief so that it applies to eligible carbon storage installations more generally, amending the trigger point to qualify for such relief.
Amendments 99 and 100, which the Minister referred to, were tabled by my noble friend Lady Liddell, who unfortunately cannot be here and therefore will not be able to move them. They reflect value-for-money considerations in the decision-making process, meaning that the Secretary of State could accept provision of security in respect of amounts to be contributed on account of decommissioning costs—costs likely to be incurred, as the Minister said, many years after the establishment of the fund—rather than requiring such amounts to be paid simply in cash.
Lord Callanan (Con)
I thank the noble Lord, Lord Teverson, and the noble Lord, Lord Lennie, for their comments, but I do not think there were any points for me to address, so I will leave it there.
Lord Callanan
Member's explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 75, line 30.
Lord Callanan
Member's explanatory statement
See the amendment in the name of Lord Callanan at page 76, line 1.
Member's explanatory statement
This amendment and amendments in the name of Lord Callanan at page 75, line 36, page 76, line 33, and page 77, line 9, revert to the label “eligible CCS installation” for certain installations that are eligible for change of use relief.
“(5) Omit subsections (2) and (3).”Member's explanatory statement
This amendment removes a restriction on change of use relief relating to certain installations whose licence was granted by the Scottish Ministers etc.
Member's explanatory statement
This amendment is consequential on amendment in the name of Lord Callanan at page 76, line 4.
“(b) whether to make a certification under subsection (5)(b).””Member's explanatory statement
This amendment requires the Secretary of State to consult with the Oil and Gas Authority before making a certification of the kind mentioned in amendment in the name of Lord Callanan at page 76, line 33.
“(8) For subsection (4) substitute—“(4) An eligible CCS installation qualifies for change of use relief if—(a) the Secretary of State has given a CCS-related abandonment programme notice to a person in relation to the abandonment of the installation, and(b) the trigger event has occurred in relation to the installation.(4A) In subsection (4) “CCS-related abandonment programme notice” means an abandonment programme notice given under section 29 of the 1998 Act in that section’s application in relation to carbon storage installations (by virtue of section 30 of this Act).””Member's explanatory statement
This amendment changes the conditions for change of use relief under section 30A of the Energy Act 2008.
The Deputy Chairman of Committees (Lord Young of Cookham) (Con)
My Lords, I must inform the Committee that if Amendment 98 is agreed to, I will be unable to call Amendments 99 or 100 by reason of pre-emption.
Amendment 98
Lord Callanan
“(5) The trigger event occurs in relation to an eligible CCS installation when—(a) a decommissioning fund (as defined in section 82(6)) has been established for providing security for the discharge of liabilities in respect of decommissioning costs in relation to the installation, and(b) the Secretary of State certifies by notice in writing (an “approval notice”) that one or more relevant persons have paid into the fund an amount or amounts the total of which is not less than the required amount.(5A) In subsection (5)—(a) “relevant person” means a person of a description specified in regulations made by the Secretary of State;(b) “the required amount” means an amount determined by the Secretary of State in accordance with regulations made by the Secretary of State.”Member's explanatory statement
This amendment amends the conditions for qualifying for change of use relief under section 30A of the Energy Act 2008.
Lord Callanan
Member's explanatory statement
See amendment in the name of Lord Callanan at page 76, line 1.
Member's explanatory statement
This amendment leaves out an unnecessary definition.
Member's explanatory statement
This amendment is consequential on amendment in the name of Lord Callanan at page 71, line 34.
Member's explanatory statement
This amendment omits definitions in consequence of the amendment in the name of Lord Callanan at page 76, line 10.
“(b) whether to make a certification under subsection (3)(b).”Member's explanatory statement
This amendment requires the Secretary of State to consult with the Oil and Gas Authority before making a certification of the kind mentioned in Lord Callanan’s amendment at line 78, line 37.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, Amendments 105 to 109 amend Clause 86 on the availability of change of use relief for pipelines. Clause 86 mirrors Clause 85, the principal difference being that its application is to pipelines rather than to installations. As such, these amendments also mirror those covered in the previous group.
As was the case for Amendment 97, Amendment 106 makes clear what conditions must be satisfied for a pipeline that has already been designated as eligible for change of use relief by the Secretary of State to qualify for change of use relief. To recap, the first is that the Secretary of State has issued a carbon capture and storage-related abandonment notice, under Section 29 of the Petroleum Act 1998, on a person for that pipeline. The second is that the trigger event has been satisfied.
Amendment 107 describes the trigger event that must occur for the relief to take effect, in the same way as Amendment 98 did for Clause 85. First, a decommissioning fund must have been established for the relevant asset. Secondly, an appropriate amount must have been paid into this fund to reflect the decommissioning liability that the previous owner is being relieved of. The amendment would also give the Secretary of State a power to make regulations on the required amount that must be paid into the decommissioning fund, and who may make such a payment, in order to qualify for change of use relief.
As was the case for Clause 85, the Secretary of State must also approve that the amount being paid into the fund in relation to pipelines is sufficient. In the same way as Amendment 96 does, Amendment 105 imposes a requirement on the Secretary of State to consult the Oil and Gas Authority before certifying that the amount is sufficient.
Amendments 108 and 109 make consequential changes to definitions and cross-references in response to previously proposed amendments.
Amendments 110 and 111 make changes to Clause 87. Amendment 110 updates the heading to reflect better the content of that section. Amendment 111 proposes to omit a subsection of Section 105 of the Energy Act 2008. This subsection is no longer necessary as a result of the simplified mechanism proposed in this Bill for designating an asset as eligible for change of use relief.
The repurposing of pipelines, alongside installations, has the potential to deliver great benefits in the deployment of carbon capture, usage and storage. These can be environmental through greater resource efficiency and the reduction in disturbing sea beds. There are also economic benefits in reducing capital expenditure and potentially speeding up the deployment of CCUS.
Lord Teverson (LD)
My Lords, I really have just one question for the Minister, and it is on decommissioning funds. It is not clear to me—that may be because I have not gone through the absolute intricacies of all these lines—who actually holds the funds for the decommissioning fund. Are they banked, are they in the Treasury, or are they in the Oil and Gas Authority? What guarantee do we have that they are there when needed and that they are not just used by the Treasury but are part of offsetting the public sector borrowing requirement? I am very keen to understand whether that is similar to the nuclear decommissioning sector, and where that happens.
I turn to the amendments from the noble Lord, Lord Lennie. He has not spoken to them yet. I suspect that the Government might accept—
Lord Teverson (LD)
Forgive me. I am looking at a slightly out-of-date document. Anyway, that is the area that I would be interested to understand from the Minister. We will come to other amendments another time.
Baroness Blake of Leeds (Lab)
I too welcome the return of the Bill. It is quite interesting to reflect back to the first and second days in Committee, when we were recording the hottest temperatures that we had ever experienced in this country and were making full use of that experience. We were also in the midst of the leadership contest and questioning the commitment of the candidates; we had no way of knowing, of course, that both of them would take their turn in No. 10 and have the ability to demonstrate their commitment.
We are really pleased to see the return of the Bill. We were concerned that there would be changes and, as we said on the first two days in Committee, there are some measures in this Bill that are urgent and that we need to get a move on with in order to address the challenges that we face in this space.
I do not have an enormous amount to add to the Minister’s very full comments. I just seek clarification. When I see an amendment on consultation, I am always slightly concerned to know who exactly would come into the sphere of consultation and make sure that it is as full as it could be. The issues around making sure that the fund remains sufficient are very practical and necessary. With that plea for clarification on consultation, I am happy to leave it there.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lord, Lord Teverson, and the noble Baroness, Lady Blake, for their remarks. I will start with the noble Baroness’s final question. As set out in the Government’s response to that consultation, it is expected that the owners of the asset will submit their assessment of the decommissioning liability to the Offshore Petroleum Regulator for Environment and Decommissioning for verification. This verification will include consultation with the North Sea Transition Authority, which will be able to compare the assessment against its extensive benchmarking data. OPRED will also be able to engage third parties to provide its own assessment if necessary. Once OPRED is satisfied that the assessment is accurate, it will advise the Secretary of State on approving the amount. That is the advice route that the Secretary of State would take.
In response to the question from the noble Lord, Lord Teverson, transport and storage companies will hold the decommissioning funds, but will be overseen by the economic and operational regulators. Funds to cover decommissioning costs will be included in the allowed revenue paid to the transport and storage company. The proportion of revenue to be paid into the decommissioning fund will be determined by the economic regulator once the decommissioning liability has been calculated. I hope that that deals with that satisfactorily—clearly not.
Lord Teverson (LD)
I thank the Minister for that very useful answer. Let me get that correct: the funds are being held by the commercial companies that are putting this money aside. Is that ring-fenced? If they go bankrupt, is that lost? How does it work?
Baroness Bloomfield of Hinton Waldrist (Con)
It could be a commercial company. It depends who gets the contract for the funds. Then they will be invested.
Lord Lennie (Lab)
Are the funds held in escrow so that they cannot be used for anything else, or can they be used as part of the normal purposes?
Baroness Bloomfield of Hinton Waldrist (Con)
I do not think we have a detailed enough answer, so perhaps we should follow up in writing.
Lord Teverson (LD)
I have a concern about this area and I think it is important that this is clarified.
Baroness Bloomfield of Hinton Waldrist (Con)
We will clarify that point in writing before the next stage.
“(6) For subsection (2) substitute—“(2) An eligible carbon storage network pipeline qualifies for change of use relief if—(a) the Secretary of State has given a CCS-related abandonment programme notice to a person in relation to the abandonment of the pipeline, and(b) the trigger event has occurred in relation to the pipeline.(2A) In subsection (2) “CCS-related abandonment programme notice” means an abandonment programme notice under section 29 of the 1998 Act given at a time when the pipeline is used, or is to be used wholly or mainly—(a) for the purpose of disposing of carbon dioxide by way of geological storage, or(b) as a licensable means of transportation.””Member's explanatory statement
This amendment changes the conditions for change of use relief under section 30B of the Energy Act 2008.
“(3) The trigger event occurs in relation to an eligible carbon storage network pipeline when—(a) a decommissioning fund (as defined in section 82(6)) has been established for providing security for the discharge of liabilities in respect of decommissioning costs in relation to the pipeline, and(b) the Secretary of State certifies by notice in writing (an “approval notice”) that one or more relevant persons have paid into the fund an amount or amounts the total of which is not less than the required amount.(3A) In subsection (3)—(a) “relevant person” means a person of a description specified in regulations made by the Secretary of State;(b) “the required amount” means an amount determined by the Secretary of State in accordance with regulations made by the Secretary of State.”Member's explanatory statement
This amendment revises the definition of “trigger event” for the purposes of relief under section 30B of the Energy Act 2008.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 71, line 34.
Member's explanatory statement
This amendment is consequential on Lord Callanan’s amendment at page 73, line 23.
Member's explanatory statement
This amendment is consequential on Lord Callanan’s amendment of Clause 87 at page 80, line 30.
“(2) In section 105 of the Energy Act 2008 (Parliamentary control of subordinate legislation), in subsection (2) omit paragraph (aa).”Member's explanatory statement
This amendment is consequential on the amendments in the name of Lord Callanan of clauses 85 and 86.
Lord Lennie
“(aa) the Official Opposition;”Member's explanatory statement
Under the Bill, the Secretary of State has to produce a CCUS strategy and it has to be reviewed after 5 years. However, they have the power to review it before the end of this 5-year term if certain circumstances have taken place (including a general election) but must consult certain people if it is outside the 5-year period. This amendment seeks to include His Majesty’s opposition in that consultation.
Lord Lennie (Lab)
My Lords, these amendments refer to Clauses 90 and 91. They concern consultation over the CCUS strategy and its periodic review. I am grateful to Drax for providing definitions. Carbon capture and storage traps and removes carbon dioxide from large sources and most of that CO2 is not released into the atmosphere. That can be either pre or post combustion. If it is post combustion, the storage usually takes place underground in large silos, the largest of which is in Texas and which is currently processing 5 million tonnes of CO2 a year. As an advert for Drax, it reckons that it would be able to process 20 million tonnes in North Yorkshire by 2030 or thereabouts.
Amendment 113 is about the requirement to include His Majesty’s Opposition in the list of organisations that must be included in stakeholder consultation. These reviews must happen either every five years or more frequently if certain circumstances take place, including a general election or if there is a material change of policy on CCUS. These reviews are to ensure a stable and predictable regulatory landscape for investors. I would have thought that the amendment to include the Opposition in the consultees’ list would be quite attractive to the Government, given the current state of the political landscape in the UK—but there you go. This new requirement would clearly be of overall benefit to the development strategy by involving a wider parliamentary group beyond just the Secretary of State when a review is required. If the Secretary of State seeks to amend the statement, they will have to follow the requirements in Clause 91, which include the requirement for the statement to have been approved by a resolution of each House of Parliament before the Secretary of State can designate it as a strategy and policy statement.
The amendment tabled by the noble Baroness, Lady Liddell, in this group would ensure a requirement for consultation on the CCUS strategy and policy statement, if the Government should seek to amend it. It sets out the process that would have to be followed, and the Opposition support this amendment. I beg to move.
Lord Teverson (LD)
My Lords, I was getting ahead of myself on the last group, and I apologise to the Grand Committee for that. I would have thought that the Government would like to accept this amendment, as they are likely to be in opposition in five years’ time. I wait to hear from the Minister.
Lord Callanan (Con)
I thank the noble Lords, Lord Lennie and Lord Teverson, for their concern about whoever might be the Official Opposition at the time. I suppose we will see. I am surprised that the noble Lord, Lord Teverson, did not want to ask for the fourth-placed political party in Parliament to be a statutory consultee as well.
These amendments seek to clarify those who must be consulted as part of the process of designating a CCUS strategy and policy statement. Amendment 113 was tabled by the noble Lord, Lord Lennie, the noble Baroness, Lady Blake, and the noble Baroness, Lady Bennett—who, sadly for us all, is unable to be with us. This amendment seeks to require the Official Opposition to be consulted as part of the strategy process. I reassure noble Lords that parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement, which must be approved by a resolution of each House of Parliament before it can be designated, as is provided for by Clause 91(10). So, of course, whoever is the Official Opposition at the time, and whoever is the fourth-placed political party at the time, will have a full opportunity to contribute to the debate on this matter.
As the Bill sets out, any CCUS strategy and policy statement that has been designated will be required to be reviewed every five years, although, in the specified circumstances set out in the Bill, a review could take place sooner than five years. When the outcome of a review is that the Secretary of State considers that the statement should be amended, the Bill provides for a statutory consultation process, including consultation with the economic regulator and relevant Ministers in the devolved Administrations. An amended statement would also be required to be approved by a resolution of each House, and would therefore be subject to parliamentary scrutiny and approval before it could be designated.
The process for designating the CCUS strategy and policy statement mirrors the process set out in the Energy Act 2013 for an energy strategy and policy statement. When the outcome of a review is that the Secretary of State considers that the statement does not require amendment, or should be withdrawn, this also requires consultation with the economic regulator and Ministers in the devolved Administrations. This is to ensure that any impact that this decision would have on the conduct of the regulator’s functions, or in relation to the important matter of devolved policy, is taken into account in the decision-making process. It is also the case, of course, that the Secretary of State can update Parliament on the plans for, and outcome of, any review, as part of the normal process of parliamentary business.
On Amendment 114, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, Clause 91 provides for the Secretary of State to consult whomever he or she considers appropriate, in addition to certain specified persons, in the process of developing a strategy and policy statement. This formulation enables the Secretary of State to consult ahead of laying a statement before Parliament. As I have set out, it is for Parliament to consider and approve any new or amended statement.
Although I thank noble Lords for their concern about whoever ends up being the Official Opposition at the time, and for their interest in this topic, I hope that the reassurances I have been able to provide on these points mean that they will not press their amendments.
Lord Teverson (LD)
May I come back to the Minister on Amendment 114? It seems very restrictive to consult as the Secretary of State decides. I cannot pinpoint this, but in many other pieces of legislation the wording is much closer to that in Amendment 114. I do not understand why the Government would not accept that very modest amendment to those “affected” by a revision of the strategy. Surely this is far more restrictive than most government legislation in this area.
Lord Callanan (Con)
I do not think that is the case. As a Minister, I have issued many consultations. In my experience there is never a problem with anybody contributing who wishes to, even if they are not statutorily listed in the legislation. They are normally public consultations in any case, with a large number of stakeholders. The advice from officials and others is always to extend the scope of consultation to be as wide as possible because you then minimise any potential legal challenges as a result. I understand the noble Lord’s concern but I do not think it is warranted on this issue.
Lord Lennie (Lab)
My Lords, the amendment that seeks to include the Opposition as part of the formal consultation would avoid what we get in Parliament, which is the “ayes and noes” and the “take it or leave it” approaches to policy development. This is an area where we have pretty much a common interest. It seems a sensible approach to throw open the consultation at least to the Opposition—who knows, maybe even to the fourth party—but to make it as wide as possible to avoid that prospect of Parliament rejecting or accepting in total whatever is put before it. It is about buy-in. As the Minister said, there are plenty of examples where buy-in has been part of the Government’s approach to consultation. It seems strange that this is not one of them. With that, I beg leave to withdraw the amendment.
Baroness Worthington
Member’s explanatory statement
This amendment requires the Secretary of State to make regulations establishing a low-carbon heat scheme within 12 months of the Bill receiving Royal Assent.
Baroness Worthington (CB)
My Lords, I too am glad to be back debating energy. As has been noted, we find ourselves in a completely different sent of extreme weather events today, but I am glad that we have all been able to make it here to resume this important discussion.
Since we last met, emergency legislation has gone through on some of the issues that we raised in Committee and at Second Reading on the need for a short-term response to the energy crisis bearing down upon us. The Bill is very much about long-term measures, so it is right and proper that the Government supplemented that legislation with faster-paced legislation. However, there were many provisions in that rather hurried legislation, which I know has caused concerns in the market, so the Government have to work hard to deliver the right signals to investors and to businesses around the country that the transition will be orderly and consistent and can encourage investment across the piece. I am sure we will come back to debating the net effect of all the Government’s measures on energy in later clauses.
Amendment 117 relates to the setting up of a low-carbon heat scheme. Specifically, the amendment would change the provision that the Secretary of State “may” by regulations make provision for the scheme to “must” and apply urgency to the challenge of bringing forward those regulations by requiring that they are passed within 12 months of the Bill being enacted.
The reasons are self-evident. If we are to solve the problem of our reliance on volatile fossil fuels, which are also contributing to air-quality problems and climate change, we need to get on with the electrification of heat. The scheme would move us along in that direction and give investors confidence that there is a market that they can plan for and invest in. We therefore urge the Minister to reassure us that the regulations will be passed with all due haste and brought in in good time, and I look forward to hearing from him on the timetable within which we might see the regulations.
Amendment 118 seeks to add to the Bill statutory requirements for and deadlines by which we will stop selling the gas-based boilers currently going into properties. I support that in principle, although I imagine that there will be concerns about the specificity going into primary legislation. However, it is essential that we give clarity to the manufacturers of existing boilers that the Government are serious about ending their current dominance.
I receive, as I am sure everyone does, a lot of correspondence about hydrogen-ready boilers. That needs to be unpacked. I do not know what can be done to prevent the mis-selling of that concept, but it is borderline mis-selling because it is very unclear whether hydrogen-ready boilers are even possible. I therefore think it has more to do with the manufacturers preserving the status quo than with their genuinely seeking to be involved in the transition. Lots of technical advisers tell me that simply saying that something is hydrogen-ready is not sufficient and that it is very difficult and complex to achieve, so I have some sympathy with Amendment 118.
Amendment 121 seeks to except hydrogen if it is compliant with the low-carbon hydrogen standard. In previous debates I have made it clear that I do not deem the low-carbon hydrogen standard sufficient. It is a number that has been put out there, but I do not think it takes into account all the effects of hydrogen on the climate specifically. Hydrogen is a greenhouse gas, as we have talked about previously. The global warming potential of hydrogen needs to be taken sufficiently into account when we consider a low-carbon hydrogen standard, and I do not think it has been, so I am a little nervous about us putting the provision in as it stands because I do not consider that standard tight enough.
The Government’s amendments on opening up the opportunity for the regulations to apply to manufacturers seem entirely sensible. We have to decide the right point at which regulation would be most efficient to drive this. The manufacturers may well be the right place for this, or they may not, but having that option seems correct to me.
In Amendment 122, the Opposition Benches seek to include specificity in relation to the heat pump market. Again, I can see the logic of that. I am sure it is probing amendment, more than anything else, to get clarity on the scale of the market that we expect. I doubt that it could survive in primary legislation, but I am sure it is there to try to elicit positive statements so that the heat pump sector can move in this regard.
Amendment 119 concerns cases where it is not possible to fit heat pumps. It is a difficult amendment to legislate on. Very few of the properties where a large enough heat pump or geothermal source can be installed cannot electrify heat. Therefore, I believe that the amendment is not necessary.
I very much look forward to hearing the response to the group. As I have said, it is of primary importance to get moving, and to get investors moving, so that we can start to have a manufacturing sector that is enabled by those regulations as quickly as possible. I beg to move.
Lord Lennie (Lab)
My Lords, 95% of UK homes are centrally heated and most CO2 emissions come from burning fossil fuels, contributing to about 30% of the UK’s total greenhouse emissions, about half of which is from heating our domestic properties. Will gas boilers be banned in 2025? As part of the future homes standard, new homes will be able to install only energy-efficient heating systems and will produce 31% lower emissions compared to the current levels. The standard will come into effect in 2025. The International Energy Agency has also stressed that no new gas boilers should be sold after 2025. The UK’s official climate advisers recommend that all gas boilers should be banned by 2033 to end the UK’s further contribution to climate change. That is the background to the amendments being moved.
We support Amendment 117 tabled by the noble Baroness, Lady Worthington, which adds a bit of the oomph by replacing “may” with “must” in relation to the low-carbon heat scheme. Amendment 119, in my name, would ensure that the Secretary of State, in making a low-carbon heat scheme, must
“provide a plan for low-carbon heating in homes where it is uneconomic or unfeasible to have a heat pump (large, rural, off-grid homes etc.).”
Amendment 121 seeks to allow
“heating appliances that use hydrogen produced to the Low Carbon Hydrogen Standard (blue hydrogen) to be included in low-carbon heat schemes.”
I note what the noble Baroness, Lady Worthington, said about hydrogen in general, but if we are going to have hydrogen, let us have blue hydrogen at this stage.
Amendment 122 states:
“Sub-paragraph (i) seeks to include the Government’s own figures for heat pumps in the Bill. Sub-paragraph (ii) seeks to include the number of heat pumps in the latest figures on recommendations from the CCC. And sub-paragraph (iii) seeks to oblige manufacturers producing gas boilers to turn to minimum 25% production of heat pumps by 2028 to facilitate the clean heat transition.”
Government Amendment 123
“makes it clear that a low-carbon heat target set by virtue of clause 100(1)(c) or (d) may be set, in the case of a manufacturer, by reference to heating appliances of the manufacturer that are supplied or installed, whether by the manufacturer or someone else.”
Government Amendment 124 simply corrects a drafting error.
Amendments 117, 119 and 121 relate to Clause 98 in Chapter 1, on low-carbon heat schemes, of Part 3, on new technology. Clause 98 provides the Secretary of State with powers to set up a regulatory scheme through secondary legislation to encourage the sale and installation of low-carbon heating technologies, such as electric heat pumps. Clause 98(3)(b) allows for this to include, for instance, hybrid heat pump systems that involve both a heat pump and a fossil fuel boiler. This is welcome, but our primary concerns are when and how the powers will be used. Amendment 117, tabled by the noble Baroness, Lady Worthington, requires the scheme to be set up within 12 months of the Bill becoming law, and we agree with that.
Amendment 119 seeks to ensure that the Government are aware that there are a number of homes where heat pumps are not the solution, and to address filling this large gap. There is one fundamental flaw with this clause that Amendment 121 seeks to address: it effectively prohibits the deployment of either hydrogen-ready boilers or boilers that use blue hydrogen under low-carbon heat schemes.
Lord Naseby (Con)
On Amendment 121, the Minister knows as well as I do that extensive work is being done on a 20% hydrogen/natural gas trial to provide central heating, et cetera, in homes. If that is the situation, either this amendment should be accepted or perhaps the Minister could explain how it will be possible for that work to continue.
Baroness Sheehan (LD)
I rise in support of Amendments 117, 118 and 122. If we are to move towards cleaning up heat, we really need to get on with it and put sensible deadlines in place rather than leaving it open-ended, as it currently stands in the Bill.
Amendment 118 tightens up what needs to happen by when and makes some very sensible suggestions on timeframes for
“the banning of the installation of unabated gas boilers in new properties from March 2025 … the banning of the sale and installation of unabated gas boilers in all properties after March 2035.”
We need to get on with this. I support the amendment wholeheartedly.
Likewise, Amendment 122 would introduce a deadline
“to include the number of heat pumps in the latest figures on recommendations from the CCC.”
On Amendment 121, like the noble Baroness, Lady Worthington, I add my note of caution about reliance on hydrogen. It is an unproven technology. There are ample studies and research that point to there being substantial barriers before it can be delivered at a low enough cost. Not least, there are technical difficulties: we know that the existing pipelines will not be suitable. So it will not be a straightforward case of replacing a natural gas boiler with a hydrogen or blend boiler. There are far greater changes that need to be made to the whole infrastructure before deployment.
Lord Callanan (Con)
My Lords, I will start with my Amendments 123 and 124. Amendment 123 seeks to provide additional clarity to Clause 100. Clause 100(1) provides examples of how targets for a low-carbon heat scheme may be set. The amendment’s addition of proposed new subsection (2A) clarifies that an average appliance efficiency or emissions intensity target could apply to all of a given manufacturer’s heating appliances sold in the UK, whether or not they were sold or installed by the manufacturer itself. This had been explicit in one of the examples in the list in subsection (1) but not in others. The Government believe that it is prudent to make this explicit and it provides additional clarity.
The Government have tabled Amendment 124 purely to correct a minor drafting error in Clause 100(4), replacing “activity” with “appliance” so that the subsection has its intended meaning.
Moving on to the amendments tabled by other noble Lords, I will start with Amendment 117 from the noble Baroness, Lady Worthington. The Government have always been clear that they intend to introduce the low-carbon heat scheme provided for by this chapter in very short order; namely, from 2024. However, it is the Government’s view that it would not be appropriate to incorporate a timeline into the Bill. If the noble Baroness will take my word for it, we intend to get on with this fairly quickly. It is important that the legislation retains the opportunity, if necessary, to respond to any unforeseen changes in market conditions, et cetera, and to ensure that the necessary administrative and enforcement systems are established. We are indeed looking at the appropriate enforcement mechanism at the moment.
I turn to Amendment 118, the first of four in this group in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I also thank the noble Baroness, Lady Sheehan, for her contribution. This amendment would require there to be a link between the introduction of a low-carbon heat scheme and a ban on the installation of gas boilers in new-build and existing properties respectively.
Noble Lords will be aware that the Government will introduce a future homes standard in 2025, which will effectively require that new properties are equipped with low-carbon heating and high energy efficiency, avoiding the need for future retrofitting. New properties would be taken care of in that respect. It would be premature to decide exactly what policy approaches will be best suited to implement the phase-out of natural gas boilers in existing properties.
I do not believe that it is helpful to create a dependency between the ability to launch a scheme on the one hand and a particular, separate measure such as an appliance ban, as the amendment proposes, on the other. That would risk delaying the introduction of such a scheme altogether.
On Amendment 119, the Government have been clear that a range of low-carbon technologies are likely to play a role in decarbonising heating. District heat networks have an important role to play in all future heating scenarios, as do electric heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting gas networks to supply 100% hydrogen for heating. As the noble Baroness, Lady Sheehan, said, it is indeed a considerable challenge, but we need to do the studies to work out whether it is feasible. Of course, other technologies may also play a supporting role.
To establish whether or not it is a feasible technology, the Government have an extensive programme of work already under way to develop the strategic and policy options for all these technologies and for different building segments. Another plan, seeking restrictively to prescribe the right solution for all properties now and out to 2050, is not particularly necessary or helpful.
I thank my noble friend Lord Naseby for his contribution on Amendment 121. This amendment would expand the potential set of low-carbon heating appliances that could be supported by a scheme established under the power in this chapter. However, I emphasise that the set of potential relevant low-carbon heating appliances established in this clause is solely for the purposes of a scheme under this power. It does not in any way serve as a comprehensive statement of all potential low-carbon heating appliances, and it has no wider bearing on what could be considered low-carbon heating appliances in any other policies, schemes or legislation.
The Government recognise that low-carbon hydrogen could be one of a few key options for decarbonising heat in buildings. To that end, the Government are working to enable strategic decisions in 2026 on the role of hydrogen in heat decarbonisation; I note the scepticism of a number of noble Members about this. The Government will bring forward the necessary policies and schemes to support the deployment of hydrogen heating, depending on the outcome of these decisions. We will also shortly consult on the option of requiring that all domestic gas boilers are hydrogen-ready from 2026. Since the scheme provided for by this measure would not be suitable or necessary to support the rollout of hydrogen-using or hydrogen-ready heating appliances, it would not be helpful to expand the scope of the power in this way.
Finally, Amendment 122 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, would require that three specific targets be incorporated into regulations for a low-carbon heat scheme. Again, the Government believe that targets are best set and adjusted in the scheme regulations, based on an assessment of the market conditions at the time, rather than in the enabling legislation in advance.
I turn to the specific targets that the noble Lord proposed. I have said a number of times that the Government’s ambition is to develop the market towards 600,000 heat pump installations per year in 2028. That is what we assess to be a scale necessary for and compatible with all strategic scenarios for decarbonising heating by 2050. Although the Government have clear plans to support industry to build a thriving manufacturing sector for heat pumps in the UK, we do not believe that a production quota is an appropriate way to achieve this.
In the light of what I have been able to say, particularly on the consultation, I hope that the noble Baroness, Lady Worthington, will agree to withdraw her amendment.
Lord Teverson (LD)
My Lords, I wanted to give the Minister the opportunity to introduce his amendments, but I will say a couple of things about this because low-carbon heating is a key issue. As he will know, 40% of UK emissions, more or less, are from heating. One of the big gaps in the Bill is part of the solution to that: home efficiency, which does not really appear in the Bill at all but should have.
I would like to ask the Minister specifically about energy from waste. Clause 98(4) has a list of fossil fuels, but energy from waste is not there. It is sort of a hybrid of being one and not. Over the last decade or so, one of the issues has been that when we have had energy-from-waste plants there has been a big emphasis on them being compatible with using the excess heat for commercial or domestic heating purposes, but hardly any of them do that. They get the planning permission but hardly anything happens. There are one or two in south London where it works, but generally it is not the case. Where do energy from waste and the high carbon emissions from disposing waste fit into this? Do the Government have any appetite—I do not really see it in this section of the Bill—to repair that past omission and make sure that excess heat from those facilities is used far more effectively, and perhaps compulsorily, in future?
Lord Callanan (Con)
The noble Lord makes a good point. Before he corrected himself, I was about to contradict him and say that a number of energy-from-waste plants are already supplying district heating networks—as he said, there is a particularly big one in south London, which I have visited. It is doing so, because the Government supported it. It received grant money to enable it to do that. There are a number of others around the country, so we already have existing powers and support funds to support heat networks.
We are very supportive of energy-from-waste plants using the waste heat to connect into district heating networks. However, it is a difficult area, because it depends on a number of factors. You have to have the energy-from-waste plant in the first place, and office blocks, apartments, et cetera have to be available to take the waste heat. The noble Lord will know that later in the Bill we will discuss the zoning power for heat networks that local authorities will have, which hopefully will enable them to utilise those powers and take heat networks forward; there are a number that are very keen to do so. I would certainly envisage that a number of energy-from-waste plants—those in inner cities, in particular—will be able to take part in those initiatives.
Baroness Worthington (CB)
I thank the Minister for his response. I am somewhat reassured by the timetable that these regulations will be pursued against. I would like to mention that it is not unusual for government to announce things and for there to then be quite a long delay. Energy-efficiency standards reaching EPC C by 2035 was first announced in 2017, but we still have not seen that make it through. If we had, we would be in a far better position now as we face this winter, where we have shortages of gas, and we should have more efficient homes. There is a reason why we are pressing on this timescale.
I support the Government’s amendments as introduced and the Minister’s statement that it is not helpful to expand this particular scheme at the moment any further than it is already defined. It is important to have clarity. The nearest corollary to this legislation is the ZEV mandate, which we will probably discuss in relation to the amendment tabled by the noble Baroness, Lady Randerson. It is better to have clarity of purpose that gives manufacturers and industry time to adapt and build an industry. It is clear in my mind that electrification of heat is probably 90% of the answer, if not the full answer. Therefore, getting it right, keeping it tight and giving confidence for investment would be the fastest way for us to get off volatile, expensive and unhealthy fossil fuels. However, I beg leave to withdraw the amendment.
Lord Callanan
“(2A) In the case of a low-carbon heat target that is imposed by virtue of subsection (1)(c) or (d) on a scheme participant who manufactures heating appliances, the target may be set by reference to heating appliances that are supplied or installed (whether or not by the scheme participant).”Member's explanatory statement
This amendment makes it clear that a low-carbon heat target set by virtue of Clause 100(1)(c) or (d) may be set, in the case of a manufacturer, by reference to heating appliances of the manufacturer that are supplied or installed, whether by the manufacturer or someone else.
Member's explanatory statement
This amendment corrects a minor drafting error in subsection (4) of Clause 100.
Baroness Randerson
“Low-carbon transport schemes(1) The Secretary of State must by regulations make provision for the establishment and operation of one or more low-carbon transport schemes.(2) A low-carbon transport scheme for the purposes of subsection (1) must include, but is not limited to, the use of hydrogen as fuel to power vehicles.(3) Regulations may include—(a) the setting of low-carbon transport targets,(b) encouraging and incentivising the provision of networks of refuelling stations supplying hydrogen for vehicles, and(c) encouraging and incentivising businesses which run fleets of vehicles to convert to hydrogen fuel.(4) Regulations must specify that, where low-carbon transport schemes include the use of hydrogen, the hydrogen must meet the UK Low Carbon Hydrogen Standard. (5) Vehicles covered by low-carbon transport schemes may include e-bicycles and e-motorbicycles.(6) Hydrogen to power vehicles may be used in a fuel cell or burned in a combustion engine.”Member's explanatory statement
This amendment would require the Secretary of State to encourage and incentivise the use of low-carbon transport schemes, similar to the low-carbon heat schemes in the Bill, particularly the use of hydrogen to power vehicles.
Baroness Randerson (LD)
I decided to table this amendment, because I felt that it was important to draw attention to what I and many in the transport sector see as the lack of leadership from the Government on this issue. It is important to bear in mind that the Government have seemingly very good targets on decarbonising the transport sector, but there is no detail on how we are going to get there. The path ahead is very vague.
Transport is the largest carbon-emitting sector in the UK. It is responsible for a quarter of CO2 emissions globally. In the UK, the sector has reduced its emissions by only 3% since 1990. That stands in contrast with other sectors. There is a desperate need for leadership, because we are falling behind. The evidence is that we have to be halfway there by 2030 to reach the goals for 2050, but we do not have the plans, the policy or the path set out for us, and it is now a matter of great urgency.
One reason why emissions have not reduced is that although the technology has improved, the number of vehicles on the road has increased, as has the size of cars. Although they are more efficient kilo for kilo, if I can put it that way, they weigh more now and have a greater impact and emit greater amounts of carbon. I want to say briefly that we are talking about this in relation to carbon emissions, but it is, of course, a matter of health. It has a huge impact on our breathing and things like heart attacks, and so on. It is a matter of considerable importance in health.
A great deal is made about the move to electric vehicles, but only 2% of the vehicles on the roads so far are EVs. We are a very long way behind the leaders—countries such as Norway, where up to half of vehicles sold are EVs. My amendment refers specifically to hydrogen, and hydrogen is controversial. Of course, it must be green hydrogen. Even then, green hydrogen has disadvantages, but the advantage of hydrogen is that it provides an early answer to the difficult-to-decarbonise sectors of the transport world—that is, heavy goods vehicles, heavy vehicles generally and, of course, shipping, which is particularly difficult to decarbonise. That is one reason why there is the reference to hydrogen.
The other reason why there is a reference to hydrogen is that, unlike with electricity for vehicles, hydrogen cannot really be installed on a commercial basis unless the Government put in place a set of carrots and sticks to encourage it commercially to be installed. It costs over £1 million to install a hydrogen-fuelling point. It is not the answer for ordinary domestic cars. It could be the answer for fleets of vehicles such as vans, but it is not going to be, unless the Government provide leadership.
I have been raising this issue for the past six years at least, and the Government have said that the market will solve the problem of electric vehicle charging points. To a certain extent, the market has stepped in. Of course, there are huge gaps, but the market has stepped in. The reason it has been able to is that all around us there is electricity—but we do not have hydrogen all around us. I deliberately mention hydrogen in the amendment because the Government need to consider how they are going to lead on this issue.
I finish by saying that the point of the amendment is to open up the matter for discussion and to give the Government the opportunity to consider—and, I hope, to think again about—the urgent need for leadership in setting out a set of steps, a policy or plan. These exist in other countries without Governments taking a huge commercial risk, but simply by providing the incentives to encourage people to choose more environmentally friendly ways of fuelling their vehicles and ensuring that, having chosen a more environmentally friendly vehicle, they can run it efficiently and effectively.
Noble Lords will be well aware that every time we talk about electric vehicles, there is immediately a discussion of the latest crisis that someone has faced in being unable to charge their EV—despite the fact that they are probably running short of electricity outside a house or fuel station that is blazing in electricity. Let us just think about how much more complex the matter is if we are talking about hydrogen.
This is about discussing the difficult issues and encouraging the Government to look ahead and plan—urgently—for what must be achieved. The average life of vehicles on the roads now is 16 years, I believe, and that will probably get longer because we are facing a period of difficulty, austerity and rising prices. This is therefore important, because those decisions made this year about what vehicle to buy—whether you are an individual or as a company—will be with us for decades to come. The Government must lead in the way only Governments can. I beg to move.
Baroness Worthington (CB)
My Lords, I shall speak to Amendment 124A, as presented by the noble Baroness, Lady Randerson. I must say that it is seldom that we disagree, because we both share the objectives of a rapid response to the growing climate risk, rapid decarbonisation and increasing the efficiency of our energy systems. I welcome this chance to have a debate about the intersectionality between transport and energy. In fact, and not to pre-empt it, I have an Oral Question later this week about how departments connect on these issues. It is hugely important that the DfT, in particular, teams up with BEIS on planning for our future decarbonised energy systems.
That said, I do not think it will come as any surprise that I am absolutely opposed to the idea of bringing in this set of amendments as currently drafted. My belief is that hydrogen will have a very limited role, for three reasons. First, it is itself a climate change gas and it is very slippery; it is the smallest molecule on the periodic table and it escapes everywhere. I do not wish to have hydrogen all around me—quite the opposite. I want hydrogen in very controlled places, being looked after by industrial chemists; I do not want it in my home or in my vehicle. We just have to look at the explosion of the hydrogen fuelling station in Norway. It is often forgotten but this is a hugely explosive gas. Norway managed to blow one of its fuelling stations and, if Norway can blow things up, anyone can.
Baroness Jones of Moulsecoomb (GP)
My Lords, I support the thrust of these amendments but I also have huge qualms about hydrogen and electric vehicles. Quite honestly, electric vehicles still clog the roads and their drivers still run over and kill people. If we are thinking about low carbon, we should go for public transport.
I also want to quibble with the noble Baroness, Lady Randerson, when she said that there was a lack of government leadership on this issue. The fact is that the Government are not giving us leadership on any issues. They are running around like a pack of confused ferrets. We are incredibly lucky that the whole of Britain is somehow hanging together and not having any disasters.
Returning to the amendments, something Greens are always very concerned about is marketisation and financial engineering around environmental issues. The UK has a long and dangerous track record of mismanaging this. In the same way that financial engineering around mortgages caused the 2008 financial crisis, there are risks that bankers will abuse the climate crisis as an opportunity to get filthy rich while destroying the very systems we are working to protect. It has been done before.
That is why we are concerned about concepts such as natural capital, which risks being a double-edged sword. If it helps policymakers to recognise the immense value of our natural capital and our natural world, it might be helpful, but if it simply creates new opportunities for bankers to get filthy rich, it is deeply dangerous.
For this reason, it is essential that carbon removals are genuine physical processes that remove carbon dioxide from the atmosphere and lock it up. There cannot be any ambiguity or scope for financial markets to exploit for profit, or for our Government to claim success when no real carbon dioxide has been removed from the atmosphere.
I was at a round table last week; there were about 16 of us, and we were fairly evenly divided between scientists and parliamentarians. All the parliamentarians were from the Commons, apart from me. The scientists all agreed with each other and kept saying the same thing: that we must stop burning fossil fuels. However, all the parliamentarians, apart from me, said, “Oh, that’s quite difficult—I cannot ask my constituents not to fly”, and things like that. My concern is for the Government to be deeply behind the science. Even the UN is now saying that we must act urgently. You cannot, even now, talk about low carbon and net zero; we are past the point where they will have the impact that we need. Instead, we should be talking about carbon-negative measures. If the Government do not wake up to that very soon, I hope that we can replace them.
Lord Whitty (Lab)
My Lords, much has been said already. I agree with the main thrust of the amendment tabled by the noble Baroness, Lady Randerson, which urges the Government to set out a very clear case for the decarbonisation of the various transport sectors. I do not think that we are there yet, and I do not think that the industry feels that we are there yet. It is important, for the reasons that the noble Baroness has just spelled out, that the transport sector knows which way it is going.
I must partially apologise to and reassure the Committee, because some of my speech was intended for the previous group of amendments. As noble Lords were making such commendable progress this afternoon, I did not get here in time to intervene on the amendment on home heating—an issue where, again, some clarity of decision is needed. Home owners and landlords are now faced with decisions on how to replace their gas boilers: they know they need to get rid of their gas boilers, but quite what they are going to get to replace them with is unclear. Of course, people replace their cars, and even their lorries and buses, rather more frequently than their houses and boilers. It is important, therefore, for the transport industry that there is some clarity on the general direction of government policy for the different sectors of transport.
On this topic, we immediately run up against the issue of hydrogen. I am not quite as sceptical as some of my colleagues, but I am sceptical, because hydrogen has been seen as a “get out of jail” card for almost every sector on their decarbonisation trails. That is not only for heavy industry, to replace the very heavily carbon-fuelled industries such as steel, glass and so forth, with its knock-on effect on the construction industry, et cetera, but for parts of the transport sector and for home heating. It has been seen by some as the solution to the decarbonisation of heavy vehicles, shipping, the train system and even aviation. However, hydrogen is not capable of doing that without safety dangers; and, in any case, it is not capable of doing that because we do not yet have the technology for producing green hydrogen at scale. Therefore, it will come in, if at all, only much further down the line. However, waiting for hydrogen—whether in the form of hydrogen blend for home heating or hydrogen-based vehicles or batteries for the transport sector—is seen as an excuse for not taking other technologies more seriously and urgently than we have done.
The amendment tabled by the noble Baroness, Lady Randerson, would require the Government to do that job for the transport sector. I think that they need to do that for other sectors as well, and that they should not exaggerate either the degree to which hydrogen is the solution or, in particular, the closeness of technological breakthroughs to provide genuinely green hydrogen. It is not going to happen in the kind of timescale that we are talking about. Therefore, the amendment has implications beyond transport, but transport itself needs a clear plan. I hope that the Minister will take up with his transport colleagues the need to work urgently, as the noble Baroness’s amendment urges, to ensure that the transport sector knows where it is going, even if nobody else does.
Baroness Worthington (CB)
My Lords, I am sorry to speak a second time—I am not sure whether I am allowed—but may I speak to Amendments 130A and 130B? In my excitement I forgot to speak to them. Those amendments in my name seek to address the carbon removals questions in the Bill.
Amendment 130A is to try to interrogate the Government’s amendments to the definitions of carbon removals, as stated in the Climate Change Act. My amendment would reinstate reference to forestry and other physical activities in the UK. I think this amendment is necessary because we do not want to see definitions used in the Climate Change Act, which are foundational to our understanding of what we need to do to tackle climate change domestically, to somehow allow vague processes such as the purchasing of offsets or some other financial instrument to be eligible for the net-zero accounting. I seek reassurances on that. I also seek reassurances that we acknowledge that forestry and land use need to be referenced alongside mechanical sinks to keep the system holistic and inclusive. So I am probing on those two questions: forestry and land use, and making sure we are talking about physical activity and not financial chicanery or accounting trickery.
I feel quite passionate about Amendment 130B. I am sure the UK will emerge as a world leader in this regard. If we are to become the centre of a market or set of policies that are economy-wide in decarbonising our system, we will have to get to grips with the MRV—the monitoring, reporting and verification of carbon removals—to get to a net-zero position. It is hugely important. When you burn a tonne of fossil fuel the impacts are certain and very low in error bars, but when it comes to the biospheric removal of carbon in particular, there are huge uncertainties and an absolute paucity of data. It really has not been looked at comprehensively enough, especially now that large sums of money may be resting on this approach to reaching net zero.
I urge the Minister and the department to really assess what the UK could do to set some gold-standard regulations regarding carbon removals. Let us start the debate with this Bill, pursue it and continue with it. Given that we are at the forefront of reaching these challenging carbon budgets that we have set ourselves, I have no doubt that carbon removals will have a role to play. But let us do it in a world-class way and not use it as a weasel-word excuse for allowing fossil fuels to continue, without the certainty that those removals are genuine, additional and permanent and can offset the almost permanent damage that we know occurs from the release of fossil fuels. It is hugely important that we do this. I tabled this as an opportunity to spark a debate, and I hope we will come back and consider it in more detail. The UK has a great potential role to play in this area.
Baroness Sheehan (LD)
My Lords, as a member of the House of Lords Science and Technology Committee, I took part in the report we produced on batteries. The genie is out of the bottle on domestic EVs. That is going to happen; I think we are well on the road to better and better battery technology.
When the committee examined transport, we heard that batteries are heavy—a battery to power a bus would be very heavy—so there is a role for hydrogen in public transport for return-to-base vehicles where hydrogen does not have to be moved too far. Where there is a limited number of filling stations, that is a model that could work. Shipping and heavy industry, such as cement, are other applications for hydrogen.
My noble friend Lady Randerson mentioned fuel cells. We found in our report that for some reason the Government are not backing research on fuel cells to the extent that they could. Fuel cells would be another potentially sensible source of power for heavy transport vehicles, so I support the basic thrust of my noble friend’s amendment.
Amendments 130A and 130B, tabled by the noble Baroness, Lady Worthington, are really crucial. We are going to have to look at carbon removals, as the noble Baroness, Lady Jones, said earlier. We need to do it in a way that gives confidence against greenwashing, of which there is far too much. The only way to do that is if accounting for carbon is rigorous.
Baroness Young of Old Scone (Lab)
My Lords, I support the noble Baroness, Lady Worthington, in her two Amendments 130A and 130B and stress that the measurement, monitoring and verification of UK removals is vital. I declare an interest as chairman of the Woodland Trust. I have just been involved in the bowels of the woodland carbon code. It is quite staggering to think that many of these verified units of removal will not achieve full verification for 20, 30, 40 or 50 years and are then required to persist for 100 years. We have to find a way of inventing a system that will keep an eye on a plethora of landowners and land interests who are planting trees to sequester carbon and have that effective supervision, light-touch as it may be, for 100 years.
This will be quite a challenge. It is something I would appreciate the Minister responding to. We are now in the middle of implementing the peat carbon code, which will have similar difficulties, but perhaps the most important one has not yet been developed: the soils carbon code. That is of far more potential than either the peatland or woodland carbon codes in sequestering carbon. It will be a very widespread code because soils exist everywhere, though not all of them will be potentially good at sequestering carbon. I urge the Minister to accept these two amendments and give us a feel, as it were, of those 100 years and how the complexity of the carbon codes can be relied upon.
Before I finish, I make a similar apology to that of my noble friend Lord Whitty, as I was not here to speak to my Amendment 119. I did not miscalculate the pace at which the Bill would go; I was miscalculating the pace at which a snowed-in train would move. Since the Minister is appearing before the Environment and Climate Change Committee on Wednesday, I can ask him the question then anyway.
Baroness Blake of Leeds (Lab)
This has become a very rich debate. I thank the noble Baroness, Lady Randerson, for putting her amendments forward to enable us to have these broader discussions. We have said from the start that the difficulty with this Bill is the things that are not in it; this is one area we can all learn from and hopefully move forward on.
I also thank the noble Baroness, Lady Worthington, for the explanation of her Amendments 130A and 130B. I am sure that we would all welcome more clarity in these areas, and indeed a strategy so that we can bring confidence and certainty to the sector in the way that she described.
I will focus most on Amendment 124A in the name of the noble Baroness, Lady Randerson, in my comments and, in particular, the notion of adding local carbon transport schemes to the section on low-carbon heat schemes—indeed, to run alongside them.
As many will know, this was last looked at under the last Labour Government, with the 2009 report Low Carbon Transport: A Greener Future, which, interestingly, was published by the DfT. It made recommendations on supporting a shift to new technologies and fuels, promoting lower-carbon choices, and using market mechanisms to encourage a shift to lower-carbon transport. Of course we have moved on in many ways, but these principles should not be overlooked and we should continue to put in our full effort.
Specifically on hydrogen vehicles, we believe there is merit in looking at potential in the HGV sector. The discussions about shipping were interesting as well, but we feel that so much more focus needs to be put on alternatives, certainly in the short-term. Electric is obviously being looked at.
It is important to debate this at this point because, with the global situation regarding gas supplies, we are focusing our attention on domestic energy in particular, for obvious reasons—the cost of living crisis, security issues and all that goes with it—but we have to bear in mind that transport is one of the biggest sources of carbon emissions in the UK. In 2019, it accounted for 34% of the UK’s total carbon emissions. Its emissions have remained largely unchanged since the 1990s, which we cannot say about the energy supply generally. We have to ask why transport is such a poor performer.
We need to be concerned about where we get the electricity from if we continue with our ambition. If we are to reach our target of net-zero emissions by 2050, the decision to ban new petrol and diesel cars from 2030 will help, but there are so many other areas that we should focus on: alternative modes of transport, cycling and walking, and shared travel options. From my point of view, we have this enormous disconnect between transport policy and the policy we are discussing. We need to pick it up and take it seriously.
I speak with my experience of being a member of Transport for the North. All the schemes we tried to bring in through the integrated rail plan to deliver not only for the travelling public but for the impact on the climate seem to have been left behind. We have discussed this before. We have had Questions in the Chamber about the lack of joined-up thinking from the Government, which needs seriously to be addressed. The noble Baroness, Lady Randerson, referred to it as a lack of leadership and vagueness in the plan, but why are we not cross-referencing within the Bill to the work that needs to be done?
Speaking with my local government hat on, on building new homes, why can we not look at the schemes in Scandinavia in particular, where every new home has solar panels and the excess electricity generated is taken off and fed into personal electric charging points for vehicles? There are so many examples that we should look at.
The amendment has generated an opportunity to discuss this. I look forward to the Minister’s response to the amendments from the noble Baroness, Lady Worthington, but in particular to her explanation as to why there is such a lack of joined-up thinking in these areas, where the potential could be enormous.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I thank all noble Lords who participated in the debate, particularly those who tabled amendments.
I will speak first to Amendment 124A, tabled by the noble Baroness, Lady Randerson, but I must start by taking issue with the idea that the Government are not showing leadership. I believe that they are showing leadership with low-carbon transport solutions. For example, this year alone we have announced £200 million for the zero-emission road freight demonstrator programme, which includes hydrogen and electrification for HGVs; another £200 million for zero-emission buses, again including both hydrogen and pure electric; £30 million for a fleet of 124 buses in the West Midlands; £206 million for the UK Shipping Office for Reducing Emissions—or UK SHORE—to decarbonise maritime, which includes a mix of different technologies; and up to £12 million until August 2023 and up to £60 million until March 2025 for the second and third rounds of the clean maritime demonstration competition, funding feasibility studies and pre-deployment trials in zero-emission shipping hydrogen technologies for maritime applications. As the noble Baroness will be aware, there is also £20 million for phase 2 of the Tees Valley hydrogen transport hub, with an additional £300,000 put forward to support local skills.
On aviation, the SR21 funding for hydrogen-related aviation activity has not yet been announced but is forthcoming. We have also announced £165 million for the advanced fuels fund to kick-start a sustainable aviation fuel industry in the UK.
All this goes to demonstrate that we are doing a lot of work to show leadership in this area, putting money into research to help us solve some of the problems raised in this debate. Work is already under way in the Department for Transport in close collaboration with BEIS; it is really helpful that the former Secretary of State for Transport is now the Secretary of State for BEIS, so he will be very well versed in some of these issues. I can reassure noble Lords of the continual conversation that happens between the two departments in this regard. In close collaboration with BEIS, as set out in the Government’s transport decarbonisation plan, the Department for Transport is delivering on its comprehensive plan for decarbonising transport, which includes supporting a greater role for hydrogen through schemes such as those I have mentioned.
As we have seen, there is a significant role for hydrogen in heavier transport applications or where things such as refuelling times and infrastructure constraints make it the best choice. However, we do not consider that a new statutory, regulatory regime would add anything new to the work already being done. It is always necessary to consider whether the benefit outweighs the regulatory burden. I hope that the noble Baroness is reassured by the Government’s commitment to this cause, and I ask her to withdraw her amendment.
Amendment 130A seeks to limit the definition of “UK removals” in Section 29 of the Climate Change Act, excluding mechanisms such as financial instruments that do not relate to the physical removal of greenhouse gases in the UK. I reassure the noble Baroness, Lady Worthington, that Clause 111 does not expand the definition of “UK removals” to non-physical processes, but instead to greenhouse gas removals achieved by engineered methods, such as bioenergy with carbon capture and storage. This is to align the definition with current international best practice, including guidelines set out by the United Nations Framework Convention on Climate Change.
I equally reassure the noble Baroness, Lady Jones, that it is the Government’s priority to reduce emissions of greenhouse gases from human activities and to adapt to those climate change impacts that are unavoidable. We are clear that the purpose of greenhouse gas removals is to balance the residual emissions from sectors that are unlikely to achieve full decarbonisation by 2050. It is not a substitute for decisive action across the economy to reduce emissions. Nature-based methods, such as afforestation and habitat restoration, will be essential in removing and storing carbon dioxide at scale while delivering a range of additional environmental benefits, such as biodiversity gain, air quality and soil health.
The Climate Change Act 2008 allows the Government to purchase off-sets or other traded instruments to set towards our emission reduction targets. The Government do not currently intend to purchase off-sets to set towards our carbon budgets, although they have retained the option to do so in future, if appropriate. I can see that I shall never manage to reassure the noble Baroness, Lady Jones.
Baroness Jones of Moulsecoomb (GP)
Could I just point out that it is easier not to send loads of CO2 out into the atmosphere in the first place? It is great to hear about all the millions that the Government are spending on these measures, but it would be cheaper not to pollute in the first place. Things such as carbon capture and storage are all incredibly theoretical ideas, so you cannot actually say that it is going to happen, because it may not.
Baroness Randerson (LD)
My Lords, I thank all those who have taken part in this short debate. I knew that I would provoke a debate by specifically mentioning hydrogen—and that was my intention. I wanted to tease out the Government’s views. I thank the Minister for her response, but it was light on detail as, I fear, the whole of the Government’s policy is.
I agree with the noble Baroness, Lady Jones, on her view of the Government. I fear that the Government have been so self-obsessed for the past two or three years that there is a policy vacuum in all sorts of places, and transport is one of them. I also agree with her that we need to rely very much more on public transport but, of course, the vast majority of public transport is provided by buses, which are heavy vehicles. Electricity is fine in towns and cities but it is not yet the answer for long distances in rural areas or for long-distance buses. Of course, not enough of our electricity is green and comes from renewable resources. Despite the ingenious plans for the national grid, we have a crisis of capacity, which will face us very soon if we all rely on electric vehicles.
The noble Lord, Lord Whitty, referred to aviation. I remind noble Lords about the Government’s jet zero strategy, which is a triumph of optimism over reality.
My noble friend Lady Sheehan made a very important point about batteries. It is important to emphasise that we are well behind in the international race for developing gigafactory capacity. Very soon, rules of origin will be a problem for those wishing to export.
Lord Callanan (Con)
I do not know what the noble Baroness is doing; she is supposed to be deciding whether she will withdraw her amendment, not responding to a debate. This is not a debate on general activity relating to hydrogen. She should say whether she wants to withdraw her amendment—that is the question.
Baroness Randerson (LD)
My Lords, in Grand Committee it is normal to allow people the courtesy to respond to well-made points from noble Lords. I want to make it absolutely clear that the intention of my amendment was to provoke debate. I am disappointed that the Government’s response has been so limited. The amounts of money announced by the Minister are attractive and worth while, but they need to be multiplied by at least 10 to have any impact at all.
I will withdraw the amendment, of course, but I remind noble Lords of the words of the United Nations Secretary-General:
“We are in the fight of our lives, and we are losing”—
we need a sense of urgency. I withdraw my amendment.
Baroness Jones of Moulsecoomb (GP)
We have discussed the issue of hydrogen, so I will delight your Lordships by saving my voice. I do not intend to speak on whether Clause 108 should stand part of the Bill.
Baroness Worthington (CB)
My Lords, I added my name to the Clause 108 and Clause 109 stand part notices and to Amendment 125 in the name of the noble Lord, Lord Teverson.
We have had wide-ranging debates but, when it comes down to the content of the Bill, the most egregious elements are possibly these two clauses. It seems absolutely incredible that we should require people to enter into a trial for something on which multiple studies have been undertaken already. We are essentially legislating to force people to take part in something we already know the answer to. We know the answer because 32 independent studies of the use of hydrogen in heating—since 2019, so they are relatively recent—by organisations including the IPCC, the IEA, Imperial College, the Potsdam Institute, the University of Manchester, the Wuppertal Institut, Element Energy and the International Council on Clean Transportation, have all found that hydrogen should not play a role in heating buildings. Hydrogen will be hugely inefficient, compared with other clean alternatives and gas, in terms of pure energy efficiency, damaging to health and dangerous. That should be enough evidence for the Government to rule out this unnecessary trial.
I honestly believe that this is a consequence of a huge amount of lobbying coming from the incumbents in the industry, including those who today manufacture gas boilers, produce gas and move gas around in the networks. What they fail to mention is that it is not as simple as just switching over to hydrogen: you have to replace virtually everything to be able to burn hydrogen at high levels. Yes, of course, you can burn very low levels, but who wants low levels? We are talking about a net-zero strategy in the next 25 years; you cannot afford to go through increments of 20% hydrogen and 30% hydrogen—it is simply not credible. It will do exactly what we saw in the co-firing of biomass in coal-fired power stations; it keeps the incumbents going for longer, keeps their investors and shareholders happy, and gives them an answer to the question, “How are you going to make your business compatible with climate change?”. It is a glib answer. It is not a full answer—in fact, it is false—but it is an answer none the less. That is why we are being forced into considering this, even though the evidence is absolutely clear that this is not the answer.
If I were a resident living in one of these poor villages—the villages of the damned, as I like to call them—I would be absolutely up in arms at the prospect of being forced into this egregious position in which I am asked to take this technology, which will be more expensive, less beneficial for my health and more damaging to the climate compared with other alternatives. I fully support the withdrawal of the two clauses; the Bill would be vastly better if we got rid of them. I am very grateful to the noble Baroness for tabling this.
Lord Teverson (LD)
My Lords, I particularly support the proposal to take out Clauses 108 and 109. I did not put my name to that, but it seems the obvious solution. As the noble Baroness, Lady Worthington, said, we have all been on the receiving end of massive lobbying by the hydrogen lobby. I will not go into hydrogen extensively, but clearly there are areas where hydrogen will need to work. It will be important in some energy-intensive industries and some long-term transport solutions, but we seem to have overreached in terms of those applications.
For heating, it just cannot make sense to use green hydrogen, which would have to be produced by renewable electricity, as electricity could be used anyway. Scientifically and in terms of the laws of physics and efficiency, it does not make sense. Heating is an important area—as we said, it represents some 40% of UK emissions—so surely it must be electrification directly, geothermal technologies or air source heat pumps, as we have discussed before. That is why I think these clauses not standing part is the best solution. If that is not agreed, I thank the noble Baroness for supporting my amendment; the noble Lord, Lord Lennie, has a similar one. This should not be compulsory and those consumers should be very aware of all the other repercussions.
My second amendment, Amendment 126, is less important. As with previous amendments, it just makes sure that only people who really benefit from these trials should have to pay for them and that those who do not should not. I do not understand how BEIS and the Government have become the victims of the lobbying that takes place.
Finally, perhaps I can cite a gentleman whose work I have been reading, Jan Rosenow. He takes his statistics from BEIS’s Hydrogen Production Costs 2021 and Ofgem’s wholesale market indicators. He is very clear that, depending on how you look at the timescale between now and 2050, hydrogen will cost three to 11 times more than fossil fuel gas at its present levels. Clearly, this is not an acceptable solution or route for decarbonisation.
Lord Lennie (Lab)
My Lords, these amendments relate to Clauses 108 and 109—Chapter 2 in Part 3—on hydrogen grid conversion trials, covering modifications of the gas code and regulations for the protection of consumers. The background to this is that in 2021 the Government launched a consultation on facilitating a grid conversion hydrogen heating trial. The Government’s Ten Point Plan for a Green Industrial Revolution sets out the ambition to support the industry to deliver hydrogen neighbourhood and hydrogen village trials by 2025. This consultation sought views on proposals to legislate to allow gas distribution network operators to carry out activities needed to deliver a grid conversion.
It would be unfair to say that the Government did not alert people to the complexity of the trial, because the consultation document announced that it involved replacing gas supplies with hydrogen in consumers’ premises. It also said:
“Existing in-home appliances and devices such as boilers and meters will need to be replaced with hydrogen-compatible equivalents. Pipework may need to be replaced if it is not already suitable for hydrogen. Additional internal work may also be required to make the property ‘hydrogen-ready’.”
On the face of it, the Government understood the complexity. They also said that the trials would be carried out by the gas distribution network operators in partnership with local authorities, and that, in the trial of hydrogen, safety
“will be of paramount importance”—
that is good news—with the Health and Safety Executive being consulted and involved in any measures of conversion.
Lord Callanan (Con)
I will start with Amendments 125 to 127; I thank the noble Lords, Lord Teverson and Lord Lennie, and the noble Baroness, Lady Blake, for their contributions and for promoting them. The amendments relate to Clause 109, which, alongside Clause 108, will ensure the safe and effective delivery of a village-scale hydrogen heating trial. This trial will gather evidence to enable the Government to make strategic decisions on the role of hydrogen in heat decarbonisation. I know that there are very strongly held opinions on whether hydrogen is the correct solution, but we will never know unless we do the appropriate research and trials.
Lord Callanan (Con)
Let me finish, then the noble Baroness, Lady Worthington, will be able to come back.
I will start with Amendments 125 and 126. With Amendment 125, the noble Lord, Lord Teverson, calls for an adequate level of information to be provided to consumers in the trial area concerning safety, long-run bill impacts and opting out of the trial. I agree that these are important issues. Support from local people will be crucial to the success of the trial, and gas transporters are already working closely with communities in the potential trial locations. In fact, the relevant Members of Parliament have already been in touch with me, and I already have meetings in my diary to talk with them and residents from the local areas about this.
Steps have already been taken to ensure that people have all the information required to make an informed choice about whether they wish to participate. Both gas transporters have opened demonstration centres in the two shortlisted local communities to raise awareness of what the trial would involve.
Clause 109 provides the Secretary of State with the power to require the gas transporter running the trial to take specific steps to make sure that consumers are properly informed about the trial. In meeting their responsibilities to inform consumers, we fully expect gas transporters to provide clear information about each of the important topics listed in the noble Lord’s amendment.
I turn to Amendment 126. The Government have been very clear that no consumer in the trial location should be financially disadvantaged due to taking part in the trial. Last year, the Government published a framework of consumer protections that will underpin the trial. Consumers in the trial location will not be expected to pay more for their heating than they would if they had remained on natural gas or to pay for the installation and maintenance of hydrogen-capable appliances.
The village trial will be paid for through a combination of government and Ofgem funding and contributions from the private sector. All gas consumers pay a very small amount towards Ofgem’s net-zero funding for network companies, which supports projects to decarbonise the energy sector; that includes this trial. All gas consumers will benefit from well-informed strategic decisions on how to decarbonise the way we heat our homes.
I hope that I have been able to reassure the noble Lord that the important issues he has raised, about which I agree with him, are already effectively addressed by the Bill, and therefore that he feels able not to press his amendments.
I move on to Amendment 127 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. As I have said, local support will be crucial to the success of the trial. Gas transporters are already working closely with communities in the potential trial locations to develop an attractive offer for people who want to convert to hydrogen. However, we understand that not everyone will want or be able to connect to hydrogen, and the Government are clear that nobody will be forced to do so. The gas transporter running the trial will have to provide alternative heating solutions and appliances for people who do not take part in the trial. In May 2022, this requirement was clearly set out in a joint letter from BEIS and Ofgem to the gas transporters, alongside the other requirements that must be met before any funding is provided for the next stages of the trial. The gas transporters will need to demonstrate that they have a viable plan for providing alternatives to hydrogen. There is already an effective way to ensure that they provide alternatives to hydrogen, through the Government’s funding requirements.
We therefore do not believe that this amendment is necessary. I fully appreciate the noble Lord’s intention—which I share—to ensure that the trial is conducted properly, with alternative heating systems offered to people who do not take part. With that information, I hope he feels reassured that there are already steps in place to ensure this and will therefore feel able not to move the amendment.
I will say a few words about the stand part notices on Clauses 108 and 109. I know that the noble Baronesses, Lady Jones and Lady Worthington, and my noble friend Lord Moylan, who is not here now, have registered their intention to vote against these clauses. I have already established that the overall intent of these clauses is to support a safe and effective trial for hydrogen heating.
Clause 108 allows the Secretary of State to designate a hydrogen grid conversion trial, ensuring that both this clause and Clause 109 are narrow in scope and would apply only for the purposes of such a trial. Importantly, the clause expands the duty to participants of the gas transporter running the trial to undertake the required work without charge. It also makes certain modifications to the Gas Act 1986 to build on existing provisions concerning powers of entry. This will ensure that the gas transporter running the trial has clear grounds to enter private properties to: carry out any essential works, including replacing appliances and installing and testing safety valves; undertake inspections and tests for the trial, such as safety checks; and safely disconnect the gas supply in a property.
It is important to emphasise that gas transporters already have powers of entry into properties through the Gas Act. We are merely extending these powers in a very limited way to conduct the necessary work to set up and deliver the trial. Gas transporters will only ever use these extended powers as a very last resort once all other attempts to contact property owners and reach an agreement are exhausted. The existing rules on powers of entry requiring a gas transporter to obtain a warrant from a magistrates’ court will continue to apply, of course. I reiterate once again that nobody will be forced to use hydrogen. I have already covered the plans for alternative arrangements in my comments on the amendment earlier.
Finally, I draw noble Lords’ attention to the fact that the majority of responses to the public consultation the department ran last year on facilitating a hydrogen village trial were broadly supportive of our proposals to change legislation in this way. I therefore urge that Clause 108 stands part of the Bill.
Clause 109 provides the Government with the powers to establish consumer protections for people taking part in this world-leading hydrogen village trial. It will do this by giving the Secretary of State two delegated powers to make regulations which require the gas transporter running the trial to follow specific processes to engage and inform consumers about the trial, and ensure that consumers are protected before, during and after the trial.
The department is of course working closely with the gas transporters as they develop their plans for consumer engagement and protection. It is worth saying that there is quite a bit of support in these communities for the trial. The council leaders in the areas concerned have expressed their support and one MP in particular is actively campaigning for their area to take part in the trial. Opinion is obviously mixed in both communities, but we want to make sure that it has the maximum level of support required. I have already highlighted the importance of consumer engagement and support in my earlier comments. Regulations made under this clause will ensure that people will have all the information required to make an informed choice about whether they wish to participate.
The second power in this clause, to introduce regulations for consumer protections, will work alongside existing protections such as the Consumer Rights Act 2015 and the Gas (Standards of Performance) Regulations 2005. This recognises that it is a first-of-its-kind trial and will allow the Government to introduce additional protections for consumers in the trial area. These might include regulations to ensure that consumers are not financially disadvantaged by taking part in the trial.
I am sure that all noble Lords will agree that these provisions, which—as I said, again—were well received by stakeholders when we consulted on them last year, are crucial to ensure the fair treatment and protection of people in the selected trial area.
Lord Lennie (Lab)
The Minister said that no one would be forced to take part in the trial. I appreciate that but, first, it seems like the place for that statement to be made is within the Energy Bill. Secondly, will they be given an alternative low-carbon solution?
Lord Callanan (Con)
The answer to both of those questions is yes. No one will be forced to take part in the trial. If they do not take part in the trial, they will of course be given an alternative low-carbon solution.
Lord Teverson (LD)
Can the Minister clarify what areas are being looked at? I have seen Redcar, Whitby and Fife being looked at as potential areas. Are those agreed? Is the number roughly three and when are those locations likely to be confirmed?
Lord Callanan (Con)
There is already a small-scale trial in Fife in Scotland. There are two shortlisted villages, Redcar and Whitby—on the west coast, not Whitby on the east coast. They have been shortlisted for the trial and we will make a decision on the basis of submissions from both communities in the new year.
Baroness Worthington (CB)
My Lords, I respond on behalf of the noble Baroness, Lady Jones, on the stand part notice that we have both signed. I thank the Minister for his response. To be honest, because I am so clear that this should not form part of the Bill, I have not gone through all the detailed provisions in these two clauses. The Minister seems to be saying that there is an absolute right of refusal, but my reading of both clauses is that the emphasis is that required information must be provided. There might be protections from financial penalties—that is implied when it talks about protecting consumers—but I cannot see it written down anywhere that the regulations will enshrine the consumers’ right of refusal.
I would be grateful if the Minister would undertake to write to us on this because this seems like a scheme where the fox is being put in charge of the henhouse. The gas transporters are the interlocuters between the poor people living in these villages who are going to be told that this is the great answer to their climate change concerns. Will they provide adequate information about safety? You are at least four times more likely to have an accident with hydrogen; it has been verified.
I take issue with the Minister’s characterisation of this as being a matter of opinion where “some people think this” and “some people think that”. It is not true. This is clear physics and chemistry. It is more likely. You may get slightly more frequent accidents at a lower explosion rate, but that does not reassure me in the slightest. Peer-reviewed scientific studies have taken place and we do not live isolated from the rest of the world. Other countries have tried this. There have been countless trials and there have even been studies in this country. This is not a safe way of proceeding. It needs to be made categorically clear that independent advice should be given to these villages, not advice given by the gas transporters which, of course, have a huge, vested interest in this going ahead.
I am afraid that I am in no way assured by the responses I have received. I certainly would not want to be living in one of these villages. I would not want hydrogen anywhere near my home. I will continue to advocate on that basis. I will not press my objection to this clause at this stage, but I am sure that we will return to this on Report. This is going to get—and needs—a lot more scrutiny. A lot more independence needs putting into the process, and it needs a rethink.
Lord Callanan (Con)
Let me just respond to the noble Baroness’s point and reiterate once again that nobody will be forced to take part in these trials. There is extensive information available. As I said, there are campaigns in some communities which want to take part in the trials. At least one MP in one of the areas is campaigning for it, and both council leaders have been contacted by officials and are supportive of it. Obviously, people want reassurance and more information; that will happen.
The noble Baroness’s other point about health and safety is crucial. I actually agree with her that, potentially, hydrogen is dangerous. Natural gas is also potentially dangerous, but we have mitigated the safety concerns of that. We will want to make sure that the HSE is involved in studies as well, and we will not do anything to put anybody at risk or do anything that will prejudice their safety. That goes without saying, and there are extensive studies taking place.
I also have some scepticism about the potential use of hydrogen for home heating, but I believe that we should do the trials to assure ourselves one way or the other where the truth lies, and whether the existing network can be repurposed easily, simply and cheaply for hydrogen. We do not actually know the answers to those questions until we do the studies, and that involves doing a trial to find that out.
With those reassurances, once again, let me reassure noble Lords that nobody will be forced to take part in these trials. Everybody will be provided with the appropriate information, and nobody will suffer any financial loss because of it, but I believe that it is worth pushing ahead with these trials.
Baroness Worthington (CB)
Would the Minister point to where in the Bill it states that there is a right to refusal and consumers can object? It should be stated up front in the legislation so that the regulations are clear.
Lord Callanan (Con)
I am giving the noble Baroness that assurance now, and it will be in the regulations. I am happy to put it in writing, if she wishes. It is not in the Bill, because that is not the place for secondary regulations. The Bill provides the principles and the powers for the Secretary of State. Of course, when we make the regulations, there will be further potential for that to be discussed both in this House and in the House of Commons, and I am sure that it will be.
Baroness Jones of Moulsecoomb (GP)
The Minister mentioned having meetings. Has he actually met scientists, who know more about this than do people involved in financing the scheme?
Lord Callanan (Con)
I know that the noble Baroness, Lady Jones, has her very passionate views, but there are lots of alternative views out there as well. We are saying that it needs to be properly looked at and studied on the basis of evidence—I know that the Greens are sometimes not big on evidence, but we believe that policy should be properly evidenced and studied. That is why we think that it is important that we should do these trials.
Baroness Worthington (CB)
With a Bill of this magnitude, if we are saying that it is a principle that there is a right to refuse, that principle should be in the primary legislation. That is where you put principles—and then the details can be worked out. Nothing in the Bill says that consumers have the right to refuse. I am sure that we are going to revisit this, as it is fundamentally important that principles are enshrined in primary legislation.
Lord Lennie (Lab)
Can I briefly support that? The place to put it is under protection of consumers in the Bill. There is a clause entitled “Regulations for protection of consumers”, and the right not to take part in the trial would be one of those protections.
Baroness Sheehan (LD)
I completely agree with the noble Lord, Lord Lennie, and the noble Baroness, Lady Worthington, on this—but could I ask the Minister a separate point about how the trials will be carried out? The Minister said they were going to provide evidence. I want to ask how long the trials will last. One of the issues with hydrogen, if I understand it, is its impact on the pipes that carry the gas to the boilers, et cetera. Those pipes perish in time, because the hydrogen makes them brittle in a way that natural gas does not. Of course, that will lead to cracks and leakages. Will the trial take place over a long enough period to see whether that is indeed the case and what the jeopardy from those pipes might be?
Lord Callanan (Con)
Let me reiterate once again. Noble Lords are getting involved in the detail of what these trials will comprise—timescales, consumer protections, et cetera. This Bill is about giving the Secretary of State the powers to make the regulations, which will then come back this House, when I am sure that we will have a massively long and involved discussion about all these precise and important details—but this Bill is not the place.
Lord Teverson (LD)
In defence of my noble friend, I think it is reasonable to ask the Minister to come back and give us an indication of the length of the trials. He must know that, and that would be a very useful bit of information.
Lord Callanan (Con)
The initial intention is for them to last two years, but we will want to come back and look at all these details on the basis of proper scientific evidence.
Energy Bill [HL]
Monday 19th December 2022
(1 year, 11 months ago)
Grand CommitteeRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-V Fifth marshalled list for Grand Committee - (15 Dec 2022)
The Deputy Chairman of Committees (Lord Haskel) (Lab)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Clause 165: Relevant heat network
Amendment 161AA
Lord Callanan
Member's explanatory statement
This amendment amends the definition of “heat network” to include any appliance connected to a heat network where the main purpose of that appliance is to provide heating or cooling for the network.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the Committee will note the large number of amendments tabled in my name on heat networks. These amendments are needed to ensure that Ofgem can operate effectively as the heat networks regulator. A large proportion of them ensure that Ofgem’s enforcement powers will replicate those that it has as gas and electricity regulator. These amendments also ensure that the Bill reflects the approach to regulation which the Government committed to in their response to the heat networks market framework public consultation. The majority of these amendments are minor and technical in nature. Some are a little more substantial, and I will address those first.
Amendments 162C and 162YYI will ensure that any price cap introduced through regulations in future can apply to non-domestic as well as domestic heat network consumers. They also widen the scope of the regulator’s power to conduct pricing investigations into instances where non-domestic heat network consumers are receiving disproportionately high prices.
The Government are committed to introducing consumer protection rules that ensure that heat network consumers receive a fair price for their heating. Regulations under the Bill will provide Ofgem with powers to investigate and intervene where consumer prices appear disproportionate, compared with heat networks with similar characteristics or compared with alternative and comparable heating systems.
Non-domestic heat network consumers, particularly micro-businesses, can be vulnerable to receiving disproportionately high prices from heat suppliers. We therefore consider it appropriate to make this amendment so that the regulator’s price investigation powers extend to non-domestic consumers, in addition to domestic consumers. The Bill also provides the Secretary of State with powers to introduce various forms of price regulation, including a price cap, should it be necessary to protect consumers while growing and decarbonising the market.
The Government have committed to using any future powers to set price caps cautiously to avoid undermining investment in this nascent sector and putting at risk the supply of heating to consumers. Should a price cap be appropriate in future, we want to ensure that it could apply to both domestic and non-domestic consumers. In particular, we found in our public consultation in 2020 that micro-businesses supplied by heat networks share similar characteristics with domestic consumers. We therefore consider that these two consumer groups should have similar protections. This amendment would enable any future price cap to also apply to non-domestic consumers such as micro-businesses.
Amendments 162YYV to 162YYY serve to ensure that the full extent of heat network regulatory activities performed by Ofgem in Great Britain, the Utility Regulator in Northern Ireland, consumer advocacy bodies and other entities are funded by heat networks and holders of gas or electricity licences. Last year, the Government ran a public consultation on a mechanism for recovering the costs of heat network regulation. The nascent state of the sector and small consumer base means that recovering these costs solely from heat networks would amount to an extra £10 or more on each heat network consumer bill per year. This would be too high and create risks to the competitiveness of the market and, of course, issues of affordability for heat network consumers.
The Government consulted on heat network, gas and electricity regulatory costs being spread evenly across heat network, gas and electricity consumers in Great Britain. The Government have estimated that this approach would amount to less than £2 added to each heat network consumer bill per year, and an additional 10p per gas and electricity consumer bill per year. Most consultation respondents agreed that this approach was the fairest and crucial to supporting the growth of the heat networks sector. The Northern Ireland Executive conducted an equivalent public consultation for cost recovery in Northern Ireland and determined this a desirable approach.
This amendment sets out for transparency purposes the full extent of the regulatory activities in scope of this approach to cost recovery. The amendment also includes Ofgem’s role as a licensing authority under the Heat Networks (Scotland) Act 2021 in the cost-recovery regime. The Scottish Government passed this Act to introduce their own heat networks regulatory framework. By ensuring a funding route for Ofgem to perform this role, the Government are helping to ensure that Scottish heat network consumers receive robust protections and that heat networks regulation is coherent across Great Britain.
The remaining amendments are minor and technical, so I will not detain your Lordships for too long with them. In summary, these amendments, first, ensure that the provisions relating to heat networks regulation are accurate; secondly, allow for regulations and authorisation conditions to be made about the connection of premises to a heat network; and, thirdly, relate to Ofgem and the Utility Regulator in their role as heat networks regulator in Great Britain and Northern Ireland respectively.
I hope, therefore, that noble Lords will agree that these amendments are necessary to enable a fair and consistent heat network market across the United Kingdom. The one non-government amendment in this group is in the name of the noble Baroness, Lady Worthington. I thank her for her thoughtful contributions—actually, I should do that at the end, after she has spoken. Oh, she is not here. I beg to move Amendment 161AA.
Lord Ravensdale (CB)
My Lords, first, I declare my interests as a project director working in the energy industry for Atkins and as a director of Peers for the Planet. I will speak to Amendment 162 in the name of the noble Baroness, Lady Worthington, who cannot be here today.
To give some context to this amendment, I welcome paragraph 14(3) of Schedule 15, in that it provides for all the conditions which may be attached to a heat network authorisation. All of this is welcome—in particular, paragraph 14(3)(f) refers to
“conditions about limiting emissions of targeted greenhouse gases in relation to relevant heat networks”.
However, it is noteworthy that the schedule does not include any conditions about the actual heat source for the emissions, and that is what Amendment 162 focuses on. It is a probing amendment, seeking to determine whether the Secretary of State or Ofgem already have the power to control the heat source using the heat networks and whether they are minded to use them.
There are some fuels which it may be in the public interest to restrict using in a heat network. For example, the UK Government are currently establishing carefully controlled trials for hydrogen for heating. Presumably, the Government would not want to be powerless to prevent a heat network provider using green hydrogen for heating if they had concerns about, for example, safety or the cost effectiveness of hydrogen as a power source. If the hydrogen trials are not taken forward, the Government may not want someone to use hydrogen in a heat network without effective oversight from Ofgem.
In another example, it may be appropriate to restrict the use of biomass, which is ostensibly low or zero-carbon. However, the Minister will have heard concerns from the noble Baroness, Lady Boycott, and other Peers last week, and there are concerns about whether the Government would have the powers to restrict biomass for local heat networks to the sustainable practices the Minister outlined in his response to that question. Can the Minister confirm in his summing up whether the Government have powers to restrict the source of heat input as applied to heat networks? If so, where? If not, would he consider taking these powers?
Baroness Bennett of Manor Castle (GP)
My Lords, I shall speak chiefly to Amendment 162. tabled by the noble Baroness, Lady Worthington, although I take the opportunity to welcome the government amendment on help for micro-businesses and say that it is great to see that happening. The noble Lord, Lord Ravensdale, has already introduced this very clearly; I shall make just one additional point and apologise to the Committee for my absence last week when a number of amendments that I had either tabled or supported were debated. I was in the Chamber with the genetic technology so-called precision breeding Bill. If we have two environment Bills running in exact parallel, it creates some difficulties. I particularly want to thank the noble Baroness, Lady Worthington, for some excellent support for some of my amendments last week.
On Amendment 162, I want to make the point that it is crucial here that we are talking about local networks; what may be appropriate in one place may be inappropriate in another. I am thinking, for example, of areas where air pollution is an issue and the kind of fuel used will be a particular issue in that area. It may, indeed, be appropriate for the regulator to take action on the basis of local conditions as well as of national polities, in terms of either the nature crisis or the climate emergency.
Lord Whitty (Lab)
My Lords, noble Lords may have noticed that I extracted my amendments to the second group, when they were originally suggested to be tabled in this group. They relate to the protection of consumers.
I am grateful that the Minister emphasised protection, for both domestic and non-domestic consumers, of the commitments to district heating, decentralised energy and community energy. I am strongly in favour of that move, but I do not think the Bill, as first drafted, or as I read the amendments proposed in the Minister’s group, entirely meet the need to protect consumers of district heating et cetera to the same extent that consumers of other suppliers are protected. I was gratified by some of the Minister’s words this afternoon, but I still do not feel that this combination of what is in the Bill and the Minister’s own amendments will deliver for consumers of district heating the protections, that have been absent for so long, which are supplied via Ofgem to consumers of other forms of electricity supply. I think it will need a bit of tweaking and I shall come to that in the following group.
I do, however, want to register my appreciation for the role of decentralised energy being recognised here. We have some tidying up to do, but I welcome the Government’s commitment to extend support both for consumers in this sector and for the sector itself.
Lord Lucas (Con)
My Lords, I wonder whether rounds one to three of the green heat network fund are throwing some light on the potential for expansion in this sector. Are the Government viewing heat networks as something that we will see a lot of, or just little bits and pieces? Coming back to the amendment spoken to by the noble Lord, Lord Ravensdale, if we are going to see a lot, are we seeing green heat sources coming into play in this area? If we are to see a lot of networks, and since the ones I am familiar with, at least, require serious street works, is there a possibility of combining those street works with separating sewage from storm water?
Lord Teverson (LD)
My Lords, I want to reflect the comments of the noble Lord, Lord Whitty, in welcoming the fact that the Government really are concentrating on this area and giving it the attention that they have. We are one of the lackeys on heat networks, certainly in comparison with the rest of Europe.
One thing that struck me, though, was that on the occasions when I meet the Minister before a Bill goes through, he normally asks me to keep the number of Liberal Democrat amendments to a minimum. I think he has broken the record on this occasion, but I will keep my side of the bargain.
Lord Lennie (Lab)
My Lords, I thank the Minister and others who have spoken in this brief debate for bringing forward these amendments, as they represent necessary but foreseeable conditions for what is already a doorstep of a Bill. As the Minister said in his introductory statement, these amendments collectively show why and how heat networks and heat zones will be regulated and established.
In response to the noble Lord’s query, my understanding is that there are currently 14,000 heat networks, which represent 480,000 customers—about 2% of the total energy network. However, that percentage is predicted to rise to just under 20% by 2050. They will be a huge and significant part of the future energy market, and thus crucial in meeting net zero as they can unlock otherwise unobtainable and inaccessible large-scale renewable and recovered heat sources, such as waste heat. They are especially important for built-up areas, as they are the most effective way of accessing waste heat from industry and heat from rivers and mines.
There are currently no specific protections for customers of heat networks. A recent Competition and Markets Authority report said that while the majority of heat networks customers received a service comparable to that for other traditional customers, a significant minority did not. Higher prices and more frequent outages were just a couple of the highlighted issues. The CMA recommended regulating the sector, with Ofgem announced as the regulator and Citizens Advice and the energy ombudsman named as alternative dispute resolution bodies.
I have some questions for the Minister. First, on non-domestic customers, what steps do the Government envisage will be taken to draw the line between which of them will receive these protections and which will not? Secondly, while protecting these provisions, why have they come to us so late and to what extent were Scottish heat network customers not receiving equivalent protections under the initial drafting of the Bill? Finally, does this come into play only in a case where the powers in Clause 171 to designate GEMA as the licensing authority in Scotland are used?
Lord Callanan (Con)
I thank all noble Lords for their contributions to this brief debate. I acknowledge the point made by the noble Lord, Lord Teverson: it will be difficult for me to ask him in future to limit the number of Liberal Democrat amendments after tabling all these. I quite take his point there; all I will say is that I flagged up to noble Lords at Second Reading that these amendments would be coming forward. There will be more on other subjects, as I also flagged up at Second Reading, which are still being drafted and will be tabled as soon as possible.
I first remind noble Lords, in acknowledging the point made by my noble friend Lord Lucas, that heat networks will play a crucial role in the UK reaching its net-zero targets, as they are one of the most cost-effective ways of decarbonising heating, particularly in built-up areas, where it would be more difficult to have individual property solutions. Noble Lords will probably be aware that the Climate Change Committee estimated that around 18% of UK heat will potentially come from heat networks by 2050—up from around 2% currently—to support the cost-effective delivery of our carbon targets. However, the sector is currently unregulated.
The Bill will provide regulation for that sector and give Ministers a power to introduce, among other things, consumer protection rules and carbon emission limits on heat networks. The majority of heat networks are performing perfectly well and often run by local authorities, housing associations and others, but one or two small, private networks are abusing their customers. Of course, once you are connected to it, that is effectively a monopoly. You have no choice but to take your business elsewhere, so regulation is required in the sector.
I will now talk to Amendment 162. The Bill already allows the Government to control heating sources by providing for authorisation conditions to contain emissions limits; this is contained in paragraph 14(3)(f) of Schedule 15. By gradually lowering emissions limits, authorisation conditions will drive changes in the types of fuels and technologies used to power various heat networks.
Using emission limits allows for dynamic, ongoing regulation. I submit that mandating specific heat sources is a more limited approach that risks the Government and this House picking winners. The exact approach for implementing emission limits will of course be subject to further consultation with industry and stakeholders. Settling on a pathway ahead of that consultation would, at this stage, be unwise.
Removing whole fuel types risks ignoring other factors that will come into play, such as technological improvements, system efficiencies, varying fuel costs, the replacement cycle of generation assets, and the need for flexibility in a system to provide separately for back-up or peak demand.
The Government are of course committed to net zero by 2050, and we see heat networks playing a vital role in this. The Government wish for the Bill and its secondary legislation to ensure that the heat network sector thrives and expands and is not held back in this goal. Therefore, I hope that the noble Lord, on behalf of the noble Baroness, Lady Worthington, will feel able not to press the amendment.
Lord Lucas (Con)
My Lords, I am delighted that my noble friend is so optimistic and shares the Climate Change Committee’s optimism about the future of heat networks. Will he therefore encourage his colleagues to support deep geothermal which, if we are to need that volume of energy, must be a serious contender as it is on the continent. However, in this country, since we have not had the exploration, there is a lot of uncertainty about whether the particular strata will behave in a way that allows heat extraction. It would be a real help to that industry if the Government were to take an interest in how to reduce that first well risk, so that we can get going in the way that the Netherlands and Germany have to take advantage of the deep heat that we all believe—or the British Geological Survey at least believes—is down there and available.
Similarly, is my noble friend content that the regulations governing tidal rivers—such as the one just outside—are such that we can use those as a source of heat for heat networks?
Lord Callanan (Con)
My noble friend makes some good points. There is tremendous potential from deep geothermal, and we are funding some exploratory projects. However, the performance is mixed: some projects have drilled and not found any rocks hot enough to power the network. What is perhaps more viable, particularly in mining areas, is the use of waste mine water for powering heat networks. There are a number of exciting schemes that I have visited, particularly in the north-east of England, where they can extract the warm water from existing mine workings, put it through heat exchangers and use it for heat networks. There are a lot of promising developments in this area.
I will get a more detailed answer for my noble friend on his question about tidal waters, but I know that there are some concerns in the industry about over-regulation from the Environment Agency in some of these areas—they have been flagged up to me. I wrote to Defra about a year ago on this subject but, to be honest, I cannot remember what reply I got—if any—at the time. I will write to him on that subject.
Lord Callanan
Member's explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 139, line 35) widens the provision made by Clause 165(3) about the treatment of heat pumps so that it applies in relation to communal heat networks (as well as district heat networks).
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 139, line 34.
Lord Whitty
“(3A) The central role of the Regulator in relation to heat networks is to ensure that customers of heat networks have at least equivalent consumer protection to customers of other forms of energy.(3B) The Regulator must have regard to the need for ensuring regulations are supportive of, and compatible with, the United Kingdom’s climate change commitments.”
Lord Whitty (Lab)
My Lords, I cannot hope to compete with the Minister, who took six minutes to speak to about 40 amendments, which I think is a record even for this Committee Room. I took out my amendments from the previous group, as I mentioned, because the combination of the Bill at present and the amendments to which the Minister and I just referred does not clearly put the consumer of heat networks on the same basis as the consumer of other forms of energy supply.
I confess that, for part of my career 10 or 12 years ago, I was a little schizophrenic about this, because I was both the honorary president of the CHP Association, which is the predecessor of the Association for Decentralised Energy, and the chair of the statutory energy consumers protection body, which was the National Consumer Council and then Consumer Focus, until the coalition Government unfortunately abolished it. I was both a champion for consumers and for this technology, and I still am. The problem is that the consumers of this technology, the households and commercial or industrial elements that depend on district heating and other forms of heat network, are the least protected of all consumers. While I agree with the amendments the Minister spoke to just now—they are a significant improvement—I do not yet feel that the new wording makes that clear.
My Amendments 161B and 161C propose to put in the Bill, eventually in the Act and the Schedule associated with it, a clear and unequivocal commitment that the regulator’s main and central role will be to ensure that consumers of energy supplied through heat networks have the same rights, protections and regulatory authority as other consumers. If you put that centrally, the role of regulation will be clear. I was gratified when the Government committed to extending regulation in this area and, by and large, I was in favour of the consultative document they put forward. I was slightly more equivocal about giving Ofgem the job, but it is logical that it should be done by Ofgem. My equivocation on that issue was that Ofgem’s record in protecting consumers over the last two or three years has not been that great. Nevertheless, I accept that Ofgem should undertake this role.
The situation at present is that the majority of customers of heat networks are in social housing run by local authorities or organisations subcontracted by local authorities. While there are a lot of private heat networks and some commercial heat networks, the majority are in that category. The consumers are therefore tenants and leaseholders of local authorities on what were once local authority estates. Therefore, they are probably among the lower incomes and have a higher proportion of vulnerable consumers.
This makes it doubly worrying that, for years, there has been no equivalent protection for those who receive their energy from the big six or big eight—whatever it is now—energy suppliers. My amendments are intended to make clear that the main role of the regulator is to protect those consumers. They relate in part to the amendments moved by the Minister relating to the price cap, but they are not just about the price cap. They are also about the price support schemes and the whole range of requirements placed on energy supply companies in relation to customer service for consumers, recognition of the problems of vulnerable consumers in particular and the need to ensure that supplies are continuous for such consumers.
Baroness Blake of Leeds (Lab)
My Lords, I rise to address the amendments in this group. My noble friend Lord Whitty outlined clearly the reasons for his amendments. I will speak to Amendment 161CA in my name and that of my noble friend Lord Lennie. At this stage, it is appropriate for me to declare my interest as a vice-president of the Local Government Association because it comes up in subsequent groups.
I want to refer to my experience when I was the leader of Leeds Council. Leeds PIPES is one of the most successful district heating schemes in the country and is expanding. It aims to take more than 16,000 tonnes of carbon out per year. It is already securing reductions in fuel bills of between 10% and 25%. The other element, which we have not addressed, is that, by working locally through these schemes, we have been able to bring training and employment to the local community. Indeed, 60% of the project spend is by local businesses in the community, making it a win-win scenario.
Social housing and council housing are not the only beneficiaries of the schemes, although they are an important aspect as there are more than 2,000 such homes already on the system. The system has started to be installed and expanded into the city centre, including in council buildings, ensuring that it is a sustainable project. I look forward with interest to the Minister’s response to the specific concerns raised by my noble friend Lord Whitty about consumer protection. The third amendment in his name, on the contribution to net zero, is valuable; it highlights how these networks need to be taken seriously. We need to make sure that they are sustainable and that their future is secure on behalf of the consumers that they supply.
Amendment 161CA in my name and that of my noble friend Lord Lennie refers specifically to ensuring
“that regulation covers systems that are operational but are operating inefficiently to the detriment of customers.”
As one of the heat network providers, Switch2, explains, a 2018 study by the CMA found that,
“although heat networks provide customers with a cost effective, efficient supply of heat compared to alternatives, some customers experience poorer outcomes in terms of price and service.”
That provider has contributed to the thinking on why heat network efficiency is so important. It says:
“The efficiency of your heat network is the crux of effective operation. Before the energy crisis and regulatory requirements, heat network efficiency was often seen by operators as a ‘nice to have’, rather than a necessity, despite significant cost saving benefits to both residents and operators.”
I think we have moved forward a great deal on that consideration.
Although we are focused on the incredibly high cost of gas at the moment, I hope that we can do everything in our power to improve efficiency and take this issue forward. It is clear that the Government are aware of this issue and are acting on it to a degree. Would it not be sensible to ensure that the regulatory remit also covers inefficiencies and that consumers are protected from the issue, rather than just requiring operators to apply for grants voluntarily?
Lord Callanan (Con)
I thank the noble Lord, Lord Whitty, and the noble Baroness, Lady Blake, for their comments and amendments. As I said on the previous group, the Government are committed to introducing protections for heat network consumers that ensure that they receive a fair price and a reliable supply of heat, and are not disadvantaged compared to other consumers. Ensuring that heat network consumers receive comparable protections to gas and electricity consumers is the primary reason for agreeing to the CMA’s recommendation to regulate heat networks.
We also recognise the vital contribution that heat networks will ultimately make in decarbonising heat in buildings. I highlight to the noble Lord that the Bill already provides for the heat networks regulator to prioritise protection of consumers and the decarbonisation of the sector. The Bill provides for Ofgem to be the heat networks regulator in Great Britain, with the Utility Regulator taking on the equivalent role in Northern Ireland.
Schedule 15 to the Bill provides for regulations making provision about the objectives of the regulator. This includes its principal objective to protect the interests of existing and future heat network consumers. This is equivalent to Ofgem’s principal objectives to protect the interests of existing and future gas and electricity consumers. We intend for this principal objective to be set out in the regulations.
Schedule 15 also provides for regulations specifying the interests of existing and future heat network consumers that are to be protected. This includes consumers’ interests in the reduction of greenhouse gas emissions generated by heat networks. Schedule 15 also provides for the introduction of carbon emissions limits on heat networks in England and Northern Ireland. We intend again for this to be provided for in the regulations.
The regulations will also give Ofgem powers to investigate and intervene on networks where prices for consumers appear to be disproportionate compared to systems with similar characteristics or if prices are significantly higher than those consumers would expect to pay if they were served by an alternative, comparable heating system. Ofgem will also be able to set rules and guidance on how heat networks recover their costs through their heat tariffs.
Amendment 161CA tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, is on ensuring the efficiency of existing heat networks. I thank them for highlighting the importance of ensuring that regulation facilitates the improvement of technical standards on heat networks. This will ensure efficient heat networks that provide fair prices and reliable heat to consumers at the same time.
I reassure noble Lords that the Bill, more specifically paragraph 14(3)(d) of Schedule 15, already provides measures for ensuring heat network efficiency. Schedule 15 provides for the introduction of technical standards, which will protect consumers from being supplied by inefficient networks. The regulator’s compliance activity in relation to new and existing heat networks will include work on any standards mandated in authorisation conditions under this power.
I therefore submit that the intentions behind the noble Lords’ amendments are already provided for in the Bill, so I hope that they do not press them.
Lord Whitty (Lab)
My Lords, I thank the Minister for that reply. I will clearly want to look at these clauses and the Schedule once all these amendments have been agreed and adopted. I am still not absolutely convinced that all aspects of consumer protection will be covered by this and by Ofgem’s role, but I welcome the Minister’s reassurance.
The key issue is whether all interventions will treat the consumers of district or decentralised heating the same as they would consumers of other forms of energy supply. That also applies to the Government. The Minister referred to the price cap, but the price subsidies or support that we agreed the other week has not found its way to consumers of district heating. That may be a matter of time or it may be that the entity that supplies the heat is obliged to pass that on, but that is not clear at the moment. Things like that need to be tightened up before the final version of the Bill is agreed. I therefore look forward to seeing what the clauses look like following the Minister’s amendments to see whether any further amendments are needed to meet my concerns in this respect. In the meantime, I withdraw my amendment.
Lord Callanan
“(2A) The provision made in Schedule 15 is without prejudice to the generality of subsection (1).”Member’s explanatory statement
This amendment makes it clear that the breadth of the power under Clause 168 is not affected by the detailed provisions made by Schedule 15.
Lord Callanan
Member’s explanatory statement
This amendment omits a definition that is no longer needed as a consequence of the amendments in the name of Lord Callanan at page 292, line 6 and at page 303, line 35.
““enforcement undertaking” has the meaning given by paragraph 39(2);”Member’s explanatory statement
This amendment inserts a definition signposting the definition of “enforcement undertaking” in paragraph 39 of Schedule 15.
““relevant requirement” has the meaning given by paragraph 38;”Member's explanatory statement
This amendment inserts a definition signposting the definition of “relevant requirement” in paragraph 38 of Schedule 15.
Lord Teverson (LD)
Is there a way in which we can just say yes to the government amendments here? There are hundreds of them—well, about 50—so it would make a lot of sense.
The Deputy Chairman of Committees (Lord Haskel) (Lab)
I am applying the usual convention. Okay?
Lord Callanan
Member’s explanatory statement
This amendment limits any requirement on a Regulator of heat networks to keep under review the carrying on of activities connected with heat networks to those activities carried on in the part or parts of the United Kingdom for which that Regulator is responsible.
Member’s explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 290, line 33) enables regulations made under Clause 168 to provide for the Regulator to specify information that must be provided by an applicant for a heat network authorisation.
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 290, line 32.
“(2A) The regulations may, in particular, provide for conditions to be included in a heat network authorisation requiring the person who holds the authorisation—(a) to comply with the provisions of a particular designated document;(b) to enter into governance arrangements with the person who is from time to time the licensed code manager for that designated document and to comply with those arrangements;(c) to provide funding for the person who is from time to time the licensed code manager for that designated document.”Member’s explanatory statement
This amendment enables regulations to provide for conditions to be included in heat network authorisations requiring their holders to comply with designated documents for purposes not limited to those concerning technical standards.
“(za) conditions about the terms on which premises are connected to a relevant heat network (whether for the purpose of supplying heating, cooling or hot water to premises, or supplying thermal energy to a relevant heat network);”Member’s explanatory statement
This amendment enables heat network authorisations to include conditions about the terms on which premises are connected to a relevant heat network, whether a connection is for the purpose of supplying heating, cooling or hot water to premises, or for the purpose of supplying thermal energy to a relevant heat network.
Lord Callanan
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
Member’s explanatory statement
This amendment clarifies the drafting of a reference to the sorts of condition that regulations may provide may be included in heat network authorisations.
Member’s explanatory statement
This amendment enables regulations to provide for a price cap in relation to the charges imposed on any heat network consumer, whether domestic or not.
Member’s explanatory statement
This amendment clarifies the drafting of a reference to the sorts of condition that regulations may provide may be included in heat network authorisations.
“(6) The regulations may, in particular, provide for conditions to be included in a heat network authorisation that—(a) in relation to England and Wales or Scotland, impose on the person who holds the authorisation a requirement of a kind that may be imposed under section 7(3) of the Electricity Act 1989 on the holder of a licence under section 6(1) of that Act;(b) in relation to Northern Ireland, impose on the person who holds the authorisation a requirement of a kind that may be imposed under Article 11(3) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)) on the holder of a licence under Article 10(1) of that Order.”Member’s explanatory statement
This amendment enables regulations to provide for heat network authorisations to include conditions imposing any requirement of a kind that may under section 7(3) of the Electricity Act 1989 (or under Article 11(3) of the Electricity (Northern Ireland) Order 1992) be imposed on licence holders under that Act (or that Order).
Member’s explanatory statement
This amendment removes provision duplicated by the amendments in the name of Lord Callanan at page 291, line 14 and at page 292, line 20.
Member’s explanatory statement
This amendment clarifies the drafting of a reference to the sorts of condition that regulations may provide may be included in heat network authorisations.
Member’s explanatory statement
This amendment clarifies the drafting of a reference to the sorts of condition that regulations may provide may be included in heat network authorisations.
“(3) In sub-paragraphs (1) and (2), a reference to the modification of a condition includes a reference to the revocation of a condition.”Member’s explanatory statement
This amendment ensures that regulations may provide for the Regulator to revoke conditions included in heat network authorisations.
“(4) The regulations may provide for the conditions of a heat network authorisation—(a) to have effect or cease to have effect at such times and in such circumstances as may be determined by or under the conditions;(b) to be modified in such manner as may be specified in the conditions at such times and in such circumstances as may be so determined.”Member’s explanatory statement
This amendment ensures that regulations may provide for conditions included in heat network authorisations to come into effect, cease to have effect or be modified in accordance with the conditions.
“(a) for the revocation of a heat network authorisation by the Regulator;(b) for a heat network authorisation to cease to have effect in circumstances specified in or determined under the authorisation.”Member’s explanatory statement
This amendment enables regulations to provide for a heat network authorisation to be revoked by the Regulator or to cease to have effect in accordance with the terms on which it was conferred.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 293, line 30.
Member’s explanatory statement
This amendment (together with others in the name of Lord Callanan in relation to Schedule 15) ensures that the purposes for which a document may be designated are not limited to those concerning technical standards.
Member’s explanatory statement
See the explanatory statement to the first amendment in the name of Lord Callanan at page 295, line 2.
Member’s explanatory statement
See the explanatory statement to the first amendment in the name of Lord Callanan at page 295, line 2.
Member’s explanatory statement
See the explanatory statement to the first amendment in the name of Lord Callanan at page 295, line 2.
“(ba) conditions about functions of the Regulator in connection with the modification of a designated document;”Member’s explanatory statement
This amendment enables regulations to provide for a code manager licence to include conditions about the role of the Regulator in the modification of designated documents.
“(4) The regulations may, in particular, provide for conditions to be included in a code manager licence that—(a) in relation to England and Wales or Scotland, impose on the person who holds the licence a requirement of a kind that may be imposed under section 7(3) of the Electricity Act 1989 on the holder of a licence under section 6(1) of that Act;(b) in relation to Northern Ireland, impose on the person who holds the licence a requirement of a kind that may be imposed under Article 11(3) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)) on the holder of a licence under Article 10(1) of that Order.”Member’s explanatory statement
This amendment enables regulations to provide for code manager licences to include conditions imposing any requirement of a kind that may under section 7(3) of the Electricity Act 1989 (or under Article 11(3) of the Electricity (Northern Ireland) Order 1992) be imposed on licence holders under that Act (or that Order).
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
“(3) In sub-paragraphs (1) and (2), a reference to the modification of a condition includes a reference to the revocation of a condition.”Member’s explanatory statement
This amendment ensures that regulations may provide for the Regulator to revoke conditions included in code manager licences.
“(4) The regulations may provide for the conditions of a code manager licence—(a) to have effect or cease to have effect at such times and in such circumstances as may be determined by or under the conditions;(b) to be modified in such manner as may be specified in the conditions at such times and in such circumstances as may be so determined.”Member’s explanatory statement
This amendment ensures that regulations may provide for conditions included in code manager licences to come into effect, cease to have effect or be modified in accordance with the conditions.
(b) for a code manager licence to cease to have effect in circumstances specified in or determined under the licence.”Member’s explanatory statement
This amendment enables regulations to provide for a code manger licence to be revoked by the Regulator or to cease to have effect in accordance with the terms on which it was conferred.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 297, line 14.
Member’s explanatory statement
This amendment enables regulations made by the Regulator about applications for installation and maintenance licences, so far as relating to England and Wales, to include provision about the information that must be provided to the Regulator by a person making an application.
Member’s explanatory statement
This amendment omits a reference to “road” that is not necessary in light of the meaning “street” has in paragraph 33.
Member’s explanatory statement
This amendment omits the definition of “road”, which is not necessary in light of the definition of “street” for the purposes of paragraph 33.
Member’s explanatory statement
This amendment broadens the definition of “transport land”, in relation to rights that may be conferred on a person by an installation and maintenance licence, to include waterways other than canals.
Member’s explanatory statement
See the explanatory statement to the amendment in the name of Lord Callanan at page 299, line 23.
Member’s explanatory statement
This amendment corrects a reference in paragraph 34(2)(d) to the wrong type of licence.
“(4) The regulations may, in particular, provide for conditions to be included in an installation and maintenance licence that—(a) in relation to England and Wales or Scotland, impose on the person who holds the licence a requirement of a kind that may be imposed under section 7(3) of the Electricity Act 1989 on the holder of a licence under section 6(1) of that Act;(b) in relation to Northern Ireland, impose on the person who holds the licence a requirement of a kind that may be imposed under Article 11(3) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)) on the holder of a licence under Article 10(1) of that Order.”Member’s explanatory statement
This amendment enables regulations to provide for installation and maintenance licences to include conditions imposing any requirement of a kind that may under section 7(3) of the Electricity Act 1989 (or under Article 11(3) of the Electricity (Northern Ireland) Order 1992) be imposed on licence holders under that Act (or that Order).
“(3) In sub-paragraphs (1) and (2), a reference to the modification of a condition includes a reference to the revocation of a condition.”Member’s explanatory statement
This amendment ensures that regulations may provide for the Regulator to revoke conditions included in installation and maintenance licences.
“(4) The regulations may provide for the conditions of an installation and maintenance licence—(a) to have effect or cease to have effect at such times and in such circumstances as may be determined by or under the conditions;(b) to be modified in such manner as may be specified in the conditions at such times and in such circumstances as may be so determined.”Member’s explanatory statement
This amendment ensures that regulations may provide for conditions included in installation and maintenance licences to come into effect, cease to have effect or be modified in accordance with the conditions.
“(a) for the revocation of an installation and maintenance licence by the Regulator;(b) for an installation and maintenance licence to cease to have effect in circumstances specified in or determined under the licence.”Member’s explanatory statement
This amendment enables regulations to provide for an installation and maintenance licence to be revoked by the Regulator or to cease to have effect in accordance with the terms on which it was conferred.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 300, line 23.
Member’s explanatory statement
This amendment (together with other amendments to Part 6 of Schedule 15 in the name of Lord Callanan) provides that regulations under Clause 168 may make provision about the enforcement of requirements contained in regulations, as well as about the enforcement of conditions contained in heat network authorisations and other licences.
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 300, line 32.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 300, line 38.
Member’s explanatory statement
This amendment clarifies that regulations making provision for the Regulator to make orders for the purposes of securing compliance may impose requirements to take such steps as the Regulator considers appropriate.
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 300, line 32.
“(aa) in a case where it appears to the Regulator that a relevant person is contravening or is likely to contravene a relevant condition or requirement, to make a provisional order requiring the person to take such steps as the Regulator considers appropriate for the purpose of securing compliance with the relevant condition or requirement;”Member’s explanatory statement
This amendment clarifies that regulations may provide for a lower standard of proof to apply to provisional orders made by the Regulator.
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 300, line 32.
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 300, line 32.
Member’s explanatory statement
This amendment corrects a typographical error.
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 300, line 32.
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 300, line 32.
““relevant requirement”, in relation to a relevant person, means a requirement imposed on the person by or under the regulations or by regulations made by the Regulator by virtue of any provision of this Schedule;”Member’s explanatory statement
This amendment defines “relevant requirement”, for the purposes of paragraph 38 of Schedule 15, as any requirement imposed by regulations made under clause 168 or by regulations made by the Regulator by virtue of any provision of Schedule 15.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 300, line 38.
Member’s explanatory statement
This amendment omits provision superseded by the amendment in the name of Lord Callanan at page 300, line 38.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 300, line 38.
“(f) make provision enabling the Regulator to accept an enforcement undertaking from a relevant person and about the consequences of accepting such an undertaking.(2) An “enforcement undertaking” is an undertaking to take, within the period specified in the undertaking, such action as may be so specified to secure compliance with a relevant condition or requirement.”Member’s explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 302, line 21) gives the Regulator power to make regulations allowing it to accept enforcement undertakings instead of taking enforcement action.
“(3) Except as provided by the regulations, the validity of an order made by virtue of paragraph 38(2)(a) or (aa) is not to be questioned in any legal proceedings.”Member’s explanatory statement
This amendment provides that the validity of an order made by virtue of paragraph 38(2)(a) or (aa) of Schedule 15 may not be challenged in legal proceedings except as provided by regulations.
“(ea) make provision about payment of a penalty (and any interest) in instalments;”Member’s explanatory statement
This amendment provides that regulations under Clause 168 may provide for payment of a penalty in instalments.
“(g) make provision enabling the Regulator to accept an enforcement undertaking from a relevant person and about the consequences of accepting such an undertaking.”Member’s explanatory statement
See the explanatory statement for the first amendment in the name of Lord Callanan at page 302, line 5.
“(3) Except as provided by the regulations, the validity of a penalty imposed by virtue of paragraph 38 is not to be questioned in any legal proceedings.”Member’s explanatory statement
This amendment provides that the validity of a penalty imposed by virtue of paragraph 38 of Schedule 15 may not be challenged in legal proceedings except as provided by regulations.
Member’s explanatory statement
This amendment corrects a typographical error.
“(ea) make provision about payment of compensation (and any interest) in instalments;”Member’s explanatory statement
This amendment provides that regulations made under Clause 168 may provide for payment in instalments of sums under a consumer redress order.
“(g) make provision enabling the Regulator to accept an enforcement undertaking from a relevant person and about the consequences of accepting such an undertaking.”Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 302, line 5.
“(3) Except as provided by the regulations, the validity of a consumer redress order is not to be questioned in any legal proceedings.”Member’s explanatory statement
This amendment provides that the validity of a consumer redress order (imposed by virtue of paragraph 38(2)(c) of Schedule 15) may not be challenged in legal proceedings except as provided by regulations.
Member’s explanatory statement
This amendment ensures that the language of paragraph 43(1) is consistent with that used in paragraph 14(4)(b) in order that regulations may make provision about how the Regulator is to determine whether charges payable by any consumer are disproportionate, rather than only domestic consumers.
“(1) The regulations may make provision conferring powers on the Regulator or imposing requirements on any person, for the purposes of or in connection with enabling the Regulator—(a) to monitor and secure compliance with relevant conditions or requirements;(b) to make an order in respect of the contravention of a relevant condition or requirement;(c) to enforce relevant conditions or requirements;(d) to make a determination under provision made by virtue of paragraph 43(1).”Member’s explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 304, line 24) allows regulations to confer powers on the Regulator or to impose requirements on any person for purposes connected to the enforcement of relevant conditions or requirements.
“(3) Regulations made by virtue of sub-paragraph (1) may, in particular—(a) confer powers to enter premises for the purposes of exercising powers conferred by the regulations;(b) make provision about the circumstances in which a warrant is required to exercise a power conferred by virtue of paragraph (a);(c) make provision for the issuing of such a warrant where conditions specified in the regulations are satisfied.”Member’s explanatory statement
This amendment clarifies that regulations made by virtue of paragraph 44(1) may confer powers to enter premises and make provision about circumstances in which a warrant is required.
“(5) Regulations made by virtue of sub-paragraph (1) may, in particular, impose requirements relating to—(a) the keeping of records by relevant persons;(b) the provision of information by relevant persons and others;(c) the audit and verification of that information.”Member’s explanatory statement
See the explanatory statement to the amendment in the name of Lord Callanan at page 304, line 5.
“(1A) Regulations made by virtue of this paragraph may make provision relating to the connection of premises to a relevant heat network whether a connection is for the purpose of—(a) supplying heating, cooling or hot water to premises, or(b) supplying thermal energy to a relevant heat network.”Member’s explanatory statement
This amendment enables regulations to make provision about the connection of premises to relevant heat networks whether a connection is for the purpose of supplying heating, cooling or hot water to premises, or for the purpose of supplying thermal energy to a relevant heat network.
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
“(1A) The regulations may provide for sections 24 and 25 of the Consumers, Estate Agents and Redress Act 2007 (provision of information to consumer advocacy bodies) to apply in relation to relevant persons as they apply to regulated providers within the meaning of section 25 of that Act, with such modifications as appear to the appropriate authority to be appropriate.”Member’s explanatory statement
This amendment provides that requirements relating to the provision of information to consumer advocacy bodies, imposed by sections 24 and 25 of the Consumers, Estate Agents and Redress Act 2007, may be imposed on holders of heat network authorisations and others by regulations under Clause 168.
“(a) to apply in relation to heat network consumers in England, Wales or Scotland as it applies in relation to gas or electricity consumers, with such modifications as appear to the Secretary of State to be appropriate;(b) to apply in relation to relevant persons in England, Wales or Scotland as it applies in relation to regulated providers within the meaning of that Part, with such modifications as appear to the Secretary of State to be appropriate.”Member’s explanatory statement
This amendment provides that requirements relating to complaints handling and redress schemes, imposed by Part 2 of the Consumers, Estate Agents and Redress Act 2007, may be imposed on holders of heat network authorisations and others by regulations under Clause 168.
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
Member’s explanatory statement
This amendment ensures consistency with the reference to costs in the amendments in the name of Lord Callanan to Clause 170.
Lord Callanan
“(ba) regulations under section 168 which create an offence or provide for an increase in the penalty for an existing offence;”Member’s explanatory statement
This amendment provides that regulations made by the Department for the Economy in Northern Ireland that create an offence, or provide for an increased penalty for an existing offence, may not be made unless a draft has been laid before and approved by a resolution of the Northern Ireland Assembly.
Lord Callanan
Member’s explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 142, line 37) clarifies the heat network-related costs that can be charged to holders of gas or electricity licences in England, Wales and Scotland.
“(1A) The costs within this subsection are—(a) costs of the GEMA—(i) under regulations made under section 168, or(ii) in its capacity as the licensing authority for the purposes of the Heat Networks (Scotland) Act 2021 (asp 9), if the GEMA is designated as such under section 171(1) of this Act,(b) costs of a person other than the GEMA in carrying out, by virtue of section 166(2) or paragraph 5 of Schedule 15, functions of the Regulator,(c) costs of holders of licences issued under Part 4 of Schedule 15 (code manager licences),(d) costs incurred by the Secretary of State in giving financial assistance under regulations made by virtue of paragraph 51 of Schedule 15 (special administration regime),(e) costs incurred by a person or body in providing, or arranging for the provision of, consumer advocacy and advice in relation to heat network consumers, and(f) costs not within any of paragraphs (a) to (e) incurred by a person in exercising a function in relation to heat networks in England, Wales or Scotland (whether by virtue of regulations under section 168 or otherwise).”Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 142, line 36.
Member’s explanatory statement
This amendment (together with the amendment in the name of Lord Callanan at page 143, line 2) clarifies the heat network-related costs that can be charged to holders of gas or electricity licences in Northern Ireland.
“(3) The costs within this subsection are—(a) costs of the NIAUR under regulations made under section 168,(b) costs of a person other than the NIAUR in carrying out, by virtue of section 166(3) or paragraph 5 of Schedule 15, functions of the Regulator,(c) costs incurred by the Department in giving financial assistance under regulations made by virtue of paragraph 51 of Schedule 15 (special administration regime),(d) costs incurred by a person or body in providing, or arranging for the provision of, consumer advocacy and advice in relation to heat network consumers, and(e) costs not within any of paragraphs (a) to (d) incurred by a person in exercising a function in relation to heat networks in Northern Ireland (whether by virtue of regulations under section 168 or otherwise).”Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 143, line 1.
Lord Lennie
Member’s explanatory statement
This amendment would ensure that the GEMA may be designated as the regulator for heat network zones.
Lord Lennie (Lab)
I shall speak to just this amendment and be fairly brief. It would ensure that the Gas and Electricity Markets Authority was designated as the regulator for heat network zones. Those zones are fundamental to the scale of expansion necessary to achieve net zero. As we heard before, this in turn depends on local authorities having the right resources to deliver their responsibilities effectively. The amendment would ensure that the Secretary of State delegates to GEMA its authority status to act as regulator in this regard, as already described for heat networks. Essentially, they should expand them in the most efficient manner possible if we are to achieve net zero. Given Ofgem’s regulatory responsibility for zoning, as well as for the networks themselves, this would ensure a joint approach to get the best out of heat networks.
While the devil may be in the detail of the regulations themselves—we have heard about some of that already—the Opposition support the proposals in this group of amendments. Essentially, they are adaptable to changes. Monitoring and adapting to market changes will be vital, and we support the amendments in the names of the noble Lords, Lord Teverson and Lord Ravensdale, to which they will speak shortly. I beg to move.
Lord Teverson (LD)
My Lords, we move on to the zoning regulations. I very much agree with the amendment moved by the noble Lord, Lord Lennie. When I read through this section, I must admit that I found it extremely opaque in many ways. I will come to my own amendments in a minute, but perhaps the Minister can explain a few things to me. Clause 174(2) says:
“A heat network zone is an area in England”.
I presume that means that this is just English legislation, not for the rest of the United Kingdom, but it is very unspecific about what a network zone would be. I had assumed that it would be a single zone or single heating system, but it obviously is not. I am interested to hear from the Minister what a zone is likely to be in practice.
We then have a zone authority. Clause 175(1) states:
“Zones regulations may designate a person to act as the Heat Network Zones Authority”.
Again, as the noble Lord, Lord Lennie, pointed out, we have very vague ideas as to who this should be. I am interested to hear again from the Minister who the authority is expected to be.
Then we move on to zone co-ordinators. Who are they and what exactly do they do in comparison with the zone authority? Of course, in Clause 175(5), we have a list defining local authorities. I was delighted to see the Council of the Isles of Scilly, which I have represented in the past, there—all 2,000 souls are represented in that list. I would be really interested to understand from the Minister how all this works. Clause 175(4) says that the
“Regulations … may make provision for the Authority to require a local authority, or two or more local authorities”,
so it seems to me a very complicated landscape. I would be interested to understand how that jigsaw fits together.
Two of my amendments would change “may” to “must”; I just cannot see how it could remain “may” in those two places. The main thrust of my arguments is in Amendments 165 and 166. They are about making sure that the regulations are in line not only with the strategy and policy statement—which we have referred to many times already regarding the text of the Bill—but with, in particular, local authorities’ net-zero plans. A huge number of local authorities, as I know the noble Baroness, Lady Bennett, has pointed out, now have net-zero objectives and plans to back them up. We should give credit to that and include it in the Bill. My Amendment 166 is very much on the same area of the delivery of heat networks within zones and how they fit in with local net-zero energy systems.
As I said, it would be really useful to everybody to understand how this geography is meant to work. I suppose my question is: is this just too complicated or is there some logical method here that does not get in the way, and does not create a bureaucracy that gets in the way, of these systems?
Lord Ravensdale (CB)
My Lords, I again declare my interests as set out in the register. I speak to Amendment 167 in my name, which really builds on the amendments that the noble Lords, Lord Lennie and Lord Teverson, have put forward to better set out the role of local authorities in this picture.
There is a great opportunity here to extend the zoning powers that we have in the Bill beyond heat networks into other areas. Ensuing that the Bill better defines local authority roles is really very applicable to the delivery of heat, because it is local authorities that know best about their housing stock and its condition and how they can deliver clean heat in their areas.
Lord Callanan (Con)
Let me first remind the Committee of the broader ambitions of this section of the Bill, which covers heat network zoning, which is a key policy to deliver the scale of expansion of heat networks that will be required to meet net zero. This process brings together local stakeholders and industry, to identify and designate areas where heat networks are expected to be the lowest-cost solution for decarbonising heating. The clauses will enable the Government’s commitment to introduce zoning by 2025.
Amendments 162YYYA, 162YYYB, 162YYYC, 162YYYD, 162YYYE, 162YYYF, 162YYYG and 165A—who gives these numbers to amendments?—are in my name. They will permit regulations to allow the heat network zones authority, which I will refer to as the authority, to directly designate zone co-ordinators and heat network zones in cases where these functions have not been performed by the relevant responsible bodies. This will deliver a more efficient process for establishing heat network zones.
More specifically, Amendment 162YYYA permits regulations to enable the authority to designate a person as zone co-ordinator. This may be necessary in scenarios where, despite directing it to do so using the powers in Clause 176(4), a local authority does not establish a zone co-ordinator. This could prevent the heat network opportunity that has been identified from being realised. Similarly, Amendments 162YYYB to 162YYYG provide for areas to be designated as heat network zones by the authority, in addition to zone co-ordinators as already provided for in Clause 177(1)(b). They also ensure that this expanded role for the authority is reflected elsewhere in Clause 177. This mirrors existing powers for identifying areas as heat network zones and reviewing areas designated as such. The authority or zone co-ordinators may undertake each of these activities. These amendments will therefore ensure that the authority may designate zones directly, avoiding unnecessary delays to the rollout of heat networks.
Amendment 165A concerns low-carbon heat sources. A range of heat sources could potentially be used by heat networks, including heat from thermal power stations, industrial processes or cooling and refrigeration. Clause 180 gives the Secretary of State powers to require heat sources in zones to connect to a heat network. This amendment will allow regulations to ensure that heat sources that are required to connect do not abuse their monopoly position and charge disproportionate prices for the heat that they provide. Equally, it will allow the regulations to ensure that the requirement to connect does not unduly disadvantage heat sources themselves. This will help to support fair pricing, which will give investors greater security and confidence and help to accelerate the delivery of large-scale heat networks in zones.
I now turn to Amendment 162YYYZA in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, regarding designating GEMA as the heat network zones authority. The authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.
In terms of who could fulfil the authority role, Clause 176(3) is explicit that the Secretary of State may but need not be designated as the authority. The clause as drafted therefore already provides that regulations may appoint GEMA as the authority. We will be specifying the authority’s functions and responsibilities in the regulations; this will therefore be the subject of further consultation.
The authority will fulfil a different function from the heat network regulator, which, as set out in Clause 166, we propose will be fulfilled by GEMA in relation to Great Britain. This role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England. We will be specifying the authority’s functions and responsibilities in the appropriate regulations; we intend for the body to undertake functions on behalf of the Secretary of State and be accountable to the Secretary of State.
Detailed considerations regarding roles and responsibilities in zones will of course be subject to further consultation as we continue to develop our policy proposals. Consultation on these issues will take place in due course. Appointing the authority in regulations will allow for amendment should this be required as and when its functions change over time as the networks become more developed in the UK. I hope that this has helped to clarify our proposed approach and the scope of the powers already provided.
I thank the noble Lord, Lord Teverson, for his thoughtful Amendments 163 and 164, which would make the provision of the zoning methodology mandatory and require the methodology to include certain details. As always, we want legislation to be flexible and future-proofed. In this context, this means that the regulations can adapt to developments in the heat network market. The Government are clear that a national methodology for identifying zones will be necessary to enable a robust and transparent approach that increases overall efficiency and drives consistency. To this end, a pilot to support the development of the methodology is under way in 28 English cities and towns. The outputs from the pilot will help to inform policy design and future consultation on the methodology and its contents. Accepting these amendments now would, in effect, tie the Government’s hands at this stage to the potential cost of industry, stakeholders and, ultimately, consumers.
Next, I turn to Amendments 165 and 166, also from the noble Lord, Lord Teverson, which concern interactions between the national methodology and the co-ordination and delivery of heat networks at a local level. Accepting Amendment 165 would mean that the methodology was no longer nationally determined and would have to vary according to each local authority’s requirements. A national methodology will minimise the duplication of effort at the local level and instead ensure that local input is applied at the most appropriate stage: the refinement and designation of the zones themselves.
Heat network zoning will support local net-zero goals by unlocking the lowest-cost pathway to heat decarbonisation in built-up areas. As we expect that zoning co-ordinators will work with the local authority, their work will be brought into local net-zero plans. Therefore, Amendment 166 risks creating unnecessary bureaucracy at a local level, reducing zoning co-ordinators’ capacity to focus on the effective delivery of zones.
The final amendment in this group, Amendment 167 tabled by the noble Lord, Lord Ravensdale, would extend the Bill’s heat network zoning provisions to individual heat pumps. As noble Lords will be aware, various factors, including building density and availability of heat sources, mean that certain localised areas are particularly suited to heat networks. This is why we are introducing a framework to identify where heat networks can provide the lowest-cost low-carbon heating solution.
The noble Lord’s amendment would apply zoning to heat pumps. Our strategic approach, set out in the heat and buildings strategy, is to work with the grain of the market and our policy levers are aligned to natural trigger points to create optionality for consumers regarding their various heating options. For clarity, such trigger points include appliance replacement and change of tenancy or property ownership, among many others of course. An approach where more technologies are zoned risks removing choice for consumers and could cause early appliance scrappage and additional disruption.
I thank noble Lords for this debate and for their amendments. I ask them not to press their amendments.
Lord Teverson (LD)
Could I ask the Minister for some clarification? I apologise if I have not got my head around this. What is a zone: a council estate, a county, a region or a combined authority? I am trying to get from the Minister a mental picture of what a zone could be and what determines that boundary.
Lord Callanan (Con)
No specific boundary is set out in the proposals. It can vary from authority to authority. It is very unlikely to be a whole region; it is much more likely to be an inner-city area, an industrial estate or something like that. It will very much depend on the local circumstances and what heating sources are available. Crucially, it will depend on local support, which is why local authorities are crucial to this process. Many local authorities around the country are already in discussions and are very keen to get on with these zoning proposals, presumably including Leeds. Although I know that the noble Baroness, Lady Blake, does not speak for Leeds any more, I know that it is one of the pioneers in this area.
Lord Ravensdale (CB)
I thank the Minister for his response. He set out the reasons why district heating is particularly well suited to a zoning approach. Could he expand a little on why, for example, heat pumps or urgent retrofits are not suitable for zoning in the same way?
Lord Callanan (Con)
They could be, but we do not want to designate a particular technology because it will vary from area to area and locality to locality. It is to be expected that heat pumps will play a part in heat network zoning. That would be the case but we do not want to be particularly specific.
Lord Lennie (Lab)
I thank the Minister and the noble Lords, Lord Teverson and Lord Ravensdale, for their contributions. I will assume that their questions have at least been addressed, if not fully answered. We might come back to them later; we shall see. On Amendment 162YYYZA, which would designate GEMA, the Minister said that there will be further consultation on who will ultimately become the designated body for network zones. Once that decision is made, will we hear about it? Will whoever has been designated that role be regulated or will it just be announced?
Lord Callanan (Con)
It will be set in the appropriate regulations. The bottom line is that we have not made a final decision at this stage.
Lord Callanan
“(b) to designate a person as a zone coordinator where a local authority (or local authorities) fail to comply with a requirement imposed by virtue of paragraph (a).”Member's explanatory statement
This amendment enables the Heat Networks Zones Authority to designate a zone coordinator where a local authority (or authorities) fail to comply with a requirement to make such a designation.
Lord Callanan
Member's explanatory statement
This amendment enables zones regulations to provide for areas to be designated as heat network zones by the Heat Network Zones Authority as well as by zone coordinators.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 146, line 5.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 146, line 5.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 146, line 5.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 146, line 5.
Member's explanatory statement
This amendment enables regulations made by virtue of Clause 177(1)(c) to impose requirements as to consultation on the Authority as well as on zone coordinators.
Lord Callanan
“(ga) make provision about the terms on which thermal energy is supplied to a district heat network in pursuance of regulations made by virtue of paragraph (f) or (g) (including in particular provision about the amount that may be charged);”Member's explanatory statement
This amendment enables regulations to make provision about the terms on which thermal energy is supplied to a district heat network where the supply is enabled by a requirement imposed on a person by a zone coordinator or where the thermal energy is generated by machinery or other equipment of specified types.
Lord Ravensdale
“PART 7ALocal Area Energy PlansDuty to provide guidance(1) The Secretary of State must publish guidance for local authorities on local area energy planning within 12 months of this Act being passed.(2) The guidance in subsection (1) may include, but is not limited to, guidance on—(a) contributing towards meeting the targets set under—(i) Part 1 of the Climate Change Act 2008 (UK net zero emissions target and budgeting), and(ii) sections 1 to 3 of the Environment Act 2021 (environmental targets);(b) adapting to any current or predicted impacts of climate change identified in the most recent report under section 56 of the Climate Change Act 2008 (report on impact of climate change);(c) the data and assumptions used in creating a local area energy plan;(d) the roles and responsibilities of those involved in creating a local area energy plan;(e) the minimum standards for a local area energy plan.(3) Local authorities must have regard to the guidance produced under subsection (1) when developing local area energy plans.(4) In this section, “local authority” has the meaning given in section 176.”Member's explanatory statement
This amendment provides guidance for local authorities to help them produce Local Area Energy Plans. It aims to widen the roll out of Local Area Energy Plans among local authorities and help better define the role of local authorities in delivering the future energy system.
Lord Ravensdale (CB)
My Lords, Amendment 168 in my name would put a duty on the Secretary of State to
“publish guidance for local authorities on local area energy planning”
and clarify some of the criteria that should be included in the guidance. This is based on Energy Systems Catapult’s guidance and includes how local area energy plans can contribute to meeting our net-zero environmental and adaption targets.
As I said on Amendment 167, local authorities will be crucial to delivering our net-zero targets, particularly on decarbonising heat from buildings, yet the Energy Bill makes only limited reference to the vital role of local authorities in heat networks. That is a particular gap in relation to local area energy planning, which is not mentioned in the Bill, and I do not believe the Government have made a firm commitment to create this mechanism.
The Government should ensure that local authorities are given powers and mechanisms to enable local area energy planning, which is a whole-system approach and methodology to discover the locally preferred and most cost-effective means to decarbonise local transport of heat in any given place. Ofgem commissioned the Centre for Sustainable Energy and Energy Systems Catapult to develop the local area energy planning methodology and, under the pilot, local area energy plans were prepared in three areas—Newcastle, Bridgend and Bury in Manchester. Other local authorities are also in the process of developing plans, but these are piecemeal, often without funding and are taking too long.
It is worth giving a bit of context around the pilots. They divided each area into zones suitable for different types of low-carbon heating technologies. The balance of technologies across the three areas shows how different each area can be. For example, the local area energy plan in Newcastle found that roughly half the homes could be heated by a heat network, whereas it was less than 30% in Bury and only 15% in Bridgend. In Bridgend, a far higher proportion of homes would need to be heated with high-temperature heat pumps to save on the extra expense of retrofitting insulation in its poorer-quality housing stock. That illustrates how different areas can be and the benefits of this local area energy planning approach.
As I have said, local authorities have the best view of their local areas and the state of their housing stock. A joined-up, co-ordinated approach to local area energy planning, led by government and providing local authorities with the support they need could, according to the Energy Systems Catapult, save £252 billion between 2025 and 2050 compared with organic, unco-ordinated approaches to energy planning. There is real value in such an approach.
In its independent review of the heat and buildings strategy, the Climate Change Committee said that local area energy planning,
“If done well … will ensure a coordinated approach for rolling out different low-carbon heating solutions in different areas.”
It also said that,
“The government acknowledges the value of Local Area Energy Planning … but is yet to bring forwards strong policy proposals that would set a direction here.”
This is a real opportunity. My amendment is really to explore what plans the Government have to develop the institutional framework to empower and fund local authorities to roll out these plans.
As a final note, I originally considered tabling an amendment that puts a duty on local authorities to prepare a local area energy plan, but we were advised by the LGA that mandating this would be very daunting for some local authorities that may be unable to achieve this without committed government funding and support. I would be grateful if the Minister could expand on the Government’s plans to develop local area energy plans in the future. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Ravensdale. I declare my position as a vice-president of the Local Government Association in offering my support for his Amendment 168, which I would have signed had I seen it. He has clearly set out the arguments for this. I just add that this would be a significant step forward for energy democracy, with decisions not being centralised in Westminster but made in local areas, by local people.
I think back to an event I attended with Gina Dowding, who was then the MEP for North West England, which dates the event rather precisely. There was work going on by a wide range of organisations in the north-west, looking at renewables across the region. With this kind of plan, different local authorities would be able to band together in different ways, according to what worked for the geography and the energy supply systems. That would be a flexible and effective way of doing that.
I have one more point to make on Amendment 168. Last month I was in Kyiv, talking to energy managers who had suffered as much of a shock as one could possibly imagine any energy manager having to receive, which was half of their systems being destroyed by vicious Russian attacks directed by people who had actually built the systems, so knew exactly where to hit hardest and worst. The Ukrainians were holding their system together, and one of the things they stressed to me was the importance of decentralised, local systems that were holding up and helping to support the national system because the local system was able to function effectively. So, we know we are in the age of shocks and, in terms of resilience, having that local basis is crucial.
That brings me on to my Amendments 237 and 238, which together form an attempt to deliver the potential of something that we saw flowering a decade ago but was then cut off in its prime, and that is community energy schemes, where community groups come together to provide cheaper, greener power and to distribute the benefits locally. The Government have made us all very familiar with the phrase “world-leading”, but I am afraid that when it comes to community energy, it really is impossible for the Government to claim any kind of leadership in clean, home-produced energy schemes at a local level. What we saw a decade ago was a real explosion of community-owned and run renewable energy generation projects that were driven by the feed-in tariff. Indeed, I recall visiting Berwick solar farm in Sussex with the sadly late Keith Taylor, then MEP for South East England, in 2015. They said, “This is now dead. This has been killed”, by the cutting of the feed-in tariff, which of course entirely disappeared in 2019.
These two amendments reflect what is contained within the Local Electricity Bill, started in the other place. That has the backing of 314 MPs from all the major parties and aims to help community groups sell the electricity they generate to local customers. That Bill is also supported by more than 100 principal authority councils and more than 80 national organisations, including the National Trust, WWF, Greenpeace, Friends of the Earth and CPRE. These two amendments offer a chance to take that Bill forward; this is the obvious opportunity to act now. Noble Lords will note that both amendments have been kindly backed by the noble Baronesses, Lady Boycott and Lady Young of Old Scone, and the noble Lord, Lord Teverson, so it has full cross-party and indeed non-party support, and I believe we will also be hearing other noble Lords speaking in support.
Similar Amendments, Amendments 242F and 242G have, been tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds. I have a list setting out the differences, but in the interests of time, I will leave it to those noble Lords to set out the details of how they differ. They are very much differences of detail, rather than of the main content and intent. The Environmental Audit Committee has looked into community energy and it says that the sector could grow between 12 and 20 times by 2030, powering 2.2 million homes and saving 2.5 million tonnes of CO2 emissions every year. That could take community renewable energy generation to 10% of the UK’s electricity generation, around 6,000 megawatts. At the moment, however, it is less than 0.5% of total UK electricity generation capacity: 331 megawatts in 2021. It is not, of course, because of the cost of generating, which has fallen very rapidly over the past decade, but is due to insurmountable costs in selling the electricity they generate and providing the operational requirements to become a licensed energy supplier. Initial costs are put at £1 million, which of course is far beyond the scale of most community energy projects.
To make it worse, community energy schemes receive no guaranteed price certainty for the electricity they generate. They knew what they were going to get under the feed-in tariff, but that scheme closed to new applicants in April 2019, at which point many schemes that were already on the drawing board and well advanced just fell apart. It is not that the Government have not been trying to encourage community energy—that is clearly their intention. There was the Licence Lite scheme route to market, but it did not put reasonable limits on costs and there was no obligation on fully licensed energy utilities to partner with community groups. More recently, we saw the smart export guarantee. That also places a requirement on larger suppliers to purchase the power, but with no guaranteed purchase price or length of contract, again making the lack of certainty killing.
Baroness Boycott (CB)
My Lords, I am very pleased to support Amendments 237 and 238, along with the noble Lord, Lord Teverson, and the noble Baroness, Lady Young. The noble Baroness, Lady Bennett, set out so many of the reasons why we should support this. As she said, the rollout of community energy has ground to a near halt in recent years for reasons related to the withdrawal of the feed-in tariffs and the surely well-intentioned but hopelessly ineffective smart export guarantee, which has given community energy generators either prices which are inadequate or, where they are adequate, no confidence that they will remain so. This has been distressing for volunteers and community energy generators who have put down roots in the community and are supplying valuable services for their community, including energy efficiency—a significant omission from the Bill, which we will hear more about—and skills.
The Government effectively banned onshore wind in 2015 and are now, after seven lost years, belatedly unbanning it in rather curious circumstances. Some communities are up in arms about solar farms, and the Government have recently wobbled somewhat awkwardly between permitting and restricting them, only to now be talking about the need for a balance between farmland and solar PV. This is odd, given that meeting the Government’s own energy security strategy, published in April this year, of reaching 20 gigawatts of installed solar by 2030 would occupy only 0.5% of UK land, which is half of that occupied by golf courses. As noble Lords know, I am very passionate about food production, but I know that we can also produce a level of energy. As I said, I am not so sure that there really is a great tension when the land needs of solar are so limited.
These bannings and unbannings and restrictions and relaxations are really just the policy manifestations of community concerns about energy installations being done to them, rather than with them. The point about the vast majority of large-scale generation in people’s areas is that there is actually very little community benefit. If the Government were willing not just to see the benefits of community energy—as I am sure the Minister does—but to put in place the policy measures to support it, it would make things so much easier for all of us.
I sit on the Environment and Climate Change Committee, which has been taking evidence about boiler upgrade schemes and the like lately. One of the things about community energy is that one or two people within a community are capable of finding their way through the quite complicated government documents to obtain the subsidies, and they in turn can empower a load of residents who otherwise might not be so minded to install insulation and take up new means of energy. There are multiple benefits to this, and I find it hard to see any drawbacks. I am sure the Minister agrees.
Baroness Young of Old Scone (Lab)
My Lords, I also support Amendments 237 and 238, to which I have added my name, and Amendments 242F and 242G in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, which, with some variations, aim to achieve the same outcome. Previous speakers talked about the role of community energy generation, which is an important one in future energy supply. It was a small but growing effort in this country and a contribution to the development of renewable energy on a local scale.
However, when the feed-in tariff disappeared for new applications that really put the nail through the head of that growth, and nothing that the Government have done in the last few years to try to reignite it seems to have worked. People have talked about Licence Lite and the smart export guarantee, but neither of these has really produced an uptick in that trend of community energy generation. We need to find a way to get around that. This depends quite substantially on reducing the barriers of upfront capital and the regulatory effort of getting a connection to the system, on making sure that there is a key partnership between the big boys and the small community energy generators, and on some sort of guarantee of purchase price and length of contract. If we do not have those, we will not get any security into the community energy generation sector through investment.
These amendments put forward simple solutions. I shall not go into any detail, because the noble Baroness, Lady Bennett, has gone through them, suffice it to say that the whole issue is about how local energy generators can sell the power they generate locally through a community scheme to local communities. That is the magic bit in this area of community generation. Local schemes are developed and owned by local people, and they have local benefits in the form of cheaper and cleaner energy. They also provide other benefits for local communities.
When I was thinking about a way of describing this, it came to mind that the Labour Party used to talk about Arthur Scargill in a particular way: “He may be a bastard but at least he’s our bastard”. There is a difference between “damn windmills” and “our damn windmills”, so there is a real attraction in local support. I thought that the Government were keen on improving the popularity of locally determined schemes—I am sure that they are—which gives me huge confidence that the Minister will take these four amendments and do the job that the noble Baroness, Lady Bennett, suggested some of the rest of us do: draw out the best cherries from among them.
However, I do not intend to do that. I would rather like the Minister to do it and come forward on Report with a government amendment that meets the key needs of obligating the big boys to buy from the small-scale generators; setting a predictable, fair price; and setting a minimum contract period.
Lord Teverson (LD)
My Lords, I was pleased to put my name to both of the amendments in the name of the noble Baroness, Lady Bennett. Most of what needs to be said has been said. I guess I need to declare my interests: I am a fairly insignificant shareholder of St Ewe community energy, which I have not heard a lot from recently—probably because of the reasons that we outlined here.
The one point I want to make is that this is exactly one of the areas that has been left out of this Bill, as the noble Baroness, Lady Boycott, said. It should be in here. However, to me, although community energy is about generating power, the real importance of it is in allowing communities to come together and be a part of the national and global march forwards to net zero. When there were feed-in tariffs, there was an enthusiasm for people coming together and being part of this essential journey towards a clean economy, a clean society and the environment that communities, families, households and small businesses wanted to see in their local areas. It is not about participation in that big COP 27 or whatever; it is about the local contribution that allows people to participate in one of the most important journeys and fights that we face at the moment, which is about climate change and all the benefits that come from net zero.
Let us have this issue in the Bill. Let us ignite this sector again. Let communities participate in one of the most important objectives that we have on this planet.
Baroness Meacher (CB)
My Lords, I rise to add my strong support for Amendments 237 and 238, so ably introduced by the noble Baroness, Lady Bennett of Manor Castle, and her strong team of cross-party supporters. I thank Steve Shaw of Power for People for his briefing. I will speak only briefly, principally to ask a few questions of the Minister; I hope that he will be able to respond to them—if he heard what I just said.
As we face the existential threat from climate change, it cannot be right for small-scale community renewable energy schemes to be rendered unworkable by disproportionate regulatory burdens and costs. Other countries are promoting small-scale energy production, apparently often by community groups, far more effectively. It must be possible for the UK to do the same. I hope that, today, the Minister will agree in principle that this Bill must remove the barriers to community energy production.
As somebody else—I think it was the noble Lord, Lord Teverson—said, if the Government can come up with improved amendments on Report to achieve this objective, I for one will welcome them. Does the Minister accept that the community renewable energy sector has the potential, as claimed by its advocates and the noble Baroness, Lady Bennett, to provide 10% of the UK’s electricity generation? I hope that the Minister can respond to this question because it is incredibly important. If the Government can really do that—come on—surely we have to enable them to do it.
Does the Minister accept that it is perfectly feasible to reduce significantly the financial, technical and operational requirements to become a licensed energy supplier, and thus to reduce significantly the initial £1 million start-up cost involved? Of course, that makes the whole idea of developing these community energy schemes quite out of the question. Can he assure the Committee that the department will work to resolve these issues before Report?
Baroness Blake of Leeds (Lab)
I shall speak to the amendments in the names of my noble friend Lord Lennie and myself. Before I get to that point, though, I want to stress that the contributions made in this debate have been so strong that I cannot see how the Government can continue not to take this aspect of the debate with the seriousness it deserves, because at the end of the day we have very serious obligations and commitments to make. We are not going to achieve what we have set out to do if we do not focus on delivery, and the importance of how we take our communities and people with us on that journey. I really do not think that has been stressed enough.
The noble Lord, Lord Ravensdale, put it very well when he stressed the importance of involving local authorities in setting up local area energy plans, particularly something that has to be repeated again and again when we talk about this: the bringing-in of powers that need to go down to local authorities and then into the communities. The important aspect of this is that the resources must be there to accompany those powers. Frankly, we are in a situation where local authorities across the country have lost over 60% of their budgets. This needs to be taken into account when we consider how local areas can contribute to the important work that needs to be done in this space. The noble Baroness, Lady Boycott, expressed it exceptionally well by highlighting the current contradictions in government policies that are holding us back in so much of what we need to do.
Going through the debate, I commend the contributions that have been made from our partners coming in. They have brought such important evidence as to what we could be doing, and about the huge potential that could be unleashed if the Government were able to put the necessary measures in place.
In this group, we have focused specifically on setting up a community electricity export guarantee programme. Our amendments relate to community energy and would bring in new clauses between Parts 7 and 8 and Parts 12 and 13. We have done this because, as we have heard, community energy covers aspects of collective action to reduce, purchase, manage and generate electricity. Projects obviously have an emphasis on local engagement and local leadership and control. I firmly believe that that action can often tackle challenging issues around energy with communities, which are well placed to understand their local areas, and bring people together with common purpose. As we have heard, it often takes only a couple of experienced and committed people at a local level to unlock some of the issues we have faced that have been holding us back, and to advise government on what needs to be changed and done to bring this forward.
I do not know whether others picked up a significant amount of interest in the different media outlets over the weekend about community energy projects and initiatives that are being brought forward. We have heard that those projects are significant and cover a whole range of different aspects and ways of coming forward. I do not want to go over all the contributions that have been made, but I hope that we are all looking for some very specific measures and some movement from the Government that we can take forward to Report to examine how we can make the difference that we need.
Running all the way through this is the cruel impact of energy bills on our communities and local people. The response communitywide is because people have to work across so many different areas. That key element of behaviour change is absolutely essential if we are to bring the necessary partners together.
Our amendments would require the Secretary of State, within six months, to
“require licensed energy suppliers with more than 150,000 customers (‘eligible licensed suppliers’) to purchase electricity exports from sites generating low carbon electricity with a capacity below 5MW, including community energy groups … Licensed energy suppliers with fewer than 150,000 customers may also offer to purchase electricity exports from exporting sites … including community owned energy groups”.
Eligible licensed suppliers must
“offer a minimum export price set annually by OFGEM”,
offer a minimum five-year contract and allow
“the exporting site to end the contract after no more than 1 year.”
These steps are important to make sure that the benefits come to community energy projects and that they have a guaranteed stable market to operate in.
A community smart export guarantee is supported by Community Energy England. It would increase investor certainty, especially for larger-scale ground-mounted projects where most of the energy is exported. I am interested to hear what consideration the Government have given to such a scheme and whether we can look forward to progress to ensure that we can deliver.
Lord Callanan (Con)
I thank all noble Lords who contributed to this important debate. Let me start with Amendment 168, moved by the noble Lord, Lord Ravensdale. It seeks to ensure that guidance is published for local authorities regarding local area energy planning. Although the amendment is well-intentioned, in my view, it is not necessary. The Government already have work under way to consider the role of local area energy planning in delivering net zero and supporting efficient network planning, including heat network zoning policy. Through the Government’s Local Net Zero Forum, we are working with local authority representative bodies to discuss the roles and responsibilities of local government, and how we will work with local government to reach our targets.
I am sure the noble Lord agrees that local authorities are already well placed to undertake local area energy planning given their established relationships with many key stakeholders. Guidance to help develop local area energy plans was already published earlier this year and the Government directly supported this activity through the £104 million “prospering from the energy revolution” programme. This included co-funding for the development of guidance for local areas developing local energy plans and the subsequent delivery of those plans. This has so far seen plans produced for Peterborough, Pembrokeshire, Stafford, Cannock Chase and Lichfield. Given that this activity is already under way, I hope the noble Lord agrees that his amendment is unnecessary and will therefore feel able to withdraw it.
I thank the noble Baronesses, Lady Young, Lady Boycott and Lady Blake, and the noble Lords, Lord Teverson and Lord Lennie, for Amendments 238 and 242G, which seek to enable community renewable generation schemes to sell electricity generated to local consumers. I also thank the noble Baroness, Lady Meacher, for her contribution. The Government believe that community groups have a role to play in our efforts to eliminate our contribution to climate change. However, it is our view that encouraging or introducing obligations on licensed electricity suppliers to mandate them to offer local tariffs would be a disproportionate intervention in the market. Local tariffs are better left as commercial decisions for suppliers.
There are already examples of suppliers offering local tariffs through the market. Octopus Energy offers customers in Market Weighton, Caerphilly and Halifax a tariff with discounted prices at times when electricity is generated locally. Any new obligation in this area is likely to be complex and burdensome, particularly if it interferes with suppliers’ existing services and processes already used to serve their customers.
It is therefore more appropriate to allow market-led solutions to continue to develop, rather than us trying to make commercial decisions on behalf of suppliers. As we set out in the British energy security strategy, the Government are developing local partnerships in England that will enable supportive communities to host new onshore wind infrastructure, for example, in return for benefits including lower energy bills. The Government are separately considering wider retail market reforms that deliver a fair deal for consumers, ensuring that the energy market is resilient and investable over the long term.
As I am sure noble Lords are aware, the Government are undertaking a comprehensive review of electricity market arrangements in Great Britain, which considers options that encourage generation and demand to consider location. It also asks how markets can better value the role of small-scale, distributed, renewable electricity. The department is currently looking at the responses to the review of electricity markets consultation, which closed in October.
Amendments 237 and 242F would enable community renewable generation schemes to receive a guaranteed minimum price for the electricity that they export to the grid. Small-scale, low-carbon electricity generation should be brought forward through competitive, market-based solutions, which will help to encourage innovation and investment. We introduced the smart export guarantee in 2020 to provide exactly that: small-scale, low-carbon electricity generators with the right to be paid for the renewable electricity that they export to the grid. It ensures that these generators, which would otherwise struggle to find a way to sell electricity, can have guaranteed access to the market and a choice of options following the closure of the feed-in tariffs scheme.
To enable the SEG to be truly market-based and encourage innovation, however, suppliers must be in a position to set both the tariff levels and structure for themselves. We should allow the small-scale export market to develop with minimum intervention and not introduce a support scheme that specifies minimum prices or contract lengths for generators.
I say without much optimism that I hope noble Lords are reassured that the Government recognise the role that community-owned and locally owned renewable energy schemes can play in supporting the UK’s national net-zero targets. I hope that noble Lords will feel able to withdraw or not press their amendments.
Baroness Bennett of Manor Castle (GP)
Before the Minister sits down, can he tell me—either now or in writing later—what is the Government’s estimate of the amount of local community energy generation that would be arrived at by 2030 under the market-led approach?
Lord Callanan (Con)
I am happy to give the noble Baroness a detailed answer in writing but we do not see any particular limit on it. It is what the market will develop. The problem with the noble Baroness’s amendment is that she is seeking, in effect, to get every other customer to subsidise a relatively uncompetitive form of energy production. If community energy schemes are low-carbon and competitive, they will be able to take their place in the generation mix. Many of these community energy schemes are already supported and will continue to be.
Baroness Young of Old Scone (Lab)
I wonder whether, in writing to the noble Baroness, the Minister could also write to us on a couple of other things, including the number of schemes that have gone through the two mechanisms that were introduced subsequent to the feed-in tariff changes. This would let us see how trends are operating in the market situation that he is describing at the moment; my perception is that it is not producing growth in the uptake of community schemes. The Government must be clear: are they keen on community schemes, seeing them as a real attribute, or are they keen on only commercially competitive ones? If it is the latter, I am almost certain that we will not see many come forward.
Lord Callanan (Con)
We are keen on these schemes but, as always, the question comes down to cost. How much we are prepared to subsidise an essentially uncompetitive scheme that is leveraged on the bills of everyone else who is not benefiting from these schemes? That is the fundamental question. I am of course happy to write with the clarification that the noble Baroness asks for.
Baroness Bennett of Manor Castle (GP)
I am sorry but I really have to come back on that. Does the Minister acknowledge that there are advantages to these schemes other than on cost? They include, for example, insulation, bringing communities together and increasing acceptance and understanding of net zero, as many noble Lords have outlined.
Lord Callanan (Con)
If the noble Baroness is asking me whether I think that there is an advantage to insulation schemes, the answer is of course yes. I am not sure what her question is, but insulation is a great thing.
Baroness Meacher (CB)
Finally, if the Minister can bear it, can he tell us in writing whether he feels that these small community schemes could in fact deliver 10% or so of the UK’s electricity energy; and what estimate he has made of the feasibility of reducing all these technical regulatory constraints, which cost so much at the very beginning? He will understand that, if you are going to make a profit, you have to invest up front. Small schemes are unlikely to be able to make that initial investment but it may well be a tremendous bonus to the country in the longer term if the Government were able to help them reduce all these costs at the outset. It would be helpful to have all that set out in a letter if the Minister is able to do so.
Lord Callanan (Con)
I am of course happy to set out to noble Lords the details of our position in writing. We want to reduce bureaucracy as much as possible but we have an overriding need to ensure the stability of the energy system. Certain technical requirements need to be met by these schemes. We want to encourage them as much as we possibly can, but that comes with limits. We will certainly write with as many details as we can provide.
Lord Lucas (Con)
My Lords, my noble friend has been very helpful, but I am none the less fairly disappointed by the replies he has been able to give. To illustrate, I live in Eastbourne and, if you stand on the hills above Eastbourne—Britain’s sunniest town—and look down at hundreds of acres of industrial and retail estates and car parks, about the only solar panel you will see is on the local college’s eco training hub. That is because the ownership and commercial benefits of these areas are extremely complicated. No one is in a position to get a cost-effective, reasonable-scale scheme going on their own; it needs something that will work as a whole.
A decent feed-in tariff need not be subsidised—it can be below market rate—but there needs to be something so that there is a base on which you can build. My noble friend’s department was kind enough to send a representative to our recent solar summit. One of the main things that came out of a gathering of local businesses, energy suppliers and so on was the need for a basis on which local collaboration can be built, not to create something that requires a subsidy to produce electricity at a greater cost than would otherwise be the case, but to enable a very complicated situation to come together and be supported into commerciality, allowing local virtuous circles of electricity generation and consumption to emerge. That is not happening in our system at the moment, which is ridiculous. Something needs to happen to enable us to move from 200 hectares of white roof to 200 hectares of black roof, and to get the benefits of that.
Lord Callanan (Con)
As I said, a number of suppliers already offer competitive tariffs in the market. They will provide long-term certainty on pricing. There are many examples of industrial units that have already put solar panels on. Obviously, the most cost-effective way is for them to use that power themselves and export any surplus power to the grid using the smart export tariff guarantees. I will answer that question again: the Government are supportive of community energy schemes. We want to see more of them, but we think that is best delivered through the market framework. I will happily provide noble Lords with more detail in writing.
Lord Teverson (LD)
Can I remind the Minister that it is government policy to decarbonise the electricity system within 12 years and one week? That is no time at all. I am absolutely a defender and promoter of market forces, but in some places they just do not act quickly enough. We have a very short period of time in which we must decarbonise the electricity system. I cannot see why the Minister would not be in favour of ease of movement into this market. As the noble Lord, Lord Lucas, said, it does not necessarily require subsidy. To use a Borisonian term, it would unleash the real will of communities in this country to help in that target of decarbonisation by 2035. I cannot see why the Government do not grasp this and make the most of it.
Lord Callanan (Con)
As I said, we are supportive of proposals. We accept the target for decarbonising electricity production and we are moving ahead full-scale with our sails erected—which is no doubt a Borisonian term—towards that goal. Community energy will play probably a small role, but it will play a role. Obviously, larger-scale generators will supply the majority of the nation’s electricity.
Lord Ravensdale (CB)
My Lords, I thank all noble Lords for participating in this very informative debate. I was very encouraged by what the Minister had to say in response to my Amendment 168 and the work already ongoing in government. I come back to the fragmented nature of local area energy plans: some local authorities have the resources and others perhaps do not. I look forward to fleshing out the detail on that as we go towards Report.
The noble Lord, Lord Teverson, and the noble Baroness, Lady Blake, put it really well. The key theme running through all this is the participation of local authorities and local groups in our energy transition and about defining the part they have to play. We have these big, top-down targets—50 gigawatts of offshore wind by 2030 and 24 gigawatts of nuclear by 2050, as well as heating targets—which are all of course very necessary. But we need that bottom-up view and a better definition of the role of local authorities and local groups in supporting this huge engineering challenge, and I say that as an engineer. It is about stitching together all that local data to better inform how we respond nationally. I look forward to further discussions leading up to Report but, with that, I beg leave to withdraw my amendment.
Member's explanatory statement
This amendment amends the reference to electrical energy in the definition of “energy smart appliance” that applies for the purposes of Part 8.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I beg to move Amendment 169 standing in the name of the Minister, my noble friend Lord Callanan, and will also speak to Amendments 170 to 172. This group of amendments considers the definitions set out in Chapter 1 under Clause 186 on “Energy smart appliances and load control”. Clause 186 sets out a number of definitions that are used in other clauses of the Bill relating to load control. These include permitting the creation of new licensable activities, the modification of licence conditions and industry codes for load control purposes, and the making of regulations for energy smart appliances.
Amendments 169 to 171 have two combined effects. First, by removing the reference to the “use, discharge and storage” of electricity, the definition broadens the potential scope of appliances captured. This is because the definition is now agnostic to the way in which the appliance interacts with electricity. Instead, we are now concerned only that there is a flow of electricity into or out of the appliance which can be controlled by a load control signal. The original formulation does not clearly capture local generation of electricity by an appliance—for example, solar panels—and we wish to capture this.
For the purposes of licensing load control, the relevant factor is the sending of a load control signal to an energy smart appliance, regardless of whether that signal is then received by the appliance. Therefore, the amendments make it clearer that the signal needs only to be sent to an energy smart appliance, not necessarily received, to be regarded as a load control signal.
Amendment 172 clarifies that a load control signal may not only be a signal that directly affects electricity usage by an appliance but one that affects the electricity flow into or out of an appliance, based on additional information that is available to the appliance. This means that the improved definition also captures a signal which can configure a device to change electricity usage, depending on additional information available to the appliance. For example, an appliance could be configured to increase its electricity usage if the price of electricity drops below a certain level.
I hope the Committee will agree that these are important amendments that deliver additional clarity in the definitions used.
Member’s explanatory statement
This amendment, together with the amendment in the name of Lord Callanan at page 154, line 25, amends the definition of “load control signal” that applies for the purposes of Part 8 so that it includes a digital communication sent to an energy smart appliance even if the communication is not received by the appliance.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 154, line 24.
“(4A) For the purposes of subsection (2) an adjustment to the flow of electricity into or out of an appliance is made in response to a load control signal whether it is made in response to—(a) the sending of the signal, or(b) the sending of the signal and one or more additional factors.”Member’s explanatory statement
This amendment glosses the definition of “energy smart appliance” that applies for the purposes of Part 8 to make it clear that a load control signal may be one of a number of factors in response to which an adjustment is made.
Member's explanatory statement
This amendment, together with the other amendment in the name of Lord Callanan at page 155, line 6, amends the list of purposes of energy smart appliances about which regulations may be made so that it includes appliances for cleaning tableware and washing or drying textiles but not other cleaning appliances.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, in moving Amendment 173, I will also speak to Amendments 174 to 176, 178 to 180 and 182 in the name of the Minister, my noble friend Lord Callanan.
Amendments 173 to 176 provide clarification and consistency to the definitions of the appliances to which the energy smart regulations will apply. These definitions focus on the purpose of an appliance. Amendments 173 and 174 ensure that energy smart regulations can be made only for cleaning appliances that are most appropriate for demand-side flexibility. This includes, for example, a dishwasher or a washing machine. Amendment 175 allows battery storage to be captured in a manner consistent with the definition of electricity storage in Clause 162. Amendments 176 and 182 clarify that the regulations capture heat pumps, which are essential to the Government’s policy objectives for decarbonising heat.
Next, Amendments 178 and 179 indicate that the Secretary of State may make provision about the recall of non-compliant appliances and may issue guidance about the prohibitions and requirements imposed by these regulations. These amendments therefore provide further safeguards to address serious cases of non-compliance and will support industry to comply with its obligations, aided by guidance.
Lastly, Amendment 180 makes a minor amendment to ensure that the regulations cover additional methods other than ordinary selling for making energy smart appliances available to consumers, such as hire purchase agreements.
Energy smart appliances will play an essential part in the transition to a smarter energy system, enabling consumers to save money on bills and contributing to cost-effective decarbonisation. These amendments provide important clarifications on the scope of these regulations and make certain that they can be implemented effectively in a way that maximises the benefits of smart functionality for consumers and the electricity group.
I will respond to the non-government amendments in this group when we have heard noble Lords’ contributions. I beg to move.
Baroness Randerson (LD)
My little Amendment 177 seems to have intruded on this group of government amendments. I tabled it because I was concerned about the practical implications of the Government’s reliance on smart regulations and smart appliances. I am certainly not arguing with the technology but I am seeking to tease out exactly how this will impact on us and the people of Britain as ordinary consumers.
If you read Clause 187, you will see that it is very dictatorial and centralised in its approach. Yet if you look at paragraph 438 of the Explanatory Notes you will see that, in practice, the Government’s intentions are going to be carried out by retailers and manufacturers, and they will face penalties if they do not get it right. My concern is that one size does not fit all. For example, the noble Baroness just mentioned washing machines and so on, but my example would be electric vehicles. We are told to charge electric vehicles at times when electricity usage is low, and we are promised that this will become an automatic default position. The Government are relying on smart usage, in effect, to expand limited national grid capacity. At the weekend, when I was reading some background material, I noticed that there are only two regions where there is currently said to be any level of surplus national grid capacity. The rest of the country is in a very stretched position.
I have been asking these questions for some years. I have been asking how a reliance on telling people when they can wash their clothes or charge their cars will impact on consumers and the way we use our gadgets and run our daily lives. There is a current experiment, not using smart technology but with a voluntary agreement, to get people to opt in to using their washing machines, dishwashers and so on at low-demand periods, with a financial incentive to do that. That is great if it is convenient for these people and they are opting in to do it. I am pleased that the experiment is taking place, as I am sure it will produce some useful information, but I want to float past everyone a couple of potential issues.
First, I do not want to bore noble Lords for long with the details of my domestic life but I have solar panels and an electric car. I want to use my washing machine and dishwasher and charge my electric vehicle when the sun is out; sometimes, that is at a time of peak demand. I am saving myself money, which I regard as a good thing, but, more importantly, I am limiting the amount I draw down from the grid because my solar panels provide my electricity. I am minimising my call on the grid. There are lots of people like me with solar panels; let us hope that there are heaps more in the coming months and years. This issue needs to be taken into account.
Secondly, more importantly, there is a host of people whose working patterns require them to charge their cars and do their washing at peak times. A care worker working nights has to fit their domestic life around those daily patterns, which might be peak demand times. This is not just about just care workers; it is about health workers, district nurses or anyone working on shifts—the police, firefighters and taxi drivers. We want taxi drivers to drive electric vehicles but they are going to run out of electricity half way through the day; they must be enabled to carry on their work.
We have all, I am sure, experienced a situation where we have had to take our phone or laptop to the technical experts because it is doing something strange, behaving in a way that is beyond our understanding. We are normally told that it is the factory settings or an automatic download. I am now aware that, because they are so automated, electric vehicles adopt patterns that one might not necessarily understand fully because they have downloaded a new program and so on. As the technology becomes more sophisticated, in reality, consumers will find it more difficult to understand what it is doing, why and to override it when they need to.
My big question is that any reliance on smart charging and smart usage must be able to be adapted for that large body of people for whom it is not convenient. In days of high energy prices, most of us can probably be relied on to know what is best for us financially and, therefore, what draws least from the grid. I am concerned that the way in which this is expressed allows no latitude, judgment or option for consumers to make that decision for themselves.
Lord Teverson (LD)
My Lords, I will speak to Amendment 181 in my name, which follows on from what my noble friend Lady Randerson was talking about.
The whole area of smart appliances is really important. It is in fact where demand management starts to creep into this Bill; it is about the only place that it does. The popularity of their potential has, I think, been shown by National Grid’s call for people to offer to manage their energy usage over particular times in the winter; the Minister may give us the figures but I think that more than a million people have shown an interest in it. I would be interested to know where we are with that.
There is a risk here, however. We have seen it with smart meters. I will not go back to the smart meters argument but one barrier to rollout has been the fear of people sharing information. Clearly, data is core to smart technology; data is personal so there is the question of how that data will be used.
My Amendment 181 is really a probing amendment; it is not in the form that would finally go into a Bill. It seeks to understand how the Government are going to communicate what is a really important thrust in terms of demand management and the way we use dispersed energy systems in a smart grid. How are they going to explain and deliver the strategy outlined so that we do not have the consumer reaction that we have had in other areas, including smart meters—very much media-driven, I should add? I want to avoid that.
The other area on which I want to tackle the Minister is concerns Clause 187(3)(d). It is one sub-paragraph of just three lines about security of information—indeed, the whole area of security. This is a core, important area: we know that, wherever smart systems or information technology are involved, there are all sorts of threats regarding the use of personal information. There is also the threat of external hacking, with state actors or others going into these systems and making them unusable.
It is easy and right to say that personal and other data used with smart technologies are secure or otherwise protected, but who is actually going to do that? I am talking about security or communication software systems. I would like to know from the Minister who will be responsible for the protection and security of these systems. I believe that it is important from the bottom up in terms of personal information but also in terms of smart grids and external, less favourable people towards the United Kingdom intervening here. I am sure that the Government have this under control and consideration but it is a really important area. We need to understand that it is being taken seriously and that, whoever the person or authority, they are going to make sure that these particular three lines in Clause 187(3)(d) are delivered.
Baroness Blake of Leeds (Lab)
I will be brief, but I will continue the comments made by the noble Lord, Lord Teverson, on security. I do not have a sense of confidence when we are told that the Government are going to be responsible for these specific areas. Could we have some more detail from the Minister about how this will be put in place and regulated? As we have heard in this discussion, exposure to cyberthreats could be enhanced by the very nature of smart technology. Therefore, we need a great deal of reassurance that this is being dealt with appropriately, and we know who is ultimately responsible for that reassurance.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lord, Lord Teverson, and the noble Baronesses, Lady Randerson and Lady Blake, for their contributions. I was going to cover enforcement in group 7, but I have now catapulted some of those remarks back into this group so that we can cover that at the same time.
Turning first to Amendment 177, tabled by the noble Baroness, Lady Randerson, the Government have published both the smart systems and flexibility plan of 2021 and the July 2022 public consultation on developing a smart and secure electricity system. Both documents set out how consumers can provide flexibility to the system and reduce their energy bills via the deployment and use of energy smart technologies and flexibility services. Consumer interests and considerations are at their heart. However, we believe that this amendment would place an unreasonable and inappropriate expectation that regulations could determine or pre-empt how and when consumers choose to use those smart technologies and appliances. It is unnecessary as the Energy Bill is already clear on the importance of protecting and providing benefit to consumers.
First, Clause 187 already allows for regulations to be made which impose requirements on energy smart appliances—in particular, to ensure that the appliance can operate in response to load control signals; to ensure the protection of end-users; and to impose technical requirements, including the requirement to display or provide information about the appliance. Secondly, in taking these primary powers, the Government are also clear that energy smart appliances should always benefit consumers in line with their preferences and choices. The detail of how appliances may be operated is for manufacturers and product designers, and for consumers when they make their product choices. No one will be forced to use their appliances at particular times, and consumers should decide how they want to utilise smart functionality to best meet their individual needs and lifestyles.
The noble Baroness referenced EV charge points. The Government anticipate implementing these measures in a phased approach over several years, recognising the EV charge point sector is already working hard to implement existing regulations. We will work collaboratively with industry as our policy develops, building and learning from the experience of the EV charge point regulations to deliver necessary protections for the energy system and for consumers. To reiterate, consumers will remain in control. This legislation is aimed at facilitating exactly the sorts of exemplary behaviours the noble Baroness is referring to. So, while I welcome the intention of her amendment, I hope she recognises that the Bill sufficiently commits future regulations to maximising the benefits of smart energy technology to deliver the best outcomes for consumers and the wider system.
Turning to Amendment 181, tabled by the noble Lord, Lord Teverson, the Government have already set out how consumers could reduce their bills and be rewarded for the value they provide by using smart appliances in a flexible way. I refer noble Lords again to the smart systems and flexibility plan and the public consultation on developing a smart and secure electricity system. However, this amendment would place an impractical and inappropriate expectation on the Secretary of State to make a statement on exactly how individual consumers can derive maximum value from their smart appliances.
This value is highly variable, depending on how flexible consumers can be with their energy use, their location and the type of smart service and appliances they wish to use. Manufacturers and flexibility service providers will be best placed to inform consumers about the best available benefits and value from their products and services. So, while I welcome the intention of the noble Lord’s amendment, I hope that he can recognise the impracticality of his suggestion and appreciate the wider government actions in train to maximise the benefits of smart energy technology for consumers and the wider system.
The noble Lord also spoke about security, a concern also raised by the noble Baroness, Lady Blake. Regulations made under these enabling powers will ensure that smart devices in scope are secure by design, and that economic operators that play a critical role in delivering load control services to consumers are meeting minimum standards of cybersecurity and data privacy. BEIS is working very closely with the National Cyber Security Centre as well as industry experts to implement measures we intend to take to achieve this. So I beg to move the amendments in the name of my noble friend Lord Callanan and ask noble Lords to withdraw their amendments.
“(ba) washing or drying textiles;”Member’s explanatory statement
See the explanatory statement to the other amendment in the name of Lord Callanan at page 155, line 6.
“(c) storing energy that—(i) was converted from electricity, and(ii) is stored for the purpose of its future reconversion into electricity;”Member’s explanatory statement
This amendment amends the list referred to in the amendment in the name of Lord Callanan at page 155, line 6 so as to refer to electricity storage using language consistent with that used in Clause 162 of the Bill.
“(d) heating;”Member’s explanatory statement
This amendment amends the list referred to in the amendment in the name of Lord Callanan at page 155, line 6 to remove unnecessary words from the entry referring to heating.
“(ca) make provision about the recall of appliances to prevent, or in response to, non-compliance with the regulations;”Member’s explanatory statement
This amendment enables energy smart regulations to make provision about the recall of appliances.
“(cb) make provision for the Secretary of State to issue guidance about prohibitions or requirements imposed by or under the regulations;”Member’s explanatory statement
This amendment enables energy smart regulations to provide for the Secretary of State to issue guidance about prohibitions or requirements imposed by or under the regulations.
Member’s explanatory statement
This amendment amends the list of persons on whom energy smart regulations may impose prohibitions or requirements so as to include persons who supply energy smart appliances by means including but not limited to selling them.
“(3A) The reference in subsection (3)(b)(ii) to electrical heating appliances includes a reference to heat pumps.”Member’s explanatory statement
This amendment glosses the definition of “relevant appliance” so as to clarify that heat pumps without the energy smart function, or that are not compatible with the energy smart function of another appliance, are relevant appliances about which provision by virtue of Clause 187(4)(c) may be made.
“(iii) take specified steps to remedy non-compliance;”Member’s explanatory statement
This amendment enables energy smart regulations to make provision about steps that must be taken to remedy non-compliance (without an enforcement authority imposing a requirement under provision made by virtue of Clause 189(5)).
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, this group of amendments seeks to strengthen the enforcement powers of the energy smart regulations. This would enable an enforcement authority to investigate and take action swiftly and effectively against non-compliance, and to provide support to industry to comply with their obligations. First, these amendments enable the regulations to place obligations on economic actors to take steps to remedy non-compliance, and to provide evidence of their compliance to an enforcement authority.
Secondly, the amendments allow an enforcement authority to test and make test purchases to assess and to ensure that appliances comply with the regulations. This is an essential requirement, given the necessarily technical requirements the Government will impose to protect consumers and the energy system. If severe non-compliance is identified, Amendment 186 grants a power to an enforcement authority to issue a recall notice to withdraw appliances from the market, if necessary.
Thirdly, Amendment 187 permits an enforcement authority to accept enforcement undertakings. This allows authorities to work constructively with industry to ensure appliances are brought into compliance with regulations, without the need for costly corrective enforcement action being taken.
Finally, Amendment 188 allows an enforcement authority to issue guidance about the enforcement of the regulations and how any authority would exercise its role. This will support industry to comply with their obligations. The market for these appliances is expected to grow rapidly and will play an essential part in the transition to a smarter energy system. These appliances will help consumers save money on bills and contribute to cost-efficient decarbonisation. I hope noble Lords will agree that this is an important group of amendments to enable an appropriate and proportionate enforcement regime to develop, which is consistent and compatible with existing product safety legislation. I beg to move.
Lord Teverson (LD)
My Lords, I just want to probe the Minister so that I understand how this works in practice. What are the Government enforcing? Is it an operating system? Is it the design of a chip? Is it the company that makes them? Will they be type-approved in the UK? Will there be compatibility across different domains? All producers of white goods are international, I think. Will we have our own standards here? I am trying to understand how this will work practically. I absolutely agree with the Minister that this is a key area.
Enforcement authorities are mentioned in the Bill. I just want to understand who they are. Are they the thought police? The Minister mentioned an organisation—the UK cyber headquarters or whatever—so is it that? Is it the Department of Trade, as we would have understood it? Is it the police? Who are those enforcement agencies and how will they work?
I have one last request for clarification. Clause 189(2)(f) refers to
“conferring functions, including functions involving the exercise of a discretion.”
I cannot work out what that means so I would be pleased to understand it.
Baroness Bloomfield of Hinton Waldrist (Con)
I agree that the language in that particular paragraph is quite legalistic. I might need to come back to the noble Lord on that one unless I can get an instant answer.
As I have said, the detailed enforcement regime will be set out in legislation. The enforcement powers underpinning these regulations will provide an appropriate toolkit to allow an enforcement authority to work with industry to ensure that appliances are both compliant with the future regulations and proportionate to the risks that non-compliant devices could pose to consumers and the grid. The Government have aligned the enforcement powers underpinning the regulations with other product regulations that have similar enforcement powers, such as the Electrical Equipment (Safety) Regulations 2016 and the Electric Vehicles (Smart Charge Points) Regulations 2021.
We are in conversation with regulators on our measures. We are confident that we will have the right knowledge and expertise to resource and regulate this market as it develops. I think that is probably as far as I can go at this stage.
“(ba) requiring persons to supply evidence of their compliance to enforcement authorities;”Member's explanatory statement
This amendment enables energy smart regulations to make provision requiring persons to supply evidence of their compliance to enforcement authorities.
“(ea) conferring powers to enable the testing of energy smart appliances by enforcement authorities, including powers to require the provision of sample appliances and powers to make test purchases;”Member's explanatory statement
This amendment enables energy smart regulations to confer the powers necessary to enable enforcement authorities to test energy smart appliances.
“(d) recall appliances to prevent, or in response to, non-compliance with energy smart regulations.”Member's explanatory statement
This amendment enables energy smart regulations to allow enforcement authorities, by written notice, to require persons to recall energy smart appliances.
“(7A) Energy smart regulations may make provision to enable an enforcement authority to accept an enforcement undertaking from a person where the authority has reasonable grounds to suspect that the person has failed to comply with any prohibition or requirement imposed by or under the regulations.(7B) An “enforcement undertaking” is an undertaking to take such action to secure compliance with the regulations as may be specified in the undertaking within such period as may be so specified.(7C) Provision made by virtue of subsection (7A) must include provision that unless the person from whom the undertaking was accepted has failed to comply with the undertaking or any part of it—(a) that person may not at any time be convicted of an offence in respect of the act or omission to which the undertaking relates, and(b) the enforcement authority may not impose on that person any penalty which it would otherwise have power to impose under the regulations.(7D) Provision made by virtue of subsection (7A) may include any provision of a kind mentioned in section 50(5) of the Regulatory Enforcement and Sanctions Act 2008.”Member's explanatory statement
This amendment enables energy smart regulations to make provision enabling an enforcement authority to accept enforcement undertakings.
“(9) Energy smart regulations may provide for an enforcement authority to issue guidance about the enforcement of the regulations and the exercise by the authority of its functions under the regulations.”Member's explanatory statement
This amendment enables energy smart regulations to provide for an enforcement authority to issue guidance about the enforcement of the regulations and about the exercise of its functions.
“(1A) Energy smart regulations may make provision about the sharing of information between an enforcement authority and the GEMA for the purposes of their functions in relation to energy smart appliances and load control.”Member's explanatory statement
This amendment enables energy smart regulations to make provision to facilitate information sharing between any enforcement authority designated under the regulations and the Gas and Electricity Markets Authority (and vice versa).
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, the Government have tabled two amendments relating to the licensing of load control. The activity of load control here refers to the control of electricity flow to an energy smart appliance by a load controller.
The first of these amendments, to Clause 192, will ensure that the information-sharing between enforcement authorities for energy smart appliance regulations and load-control licensing is explicitly provided for in legislation. The energy smart appliance regime and the load control regime may be regulated by different authorities, so it is imperative that they are able to communicate effectively and share information where necessary. The second of these amendments also relates to the effective delivery of the load control licensing regime. It relates to Schedule 16 and ensures that the provision for consequential amendments to be made to existing legislation, in practice to support the amending of licence conditions, also applies to Acts of the Scottish Parliament or instruments made under them.
In practice, it is unlikely that amendments will be required to Acts of the Scottish Parliament or instruments made under them. However, the load control market is a nascent market. We cannot rule out the possibility that future categories of licence could interact with devolved matters in Scotland. This amendment will ensure that that scenario is provided for, should it ever be needed; should this scenario arise, the Government would of course work with the Scottish Government and adhere to the appropriate processes.
These two amendments will help to provide clarification and explicit provision to support the effective delivery of a load-control licensing system. I beg to move.
Member's explanatory statement
This amendment omits a provision that is superseded by new Clause (Section (Modifications of licences etc): supplementary).
Member's explanatory statement
This amendment enables provision made by regulations under section 56FBA of the Electricity Act 1989 (inserted by the Bill) to include amendments to Acts of the Scottish Parliament and Scottish Statutory Instruments (which are not within the meaning of “enactment” given by the Interpretation Act 1978).
Lord Ravensdale
“National Energy Demand Reduction Strategy(1) The Secretary of State must, before the end of the period of 12 months beginning with the day on which this Act is passed, publish an Energy Demand Reduction Strategy, to include but not limited to the following—(a) achieving a low-carbon heat target, of 100% of installations of relevant heating appliances being low-carbon by 1 January 2035;(b) achieving an energy-efficiency target, of all UK homes and buildings attaining a minimum EPC C rating by 2028;(c) interim targets relating to the targets in paragraphs (a) and (b), and the development of skills to achieve them, at not less than three-yearly intervals;(d) a programme of public engagement and a single source of advice provided by the Government to raise awareness of and encourage energy demand reduction.(2) The Secretary of State must, in developing the Government’s strategy on reducing energy demand, consult the Climate Change Committee and its sub-committee on adaptation.”Member's explanatory statement
This is a new Clause which requires the Secretary of State to publish a National Energy Demand Reduction Strategy to provide for delivery of low carbon heat and energy efficiency targets for all UK homes and buildings.
Lord Ravensdale (CB)
My Lords, I shall speak to Amendment 192 in the name of my noble friend Lady Hayman, which is supported by noble Lords across the House, some of whom cannot be here today, including my noble friend. Amendment 192 is quite simple in that its sole purpose is to require the Government to produce an energy demand reduction strategy. It would require the strategy to be in line with the Climate Change Committee’s recommendation for all buildings to be EPC C by 2028, and in line with the Government’s own non-statutory commitments for all heating appliances to be low carbon by 2035. The strategy would have to include interim targets, including on the development of the necessary skills needed for the strategy to be achieved, and a public engagement element.
Since my noble friend Lady Hayman tabled this amendment at the end of the summer, we have seen some welcome movement from the Government. Last month they announced an £18 million public awareness campaign, with an overall target of reducing energy demand by 15% by 2030. To do this the Chancellor, in his Autumn Statement, announced £6 billion of funding—but not for this Parliament. I believe that while the Exchequer is footing our energy bills to the tune of billions of pounds a year, it would perhaps make sense to bring forward this investment. A new energy efficiency task force was also announced, which will be charged with delivering energy efficiency across the economy to realise that 15% reduction.
The government announcements on demand are most welcome, but what is lacking is that golden thread of a strategy to weave it all together. In that sense, the amendment is highly complementary to what the Government are aiming to achieve with demand reduction. A strategy such as this would link together all the areas which need to coalesce to ensure we can reduce the energy consumption of our buildings: strategic leadership by government, providing certainty to the sector; a plan for how and where efficiency will be achieved; importantly, the jobs and skills which will be required to deliver the energy efficiency improvements; and engaging with the public so that they are fully aware of the necessity of doing this and of the benefits to them that can be realised.
The final strategy would be up to the Government to decide, as is correct, but it could include and outline who will receive government support and through what means; what the expectations will be for those who are able to pay for it but perhaps are not doing so at the moment, because they are waiting to see whether they will receive support from the Government; and what non-financial incentives the Government will use to achieve the overall target. The strategy could also outline in what order improvements to efficiency could or should be made, while it should include provisions for skilling the workforce that will be needed. As I said, the Government have already implemented or are planning to implement things which are included in this amendment, but it would be helpful for the sectors which will carry out the work, for households and building managers and, no doubt, for civil servants to have this all in one place.
I have an example: I went to visit a heat pump manufacturer a few weeks back. It made the point that we have the target of installing 600,000 heat pumps per year by 2028, which is very good, but that the dots need to be joined—for example, having the skills available to install those heat pumps and incentives for households to install them. The dots need to be joined between the production of heat pumps, demand, skills and all those other aspects. That is one of the things this strategy could provide.
Reducing energy consumption in the near term does not require every household to do an urgent retrofit or install a heat pump next year. There are small and relatively cheap improvements, such as installing loft and cavity wall insulation, draught-proofing, thermostatic radiator valves and smart thermostats. It would cost around £1,100 on average to install these in a typical semi-detached house, which would cut energy bills by £273 annually. Under current energy prices, these costs would pay for themselves in just five years. The earlier we take action, the bigger the aggregate savings will be.
I also note that this approach would be popular with the public. Various organisations have come out in favour of a strategy like this. In a recent briefing, UKSIF, E3G and Carbon Tracker stated that improving the efficiency of the UK housing stock could lead to bill savings of at least £500 every year per household, and around £1,000 per year for the least efficient homes—an aggregate annual saving to the economy of £10 billion. Insulated buildings are also less damp and healthier to live in. I beg to move Amendment 192.
Baroness Young of Old Scone (Lab)
My Lords, I rise to support Amendment 192 in the name of the noble Baroness, Lady Hayman, which has been so ably introduced by the noble Lord, Lord Ravensdale. The crux of it is that it calls for joined-up policies around energy demand management, low-carbon heat and energy efficiency by requiring a national energy demand reduction strategy.
I have the privilege of sitting on your Lordships’ Environment and Climate Change Select Committee, and our current inquiry, as noble Lords have already heard, is into the boiler upgrade scheme. Indeed, we had an interesting session with the Minister last week. We have been hearing evidence from the UK and internationally, particularly those countries which are further ahead on air and ground-source heat pump adoption than we are. Both national and international witnesses have confirmed the importance of the key elements of this amendment.
The first is joining up policies by having multiple instruments clustered together and working to maximise uptake of grants and loans. Regulatory bars on old technology should be signalled in advance, but not too far in advance. There should be public information campaigns and effective campaigning for the positive promotion of energy demand reduction.
The second feature that comes clearly in this amendment is that low-carbon heat is not enough. Our housing stock is among the worst in western Europe. Low-carbon heat needs to be linked much more closely than it currently is with effective energy efficiency programmes, and both need interlinked targets so that progress can be co-ordinated and measured. The whole issue of rising energy prices has brought this into sharp focus. We expect to see nearly 11 million households in fuel poverty this winter. Many of those households live in houses that typify the UK as having the worst-insulated housing stock in western Europe.
There needs to be huge progress in energy efficiency as part of the mix but I caution an overreliance on EPCs as a means of judging that, because they are very imprecise instruments. In fact, they can have some peculiar outcomes: if you have an air source heat pump installed in your building you will not necessarily get a higher rated EPC as a result. We have to be sure that we are not inadvertently placing a trap for ourselves for buildings, particularly old and heritage buildings, that will never reach EPC band C.
The third element of the integrated strategy the amendment calls for is the issue of skills in installing and maintaining low-carbon technologies, and in installing energy-efficiency measures. Energy-efficiency skills are much more timeworn and easier. Skills for installing low-carbon technologies are more complex and we are only at the beginning of the road. NESTA has estimated that there were around 3,000 heat pump engineers as of July. It projects that we will need around 27,000 heat pump engineers if the Government are to meet that target of 600,000 installations a year by 2028. There has to be a really big investment in skills programmes. I had a figure that I have now lost, but the German Government have put about €28 million towards skills improvement. We need to be in that ballpark.
The fourth thing is public engagement. I commend the Government for, at long last, having lurched into action with their “It All Adds Up” campaign, but that is rather late in the day and very much short term in the face of price rises. It needs to be sustained and not overly to rely on social media and the public being left to seek out digital sources. I am glad that it will contain a couple of TV ads, but you do not get much television advertising for an £18 million budget these days.
The national energy demand reduction strategy that the amendment proposes would be well worth while in bringing these issues together in a co-ordinated way.
Lord Foster of Bath (LD)
My Lords, I will speak to Amendments 197, 198A, 198B and 212. While I acknowledge that there are some differences between the targets referred to in Amendment 192 and my own, I nevertheless support the principles behind the amendment from the noble Baroness, Lady Hayman, which was so ably introduced. The main purport of my amendments, and part of her Amendment 192, relates to energy efficiency and the important, urgent need to improve that in some 19 million homes across the UK. which are currently classed as energy inefficient—those rated below EPC band C. I say in passing to the noble Baroness, Lady Young, that I entirely agree that we urgently need to address the way we take the measurements that we currently use in our very out-of-date EPC system.
I have raised the issue of energy efficiency on numerous occasions in your Lordship’s House and have arguing for a crash programme of energy efficiency to reduce fuel consumption and fuel bills for years to come. Yet, sadly, even in the past year, work on home energy efficiency has plunged by 50% and is now at its lowest level since 2018. A decade ago, 2.3 million homes had energy-efficiency measures being installed; now it is nothing like that.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a great pleasure to follow that tour de force from the noble Lord, Lord Foster of Bath, who is your Lordships’ House’s acknowledged expert in this area. I will add just a couple of small points to what he said. In case anyone is wondering, all those withdrawn amendments to the noble Lord’s original amendments were me saying, “Please, Government, can we have some more?”, because that is the Greens’ role in life.
The arguments just presented by the noble Lord for the Government putting their own existing targets into the Bill are overwhelming. I would be very happy to come behind his amendment on Report, if needed, although I should note that I will also be speaking in favour of Amendment 192, tabled by the noble Baroness, Lady Hayman. It has full cross-party support, including from the Conservative noble Lord, Lord Bourne of Aberystwyth, so there was no space for my name.
I shall make just a couple of points and point to a couple of sets of stats that I think are quite useful here. One is a study by Friends of the Earth, which found that nearly 9,000 neighbourhoods in England and Wales—just over a quarter of all neighbourhoods—have less-than-average incomes but higher-than-average energy bills. This picks up the point made by the noble Baroness, Lady Young of Old Scone, that EPCs take us only so far and can be misleading. It is looking at actual energy figures that really shows us where some of the greatest need lies. These neighbourhoods are occupied by 15 million people. Although it is not explicitly written into Amendment 192, it could be in the strategy to target help at those who need it most and fastest. We could make that a priority area, which would certainly seem to be a logical part of an energy strategy and, again, very much in line with the Government’s levelling-up agenda.
One other point to make is that we tend to feel that we have done all the easy stuff and now we have to think about ground source heat pumps and high levels of insulation. We still have an estimated 4.4 million homes in England that do not have cavity wall insulation but could have it, and 4.8 million homes without the absolute basic of loft insulation. There is a lot of basic stuff to be done.
Coming back to Amendment 192, I will spare the Minister another debate on video advertising screens but it is worth stressing—I see this in my social media feeds all the time—that we are now subsidising business energy use. Surely the Government want to cut government spending as much as possible. It may not be the biggest scandal in the world but, boy, it annoys people to regularly drive past an unoccupied building site and see it, or unoccupied or barely occupied office buildings, lit up like a Christmas tree 24 hours a day—and we are all paying for it. Surely this is something that the Government would want to tackle in an energy strategy to make sure that we are not subsidising unnecessary energy use.
I probably will not make myself very popular with the Government by saying this, but I want to point to a report, which came out at the weekend, by Another Europe Is Possible and the Friedrich Ebert Foundation, a well-respected group in Germany. The report points out that the EU already has a much higher rate of home energy efficiency measures, so is starting from a much better base, and is aiming to double its annual rate of renovation and reduction in energy use over the next eight years to 2030. If the EU can do it, why can we not?
Baroness Sheehan (LD)
My Lords, so much has already been said that there is little for me to add. I have put my name to Amendment 192.
The only thing I want to say is that the Government need to understand the strength of feeling across the Committee on the complete lack of emphasis in this Bill on something that is doable, that is within our grasp and that the Government have recognised needs to be done but have done nothing whatever to implement it. Noble Lords are trying to help the Government here by tabling what I think are very sensible amendments; I hope that the Government will take note of them.
We have had lots of briefings on this issue. There is huge depth of feeling in the communities of Britain on this. One of the NGOs that we received some briefings from, the UK Green Building Council—sorry, it is not an NGO; it is, however, a body that knows an awful lot about this matter—published a scorecard assessing the Government’s progress since they published their Heat and Buildings Strategy in October 2021. The council concluded that
“most of the Government’s proposals or plans fail to deliver progress towards—or even actively hinder—a net zero carbon built environment.”
In its Review of Energy Policy 2022, the UK Energy Research Centre is equally scathing.
I hope that the Government will take note of these telling criticisms and do something in the Bill to rectify that.
Lord Lennie (Lab)
My Lords, I thank noble Lords who have spoken in this debate so far. We on the Labour Benches certainly welcome Amendment 192 in the names of the noble Baronesses, Lady Sheehan and Lady Hayman, and others, which would create a requirement to publish a national energy demand reduction strategy. It seems an obvious point to make.
We received some information from Energy UK. It says that, although we cannot deal with the current crisis in this Bill, it can ensure that long-term strategies are put in place to tackle the energy efficiency of the UK’s housing stock. This powerful point was made by the noble Lord, Lord Foster. If we do not have targets to measure it against, we cannot really manage it; we just have—I do not quite know what—a sort of wish list, I suppose. We support the targets suggested by the noble Lord, Lord Foster.
The Bill outlines its intention to create powers to remove the European energy performance of buildings directive, or EPBD, requirements in the UK. Those requirements are not perfect, but they have been in place in the supply chain, effectively delivering energy efficiency measures and low-carbon technologies. How will the Government safeguard against the potential for the UK to roll back on energy performance of buildings regulations when we remove the European energy performance of buildings regulations? We risk falling behind the rest of Europe, if we have not done so already, in this space.
We also need to see the detail regarding how the Government will safeguard against the potential for the UK to fall behind the rest of Europe. We need clarification on what measures the Government will take to ensure that all buildings are fit for the future, given the lack of measures in the Bill to reform planning and building regulations. The latter requirement could also be backed by the introduction of a net-zero test, as previously set out, but what measures will the Government take to ensure that all buildings are fit for the future, given the lack of measures in the Bill to reform planning and building regulations or set specific targets for delivery?
Finally, in relation to what the noble Lord, Lord Foster, said about the 19 million homes requiring energy efficiency measures to be put in place pretty quickly, I recommend to the Government Labour’s warm homes plan, which will deliver fully costed upgrades to 19 million homes, cutting bills and creating thousands of good jobs for the future.
Lord Callanan (Con)
I thank everyone who has contributed to this debate on energy efficiency, which is very much a matter dear to my heart. Noble Lords may have noticed that I was delighted to launch the Government’s £18 million “It all adds up” energy saving campaign on Saturday—it is almost as if it was designed especially for this debate—with advice that could help UK households cut hundreds of pounds off their bills. The campaign features tips on simple, low or no-cost actions that households can take to immediately cut energy use and save money while ensuring that people are able to stay safe and warm this winter.
We know that warmer homes and buildings are key to reducing bills and will create jobs along the way. That is why the Government are committed to driving improvements in energy efficiency, with a new ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030. Existing plans that we already have in place are expected to deliver around half of this new ambition. To go further, we will need to work together as a country to reduce waste and improve the way we use energy. As has been referenced in this debate, a new energy efficiency task force is being established to lead this national effort.
First, Amendment 192, in the names of the noble Baronesses, Lady Hayman and Lady Sheehan, and the noble Lord, Lord Whitty, requires the Secretary of State to publish a national energy demand reduction strategy to provide for the delivery of low-carbon heat and energy efficiency targets for all UK homes and buildings. Again, while I understand the reasoning behind this amendment, we do not consider it necessary to ensure that our commitments to improve the energy performance of buildings and our net-zero targets are met.
We already have a heat and buildings strategy which sets out the actions the Government need to take to increase the energy efficiency of buildings in the near term and provides a clear long-term framework to enable industry to invest and deliver the transition to low-carbon heating. Just having another strategy document does not make the policy decisions that are required any less difficult. As I have already mentioned, the Government are launching the energy efficiency task force with the key objectives of developing a long-term strategy to drive improvements in energy efficiency and reduce national energy demand.
As I have repeated many times in the House, we are investing £6.6 billion over this Parliament on clean heat and improving energy efficiency in buildings, reducing our reliance on fossil fuel heating. As I think the noble Lord, Lord Ravensdale, referenced, the Autumn Statement also recently announced a further £6 billion of funding to become available from 2025. In the context of spending reductions and a difficult economic environment, I was delighted to see that announcement from the Chancellor. The Government also recently announced—and we are now consulting on—a further energy efficiency support scheme through ECO+. The scheme will be worth about £1 billion and shall deliver an average household saving of around £310 per year through a broad mix of affordable insulation measures, including loft insulation, cavity wall insulation, draught-proofing and heating controls.
Amendment 197, in the name of the noble Lord, Lord Foster, requires the Secretary of State to set an average energy performance certificate target for mortgage lenders of EPC C by the end of 2030. It also gives the Government the power to make regulations that relate to the disclosure of energy performance information on properties in their portfolio. I have met with many of the lenders, and I agree that they have an important role to play in improving the energy efficiency of the UK’s housing stock. However, as we highlighted in our consultation on improving home energy performance through lenders, the Government are concerned that the amendment may have unintended consequences for the mortgage and housing market. I am sure that this is not the noble Lord’s intention, but there is a danger of disincentivising mortgage lenders from lending to energy-inefficient properties. We would then end up with a load of unmortgageable homes in the UK, which I do not think anybody wants to see.
It is imperative that mortgage lenders are not disincentivised from lending to any particular group while home owners are under unprecedented financial pressure. The Government are using the feedback from the consultation to refine the policy and will publish a response once the policy matters have been resolved.
The noble Lords, Lord Ravensdale and Lord Foster, and the noble Baroness, Lady Young, all mentioned the importance of skills. If anything, that is key to this area, probably even more so than the availability of funding. We understand that scale-up requires consistent long-term deployment streams via government funding and regulation, which is what we are attempting to do, so that companies working in these markets can make the investments needed and individuals can choose to upskill.
To grow the installer supply chain, we are investing in skills and training. In 2021, the Government invested £6 million in the BEIS skills training competition, resulting in almost 7,000 training opportunities being provided across heat pump installation and wider retrofit skills. In fact, we have another training competition out for bids at the moment.
Amendment 212 in this group from the noble Lord, Lord Foster, would require the Secretary of State to collect and publish a list of those public buildings that hold display energy certificates, commonly referred to as DECs, and those that do not. I really do not believe that it would be cost effective for the Government to identify and inspect all public buildings that require a DEC, nor to record this information. The energy performance of buildings report published in 2020 cited an estimated DEC compliance of about 83%. We currently publish DEC data as part of our register. I hope noble Lords agree that this demonstrates that the existing system, which we intend to continue and keep under review, is working well in respect of DEC compliance.
Finally, Amendments 198A and 198B from the noble Lord, Lord Foster, would require the Secretary of State to ensure that all households achieve an energy performance certificate band C by 2035, with specified exemptions, and require regulations relating to energy performance in existing premises. The Government remain committed to our aspiration of improving as many homes as possible to reach EPC band C by 2035 where practical, cost effective and affordable. That is why, as I mentioned, we are investing £12 billion during this Parliament into the various Help to Heat schemes, some of which the noble Lord referenced, to make sure that homes are warmer and cheaper to heat, including £1.5 billion to upgrade around 130,000 social housing and low-income properties in England. However, we need to retain flexibility to choose the best approach, rather than being restricted to the regulatory requirement.
Regarding existing premises, the Government have consulted on raising the minimum energy-efficiency standards for the domestic and non-domestic private rented sectors. We are in the process of considering our responses to both consultations. However, it is important to stress that improving existing buildings is a complicated issue and requires striking a balance between improving standards and minimising impacts on the housing market, and, for the private rented sector specifically, ensuring that the final policy is fair to both landlords and tenants. That is a particular dilemma that we face with the PRS regulations.
Similarly, regarding the social rented sector, the Government have committed to consult within six months of the Social Housing (Regulation) Bill receiving Royal Assent. By prescribing specific targets without any opportunity for landlords to offer views, the proposed amendment would be at odds with this commitment.
I thank all noble Lords who contributed during this debate, but given what I have set out and the Government’s long-term commitment to drive improvements in energy efficiency, I hope that they will not press their amendments.
Lord Foster of Bath (LD)
Before the Minister sits down, could he clarify whether the Government believe that the 2017 Clean Growth Strategy, which talks about achieving EPC band C by 2035 for all homes where this is feasible, affordable and cost-effective, is a target or now just an aspiration? Could he be clear on the language? He used “aspiration” a minute ago. In the documentation, and in every letter he has written to me and in every answer, it has been described as a “target”. I just want to be clear.
Lord Callanan (Con)
I think we are getting into semantics here. I am not sure there is a huge difference between them. My point is that it is not helpful to embed it in primary legislation. It is a target; it is an aspiration; it is something we are working towards that we want to try to deliver, but it is a complicated area with a lot of difficult policy choices and potentially a huge amount of expenditure.
Lord Foster of Bath (LD)
In the light of that, if “aspiration” and “target” are the same and the Minister is not therefore resiling from the 2017 document, could he tell me why the noble Lord, Lord Greenhalgh, and, more recently, the Secretary of State for Environment, Food and Rural Affairs have argued that there is merit in putting environmental targets into legislation? I do not understand where the problem comes. The Minister says the Government need flexibility in the way this is delivered. I do not disagree with that. I am sure that new technology will come along that will perhaps help to do this more efficiently, effectively and quickly. I hope that is the case, but the way in which a target is achieved is totally different from having that target. The industry has been absolutely clear that it is very keen to see a statutory target to give it the confidence it needs.
Lord Callanan (Con)
I disagree with the noble Lord. I have had many discussions with businesses and companies in this area, and we are providing the policy certainty they need. It is clear what direction the country is going in. We have listened to a lot of the feedback, have set out longer delivery programmes for the various schemes that we fund directly and are giving the certainty that people need. It does not make any difference to the industry, in terms of the policy landscape, to enshrine a target in primary legislation as opposed to it being an aspiration, a target or whatever other language the noble Lord prefers.
Lord Ravensdale (CB)
My Lords, I have listened to everything the Minister said in response and, as I said earlier, it is great that the Government are moving strongly on this and all these matters, particularly skills and many other areas. However, there is still a need for a joined-up strategy and for some of these targets to be in statute. We have learned from the green homes grant, for which one of the issues was the lack of the long-term thinking that a strategy would provide.
The real issue here, as noble Lords have powerfully articulated, is that we have picked all the low-hanging fruit—the decarbonisation of our electricity system, and vehicle and transport electrification—and now we have to move much higher up the tree to more difficult matters, such as the decarbonisation of heat. The noble Lord, Lord Foster, powerfully articulated the challenges in that area. We will have many more discussions on this leading to Report but, with that, I beg leave to withdraw the amendment.
Lord Callanan
“Part 9AEnergy Savings Opportunity SchemesEnergy savings opportunity schemes(1) The Secretary of State may by regulations (“ESOS regulations”) make provision for the establishment and operation of one or more energy savings opportunity schemes.(2) An “energy savings opportunity scheme” is a scheme under which obligations are imposed on undertakings to which the scheme applies for one or more of the ESOS purposes.(3) The ESOS purposes are—(a) enabling or requiring the energy consumption for which an undertaking is responsible, or the greenhouse gas emissions resulting from that consumption, to be assessed, audited, reported and published;(b) enabling or requiring possible energy savings or emissions reductions to be identified and recommended;(c) enabling or requiring the costs and benefits of possible energy savings or emissions reductions to be assessed;(d) encouraging or requiring undertakings to produce plans or set targets for achieving energy savings or emissions reductions;(e) encouraging or requiring undertakings to take action for the purpose of achieving energy savings or emissions reductions;(f) encouraging or requiring undertakings to achieve energy savings or emissions reductions.(4) An energy saving is a reduction in the energy consumption for which an undertaking is responsible.(5) An emissions reduction is a reduction in the greenhouse gas emissions that result from the energy consumption for which an undertaking is responsible (whether or not that consumption is also reduced).(6) ESOS regulations may make provision about determining—(a) the energy consumption for which an undertaking is responsible;(b) the greenhouse gas emissions resulting from that consumption.(7) ESOS regulations may—(a) impose requirements on any person;(b) confer functions on any person;(c) provide for a person to exercise discretion in dealing with any matter.(8) The provision made by this Part is without prejudice to the generality of subsection (1).(9) For the purposes of this Part—(a) the scheme established by the Energy Savings Opportunity Scheme Regulations 2014 (S.I. 2014/1643) is to be treated as having been established by provision made under subsection (1);(b) a reference to a scheme administrator includes a reference to a compliance body within the meaning given by those Regulations.”Member's explanatory statement
This new Clause is the first Clause in a new Part 9A of the Bill (also containing the 12 other new Clauses inserted after Clause 201 by amendments in the name of Lord Callanan) making provision about Energy Savings Opportunity Schemes. The new Clause gives the Secretary of State the power to make regulations about Energy Savings Opportunity Schemes.
Lord Callanan (Con)
My Lords, for the benefit of the noble Lord, Lord Teverson, I have some more government amendments for his delectation. I will also speak to Amendments 200 to 211, 243 and 244, 246 and 247, which all stand in my name.
Amendment 199 introduces a new Part 9A to the Bill which relates to the existing energy savings opportunity scheme, commonly referred to as ESOS. I committed at Second Reading to table these new clauses regarding improvements to ESOS. For those noble Lords who do not know, ESOS is a mandatory energy audit scheme for large organisations, covering their buildings, transport and industrial processes. ESOS provides businesses with cost-effective recommendations on energy efficiency measures. The existing scheme is estimated to lead to £1.6 billion of net benefits to the UK, with the majority of these benefits applying to participating businesses as a result of reduced energy costs.
The power in the amendment would replace the repealed power in the European Communities Act 1972 under which the UK established ESOS in 2014. Without this, ESOS is a frozen scheme and cannot be updated. The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings.
Lord Teverson (LD)
Can the Minister clarify: did he say that this Bill revokes that EU legislation? Is that what he just said?
Lord Callanan (Con)
The power in the amendment would replace the repealed power in the European Communities Act 1972, which I presume was repealed after Brexit, or rather the end of the implementation period.
The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings. The benefits to existing participating businesses are estimated to be savings of £1.12 billion from 2023 to 2037 through reduced energy bills. The savings would of course help to support businesses to keep the costs of their products and services affordable for consumers.
Amendments 200 to 202 outline some of the details of the ESOS regime and associated powers to make regulations. They include provisions regarding which undertakings ESOS should apply to; provisions regarding when, how and by whom an ESOS assessment should be carried out; and ESOS assessor functions and requirements.
Amendment 203 enables regulations to introduce a requirement for ESOS participants to publish an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. This requirement aims to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures. Amendment 204 enables regulations to impose requirements for ESOS participants to take actions that directly or indirectly support the reduction of energy use or greenhouse gas emissions.
Amendments 205 to 207, 209 and 210 concern the administration and enforcement of the scheme. They enable regulations to make provisions about the appointment of scheme administrators and their functions, including compliance monitoring and enforcement, provisions on penalties and offences, and rights of appeal. These amendments also enable the Secretary of State to provide financial assistance and to give directions to a scheme administrator, with which it must comply.
Amendment 208 concerns procedures for making regulations. It requires the Secretary of State to consult appropriate persons considered likely to be affected by the regulations and, where provisions relate to devolved matters, the respective devolved Administrations. It describes where affirmative procedure would be required, for example if extending ESOS to smaller businesses, mandating action by ESOS participants or creating offences.
Amendments 211 and 243 define certain terms used in the ESOS provisions, explain where provisions fall within devolved competence and set out the extent of the ESOS provisions to be England and Wales, Scotland and Northern Ireland. Amendments 244 and 246 clarify when the amendments will come into force. Amendment 247 inserts into the Title of the Bill a reference to the new clauses on ESOS, introduced by Amendments 199 to 211. With that, I beg to move Amendment 199 in my name.
Baroness Bennett of Manor Castle (GP)
My Lords, given the hour I will ask one very simple and direct question on government Amendment 210, which is about financial assistance. The second part of it says:
“‘Financial assistance’ means grants, loans, guarantees or indemnities, or any other kind of financial assistance”.
Can the Minister give us any indication of what the Government’s intentions are here? That is a very broad range and we know, for example, how wrong loans have gone in the past and how schemes based on loans have really not worked out. Given what interest rates are now, that is obviously a challenge. To tackle the kind of issues I raised earlier about the most disadvantaged areas having particular problems with the quality of housing, do the Government intend to look towards grant-type schemes?
Lord Callanan (Con)
The clause enables the Secretary of State to provide financial assistance to scheme administrators and ESOS participants. It does not, of course, compel us to do so but we are taking a power to have that option. If we decide to provide financial assistance, I will inform the House accordingly.
Lord Teverson (LD)
My Lords, there was a reason for my question. I absolutely agree that the Minister warned us that we would have these amendments coming down the track, and on ESOS I welcome that fact because it has been a very good scheme. Although companies occasionally bitch about it, as he says, it has caused actual change.
As the Minister will know, being a former MEP and so on, the ESOS scheme at the moment is based on the energy efficiency directive of 2012, which was updated in 2018. It came into force in the UK in 2014 and, as the Government’s website says:
“Government established ESOS to implement Article 8 (4 to 6) of the EU Energy Efficiency Directive (2012/27/EU).”
The reason I asked him for a clarification on his opening statement is that nowhere in his amendments could I see anything that repealed the existing directive or regulations that related to the energy efficiency directive.
Is this a sort of parallel scheme to the one that still exists, or is it still based on the original EU directive? If it is still based or relies upon the original EU directive, what happens if ever the retained EU law revocation Bill becomes a statute? Does all this fall away because it still relies on that EU legislation? If it is a parallel scheme, when does the existing one stop under the EU directive and this one actually start? That is what I am trying to understand. The Minister may well have explained this—forgive me if he has—but I do not get a flavour for what the big difference is between this one and the existing one. What would he see as the big positive change?
My last question is a more general one. I have not counted the non-government amendments that have come forward, yet—despite having on this side, and even part of that side, combined brains the size of a planet, excluding mine—the Government have not seen one amendment worthy of thinking, “Yes, that could be useful and might be something that could improve the Bill.” I just ask the Minister before the end of the year—and I wish him and the Bill team a very enjoyable Christmas and break—why has none of the brainpower on this side has been worth taking notice of in terms of the Bill going forward?
Baroness Blake of Leeds (Lab)
I shall be very brief. There are many aspects of this that are to be welcomed, but I am just intrigued. The Minister mentioned the section on finances. I am concerned about the capacity of the lead assessors and professional bodies to do this work, with particular reference to the intention to expand the scheme to, I think he said, small and medium-sized enterprises. I understood that it was medium-sized: I do not know quite where the definition lies, which would also be interesting. That is a major expansion, and I wonder whether an assessment has been made of how many additional businesses we could be talking about, and how the work is going to be done in those circumstances.
Lord Callanan (Con)
Let me respond first to the final point of the noble Lord, Lord Teverson. He and I know each other well; I have taken a number of Bills through this House, and I think that if he talks to the Official Opposition as well, he will find that I have a reasonable record of listening carefully throughout Committee on Bills and, where I can, within the confines of government policy—he will know how the process works within government—I try to take on board, where possible, the concerns of the Committee. On some Bills, that does mean accepting opposition or Back-Bench amendments directly, and I have done so on a number of occasions.
I am not giving any commitments on some of the amendments we have been debating in this Committee but, as always, I will take careful note of comments, discuss them with the Bill officials and other departments where it is required to do so and, if there are matters on which we can move, then of course we will do so. We will seek to discuss these matters before Report and, as always, I am listening to comments that noble Lords are making and trying to assess the will of the Committee.
ESOS is an important scheme that was originally implemented on the back of the energy efficiency directive, but there were specific parts of it that were UK legislation. We did not directly copy the energy efficiency directive and we will seek to do the same with the new scheme as well. The BEIS Select Committee made recommendations on energy efficiency, including that ESOS should require reports to be made public and should mandate participants to take action to reduce energy review. There was also a post-implementation review of ESOS in 2020, which found that it was largely achieving its original aims and that businesses were unlikely to carry out energy audits unless mandated to do so, but that the scheme could be helpful in producing that. I think that covers most of the points that were discussed and I thank noble Lords for their attention.
Baroness Blake of Leeds (Lab)
The Minister did not respond to my question about the capacity and extent of extending the scheme.
Lord Callanan (Con)
It is not our intention to extend it to small businesses at the moment. We are obviously always concerned about the impact on small businesses in particular but, if these amendments are accepted, we would have the regulation-making powers to extend it to businesses of different sizes. I think it is very unlikely that we would ever extend it to small businesses but that would be the subject of secondary legislation, which would, of course, be debated in the House.
Baroness Blake of Leeds (Lab)
I raised that because I may have misheard what the Minister said in referencing small businesses. I understood that this extended to medium-sized businesses but, even so, that is a significant increase. Have the Government taken on board the additional workload and whether the capacity will be there, assuming that the work is taken on?
Lord Callanan (Con)
We are not proposing to extend it to medium-sized businesses at this stage. We would want to work with stakeholders on the detail of any potential future implementation, which would be subject to a further consultation and, ultimately, a cost-benefit analysis. This is a complicated area and there are a number of different views. We have had a couple of consultations on this. With these amendments, we are taking the powers to implement the scheme. Of course, the regulations would be subject to further debate in the House.
Lord Teverson (LD)
I just want to check something with the Minister. Are we saying that, if the retained EU law Bill became an Act, with its sunset clause of 2023, this scheme would still remain in force and there would be no legal ambiguity about it? Also, I believe that the next deadline for reporting is December 2023. Can I check that this still holds?
Lord Callanan (Con)
The noble Lord is asking for commitments on a different piece of legislation. When that Bill arrives in the House, we will no doubt have a full discussion on it. My understanding is that it is at Report stage in the House of Commons now. The sunset date is still set at 2023 although there are powers in that Bill to exempt particular pieces of legislation and Ministers have the option of extending the sunset date for pieces of retained law that it is not possible to update or review in the short time available. I am sure that we will have a long, involved discussion on the retained EU law Bill when it arrives in the House and that I will get déjà vu from the Brexit withdrawal Act, with many of the same people no doubt making many of the same points they made during that time.
Lord Callanan
“Application of energy savings opportunity schemes(1) ESOS regulations may provide for—(a) an energy savings opportunity scheme to apply to specified descriptions of undertakings;(b) specified descriptions of undertakings to be excluded from the application of the scheme.(2) ESOS regulations may make provision about circumstances in which—(a) two or more participants are to be treated for the purposes of the regulations as if they were a single participant;(b) an obligation imposed under the regulations on one participant is to be treated as if it had been imposed on a different participant.(3) The provisions of this Part relating to energy consumption apply to energy consumed by assets located, or activities carried on—(a) wholly or partly in the United Kingdom;(b) wholly or partly in an offshore area;(c) where subsection (4) applies, elsewhere.(4) ESOS regulations may make provision about circumstances in which the energy consumption for which a participant is, for the purposes of the regulations, responsible may include energy consumed by—(a) assets located elsewhere than in the United Kingdom or an offshore area, or(b) activities carried on elsewhere than in the United Kingdom or an offshore area.(5) The provisions of this Part relating to greenhouse gas emissions apply to the emissions resulting from energy consumption to which this Part applies whether such emissions occur in the United Kingdom, in an offshore area or elsewhere.(6) ESOS regulations may make provision about the attribution of energy consumption to participants, including in particular provision about the treatment for the purposes of the regulations of—(a) a participant’s consumption of energy generated by that participant;(b) energy consumption by a person over whom a participant has control or influence;(c) energy consumption shared between a participant and one or more other participants or other persons;(d) energy consumed by assets held on trust by or for a participant.(7) In this section, “offshore area” means—(a) waters landward of the seaward limit of the territorial sea adjacent to the United Kingdom,(b) any designated area within the meaning of section 1(7) of the Continental Shelf Act 1964, and(c) any area for the time being designated under section 41(3) of the Marine and Coastal Access Act 2009,and includes the places above those areas and the bed and subsoil of the sea within those areas.”Member's explanatory statement
This new Clause makes provision about the application of regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201.
“Requirement for assessment of energy consumption(1) ESOS regulations may require the carrying out of assessments of—(a) a participant’s energy consumption;(b) the greenhouse gas emissions resulting from that consumption.Such an assessment is referred to as an “ESOS assessment”.(2) The provision that may be made by virtue of subsection (1) includes in particular provision about—(a) the frequency of ESOS assessments;(b) the period or periods to which assessments must relate;(c) how assessments are to be carried out;(d) the information that must be provided or obtained for the purposes of an assessment;(e) the matters that must be taken into account in an assessment;(f) record-keeping in relation to an assessment.(3) ESOS regulations may make provision requiring an ESOS assessment, or specified parts of an ESOS assessment, to be carried out, approved or audited by a person appointed by a participant (referred to as “an assessor”).(4) Regulations made by virtue of subsection (1) may include provision enabling or requiring an ESOS assessment to include recommendations relating to energy savings or emissions reductions.(5) The provision that may be made by virtue of subsection (4) includes in particular provision about—(a) the matters about which recommendations may, must, or must not be made;(b) the matters that must be taken into account in making a recommendation;(c) the carrying out of a cost-benefit analysis before including a recommendation in a report.(6) “Cost-benefit analysis”, in relation to a recommendation or requirement to take action, means—(a) an estimate of the likely costs to a participant of acting in accordance with the recommendation or requirement;(b) an estimate of the energy savings or emissions reductions likely to result from such action;(c) an analysis of the costs referred to in paragraph (a) together with an analysis of the savings or reductions referred to in paragraph (b) and of any other benefits likely to arise.(7) ESOS regulations may make provision about the reporting of ESOS assessments, including in particular provision—(a) about the production of written reports;(b) about the form and content of such reports;(c) about the dissemination of such reports within an undertaking and between related undertakings.(8) ESOS regulations may make provision requiring a participant to notify a scheme administrator of specified matters relating to the participant’s compliance with requirements imposed by virtue of this section and may in particular include provision—(a) about the procedure for giving such notice;(b) about the form and content of notices;(c) about the publication of certain information contained within a notice;(d) requiring a participant to justify its choice of assessor.(9) ESOS regulations may provide for any requirement imposed by virtue of subsection (1)—(a) to be treated as having been complied with by a participant in specified circumstances, or(b) not to apply to a participant in specified circumstances.”Member's explanatory statement
This new Clause enables regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201 to make provision about the assessment of the energy consumption of participants in an energy savings opportunity scheme and of the greenhouse gas emissions resulting from that consumption.
“Assessors(1) ESOS regulations may confer functions on an assessor in relation to assessing, monitoring and reporting on compliance with requirements imposed by the regulations.(2) ESOS regulations may provide that a participant may only appoint as an assessor a person of a specified description.(3) A description may be specified for the purposes of subsection (2) by reference to any criteria, including by reference to—(a) a person’s competence, qualifications or experience;(b) a person’s inclusion in a designated list or register;(c) a person’s membership of a designated body;(d) a person’s participation in an designated accreditation scheme;(e) a person’s relationship to a participant.(4) For the purposes of this section, “designated” means designated by the Secretary of State or a scheme administrator in accordance with ESOS regulations.(5) A body may only be designated for the purposes of this section if the body is willing to be so designated.(6) ESOS regulations may make provision about—(a) the giving of designations for the purposes of subsection (4);(b) reviewing such designations;(c) circumstances in which such a designation may be removed;(d) maintaining and publishing a list of such designations.(7) ESOS regulations may make provision enabling a list or register of persons who may, or who may not, be appointed as an assessor for the purposes of subsection (2) to be maintained by—(a) a designated body;(b) a scheme administrator;(c) the Secretary of State.(8) ESOS regulations may confer functions or impose requirements on a person responsible for maintaining a designated list or register and may in particular include provision—(a) about the process for including a person in a list or register;(b) about the details to be included in a list or register;(c) for ensuring those details remain up to date;(d) about the publication of a list or register;(e) for the purpose of ensuring that a person included in a list or register continues to meet the criteria for appointment as an assessor;(f) for the purpose of ensuring the quality of ESOS assessments;(g) about the temporary or permanent removal of a person from a list or register in specified circumstances.(9) The regulations may make provision authorising a scheme administrator to share reports, notices or other information relating to an energy savings opportunity scheme with a designated body for the purposes referred to in subsection (8)(e) or (f).(10) ESOS regulations may make provision—(a) enabling the Secretary of State or a scheme administrator to give a direction relating to the maintenance of a list or register;(b) requiring a person responsible for maintaining a list or register to comply with such a direction.”Member's explanatory statement
This new Clause enables regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201 to make provision about the persons who may be required to carry out, approve or audit some or all of an assessment carried out for the purposes of an energy savings opportunity scheme; and about the maintenance of lists of persons who may be appointed for those purposes.
“ESOS action plans(1) ESOS regulations may require participants to produce ESOS action plans.(2) An “ESOS action plan” is a written statement of—(a) any action a participant proposes to take for the purpose of achieving energy savings or emissions reductions;(b) any energy savings or emissions reductions targets a participant intends to achieve.(3) Where an ESOS action plan does not include any proposals for taking such action or any such targets, provision made by virtue of subsection (1) may require that a participant include an explanation in the plan.(4) ESOS regulations may make provision about the production of ESOS action plans, including in particular provision about—(a) when a participant must produce a plan;(b) the period to which a plan must relate;(c) the form and content of a plan;(d) the matters that must be taken into account in producing a plan.(5) ESOS regulations may make provision about the publication of ESOS action plans.”Member's explanatory statement
This new Clause enables regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201 to make provision about action plans for achieving energy savings or emissions reductions.
“Action to achieve energy savings or emissions reductions(1) ESOS regulations may make provision—(a) imposing requirements (other than the requirements referred to in paragraph (b)) on participants so as to encourage them to—(i) take specified action for the purpose of achieving energy savings or emissions reductions, or(ii) achieve specified energy savings or emissions reductions, or(b) requiring participants to—(i) take specified action for the purpose of achieving energy savings or emissions reductions, or(ii) achieve specified energy savings or emissions reductions.(2) The kinds of action that may be specified for the purposes of subsection (1) are—(a) taking action in accordance with a recommendation made in an ESOS assessment;(b) taking action in accordance with an ESOS action plan;(c) taking any other action of a specified kind;(d) taking action to achieve a target included in an ESOS action plan;(e) taking action to achieve any other specified outcome;(f) adopting processes, practices or systems of a specified kind;(g) conforming to specified standards.(3) The provision that may be made by virtue of subsection (1)(a) includes in particular—(a) provision requiring a participant to report—(i) on whether the participant has taken the specified action, or on the steps taken by the participant towards doing so, or(ii) on whether the participant has achieved the specified energy savings or emissions reductions, or on the progress made by the participant towards doing so;(b) provision requiring a participant to provide an explanation for any of the matters mentioned in paragraph (a).(4) Provision made by virtue of subsection (1)(b) may include a requirement for a participant to report on action taken or energy savings or emissions reductions achieved.(5) Regulations made by virtue of subsection (1) may make provision—(a) requiring participants to produce and retain evidence;(b) about the verification of matters about which the participant has reported;(c) about the publication of reports.(6) ESOS regulations may—(a) specify the requirements imposed on a participant by virtue of subsection (1) by reference to a cost-benefit analysis;(b) specify circumstances in which a participant is required to take action;(c) impose a requirement to take a specified action on all participants in an energy savings opportunity scheme, or on all participants of a specified description.”Member's explanatory statement
This new Clause enables regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201 to require, or to impose requirements to encourage, participants in an energy savings opportunity scheme to achieve energy savings or emissions reductions.
“Scheme administration(1) ESOS regulations may appoint one or more public authorities to carry out functions with respect to—(a) administering an energy savings opportunity scheme;(b) monitoring compliance with, and enforcing requirements imposed by, the regulations.(2) A person appointed by virtue of subsection (1) is referred to as a “scheme administrator”.(3) The regulations may make provision for a scheme administrator to authorise another person to exercise specified functions of the scheme administrator.(4) Regulations made by virtue of subsection (1) may in particular include provision about—(a) the obtaining of information by, and the provision of information to, a scheme administrator;(b) the determination by a scheme administrator of information in default of its being provided;(c) the auditing and verification of information;(d) the keeping, production and inspection of records;(e) the determination by a scheme administrator of whether an undertaking is a participant in an energy savings opportunity scheme;(f) cooperation and information sharing between scheme administrators.(5) ESOS regulations may make provision imposing requirements on a participant relating to the provision of such facilities and services, including transport and accommodation, as may be necessary to facilitate the carrying out of any of the scheme administrator’s functions.(6) ESOS regulations may confer functions on a scheme administrator in relation to the publication of information relating to an energy savings opportunity scheme or its participants.(7) ESOS regulations may make provision—(a) about the giving of guidance by a scheme administrator or the Secretary of State in connection with the operation of an energy savings opportunity scheme;(b) requiring specified persons to have regard to such guidance.(8) ESOS regulations may make provision requiring the payment by participants to the scheme administrator of fees for or in connection with the carrying out by the scheme administrator of the scheme administrator’s functions.(9) ESOS regulations may confer a power on a national authority to require a scheme administrator to provide the authority with such information—(a) relating to an energy savings opportunity scheme, and(b) relevant to the exercise of the authority’s functions,as the authority requests.(10) In this section—“national authority” means—(a) the Secretary of State;(b) the Welsh Ministers;(c) the Scottish Ministers;(d) the Department for the Economy in Northern Ireland;“public authority” means a person with functions of a public nature.”Member's explanatory statement
This new Clause enables regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201 to make provision about the administration of energy savings opportunity schemes.
“Enforcement, penalties and offences(1) ESOS regulations may authorise a scheme administrator—(a) to require the production of documents or the provision of information by any person;(b) to question the officers of an undertaking;(c) to enter premises with a warrant;(d) to inspect premises and anything on premises and when doing so—(i) to take measurements, photographs, recordings or copies;(ii) to seize documents or records;(iii) to require any person at the premises to provide facilities and assistance to the extent that is within that person’s control;(e) to issue a notice requiring a participant to take steps specified in the notice for the purpose of—(i) demonstrating compliance with requirements imposed by or under ESOS regulations, or(ii) remedying a failure to comply with such requirements.(2) ESOS regulations may make provision requiring a participant to give notice to a scheme administrator where the participant is unlikely to comply, or has failed to comply, with a requirement imposed by or under the regulations.(3) ESOS regulations may provide that a person is liable to one or more penalties in respect of—(a) a failure to comply with a requirement imposed on the person by or under the regulations;(b) making a false or misleading statement in connection with an energy savings opportunity scheme.(4) The provision that may be made by virtue of subsection (3) includes provision—(a) for the publication of specified information relating to the failure to comply;(b) authorising a scheme administrator to impose a financial penalty.(5) Where by virtue of subsection (3) ESOS regulations provide for the imposition of a financial penalty, the regulations—(a) must provide for the penalty to be paid to the scheme administrator or such other person as the regulations may specify;(b) may specify the amount of the penalty or provide for the amount to be determined by the scheme administrator in accordance with the regulations;(c) may provide for the payment of a further penalty (of an amount specified by or determined in accordance with the regulations) for each day on which the failure to comply is not remedied;(d) may specify how the penalty may be recovered.(6) ESOS regulations may create offences relating to energy savings opportunity schemes.(7) Regulations made by virtue of subsection (6) may provide for an offence created by the regulations to be triable—(a) only summarily, or(b) either summarily or on indictment.(8) Regulations made by virtue of subsection (6) may provide for an offence created by the regulations to be punishable with a fine.(9) Regulations may—(a) provide for defences against offences;(b) make provision about matters of procedure and evidence in proceedings relating to offences;(c) include provision about the liability of a director, manager, secretary or other officer of a body corporate, or a partner of a Scottish partnership, or of a person purporting to act in such a capacity, where an offence under the regulations—(i) is committed with the consent or connivance of such a person, or(ii) is attributable to neglect on the part of such a person.(10) References in this section to a scheme administrator include references to a person authorised by a scheme administrator in accordance with provision in ESOS regulations made by virtue of section (Scheme administration)(3).”Member's explanatory statement
This new Clause enables regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201 to make provision for the enforcement of those regulations.
“Appeals(1) ESOS regulations may confer rights of appeal against—(a) decisions made in relation to an energy savings opportunity scheme, and(b) penalties imposed or enforcement action taken for failure to comply with the requirements of the regulations.(2) The regulations must specify the court, tribunal or person who is to hear and determine an appeal.(3) The provision that may be made by virtue of subsection (1) includes, in particular, provision about—(a) the grounds on which an appeal may be made;(b) the procedure for making an appeal (including any fee which may be payable);(c) suspending the effect of any decision, penalty or enforcement action pending determination of the appeal;(d) the powers of the court, tribunal or person to which an appeal is made.”Member's explanatory statement
This new Clause enables regulations made under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201 to make provision about appeals.
“ESOS regulations: procedure etc(1) Before making ESOS regulations, the Secretary of State must consult—(a) such persons likely to be affected by the regulations as the Secretary of State considers appropriate;(b) to the extent that the regulations contain provision within Welsh devolved competence, the Welsh Ministers;(c) to the extent that the regulations contain provision within Scottish devolved competence, the Scottish Ministers;(d) to the extent that the regulations contain provision within Northern Ireland devolved competence, the Department for the Economy in Northern Ireland.(2) Subsection (1) may be satisfied by consultation before this section comes into force (as well as by consultation after that time).(3) ESOS regulations may make consequential provision including provision amending or repealing primary legislation.(4) ESOS regulations may create exceptions to any requirement imposed by the regulations.(5) ESOS regulations may—(a) make provision about application to the Crown;(b) to the extent that they bind the Crown, restrict or modify the application of the regulations.(6) ESOS regulations containing any of the following (with or without other provision) are subject to the affirmative procedure—(a) provision extending the descriptions of undertaking to which the regulations apply;(b) provision made by virtue of section (Action to achieve energy savings or emissions reductions)(1)(b) of a kind not previously provided for in ESOS regulations;(c) provision conferring on a scheme administrator enforcement powers of a kind not previously provided for in ESOS regulations;(d) provision creating penalties;(e) provision increasing the amount of financial penalties by more than is necessary to reflect changes in the value of money;(f) provision creating an offence or increasing the fine for an existing offence;(g) provision for the payment of a new fee;(h) provision amending or repealing primary legislation.(7) Any other ESOS regulations are subject to the negative procedure.(8) In this section,“primary legislation” means—(a) an Act,(b) an Act of the Scottish Parliament,(c) a Measure or Act of Senedd Cymru, or(d) Northern Ireland legislation.”Member's explanatory statement
This new Clause makes provision about the procedure for making regulations about Energy Savings Opportunity Schemes under the first of the new Clauses in the name of Lord Callanan inserted after Clause 201.
“Directions to scheme administrators(1) The Secretary of State may give directions to a scheme administrator.(2) The power to give directions under this section includes a power to vary or revoke the directions.(3) A scheme administrator must comply with any direction given to it under this section.”Member's explanatory statement
This new Clause enables the Secretary of State to give directions to a scheme administrator under an Energy Savings Opportunity Scheme.
“Financial assistance to scheme administrators and participants(1) The Secretary of State may give, or arrange for the giving of, financial assistance to—(a) scheme administrators;(b) participants.(2) “Financial assistance” means grants, loans, guarantees or indemnities, or any other kind of financial assistance.(3) Financial assistance under this section may be given subject to such conditions as may be determined by, or in accordance with arrangements made by, the Secretary of State.”Member's explanatory statement
This new Clause enables the Secretary of State to provide financial assistance to scheme administrators under, and participants in, an Energy Savings Opportunity Scheme.
“Interpretation(1) In this Part—“assessor” has the meaning given by section (Requirement for assessment of energy consumption)(3);“cost benefit analysis” has the meaning given by section (Requirement for assessment of energy consumption)(6);“emissions reduction” has the meaning given by section (Energy savings opportunity schemes)(5);“energy consumption” has the meaning given by ESOS regulations;“energy saving” has the meaning given by section (Energy savings opportunity schemes)(4);“energy savings opportunity scheme” has the meaning given by section (Energy savings opportunity schemes)(2);“ESOS action plan” has the meaning given by section (ESOS action plans)(2);“ESOS assessment” has the meaning given by section (Requirement for assessment of energy consumption)(1);“ESOS regulations” means regulations made under section (Energy savings opportunity schemes)(1);“greenhouse gas” has the meaning given by section 92 of the Climate Change Act 2008;“participant” means an undertaking to which an energy savings opportunity scheme applies;“related undertaking” , in relation to a participant, means a fellow subsidiary undertaking of, or a group undertaking in relation to, that participant;“scheme administrator” has the meaning given by section (Scheme administration)(2);“specified” means specified in ESOS regulations;“undertaking” , “group undertaking” and “fellow subsidiary undertaking” have the meanings given by section 1161 of the Companies Act 2006.(2) For the purposes of this Part, provision—(a) is within Welsh devolved competence if it would be within the legislative competence of Senedd Cymru if it were contained in an Act of the Senedd (ignoring any requirement for the consent of a Minister of the Crown imposed under Schedule 7B to the Government of Wales Act 2006);(b) is within Scottish devolved competence if it would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament;(c) is within Northern Ireland devolved competence if that provision—(i) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and(ii) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.”Member's explanatory statement
This new Clause makes provision about the interpretation of the new Clauses in the name of Lord Callanan to be inserted as a new Part 9A after Clause 201.
Energy Bill [HL]
Monday 16th January 2023
(1 year, 10 months ago)
Grand CommitteeRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-VI(a) Amendment for Grand Committee (Supplementary to the Sixth Marshalled List) - (13 Jan 2023)
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
Good afternoon, and welcome to the Grand Committee. I should remind the committee that if there is a Division in the Chamber while the committee is sitting it will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Clause 203: “Core fuel sector activity” and other key concepts
Amendment 213
Lord Ravensdale
Lord Ravensdale (CB)
My Lords, I rise to move this amendment in place of my noble friend Lady Worthington—who has just arrived, so I will leave it there.
Baroness Worthington (CB)
My Lords, I must start with an apology. My train was delayed for 45 minutes and many others were cancelled, so I am just about here on time. I thank my noble friend Lord Ravensdale for stepping in just as we started.
I am delighted to be here to speak to the amendments in this group which relate to the part of the Bill that seeks to take further powers to ensure that we have fuel resilience in our country. Amendments 213 to 219 seek to extend the scope of the Government’s proposals so that we have a more inclusive definition of fuel resilience beyond oil and liquid biofuels that includes gas.
The measures in this clause are a set of broad powers to allow the Government to ensure that economic activity in the United Kingdom is not adversely affected by disruption to core fuel sector activities, reducing the risk of emergencies affecting fuel suppliers. They give powers to the Government to issue directions for the purposes of managing risk, reducing potential adverse impacts and facilitating recovery from disruptions to core fuel sector activities.
The powers given to the Government by the Bill are extremely wide and potentially concerning, but I will come on to that. In essence they allow the Secretary of State to direct any core fuel sector participant to do anything for these purposes. More reasonably, they also allow the Secretary of State to require information and that certain types of incidents be reported. Leaving aside the wide-ranging nature of the powers for now, we have tabled these amendments to inquire why the definition of fuels excludes gas from the resilience proposals. I am sure I will be told that a draft version of the Bill was shared with the BEIS Select Committee, that no reference was made to gas as a core fuel and no complaints were made at that point. However comments from the committee in November 2021 were informed by the fuel shortages of autumn 2021 and since then we have seen a sharp spike in gas prices and some constraints on the supply of gas, which were exacerbated by the invasion of Ukraine. I should note that in 2021 the UK imported around 60% of its gas for use in all sectors. Although we have North Sea gas, we are by no means self-sufficient, so interruptions to fuel supplies raise problems. Gas is the sector where we remain very exposed—but that is certainly not true of biofuels. If we compare the two, the volumes are completely different and it seems odd to include biofuels but exclude gas.
Helen Thomas wrote last week in the Financial Times:
“The Rough offshore gas storage facility, partially reopened … by Centrica”
last year after having been closed for five years,
“has been steadily withdrawing gas … At about 54 per cent full … it is far from the 80 per cent-plus levels on the continent. And European storage capacity … is about 25 per cent of annual consumption compared with less than 1 per cent for the UK”.
That is equivalent to only three days, so we can see how tight some of these margins might be if there are disruptions. That could have left the country very short, especially had this winter’s weather been harsher than it has been.
Rough is not being refilled because the facility is being operated on a merchant basis rather than the strategic one which the Government might perhaps prefer. Whereas Governments in Europe can mandate storage, here, we are relying on Centrica to find a place where future prices make sense to it commercially to take storage into Rough, and it is of course looking for a decent return rather than strategic fuel resilience. The journalist added that no one thinks that storage operated on this basis will provide security of supply, and I tend to agree. I would be interested in the Minister’s thoughts on this question and on what more the Government could and should be doing to include gas in their fuel resilience strategy and indeed in this legislation.
It seems sensible that we would want the same powers, should we need them, to issue directions and to require reporting of incidents and the provision of information. Had we experienced a more severe winter, we could have come seriously unstuck, and I would like to understand how the Government would have intervened to ensure that critical businesses and households were prioritised. That is obviously an issue of some concern to the Government, given that these powers are being taken. Do the Government already have the necessary powers? If so, where are they and how would they work? I would be interested to hear more about that.
I have tabled Amendments 220 and 221 because I am seeking clarification and expressing concern about the wide-ranging nature of the types of financial assistance the Bill will allow. Certain types may be required, but why does the Secretary of State need powers to make grants, effectively, to firms involved in refining, transporting and storing fuels that are commercially very lucrative? We have all seen the headlines about how much money these companies are making, and it seems odd to take such a broad power, which could mean that public money was being spent with no requirement to pay it back to the public purse. It seems unnecessarily broad, providing the equivalent of a grant, and I would like to understand the justification for it. When looking ahead to the transition to net zero, we have described how we need to provide more public money, but it is right to say that investors in the current fossil-fuel-based energy system should have enough resources to ensure that they can meet regulations set by government without the need for further public money. That is a point that needs answering.
This is also arguably a sector that we would expect to go into managed decline as we look to electrify most of the demand being met by the current provision of these fuels, so it may be appropriate for assistance to be given. Transition loans, guarantees or even the Government taking a stake could be required to make the transition happen swiftly and in an orderly fashion, but simply giving out public money with no strings attached seems rather reckless. I would like to understand the specific circumstances and conditions under which a grant would be appropriate. If that cannot be dealt with in detail here, I would be happy to receive a letter outlining a case study that could justify this use of public money, given the economic climate we find ourselves in.
Finally, Amendment 222 is a modest proposal relating to the reporting of such financial assistance to Parliament. I could not see any reference in the Bill to the notification of Parliament in relation to these financial forms of assistance—only in relation to the scrutiny of statutory instruments or guidance. Is it really the Minister’s intention that this assistance would not be made public until BEIS’s accounts are published, which would obviously be after the horse has bolted and we would have to comb through the footnotes to understand what forms of financial assistance had been given under Clause 222? I feel quite strongly that, if it is important enough to have its own separate regime, it should be important enough to brief Parliament and there should be a protocol for notifying us of the intention to use these powers.
I have drafted an amendment that I hope the Minister will accept. If not, I look forward to assurances from the Dispatch Box about how and when Parliament will be notified before the expenditure is committed. With those remarks, I beg to move.
Lord Lennie (Lab)
My Lords, we on these Benches are generally supportive of the amendments in the name of the noble Baroness, Lady Worthington, but I would like to ask the Minister about some specifics.
Three key powers are taken under the Bill: the direction-making power, the information power and the financial assistance power. I am particularly interested in the information power. The government fact sheet states:
“The information required from industry will be limited to what is necessary and Government will work with industry to minimise any administrative burden incurred.”
What practical protections will be in place to ensure that this information is limited in this way, and what, in practice, is meant by:
“Government will work with industry to minimise any administrative burden incurred”?
I would welcome a response to those questions. If the Minister cannot answer today, writing will do.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Baroness, Lady Worthington, for her amendments. I start by reminding noble Lords that this part of the Bill was published in draft and scrutinised by the BEIS Select Committee.
Amendments 213 to 219 seek to include gas under the definitions of core fuels and core fuel sector activity. These measures broadly seek to address threats to the security of fuel supply by introducing powers to ensure fuel supply resilience for the core fuel sector. They capture companies involved in oil-based products, which include heating oil, liquefied petroleum gas and gas oil, also known as red diesel.
I understand the reasoning for gas to be included in these definitions, given that it is utilised for heating and cooking in homes as well as fuelling power stations that provide electricity and contribute to overall energy security. Some forms of gas are, however, already included in this measure, such as liquefied petroleum gases—propane and butane.
I believe that my noble friend the Minister has previously written to the noble Baroness to highlight that the way gas is transported, handled and stored is different from oil, which operates under a separate regulatory regime. For the benefit of your Lordships’ House: gas is transported and handled across the country through a network of pressurised pipelines that connect gas terminals to the distribution network, and this infrastructure is owned by the national grid. I also highlight that the measures in the Bill are limited to the resilience and continued operation of the core fuel sector, which we traditionally refer to as the downstream oil sector.
The inclusion of gas generally would significantly widen the scope of this part and bring a wide range of stakeholders who are already heavily regulated into the scope of the Bill. The level of regulation and resilience in place for the gas industry is significantly higher than that of the oil sector and I caution against adding further regulation to the sector of the kind outlined by these amendments.
I assure the noble Baroness that the gas system is resilient and we have a highly diverse source of gas supply in Great Britain to rely on. It includes pipelines from the UK and Norwegian continental shelves, interconnection with the European continent and three liquefied natural gas—LNG—terminals, providing Great Britain with one of the largest LNG import infrastructures in Europe. I am sure the noble Baroness is aware that last summer the UK was responsible for providing a significant amount of natural gas to mainland Europe through this land bridge.
National Grid Gas has robust, long-standing emergency procedures in place for the extremely unlikely event of an emergency on the gas network. The Government continue to work closely with Ofgem, National Grid Gas and other key industry organisations to monitor the gas supply horizon and prepare for the winter. The overarching aim is that fuel supply is maintained as we transition to a net-zero economy, and I assure noble Lords that the department is also exploring the longer-term options for gas storage and other clean energy, such as hydrogen.
I turn now to Amendments 220, 221 and 222, which relate to the financial assistance measures under Clause 222. It is important to highlight that the Government currently have no dedicated powers to enable spending for the purpose of core fuel resilience. I must emphasise that existing spending powers are limited in terms of their application. Current powers do not apply to providing financial assistance for the purpose of improving or maintaining the resilience of the core fuel sector.
Baroness Worthington (CB)
I thank the noble Baroness for her response. I will indeed study her reply in detail; I am grateful for the information provided.
In the recently published net-zero review by Chris Skidmore, there was a statement that we would review the regulatory regime to make sure that it is fit for a net-zero transition. I wonder if some of the points made about how we traditionally define core fuels need perhaps to be thought about in the light of the transition that we are about to go through. It is clear that rising electrification and reducing demand for chemical fuels could cause unexpected consequences and shortages in the future. In fact, if we had had a different set of circumstances this winter, with less wind, more cold snaps and greater demand for gas across the continent—where it has been unusually warm—we could have found ourselves in a situation where we may well have had a very efficient gas transportation network owned by National Grid, but would have been reliant on access to a sufficient source of fuel to be transported through the network.
That is where storage comes in, which is why the focus has been on that rough storage site and what would now appear to be the rather reckless commercial decision not to keep that as part of our infrastructure. That is what I am trying to get at: are we seeing resilience as a holistic system-wide measure? It is clear that these things all interrelate. We cannot take the traditional view that there is a downstream fuel sector that relates just to oil and transportation needs and not consider chemical fuels being used for other vital sources of security and health—heating our homes, keeping ourselves safe and well through the winter months and other needs throughout the year.
I thank the noble Baroness for her response, but I would like to reconsider. Of course, at this stage I will not press those amendments.
On the question of public money, I am somewhat reassured that there “may” be a requirement to make it public that this sort of assistance is being granted, through transparency rules. I will look at them to interpret that “may”, because it is a rather weak word. It would be good if it was a requirement. These are potentially untrivial amounts of money going to a sector which, as has been described, is not short of resources to meet its needs. We need to be very careful in taking these broad powers.
If anything, the noble Baroness has worried me slightly further in saying that this is a non-exhaustive list and that it could happen anyway without these powers. I will give that further consideration and definitely look at the examples of housing and regeneration, but we are talking about a unique sector that is tied to our health, prosperity and security. We need to take a systems approach to resilience—the interconnectedness between all the different fuels and the electricity that will be a growing part of our energy system as it replaces these fuels over time. With thanks again for the response of the noble Baroness, I beg leave to withdraw the amendment.
Lord Callanan
“Chapter 1Offshore wind electricity generationMeaning of “relevant offshore wind project”In this Chapter, “relevant offshore wind project” means a project involving the planning, construction, operation or decommissioning of—(a) a generating station in the UK marine area, that generates electricity from wind, or(b) infrastructure, in the UK marine area, used or intended for use in connection with a generating station within paragraph (a).”Member's explanatory statement
This new Clause, to be inserted as the beginning of a Chapter 1 for Part 11 of the Bill about offshore wind electricity generation, defines what is meant by “relevant offshore wind project”.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I will also speak to Amendments 222ZB, 222ZC, 222ZD, 222ZE, 222ZF, 242I and 246A in my name. They will deliver on commitments we made in the British Energy Security Strategy to support the simplification of the offshore wind consenting process while continuing to protect our marine environment and meet our international conservation obligations.
The UK is a leader in offshore wind—we have the most installed capacity in Europe, as the Committee will be bored of hearing me say. Our ambition is shared across the devolved Administrations and we recognise the key role of Scottish projects in particular, as well as Welsh projects in the Celtic Sea. We will continue to work with the devolved Administrations as the Bill progresses through Parliament and as we develop subsequent secondary legislation to ensure a streamlined and efficient consenting process across the whole of the United Kingdom.
Amendment 222ZA sets out definitions for the subsequent clauses and Amendment 222ZB allows the use of strategic compensation measures to discharge obligations under the habitats regulations, the Marine and Coastal Access Act 2009 and the Scottish and Northern Irish equivalents. If all feasible options to avoid, reduce or mitigate any adverse impact on protected sites have been exhausted, the consenting authority may decide that an offshore wind project is in the public interest. However, it must first satisfy itself that sufficient compensatory measures are taken or secured before granting consent.
Identifying ecologically robust and securable compensatory measures in the marine environment frequently causes delays to project consent. To date, these measures have been delivered on a project-by-project basis. This is likely to become increasingly challenging. This amendment will enable earlier identification and agreement of suitable compensatory measures on a larger scale across multiple projects, which will help to support quicker decision-making on consents. Ministers in the devolved Administrations will retain their current roles in consenting. This amendment will ensure that they are also able to agree and secure strategic compensatory measures to satisfy compensation obligations for projects to which they consent.
Amendment 222ZC will enable the creation, operation and management of one or more marine recovery fund. The funds, once established, will be an optional mechanism for offshore wind developers to discharge a specified consenting condition that will help to compensate for damage to a protected site by paying into the fund. The Secretary of State will be able to delegate functions connected with the marine recovery fund. It is our intention to delegate the functions necessary for devolved Administrations to operate their own funds where appropriate, so that their Ministers may choose to use a marine recovery fund to undertake the delivery of measures related to projects to which they consent.
Amendment 222ZD will help to speed up the consenting process by streamlining assessments, including the habitats regulations assessment process. It will do this by enabling future regulations to address environmental protection of all protected marine sites early enough in the pre-application planning process to inform adequate and ecologically robust mitigation measures. This amendment also allows the Government to consider enabling developers to provide compensatory measures that improve wider marine ecosystems. I must emphasise that this broader approach would be considered only where developers have already avoided and mitigated their environmental impacts, and where like-for-like measures are not possible. Consent decisions will remain subject to advice from Defra’s statutory nature conservation bodies and their equivalents in the devolved Administrations.
Amendment 222ZE requires the Government and the devolved Administrations to consult each other, as well as statutory nature conservation bodies and marine regulatory bodies, on changes to the process prior to making regulations on environmental assessments.
In addition to Amendment 222ZA, Amendment 222ZF sets out some key definitions for the purposes of these new clauses. Amendment 242I ensures that the provision about affirmative procedures in the UK Parliament does not apply to regulations made by the Scottish Ministers under Amendment 222ZD, which will instead be subject to affirmative procedure in the Scottish Parliament. Amendment 246A sets out the commencement date of the clauses in this chapter. With that, I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, it would be churlish of me not to congratulate and thank my noble friend the Minister and the department on bringing forward the amendments to which he just referred. He promised these at Second Reading and they form part of a package, from April 2020, in the British energy security strategy. So far, so good. However, as I mentioned at Second Reading, in the EU Energy and Environment Sub-Committee some two or three years ago we took evidence to the effect that there should be a moratorium, particularly given the scale of the programme, the numbers involved and the massive area to be covered by offshore wind development; as my noble friend said, that is a very ambitious programme. However, the government amendments are flouting the mitigation hierarchy that I am sure he would wish to sign up to. The amendments seem to be proceeding to the end stage, which is only meant to be a last resort in law: that is, mitigation and compensation.
Baroness Young of Old Scone (Lab)
My Lords, I shall speak to the government amendments, the accompanying policy statement and Amendment 242D in the name of the noble Baroness, Lady McIntosh.
There is absolutely a need for a real balance when it comes to the speed of getting both onshore and offshore wind online. There is no point in reaching net zero if behind us is the other threat that the ecosystems on which we all depend have started to collapse. The Environmental Audit Committee in the other place has already said that the planned fourteenfold increase in offshore energy production risks sensitive marine and onshore environments, so we really have to look carefully at how we get the balance between the two drivers. I share the view already put that some of the safeguards in the policy statement need to be toughened up and put in primary legislation, in a Bill.
The amendments give Ministers pretty broad powers. Although I am sure this Minister is wholly trustworthy, Ministers come and go. In common with the noble Baroness, I ask the Minister to support some strengthening of his amendments. First, there should be the clear presumption against development in protected areas, particularly marine protected areas, by avoiding those at all costs for renewable energy developments, rather than relying on shutting the stable door after the horse has gone by providing compensation. The mitigation hierarchy that the noble Baroness, Lady McIntosh, outlined is fundamental to that. Its principles are, first, avoid; if you cannot avoid, then reduce and mitigate impact; and then, only as a very last resort, compensate. That needs to be enshrined in law, and I look forward to the Minister’s response on where the mitigation hierarchy is in legal terms.
There is a message that the Government need to give to developers of offshore and onshore wind and associated infrastructure: that, to be honest, avoiding protected areas, particularly MPAs, means avoiding hassle. If it looks too easy to focus on protected areas as part of the area available without too much hassle because that is all downstream, developers will not make the effort.
The second issue is compensation and making sure that it does not damage the coherence of the marine protected area network. There is an Environment Act target to have 70% of MPAs in a favourable condition by 2042; they will not be in a favourable condition if they have wind farms on them. We need a joining up of government, so that the left hand and the right hand are aware of what each is doing. Distressingly, we see that not happening from time to time in the relationship between BEIS, DLUHC and Defra. Perhaps we can urge the Minister to get the rest of government to walk, talk and chew gum at the same time. We need to make sure that there is a process for measuring the intentions of the compensation, reviewing that periodically and, if it is not working, doing something different.
The third thing that needs to be toughened is the clause—of which I am deeply suspicious—that makes it possible for Ministers to override the protections of the habitats regulations and the Marine and Coastal Access Act. I understand that the Minister will say that the imperative reason of the overriding public interest test will be used and compensation will be available, but that is no substitute for the statutory protections that have revolutionised biodiversity and ecosystem protection over the last 30 years. It would be greatly detrimental and, in my view, the thin edge of the wedge if we saw that diminution happening. We are going to have this argument in bucketloads on the retained EU legislation Bill. The reality is that these pieces of legislation have proved very effective and anything that undermines them would be a backward step. As I have said before, policy statements and ministerial commitments come and go.
Can the Minister tell us how his amendments can be strengthened to give statutory assurances that there will be no weakening of protection for designated marine sites? There is a lot of space and a lot of wind out there at sea; putting wind power sites in areas not long designated for protection—it is comparatively recently that all these marine protected areas have been declared—is not something we should see going forward. Can the Minister assure us that he will consider these concerns and come back with a way forward before Report?
Baroness Worthington (CB)
My Lords, I congratulate the Government on bringing forward these amendments to help us to reduce the delays that are often commonplace when it comes to investment in our offshore wind industry, which has been one of the crown jewels of the UK’s energy transition. We can all look back and say that it was a wise group of civil servants and Ministers who understood the sheer potential of that transition to a wind-based economy in the North Sea. Many of the jobs that have shifted from our offshore oil and gas sector in maintaining the oil rigs are now being deployed in the maintenance of this very important part of our new and clean energy system.
It is very rare that I deviate from the noble Baroness, Lady Young, in my belief in preserving the wildlife, countryside and marine environment that we all enjoy—indeed, I started my career in conservation and it is a very deeply felt passion of mine. I therefore have sympathy for the amendment from the noble Baroness, Lady McIntosh of Pickering, but—and this may seem a little heretical, I am afraid—I feel that we must take a systematic and holistic view of this. If we are going to start enshrining mitigation hierarchies in legislation, the very first place that we should apply those is to the fossil fuel industry, which this Bill largely concerns itself with. It would be disproportionate to introduce this merely for offshore wind in this part of the Bill. We should be seeking to avoid and mitigate before we compensate—certainly before we give money out to the oil and gas industry for fuel security reasons. It would be disproportionate to simply apply it to the offshore wind industry which, let us be honest, is part of the solution.
If we care about the marine environment and marine mammals specifically, the damage being wrought on those species and habitats from the existing fossil-fuel-based energy system should be first and foremost in our minds. We have no real evidence for why cetaceans are beaching. The noble Baroness, Lady McIntosh of Pickering, infers that it could be because of wind farms. We do not have evidence of that; what we have evidence of is the build-up of toxic chemicals in these mammals.
Baroness Young of Old Scone (Lab)
I just want to address the Minister on what the noble Baroness has just said. She has made an admirable case for marine protected areas being protected from all sorts of things. The opportunity in front of us is to do that job as the legislation is going through on offshore wind. I absolutely make the case that saying, “Let me be good, but not yet” is not in the interests of marine conservation and some of the hugely important ecosystems that are under threat from all sorts of other things. If we wait for all of them to be addressed before addressing offshore wind, we will wait for ever, and they will be gone.
Baroness Worthington (CB)
Since we are having this conversation, it is not a question of putting off these measures but of proportionality and ranking those impacts according to the scale on which they are occurring today, taking into account the positive impacts of offshore wind on no-take zones and the artificial reefs they create, as well as the advances in technology that mean that floating platforms will be more common.
Then there is subsea cabling. The noble Baroness, Lady McIntosh, did not pick up on the fact that the 30% loss she cited is very old data. We do not see those losses now, with modern technology. Subsea cabling will be the future of connections into existing places where there are already reinforced grids, thanks to the closing down of thermal plants. I do not see that we should be unduly raising issues and putting more and more barriers in the way of clean technologies delivering great reductions in emissions, as well as providing energy security and jobs. I support the Government’s amendments and I am sorry that I cannot be more supportive of the amendment proposed by the noble Baroness, Lady McIntosh of Pickering.
Lord Teverson (LD)
My Lords, before I start, as we may talk about energy storage later, I declare my interest as a director of Aldustria Limited, which is into energy storage. I am also chair of the Cornwall and Isles of Scilly Local Nature Partnership.
First, I congratulate the Government on the Chris Skidmore report that has just come out. It is one of the best reports sponsored by the Government, and I look forward to hearing their reaction to its recommendations. There is some really good stuff in there that must be applauded.
Generally, I welcome these amendments. We know that we have to decarbonise our energy and, in particular, our electricity system; the Government have committed to do so completely by 2035. To do that, we have to make sure that we can deliver. Probably pretty well everybody agrees that methods of implementation, planning and getting wind farms into the gestation period all need to happen quicker, but we also know that there is a biodiversity crisis.
I say to the noble Baroness, Lady Worthington, that I deal a lot with the Wildlife Trusts, and it is about nature recovery, not stopping stuff. No other organisation is more into pointing out that we have been in retreat, we continue to retreat and that we need to reverse that—and the ways of doing so, primarily through agriculture but also, in the marine environment, various other ways as well.
I get a bit involved in the Celtic Sea development, which, I am pleased to say, the Minister mentioned. Down in the south-west we have been saying that there needs to be a holistic look at the effects of that programme on the environment—marine and terrestrially, where it comes on board—and that the research needs to be done in advance. That should quicken it, in that it is done in one whole system rather than by individual planning applications for individual farms or floating facilities, and so on. Through that, there is not necessarily a conflict between the two.
I very much support the exposition of the noble Baroness, Lady McIntosh, about the hierarchy, because I am certain that, as we know from onshore and things we have talked about before, off-setting as we knew it is an excuse, mainly for developers—I declare that I have a developer role. It is sometimes too easy to push the problem somewhere else and not confront it where you are actually causing the damage. One of the problems is enforcement and making sure that those things actually happen.
As I said, I generally welcome these amendments and trying to speed up the process, which is necessary, but, like the noble Baroness, Lady Young, I am concerned that we need to make sure that the powers given under these amendments are restricted to environmental improvement, in that they do not detract from that. I am particularly interested in how this compensation might work. The mitigation hierarchy absolutely needs to be put in primary legislation, but I want to understand from the Minister whether it is the Government’s intent that mitigation elsewhere should be a last resort. That is the fundamental question, and I would be very interested to hear the answer.
On the voluntary marine recovery fund, the idea of a voluntary fund seems very strange to me. What does it mean? I would like to understand from the Minister whether it means that, ultimately, it is voluntary. Is it voluntary for a developer that cannot do mitigation as we would all wish to contribute to this fund, or is it, at that point, compulsory? I do not get it. If it is voluntary, I am heavily concerned.
In addition, who will manage it in England? I understand well and I agree that it should be farmed out to the devolved authorities, but who will be the manager of that fund? I assume that it would involve rather large amounts of money, so how it is managed will be particularly important.
I also understand, although I do not think it is in the amendments, that there will be offshore wind environmental standards; I think that is in part of the briefing. I presume that these will have to be done by Defra. Defra is absolutely useless at doing environmental standards anything like on time. It has the whole of the EU repeal legislation Bill to do; I think the Defra Minister, Richard—
Lord Teverson (LD)
Yes; the noble Lord, Lord Benyon, said that there were 1,200 pieces of legislation. I am therefore very concerned about how those standards will be produced and when. Perhaps the Minister could just give us an idea of those deadlines. I have a concern about enforcement generally but I am sure that the Minister will say, “They will be enforced.”
I have a further question in this area, which is around making sure in future that we have much better co-ordination on new developments and sharing infrastructure. I know this has come up in the Bill, but can the Minister assure us that this will be much better managed than in the past and that it will be a network rather than point to point? I again congratulate the Government on their agreement with the EU last month on the North Seas Energy Cooperation forum, which the UK has now joined. That makes complete sense to me. I will be interested to hear from the Minister what the next step on that co-operation is.
Baroness Blake of Leeds (Lab)
I start by thanking the Minister for his full explanation of the amendments in this group. I also thank all those who have contributed to the discussion so far and I very much look forward to the answers the Minister will give to the relevant questions that have been asked.
Obviously, the Government’s ambition of delivering up to 50 gigawatts of offshore wind by 2030, including up to five gigawatts of innovative floating offshore wind generation, is to be welcomed. However, as we have heard, this is a challenge in terms of delivery and obviously, it poses questions about the impact on the wildlife in the areas where these installations will go.
I understand that Denmark is well advanced in this respect, particularly on innovative floating offshore developments. Are we in dialogue with Denmark about its experience in this area? What has it learned, and does it have the same measures in place? It does not seem that we need to be setting this out if some of these challenges have already been met or understood, or indeed through implementation. I know that one of Denmark’s real concerns is moving the energy off the island and how that will be achieved, but also energy storage. Perhaps the Minister could enlighten us as to the thinking on putting in these installations and how we will get the maximum benefit from them without losing, as we have heard, some of the valuable energy delivered through the process.
Lord Callanan (Con)
My Lords, I thank all noble Lords for their contributions to this debate and the broad support for the government amendments. I congratulate the noble Baroness, Lady Worthington, on summarising quite well the dilemma that we all face in these matters: we can spend lots of time doing lots of very detailed environmental assessments and take everything into account, but the practical effect is that we continue with the existing power generation system that we know is damaging. I am not pretending that any of these issues is easy, but we think that we have provided a balance.
I start by providing reassurance that these amendments will not change the level of environmental protection, only the responsibility for delivering those actions, to ensure that they are implemented at the earliest opportunity and across a broader area than planned.
I thank my noble friend Lady McIntosh for her Amendments 242C and 242D on the impact of offshore wind farms on wildlife and marine habitats. On her first amendment, I reassure her that the Government already have in place rigorous environmental protection processes which each offshore wind development must undergo. These include a requirement for the Secretary of State to consult the relevant statutory nature conservation body and an examination of each application by an examining authority—in this case the Planning Inspectorate—which makes an independent recommendation to the Secretary of State. When developers submit their applications, they are required to provide information to enable the competent authority—in this case the Secretary of State—to undertake various assessments, including an environmental impact assessment and, where relevant, a marine conservation zone assessment and/or a habitats regulation assessment. These evaluate the impacts that the projects will have on the environment throughout their operational life cycle, from construction right through to eventual decommissioning.
Turning to Amendment 242D, I welcome my noble friend’s interest in our marine protected areas network. The current planning and legislative frameworks already ensure that offshore wind developments undergo rigorous scrutiny to identify impacts on marine protected areas, including the environmental assessments that I have just outlined. If at any stage of its life cycle the offshore wind farm would have impacts on protected sites and those impacts cannot be avoided, reduced or mitigated, but at the same time the project is considered to be in the public interest, then the Secretary of State, as the appropriate authority, has a duty to ensure that the necessary compensatory measures are put in place.
Defra is currently leading work with the offshore wind industry and other stakeholders to develop a library of ecologically robust and commercially feasible strategic compensation measures. Those compensation measures within the library will have had their effectiveness and feasibility tested before they are ever placed in that library. We also intend to introduce a set of offshore wind environmental standards for offshore wind farms, including a noise standard. The standards will apply across the industry and will, we hope, reduce the overall environmental impact of the sector.
It should not be automatically assumed that offshore wind developments will necessarily be harmful to marine protected areas. In many cases, such developments, as the noble Baroness, Lady Worthington said, may be compatible with the conservation objectives of the marine protected area in question. In any event, the Secretary of State cannot provide consent for an offshore wind development unless they are satisfied that the sequential legislative tests have been met.
Baroness McIntosh of Pickering (Con)
I understand that in Norway oil and gas firms are required to publish the environmental data that they hold. Would my noble friend see fit to ensure that the same happened here? What sort of environmental impact assessment is done before planning is given?
Lord Callanan (Con)
I have just outlined to my noble friend all the different assessments that are carried out before permission is given. The Planning Inspectorate makes a recommendation to the Secretary of State, and all those documents are published when relevant consents or others are given. If that is not the case, I will correct that for my noble friend, but as far as I am aware they are all published.
In respect of the comments that were made about the onshore grid, the amendments here apply only to the offshore elements of the wind farm development, which are the generation station itself and the offshore transmission. The building and the upgrade of the onshore network infrastructure—I am well aware that that is a very controversial subject in certain parts of the country, particularly East Anglia, at the moment—will always be subject to separate planning applications from National Grid, which is undertaking that work.
I reassure my noble friend that the wider offshore wind environmental improvement package has an evidence programme looking at all environmental impacts of offshore wind and how to address them, including a workstream on the impact of noise on marine mammals. The offshore wind environmental standards will use that evidence base to suggest any appropriate mitigation measures that developers can take. With that explanation, I hope my noble friend is reassured that existing legislation provides for robust protection for wildlife and for our marine habitats, and will therefore feel able to not press her amendments.
I turn to the question from the noble Lord, Lord Teverson, about whether the fund is voluntary. The marine recovery fund will be an optional framework through which developers could discharge a condition of their consent, to compensate for any adverse environmental effects on a protected site or sites that cannot otherwise be avoided or mitigated. Developers will of course retain the ability to deliver compensation outside the MRF. Again, Defra is currently looking at a range of potential operators for the fund. We will set out further details in the regulations when they are tabled, and I am sure we will have further debates on that important subject. I thank noble Lords for their contributions to the debate.
Baroness McIntosh of Pickering (Con)
Would my noble friend explain the status of the mitigation package, with compensation coming last and mitigation, recovery and all the other aspects coming first? What is its status in law?
Lord Callanan (Con)
Yes, of course, mitigation avoidance will always come first. It is only as a last resort, if it cannot be avoided or mitigated, that compensation will be looked at as an alternative—only at the very last stage.
Baroness Worthington (CB)
Has the Minister considered whether, if the development is actually increasing biodiversity because of the no-take effect, it should get credits, and maybe money back?
Lord Callanan (Con)
That is a very interesting point from the noble Baroness, which we will take into account.
Lord Callanan
“Strategic compensation for adverse environmental effects(1) This section applies where a public authority is subject to one or more environmental compensation obligations in relation to one or more relevant offshore wind projects. (2) “Environmental compensation obligation” means—(a) a statutory duty (however expressed) to secure that measures are taken to compensate for adverse environmental effects of a project, or(b) a statutory condition (however expressed) requiring a public authority, before granting consent for the doing of an act by a person (“P”) in connection with a project, to be satisfied that P will take or secure the taking of measures to compensate for adverse environmental effects of the act.(3) The public authority may determine that—(a) measures taken or secured by the authority in the exercise of any of its functions, or(b) measures to be taken or secured by the authority in the exercise of any of its functions,are to count towards discharging the environmental compensation obligation or obligations to which the authority is subject.(4) In this Chapter, “adverse environmental effect” means—(a) anything that adversely affects the integrity of any site comprised in the national site network, or(b) anything that hinders the achievement of the conservation objectives stated for a protected marine area.(5) The measures referred to in subsection (3) may be measures taken at the site or sites of the project or projects to which the measures relate or elsewhere.(6) In this section—“act” includes omission;“the national site network” has the same meaning as in the Conservation of Habitats and Species Regulations 2017 (S.I. 2017/1012);“protected marine area” means an area designated under—(a) section 116 of the Marine and Coastal Access Act 2009 or section 13 of the Marine Act (Northern Ireland) 2013 (c. 10 (N.I.)) (marine conservation zones), or(b) section 67(1)(a) of the Marine (Scotland) Act 2010 (asp 5) (marine protected areas);“statutory” , in relation to a duty or condition, means imposed by or under primary legislation.(7) For the purposes of subsection (3), a public authority (“authority A”) may, with the consent of another public authority (“authority B”), treat measures taken or secured (or to be taken or secured) by authority B as taken or secured (or to be taken or secured) by authority A in the exercise of any of its functions.(8) In subsection (4)(b), the reference to the conservation objectives stated for a protected marine area is a reference to the conservation objectives stated for the area pursuant to (as the case may be) section 117(2)(b) of the Marine and Coastal Access Act 2009, section 14(2)(b) of the Marine Act (Northern Ireland) 2013 or section 68(3)(b) of the Marine (Scotland) Act 2010.”Member's explanatory statement
This new Clause provides that where a public authority is under obligations relating to the provision of environmental compensation in relation to one or more relevant offshore wind projects, the authority may allocate measures taken or secured by the authority towards the discharge of those obligations.
“Marine recovery fund(1) The Secretary of State may by regulations make provision for the establishment, operation and management of one or more marine recovery funds.(2) A marine recovery fund is a fund— (a) into which payments may be made in respect of relevant offshore wind projects, and(b) out of which payments may be made towards expenditure on measures to compensate for adverse environmental effects of one or more relevant offshore wind projects.(3) The following provisions of this section are without prejudice to the generality of subsection (1).(4) Regulations under this section may make provision—(a) for and in connection with the determination of the extent to which a payment into the fund discharges a compensation condition imposed on a person in connection with the granting of consent in respect of a relevant offshore wind project;(b) for a payment into the fund to be treated as discharging a compensation condition to the extent determined by virtue of paragraph (a).(5) “Compensation condition”, in relation to a person, means a condition requiring the person to take measures to compensate for adverse environmental effects of a relevant offshore wind project.(6) Regulations under this section may make provision—(a) enabling payments to be made out of the fund towards expenditure described in subsection (2)(b);(b) about the persons to whom such a payment may be made;(c) enabling conditions to be imposed on a person to whom such a payment is made in connection with the taking of measures described in subsection (2)(b).(7) Regulations under this section may make provision—(a) about the recovery of costs incurred in connection with the exercise of functions conferred by the regulations;(b) conferring functions, including functions involving the exercise of a discretion, on the Secretary of State;(c) for the delegation of functions conferred on the Secretary of State.(8) Regulations made by virtue of subsection (7)(c) may provide that a function may be delegated—(a) to a Scottish public authority only if the function relates to the taking or securing of measures in Scotland;(b) to a Welsh public authority only if the function relates to the taking or securing of measures in Wales;(c) to a Northern Ireland public authority only if the function relates to the taking or securing of measures in Northern Ireland.(9) Regulations made by virtue of subsection (7)(c) must provide that the delegation of a function—(a) may be cancelled by the Secretary of State in accordance with the regulations;(b) does not prevent the Secretary of State from carrying out any function delegated.(10) Regulations under this section are subject to the negative procedure.(11) References in this section to a Scottish public authority, a Welsh public authority or a Northern Ireland public authority are to a public authority whose functions are exercisable only or mainly in or as regards Scotland, Wales or Northern Ireland (as the case may be).”Member's explanatory statement
This amendment provides for the establishment by regulations of one or more marine recovery funds, out of which payments may be made towards environmental compensation measures required as a result of relevant offshore wind projects.
“Assessment of environmental effects etc(1) The appropriate authority may by regulations make—(a) provision for and in connection with the assessment of the environmental effects of relevant offshore wind projects in relation to protected sites;(b) provision about the taking or securing of measures by a public authority in compensation for any adverse environmental effects of a relevant offshore wind project in relation to protected sites (“compensatory measures”).(2) The appropriate authority is the Secretary of State, subject to paragraphs (a) to (c)—(a) the Scottish Ministers are the appropriate authority in relation to relevant offshore wind projects in the Scottish inshore region, other than in relation to qualifying Secretary of State functions;(b) the Welsh Ministers are the appropriate authority in relation to relevant offshore wind projects in the Welsh inshore region, subject to subsection (3) and other than in relation to qualifying Secretary of State functions;(c) DAERA is the appropriate authority in relation to relevant offshore wind projects in the Northern Ireland inshore region, other than in relation to qualifying Secretary of State functions.(3) In subsection (2)(b), “relevant offshore wind project” does not include a project relating to a generating station that has a capacity such that the construction or extension of the generating station would be a nationally significant infrastructure project (within the meaning given by sections 14 and 15 of the Planning Act 2008).(4) The provision that may be made by virtue of subsection (1) includes provision—(a) specifying the matters to be dealt with by an assessment;(b) about the procedure to be followed in carrying out an assessment, including when an assessment must be carried out and matters that must be taken into account;(c) specifying the person by whom an assessment, or a specified kind of assessment, must be carried out;(d) requiring an assessment to be carried out by a specified person in specified circumstances;(e) authorising or requiring the supply of information (including information the supply of which would not otherwise be permitted) for the purposes of an assessment;(f) enabling a person carrying out an assessment (an “assessor”) to require a person who has applied for consent to provide the assessor with assistance for the purposes of or in connection with the assessment;(g) prohibiting the granting of consent in respect of a project where an assessment has not been carried out in accordance with the regulations;(h) about when or how compensatory measures must or may be provided;(i) disapplying or otherwise modifying, whether generally or in specified circumstances or subject to specified conditions—(i) any of the provisions listed in subsection (5)(a), (b), (c) or (d) (as the case may be);(ii) any relevant Habitats Directive rights.(5) The provisions referred to in subsection (4)(i)(i) are—(a) in the case of regulations made by the Secretary of State—(i) section 126 of the Marine and Coastal Access Act 2009; (ii) regulations 9 and 10 and Part 6 of the Conservation of Habitats and Species Regulations 2017 (S.I. 2017/1012);(iii) regulations 6, 27, 28 and 30 to 37 of the Conservation of Offshore Marine Habitats and Species Regulations 2017 (S.I. 2017/1013);(iv) any other provision that relates to the taking or securing of compensatory measures, where the provision is made by or under an Act;(b) in the case of regulations made by the Scottish Ministers—(i) section 83 of the Marine (Scotland) Act 2010 (asp 5);(ii) regulations 3 and 3A and Part 4 of the Conservation (Natural Habitats, &c.) Regulations 1994 (S.I. 1994/2716);(iii) regulations 9 and 10 and Part 6 of the Conservation of Habitats and Species Regulations 2017 (S.I. 2017/1012);(iv) any other provision that relates to the taking or securing of compensatory measures in or in relation to the Scottish inshore region, where the provision is made by or under an Act of the Scottish Parliament;(c) in the case of regulations made by the Welsh Ministers—(i) section 126 of the Marine and Coastal Access Act 2009;(ii) regulations 9 and 10 and Part 6 of the Conservation of Habitats and Species Regulations 2017 (S.I. 2017/1012);(iii) any other provision that relates to the taking or securing of compensatory measures, where the provision is made by or under an Act or Measure of Senedd Cymru;(d) in the case of regulations made by DAERA—(i) section 23 of the Marine Act (Northern Ireland) 2013;(ii) regulations 3 and 3A and Part 4 of the Conservation (Natural Habitats, etc.) Regulations (Northern Ireland) 1995 (S.R. (N.I.) 1995 No. 380);(iii) regulations 9 and 10 and Part 6 of the Conservation of Habitats and Species Regulations 2017 (S.I. 2017/1012);(iv) any other provision that relates to the taking or securing of compensatory measures in or in relation to the Northern Ireland inshore region, where the provision is made by or under Northern Ireland legislation.(6) But regulations under this section may not disapply or otherwise modify, or make provision which could undermine or circumvent—(a) section 126(7)(a) or (b) of the Marine and Coastal Access Act 2009, section 83(4)(b)(i) or (ii) of the Marine (Scotland) Act 2010 or section 23(7)(a) or (b) of the Marine Act (Northern Ireland) 2013,(b) regulation 64 of the Conservation of Habitats and Species Regulations 2017,(c) regulation 29 of the Conservation of Offshore Marine Habitats and Species Regulations 2017,(d) regulation 49 of the Conservation (Natural Habitats, &c.) Regulations 1994,(e) regulation 44 of the Conservation (Natural Habitats, etc.) Regulations (Northern Ireland) 1995, or(f) any provision about qualifying Secretary of State functions (unless the regulations are made by the Secretary of State). (7) Regulations under this section may make provision—(a) enabling the appropriate authority to direct a person to take steps or to refrain from taking steps;(b) requiring a person given such a direction to comply with it.(8) Regulations under this section may require the appropriate authority or a specified person—(a) to give guidance about specified matters;(b) to consult specified persons, or persons of a specified description, before giving guidance by virtue of paragraph (a).(9) Regulations under this section may confer functions, including functions involving the exercise of a discretion—(a) in the case of regulations made by the Secretary State, on any person;(b) in any other case, on a person other than a Minister of the Crown.(10) The functions that may be conferred on a person by virtue of subsection (9) include a function of giving advice in relation to the application or exercise of any other function, whether exercisable by that or another person, under or by virtue of regulations under this section.(11) In this section—“protected site” has the meaning determined in accordance with regulations under this section; and those regulations—(a) must be framed so that protected sites consist of natural habitats or habitats of species, and(b) must in particular include protected marine areas;“qualifying Secretary of State functions” means functions of the Secretary of State in relation to relevant offshore wind projects in (as the case may be) the Scottish inshore region, the Welsh inshore region or the Northern Ireland inshore region;“relevant Habitats Directive rights” means rights, powers, liabilities, obligations, restrictions, remedies and procedures that continue to be recognised and available in domestic law by virtue of section 4 of the European Union (Withdrawal) Act 2018 (including as they are modified by domestic law from time to time), so far as derived from Article 6 of Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora;“specified” means specified in regulations under this section.”Member's explanatory statement
This new Clause enables the Secretary of State, the Scottish and Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland to make regulations about the assessment of environmental effects of relevant offshore wind projects and about environmental compensation.
“Regulations under section (Assessment of environmental effects etc): consultation and procedure(1) The Secretary of State must, before making regulations under section (Assessment of environmental effects etc), consult—(a) the Marine Management Organisation,(b) the Joint Nature Conservation Committee,(c) Natural England,(d) the Scottish Ministers and Scottish Natural Heritage, so far as the regulations relate to relevant offshore wind projects or protected sites in Scotland, (e) the Welsh Ministers and the Natural Resources Body for Wales, so far as the regulations relate to relevant offshore wind projects or protected sites in Wales,(f) DAERA, so far as the regulations relate to protected sites in Northern Ireland, and(g) such other persons as the Secretary of State considers appropriate.(2) Regulations made by the Secretary of State under section (Assessment of environmental effects etc) are subject to the affirmative procedure.(3) The Scottish Ministers must, before making regulations under section (Assessment of environmental effects etc), consult—(a) the Secretary of State,(b) the Marine Management Organisation, so far as the regulations relate to protected sites in England or the Northern Ireland offshore region,(c) Natural England, so far as the regulations relate to protected sites in England,(d) the Joint Nature Conservation Committee, so far as the regulations relate to protected sites in such part of the UK marine area as is beyond the seaward limits of the territorial sea,(e) Scottish Natural Heritage, so far as the regulations relate to protected sites in Scotland,(f) the Welsh Ministers and the Natural Resources Body for Wales, so far as the regulations relate to protected sites in Wales,(g) DAERA, so far as the regulations relate to protected sites in Northern Ireland, and(h) such other persons as they consider appropriate.(4) Regulations made by the Scottish Ministers under section (Assessment of environmental effects etc) are subject to the affirmative procedure (see section 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10)).(5) The Welsh Ministers must, before making regulations under section (Assessment of environmental effects etc), consult—(a) the Secretary of State;(b) the Marine Management Organisation, so far as the regulations relate to protected sites in England or the Northern Ireland offshore region,(c) Natural England, so far as the regulations relate to protected sites in England,(d) the Joint Nature Conservation Committee, so far as the regulations relate to protected sites in such part of the UK marine area as is beyond the seaward limits of the territorial sea,(e) the Scottish Ministers and Scottish Natural Heritage, so far as the regulations relate to protected sites in Scotland,(f) the Natural Resources Body for Wales, so far as the regulations relate to protected sites in Wales,(g) DAERA, so far as the regulations relate to protected sites in Northern Ireland, and(h) such other persons as they consider appropriate.(6) The power of the Welsh Ministers to make regulations under section (Assessment of environmental effects etc) is exercisable by statutory instrument.(7) A statutory instrument containing regulations made by the Welsh Ministers under section (Assessment of environmental effects etc) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, Senedd Cymru.(8) DAERA must, before making regulations under section (Assessment of environmental effects etc), consult— (a) the Secretary of State,(b) the Marine Management Organisation, so far as the regulations relate to protected sites in England or the Northern Ireland offshore region,(c) Natural England, so far as the regulations relate to protected sites in England,(d) the Joint Nature Conservation Committee, so far as the regulations relate to protected sites in such part of the UK marine area as is beyond the seaward limits of the territorial sea,(e) the Scottish Ministers and Scottish Natural Heritage, so far as the regulations relate to protected sites in Scotland,(f) the Welsh Ministers and the Natural Resources Body for Wales, so far as the regulations relate to protected sites in Wales, and(g) such other persons as DAERA considers appropriate.(9) The power of DAERA to make regulations under section (Assessment of environmental effects etc) is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).(10) Regulations may not be made under section (Assessment of environmental effects etc) by DAERA unless a draft of the regulations has been laid before and approved by a resolution of the Northern Ireland Assembly.(11) In this section, “protected site” has the same meaning as in section (Assessment of environmental effects etc).”Member's explanatory statement
The new Clause inserted by this amendment sets out consultation and other procedural requirements relating to the making of regulations under the new Clause about assessment of environmental effects of relevant offshore wind projects.
“Interpretation of Chapter(1) In this Chapter—“adverse environmental effect” has the meaning given by section (Strategic compensation for adverse environmental effects)(4);“consent” means any consent, approval, permission, authorisation or confirmation (however described or given) that is required, or otherwise provided for, by or under primary legislation;“DAERA” means the Department of Agriculture, Environment and Rural Affairs in Northern Ireland;“England” includes the English inshore region and the English offshore region;“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act);“Northern Ireland” includes the Northern Ireland inshore region;“primary legislation” means—(a) an Act of Parliament,(b) an Act or Measure of Senedd Cymru,(c) an Act of the Scottish Parliament, or(d) Northern Ireland legislation;“protected marine area” has the meaning given by section (Strategic compensation for adverse environmental effects)(6);“public authority” means—(a) a Minister of the Crown,(b) the Scottish Ministers,(c) the Welsh Ministers,(d) a Northern Ireland department, or (e) any other person with functions of a public nature;“relevant offshore wind project” has the meaning given by section (Meaning of “relevant offshore wind project”);“Scotland” includes the Scottish inshore region and the Scottish offshore region;“UK marine area” has the meaning given by section 42(1) of the Marine and Coastal Access Act 2009;“Wales” includes the Welsh inshore region and the Welsh offshore region.(2) References in this Chapter to the English, Scottish, Welsh or Northern Ireland inshore and offshore regions are to be construed in accordance with the Marine and Coastal Access Act 2009 (see section 322 of that Act).”Member's explanatory statement
The new Clause inserted by this amendment contains some further definitions of expressions used in the new Chapter consisting of the new Clauses inserted by the amendments in Lord Callanan’s name for insertion before Clause 225.
Baroness Sheehan
“Transparency of decommissioning costs(1) The Secretary of State must publish, within 6 months of this Act coming into force and not less than every 3 years thereafter, a statement on decommissioning offshore installations that includes—(a) a list of decommissioning relief agreements in force and the qualifying companies which are parties to each agreement,(b) the estimated likely range of the total future amount of tax relief to be granted in respect of any decommissioning expenditure under existing decommissioning relief agreements under—(i) current oil, gas and decommissioning prices, and(ii) expected future oil, gas and decommissioning prices,in current prices and as a proportion of tax revenue paid by qualifying companies which are parties to those agreements;(c) an assessment of how the estimates under paragraph (b) would be affected by world oil and gas prices equal to the lowest cost of global oil and gas production.(2) In this section—“decommissioning relief agreement” and “qualifying company” have the meanings given in section 80 of the Finance Act 2013;“offshore installation” has the meaning given in section 44 of the Petroleum Act 1998.”Member's explanatory statement
This amendment is intended to bring greater transparency to the future taxpayer liability in respect of decommissioning relief agreements.
Baroness Sheehan (LD)
My Lords, I rise to speak to Amendments 222A and 227AA in my name. I put on record my support for Amendment 223 in the name of my noble friend Lord Teverson; Amendment 227 in the name of the noble Baroness, Lady Bennett of Manor Castle; Amendment 227A in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds; and Amendment 232 in the names of my noble friend Lord Teverson and the noble Baroness, Lady Bennett of Manor Castle, to which I have added my name. I regret that I cannot offer support to the remaining amendments in this group, which I am sure will come as little surprise to those who tabled them.
I start with my Amendment 222A on decommissioning tax reliefs, and why I think it necessary. I hope that I can provide some useful background information, taken mostly from the National Audit Office report of January 2019 entitled Oil and Gas in the UK—Offshore Decommissioning. The report sets out the landscape of oil and gas decommissioning so that Parliament is in a position to consider whether the various government departments involved are protecting taxpayers’ interests effectively. The report states that:
“There are currently around 320 fixed installations, such as oil platforms, in production in the UK, primarily in the North Sea. … Oil and gas operators … are increasingly decommissioning their assets as they are reaching the end of their useful economic lives … Decommissioning affects the government’s finances because operators can recover some of their costs through tax reliefs. These enable operators to deduct decommissioning costs from their taxable profits and potentially claim back some taxes that they have previously paid.”
That is all well and good, and fairly normal practice. However, the report goes on to say:
“With decommissioning activity increasing, the government is paying out more in tax reliefs for decommissioning at the same time as tax revenues have fallen due to a combination of lower production rates, a reduction in oil and gas prices and operators incurring high tax-deductible expenditure.”
That represents a triple whammy for UK taxpayers such that, as the report says:
“In 2016-17, the government paid out more to oil and gas operators in tax reliefs than it received from them … for the first time”.
While oil and gas expansion looks artificially secure, with very generous tax reliefs, it is nevertheless clear that government is, on behalf of taxpayers, taking on a liability that is ultimately unknown. The lower and upper estimates of decommissioning costs from the Oil and Gas Authority, now known as the North Sea Transition Authority, are £38 billion and £61 billion respectively, but even that is only a guestimate. With another round of new licences being issued—potentially up to another 100—the risk is enormously compounded. Furthermore, it used to be that a ceiling was kept on the overall cost to the taxpayer by the fact that a firm cannot claim back more in decommissioning tax relief than it has previously paid in tax. However, since 2017, when firms default, government has explicitly said that partner firms that pick up the Bill can claim back more in tax relief than they have ever paid.
This amendment is designed to put more information into the public domain about who the taxpayer is on the hook to; what the liability amounts to, as a proportion of tax received; and by how much this amount will increase in a low-demand world, which is the way in which we are headed.
The amendment asks for three things. First, in proposed new subsection (1)(a), it asks for
“a list of decommissioning relief agreements”
and who has signed them—because at the moment we have no idea. We know how many there are—approximately 100—but not who those agreements are with. As the taxpayer faces a liability from each of these agreements, at an average of £200 million per agreement, some public transparency is desirable.
Lord Teverson (LD)
I shall speak to my Amendments 223 and 232, but I am in sympathy with my noble friend Lady Sheehan’s amendments. On flaring, we are undoubtedly the dirty man of the North Sea. Although the Minister may say that over the past year we have reduced our flaring by some 20%—we are starting to get there—as my noble friend said, really it should be zero, as many North Sea neighbours have been able to do.
Amendment 223 effectively bans fracking. It is straightforward, in black and white. I shall go through a bit of modern history—this Government’s view of fracking. In November 2019, there was a moratorium on fracking. In September 2022, fracking was allowed. In October 2022, fracking was banned. Let us be clear about this: we need a little certainty and the firm smack of decisive government here. Let us put this to bed by putting a ban on fracking in primary legislation.
With the cost of energy from gas at the moment, the problem is that in the UK we are still overdependent on gas, but our production, even with fracking, would be minuscule in terms of global production, so it would have little effect on the market price. Looking back to last February, Kwasi Kwarteng tweeted
“UK producers won’t sell shale gas to UK consumers below the market price. They are not charities.”
Indeed they are not. Fracking in this country will make no difference to gas prices at the moment. It will take some years to develop it, and the time is past. Let us be decisive about this and make clear where the UK stands.
Amendment 232 is very similar; it concerns England, because this is a devolved area. We should end the licensing of new coal mines. I was quite shocked at the end of last year that the Whitehaven mine in Cumbria was approved, and that it was approved by the Levelling-Up Secretary, Michael Gove, who should know better, having invented the 25-year environment plan, knowing all about these issues and being one of the best Environment Secretaries we have had for many years and a member of a Government who have sufficient respect and leverage to say no to something that should not happen. We have become an international laughing stock in many ways. Our reputation has been straightforwardly destroyed by hypocrisy.
I looked at a BEIS press release from just over a year ago, on 3 November 2021, regarding COP 26. It says:
“The end of coal—the single biggest contributor to climate change—is in sight thanks to the UK securing a 190-strong coalition of countries and organisations at COP26, with countries such as Indonesia, South Korea, Poland, Vietnam, and Chile announcing clear commitments to phase out coal power … Business & Energy Secretary Kwasi Kwarteng said: ‘Today marks a milestone moment in our global efforts to tackle climate change as nations from all corners of the world unite in Glasgow to declare that coal has no part to play in our future power generation. Spearheaded by the UK’s COP26 Presidency, today’s ambitious commitments made by our international partners demonstrate that the end of coal is in sight.’”
A year later, just after COP 27 has finished, we have the Government declaring that a coal mine should open in England.
Lord Lilley (Con)
Would the noble Lord remind the Committee that that coal mine will not produce power—all the pledges that he has just talked about concern the use of coal to produce power—but steel?
Lord Teverson (LD)
The noble Lord makes a very good point. One-fifth of that production is estimated to be going towards steel, an industry that needs to decarbonise and has said that it will do that itself. The other 80% is to be exported and will be used as energy. I cannot understand what else it would be used for.
Lord Teverson (LD)
But that industry should be decarbonised. Whatever the noble Lord says, it goes exactly against what we as a nation have said about the future of coal. That brings disrespect, I am sad to say, on not just this Government but this country. That is why I believe this amendment is an important one to go forward.
If the Government cannot agree to the amendment from the noble Lord, Lord Lennie, on the name of the Oil and Gas Authority then there is absolutely no hope for the Bill. I also very much support the amendment by the noble Baroness, Lady Bennett. I remind the Committee that the International Energy Agency’s executive director, Fatih Birol, said at the end of last year:
“If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now—from this year.”
Lord Moylan (Con)
My Lords, I shall speak to Amendments 224 and 230 standing in my name. Before I do so, I shall make a supportive remark about Amendment 226 in the name of my noble friend Lord Lilley.
I remind the Committee, since it is such a long time since Second Reading back in July, that the context in which it was introduced was one of a very serious energy crisis. Whether or not we have a climate crisis is highly debateable, and many of us do not accept that alarmist language. However, that we undoubtedly had an energy crisis in the course of last year is absolutely manifest in the lives of hundreds of thousands, if not millions, of ordinary people living in this country. Although we have been assisted by the weather in having a very moderate winter and therefore less demand for domestic energy, none the less that energy crisis has not abated; prices remain extremely high and energy is in short supply. We all know the reprehensible reasons lying behind that and we condemn Russia’s action in Ukraine, but none the less there is no likelihood of it ending very soon, as far as anyone can see, and we have a very serious crisis. That is the background to the amendments that I am speaking to. It is remarkable that in the same group there are a number of other amendments that seek to cut off—radically, permanently and, by statute, for ever—access to energy supplies that we have available to us.
The noble Baroness, Lady Sheehan, was somewhat surprised that I should talk in Amendment 224—which I will speak to in more detail in moment—about increasing gas supply to reduce foreign dependency. The noble Baroness seems to think that we have a target of zero carbon emissions set in law in this country. We do not; we have a net-zero target and there is nothing that I am aware of in government policy that says that the use of some amounts of carbon, including gas, in our energy mix over the long term is not both foreseeable and acceptable, provided that it meets a net-zero target.
Lord Teverson (LD)
I am not objecting to importing. I have supported fracking in the past. The point is that the time has gone; it has all changed. The United States has been fracking for some time; I have no problem if we import that. My whole concern is about new sources and new exploration.
Lord Moylan (Con)
I am grateful for that clarification. If the noble Lord is saying that the time has gone, that, it seems to me, is essentially a commercial and practical judgment. It may be right—I do not run a fracking company; I know very little in practice about fracking. It is possible that the time has gone in commercial terms, and that it might not be a sensible thing to do in current circumstances. None of that is grounds for ruling it out as a matter of statute and prohibiting it. It is complete nonsense to suggest doing that. We will leave fracking to one side for the moment.
I turn to Amendment 230, a much narrower and more technical probing amendment which relates to the composition of the domestic gas supply. It takes me back to my boyhood and the childhoods of a number of people in this Room, though not all, who might remember what life was like before we had North Sea gas pumped into our homes. We had town gas, which was produced from coal. Its content was a mixture of gases, including CH4, CO, CO2, H2, higher-order hydrocarbons and phenols. The composition was adjusted according to the calorific value.
When we switched over to North Sea gas, the composition of the gas that we used became over-whelmingly methane, with a small amount of higher-order hydrocarbons. The switchover to using methane allowed the calorific value to be higher. Those of us with very long memories will recall that it was marketed as “high-speed gas”, which meant “hot”—it had a high calorific value, so you could cook that much faster. Moreover, we then put that composition into legislation, which I am grateful to the Library for finding for me: the Gas Safety (Management) Regulations 1996, which are referred to in my Amendment 230.
The result is that, today, a significant amount of gas that we could extract from the North Sea is not being extracted because it cannot be used in our domestic supply by law. In effect, a lot is going to waste. The proposal in this probing amendment is to ask the Government to reflect on this and consider whether, given the energy crisis we have been facing, it might not be sensible and possible to amend those regulations so that we could make use of many of these gases that are currently going to waste but could, none the less, be fed into our domestic system. It could mean that the calorific value would be a little lower in our cookers, so it might take a little longer to bake a cake—a number of television programmes might be affected by this in detail; the outcomes might change—but in terms of efficiency, at a time when we desperately need energy, it is certainly worth looking at.
Baroness Hayman (CB)
I have listened to the noble Lord with some interest, but those of us with long memories remember the dangers inherent in the gas that was used before the date he was talking about and the number of suicides that took place. Does he think there is a health and safety issue to consider before going back to those days and that sort of gas?
Lord Moylan (Con)
The name of the regulations that I am suggesting we review is the Gas Safety (Management) Regulations, so I fully acknowledge that this is a question of safety, but it is not necessarily the case that these regulations, passed in 1996, that we are still adhering to could not be looked at to see whether, precisely as I say in my amendment, they could be
“safely amended to allow more efficient use of extracted … gas.”
It may be that they cannot but, nearly 30 years on, it would be helpful if the Government could look more closely at this.
My principal point in raising these amendments relates to Amendment 224. A bit like the noble Baroness, Lady Worthington, earlier, I want to know whether the Government have a strategy for resilience. Do they contemplate the dependence on foreign supplies going on endlessly in very large measure, and what would they like to do about it? I think that an awful lot of people in this country were shocked to discover our level of dependency on imports and would like to hear that we are becoming more self-sufficient.
Baroness Sheehan (LD)
My Lords, may I address some of the noble Lord’s responses to my comments earlier? It is clear to me that we have a fundamental difference of opinion on the science behind climate change. I believe that climate change is real, as is shown by the change we are experiencing. What evidence can the noble Lord point to that climate change is not real? There is substantial evidence of it, including the unprecedented levels of the concentration of carbon dioxide in the atmosphere, as verified by ice core samples from the Antarctic and tree rings over millennia. The changes in carbon dioxide correlate precisely to the changes in climate that we have seen in historic times. That is the basis on which my amendments have been tabled, and they are clearly designed to meet the Government’s legal duties under the Climate Change Act and their need to reduce oil and gas consumption to meet net zero by 2050. The noble Lord’s amendment talks about a strategy for increasing domestic gas production. That cannot be compatible with meeting climate change targets—the Government have a legal duty to do that. Will the noble Lord, Lord Moylan, please accept that?
Lord Moylan (Con)
I am grateful for those points, which I will try to answer briefly since they were put to me directly.
First, I hope that nothing in what I said suggested, implied or stated that I do not accept that climate change is happening. I am also perfectly happy to accept that there is a man-made contribution to that. What I reject is the language of climate alarmism and climate crisis. The questions around the consequence, in practice, of climate change and the best means for dealing with it remain absolutely open. Over the last 20 years, we have seen wild, extravagant and unjustified claims about how large parts of the world are going to sink under water and we are all going to scorch; in fact, we see very little of that, but we see a few weather events being played up as if they are great catastrophes. Even if that were happening, the question that arises is what you do about it.
Many of us would rather put the emphasis on mitigation and adaptation rather than what we are doing at the moment, which is absolutely damaging our economy, in order that we should try to avoid those emissions. The cost of that damage to our economy has been estimated by the Climate Change Committee as at least 1% of GDP per annum—most people recognise, I think fairly, that it is closer to 4% or 5%. There are those who would say that that that cost is both necessary and justified, but it is none the less a damage to our economy, and not all of us accept that it is necessary and justified—we think that there are other methods of dealing with it.
I have not rejected climate change. I accept that net zero is a statutory target—I said nothing contrary to that. If I may repeat myself—this is my fault entirely; it is the problem with having an amateur such as myself drafting amendments—I apologised when I spoke for using the word “increase”, which I can change if we come back to this on Report. That was not quite what I meant; I meant increase relative to imports, such that I explained that my amendment would be applicable even if our consumption of gas was falling.
There is not that much in the substance of the comments that the noble Baroness, Lady Sheehan, made about my remarks. None the less, we have a profound disagreement—less about the science and more about what to do about it.
Baroness Bennett of Manor Castle (GP)
My Lords, rising to speak after the contribution of the noble Lord, Lord Moylan, and his representation of an extremely minority view, I will restrain myself and simply say that there will be no jobs on a dead planet. I will leave it there.
Lord Lilley (Con)
I shall speak to Amendment 226 and say a few words about Amendment 223 in the name of the noble Lord, Lord Teverson, and, by implication, Amendment 227 to which the noble Baroness, Lady Bennett, has just referred.
The noble Lord, Lord Teverson, said he is against just new supply and not fracking as such, in which case, why has he singled out fracking and not sought to ban new North Sea fields? If he were logical, he would be signing the amendment tabled by the noble Baroness, Lady Bennett of Manor Castle, which seeks to ban all new fields.
Lord Teverson (LD)
That is a very good question. It is partly answered by the fact that I put my amendment down first before the other amendment went down. The other answer is that in all legislative processes—the noble Lord, Lord Lilley, will know far more about this than me—you try to go for what might be possible, and I suspect that the Government are less keen on the amendment tabled by the noble Baroness, Lady Bennett, whereas all my amendment does is confirm present government policy.
Lord Lilley (Con)
So, had the noble Baroness, Lady Bennett, got her amendment in first, the noble Lord would have signed it. It is interesting to know that the Liberal Democrats are against any new fields in the North Sea.
What I want to try to get home to those members of the Committee who have not yet taken it on board is that up to now we have pursued a path to net zero which involves reducing demand for fossil fuels by replacing fossil fuels with renewable energy. That is a logical path to pursue. We have not been seeking to achieve it by reducing supply of fossil fuels. As a result, if people choose to produce more fossil fuels than there is demand, as demand falls fossil fuel producers will be left with stranded assets and lose money. It could not happen to a nicer bunch of people, but why should we think that our judgments are better than theirs or worry about them erring and producing too much, investing too much and not getting their money back? That is up to them.
Lord Lilley (Con)
May I pursue the point? When I have made it and made my own case, I look forward to the noble Baroness demolishing it.
We will continue to use gas, albeit in reducing amounts, for decades, probably alongside carbon capture and storage. That is accepted by almost everybody I know. If the UK bans production, which would be an absurd thing to do, given that we do not ban imports of natural gas, we will simply leave others to supply our needs and needs elsewhere in the world. If lots of countries decide to ban new supply, if they succeed in reducing supply faster than we reduce demand, there will be shortages. Prices will shoot up. There will be the same sort of crisis—and huge profits for the oil industries—and we will have done to ourselves what Putin has done to us by reducing supply more rapidly than demand. I want to know why the noble Baroness, Lady Bennett, and the noble Lord, Lord Teverson, want to introduce that sort of risk into the system. Why not just pursue the steady path of reducing demand until it is net zero?
Baroness Bennett of Manor Castle (GP)
It is interesting that the noble Lord’s analysis bears a great deal of resemblance to that of the fossil fuel non-proliferation treaty proponents, who point out that we have been seeking to reduce demand and say that they explicitly want to reduce supply. I think the noble Lord was making the case that the price will go up if there is not enough supply. Of course, the reverse is true: if there is too much supply, the price will go down. Indeed, we saw this during Covid, with petrol in the United States—gas, as they call it—where people were actually being paid to store and hold it, because you cannot switch these supplies on and off like a tap. Once you build a field, you are going to keep producing that stuff: you cannot suddenly switch it on and off. So, if you have overproduction, you have extremely low prices and those prices, of course, do not reflect the actual cost and the damage being done, either in terms of the climate or all the other damages that the WHO, signing up to this treaty, points out, in terms of the damage done to human health by burning fossil fuels.
Lord Lilley (Con)
If that the best argument against the thesis I put forward, I know I am on strong ground. The noble Baroness says that we might end up with cheap fuel and the oil companies losing money: well, I can cope with both those things.
Baroness Sheehan (LD)
Will the noble Lord at least agree that, when we are looking at supply and demand and prices going up and down, that will work only where we have a level playing field? Where you have a market that is skewed, with perverse incentives, such as tax reliefs in the example I gave on my first amendment, that really negates his argument: you cannot say supply is going to be one factor and then have it overridden by incentives to investment that reduce the risks for the people taking them.
Lord Lilley (Con)
I think that is a rather different set of arguments. My point is that we can approach net zero by reducing demand and let supply find its own level, with or without incentives. Incidentally, the idea that there are incentives to oil production, when the taxes at our pumps are a massive proportion of the price we pay and when oil in the North Sea pays double the corporation tax rate that other companies do in any other industry, is simple nonsense.
However, now I will turn, if I may, to my own Amendment 226, which would ensure that the conditions relating to vibrations from drilling for shale should not exceed those applied to other industries, for example under British Standard 5228. There is no reason that shale drilling should face different conditions as to the tremors it may cause from, say, quarrying, mining, construction or pile driving. In particular, there is no reason, other than environmentalist virtue signalling, why standards for shale as far as tremors are concerned should be stricter than drilling for geothermal or carbon capture and storage—other than that they get positive ticks from the green lobby whereas shale does not, even though we are going to continue using gas for many decades to come.
Indeed, recently, there was a 1.6 magnitude tremor in Cornwall as a result of drilling for geothermal. People could feel it. It did not do any damage, of course, and it is an order of magnitude higher than the maximum tremor that we allow without stopping production in shale. The level set by Sir Ed Davey when he was Secretary of State for Energy was a magnitude of 0.5 and the one in Cornwall was 1.6. Sir Ed Davey has since admitted that he was proud that, by setting this limit, he effectively stopped the fracking industry in this country. Of course, that was not what he said at the time.
At the time, he said that he was accepting the report that came out at the time. It was an excellent report, produced by the Royal Society for Science and the Royal Academy of Engineering, called Shale Gas Extraction in the UK: a Review of Hydraulic Fracturing. The opening paragraph states:
“The health, safety and environmental risks associated with hydraulic fracturing (often termed ‘fracking’) as a means to extract shale gas can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation.”
So it gave a pretty clear vote of support. It said that the
“magnitude of seismicity induced by hydraulic fracturing would be no greater than”
magnitude 3, which would be
“felt by few people and result in negligible, if any, surface impacts.”
So we are left with this absurdly low criterion, which is an order of magnitude more severe than that applied to any other industry.
It is not only an order of magnitude; it is entirely unreasonable. Natural earthquakes in this country can be several orders of magnitude greater than is permitted as a result of fracturing for shale gas, and these natural earthquakes occur with little damage. I can remember being woken up at midnight on 23 September 2002 in London. My whole house shook and the windows rattled and I was woken. It was the only time—no, I will not say anything about that. The earthquake was actually centred in Dudley in the Midlands and was a force 4.7 and had that effect in London. There were no reports of damage anywhere in the United Kingdom as result of it—and that was 500 times greater than the highest seismicity induced so far by fracking in the UK, let alone the low 0.5 standard set. Over the last 50 years, according to the British Geological Survey, there have been 25 natural earthquakes of greater than or equal to magnitude 4 and in the last 60 days we have had 29 minor earthquakes in the United Kingdom about which no one has complained at all.
The University of Liverpool produced a study using seismicity measurements which showed the impact of a whole range of household events. I have a copy of it here. It showed that, for example, a door slamming uses more vibration at its surface than the maximum magnitude permitted from fracking in the United Kingdom. So does sitting down suddenly on an office chair, or a building site piledriver 15 metres away. They are all similar orders of magnitude—they are 0.6—but you can find things which are an order of magnitude higher, and we should remember that this is a logarithmic scale. Dropping a large bag of shopping has a magnitude of 1.5 and a toddler playing on a wooden floor, I am astonished to learn, can produce seismicity of 2.1. So we are talking about having such a degree of security against any seismic shock resulting from fracking as to be completely ridiculous.
Baroness Altmann (Con)
I thank my noble friend for giving way. I have listened carefully to his arguments and would like to ask him whether he is excluding the other risks associated with fracking. Whether or not there are earthquake risks, surely we have the pollution of the groundwater, the toxic chemicals being released, the ground level ozone, air pollution and the use of large volumes of water in a country which had water shortages not that long ago and indeed where the geography seems to be rather different from that in other countries where fracking has been so successful.
Lord Lilley (Con)
I have good news for the noble Baroness, because those issues were covered in Shale Gas Extraction in the UK: A Review of Hydraulic Fracturing, produced by the Royal Society and the Royal Academy of Engineering. We are all constantly urged to follow the science, so let us follow the science in that review. She discussed water, and according to the review:
“Overall water use is important. Estimates indicate that the amount needed to operate a hydraulically fractured shale gas well for a decade may be equivalent to the amount needed to water a golf course for a month”.
That seems something with which we can probably cope. She then discussed the possible results leading to the pollution of aquifers. The review says:
“Concerns have been raised about the risk of fractures propagating from shale formations to reach overlying aquifers. The available evidence indicates that this risk is very low provided that shale gas extraction takes place at depths of many hundreds of metres or several kilometres.”
In the UK’s Bowland shale, it would be kilometres deep. The review continues:
“Geological mechanisms constrain the distances that fractures may propagate vertically. Even if communication with overlying aquifers were possible, suitable pressure conditions would still be necessary for contaminants to flow through fractures.”
When you have a kilometre or more of stone—impermeable rock—bearing down, you could not get a better seal.
Nevertheless, we do not have to worry about scientific analysis and theory, because we have practical experience. Over a million wells have been fracked in North America; not a single one has resulted in a building falling down from tremors or in a single person being poisoned by contaminated aquifers. So we are bound to conclude that lots of people have been spreading the sort of scaremongering that would make anti-vaxxers blush—even Andrew Bridgen would probably blush if he heard some of the stuff that has been put out by the friends of the noble Baroness, Lady Bennett, at their various camps around every conceivable attempt to get fracking going. We should rely on the science and the scientific reports and regulate the industry well, as we have done in the past.
Baroness Bennett of Manor Castle (GP)
Since the noble Lord addressed me directly on fracking, I ask him if he is aware of the article published in 2020 in Environmental Health Perspectives in the United States which showed that babies with low birth weight are significantly more common in families living close to fracking wells in the US. That demonstrates the practical reality of the outcome of fracking on health.
Lord Lilley (Con)
What is the mechanism by which those babies are born with low health when they are near a well?
Baroness Bennett of Manor Castle (GP)
The scientists behind that study say that they cannot explain it, that it needs further examination and that there are a number of possible mechanisms.
Lord Lilley (Con)
I have not read the report, but I will read it. I have read similar reports, and almost all rely on the statistical phenomenon that random events are as likely to be bunched together as they are to be evenly spread; I say that as someone who studied statistics. This results in bunches of things; for example, you will get bunches certain cancers somewhere near Windscale, as it used to be called, yet there are bunches elsewhere not near Windscale but people do not worry about them. I very much doubt that there is any scientific basis—and indeed the authors of the article could not think of any scientific basis—as to why we should relate one thing to another in that case. It is the sort of thing that the anti-vaxxers say when they find a little concern. Obviously we should always be concerned about issues such as vaccination or drilling under pressure, but we should not exploit people’s fears to stop something we do not like for other reasons. I hope that my amendment will be adopted and that it will mean that we actually regulate the shale gas industry on exactly the same basis as we do all other industries which can produce similar environmental impacts.
Baroness Worthington (CB)
My Lords, I hesitate to speak on this fascinating group of amendments, because we have had a rather long debate already. However, as it is such an important aspect of energy policy, I hope that the Grand Committee will bear with me as I comment on the group of amendments. If I had more time and had not been overseas recently, I would have added my name to Amendment 222A tabled by the noble Baroness, Lady Sheehan, as it is absolutely critical that we have transparency.
Over a series of years, finance measures have allowed us to walk into quite a huge liability on the public purse in relation to decommissioning the oil and gas facilities that are already there. That should not be ignored; it could be huge and very significant, especially as the nature of the investment in the North Sea shifts away from the majors into much smaller, less stable and less financially competent entities. I fully support the amendment and look forward to hearing from the Minister in detail in his response, because it is very well drafted and concerns an absolutely critical issue.
Baroness Worthington (CB)
I will continue if I may, and perhaps the noble Lord will come back to me on all the reasons. Another reason is that there is a moral dimension to climate change. We should never forget that. It is not about number crunching and bean counting of carbon in one country or another. This is a common-action problem. The whole world needs to move. Arguably, we have had the greatest number of years of unfettered exploitation of fossil fuels of any country on the planet. Therefore, it is high time that we signalled an end to that, to allow those countries that have not had that possibility to potentially increase their revenues from their resources while we signal the direction for the whole planet. That moral leadership is what led to net zero and it is what will lead to us acting on the supply side, because we must do both. We cannot effectively do this by cutting with one side of a pair of scissors. We need to cut with both. It seems ludicrous that the only body in the world that discusses supply-side constraints is OPEC. We are a nation state and we should, as a group of countries, come together to negotiate a much more considered and appropriate mechanism for looking at the supply side.
Finally, there is an absolute imbalance of power in those incumbents currently involved in the extraction of fossil fuels. They do not sit by passively, waiting for demand to be destroyed. I can tell the Committee as a matter of fact that money is being put into disinformation and misinformation campaigns to slow down the demand reduction that we want sped up. I do not disagree that demand is a very good way of doing this, but it is not the only way. We must be clear-sighted and honest with ourselves when we look at this problem from the perspective of a single-member state. What influence can we have on the world? Standing up to these giant companies with huge budgets, massive legal teams and huge sophisticated communication exercises is not easy. If we in the UK took this on, we would have to do so in an international context.
Therefore, I am not putting my name to these amendments. They are not appropriate without that commitment to act on an international basis. Here I am echoing some of the comments made about the non-proliferation treaty. Something must happen on the supply side within the auspices of an international agreement. We can then have an orderly transition in which everyone understands what we are allowed to do and what we are not. The current situation, where coal mines can be approved in the UK in the 21st century—sending people underground to dig out coal that no one wants with high sulphur content—is ludicrous. We as a country should lead on this. We should introduce appropriate policy at this stage, not legislation, which leads us to an international agreement.
I am sorry that I have spoken at length, but I feel strongly that we should take this on as a nation, particularly for that moral reason.
Lord Lilley (Con)
I was touched by the concern expressed by the noble Baroness for giving people in the fossil fuel industry certainty about the future. I used to be an analyst in the City, analysing energy and trying to forecast. It was very uncertain. The oil, gas, coal and electricity companies all found it very difficult to forecast. It is now somewhat easier because we have spelled out a path to net zero. They know that there will be a decline. They may think that perhaps it will not as much as that, or a bit more, but they have a better trajectory than ever before. In any case, why is she so worried about people in the fossil fuel industry having certainty, which no one else has? Also, she said that it is a moral issue—that it is about signalling something. In other words, it is virtue signalling.
Baroness Worthington (CB)
I dispute that point completely. It is not about virtue-signalling; it is about moral leadership. There is a difference. When the UK stood up and passed legislation on climate change, and took those measures to pass net zero, the rest of the world took notice. We can do the same on this issue, and we will need to. It does not have certainty because it depends on who you talk to in the City. At the moment, many people in the City are saying, “Woohoo!” Everybody is piling on to fossil fuels, with record high profits and huge amounts of money to be made in the short term. That short-termism is going to send us as a society collectively off a cliff. We do not want to see that. What happens in that uncertainty is speculation. A huge amount of trading that goes on with these commodities creates a bubble that all of us then pay for. I do not want to see any more of that; I want it to become a regulated industry that is declining according to an agreed strategy. Otherwise, I have no doubt that they will push us off a cliff; arguably, they already have.
I turn to other amendments in this group. I do not want to get into a debate about fracking but, for the record, I remember being on the Front Bench when we debated fracking regulations in our debates on the energy Bill that introduced them. Why did the industry not spot this at the time? Perhaps it was a clever move by the Lib Dems that it did not spot, although I would find that surprising. There is a host of regulations that have been passed on this issue. I am not averse to us looking at these seismic limits again because nobody wants to hold the Bill back on that basis. However, my contention is that the time has passed and it will be too slow to make a significant contribution to our domestic gas supply. We would be far better off electrifying everything and reducing primary energy demand by at least a third in that process.
That brings me on to Amendment 224, tabled by the noble Lord, Lord Moylan. Surprisingly, I quite like this amendment because it would force us to think about how we could reduce our domestic reliance on gas. Within that timeframe, no fracking is coming online, I am afraid, so the only option left is massively reducing our dependence on gas. That means electrification, not just because it is abundant, clean and cheap but because it is much more efficient. It is an energy-efficiency measure to electrify, taking down primary consumption. I feel confident that, if we were to produce a strategy, we would see a huge amount of electrification being brought on. That may well be what we should be doing; in fact, Amendment 242, which we debated previously, would have asked the Government to do just that. Perhaps there is something here to come back to on Report.
I turn to Amendment 227A; it was not debated but I am sure that we will come on to it. I just want to say that I lend my support to that renaming.
On Amendment 227AA in the name of the noble Baroness, Lady Sheehan, flaring is absolutely ludicrous in the sense that we should not be allowing this resource to be burned without it being captured and brought to market. However, there is something worse than flaring: venting. I want to hear some reassurance on the banning of flaring—it has been banned at times, specifically for wildlife protection reasons as I remember it—because it can lead to venting. That means allowing methane to be released into the atmosphere, which would be far more damaging and much harder to track. I would not want to see this amendment agreed to unless that issue was addressed.
We have had a debate about coal. If we are looking at this Bill holistically—I offer the Minister this thought for free—there is a way through the apparent contradiction around allowing us to exploit in environmentally sensitive ways the continued use of our own fossil resources where that will avoid us bringing in more polluting sources from America, which I think is the case at the moment. What about a climate recovery fund? We have just created a marine recovery fund for the almost non-existent damage that the offshore wind industry creates. What about a climate recovery fund for the very real damage that the continued extraction and burning of fossil fuels causes? Why do we not innovate around that policy? It would be easy to implement it. It could become a condition of all future licensing of fossil fuels in this country. We could work out the price we think should be paid and give the industry an incentive to make CCS work. That is something the Government could look at; I would be happy to meet the Minister to discuss it but I have only just thought of it.
Baroness McIntosh of Pickering (Con)
My Lords, I was not going to speak, but I think I am the only person in the Committee who has had first-hand experience of a planning application for fracking, which was in my then constituency. This is a classic example of what a broad church the Conservative Party is, because I support Amendment 223 in the name of the noble Lord, Lord Teverson.
I think my noble friend the Minister is going to reply that the government position is that we will only proceed to frack—if I am completely up to date—if local communities are agreeable to it. My concern is how you determine whether the local community is agreeable to it. I am minded to be guided by the science, which is very clear. The British Geological Survey says that
“it is well known that hydrocarbon exploration and production can result in man-made or ‘induced’ earthquakes”.
It goes on to say that fracking is one of the usual causes of these manmade earthquakes.
I am more pro-European than pro-American. What works in America—in the wide open spaces of North America, which are very sparsely populated and have a very isolated population in most cases—does not work in counties like North Yorkshire.
One of the reasons I took the title of “Pickering” is because there was an application in Kirby Misperton. It was well funded by Third Energy and underscored by Barclays. I am delighted to say that the reason it failed—and why I think no future application will be made—is that there was nowhere to put the polluted water. That area is prone to water stress, not only because of its proximity to Scarborough, but because that north-eastern corner of North Yorkshire is prone to water stress. Sometimes we have flooding, as there is in York at the moment. That particular corner is very water stressed. The problem was that there was nowhere to put the polluted water. There was also the usual problem, which all MPs are familiar with, of very narrow rural roads and heavy lorries coming in at the construction phase. The locals did not like the congestion. It was also very close to Flamingo Land, which is probably the second most frequently visited attraction after the North Yorkshire Moors Railway. That is also in Pickering.
With those few remarks, I am minded to support the amendment in the name of the noble Lord, Lord Teverson, rather than my own Government’s position.
Baroness Blake of Leeds (Lab)
My Lords, I thank everyone for the discussion. I want to start with Amendment 223 in the name of the noble Lord, Lord Teverson, but I do not intend to open another strand of debate on this. Obviously, the Minister will come back to it.
Picking up on the point made by the noble Baroness, Lady McIntosh of Pickering, from all my experience in planning, I really struggle with leaving these decisions to the planning system. There has obviously been the intervention of the Planning Inspectorate in the decision on the coal mine in Cumbria. We must have much clearer policies to guide us as we go forward, rather than effectively setting people against each other. One year ago, would we have anticipated that this debate could have such a devastating impact on the Government of the day, with the Prime Minister effectively falling afterwards? The heightened emotion of this debate in the Commons is something to behold. I want to clarify that Labour Party policy is to move to a permanent ban on fracking. I think it is very clear where we stand in that regard.
I will also comment on the debate from the noble Lord, Lord Teverson, on coal mines and Amendment 232. I honestly do not think that we could sum it up any better than the president of COP 26, Alok Sharma. On hearing of the possibility, he said:
“A decision to open a new coal mine would send completely the wrong message and be an own goal. This proposed new mine will have no impact on reducing energy bills or ensuring our energy security.”
This was quoted in the Observer on 3 December. I do not know whether noble Lords looked at the press coverage around the world following the decision, but the reputational damage that was done to this country in this space through that one action is incalculable—it is, frankly, shocking.
Baroness Worthington (CB)
I wanted to say something in my speech, but it went on too long. There is this question of carbon neutrality of fossil fuel extraction, and two things are really important here. First, you have to take into account the embedded carbon within the product, which, it has to be assumed, will be released into the atmosphere, with an almost guaranteed impact now because the concentrations are so high that every additional tonne, which will be there for 1,000 years, will have a certain impact. Attribution science is getting ever better; you can now attach a cost to allowing that to happen, so we should do that.
Secondly, any neutrality that is sought on the back of something that is storing carbon in the biosphere is in no way equivalent to that extraction of something from the lithosphere and allowing it into the atmosphere. I feel very strongly that any claims around carbon neutrality of fossil fuel extraction need to be regulated: we need government standards that state what is and is not allowable. That is not to say that it cannot be done—it can be—but it is the equivalence of impact and the certainty of it that must be matched in any off-set, and it will not be achieved by planting trees or, even worse, saying that you will protect some trees that may or may not be cut down. That is the key to this. You could come up with a climate checkpoint that allows a limited amount of continued licensing, but it has to be done in mindfulness of the full effect of that on the climate.
Baroness Blake of Leeds (Lab)
I thank the noble Baroness. This brings to mind the debate we had in the Chamber last week about greenwashing and all the wider implications.
On the amendments in this group, I will talk about the demand and supply side, because it is important that we do not look at this in isolation; we have to think about the impact on people and how we can motivate our populations and communities to get behind the drive towards net zero. That is a very important consideration in these amendments.
The International Energy Agency clearly set out that there must be no new oil and gas fields and no new coal-fired power stations built if the world is to stay within safe limits of global heating and meet the goal of net-zero emissions by 2050. There is now, finally, acknowledgement and recognition that moving away from fossil fuels is the key to achieving greater energy security. This debate has been going on for decades; what a tragedy that it is the horrendous situation in Ukraine that has brought it to a head. Action much sooner would have helped prevent us being in the position we are in today.
The noble Lord, Lord Lilley, talked about a steady transition. The point we are trying to get across is that there is an urgency here. There needs to be a rapid transition if we are to have any chance of moving along in the way that has been outlined, as we need to.
The other issue is how we permanently help households move away from the volatility of fossil fuel prices and reduce the fiscal burden of financial support to households through this and any future energy crisis. We have talked a great deal on other occasions about energy efficiency. We hear about the amounts that the Government are putting into this space but, quite frankly, the demand in this area is much higher than the response that we have had so far. I will not go into all the cost of living implications, but we cannot forget the millions of households that are set to be in fuel poverty this winter. This has to be one of the main drivers in making sure that we get the amendments we need into the Bill so that we can move away from the volatility and expense of fossil fuels.
Amendment 227A in my name and that of my noble friend Lord Lennie seems to me an absolute no-brainer; it is already in train, and we need to move forward on it. I have one very simple question for the Minister: will he support our amendment today?
Baroness Bennett of Manor Castle (GP)
I am very interested and pleased that the noble Baroness referred to the International Energy Agency study that I mentioned. The inference could be drawn from her comments that the Labour Party supports a ban on new oil and gas. I know that many people out there listening to us today would be very interested to know whether that is the case. Can the noble Baroness confirm that the Labour Party supports a ban on new oil and gas?
Baroness Blake of Leeds (Lab)
It was a nice try, but I think that is without the scope of this debate.
Lord Callanan (Con)
Well done to the noble Baroness, Lady Blake, for avoiding the question.
I thank everyone who has contributed today; it has been a fascinating debate. In the context of the Energy Bill, I think it is the first we have had on the fundamentals of our energy policy, with both sides: those who, in the case of the noble Baroness, Lady Bennett, seem to want to ban everything, and those who take a more pragmatic view of the issues. I will attempt to set a centre course of a sensible, pragmatic energy policy, which is the one we will follow.
I will address the various amendments, starting with Amendments 224 and 227, tabled by that fascinating pairing: on the one hand my noble friend Lord Moylan and on the other the noble Baroness, Lady Bennett. I will also address the contribution from the noble Baroness, Lady Worthington.
I begin by stating our fundamental policy of driving down demand for fossil fuels as we transition to our legally binding net-zero economy. Of course, the noble Baroness’s Amendment 227 would have significant ramifications. At a time of global energy crisis, an orderly transition underpinned by oil and gas is the best approach and it is crucial to maintaining our energy security of supply.
Outside the rarefied world that the noble Baroness lives in, Greens in other parts of the world are having to live up to these difficult choices in the real world, in real policy. At the moment, the German Greens are quite hilariously justifying the expansion of a massive new coal mine—producing lignite coal, one of the dirtiest forms of coal—in northern Germany, because of the energy crisis. The noble Baroness, Lady Bennett, might think it is funny for us all to sit in the cold and dark, relying on unstable sources of power, but the rest of us think that we need to supply this country with the energy it needs. We need to set the country on a net-zero transition, but we need to do it gradually and responsibly. We set this out in the British Energy Security Strategy, where we set out our long-term plan for greater energy security, including references to domestic gas supply. In the Autumn Statement, the Chancellor built on that and set out that the Business and Energy Secretary will publish further details on our energy independence plans in due course, and we will do so.
The North Sea Transition Authority launched the 33rd licensing round on 7 October 2022. This is expected to deliver over 100 new licences, which will put more UK gas on the grid. I repeat: it will not put more gas on the grid—it will put more UK gas on the grid. I have had this debate many times in the Chamber with the noble Baroness, Lady Sheehan, and I still fail to see how she does not think that this is a good idea. In our transition, as we are reducing our demand, it makes sense to have that gas from relatively low carbon-producing sources rather than importing highly polluting, high-carbon fracked gas from other parts of the world.
Baroness Sheehan (LD)
So the gas produced from the licences that will be issued in the 33rd round will not be traded on the commodities market—is that what the Minister is saying?
Lord Callanan (Con)
Of course it will be traded on the commodities market, but the vast majority of it will be moved, produced and used in the UK. We have relatively limited ways of exporting gas. We have some interconnector pipelines, which, interestingly, over the summer were used extensively to build up continental supplies of stored gas ready for the winter. Most of our LNG terminals are used for importing; very few are used for exporting. The gas will be subject to the international price—I totally accept that; we cannot isolate ourselves from the international market—but the vast majority of the gas would be used and produced on the UK market. Unless the Lib Dems are telling us that we are going to tell everybody to switch off their gas boilers, turn off their heating and sit in the dark and cold—which I do not think is a practical policy, but I look forward to seeing that in focus leaflets, if that is what they really believe—this is a sensible way of proceeding, gradually reducing our demand over time. The Climate Change Committee accepts this as well.
I hope that the noble Baroness will find some reassurance in the landmark North Sea transition deal between the Government and industry. This deal will help to reduce emissions, ensuring a net-zero basin by 2050, and support our goal of decarbonising the wider economy. We have seen the sometimes wildly opposing views on this matter, but the Government believe that we can pursue a pragmatic, sensible, middle ground approach—our Lib Dem approach, if you like—to meet our climate ambitions while also ensuring British energy security.
I turn to Amendment 227A, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. As drafted in the proposed amendment, the Oil and Gas Authority’s name change to the NSTA would occur only in the Energy Act 2016. However, the OGA is mentioned in a large amount of primary and secondary legislation which would also need to be changed. The Government recognise the importance of this change, and we are currently considering all the legislative options to amend the statutory name of the OGA to the NSTA in all places where it occurs. The amendment also seeks to remove the NSTA’s statutory principal objective to maximise the economic recovery of UK petroleum and add a new obligation regarding net zero. As I have just said on the previous amendments, in my view, maximising economic recovery of oil and gas need not be in conflict with the transition to net zero.
Lord Teverson (LD)
I will not detain the Minister for long, it was interesting that he referenced the Climate Change Committee in response to my noble friend’s amendment. That same letter said,
“the evidence against any new consents for coal exploration or production is overwhelming.”
I am sorry that the Minister accepts part of that letter, but maybe not the other part. The Minister has nobly and served well a number of Administrations, including the one during COP 26, and I would like to know how he reconciles the COP 26 statements by his own department with the opening of that new coal mine.
Lord Callanan (Con)
The decision was taken by a different department, by DLUHC, in a quasi-judicial manner. It is likely to be the subject of judicial proceedings, so I cannot comment in detail on that decision, as the noble Lord will understand. I am sure we will be having this debate lots of times in future.
I move on to the question from the noble Baroness, Lady Blake. The reasons for the Secretary of State’s decision are set out in full in his published letter on GOV.UK, which takes into account matters like the demand for coal, climate change and the impact on the local economy. To reiterate the point of my noble friend, coking coal is used in the production of steel—it is not used in power generation—which is, of course, crucial to building the infrastructure that we all wish to see more of, such as offshore wind turbines.
On fracking, I thank my noble friend Lady McIntosh for her contribution. The Government have been clear that in line with the commitment made in the 2019 Conservative manifesto, it is adopting a presumption against issuing any further hydraulic fracturing consents for the extraction of shale gas. That position is, in effect, a moratorium. This will be maintained until compelling new evidence is provided that addresses the concerns around prediction and management of induced seismicity.
I move on to my noble friend Lord Lilley’s amendment. I welcome his thoughtful contributions to today’s debate, as well of those of my noble friend Lady Altmann. British Standard 5228, which my noble friend quoted, recommends procedures for noise and vibration control in respect of construction and open-site operations. It is not a measure designed to reduce the risk of induced seismicity. The potential for induced seismicity from hydraulic fracturing is a result of the injection of fluid deep underground, at depths of one kilometre or more. Seismicity induced by hydraulic fracturing is therefore different in nature from vibration directly induced by a construction site, and the application of BS 5228 would therefore not be appropriate.
My noble friend Lord Moylan tabled an amendment about the composition of our domestic gas supply. A review of the Gas Safety (Management) Regulations 1996 is currently under way. The Health and Safety Executive has been reviewing these regulations, which govern gas quality, and is consulting on a set of proposed changes. The HSE’s consultation closed in March 2022, and it will be aiming to publish its response in due course. BEIS has worked closely with the HSE and has taken regular opportunities to input into the process in both an analytical and a policy capacity. A statement by the Secretary of State at this stage is therefore unnecessary as the publication of the Government’s formal response will be tantamount to just that. I hope my noble friend will understand that in advance of that document, I cannot comment as it would not be proper.
The noble Baroness, Lady Sheehan, tabled two amendments in this group. On Amendment 222A, I should say at the outset that tax matters are an area for the Treasury. Since the introduction of decommissioning relief deeds—DRDs—the Treasury issues a Written Ministerial Statement at the end of each financial year updating on DRDs, including the total number of DRDs in force during the past financial year, past payments under DRDs and the projected value of future payments under ongoing DRD claims. While a DRD claim may arise where a company has defaulted on its decommissioning obligations, the tax system also provides tax relief for decommissioning costs in recognition that decommissioning is a significantly expensive and statutory obligation. HMRC publishes information annually on the estimated sum of all forecast tax relief payments due to decommissioning as part of its annual report and accounts.
Baroness Sheehan (LD)
I thank the Minister for his comments on decommissioning. He is unwilling to move further on the amendment, but will he at least commit to writing with the current estimate of the Exchequer costs of decommissioning if prices were to fall to less than $5, in line with Clause 1(3)(c), and to explain how these risks are being managed? I think that would be within scope.
Lord Callanan (Con)
Decommissioning relief deeds are private contracts between the Treasury and the relevant company. That is a matter for the Treasury. I cannot give a commitment on behalf of the Treasury. I suspect that the best option would be for the noble Baroness to take it up with Treasury Ministers.
Baroness Sheehan (LD)
I hope the Minister will not mind me pressing on this issue. I am not asking for anything commercially secret but just for some assurance, which I think the PAC and the NAO have sought, that the Government have a handle on the liability and risks which they are potentially exposing taxpayers to in the future.
Lord Callanan (Con)
As I said, the noble Baroness should take this matter up with the Treasury. I cannot give commitments on its behalf. I do not know the details. I have set out the position on DRDs. As far as I am aware, this is not tax or revenue legislation. I suggest that the noble Baroness take this up with a Treasury Minister.
I move on to Amendment 227AA on the prohibition of flaring. The Government are already taking steps to drive down routine flaring and the similar practice of venting. The UK has committed to the World Bank’s Zero Routine Flaring by 2030 initiative, and we are working with regulators towards eliminating this practice as soon as possible. Through the North Sea transition deal, industry has committed to accelerating compliance with the World Bank initiative ahead of 2030. We are making good progress: in 2021, total flared gas and vented gas reduced by 20% and 22% respectively, relative to 2020. Furthermore, the North Sea Transition Authority, as the lead regulator on these matters, expects all new developments to be planned and developed on the basis of zero routine flaring and venting.
With the explanations on these various points, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Sheehan (LD)
I thank the Minister, but I have to say that I am not hugely satisfied with the responses on decommissioning tax reliefs. I take up the point made by the noble Lord, Lord Lilley, about stranded assets and who will pick up the risk. In a scenario where, say, Shell decides that a particular field has become uneconomic for it to exploit commercially and decides to sell on that asset, which is then picked up by another entity which, in turn, goes bust, who will pick up the cost of that decommissioning? I hope that the Minister will be able to quickly address that.
In terms of flaring, I am really disappointed. It is such a no-brainer. Since 1991, Norway has been able to ban flaring—and, within that, I would include venting—yet our Government cannot give that commitment, when we have made commitments at COP 26 and COP 27 under the Global Methane Pledge, and we continue to do this. It really is on a par with asking countries to ban coal and then giving permission for our own coal mine in Cumbria to go ahead. It is just incomprehensible, and I hope that the Minister can quickly address that before I withdraw my amendment.
Baroness Sheehan
“Prohibition on flaring(1) The Secretary of State must by regulations prohibit the practice of flaring by oil and gas installations within the jurisdiction of the United Kingdom.(2) In this section “flaring” means the burning of gas, produced during oil extraction, in order to dispose of it.(3) Regulations under this section must be made so as to bring the prohibition into force by 31 December 2025.”Member’s explanatory statement
This amendment would prohibit ‘flaring’ which is the burning of gas, produced during oil extraction, to dispose of it. This is in line with recommendations made by the Commons Environmental Audit Committee and would help ensure the UK fulfils commitments it made at COP26 and COP27 under the Global Methane Pledge.
Baroness Sheehan (LD)
Despite the Minister’s lack of response to my comments, I will not move the amendment at this stage.
Baroness Bennett of Manor Castle (GP)
As I say in the Member’s explanatory statement, this debate is to raise issues that many people have raised with me about the purpose of Clause 230, which covers licensing nuclear sites that are on or under the territorial sea of the UK.
The noble Baroness, Lady McIntosh of Pickering, in talking about offshore wind farms, referred to the impact on marine mammals of seismic testing in particular. In the middle of last year we saw seismic surveys being carried out in the Irish Sea off Cumbria in order to assess the potential of undersea nuclear storage. At that time the Marine Management Organisation noted in a letter that those tests could cause disturbance to certain cetacean species. Those tests were carried out before this Bill became law. Those are interesting circumstances for them to be carried out in, which I will come back to.
In the Government’s own words, they need to keep the waste safe and secure for hundreds of thousands of years, give or take, for the radioactivity to decay. That is why they are seeking long-term storage for hundreds and thousands of years. The UK has the world’s largest stockpile of untreated nuclear waste, more than 100 tonnes of plutonium, and the total volume is 750,000 cubic metres. We are talking about a lot of nuclear waste. The chair of Nuclear Free Local Authorities, David Blackburn, who for full disclosure I will note is also the leader of the Green Party group on Leeds City Council, has said:
“The waste would be left in situ for millennia and, no matter how effective the barriers, some of the radioactivity will eventually reach the surface. The rate at which radioactivity would leak … can be poorly predicted and is likely to remain so for an indefinite period.”
I was in Cumbria a decade ago when there was talk of onshore storage of nuclear waste there and a great deal of local resistance. We are aware that there is no certainty. Putting it under the sea would seem to add to that uncertainty, to the risks and to the difficulties of dealing with anything should it go wrong. I put down this clause stand part debate because there is a great deal of uncertainty. People are unsure what the Government’s intentions are, which is why I hope the Minister may be able to provide more certainty.
I also refer to the fact that seismic testing was going on. The Explanatory Notes for the Bill appear to suggest that Clause 230 is actually to close a possible loophole that nuclear sites under the sea might not currently require a licence or be subject to the nuclear regulator. Page 71 of the Explanatory Notes states that:
“This clause amends section 1 and section 26 of the NIA 1965 and section 68 of the Energy Act 2013 … to make it expressly clear that certain nuclear sites located wholly or partly in or under the … sea … require a licence and are regulated by the Office for Nuclear Regulation”.
That raises a question that I will put explicitly to the Minister: are the Government aware OF or concerned about any unlicensed or unregulated nuclear sites on or partly on or underneath the sea in UK territorial waters?
Lord Teverson (LD)
My Lords, I shall be brief. When I first read this clause I assumed it was effectively to give permission to go out to sea from land, like some coal mines. I am interested to know whether that was the Government’s intention.
I was also quite interested that the site has to be partly in territorial waters. Territorial waters go out to 12 nautical miles, so that seems to suggests that it does not. I wonder why there is the stipulation that the site has to be partly in territorial waters. It seems to me that if this is done it really needs to be within territorial waters. I have no other questions.
Lord Lennie (Lab)
My Lords, I will also be brief. I do not want to provoke another debate—two hours on this would be unnecessary. We are all doing our bit by keeping this Room at low temperature in terms of this debate. I do not know whether they can turn the heat up a bit, as I think that would be helpful to all of us.
Lord Callanan (Con)
The noble Baronesses, Lady Sheehan and Lady Bennett, are in charge of heating.
Lord Lennie (Lab)
Perhaps it is something like that.
The Government state that the best means to manage hazardous nuclear waste in the long term is in GDF undersea burial sites. Can the Minister tell us how they have concluded that that is the best possible means? Clearly we have plenty of it and we will have plenty more. We support nuclear power and nuclear generation as part of the overall mix of energy fuels to supply the UK—there is no question about that. However, dealing with hazardous waste is an important matter that we would like some information about.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Baroness, Lady Bennett of Manor Castle, for the opportunity to debate and discuss Clause 230.
This clause relates to geological disposal facilities. We have spoken about this often in the Chamber during Questions. GDFs are highly engineered facilities capable of isolating and containing radioactive waste within multiple protective barriers deep underground, so that no harmful quantities of radioactivity ever reach the surface environment.
The Government consider a GDF to be essential to the successful decommissioning of the UK’s civil nuclear legacy and our new-build nuclear power programme which will support the UK Government’s net-zero ambitions and their energy security strategy. The process to find a site for a GDF is under way, and it is therefore vital that we have a clear legal framework to ensure that such a site will be licensed and subject to oversight by the Office for Nuclear Regulation—the ONR.
On the noble Baroness’s point about disturbance, there is no evidence that any disturbances were caused by the specific seismic studies undertaken on behalf of Nuclear Waste Services. We have not seen any, and none has been drawn to our attention, but if the noble Baroness has other information, obviously we would be very grateful if we could see it.
Clause 230 makes clear that certain nuclear sites, including a GDF once prescribed in regulations, located wholly or partly in or under the territorial sea adjacent to the UK require a licence and are regulated by the ONR. In answer to the noble Lord, Lord Teverson, I have no idea why it says “wholly or partly”; I take his point that it is a long way off to get to “partly in our territorial waters”. However, presumably that is a drafting necessity.
The GDF siting process is a consent-based approach which requires a willing community to be a partner in the project’s development. Four areas have entered the siting process: three areas in West Cumbria—in Copeland and Allerdale—and one in Theddlethorpe in Lincolnshire. This clause is intended to provide clarity to parties with an interest in the GDF process that a GDF in their community, whether located deep below the land surface or deep below the seabed, will be safe, secure and appropriately regulated by the ONR. I would like to be clear: no part of a GDF will be in the sea itself, nor will radioactive waste be dumped in the sea. That is banned by international conventions, including the London convention and protocol. Whether a GDF is built in the geological formations deep below the land surface or deep below the seabed, it will be accessed from facilities on land, and the waste will be isolated deep underground within multiple barriers to ensure no harmful quantities of radioactivity reach the surface environment.
I thank noble Lords for their contributions, I hope this has assured the noble Baroness of the Government’s intentions for this clause, and I hope she will feel able not to oppose that this clause stand part of the Bill.
Baroness Bennett of Manor Castle (GP)
I raised the question of whether the Government are aware of or concerned about any unlicensed, unregulated nuclear sites, which the Explanatory Memorandum seems to suggest might be a reason for this.
Baroness Bloomfield of Hinton Waldrist (Con)
My officials say that that is not a concern to us. If we establish that it is otherwise, then of course we will let the Committee know.
“Chapter 3Relevant nuclear pension schemesCivil nuclear industry: amendment of relevant nuclear pension schemes(1) The Secretary of State may by regulations make provision requiring a designated person to amend the provisions of a relevant nuclear pension scheme in respect of which the person is designated—(a) for the purpose of making scheme-specific changes;(b) for the purpose of making changes that relate to any scheme-specific changes;(c) for the purpose of making contribution rate adjustments.(2) “Scheme-specific changes”, in relation to a relevant nuclear pension scheme, are changes that—(a) relate to defined benefits for members of the scheme, and(b) are in connection with one or more of the matters mentioned in subsection (3).(3) Those matters are—(a) securing that the structure under which the defined benefits in question accrue is a career average revalued earnings structure (in particular where it would otherwise be a final salary structure);(b) providing for other changes to the amounts of such of those defined benefits as are payable in respect of members of the scheme;(c) providing for revaluations of pensionable earnings, or of benefits in deferment or pensions in payment, to be by reference to the consumer prices index (and not the retail prices index) but not involving imposing a cap on any revaluation or revaluation rate;(d) setting percentage rates, for contributions to the scheme by members of the scheme, that are higher than they would otherwise be; (e) setting periods for which contributions to the scheme by members of the scheme are required to be made that are longer than they would otherwise be.(4) Amendments made by virtue of subsection (1)(b) may include amendments relating to benefits provided under the scheme other than defined benefits.(5) “Contribution rate adjustments” means such adjustments—(a) to the rates of contributions to the scheme by its members in respect of defined benefits, or(b) to the salary bands to which such contribution rates apply, as are considered appropriate by the designated person (acting on actuarial advice) to ensure that the average contribution rate for members of the scheme in respect of defined benefits is as close as reasonably practicable to 8.2%.(6) Where a person is required by regulations under this section to amend the provisions of a relevant nuclear pension scheme, the amendments may be made—(a) free from any consent requirements set out in the scheme, and(b) notwithstanding provision made by or under any other Act of Parliament, or any rule of law, that would otherwise prevent or limit, or impose conditions on, the making of the amendments.(7) Amendments made by virtue of subsection (1)(a)—(a) must not relate to service prior to the date on which the amendments are made;(b) may be made in the case of a particular scheme on one occasion only.(8) Nothing in this section limits any power that a designated person has to amend a relevant nuclear pension scheme.(9) A person may not be designated in relation to a relevant nuclear pension scheme unless it appears to the Secretary of State that the person has the power to amend the scheme.(10) In this section, “designated” means designated by regulations under this section.”Member's explanatory statement
This new Clause is the first Clause in a new Chapter of Part 12 of the Bill (also containing the other new Clauses inserted after Clause 237 by amendments in Lord Callanan’s name). This new Clause enables regulations to be made requiring persons with responsibility for pension schemes for public sector employees in the nuclear sector to amend those schemes in line with wider changes to public sector pensions.
Baroness Bloomfield of Hinton Waldrist (Con)
I turn now to the amendments in the name of my noble friend the Minister. The 2011 report by the noble Lord, Lord Hutton of Furness, started the Government on the road to the reform of public sector pensions. While the Public Service Pensions Act 2013 made a large number of reforms, it did not cover all public sector bodies, including those within the Nuclear Decommissioning Authority group. A proposed bespoke career average revalued earnings scheme was, following statutory consultation with affected NDA employees and a ballot of union members, formally accepted by the trade unions. The bespoke scheme is in line with the rest of the public sector. The reformed scheme still offers excellent benefits to its members. Notably, indeed unusually for other reformed schemes, it still includes provision for members to retire at their current retirement age. For nearly all, this will be 60.
The complicated nature of the pension schemes in the context of the statutory framework which applies to pension benefits across the NDA estate means, however, that specific legislation is needed to implement the new scheme. Amendment 227B provides the Secretary of State with the power to make secondary legislation designating a person who will be required to amend the provisions of a nuclear pension scheme.
The Deputy Chairman of Committees (Lord Lexden) (Con)
My Lords, the amendment is Amendment 227B.
Baroness Hayman (CB)
For the assistance of the Committee, I point out that the numbering of the groups that we were given last night and was up to date was changed when we came to the paper that we received today, but no indication was given of that. Therefore, I believe that this is now the correct order.
Baroness Bloomfield of Hinton Waldrist (Con)
We are on the fifth group, with government Amendment 227B on pensions. I turn to Amendment 227C. The amendment that I just spoke to uses the phrase “relevant nuclear pension scheme” to describe the types of schemes that a designated person could be required to amend by virtue of that amendment. This amendment explains what is meant by that phrase. New subsections (1) and (2) provide that a relevant pension scheme is one run by, or on behalf of, the NDA under Section 8 of the Energy Act 2004, or one which provides pensions or other benefits to persons who are, or were, performing similar public functions. The new clause also clarifies that the UK Atomic Energy Authority pension schemes and pension schemes that benefit persons specified in Public Service Pension Scheme Act 2013 are not relevant pension schemes.
I turn to Amendment 227D. In order to implement the proposed pension reforms, the NDA and, in the case of the MEG-ESPS, Magnox Limited, will need information from others. Amendment 227D gives a person who has been required to amend a relevant nuclear pension scheme the power to require persons holding any information they might reasonably require to provide such information. Examples of information that they may need but which they might not otherwise be able to obtain include the number of members in a pension scheme and the salaries and ages of those members. Data protection legislation may still prevent the information from being shared; however, this amendment specifies that in making that assessment the requirement to disclose imposed by this clause must be taken into account. This amendment also provides that disclosure does not constitute a breach of confidence or a breach of any other restriction on the disclosure of information.
Lord Teverson (LD)
One thing that the Minister did not mention, although I may have missed it, is the employees and staff of the NDA. What consultation has taken place as far as they are concerned?
Baroness Blake of Leeds (Lab)
I have a few questions and, if it is not possible to answer them all, I shall accept a written response. It would appear that the Government are bringing forward legislation that breaks promises of previous Governments, going way back, in relation to nuclear workers’ pensions. The statutory pensions protections that Parliament previously legislated for were vital to the success of privatisation. Is it right for the Government to promise those protections to ensure that success, and then to rip them up that many years after the event? We would like some clarification as to whether the Minister believes that that is the case—and, if not, why not?
Is it accurate to claim that these reforms would bring pension provision across the NDA group into line with wider public sector pensions? These pension schemes underwent much more radical reform long before my noble friend Lord Hutton’s review of public sector pensions. They have been closed to new entrants for many years. My noble friend recommended that public sector pension accrual should remain on a defined benefit basis, but pension provision across the NDA group is mostly on a defined contribution basis. I have it on good authority that there is an appetite from the trade unions to discuss these reforms with Ministers. Would the Minister be prepared to accept this course of action?
Several more questions are coming up, particularly on technical issues and questions about the proposed amendments. The amendments should allow for the implementation of the agreement between BEIS, the NDA and the recognised trade unions. There is a lot of detail about the proposed career average benefit structure in the heads of terms, but the proposed amendments are drafted in more general terms. Regulations are the proper place for the detail to be set out, but might the agreed accrual rate be an important enough term of the agreement to be in the Bill as well? The average member contribution rate of 8.2% is specified.
There are concerns about proposed new subsection 3(c) of the first proposed new clause that adds this chapter to Part 12, which provides for the increase of pensions in line with CPI, not RPI, for active and deferred pensioner members. However, it says that only increases for active and deferred members—that is, re-evaluation—cannot be capped. This opens the real possibility that the Government intend to bring forward regulations that provide for pension increases for at least some members, possibly members of the Magnox group, to be capped. This is contrary to the heads of terms, which explicitly states that pension increases will be in line with inflation as measured by CPI, with no reference to any cap. Would it be possible to propose an amendment so that we can look at ensuring that regulations cannot propose capped increases for any pensioners?
I will end by asking: how confident are the Government that they can identify people in and out of scope of future regulations, given that there is a fair degree of geographical mobility around the industry?
Baroness Bloomfield of Hinton Waldrist (Con)
I thank both noble Lords for their contributions to this important debate. I suspect that I might end up having to write to the noble Baroness, Lady Blake, with the answers to some of her questions.
I turn first to the question raised by the noble Lord, Lord Teverson, on what consultation there had been with NDA employees. As I mentioned in my opening remarks, a public consultation was undertaken and published in December 2018. It ran for a number of months before that. All these changes were agreed then with the trade unions, recognising the vital work that the NDA and its workforce delivers. BEIS and the NDA worked with national trade unions in 2017 to develop an agreed pension benefit structure tailored to the characteristics of the affected NDA employees. This resulted in a proposed bespoke CARE benefit structure, which is in line with the key principles of reforms already implemented in respect of other public sector pension schemes. The bespoke CARE scheme design was formally accepted by the national trade unions following statutory consultation with affected NDA employees and a ballot of union members. There are two final salary public sector schemes within the NDA, with a total of approximately 8,000 scheme members, that are therefore within scope for reform.
As I said in my opening remarks, this is still a very good pension. It allows full pension awards at 60 for the majority of members, whereas most public sector pensions are linked to state retirement age. I am afraid there has been a delay in implementing these reforms, purely because the Energy Bill has provided the first opportunity to make the change since the agreement with the unions; previous legislative vehicles were considered but were not deemed appropriate for these clauses. I will respond to any further questions that were raised in writing. I beg to move.
Lord Callanan
“Meaning of “relevant nuclear pension scheme”(1) In this Chapter, “relevant nuclear pension scheme” means—(a) a pension scheme maintained by or on behalf of the NDA under or by virtue of section 8(1)(a) or (b) of the Energy Act 2004, or(b) subject to subsections (2) and (3), a scheme that provides for the payment of pensions or other benefits to or in respect of persons who are, or have been, employed to perform duties relating to matters that correspond or are similar to matters in respect of which the NDA has functions.(2) A scheme of a kind mentioned in subsection (1)(b) is a relevant nuclear pension scheme only to the extent that the pensions or other benefits are provided in connection with employment by a person with public functions.(3) Subsection (1)(b) does not apply to—(a) a UKAEA pension scheme (within the meaning given by paragraph 1(1) of Schedule 8 to the Energy Act 2004);(b) a scheme that provides for the payment of pensions or other benefits to or in respect of persons specified in section 1(2) of the Public Service Pensions Act 2013 (schemes for persons in public service).(4) In this section, “the NDA” means the Nuclear Decommissioning Authority.”Member’s explanatory statement
This new Clause defines “relevant nuclear pension scheme” for the purposes of the Chapter consisting of the new Clauses in Lord Callanan’s name inserted after Clause 237.
“Information(1) This section applies where a person (“P”) is required by regulations under section (Civil nuclear industry: amendment of relevant nuclear pension schemes) to amend a relevant nuclear pension scheme.(2) P may require a person who holds relevant information to provide it to P.(3) “Relevant information” means any information or data that P reasonably requires in connection with deciding whether, or how, to amend the scheme. (4) Except as provided by subsection (5), the disclosure of information under this section does not breach—(a) any obligation of confidence owed by the person making the disclosure, or(b) any other restriction on the disclosure of information (however imposed).(5) This section does not require a disclosure of information if the disclosure would contravene the data protection legislation (but in determining whether a disclosure would do so, a requirement imposed under subsection (2) is to be taken into account).” Member’s explanatory statement
This new Clause gives a person who is required, by regulations under the first of the new Clauses in Lord Callanan’s name inserted after Clause 237, to amend a relevant nuclear pension scheme the power to require persons with relevant information to provide that information.
“Further definitions(1) This section applies for the purposes of this Chapter.(2) References to the amendment of a relevant nuclear pension scheme include references to the amendment of any one or more of the following—(a) the trust deed of the scheme, if there is one;(b) rules of the scheme;(c) any other instrument relating to the constitution, management or operation of the scheme.(3) References to a relevant nuclear pension scheme include references to any section into which the scheme is divided.(4) A “career average revalued earnings structure” is a structure where—(a) the pension payable to or in respect of a person, so far as it is based on the person’s pensionable service, is determined by reference to the person’s pensionable earnings in each year of pensionable service, and(b) those earnings, or a proportion of those earnings accrued as a pension, are under the structure revalued each year until the person leaves pensionable service.(5) “Consumer prices index” means—(a) the general index of consumer prices (for all items) published by the Statistics Board, or(b) where that index is not published for a month, any substituted index or figures published by the Board.(6) “Defined benefits” are benefits—(a) that are not money purchase benefits (within the meaning of the Pension Schemes Act 1993), and(b) that are not provided under an injury or compensation scheme (within the meaning of the Public Service Pensions Act 2013).(7) A “final salary structure” is a structure where entitlement to the pension payable to or in respect of a person which is based on the pensionable service of that person is or may be determined to any extent by reference to the person’s final salary; and “final salary” here means the person’s pensionable earnings, or highest, average or representative pensionable earnings, in a specified period ending at, or defined by reference to, the time when the person’s pensionable service in relation to the structure terminates.(8) “Retail prices index” means—(a) the general index of retail prices (for all items) published by the Statistics Board, or(b) where that index is not published for a month, any substituted index or figures published by the Board.” Member’s explanatory statement
This new Clause sets out definitions relevant to the provisions about amendment of relevant nuclear pension schemes.
“Application of relevant pensions legislation(1) The Secretary of State may by regulations make—(a) such provision about the application of relevant pensions legislation in relation to persons of a specified description, or (b) such amendments of relevant pensions legislation,as the Secretary of State considers appropriate for the purposes of or in connection with the amendment of a relevant nuclear pension scheme in pursuance of regulations under section (Civil nuclear industry: amendment of relevant nuclear pension schemes).(2) In this section—“relevant pensions legislation” means—(a) Schedule 8 to the Energy Act 2004 (pensions), or(b) regulations made under Schedule 14 or 15 to the Electricity Act 1989 (the Electricity Supply Pension Scheme etc);“specified” means specified in regulations under subsection (1).”Member’s explanatory statement
This new Clause enables the Secretary of State to make regulations about the application of relevant pensions legislation, or amending relevant pensions legislation, in connection with the amendment of a relevant nuclear pension scheme in pursuance of regulations under the first of the new Clauses inserted by the amendments in Lord Callanan’s name inserting new Clauses after Clause 237.
“Procedure for regulations(1) Regulations under this Chapter are subject to the affirmative procedure.(2) If, apart from this subsection, a draft of an instrument containing regulations under this Chapter would be treated for the purposes of the standing orders of either House of Parliament as a hybrid instrument, it is to proceed in that House as if it were not such an instrument.”Member’s explanatory statement
This new Clause provides that a statutory instrument containing regulations under any provision of the new Chapter of Part 12 (consisting of the new Clauses inserted after Clause 237 by the amendments in Lord Callanan’s name) is subject to the affirmative procedure. It also provides for the disapplication of the hybrid instrument procedure in the House of Lords.
Lord Teverson
“Net Zero duty(1) In section 4AA of the Gas Act 1986, after subsection (1) insert—“(1ZA) In exercising its functions in relation to the principal objective the Authority has a duty to assist the delivery of greenhouse gas emissions targets as set out in the Climate Change Act 2008.”(2) In section 3A of the Electricity Act 1989, after subsection (1) insert—“(1ZA) In exercising its functions in relation to the principal objective the Authority has a duty to assist the delivery of greenhouse gas emissions targets as set out in the Climate Change Act 2008.”” Member’s explanatory statement
This amendment would place on the Gas and Electricity Markets Authority a duty to assist in the delivery of Net Zero.
Lord Teverson (LD)
My Lords, I will speak also to Amendments 229 and 233 in my name. Amendment 228 is around Ofgem. We have debated this many times, in many contexts, within the House. It is about Ofgem having a direct net-zero responsibility and objective. That is what this amendment does, and I know another amendment is trying to do exactly the same thing. I am indifferent as to which one is accepted, as long as we achieve this.
The thing about Ofgem is that it is, rightly, customer focused in many ways, but it is focused very much on the short term and not so much on the long term—and that is why we are here. I believe that, in many ways, we have high energy prices because we have not transitioned enough towards net zero in the past. This is partly around the lack of infrastructure and the way that Ofgem assesses investment by the national grid and DNOs, in particular to upgrade the transmission system in the United Kingdom.
Ofgem’s objectives have not been updated since its establishment in 2000. Although Ministers have always said that there is, in effect, a net-zero obligation on Ofgem, I do not believe it is specific enough. There are a number of blockages in the system at the moment: solar farms are not all able to connect and we have talked before about slow offshore wind, which will be more likely in the future. I hope that new onshore wind is coming on, but I am sure the connections for that will be equally difficult. We even have housing developments in the south-east that are not able to connect to the grid through lack of capacity. This is all around Ofgem not being balanced in the way that it looks at investment programmes.
Page 10 of Chris Skidmore’s report says that one of the needs is
“to finally update the mandate of Ofgem”,
which must be to
“accelerate the connection of our cheap renewable generation”.
So let us bite the bullet with my Amendment 228 and finally put a net-zero objective into Ofgem.
As I said, I was impressed that the Government’s future systems operator—which, we understand, is, in effect, a subsidiary of Ofgem, although I am sceptical about that structure—does indeed have a net-zero objective. I welcomed that at the time and welcome it now. Let us reflect that up the management chain to Ofgem as well.
Baroness McIntosh of Pickering (Con)
My Lords, I shall speak to Amendment 229, which is tabled in my name.
Although I am against fracking, I am very much for energy from waste, and I am very proud of the facility close to the A1 at Allerton which is creating energy from waste material that is difficult to dispose of and used to go landfill. The benefits of energy from waste are twofold: we are creating an energy strand and we are disposing of waste. I think there is still an incinerator in Sheffield. I understand it was created by the Liberal Democrat administration at the time of the severe floods in the 2000s. One of the reasons for it was that there was a large quantity of furniture and other items damaged by the floods that needed to be disposed of very quickly. I hope that my noble friend will be minded to do more on energy from waste. Where it works, it works very effectively. We could learn from the experiences of other European countries, notably Denmark and other Scandinavian countries, Austria and Germany. In Allerton at the moment, the energy created is going into the national grid. I argue it should go to the local community. Allerton is one of the coldest parts of the country, and it would be in its interest to have a cheaper source of fuel.
The criticism that is made of energy from waste is around potential emissions. Looking at the BEIS figures which were brought to my attention thanks to the House of Lords Library, I see that the emissions figure for waste incineration was static between 2016 and 2020, at just 0.3 million tonnes of carbon dioxide equivalent, whereas the waste management total stayed at around 17 million tonnes of carbon dioxide equivalent and landfill was off the stratosphere, with extremely high methane emissions. That is another argument in favour of energy from waste.
I hope my noble friend will look favourably on rolling out more projects on energy from waste, such as those he knows about from exchanges we have had on the Floor of the House.
Baroness Hayman (CB)
My Lords, I declare my interests as set out in the register. I have Amendment 242A in this group, which is supported across all parties in the Committee—I am grateful to noble Lords who have signed it. It is similar to Amendment 228, which has just been moved by the noble Lord, Lord Teverson. There is a choice of amendments for the Minister, because we have the Labour amendment later on.
Like the noble Lord, Lord Teverson, I am in some ways indifferent to which of the three amendments the Minister supports or to whether he wants to put forward different drafting himself, but I hope that the number of ways the Committee has brought forward this issue will persuade the Government to move. It is worth saying that there is not just support from different parties and political support, and from the Skidmore report, as the noble Lord, Lord Teverson, said, but great support for replacing the existing language of Ofgem’s objectives and duties in the Electricity and Gas Acts with a new text which makes reference to enabling the Secretary of State to meet the targets set out under Part 1 of the Climate Change Act.
As has been said, the future systems operator—the new regulator created by the Bill—does have a specific statutory net-zero objective linked to our climate change targets. However, this is weakened by the fact that there is no equivalent provision in relation to Ofgem, which has only the much more limited duty given to it in the Energy Act 2010. In their consultation on the future systems operator, the Government noted that
“There were several strong calls for Ofgem’s remit to be reformed to focus on enabling net zero in the most economic and efficient way”.
This view is also shared by your Lordships’ Industry and Regulators Committee. I am sure that the noble Lord, Lord Hollick, who signed my amendment, will go into the committee’s rationale for this recommendation.
The case for updated net-zero duties goes far wider than this House or political circles. It has been argued for by environmental organisations such as Green Alliance but also by industry bodies such as Energy UK, the main trade body for energy, representing over 100 energy suppliers and generators. It has said that strengthening Ofgem’s statutory duties to explicitly support the delivery of the legally binding net-zero target would help ensure it balances the needs of both current and future consumers.
As has been said, the Skidmore review has been published in the last few days. It recommends that this change takes place to ensure that Ofgem gives sufficient weight to net zero and to incentivise network companies to plan ahead, emphasising the importance of future-proofing our energy infrastructure. It is essential that Ofgem is given, by government and Parliament, a very clear remit and role as to the importance of net zero and that it recognises the cost to consumers of delayed action. Regulators, given explicit responsibilities by government and Parliament, have a key role to play in demonstrating cross-government commitment to reducing carbon emissions. There is widespread support for this change and I hope the Minister will be able to respond positively to it.
I will turn briefly to two other issues. I record my support for the case made by the noble Baroness, Lady McIntosh of Pickering, and hope that she too will get a positive response.
Turning to Amendment 229 in the name of the noble Lord, Lord Teverson, to which I have added my name, the Minister and I have had many exchanges on the topic of onshore wind. I should start by saying that I welcome the movement the Government have made here and that they have opened a consultation on changing the National Planning Policy Framework guidance on onshore wind, to remove the effective moratorium to allow a new development where the proposal has community support and to encompass the repowering of existing sites.
I also welcome the commitment in the Written Ministerial Statement that the Government intend to make changes by the end of April this year. It is important that we move forward with some speed on this. It is now three years since I tabled a Private Member’s Bill to deal with this issue specifically. In that time, wind farms could have been built in the appropriate places, feasibly adding to the grid at this precise moment and reducing our reliance on expensive gas and foreign imports.
The amendment is not overly prescriptive, as the noble Lord, Lord Teverson, has laid out; it simply requires the Secretary of State to set out a plan as to how more onshore wind farms will be deployed. It does not force the installation of turbines anywhere and would complement the existing consultation, which is focused on allowing communities which can show demonstrable support for onshore wind the ability to install it.
It would indicate the need, and the recognition of the need, for an overarching plan. RenewableUK has long called for the Government to set targets for new onshore wind and solar capacity:
“While onshore wind and solar are now eligible for CfDs, there is no clear medium- to long-term ambition.”
I hope the Minister will recognise that setting a target of 300 gigawatts by 2030 would create 27,000 high-quality jobs and add £45 billion to the UK economy. It is time to set a target now and to be ambitious. I hope the Minister will respond positively.
Lord Ravensdale (CB)
My Lords, I shall speak to Amendments 241, 242B and 242H in my name. In so doing, I declare my interests, first as an engineer and project director working for Atkins within the nuclear industry and as a director of Peers for the Planet.
Amendments 241 and 242H both relate to the renewable transport fuel obligation, the RTFO. I shall concentrate my remarks on Amendment 242H, as I believe it is the right amendment of the two to take forward. It aims to widen the scope of the RTFO from renewables to cover all low-carbon sources. I know the Minister will agree that we should, as far as possible, be technology-independent in how we set up subsidy schemes; as long as the source from which the fuel is derived is low-carbon, we should not care about its wider classification. The amendment seeks only to reflect existing government policy.
I note the July 2022 consultation on the related topic of recycled carbon fuels, which was titled Supporting Recycled Carbon Fuels through the Renewable Transport Fuel Obligation. Recycled carbon fuels are not classified as renewable fuels, as they are made from fossil-derived waste: for example, non-recyclable plastic waste or industrial waste gases that would otherwise be landfilled or incinerated. However, RCFs can provide significant carbon savings compared to traditional fossil fuels such as petrol, diesel and kerosene. The consultation says:
“To introduce support for RCFs into the RTFO we will need to amend the Energy Act 2004 and lay secondary legislation to amend the RTFO Order 2007. The measure is expected to be part of the forthcoming Transport Bill.”
The Government have already agreed with the principle of taking this important measure forward and there is a great opportunity for them to get it done now, within the Energy Bill, so that primary legislation is in place to begin allowing the significant carbon savings that can be generated from recycled carbon fuels, the constituents of which would otherwise end up in landfill. Otherwise, if we wait for the transport Bill, we are looking at a significant delay, as I understand that it will not be progressed in this Session—perhaps the Minister will correct me. I am sure he will see the sense in this argument, given the benefits of progressing with these measures now. It would not commit the Government to anything. Obviously, secondary legislation would be needed to enact any of this, but it would remove the blocker that currently exists in primary legislation and allow the Government to progress with these measures when they so choose.
The amendment would also have wider benefits beyond recycled carbon fuels. It would also allow, for example, hydrogen produced from nuclear power to be eligible for RTFO support. There are plans being developed to use nuclear-derived hydrogen to power construction vehicles for Sizewell C build. It could be a key use case for hydrogen in transport and in construction vehicles which need to operate for long periods—24 hours a day—on sites with limited electrical or charging infrastructure.
As with the RCF, much further work would be required to implement this in secondary legislation if the Government chose to, not least on additionality rules. However, it would remove the blocker that exists in primary legislation and open an opportunity for the nuclear industry to begin generating hydrogen. It would also demonstrate the Government’s commitment to technological independence.
The question may arise of how exactly we define low carbon. In the RTFO context, the Government have published detailed sustainability criteria which any eligible fuel must meet. These include requirements to deliver at least a 60% greenhouse gas emissions saving versus fossil fuels. Compliance with the sustainability and carbon reduction criteria would be a straightforward way to define this term in secondary legislation.
To summarise, this is a straightforward amendment that reflects existing government policy. It does not commit the Government to do anything but does remove a blocker that currently exists in the Energy Act 2004 in extending RTFO support to other low carbon sources. It would also allow the Government to progress with their plans for recycled carbon fuels, given the delays with the Transport Bill. Therefore, I hope the Minister will agree that it would be sensible to proceed with Amendment 242H and allow the carbon reductions that will be possible through the use of recycled carbon fuels.
Amendment 242B was originally put forward by the noble Baroness, Lady Neville-Rolfe, and was transferred to me following her move to the Front Bench, so I thank her for originally tabling it. It is also related to an amendment I put forward regarding the Nuclear Energy (Financing) Act. It is a probing amendment designed to highlight a key issue with the financing of nuclear projects going forward, both through the RAB and other investment mechanisms. There are two aspects relating to financing of new nuclear that need to be highlighted here.
First, investors are constrained by ESG criteria that apply to their funds. My concern is that nuclear will not be considered sustainable, or taxonomy aligned, under the green taxonomy, which the Minister assured us last week is progressing at the Treasury. This concern comes from previous positions on nuclear in similar EU schemes, and from the Treasury’s not including nuclear in its green financing framework.
As with the previous group of amendments, this all comes back to technology independence. Nuclear is a low carbon technology, along with many others, and the Government should not be picking winners in the race to net zero but enabling a level playing field. If nuclear is not considered as taxonomy-aligned under the UK green taxonomy, there is a real risk that nuclear projects will not be able to attract capital in sufficient quantity to realise the Government’s ambitions for the sector. ESG alignment is now a key factor in capital raises for pension funds and institutional investors. I would be most grateful if the Minister could again provide some assurance that nuclear will be considered as taxonomy-aligned under the forthcoming green taxonomy.
Secondly, I referred earlier to the UK Government Green Financing Framework, which describes how the UK Government plan to finance expenditures through the issuance of green gilts and the retail green savings bond. Currently, this excludes investment in nuclear, but again I urge the Government to reconsider. The Government need to take the lead here in defining what counts as sustainable within their frameworks. This is so important in leading the markets in the right direction and in allowing these schemes to finance future government investment in nuclear.
Lord Hollick (Lab)
I rise to speak to Amendment 242A, which my noble friend has just introduced. In the course of our inquiry into the net zero transformation, the Industry and Regulators Committee, which I chair, took extensive evidence about Ofgem’s remit and whether it should be amended to include a specific requirement to have regard to meeting the UK’s net zero emissions target.
Ofgem’s primary statutory duty is to protect the interests of existing and future consumers in relation to gas and electricity. This objective is to protect those interests taken as a whole, including their interest in the reduction of greenhouse gases and in the security of the supply of gas and electricity. This duty guides Ofgem when it is making decisions and trade-offs in the regulatory framework between the three objectives of decarbonisation, affordability and security of supply.
Many of our witnesses told us that the net zero target should be included explicitly within Ofgem’s strategic duties, not least because Ofgem’s responsibility for setting the price and affordability of energy must take into account the substantial level of costs of the transition to net zero which will have to be borne by consumers.
If there is no explicit reference to net zero, there is a danger that the decisions will be very short-term in nature, focusing on short-term costs for consumers and not the long-term costs of failing to achieve net zero and invest in the infrastructure necessary to achieve that. The Climate Change Committee agreed. It argued:
“Giving Ofgem a net zero responsibility”
will help it to
“think … strategically about the changes that lie ahead so that we can minimise the cost to the consumer in the long run.”
Jonathan Brearley, the CEO of Ofgem,
“said that Ofgem is open-minded about whether it should be given a primary duty to achieve net zero, arguing that ‘I and the board have been very clear that we see net zero as fundamental to our existing duty’ … noting that there may be a benefit to clarifying that.”
The impact of net-zero costs on consumer bills is, ultimately, a decision for the Government, not for regulators. The Government promised a strategy and policy statement setting out priorities for delivering a net-zero energy system to ensure that the supplies are available at the lowest possible cost—that was promised in 2022. They also promised to publish a fairness and affordability proposal by the end of 2022. Neither of those documents has yet been cited, and it is indeed unclear whether the consultations are actually taking place. There will be an opportunity in our debate on Friday on the report from the Industry and Regulators Committee for the Minister to enlighten us on the progress of those two very important pieces of work on strategy and affordability.
Without those two statements from the Government, Ofgem will struggle to reflect net-zero costs in its energy pricing; but there is no doubt that those costs will have to be reflected, and Ofgem should have a clear and explicit duty to do that. That is why the Government should accept the amendment, to make it plain to all parties that Ofgem has a strategic duty to take into account the very considerable short and long-term costs of the transformation of our energy system and challenge the Government should their guidance impose unaffordable or unfair costs on consumers. Perhaps the Government might find such an independent intervention from the statutory regulator a little inconvenient. It would be ironic if the regulator most responsible for regulating the journey to net zero is one of the only regulators which does have a specific responsibility in its remit.
Lord Lennie (Lab)
My Lords, I thank all noble Lords who have spoken, particularly the noble Lord, Lord Teverson, my noble friend Lord Hollick and the noble Baroness, Lady Hayman. I also support what the noble Baroness, Lady McIntosh, said and what the noble Lord, Lord Ravensdale, asked.
I will comment on how reforming the remit of Ofgem using the Energy Bill would achieve what we are trying to achieve in the amendments in my name and those of the noble Baroness, Lady Hayman, and the noble Lord, Lord Teverson. Ofgem’s remit has not changed substantially since 2000. It does not prioritise electricity decarbonisation in line with the Government’s recent legislation or stated ambitions; it has only a consideration of greenhouse gas reduction. As a result, Ofgem has been unable to reform substantially its working practices and regulatory frameworks in response to the Climate Change Act 2008 and the UK’s subsequent net zero ambition.
The Government have an opportunity to address that with the Energy Bill, and, while they have recognised the need to reform substantially the working practices of Ofgem in the past, they have done so through the creation of a strategy and policy statement—an SPS—for Ofgem. That urgent statement will be welcome; we note that, largely due to its complexity, it has not been published since 2020, when it was first proposed. It was consulted about in 2021, but we are still waiting for the statement to see the light of day. It seems to us that, to help with the Government’s net zero ambition, giving Ofgem the mandate to advance policies in support of net zero would be extremely welcome.
Lord Callanan (Con)
I will start my remarks by talking about the amendments on a new net-zero duty on Ofgem. While the Government agree with their intent, we do not believe that they are necessary, because Ofgem already has a decarbonisation objective in law. The Energy Act 2010 amended the Gas Act 1986 and the Electricity Act 1989 to modify Ofgem’s principal objective—that is, protecting the interests of existing and future consumers, including their interests in the reduction of targeted greenhouse emissions. Ofgem agrees that its principal objective includes an obligation to support delivery of our net-zero targets, and it would be keen to avoid any confusion over the need to balance decarbonisation, affordability and security of supply. This will be supported by the upcoming strategy and policy statement setting out the Government’s priorities, including those that will help to deliver net zero as a guide for the regulator. As the noble Lord noted, the Government published the results of Chris Skidmore’s net zero review on 13 January, and we will carefully consider the recommendations proposed and respond to the review in the spring.
On the amendment to designate a strategy and policy statement for the purposes of the Bill, this replicates the provisions set out in the Energy Act 2013 so, again, we think that this is unnecessary.
Amendment 229, tabled by the noble Lord, Lord Teverson, and the noble Baroness, Lady Hayman, is on onshore wind. As the noble Baroness said, on 22 December the Government launched a consultation on making changes to the National Policy Planning Framework so that local authorities can have more flexibility to respond to their communities when they wish to host onshore wind infrastructure. On improving infrastructure to ensure access-to-grid connections for onshore wind, the Government are already making strides, publishing a comprehensive strategic framework for the electricity networks. As has been said, the Government included onshore wind in the latest contracts for difference round, where it played a key part in securing almost 1.5 gigawatts of power, including 900 megawatts of mainland projects.
On the annual reporting of onshore wind deployment, BEIS in fact already publishes quarterly and annual statistics for all renewable sources of electricity, including generation and capacity of onshore wind.
On Amendment 233, on decarbonising the capacity market, the most recent capacity market four-year-ahead auction was held in February 2022. There was a record investment in low-carbon flexible capacity; for example, it included more than 1 gigawatt of new-build battery storage. I can reassure the noble Lord, Lord Teverson, that the Government recognise the need to ensure that the design of the capacity market is aligned with the wider decarbonisation of the power sector. As he noted, the Government published a consultation on this on 9 January, aiming to consult on design changes to the capacity market. I assure him that the consultation proposes measures that support greater investment in low-carbon capacity, including demand-side management.
I turn to Amendment 239 from the noble Baroness, Lady McIntosh, on energy from waste. The Government are committed to minimising waste; making better use of existing energy sources will play an important role in our journey to net zero. It is estimated that the total power exported by energy-from-waste plants in the UK in 2021 was approximately 2.9% of total net UK electricity generation. The Government have already made good progress in diverting waste away from landfill and maximising the energy that can be recovered from non-recyclable waste. Waste holders already have a legal duty to act in accordance with the waste hierarchy, which prioritises the prevention of waste arising in the first place, followed by preparing items for reuse and then recycling them. Only then should waste be sent for energy recovery, with only that which cannot otherwise be managed sent for disposal, including to landfill.
All energy-from-waste plants are largescale and, therefore, electricity. While some have private wire connections, most of the power is exported to the grid rather than locally. Therefore, it is not practical to ensure that all electricity produced from waste is used locally. However, of course, it is possible to ensure that heat produced from those waste plants is used locally, and there are some excellent examples of that, including a large plant in east London. The Government believe that our existing provisions in this Bill are sufficient to promote that heat and power source. We discussed that a couple of weeks ago, when we discussed heat network zoning, which will accelerate the deployment of heat networks provisions and ensure that waste heat sources connect to local heat networks and ensure greater use of waste heat sources, such as residual household waste.
Finally, on Amendments 241, 242B and 242H in the name of the noble Lord, Lord Ravensdale, we recently published our intent to allow the use of nuclear-derived fuels to receive support from government fuel support programmes—particularly a form of sustainable aviation fuel—but we do not support the wording of these amendments. We look forward to working together through the passage of this Bill to permit the support of nuclear-derived fuels while not categorising nuclear-derived fuels as “renewable”.
On Amendment 242B, the Government agree that nuclear should play a critical role in decarbonising the UK’s energy sector. However, accepting this amendment would pre-empt the outcome of the further work that is required in this area, which was announced in the WMS by the noble Baroness, Lady Penn, on 14 December. I therefore hope that noble Lords will not press their amendments.
Baroness Bennett of Manor Castle (GP)
Before the Minister sits down, will he acknowledge that this debate has been extraordinarily truncated and that this wide range of issues will need to be fully examined on Report?
Lord Callanan (Con)
I am sure that we will have lots to discuss about lots of issues on Report.
Lord Teverson (LD)
My Lords, there have been some excellent responses. We are getting somewhere on the capacity market and onshore wind. I thank the noble Baroness, Lady Hayman, for her support on onshore wind and my amendment. I had not realised there would be the contract for difference, and I take that as very positive. As the Minister knows, I like to be positive about these things.
However, I find it very difficult that the Government and the Minister will still not bite the simple bullet around Ofgem and the decarbonisation of the grid. It is having a practical effect as regards moving the whole transmission system forward—it really is. Those dilemmas about objectives that he talks about are the same for the future system operator, yet it has that objective.
I am sure that we will come back to this on Report. It is certainly my intention to work with others of a similar mind to find the right amendment and back whoever wishes to bring it forward. However, at this stage, I beg leave to withdraw the amendment.
“Energy Efficiency Commission(1) Within six months of the date on which this Act is passed the Secretary of State must establish an Energy Efficiency Commission.(2) The role of the Energy Efficiency Commission is to advise on targets and timetables for effective ways of using energy more efficiently and conserving energy across—(a) generators,(b) industry,(c) commercial developers and real estate managers,(d) households,(e) transport agencies, and(f) any other relevant sectors,to ensure minimal wastage of energy, improved conservation and best practice towards achieving net zero.(3) The Energy Efficiency Commission must also advise the Secretary of State on targets set in relation to energy storage.”Member's explanatory statement
This amendment would seek to establish an Energy Efficiency Commission to advise on targets and timetables for effective ways of using energy more efficiently.
Lord Bruce of Bennachie (LD)
My Lords, I rise to move Amendment 234 in my name. We are at the end of this Committee stage, but this could in a way have been taken at the beginning. We have had an interesting debate over the last few hours with contradictory views about different forms of generation. However, we should all agree that the best possible outcome is to use whatever energy we generate much more efficiently than we do.
My amendment basically suggests that we need a dedicated commission to test all the possible ways of using energy more efficiently, to ensure that—although we have achieved quite a lot—we achieve a great deal more. That will help us to get to net zero an awful lot quicker. That is the essence of this amendment.
There is quite a lot of evidence that investing in energy efficiency delivers returns three or four times greater than investing in energy generation. Of course, in the present climate, when energy costs are very high, people will themselves be taking steps to use energy more efficiently because they have to—although, for some people, the only way they can use it more efficiently is by not using it at all, which leads to considerable hardship.
It is possible to accelerate energy efficiency in a whole variety of ways, and I accept that the Government have promoted quite a lot of them. I also accept that the Secretary of State is perfectly capable of interesting new policies, but unless we have a dedicated commission, I do not think that all the possible permutations will be explored quickly or thoroughly enough to deliver the results.
It has been estimated that simply raising the quality of home insulation in the UK could deliver £10 billion to £20 billion of benefit a year. Energy conservation has been called the fifth fuel—after coal, hydrocarbons, nuclear and renewables. It is interesting that the Energy Saving Trust has identified that:
“Retrofitting homes to an Energy Performance Certificate standard of ‘C’ would save as much energy as six times the forecast output for the Hinkley Point C power station.”
That raises the whole question of why we are building the power station rather than investing in energy conservation. I really believe we can do a lot more, and remarkably quickly. It also creates a whole economic activity: it creates employment.
We have discussed these issues in the past, and policies have been introduced. I seem to remember that, when he was Environment Secretary, the noble Lord, Lord Prescott, as he now is—then John Prescott—suggested that every new house should have solar generation capacity installed on its roof. That did not seem to happen. We have seen examples of passive planning to ensure that houses are built and designed to get the maximum benefit from the environment. Again, it happens here and there but it is not a policy overall. We have discussed district heating systems and domestic combined heat and power, which has always been around the corner but never actually delivered.
As an aside, there is clearly potential for heat pumps, but they do not suit every situation. In Scotland, the Green Party has persuaded the Scottish Government to basically ban the installation of any new oil-fired boilers after 2025. I think they will find that very difficult to enforce. For many people in my part of Scotland, Aberdeenshire—the highlands—who are off the gas grid, the alternatives just do not exist yet, and they are not likely to exist in 2025. Most of those houses are reliant on oil and many are old and hard to heat. I had a conversation with my local plumber who said that he had installed a number of heat pumps in and around the village, but in the last 12 months he had been asked to take quite a few of them out because they did not deliver the ambient heat that was required, and people found that they were having to pay for additional heating to supplement the heat pumps.
Clearly, we have to identify the properties that can benefit from insulation and heat pumps and assist them to get there as fast as they possibly can. At the moment—I guess in the short run the Government have no option—billions of pounds are being spent simply enabling people to get a contribution from the Government towards paying their bills, but over any length of time that money would surely be much better invested in increasing the efficiency of those homes so that they are more affordable.
I suggest that a commission makes sure it looks at the best practice nationally and internationally and tests all the options; is able to make very clear recommendations about priorities and what could be achieved, how quickly and at what cost; and suggests what mechanisms might be better—whether grants or loans. In some cases, just having access to advice and information would enable people to make their own decisions.
I must be honest: I have a concern about those who think that we can just turn off oil and gas now when we clearly have not developed the alternatives. People say that in transport, for example, we need to move to hydrogen, but the technology is not yet there. Even with electric cars, there are still enough problems with charging units, batteries and so forth that there is a question of whether we can get there as fast as we want. We have to find ways of doing it—I am not suggesting that we should not—but we cannot switch off what we have until we have developed the alternatives.
Lord Teverson (LD)
My Lords, I have a question for the Minister that follows on from that. I very much support the idea of an energy commission, although Chris Skidmore says very strongly in his report, on decarbonisation, that:
“None of this will happen without a step change in the government’s approach to delivering net zero.”
He says that an office for net-zero delivery within government is needed but, if we cannot get that, energy efficiency must be part of it.
When we were in the European Union and single market, part of energy efficiency was around appliances and all sorts of things that we use or do, and we have had an increase in energy efficiency—not fast enough, but a sectoral trend—largely because of the sorts of implements we use; cars, vacuum cleaners or whatever. I therefore ask the Minister: in terms of energy efficiency and standards for equipment and pieces of machinery, what is happening now? Is BEIS doing this itself? Does it have a programme? How does that relate to our export markets and manufacturing sector? I would be interested to understand.
Baroness Bennett of Manor Castle (GP)
The noble Lord, Lord Bruce of Bennachie, has presented very interesting proposals. Like the noble Lord, Lord Teverson, I think this offers us one way forward on the crucial issue of energy efficiency, but I have a question for the noble Lord, Lord Bruce. Would he agree that a useful role for the energy efficiency commission would be ensuring systems to educate people to install this new technology properly, so that people such as the plumber whom he cited had the information available to ensure that they knew that what they were installing would work for their customers?
Lord Callanan (Con)
I thank the noble Lord, Lord Bruce, for his amendments. I will take up the question from the noble Lord, Lord Teverson, first. The answer is absolutely; we have an extensive programme called the Energy Efficiency (Energy Using Products) Regulations. They are largely similar to those we had in the European Union, but we have extended them and taken them further. We have recent regulations on more efficient lighting and there are others coming, as well as some on the more popular white goods that people use. I would be happy to send him more details of that.
I move on to Amendment 234 from the noble Lord, Lord Bruce. The Government agree of course with the principle of having an independent body to advise on targets and timetables for energy efficiency policy and net-zero policy more broadly. But we already have that body: the Climate Change Committee fulfils that role. He will also be aware that the Government will announce further details about the energy efficiency task force that was announced by the Chancellor and the Business Secretary late last year. There is a lot of detailed work happening on that at the moment. We hope to have more to say very shortly.
On Amendment 235, the Government fully recognise the importance of energy storage and its ability to help us to use energy more flexibly and decarbonise our electricity system more cost-effectively. Our measure to define electricity storage provides long-term clarity and certainty over its treatment in regulatory frameworks. That will facilitate storage deployment going forward. At this stage, however, it is premature to set a target for the sector. We do not yet know the full extent of the system requirements for storage. Especially in the context of high energy bills and having to pay for increased storage, it would not be responsible to set storage target at this time, as we could set a target that is too high or too low and favour a more expensive technology over a relatively cheaper one. Instead, our approach is to remove barriers and spur innovation for all low-carbon flexibility technologies. We published the 2021 Smart Systems and Flexibility Plan with actions to facilitate the deployment of these technologies, including storage at all scales.
The Government are not in disagreement with the noble Lord, except on the narrow issue of targets. I hope he recognises our commitment to enabling the deployment of flexibility, including energy storage, across our energy system to even out fluctuations in generation and demand and therefore deliver the best outcomes, which we all want, for our consumers. Therefore, I hope that he will see fit to withdraw his amendment.
Lord Bruce of Bennachie (LD)
My Lords, I am grateful to the Minister for that response. As I said, I accept that the Government have been doing quite a lot, but I still believe they can do an awful lot more. I hope that those initiatives yield results.
On the noble Baroness’s intervention, I do not think it is a question of people not knowing how to install heat pumps; it is about people having expectations of heat pumps that do not suit every property. I speak from my own personal concerns. I have a house built in 1910; it is not the most efficient house. I inquired about a heat pump, and was told that if I was lucky I would get an ambient temperature of about 14 degrees, which would cost me about £10,000. I could get the ambient temperature up to 18 or 19 degrees as long as I spent £120,000 on increasing the insulation in the house. But other houses could be upgraded much more cheaply, so I suggest that they should be prioritised.
I am sorry, but I do not think the Scottish Greens are realistic about what they think can be achieved between now and 2025. In places such as Aberdeenshire and the Highlands, they will find a kickback when people are told that they cannot have an oil-fired boiler, there is no gas and we do not have a viable alternative for their property—yet.
Baroness Worthington (CB)
I am sorry; I was saying to myself that I would not do this, but I point out that when it comes to energy efficiency, electrification, which is a tried-and-tested way of providing heating to homes, is a fundamentally more efficient way of getting energy. The total primary energy demand of the UK could go down by one-third if we were to electrify our heating and transport, because of the lack of efficiency of anything that is combusted. The combustion inefficiency of engines and boilers cannot be fixed. Electricity is the best vector.
Lord Bruce of Bennachie (LD)
The noble Baroness took the next sentence out of my mouth because the advice I was given for my house was to electrify it, but I cannot be guaranteed green, renewable electricity at the moment. For hard-to-heat houses, that is the way forward, but we have to ensure that we generate efficiently and economically, and deliver. I completely agree that that is exactly the result. We have got to get there as fast as possible, so I am on the same page. I just think that some people are being unrealistic in thinking we can choke off options before we have developed the alternatives. It is a question of how quickly we can get there. That was the purpose of my amendment.
I heard what the Minister said, and I urge him to keep moving and to do this as fast as he can. I beg leave to withdraw the amendment.
Lord Callanan
“(6) Subsection (3) does not apply to regulations made by the Scottish Ministers under section (Assessment of environmental effects etc).”Member's explanatory statement
This amendment ensures that the provision about affirmative procedure in the UK Parliament does not apply to regulations made by the Scottish Ministers under the new Clause relating to assessment of environmental effects of offshore wind projects (which will instead be subject to affirmative procedure in the Scottish Parliament).
Lord Callanan
Member's explanatory statement
This amendment provides that the new Clauses in the name of Lord Callanan, to be inserted as a new Part after Clause 201, extend to England, and Wales, Scotland and Northern Ireland.
“(ha) Chapter 3 of Part 12;”Member's explanatory statement
This amendment provides for the new Clauses in Lord Callanan’s name to be inserted after Clause 237 to extend to England and Wales, Scotland and Northern Ireland.
Lord Callanan
“(ba) Part 9A, except sections (Directions to scheme administrators) and (Financial assistance to scheme administrators and participants);”Member's explanatory statement
This amendment provides that the new Clauses in the name of Lord Callanan which contain provision about ESOS regulations (but not those making provision about directions or financial assistance) come into force on the day on which this Bill is passed.
“(ca) Chapter 3 of Part 12;”Member's explanatory statement
This amendment provides for the new Clauses in Lord Callanan’s name to be inserted after Clause 237 to come into force on the day on which the Bill receives Royal Assent.
Lord Callanan
Member's explanatory statement
In consequence of the notice given by Lord Callanan of his intention to oppose the Question that Clause 161 stand part of the Bill, this amendment removes the reference to that Clause from the list of provisions that are to come into force two months after Royal Assent.
“(ga) sections (Directions to scheme administrators) and (Financial assistance to scheme administrators and participants);”Member's explanatory statement
This amendment provides that the new Clauses in the name of Lord Callanan which make provision about giving directions and financial assistance in relation to Energy Savings Opportunity Schemes come into force at the end of the period of 2 months beginning with the day on which this Bill is passed.
“(ga) Chapter 1 of Part 11;”Member's explanatory statement
This amendment provides for the new Chapter for Part 11, comprising the new Clauses inserted before Clause 225 by the amendments in Lord Callanan’s name, to come into force 2 months after Royal Assent.
Lord Callanan
Member's explanatory statement
This amendment amends the long title to insert reference to the new Clauses in the name of Lord Callanan to be inserted as a new Part 9A after Clause 201.
Member's explanatory statement
This amendment amends the long title.
Energy Bill [HL]
Tuesday 28th March 2023
(1 year, 7 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 86-I(a) Amendment for Report (Supplementary to the Marshalled List) - (27 Mar 2023)
18:50 - Division on Amendment 18 - Ayes: 170 / Noes: 160 - Amendment 18 agreed.
Lord Ravensdale
“Principal purpose(1) The principal purpose of this Act is—(a) to increase the resilience and reliability of energy systems across the United Kingdom,(b) to support the delivery of the United Kingdom’s climate change commitments,(c) to reform the United Kingdom’s energy system while minimising costs to consumers and protecting them from unfair pricing, and(d) to improve the overall efficiency of the United Kingdom energy system and economy.(2) The Secretary of State must report to Parliament annually on—(a) how the resilience and reliability of energy systems across the United Kingdom are being increased;(b) how the United Kingdom’s climate change commitments in relation to energy are being delivered, including updates on—(i) the decarbonisation of existing electricity usage, and(ii) the electrification of processes in the United Kingdom so that they are powered by electricity rather than other primary energy sources;(c) how costs to consumers are being minimised and how unfair pricing is being avoided.(3) In performing functions under this Act, the Secretary of State and any public authority must have regard to the principal purpose set out in subsection (1).”
Lord Ravensdale (CB)
My Lords, the Bill has had a protracted journey through this House. I make it around eight months since Second Reading, and the global energy system and its impact on households has never been far from the top of the headlines over that whole tumultuous period. So although we may not see some of the passions we saw on display in the previous debate on the Public Order Bill, it underscores the vital importance of many of the issues we are going to talk about today. As Vaclav Smil said in his excellent work Energy and Civilisation:
“Energy is the only universal currency: one of its many forms must be transformed to get anything done.”
It is a pleasure to open the debate on Report and I look forward to this really important legislation making its way to the other place and, I hope, on to the statute book very soon.
I thank the noble Baroness, Lady Worthington, for her support of my Amendments 1 and 136 in this group and for her help in developing them. I declare my interests as an engineer and project director with Atkins, working on the energy system, and as a director of Peers for the Planet. Upfront, I thank the Minister and his team for meeting me and for all their engagement on these issues.
I was keen to come back to this issue on Report due to the number of developments in this area since Committee. Without repeating much of what I said then, back in September last year—again, it has been a long journey on the Bill—it is worth coming back to the headline concern I raised and that I want to progress with this amendment. Electrical generation and distribution is at the core of the net-zero energy system, being the enabler for ambitions in so many other areas.
We are not building electrical generating capacity or network capacity anywhere near quickly enough to meet the Government’s aspirations—and not just the 2035 decarbonisation target. Setting it aside for one moment: if we do not manage to vastly increase our generating and network capacity over the coming decade, all the other aspirations, in terms of energy security, decarbonising heating, the uptake of electric vehicles and hydrogen production, will simply not be possible at scale. That is why Amendment 1 places the electrical generating system at the core of what the Bill is trying to achieve by setting out its principal purpose.
What is missing as a first step to give industry direction is a clear delivery plan for how we are going to achieve targets for our power-generating system. Amendment 136 achieves this by requiring this plan to be produced and setting a clear, measurable pathway for what needs to be achieved each year to 2035. The need for such a plan has been set out clearly in two recent reports published since Committee: the NAO report, Decarbonising the Power Sector, and the CCC report, Delivering a Reliable Decarbonised Power System. Both of these starkly highlight the challenge the Government have in meeting that 2035 target. The CCC and previous BEIS analysis state that we need to get to approximately 250 gigawatts of installed capacity by 2035 from a current base of around 108 gigawatts. Imagine the huge complexity and scale of our current energy-generating system. We need to build it all over again, and more, in 12 years. We have not, historically, come close to the build rates that would be needed to achieve that.
If we look at all the risks in terms of achieving our energy security and decarbonisation ambitions, the one that should really be flashing red on the Government’s dashboard is the risk of not achieving sufficient low-carbon generating and network capacity by 2035. But the important point made in the NAO report is that we cannot even make an adequate assessment of that risk, because we do not have a coherent delivery plan to back up the Government’s ambitions. I know that BEIS and now DESNZ have perhaps had one or two distractions in terms of the energy system over the past year, so the position we are in is understandable. But now the Government need to come back to this issue with real urgency.
As the National Audit Office states:
“The longer DESNZ goes without a critical path bringing together different aspects of power decarbonisation, the higher the risk that it does not achieve its ambitions, or it does so at greater than necessary cost to taxpayers and consumers”.
The Government have individual targets for solar, wind and nuclear, but these need to be brought together into a coherent, system-level plan, the delivery of which will see so many attendant benefits for the country in economic growth, energy security, decarbonisation and the health and well-being of the population.
Baroness Hayman (CB)
My Lords, I declare my interest as co-chair of Peers for the Planet. I will speak to my Amendment 133. I am grateful for the support of my co-signatories: the noble Lords, Lord Hollick and Lord Teverson, and the noble Baroness, Lady Altmann.
I also very much support the case for Amendment 1 made by the noble Lord, Lord Ravensdale. One phrase stuck out for me: his advocation of a “coherent, system- level plan”. In so many of the areas around energy efficiency that we will deal with later in the Bill, this is what we have been missing—not individual initiatives but a strategic approach, with time limits, timescales and targets to be met, so that we can see delivery.
I also support Amendment 130 from the noble Lord, Lord Teverson—which is a different approach to achieving the same goal as my Amendment 133—and Amendment 132 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, which would finally ensure that the long-awaited strategy and policy statement setting out the Government’s priorities would be published within six months. I very much hope that the Minister can respond positively to that and say that that statement is imminent.
Ofgem’s current remit pre-dates the 2050 net-zero target set by Parliament in 2019. Amendment 133 gives Ofgem a specific statutory net-zero objective linked to our climate change targets, in so doing mirroring the remit that the Government are giving the future systems operator. In Committee, the Minister said of similar amendments updating Ofgem’s remit that the Government “agreed with their intent” but did not consider them necessary because of the existing decarbonisation objective, referring to the 2010 change to Ofgem’s remit, which included a non-specific greenhouse gas reduction objective.
However, this existing duty is limited and related to the reduction of electricity and gas supply emissions of targeted greenhouse gases only—in other words, to reduce greenhouse gas emissions by an unspecified amount over an unspecified timescale. It does not link to our net-zero targets and as a result is less specific and ambitious than what the Government are legislating for the future systems operator.
The change advocated in Amendment 133 has broad support, as was recognised by the Government in their consultation on the future systems operator. The Government themselves noted that
“there were several strong calls for Ofgem’s remit to be reformed to focus on enabling net zero”.
The change was recommended in a report by your Lordships’ Industry and Regulators Committee, chaired by the noble Lord, Lord Hollick, and was also recommended this year by the Skidmore review and the Climate Change Committee. The latter argued that:
“Giving Ofgem a net zero responsibility”
will help it to
“think … strategically about the changes that lie ahead so that we can minimise the cost to the consumer in the long run.”
Just yesterday, the National Infrastructure Commission, in a fairly coruscating report on the Government’s progress towards reaching net zero, recommended the change in its Infrastructure Progress Review.
Support does not end there. The new duty is strongly endorsed by the main industry trade bodies: Energy UK, whose 100 members deliver nearly 80% of the UK’s power generation and over 95% of the energy supply; RenewableUK, which represents 1,000 businesses employing 250,000 people in the UK; and the Energy Networks Association, whose members include every major electricity and gas network operator in the UK and which employs 40,000 people in Great Britain.
This is not just a matter of semantics. The reason all these organisations and bodies support this change is that they believe it essential for increasing the pace and scale of investment in the UK’s electricity grid, which we were hearing about earlier, in order to deliver net zero and ensure that long-term planning happens at the pace needed. As the noble Lord, Lord Hollick, who cannot be with us today, said when we were debating a similar amendment in Committee:
“Many of our witnesses”
at the Select Committee
“told us that the net zero target should be included explicitly within Ofgem’s strategic duties … If there is no explicit reference to net zero, there is a danger that the decisions will be very short-term in nature, focusing on short-term costs for consumers and not the long-term costs of failing to achieve net zero and invest in the infrastructure necessary to achieve that.”—[Official Report, 16/1/23; col. GC 418.]
The trade bodies that represent the industry have been clear that they consider the lack of a clear duty that specifically refers to our net-zero targets as a reason why there has been historic underinvestment in the grid. Ofgem is not currently empowered to consider the benefit of long-term investments with sufficient weight, meaning that new renewable infrastructure is having to wait years to connect to the grid in some cases. This is not a case of it saving the consumer money, as it will cost more in the long term if we continually, but only slowly and incrementally, improve localised energy grid infrastructure. To put it colloquially, it will mean repeatedly digging up the road many times over, rather than digging it up once and for ever.
As RenewableUK has commented to us, at present
“grid development only takes place when there is overwhelming demand for it”,
rather than in future anticipation. That would make sense in a situation where there were uncertainties, but we are certain that we are going to have vastly increased demand for electricity in the near future and that the grid will be decarbonised. We know that every street in every town is going to need to be able to install EV charging points, and we hope that new developments will need to install solar panels and heat pumps, which will all need to connect to the grid. This is something we all know we need to do, but as things stand, by the time there is what is seen as overwhelming demand for grid expansion, it is very hard for grid development to catch up.
Responding to this amendment in Committee, the Minster also said that Ofgem would be keen to avoid any confusion over the need to balance decarbonisation, affordability and security of supply. I agree: Ofgem has repeatedly made it clear that it would welcome such clarification. My amendment does not alter those other aspects of Ofgem’s remit or weaken them in any way. It is for the Government to clarify to Ofgem how those various trade-offs can be balanced.
As I said, Amendment 132 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, would ensure that the long-awaited strategy and policy statement setting out the Government’s priorities is published within six months—something that is overdue and badly needed. But as all the committees and trade bodies I have cited make clear, doing this does not detract from the need for legislative change to reflect our 2050 targets.
We should not miss the opportunity given by the Bill to update the consumer interests that must be protected when Ofgem carries out its functions to include our statutory responsibilities to achieve net zero by 2050. I end by reminding the House of the contribution from the noble Lord, Lord Hollick, in Committee. He said that it would be ironic if the regulator most responsible for regulating the journey to net zero is one of the only regulators which does not have a specific responsibility in its remit. I hope we can persuade the Minister to agree.
Baroness Altmann (Con)
My Lords, I declare my interest as a member of Peers for the Planet. I am speaking specifically to Amendment 133—so excellently spoken to by the noble Baroness, Lady Hayman—to which I have added my name. I also support the other amendments in this group.
As the noble Baroness, Lady Hayman, has made clear, the future systems operator, which will regulate under the terms of the Bill in future, will have a statutory net-zero objective linked specifically to our climate change targets. Currently, Ofgem does not have that, and this amendment simply seeks to bring it into line. The consequences of an ill-defined and time-limited free objective to reduce greenhouse gas emissions is that Ofgem is not giving sufficient weight to net zero and focusing instead on near-term energy costs, which do not properly recognise the cost impacts for future consumers of delaying specific action to achieve net zero.
The network companies are therefore currently incentivised not to plan ahead. Instead, they are encouraged to defer investment to the last possible moment, and not to anticipate the increases in long-term demand that we are all aware are coming. This has discouraged future-proofing of our energy infrastructure and left us with an ageing network infrastructure that is not really fit for purpose now, let alone for 2050, with constraints and delayed reinforcements being a barrier to connections for housing developments and to the connection of low-carbon power, transport and heating. The reality is that we will need much more grid infrastructure due to the decarbonisation of heat—which is commendably legislated for in the Bill—and of transport through the increased take-up of electric vehicles.
The Financial Times reported last year that renewable energy developers are being told that they will have to wait six to 10 years to connect to regional distribution networks. RenewableUK has highlighted that, in Scotland, a significant number of offshore wind farms that were granted leases last year by the Crown Estate Scotland will not be able to get a grid connection until the mid-2030s. Clearly, there is not a sufficient sense of urgency. Indeed, part of this is likely to be due to the non-specificity of the timescale for achieving net zero that Ofgem currently has.
There is a specific example of a 3-gigawatt east coast offshore wind farm being developed by RWE. This will be instrumental in meeting the Government’s 2030 net-zero target, but it has a grid connection date of 2032.
Baroness Bennett of Manor Castle (GP)
My Lords, I am aware of the desire to get to votes, so I shall be brief. It is a great pleasure to follow the noble Baronesses, Lady Altmann and Lady Hayman. They have overwhelmingly made the case for Amendment 133 and the need for the systems operator to have that net-zero duty.
I shall briefly address Amendment 1, which sets the tone and direction of this debate in an important way. The noble Lord, Lord Ravensdale, and the noble Baroness, Lady Hayman, made the case for the need for an energy system to deliver for net zero. I want to focus on one word in Amendment 1—“resilience” and the need to increase it. We are now in the age of shocks. So many shocks have hit the world and our country, whether they be climatic, health or economic. There is a need for resilience. There is an idea that we can pick off these new, shiny technologies and say, “Great, we will chase after this or after that”. We should look at the basics, starting with an energy system which understands that the cleanest, greenest, cheapest, best possible energy is the one you do not need to use.
I am not sure that the report is out yet, but it is worth noting anecdotally the interesting experiments in energy demand that have happened during the winter. They will ensure that we can manage the peaks of demand and have less need for generation overall. I wanted to set out that focus on resilience because, in later amendments, we will get to the issue of community energy—local energy generation systems in local communities, spread around our islands. These will give us a real foundation of resilience and security that we desperately need for the future.
Lord Teverson (LD)
My Lords, perhaps for the purpose of the whole of Report, I should declare my interest at chair of Aldustria Ltd, which is concerned with battery storage.
I liked the speech by the noble Lord, Lord Ravensdale, today, as well as the speeches he gave on the levelling-up Bill debate yesterday evening. There is an important need for an understandable programme that moves us forward—a route map that works, rather than just targets and slogans. Of course, we will have Green Day on Thursday. When the Minister replies, could he give us a few clues as to what will be said then? The House would be all ears and grateful for the advance information. I thought that the net-zero report, commissioned by the Government and produced by his honourable colleague, Chris Skidmore MP, was an excellent document. I hope that the Government can say that we will be moving ahead in a comprehensive way in much of the area under discussion.
I will speak mainly about the three amendments that we have around Ofgem. It is just stark staringly obvious that Ofgem, our regulator for the energy industry, should have a net-zero objective. I cannot see how you can argue against that, for all the reasons that the noble Baronesses, Lady Hayman and Lady Altmann, have gone through so well. If there was one example of that to me, it is that Ofgem has clearly been very effective in its own mind at making decisions for customers of today but has been utterly unable to make decisions for customers of future generations. That area of the grid is now utterly incapable of delivering; whether it is offshore, onshore or developments on the residential side, those connections and that grid are unable to help us to move towards those net-zero objectives. On connection dates, I know one of 2035, which just happens to be the year when the Government’s target is to have finished decarbonising the electricity grid. Clearly we are not going to make that unless we move it forward very quickly, and I have concerns that we will already not be able to meet it.
The Minister and others in his position have said, all the time, “This is not necessary—it is already covered.” However, those examples already given by the noble Baronesses in the debate show that the directions and the objectives that the Government now have are not sufficient, and that this needs to change. We need to change it now, otherwise our decarbonisation of the grid by 2035, let alone net zero by 2050, will be missed. That cannot be allowed; these amendments must be part of the Bill.
Lord Lennie (Lab)
My Lords, my thanks to noble Lords who have spoken in the debate: the noble Lords, Lord Ravensdale and Lord Teverson, and the noble Baronesses, Lady Hayman, Lady Altmann and Lady Bennett. I will quickly review what I think they said and set out our amendment.
The noble Lord, Lord Ravensdale, set out the principal purpose for the Bill. Split in four ways, it will: increase energy systems’
“resilience and reliability … support the delivery of the UK’s climate change commitments … reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing”,
and improve the overall efficiency of the UK energy system and economy. It also requires an annual report to Parliament on the above. The first three of those points are lifted directly from the opening paragraph of the Explanatory Notes, while the fourth is also an objective of the ISOP simply made wider.
Labour tabled an amendment in Committee, and I will remind noble Lords of its contents. The context of that was, at that time, the cost of living crisis; the energy price cap was going up to £3,549 per year. National Energy Action predicted that the number of UK households in fuel poverty would rise to 8.9 million. Tory leadership candidates at that time were vying for leadership to be Prime Minister but were running away from the issue of net zero; the High Court found that the net-zero climate strategy was inadequate, and the Climate Change Committee found that credible plans existed for only 39% of emissions, citing “major policy failures” and “scant evidence of delivery”. As regards energy security at that time, gas prices were expected to surge to record highs the week after the Nord Stream 1 pipeline was shut down, and European prices had risen by nearly 400% over the past year. The UK relies on gas for about 40% of its power generation, and even more on the coldest days when demand is high and wind generation tends to be low. In 2017, a BEIS report included a scenario for a complete cut-off of Russian gas and found that the UK could see “significant unmet demand” if the cut was prolonged and continental European countries paid whatever was necessary.
However, the Bill is a hotchpotch of things thrown together, lacking an overarching theme to tackle these issues. Our amendments would have set out a purpose for the Act, increasing resilience and reliability; supporting the delivery of UK’s climate change commitments; reforming energy systems; binding the Secretary of State and public authorities to these purposes; requiring the Secretary of State to designate a statement as a strategy and policy statement with regard to the purpose of the Act; and requiring the Secretary of State to review the strategy and policy statement on a five-year basis. That would have forced successive Governments into long-term thinking about the specific purpose, not limiting the impact and ambition of the Bill to what has been tacked together, which simply does not go far enough or tackle the immediate problems.
The amendment from the noble Lord, Lord Teverson, would place gas and electricity markets under a duty to assist in the delivery of net zero, and our amendment would require the Secretary of State to designate a statement giving GEMA a mandate for considering the role of energy in supporting government policy in achieving net zero. The amendment from the noble Baroness, Lady Hayman, would include in Ofgem’s general duties a specific requirement to have regard to meeting the UK’s net-zero emissions.
Briefing from RenewableUK sets out the argument for Ofgem remit reform. It states:
“Ofgem’s remit has not changed since its establishment in 2000, and does not prioritise electricity decarbonisation”—
in line with recent government legislation or stated ambitions. It has only a consideration of greenhouse reduction. It continues:
“As a result, Ofgem has been unable to substantially reform its working practices and regulatory frameworks in response to the 2008 Climate Change Act and the UK’s subsequent net zero ambition, to detriment of renewable energy investment and decarbonisation pace.”
It goes on to say that the Government have an opportunity to reform Ofgem’s remit in the Bill we are addressing today.
There is some key evidence for that. Mike Thompson, the Climate Change Committee’s chief economist, noted the integration of energy with transport and heat, including the potential for
“cars sitting on driveways acting as batteries and putting electricity back into the grid”.
He argued that there is a
“need for real integration and a regulator that can think from a systems perspective”,
suggesting that hydrogen and heat networks should be within Ofgem’s remit.
Jonathan Brearley, chief executive of Ofgem, said:
“Planning the system and setting how it evolves should not really be done by the regulator. The regulator’s job is to make sure that that is done efficiently and effectively by the companies concerned.”
We appreciate that argument.
A number of witnesses told the committee that the net-zero target should be included explicitly within Ofgem’s statutory duties. Dr Hardy said that he would
“put net zero up top”,
balancing out its other duties against the context of
“hitting that legislated carbon target”.
Professor Mitchell said that
“net zero has to be the raison d’être of Ofgem”
and argued that
“delivering on legally enshrined commitments to decarbonise”
should form part of Ofgem’s principal duty.
The committee concluded:
“To ensure that, on an enduring basis, the appropriate focus is given to net zero within its competing priorities, we recommend that Ofgem’s duties should be amended to include explicit reference to having due regard to the net zero target. While Ofgem maintains that net zero considerations already factor into its decision-making, adding net zero explicitly to its statutory duties will serve to make this clear.”
We feel that the UK needs not to be left behind but to show similar ambition in its plans for the future of the electricity industry, including Ofgem’s remit.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
First, I thank the noble Baroness, Lady Worthington, and the noble Lord, Lord Ravensdale, for bringing forward Amendments 1 and 136 and the noble Lord, Lord Teverson, for his contribution to the debate. As I set out in Committee, although the Government believe these amendments are well intentioned, ultimately, they are unnecessary. First, the Bill has a clear purpose, so I do not think any introductory clauses are necessary. Where appropriate, the Bill already sets out fairly clear objectives and general duties for the Secretary of State and other specified bodies in carrying out their functions under the relevant parts.
Secondly, in regard to an annual report, I assume noble Lords are aware that the Energy Act 2013 introduced the power for the designation of a strategy and policy statement that sets out the Government’s strategic priorities for energy policy, the roles and responsibilities of those implementing such policy, and the policy outcomes that we want to see achieved. We have committed to a second statutory consultation this spring. I therefore believe that an annual report to Parliament would cause unnecessary duplication of the existing strategy and policy statement.
Baroness Hayman (CB)
Before the noble Lord sits down, I would be very grateful if he can tell me why he thinks so many other people disagree with him on this—so many people who are regulated by the regulator, and so many reports, from your Lordships’ House, the Skidmore report, and from the CCC. Why does the rest of the world not get it?
Lord Callanan (Con)
I think it is very easy for other people who are not directly engaged in the business of regulation to think that adding a statutory duty will be the magical cause of all the different elements of the energy system that they want to contribute to. But, of course, what we should also remember is that placing a duty in primary legislation also makes it justiciable.
I am sure there are plenty of lawyers in this House, and lots of litigation is already flying around on net-zero duties—the Government, indeed, need to respond to further litigation by the end of the week. If the House wants to give yet more work to their learned friends—of course, all the costs of that are ultimately borne by consumers—then the House is free to do that. We continue to keep the matter under review, but we are very clear, as is Ofgem, that Ofgem feels as though it already has this responsibility. I hope that Peers will think again.
Baroness Altmann (Con)
Before my noble friend sits down, is there any chance that the Government might reconsider this? Will he consider that the future system operator will have this remit? The FCA, the PRA under the current Financial Services and Markets Bill, the NHS, and the Advanced Research and Invention Agency will all have this specific remit written in. Why do the Government so reject putting it in the Bill for Ofgem?
Lord Callanan (Con)
Because the other bodies do not have the responsibility for regulating the energy system. I do not see why that is so difficult for my noble friend to understand.
Lord Ravensdale (CB)
My Lords, to sum up my Amendments 1 and 136, the important part of the whole Bill for me is to bring into being the future system operator, which will be a key enabler for much of what we have been talking about today. In the end, it will provide advice to the Government, and it is the responsibility of the DESNZ to own the development of a plan for our future electricity-generating system.
The amendments proposed by the noble Baroness, Lady Hayman, and the noble Lord, Lord Lennie, align with what I am talking about around linking up the duty for Ofgem. They pointed out the links between it and the future system operator, and talked about making sure that it is coherent and that we think more strategically to reduce costs to the consumer in the long term.
Another important point is tackling long-term under- investment in the grid, as brought out by the noble Lord, Lord Teverson, and the noble Baroness, Lady Altmann. Alongside the increase in generating capacity that we require, there is just as much of a challenge in our grid infrastructure and ensuring that the grid connections are there to make use of that.
The Minister gave me some reassurance with the announcements that he said were due later this week on the energy system and on the electricity system in particular. I look forward to that event with great interest and, for now, beg leave to withdraw my amendment.
“(d) assist the delivery of greenhouse gas emission targets as set out in the Climate Change Act 2008, including any carbon budgets set under that Act and climate targets specified in subsection (8).”Member's explanatory statement
This amendment places an equivalent principal duty on the Gas and Electricity Markets Authority to assist in the delivery of Net Zero, alongside protecting the interests of current and future transport and storage network users. This would enable Ofgem to better justify and evidence decisions enabling strategic anticipatory investment.
Baroness Liddell of Coatdyke (Lab)
Ironically, I am also going to talk about some of the responsibilities for Ofgem in among other issues. If noble Lords look at the Explanatory Statement, they will see that we are talking about how to put in place a setting within which Ofgem can better justify and evidence decisions enabling strategic anticipatory investment.
I make the point that I am the honorary president of the Carbon Capture and Storage Association. The CCSA has grown considerably in the past two years, because of all the interest in carbon capture. We have been marched up to the top of the hill more than once, but this time we hope that we will be able to deliver.
Amendment 2 talks about the importance of enabling rapid network expansion. For us to meet the emissions reduction targets, carbon capture and storage will need to be rolled out rapidly across the UK during the rest of the decade. One role of the CCSA that I find extremely interesting is its interchange with the industry. There are some big companies in it but there are also small, cutting-edge companies involved in the development of how we cope with carbon capture, storage and utilisation.
I ask the Minister to bear in mind that it is not just Ofgem that needs to understands its remit; we need to look further and ensure that, throughout the industry, there is confidence, consistency and certainty, because the amount of money that will have to be invested in this is very considerable. To capture and store 30 million tonnes a year by 2030, as per the net-zero strategy, we will need to go from absolutely nothing to building significant CO2 infrastructure in a very short space of time, connecting capture projects continually throughout the 2020s. The industry wholeheartedly welcomes the Government’s recent commitment of £20 billion to build the industry up from scratch. It is therefore vital that Ofgem has updated duties that enable it to justify investment to allow for the rapid network expansion to connect more carbon sites to a growing suite of storage sites.
A lot of this is being done elsewhere. We have an opportunity to be leaders in carbon capture, utilisation and storage, but we need help from the Government, and signals need to be given out. Twenty billion pounds is a very large sum of money but it is not enough; it is estimated that around £50 billion will be needed. Some of that can come from private investment—indeed, it is important that it does—but there needs to be the degree of certainty that I spoke about a couple of seconds ago.
In Committee we debated Ofgem’s powers and whether its role in delivering net zero while protecting current and future users of the network is sufficiently clear. My noble friend Lord Foulkes, who is also a signatory to this amendment, stressed this time and again during those debates. The point was also made much more dramatically by the noble Baroness, Lady Hayman. How is it that so many people out there do not think that Ofgem has the right environment, role or powers to deal with the complexity of these issues?
Ofgem’s current set of duties makes it difficult to justify strategic investment in networks, as this would increase costs to current users in the short term. This is the dilemma that has to be got across. This has been an ongoing issue of concern, as raised in the National Infrastructure Commission’s 2019 regulation review, Strategic Investment and Public Confidence, which recommended that economic regulators’ duties be updated to facilitate long-term investment in networks, and, more recently—referred to by the noble Lord, Lord Teverson —in the Skidmore review.
While the Government should be commended—and I do commend them—for proposing that the duties of the economic regulator should include consideration of the needs of existing and future users, a principal duty to deliver net zero by 2050 would help the regulator to effectively balance these two equally important factors. However, it should be noted that, outside of the regulator’s core duties, the Bill includes a further requirement for the regulator to support the Secretary of State in having regard to the Climate Change Act 2008 and the new CCUS strategy and policy statement. That should go some way to addressing this.
However, it is not enough that these mechanisms are not as strong as the regulator’s own duties. This amendment is essential to give the regulator the necessary powers to make decisions that enable the required strategic anticipatory investment on the network. Ofgem will need to be empowered to make well-justified decisions, balancing the interests of current and future transport and storage network users with delivering net zero.
Lord Teverson (LD)
My Lords, I will speak to my Amendment 33, which is around the decommissioning costs of carbon capture and storage installations. First, I will read what is in Clause 85(1) about financing costs:
“The Secretary of State may by regulations make provision for requiring relevant persons to provide security for the performance of obligations relating to the future abandonment or decommissioning of carbon dioxide-related sites, pipelines or installations.”
It is not often that one is shocked in Grand Committee in the Moses Room. Normally it is a feeling of impotence when you are going through SIs, rather than some sort of greater emotion, but I was shocked when we discussed this. I asked the Minister how we protect the funds that are for decommissioning at some point way into the future. How are we sure that they are not like the dodgy builder who takes your deposit and then, when you ask him or her to decorate your house, the phone is no longer answered and the money has disappeared? How do we know, in this rather difficult area of energy, that those “relevant persons”, and more importantly their banks accounts, will still be there so that in some distant future, maybe decades ahead, this money is available?
If I am honest, when I had the answer from the Minister—which I cannot quote as I have not looked it up—I was shocked that there did not seem to be any provision for protection of the rather large sums that I expect to be there. That is why I have introduced this amendment. It is very simple and demands that when these payments are made they are effectively put into an escrow account, or at least a ring-fenced fund of some sort, so that they are there when these facilities need to be decommissioned. It is then up to the Secretary of State to agree when that money can be disbursed so that decommissioning can take place or disbursed because the funds are no longer needed.
It is as simple as that. It is about protecting that money that we as taxpayers and citizens of the UK are owed when that decommissioning happens and making sure that the money really is paid rather than having disappeared at the time. I see no guarantee within the three pages of other details about how these funds should work. I hope the Minister can come back to me and reassure me that, if he is not going to accept this amendment, the Government will ensure that this money is ring-fenced and is there for us and future generations when we reach that decommissioning point.
Baroness Sheehan (LD)
My Lords, I declare my interest in the register as a director of Peers for the Planet.
I shall speak to only one amendment in this group, Amendment 33, in the name of my noble friend Lord Teverson, to which I have added my name. It aims to ensure that decommissioning funds, as the noble Lord has explained, are available for decommissioning when the time comes. I support it not least because it complements Amendment 222A, which I tabled in Committee, on transparency of decommissioning, particularly with respect to future taxpayer liability for decommissioning relief deeds, which are agreements between the individual oil and gas companies and the Treasury. The National Audit Office and the Public Accounts Committee have both expressed concern about this public liability. I quote from the 2019 NAO report on decommissioning:
“With decommissioning activity increasing, the government is paying out more in tax reliefs for decommissioning at the same time as tax revenues have fallen due to a combination of lower production rates, a reduction in oil and gas prices and operators incurring high tax-deductible expenditure.”
That represents a triple whammy for UK taxpayers since, as the report says, for the first time ever, in 2016-17,
“the government paid out more to oil and gas operators in tax reliefs than it received from them.”
The scenario under which that public subsidy of oil and gas production took place in 2016-17—that is, the triple whammy of lower production rates, a reduction in oil and gas prices and operators incurring high tax-deductible expenditure—is the future outlook for the gas and oil sector as the world moves ever more rapidly towards decarbonisation. The USA’s inflation reduction Acts and the imminent EU response via the green deal industrial plan will turbocharge that transition, and rapid transformative change is very visible on the horizon.
While oil and gas expansion currently looks secure, it is only artificially so, given the very generous tax reliefs, subsidies and other support that the Government continue to provide, not least via decommissioning relief deeds. With over 100 new licences for exploration and production on offer, the risk of stranded assets is compounded hugely. Why do the Government persist in giving preferential treatment to fossil fuel producers? That is a question that I have put to the Minister before on several occasions, and I hope that this time there might be an answer.
It used to be that a ceiling of sorts was kept on the overall cost to the taxpayer by the fact that a firm could not claim back more in decommissioning tax relief than it had previously paid in tax. That makes sense but, since 2017, the Government have explicitly said that when firms default the partner firms that pick up the bill can claim back more in tax relief than they have ever paid. That certainly needs some digesting.
It cannot be right to put on life support an industry that has had its day—life support that is publicly funded. The amendment asks the Government to take precautions with the public purse, uphold the “polluter pays” principle and ensure that operators of new fields and buyers of existing ones accept that they cannot escape their responsibility to our planet, the one and only planet that we have.
Baroness Blake of Leeds (Lab)
My Lords, in speaking to the amendments in this group, I particularly thank my noble friend Lady Liddell for the well-informed and detailed explanation of why the amendments in her name and that of my noble friend Lord Foulkes are so important and relevant. What we heard was the crossover between the considerations within these amendments and the discussions that we had on the previous group regarding the work that we believe needs to be done to strengthen the hand of Ofgem, particularly to justify and evidence decisions, as we heard, enabling strategic anticipatory investment.
Lord Callanan (Con)
I thank everyone who contributed to the debate. If the House will have a little patience, I will first take some time to set out and explain the government amendments in this group, before I come on to the non-government amendments.
Amendment 4 to Clause 9 ensures that, ahead of making any regulations under this power, there should first be consultation with the economic regulator and the appropriate devolved authorities.
Amendments 5 and 6 to Clause 19 preserve the independence of the economic regulator by removing the power for the Secretary of State to direct the economic regulator not to impose conditions in consenting to the transfer of a licence.
Amendment 7 clarifies that the requirement to provide information to the Secretary of State or the CMA under Clause 28 is in relation only to Ofgem’s functions under Part 1 of the Bill, not to any of its other functions.
Amendment 8 clarifies that, under Clause 29, disclosure of information to the economic regulator does not breach any obligation of confidence owed by the licence holder making the disclosure, or any other restriction on the disclosure of information. It also clarifies that this provision does not authorise a contravention of data protection legislation.
Amendment 9 provides updated definitions of a “final order” and “provisional order” in Clause 31—these are consequential on amendments made to Clause 32 in Committee, which inserted a new Schedule 3, setting out the enforcement measures in the Bill.
Amendments 10 to 12 and 15 concern the list of persons whom the Secretary of State must consult under Clause 46 before modifying the terms of a company’s licence in relation to a transport and storage administration order. These amendments make it clear that there should be consultation with the relevant storage licensing authority where a carbon storage licence is in place.
On Amendment 35, we must mitigate the risk that decommissioning liabilities fall to the taxpayer, given that the Government ultimately sit as the decommissioner of last resort. Section 29 of the Petroleum Act 1998 enables the Secretary of State to serve notices that require the recipient to submit a decommissioning programme for an installation or pipeline. The Section 29 regime is therefore a key lever in mitigating that risk.
Amendment 35 proposes amendments to Section 30 of the Energy Act 2008, which would enable modifications to Sections 30, 31 and 45 of the Petroleum Act 1998, in its application to the decommissioning of carbon storage installations. These modifications seek to ensure that the Secretary of State can issue a Section 29 decommissioning notice on entities with a licence for CCUS activities, under Section 18 of the Energy Act 2008. This will enable the Secretary of State to impose decommissioning obligations on CCUS licensees, among other persons.
Amendment 36 proposes an amendment to Section 29 of the Petroleum Act 1998. Under current legislation, a new Section 29 notice cannot be issued on assets that have already been included in a decommissioning programme, unless that programme is rejected or approval for it is withdrawn. This would mean that, if an oil and gas asset were subsequently repurposed for use in a CCUS network, the Secretary of State may not be able to serve a new Section 29 notice on the CCUS operators of that asset without first rejecting, or withdrawing approval for, the existing decommissioning programme. This could lead to a gap in liability for decommissioning a repurposed asset, which of course increases the risk to the taxpayer. The amendment seeks to ensure that the Secretary of State can issue a new Section 29 notice on assets that are already within an approved decommissioning programme, thus mitigating the risks.
Amendments 37 to 39 clarify the duties in Clause 92 for the Secretary of State and the economic regulator to carry out their respective functions with regard to considerations in a CCUS strategy and policy statement. The amendments clarify that these duties apply only to functions relevant to the strategic priorities set out in the statement, and related to carbon dioxide capture, usage and storage policy. The amendments seek to exclude other functions set out in Part 2, which relate to hydrogen production that may not rely on CCUS, such as hydrogen produced via electrolysis. They seek to expressly exclude hydrogen levy functions.
Amendments 41 to 47 to Clause 99 ensure that sufficient powers are available to the Secretary of State to be able to update or make new access to infrastructure regulations, should that be appropriate to ensure that access arrangements remain fit for purpose. In particular, updates to the existing regulations may be needed in light of the new economic licensing framework established in Part 1. These amendments are necessary because the existing regulations were made using the powers in Section 2(2) of the European Communities Act 1972, and there are currently no domestic powers to update, replace or make new access to infrastructure regulations.
Amendment 14 to Schedule 5 ensures that, where appeals are made to the Competition and Markets Authority in respect of a decision made by the economic regulator for carbon dioxide transport and storage, a “specialist utility” group is convened to hear such an appeal. This is consistent with provisions for licence modification appeals in the Gas Act 1986, the Electricity Act 1989 and the Water Industry Act 1991, as I am sure the House is aware.
I move to the non-government amendments. Amendment 33 requires CCUS decommissioning funds to be ring-fenced. I thank the noble Lord, Lord Teverson, for his contribution. The Government’s view is that the primary purpose of a funded decommissioning regime is to provide assurance that decommissioning liabilities for CCUS assets will be paid, mitigating the risk that these liabilities fall to the taxpayer—we share the noble Lord’s concern about this. The noble Lord asked me for reassurance that the funds will be ring-fenced. The Government agree that appropriate safeguards will need to be put in place to ensure that the funds carry out the desired function.
The Government’s 2021 consultation on establishing a funded CCUS decommissioning regime set out our proposals for access to the decommissioning funds and, in particular, the expectations for ring-fencing and regulatory authorisation for any withdrawals. The Government expect that the decommissioning funds will be overseen by the economic regulator, to ensure that the funds are accruing appropriately. In addition, the intention is that the Offshore Petroleum Regulator for Environment and Decommissioning will need to authorise any withdrawal requests made by the operator to ensure that use of the funds is restricted to decommissioning-related purposes.
The noble Lord will be pleased to know that the Government plan shortly to publish an update document, which will include further detail on regulatory oversight of the decommissioning funds, the holding arrangements and, crucially, the protection against insolvency. The Government intend to set out the requirements for appropriate restrictions and safeguards for the fund in regulations and guidance. These requirements will be essentially technical in nature, so it is the Government’s view that it would be more appropriate to set these out in secondary legislation.
I move to Amendment 2, from the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, who is not in his place, sadly—I was looking forward to debating with him. It is the Government’s view that this amendment is not necessary. The Secretary of State is already bound by law under the Climate Change Act to ensure that targets to reduce greenhouse gas emissions are met. Under Clause 1(6), the economic regulator is required to have regard to the need to assist the Secretary of State in complying with his statutory duties under Sections 1 and 4 of the Climate Change Act 2008, and to have regard to the statutory emissions-reduction targets in each of the devolved Administrations.
Anticipatory investment will be essential to scale up CO2 transport and storage networks to meet our CCUS ambitions and net-zero targets. However, this investment must be driven by the needs of the users of the network, both those already connected to a network and, of course, those wanting to connect.
Baroness Sheehan (LD)
Before the Minister sits down, I will ask him to clarify a couple of things. First, I welcome his statements on decommissioning, but can he confirm whether the safeguarding of decommissioning funds will include all fields, both existing and new? Secondly, can he confirm that it is the FCA that will provide the regulatory oversight for decommissioning funds?
Lord Callanan (Con)
It would depend on what the noble Baroness means by “decommissioning funds”. What would the decommissioning funds be for? In response to the noble Lord, Lord Teverson, I outlined our intention to ring-fence the CCUS decommissioning funds.
Baroness Liddell of Coatdyke (Lab)
I beg leave to withdraw my amendment.
Lord Callanan
Member's explanatory statement
This amendment requires proposed regulations under subsection (6) to be consulted on in the same way as regulations under subsection (2).
Lord Callanan
Member's explanatory statement
This amendment removes a provision that would have authorised the Secretary of State to direct the economic regulator not to impose conditions on consent to the transfer of a licence. Lord Callanan’s amendment at page 21, line 19 is consequential on this amendment.
Member's explanatory statement
See the explanatory statement for Lord Callanan’s amendment at page 21, line 9.
Lord Callanan
Member's explanatory statement
This amendment clarifies that the duties under subsection (3) relate only to functions under Part 1 of the Bill, not to other functions of the Gas and Electricity Markets Authority.
Lord Callanan
“(5) Except as provided by subsection (6), the disclosure of information under this section does not breach—(a) any obligation of confidence owed by the person making the disclosure, or(b) any other restriction on the disclosure of information (however imposed).(6) This section does not authorise or require a disclosure of information if the disclosure would contravene the data protection legislation (but in determining whether a disclosure would do so, a requirement imposed by virtue of subsection (2) is to be taken into account).”Member's explanatory statement
In this amendment new subsection (5) clarifies that disclosure of information under the Clause would not amount to a breach of any other legal restrictions and new subsection (6) clarifies the relationship between the power to require information under the Clause and requirements in data protection legislation.
Lord Callanan
Member's explanatory statement
This amendment updates subsection (4) to take account of amendments made in Committee which affected the way “final order” and “provisional order” are defined in Part 1.
Lord Callanan
Member's explanatory statement
This amendment is supplementary to Lord Callanan’s amendment at page 43, line 4.
“(b) if the section 7 licence authorises activities within section 2(2)(a), the person who granted any associated licence under section 18 of the Energy Act 2008, and”Member's explanatory statement
This amendment, which is supplemented by Lord Callanan’s amendments at page 42 line 29, page 43 line 12 and page 49 line 27, amends the list of persons whom the Secretary of State must consult before exercising the powers under subsection (1).
“(6) For the purposes of this section, a licence under section 18 of the Energy Act 2008 (“the carbon storage licence”) is an “associated licence” in relation to the section 7 licence if—(a) the carbon storage licence is in respect of activities within section 17(2)(a) of that Act, and(b) any part of the site to which the section 7 licence relates is within any place to which the carbon storage licence relates.”Member's explanatory statement
See Lord Callanan’s amendment at page 43, line 4.
Lord Callanan
Member's explanatory statement
This amendment takes account of the passing of the Energy Prices Act 2022, which inserted a reference to that Act in section 105(1)(a) of the Utilities Act 2000, since this Bill was introduced.
Lord Callanan (Con)
My Lords, in moving Amendment 13, I will also speak to Amendments 58, 63, 75, 78, 79, 95 and 143 in my name.
Turning first to Amendments 58 and 143, I thank the noble Lord, Lord Ravensdale, for bringing forward his original amendment on the classification of nuclear-derived fuels in Committee. While we believe that we should not categorise nuclear-derived fuels as renewable, I have welcomed the constructive discussion with noble Lords since Committee, and, in response to that, the Government are pleased to bring to forward these amendments.
Amendment 58 will enable the renewable transport fuel obligation and the forthcoming sustainable aviation fuel mandate to support two types of low-carbon fuel, helping the UK to decarbonise transport further, thereby achieving, I think, the noble Lord’s objective. First, it will enable the support of recycled carbon fuels. These are produced from otherwise unrecyclable waste plastics or industrial waste gases that cannot be avoided, reused or recycled. Secondly, it extends support to fuels derived from nuclear energy. Both fuel types have the potential to deliver significant carbon savings over traditional fossil fuels and are a vital replacement for sectors that are difficult to decarbonise, such as commercial aviation and heavy goods vehicles. Amendment 143 sets the timing on which the power comes into force at two months after Royal Assent.
I turn now to Amendment 95, which relates to Part 8 on the regulation of energy smart appliances, specifically under Clause 191, which deals with how energy smart regulations will be enforced. It will enable the regulator to agree an enforcement undertaking with an economic actor, where appropriate, and, if required, it will still issue a penalty on a separate non-compliance issue to the same economic actor. The ability to agree an enforcement undertaking with a business is a useful tool for a regulator. It allows it to work with a business to bring it into compliance without the need for potentially harsher penalties. This will be particularly important in the regulation of energy smart appliances, which is a nascent and evolving market at the moment. Should other, unrelated instances of non-compliance arise while an enforcement undertaking is in place, the regulator still has the power to issue a penalty. The amendment will put that ability beyond any doubt by clarifying that the regulator can issue a penalty against a business with which it has agreed an enforcement undertaking, providing that the two relate to separate issues. The amendment will help to enable the implementation of a consistent and fair enforcement regime for the energy smart appliances market.
Amendments 13 and 63 simply take account of the Energy Prices Act 2022, which has been passed since the Bill was introduced.
Amendments 75, 78 and 79 are minor and technical amendments relating to Schedule 16 on heat networks regulation. Amendment 75 corrects an error in relation to installation and maintenance licences for heat networks by removing the reference to Scotland, where the licensing regime will not apply. The licensing regime will apply in England and Wales, and the Northern Ireland Executive will have powers to introduce an equivalent regime. The regime will not apply in Scotland, as the Scottish Government, I am told, will introduce their own regime.
Amendment 78 simply corrects a typographical error in paragraph 40 of Schedule 16, replacing a reference to “a penalty” with “compensation”.
Finally, Part 9 of the schedule provides for regulations introducing a special administration regime for the heat network sector. It provides for the appropriate authority to modify existing legislation relating to the special administration regime for energy companies to allow for the equivalent introduction of an energy regime for heat networks. Amendment 79 provides a definition of the appropriate authority for paragraph 50 of the schedule, to match the definition in paragraph 61 of that schedule. The appropriate authority in this case is defined as the Secretary of State for England and Wales and Scotland, and the Department for the Economy in Northern Ireland. I beg to move.
Lord Ravensdale (CB)
My Lords, I shall speak to Amendment 58, to which I have added my name. First, I thank the Minister for his constructive approach, and for listening to my amendments in Committee and responding by introducing this amendment, which addresses all of the points in my Committee amendments. I am most grateful. I must also thank his officials for the work that they have put into drafting and finding an acceptable way forward, and for engaging with me throughout the process. I also thank the noble Baroness, Lady Worthington for her support throughout.
I break down the benefits of this amendment into three broad areas. First, it continues the work that the Government are doing to create a level playing field for low-carbon technologies. We heard the welcome news in the recent Budget Statement that nuclear will be considered as environmentally sustainable, or taxonomy aligned, under the UK green taxonomy. In a similar vein, the renewable transport fuels obligation amendment will allow nuclear to benefit from a subsidy scheme that is already available to renewable operators. This sends a clear message to investors that the Government sit squarely behind nuclear as an environmentally sustainable energy source. It also brings out the important principle of technological independence—to let the market do its job to find the most efficient solutions, but also because for net zero we need to throw the kitchen sink at the problem, if we are going to achieve it.
Secondly, the amendment directly enables a whole range of near-term projects that will help to kick-start the green hydrogen and recycled carbon fuel industries within the UK. With recycled carbon fuels, there are a number of industrial projects being scoped that will be enabled by this amendment—for example, Project Dragon, to use industrial waste gases from Port Talbot to produce ethanol from which recycled carbon fuels, including sustainable aviation fuels, can be derived. By setting strict rules for how to account for emissions, savings of around 70% can be generated when compared with the baseline of using fossil fuels. Those projects, enabled by this amendment, will be an important enabler for decarbonising transport fuels and moving towards a circular economy, saving significant amounts of greenhouse gas emissions in future.
For nuclear, there are near-term plans to produce hydrogen from Sizewell B for use in Sizewell C construction, and also in other nuclear projects, including SMRs and AMRs. Particular economic benefits may be gained through using nuclear power to produce hydrogen—for example, high temperature electrolysis, using heat from the nuclear reaction to produce hydrogen much more efficiently than cold electrolysis. Further down the line, using the heat from high temperature reactors to produce hydrogen directly through the sulfur-iodine cycle has the potential to increase efficiency further beyond traditional electrolysis techniques. If the Government are to meet their ambitious hydrogen production targets, nuclear needs to be part of the picture, which will be enabled by this amendment and help kick- start green, or pink, hydrogen production—I sometimes lose track of the colours—in the UK.
Thirdly, the amendment enables these fuel sources to be eligible for the sustainable aviation fuels, or SAF, mandate. Both recycled carbon fuels and nuclear will have a key role to play here. RCF has the potential to produce large volumes of SAF in the near term; in the longer term, the combination of direct air capture and hydrogen production from nuclear could allow power-to-liquid sustainable aviation fuel to be produced economically.
As I said, I am very grateful to the Minister and his officials for working together to make this important change to the Bill.
Baroness Worthington (CB)
I shall speak briefly to Amendment 58, which the noble Lord, Lord Ravensdale, has so eloquently spoken to. I definitely support the nuclear element of this amendment, and I am grateful to the noble Lord for bringing this to our attention, as well as to the Minister for taking it on proactively. However, I have a question around the inclusion of fossil-derived sources of energy in this approach. I am not one to rule things out, and I think that we need to use all the tools available to us, but there is a material difference when you are using a fuel derived from fossil fuels, in that once it is combusted the CO2—the greenhouse gases—will be readmitted to the atmosphere. Can the Minister say a bit more about how something derived from nuclear electricity, which is intrinsically clean, to create a fuel, is different from the waste derived from a fossil source of energy? I just want clarification on that point.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Baroness, Lady Worthington, and to partly agree and partly disagree with her comments. I speak in strong opposition to government Amendment 58, which is the substantive amendment in this group, buried in the depths of a whole lot of technical detail.
It is worth focusing on what Amendment 58 actually does. The Minister said this in his introduction, but it deserves to be highlighted. The Minister acknowledged that these are not renewable sources of energy, but what we are doing here is to treat them as though they are renewable. That is an important distinction, which clearly needs to be made. It is quite significant.
As the noble Lord, Lord Ravensdale, said earlier, we have been debating this Bill for eight months or so. The second element of the government amendment, referring to nuclear-derived fuels, reflects something that the noble Lord brought to Committee but, so far as I can recollect across those eight months, recycled carbon fuels have suddenly popped here at Report, without any previous debate at all. That is something that presents an issue when it comes to scrutiny and examination—an issue which the other place, when this Bill reaches it, may well need to look at and consider in some detail, given that your Lordships’ House has not had the opportunity to look at recycled carbon fuels along with some of the issues that the noble Baroness, Lady Worthington, raised and which I am going to expand on.
It is worth highlighting that nuclear-derived fuel is now an extremely hot political issue—no pun intended—in Europe. Germany, Spain and Denmark are among the countries opposed to nuclear-derived fuel being classed as a renewable there, in a debate that is going on this very week, as we are meeting now in your Lordships’ House. The opposition from those states says that nuclear energy does not belong within renewable targets and that there is a risk that treating it as though it was renewable will undermine the massive expansion of renewables that we need to hit our climate goals. So this is a replacement-type issue—and that raises a very important point.
When I speak in opposition to this amendment, I am not necessarily saying that we should not, in a limited way, be using recycled carbon fuel of the industrial waste type to which the noble Lord, Lord Ravensdale, referred, or even, while we have the nuclear plants, nuclear-derived fuel. The question is whether it receives treatment as though it was a renewable when it is not a renewable—that is the question that arises from this amendment.
On recycled carbon fuel, as the noble Baroness, Lady Worthington, said, there are some grave concerns about burning fossil fuel wastes, particularly plastics, in incinerators or hydrolysis processes to produce fuels. I can quote some figures on this. When municipal solid waste containing 65% of non-biogenic waste, which is usually mostly plastic, is turned into fuel, the emissions range between 52.6 and 124 grams of carbon dioxide equivalent per megajoule. When the waste is all non-renewable, the impact is actually worse than conventional diesel, petrol or kerosene. Even when there are some reductions, at best they are 1% to 14%.
We come to a broader issue, and here I mention the noble Lord, Lord Lansley, who I see is not in his place. Yesterday, on the levelling-up Bill, he was expounding the virtues of the circular economy. Of course, in a circular economy, and thinking about the waste pyramid, the best thing we can possibly do is reduce the amount of waste. There is a risk if we are providing a way out at the other end for plastics, subsidising them as though they were renewables: this could encourage the production of more plastics, which is absolutely the last thing this planet needs, both for climate reasons and for all the other reasons of human health and well-being, microplastics and all the issues we have on a planet that is choked with the stuff already.
There is also the problem, of course, that while recycling is the third-best option—a bad option but not as bad as the others on the waste pyramid—anything that encourages the production of more plastics is an issue. I am aware that the Minister, when we were debating methane earlier this month, complained that people keep quoting scientists at him. I am afraid I am going to do that again, and I make no apology for continuing to do so, because I believe that we should have evidence-based policy that relies on the science. A study was published in Energy in 2017, “The utilisation of oils produced from plastic waste at different pyrolysis temperatures in a DI diesel engine”. I apologise that that is a bit of a mouthful. To boil down the point of this study, there are different ways of doing pyrolysis with fuels made from plastic, but whichever way you do it the air pollution results are worse than diesel.
Many Members of your Lordships’ House will be aware that my noble friend Lady Jones of Moulsecoomb has taken the Clean Air (Human Rights) Bill right through the House and has received very wide backing. There is a real issue here: climate is only one of the many threats we face. Air pollution is a very serious issue. Essentially, we are in a position where it is very clear that we have to stop burning stuff and polluting our planet, whether that is carbon dioxide pollution or other pollutants that come from burning fossil fuels or organic materials. There is a very grave danger in this amendment, I suggest.
Given that we are where we are, I am not going to call for a vote on this; I do not think your Lordships’ House is ready. I do not think we have had sufficient debate on this issue to do that, but I very much hope that today’s debate—and others may contribute as well—will be taken on board when the Bill gets to the other place.
Lord Teverson (LD)
My Lords, I also have great concern about this amendment. It seems to me that, on renewable transport fuels, we have a government amendment, in a group of some 20 amendments or more, that changes the taxonomy in the UK, exactly as was said by the noble Baroness, Lady Bennett, and the definition of a renewable fuel. I do not think that is particularly good practice; it is the wrong way to do this. I hope that the Commons, when this goes down the other end, will debate it rather more, because it requires a lot more thought.
I can get my head around the nuclear bit with hydrogen, which has now been well explained to me. I was trying to understand this amendment, I must admit, before the noble Lord, Lord Ravensdale, spoke, but whether it is renewable or not is a debate to be had. I do not have quite such an issue over that, maybe, but it needs to be debated fully. What I have a problem with is more the carbon side, because what we are talking about is no different from energy from waste. Energy from waste is one of the dirtiest forms of energy that is produced. It has other benefits—it does not produce landfill and all that sort of side—but it is not, in any description, a renewable fuel. So I too have great reservations about this amendment. Clearly I am not going to oppose it here today, but I very much hope that the other end of the building will give this much greater scrutiny and see it as a major decision around the taxonomy of renewable fuels and renewable energy when the Bill reaches there.
Lord Lennie (Lab)
My Lords, this amendment would allow two other low-carbon fuels to be supported under the existing and forthcoming renewable transport fuel schemes. As we have heard, these are recycled carbon fuels and nuclear-derived fuels. While the noble Lord has created a degree of happiness with the noble Lord, Lord Ravensdale, some unhappiness still exists around the Chamber. These fuels can provide similar carbon emissions savings to the renewable fuels already considered under these schemes. Furthermore, these fuels are crucial for the production of sustainable aviation fuel, which is imperative to achieving the jet zero strategy and fulfilling the forthcoming sustainable aviation fuel mandate.
I will not speak for long on this, because we want to move on, but this amendment would insert a new clause in Chapter 3 of Part 3 of the Bill, providing for recycled carbon fuel and fuel derived from nuclear energy to be treated as renewable transport fuel. Amendment 74, in the name of my noble friend Lord Whitty, would make it clear that the regulator needs to ensure that consumers of heat networks have equivalent consumer protection to those of other suppliers. The Explanatory Notes say of Clause 166:
“This clause provides that GEMA will be the regulator for heat networks in England, Wales and Scotland. The Secretary of State may introduce regulations to appoint a different regulator by affirmative procedure. The regulator in Northern Ireland will be the Northern Ireland Authority for Utility Regulation (NIAUR) subject to a similar power to make changes by secondary legislation.”
I think that is something we can all agree with.
Lord Callanan (Con)
I thank all noble Lords who have taken part in this debate. Before I engage in the detail of the amendments, let me respond to the noble Baroness, Lady Bennett. I am sure I have never said that we should not listen to scientists; of course we should, but we should accept that there are sometimes different scientific opinions. I notice that the noble Baroness is very keen to listen to scientists on some occasions, but the Greens are totally opposed to listening to the vast majority of scientists who say that nuclear should provide an essential way of decarbonising the country’s economy.
By way of example, perhaps she would like to look at the mess her Green friends have got themselves into in Germany by their irrational objections to nuclear policy: they have ended up, now that they are in government, supporting the eradication of villages to open more lignite mines, the dirtiest form of coal production, because they got rid of all their nuclear capacity. Obviously they could not have predicted the gas shortages that would come along, but this is the problem you get yourself into with idealistic policies without any practical effect in the real world. Thankfully, I do not think there is any chance of the noble Baroness or her party being in government in the UK to make similar errors and mistakes.
Baroness Bennett of Manor Castle (GP)
I have to correct the noble Lord and point out that there are Green Ministers in government in the UK.
Lord Callanan (Con)
I accept the noble Baroness’s point—yes, that was an error on my behalf. Of course, Patrick Harvie is my opposite number in Scotland and I discuss these matters with him quite often, although we have never had a nuclear discussion yet.
Turning to the amendments, I thank the noble Lords, Lord Ravensdale, Lord Teverson and Lord Lennie, and the noble Baroness, Lady Worthington, for their contributions on Amendment 58. I thank the noble Lord, Lord Ravensdale, for his engagement and pay tribute to the excellent work of my officials in drafting the amendments. In response to the very appropriate request by the noble Baroness, Lady Worthington, for clarification on fossil fuel waste, both the renewable transport fuel obligation and the forthcoming sustainable aviation fuel mandate are underpinned by strict sustainability and eligibility criteria. This includes requiring qualifying fuels to provide minimum greenhouse gas savings when compared with the fossil fuels they displace.
Fuels produced from nuclear energy are considered to be zero carbon; however, it will be important that we do not incentivise the diversion of electricity generated by nuclear power stations from current uses. The RTFO already includes criteria to ensure that renewable energy—
Baroness Bennett of Manor Castle (GP)
Perhaps the Minister might wish to correct himself. He just referred to nuclear energy as zero carbon. It is of course, as under the Government’s own classification, low carbon.
Lord Callanan (Con)
I think I said fuels produced from nuclear energy, but never mind.
The RTFO already includes criteria to ensure that renewable energy used for fuel production is additional to that which would otherwise be supplied, and the same principles would be developed for nuclear power.
With regards to the waste hierarchy, this policy makes effective use of what otherwise would be difficult to manage waste. RCFs are non-recyclable fossil wastes. Utilising these types of wastes to synthesise fuel is a better end-of-life fate than landfill or incineration. It will be important to mitigate risks and ensure adherence to the UK waste hierarchy, so we are in the process of concluding a consultation on detailed policy proposals to ensure that RCFs contribute to and meet our wider objective of effectively reducing the greenhouse gas emissions of fuels. Sustainability criteria are being carefully formulated in consultation with a wide range of scientists, technical experts, other government departments, fuel suppliers and wider stakeholders to ensure that the risks are carefully managed and mitigated. I hope that provides appropriate reassurance to the noble Baroness.
Lord Callanan
“Enterprise and Regulatory Reform Act 2013
9 In Schedule 4 to the Enterprise and Regulatory Reform Act 2013, in paragraph 35(3) (membership of CMA panel), in the definition of “specialist utility functions”, after paragraph (b) insert—“(ba) an appeal under section 20 of the Energy Act 2023;”Member's explanatory statement
This amendment provides for appeals under Clause 20 to be “specialist utility functions”. This will attract special provisions relating to the composition of groups constituted to carry out such functions.
Lord Callanan
Member's explanatory statement
This amendment is consequential on Lord Callanan’s amendment at page 43, line 4.
Lord Callanan
Member's explanatory statement
This amendment provides for the Parliamentary procedure to which regulations under new Clause (Payments to relevant market participants) are to be subject.
Lord Callanan (Con)
My Lords, in moving Amendment 16 I will speak also to Amendments 20, 21 and 30 standing in my name.
Amendment 30 further clarifies the scope of the modifications that the Secretary of State can make to certain licences for the purposes of facilitating or supporting the enforcement and/or administration of the hydrogen levy. Before making a proposed modification, the Secretary of State is required to consult the holder of any licence being modified. This will help to ensure that relevant bodies are engaged on proposed modifications. To ensure sufficient scrutiny of proposed modifications, the Secretary of State must also lay a draft of the modifications before Parliament, where they will be subject to a procedure similar to the draft negative resolution procedures used for statutory instruments.
I turn to Amendments 21, 20, and 16. I thank the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, again for their amendments in Committee. Having considered those amendments, the Government are introducing a new clause on the hydrogen levy provisions, which I hope noble Lords will find satisfying. The new clause will enable revenue support regulations to make provisions for amounts to be paid to levied market participants by a hydrogen production counterparty or hydrogen levy administrator. This includes the pass through of payments received by a hydrogen production counterparty from hydrogen producers under revenue support contracts, such as payments made to the counterparty when the market price of hydrogen is higher than the strike price. This will help to ensure that regulations can make provisions for fair and efficient payments and reconciliation arrangements.
Subsection (3) of this new clause was prompted specifically by consideration of Amendment 62 from the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, in Committee. This provision enables the Secretary of State to make regulations requiring that customers of levied market participants benefit in accordance with these regulations from payments made to levied market participants by a hydrogen production counterparty or levy administrator. I beg to move.
Baroness Liddell of Coatdyke (Lab)
My Lords, I will speak to Amendment 17. I will not take up much of the House’s time, because this is just about consistency.
The Government have defined a UK low-carbon hydrogen standard, which was updated in July this year, and it includes guidance and a calculator tool for hydrogen producers to use for greenhouse gas emissions reporting and sustainability criteria. It has been designed to demonstrate that low-carbon hydrogen production methods can meet a greenhouse gas emissions test and threshold, and this amendment would require the regulations to have regard to that standard when assessing the eligibility of low-carbon hydrogen production. Using the low-carbon hydrogen standard will ensure that there is consistency for the industry and its users, and will provide them with the degree of certainty that they are looking for when developing their projects.
Baroness Worthington (CB)
My Lords, I added my name to Amendment 18 in respect of who should be paying a hydrogen levy. I do not consider that hydrogen is going to play a large role in our broader economy. I think it will have specialised uses: it will be used where it is already used, in the production of fertilisers and in certain chemical processes, and it may well be used as a back-up fuel in extremis when we have no other forms of storage. I say that because it is going to be a relatively expensive commodity, it is not going to be easy to handle and it is not necessarily going to be very safe. For those reasons, I think we are overexcited about hydrogen in general, and the Bill is overexcited about hydrogen—and probably, as a result, about carbon capture and storage, which will also be quite expensive.
The reason I lent my name to this amendment is that it seems particularly egregious to expect electricity billpayers to be picking up the price of this expensive commodity, which is not very safe and quite unlikely to be very useful. Therefore, I think it is really important that the Government listen, and listen to everyone outside this Chamber who is saying that we should not be loading any more costs on to electricity consumers but should be doing the opposite. I am looking forward to the Government taking on this issue to redress the balance of how we are tackling climate change and who is paying. At the moment, the electricity consumer is paying nearly everything and the gas consumer almost nothing.
It is time that we started to recognise the value of electricity. It is hugely efficient, and it can be indigenously produced from our nuclear and homegrown renewables and offshore wind. It is that which we should be supporting, not necessarily this rather expensive alternative. Gas, oil and coal companies will continue to promote it, but it is not for the electricity billpayer to pick up the tab. So I fully support Amendment 18.
I would love to hear a little more from the Minister on new subsection (3) inserted by Amendment 20 in relation to the regulations. It is my understanding that that will enable payments to be made back to consumers, but could those regulations also decide not to impose any hydrogen levies on electricity consumers? I would like to understand the extent to which those regulations could solve this problem.
Baroness Blake of Leeds (Lab)
I make reference to the Minister’s amendments, particularly the issue he highlighted of including the new subsection that would allow regulations to make provisions requiring that energy consumers benefit. I want to ask just one question on that. While we welcome that provision, there is a concern. If we are allowing regulations to make this provision, what guarantee is there that they will actually be used? Are the Government committing to using them, if they use Clause 66 powers?
I support all of my noble friend Lady Liddell’s comments on her amendment. The main amendment for me is that just referenced by the noble Baroness, Lady Worthington. We spent a significant amount of time talking about this area in Committee, so I will not go through all the detail. However, as the noble Baroness mentioned, in the circumstances we are in, with the extra pressure on the cost of living from energy bills, why are we looking at a situation where we could be asking householders to pay more money? I acknowledge that there will be further consultation but I hope that, as well as it being done thoroughly, its conclusions will lead to the spirit of our amendment. As shown in our amendments, we believe that the Secretary of State could put a levy on gas shippers but not on gas and electricity suppliers, thus preventing responsibility for the levies falling on households.
We need to reflect on the spirit of the Bill—the whole idea is that, while reforming energy systems, we do everything we can to protect consumers and their ability to pay their bills. Every possible action should be taken to minimise the impact on consumers, focusing always on affordability. I am disappointed that the Minister has not gone further on this point. Unless he indicates a willingness to do so, due to the strong feelings surrounding the protection of consumers from inflated bills, I am minded to test the opinion of the House.
Lord Callanan (Con)
My Lords, I will start by addressing Amendments 18 and 19, which the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, have retabled from Committee. I thank the noble Baroness, Lady Worthington, for her contribution. She requested further detail; I will provide clarification in writing, if that is okay with her.
These amendments seek to ensure that funding for the hydrogen production business model can be provided through the Consolidated Fund. They also seek to restrict where a levy may be placed, removing the option for levying energy suppliers and requiring that a levy could be placed only on gas shippers. They are intended, I assume, to take responsibility for levies away from households.
The powers in the Bill already enable Exchequer funding of the hydrogen production business model, which will initially be Exchequer-funded. It is therefore unnecessary to include additional provisions that enable the business model to be funded through the Exchequer.
The proposal in these amendments to require that the levy could be placed only on gas shippers will limit options for the levy design, with possible implications for its costs and ultimate impact on consumers. There is no such thing as a free lunch. A gas shipper levy would be a completely novel scheme, with administration and set-up costs that could be considerably higher than those required to implement a supplier levy; this is well understood.
The Government have set out their intention not to levy gas shippers in the near term. Levies on energy suppliers have been used in the past to support the deployment of low-carbon electricity and increase the proportion of green gas in the gas grid. These levies are well understood by the private sector. By taking a similar approach with the hydrogen levy, we can help provide investors with the confidence they need to invest in low-carbon hydrogen production projects and support the delivery of our 10-gigawatt production capacity ambition.
By seeking to ensure that the levy could be placed only on gas shippers, these amendments appear to try to protect energy consumers from the costs of a levy. However, as I outlined when they were tabled previously, we anticipate that any costs associated with a levy on gas shippers would ultimately be passed on to energy consumers in a very similar way to levies on energy suppliers. As I say, there is no such thing as a free lunch. It is the opinion of all the policy analysts that it is unlikely that the amendments would have their intended effect.
Baroness Blake of Leeds
Member's explanatory statement
This amendment means the Secretary of State may put a levy on gas shippers, but may not put it on gas or electricity suppliers, thus taking responsibility for levies away from households.
Baroness Blake of Leeds (Lab)
My Lords, on behalf of consumers I express my disappointment in the Minister’s response, and I would like to test the opinion of the House.
Lord Callanan
“Payments to relevant market participants(1) Revenue support regulations may make provision about amounts which must be paid—(a) by a hydrogen levy administrator to relevant market participants, or(b) by a hydrogen production counterparty—(i) to relevant market participants, or(ii) to a hydrogen levy administrator for the purpose of enabling payments to be made to relevant market participants.(2) Regulations by virtue of subsection (1) may make provision—(a) for a hydrogen levy administrator to calculate or determine, in accordance with such criteria as may be provided for by or under the regulations, amounts which are owed by—(i) the hydrogen levy administrator, or(ii) a hydrogen production counterparty;(b) for a hydrogen production counterparty to calculate or determine, in accordance with such criteria as may be provided for by or under the regulations, amounts which are owed by—(i) the hydrogen production counterparty, or(ii) a hydrogen levy administrator;(c) for the issuing of notices by a hydrogen levy administrator to require the payment by a hydrogen production counterparty of amounts calculated or determined by the hydrogen levy administrator in accordance with paragraph (a)(ii);(d) for the issuing of notices by a hydrogen production counterparty to require the payment by a hydrogen levy administrator of amounts calculated or determined by the hydrogen production counterparty in accordance with paragraph (b)(ii); (e) for the provision of copies of notices such as are mentioned in paragraph (c) or (d) to persons specified in the regulations, or the publication of such notices.(3) Revenue support regulations may make provision imposing on a relevant market participant who receives a payment from a hydrogen levy administrator or a hydrogen production counterparty a requirement to secure that customers of the relevant market participant receive, by a time specified in the regulations, such benefit from the payment as may be specified in or determined in accordance with the regulations.”Member's explanatory statement
This amendment enables regulations to require payments to be made to levy payers and to require benefits from such payments to be passed on to customers of levy payers. Lord Callanan’s amendments at page 52, line 2 and page 59, line 23 are consequential on this amendment.
Lord Callanan
Member's explanatory statement
See the explanatory statement for new Clause (Payments to relevant market participants).
“(4A) Provision made by virtue of subsection (3)(d) for the imposition of a financial penalty must include provision for a right of appeal against the imposition of the penalty.”Member's explanatory statement
This amendment requires regulations under Clause 67(3)(d) (functions of hydrogen levy administrator) that make provision for the imposition of financial penalties to include provision for a right of appeal.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I rise to speak to the amendments standing in the name of my noble friend, which address recommendations made by the Delegated Powers and Regulatory Reform Committee on the Energy Bill. We are grateful to the committee for its detailed scrutiny of the provisions in the Bill. The committee provided a range of comments and recommendations which the Government have carefully considered. The Minister was pleased to confirm in his response to the committee that the Government have accepted nine recommendations. He also provided further clarification, as requested, in response to the majority of the committee’s other comments. These amendments address the recommendations the Government have accepted, and I hope they will be welcomed by noble Lords.
Turning first to Amendments 22, 34, 48, 49, 50, 51, 52, 55, 64, 76, 77, 92, 93, 99 to 103, 105 and 106, the committee highlighted that certain clauses of the Bill confer powers to make provision for the imposition of civil penalties without mandating a requirement for the regulations to provide for a right of appeal. While it was absolutely the Government’s intention that regulations under such clauses would provide for a right to appeal, we have taken on board the committee’s comments.
These amendments clarify this point and ensure that regulations made under these clauses, which make provision for a civil or financial penalty, must also include provision for a right of appeal to a court or tribunal against the imposition of such a penalty. The committee’s recommendations referred to three specific instances in the Bill. To ensure consistency across the Bill, we have tabled similar amendments to a number of other clauses which make provision for a civil or financial penalty.
Amendments 73, 80 to 90, 96, 107 to 123 and 139 to 142 address the committee’s recommendations relating to changing the procedure to which regulations made under powers in the Bill are subject. The Government agree with the committee on the importance of parliamentary scrutiny. As such, we have tabled amendments to address the committee’s recommendations relating to changing the parliamentary procedure. These amendments will facilitate detailed scrutiny of the powers, when used.
Amendment 91 responds to the committee’s recommendation regarding subsections (3) and (4) of Clause 180, on heat network zoning. The committee had concerns that these provisions would confer powers allowing non-statutory documents to make requirements in relation to the methodology for identifying areas as potential heat network zones. We welcome the committee’s comments, and this amendment will ensure that any non-statutory documents do not have legislative effect. The amendment omits from Clause 180 subsection (3), which provides for the heat network zones authority to publish documents elaborating on one or more aspects of the zoning methodology. It also omits from the same clause subsection (4), which provides that regulations may require the authority and zone co-ordinators to comply with any requirements set out in these documents.
I reiterate my thanks to the Delegated Powers and Regulatory Reform Committee for its engagement and reports on the Bill, and I hope its members will be pleased with the amendments discussed today. I beg to move Amendment 22.
Lord McLoughlin (Con)
My Lords, on behalf of the committee, I thank the Government for responding favourably to the report. I hope this is something that other departments will follow through in their subsequent considerations.
Lord Lennie (Lab)
My Lords, as we have heard, these amendments relate to ensuring that regulations which make provision for a civil penalty must include the provision of a right of appeal to a court or tribunal against the imposition of such a penalty in a number of instances in the Bill, as recommended by the DPRRC. It is good news that the Government have accepted these recommendations. These amendments have been tabled to make changes to the procedure of regulations under several powers, as recommended by the committee, and to clarify that non-statutory documents do not have legislative effect in relation to heat network zoning methodology. We support these amendments.
Lord Callanan
“(1A) The power under each paragraph of subsection (1) may be exercised so that more than one appointment has effect under that paragraph at the same time.”Member's explanatory statement
This amendment makes it clear that more than one appointment of a hydrogen production allocation body or carbon capture allocation body may have effect at the same time.
Member's explanatory statement
This amendment is about regulations that treat a person whose appointment as an allocation body has ceased as if they were still so appointed, and enables such regulations to specify for what purposes the body is to be so treated.
Lord Callanan
“Licence conditions regarding functions of certain allocation bodies(1) In section 7B of the Gas Act 1986, after subsection (5) insert—“(5ZA) Without prejudice to the generality of paragraph (a) of subsection (4), conditions for or in connection with the purpose set out in subsection (5ZB) may be included in a licence under section 7AA by virtue of that paragraph.(5ZB) The purpose is to facilitate or ensure the effective performance (whether in relation to Northern Ireland or any other part of the United Kingdom), at relevant times, of functions of a hydrogen production allocation body under Chapter 1 of Part 2 of the Energy Act 2023.(5ZC) In subsection (5ZB) “relevant times” means times when the hydrogen production allocation body holds a licence under section 7AA.”(2) Where—(a) the GEMA proposes by a modification under section 23 of the Gas Act 1986 of a licence under section 7AA of that Act to add, remove or alter a condition such as is mentioned in section 7B(5ZA) of that Act, and(b) that condition relates to functions of a hydrogen production allocation body that are exercisable in relation to Northern Ireland,section 23 of that Act has effect as if the persons listed in subsection (4)(b) of that section included the Department for the Economy in Northern Ireland.”Member's explanatory statement
This new Clause makes it clear that licences under section 7AA of the Gas Act 1986 may include certain conditions relating to functions of certain bodies appointed under Part 2 of the Bill, and makes related provision about proposed licence modifications.
Lord Callanan
“(ca) for a revenue support counterparty to require a person specified, or of a description specified, in the regulations to provide information to it;”Member's explanatory statement
This amendment enables regulations to provide for a revenue support counterparty to require a person or description of persons to provide information to it.
Lord Callanan
“(3) Revenue support regulations may make provision for special allocation body requirements (or a subset of such requirements) to be enforceable by the GEMA as if they were relevant requirements within the meaning of sections 28 to 30O of the Gas Act 1986.(4) In this section “special allocation body requirements” means requirements imposed by or under revenue support regulations or regulations under section 68 on a hydrogen production allocation body, so far as the requirements relate to times when the body holds a licence under section 7AA of the Gas Act 1986 (including requirements in respect of functions of the body that relate to Northern Ireland).”Member's explanatory statement
This amendment provides for requirements imposed on a hydrogen production allocation body which holds a gas system planner licence to be able to be enforced by the application of provisions of the Gas Act 1986.
Lord Callanan
“(ba) a person in accordance with whose directions or instructions the members of a Chapter 1 entity which is a limited liability partnership are accustomed to act;”Member's explanatory statement
This amendment ensures that the Secretary of State will not, by virtue of exercising functions under Chapter 1 in relation to an entity which is a limited liability partnership, be treated (for the purposes of any relevant rule of law) as a person in accordance with whose directions etc the members of a limited liability partnership are accustomed to act.
“(ba) a person in accordance with whose directions or instructions the members of a revenue support counterparty which is a limited liability partnership are accustomed to act;”Member's explanatory statement
This amendment ensures that an allocation body will not, by virtue of exercising functions under Chapter 1 in relation to a revenue support counterparty which is a limited liability partnership, be treated (for the purposes of any relevant rule of law) as a person in accordance with whose directions etc the members of a limited liability partnership are accustomed to act.
Lord Callanan
“(6A) Provision included in a licence, or in a document or agreement relating to licences, by virtue of a power conferred by this section may do anything authorised for licences of that type by—(a) section 7(2A), (3), (4), (5) or (6A) of the Electricity Act 1989,(b) section 7B(5)(a), (6) or (7) of the Gas Act 1986,(c) Article 11(3), (4), (5), (6A) or (6B) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I. 1)), or(d) Article 10(3)(a) to (d), (4), (5) or (6A) of the Gas (Northern Ireland) Order 1996 (S.I. 1996/275 (N.I. 2)).(6B) For the purposes of subsection (6A)(c) and (d), the provisions referred to in those sub-paragraphs are to be read as if references to the Northern Ireland Authority for Utility Regulation included the Secretary of State.”Member's explanatory statement
This amendment further supplements the Secretary of State’s powers under clause 83 to modify certain licences and related documents.
Lord Callanan
“Electricity system operator and gas system planner licences: modifications(1) The Secretary of State may, for the purpose of facilitating or ensuring the effective performance of functions specified in subsection (3), modify—(a) the conditions of a licence under section 6(1)(da) of the Electricity Act 1989 (electricity system operator licence);(b) a document maintained in accordance with the conditions of such a licence, or an agreement that gives effect to a document so maintained.(2) The Secretary of State may, for the purpose of facilitating or ensuring the effective performance of functions specified in subsection (3), modify—(a) the conditions of a licence under section 7AA of the Gas Act 1986 (gas system planner licence);(b) a document maintained in accordance with the conditions of such a licence, or an agreement that gives effect to a document so maintained.(3) The functions referred to in subsections (1) and (2) are—(a) functions of hydrogen production allocation bodies, and(b) other functions under this Chapter which are related to such functions.(4) Modifications under subsections (1) and (2) may only make provision in relation to times when the person holding the licence is a hydrogen production allocation body.(5) The provision referred to in subsection (4) includes consequential or transitional provision in relation to times when it is no longer the case that the person holding the licence is a hydrogen production allocation body. (6) Provision included in a licence, or in a document or agreement relating to licences, by virtue of a power under this section may in particular—(a) include provision of any kind that may be included in revenue support regulations or regulations under section 68;(b) do any of the things authorised for licences of that type by—(i) section 7B(5)(a), (5ZA), (6) or (7) of the Gas Act 1986, or(ii) section 7(3), (4), (5) or (6A) of the Electricity Act 1989.(7) Before making a modification under this section the Secretary of State must consult—(a) the holder of any licence being modified;(b) the GEMA;(c) such other persons as the Secretary of State considers it appropriate to consult.(8) Subsection (7) may be satisfied by consultation before, as well as by consultation after, the passing of this Act.”Member's explanatory statement
This amendment enables the Secretary of State to modify electricity system operator licences and gas system planner licences, and related codes etc, for the purpose of facilitating etc the effective performance of certain functions relating to hydrogen production allocation bodies.
Lord Callanan
(b) section (Electricity system operator and gas system planner licences: modifications).”Member's explanatory statement
This amendment is supplementary to new Clause (Electricity system operator and gas system planner licences: modifications)
Lord Teverson
“(7A) Any decommissioning fund must be ring-fenced and held in an escrow account, or similarly ring- fenced fund.(7B) The funds may be released only when—(a) decommissioning work takes place;(b) it is determined by the Secretary of State that the funds are no longer required for the purpose of decommissioning.”Member's explanatory statement
This amendment ensures that funds for decommissioning are still available when required for decommissioning.
Lord Teverson (LD)
I am very happy with the Minister’s reply, and I will not move Amendment 33.
Lord Callanan
“(3A) Where regulations under section 85(1) provide for the imposition of a civil penalty, they must also provide for a right of appeal against the imposition of the penalty.”Member's explanatory statement
This amendment requires regulations under Clause 85(1) (financing costs of decommissioning etc) that make provision for the imposition of civil penalties to include provision for a right of appeal.
Lord Callanan
“(1) Section 30 of the Energy Act 2008 (abandonment of installations) is amended in accordance with subsections (1A) to (1D).(1A) In subsection (1), for “, (2)” substitute “to (2)”.(1B) After subsection (1A) insert—“(1AA) Part 4 of the 1998 Act, in its application in relation to carbon storage installations, has effect with the modifications set out in subsection (1AB).(1AB) The modifications are as follows—(a) in section 30 of the 1998 Act, for subsections (5) and (6) substitute—“(5) This subsection applies to a person in relation to a carbon storage installation if—(a) the person has the right—(i) to use a controlled place for the storage of carbon dioxide (with a view to its permanent disposal, or as an interim measure prior to its permanent disposal),(ii) to convert any natural feature in a controlled place for the purpose of storing carbon dioxide (with a view to its permanent disposal, or as an interim measure prior to its permanent disposal), or(iii) to explore a controlled place with a view to, or in connection with, the carrying on of the activities within sub-paragraph (i) or (ii), and(b) either—(i) any activity mentioned in subsection (6) is carried on from, by means of or on the installation, or(ii) the person intends to carry on an activity mentioned in that subsection from, by means of or on the installation,or if the person had such a right when any such activity was last so carried on.(6) The activities referred to in subsection (5) are—(a) the use of a controlled place for the storage of carbon dioxide (with a view to its permanent disposal, or as an interim measure prior to its permanent disposal) in the exercise of the right mentioned in subsection (5)(a);(b) the conversion of any natural feature in a controlled place for the purpose of storing carbon dioxide (with a view to its permanent disposal, or as an interim measure prior to its permanent disposal) in the exercise of the right mentioned in subsection (5)(a);(c) the exploration of a controlled place in the exercise of the right mentioned in subsection (5)(a) with a view to, or in connection with, the carrying on of activities within paragraph (a) or (b) of this subsection; (d) the conveyance in the controlled place mentioned in subsection (5)(a) of carbon dioxide by means of a pipe or system of pipes, in the exercise of the right mentioned in subsection (5)(a); and(e) the provision of accommodation for persons who work on or from an installation which is or has been maintained, or is intended to be established, for the carrying on of an activity falling within any of paragraphs (a) to (d) of this subsection.”(b) in section 30(7) of that Act, in the words before paragraph (a), for “(c)” substitute “(e)”;(c) in section 31 of that Act, for subsection (B1) substitute—“(B1) This subsection applies to an activity if—(a) where the activity is within paragraph (a), (b) or (c) of section 30(6), the controlled place mentioned in that paragraph is one for which the installation is, or is to be, established or maintained;(b) where the activity is within paragraph (d) of section 30(6), the conveyance of the carbon dioxide relates to a controlled place for which the installation is, or is to be, established;(c) where the activity is within paragraph (e) of section 30(6), the installation is in a controlled place in respect of which P has a licence under section 18 of the Energy Act 2008.”(d) in section 31 of that Act, omit subsection (C1);(e) in section 45 of that Act, in the appropriate place insert—““controlled place” has the same meaning as in section 17 of the Energy Act 2008;”.”(1C) After subsection (4A) insert—“(4B) The powers in subsections (2)(b) and (4) include power to amend or repeal subsections (1AA) and (1AB).”(1D) In subsection (5) for “established or maintained” substitute “or has been maintained, or is intended to be or has been established,”.”Member's explanatory statement
This amendment sets out modifications of Part 4 of the Petroleum Act 1998 as it applies to carbon storage installations and extends the definition of “carbon storage installation” in section 30 of the Energy Act 2008.
“(3A) In section 29 of the Petroleum Act 1998 (preparation of programmes), in subsection (6), for the words from “in question,” to the end substitute “in question if the Secretary of State has under section 32—(a) rejected that programme, or(b) approved it (whether or not the approval has been withdrawn).”Member's explanatory statement
This amendment abolishes the rule that where an abandonment programme has been approved in relation to an installation or pipe-line the Secretary of State may not serve a further notice under section 29 of the Petroleum Act 1998 in relation to the installation or pipeline unless the approval has been withdrawn.
Lord Callanan
Member's explanatory statement
This amendment and Lord Callanan’s amendments at page 83 line 27 and page 84 line 9 make it clear that the duties in subsections (1) and (2) of this Clause only affect functions related to carbon dioxide capture, usage and storage policy.
Member's explanatory statement
See Lord Callanan’s amendment at page 83, line 24.
“CCUS-related functions” means functions to which the strategic priorities are relevant (not including functions under sections 65 to 67, 78(1) or (2) or 83, or other functions so far as carried out in connection with those functions);”Member's explanatory statement
See Lord Callanan’s amendment at page 83, line 24.
Baroness Worthington
“Chapter 4ACarbon take back obligationClimate policy for fossil fuel extraction(1) No licence for exploration or extraction of oil, gas, coal or peat (“fossil fuels”) may be granted unless the condition in subsection (2) is met.(2) The condition is that the licensee must agree to produce certification to the economic regulator that the percentage of carbon dioxide which would be emitted when the fossil fuels are extracted and completely oxidised set out in subsection (4) has in each year of operation been captured and disposed of by way of permanent geological storage.(3) The carbon dioxide captured and disposed of under subsection (2) must be either—(a) carbon dioxide removed from the atmosphere, or(b) carbon dioxide that otherwise would have been emitted to the atmosphere under normal business practice.(4) The percentage referred to in subsection (2) is—(a) for years starting from 2025 and ending in 2034, prescribed in regulations;(b) 100 per cent for subsequent years.(5) Where the condition in subsection (2) is not met, the licensee must pay a penalty of £200 per tonne of the carbon dioxide which is not captured.(6) In relation to existing licences for extraction of fossil fuels, no new fossil fuels may be extracted from 2045 without certified evidence that 100 per cent of carbon dioxide emissions which would be emitted when the extracted fossil fuels are extracted and completely combusted are captured and disposed of by way of permanent geological storage.(7) In this section—“emissions” has the meaning set out in section 97 of the Climate Change Act 2008;“permanent geological storage” means storage of carbon dioxide in geological and chemical formations with a view to the permanent containment of carbon dioxide.”Member's explanatory statement
This amendment sets an escalating proportion of carbon dioxide for new fossil fuel extraction licences which must be permanently geologically stored, whilst setting a 2045 requirement for 100% geological storage in relation to existing fossil fuel extraction licences.
Baroness Worthington (CB)
My Lords, Amendment 40 relates to the carbon take-back obligation. We had an excellent debate towards the end of Committee about the question of what government policy is on the supply side of the equation of tackling climate change and environmental impact. On one hand, we had a group of Peers who were talking about the need to increase our extraction of fossil fuels and to move into fracking and other types of exotic extraction. On the other hand, we had an amendment which said, “Absolutely no more—turn off the licensing completely”.
It struck me that there needs to be a path through those two positions. We need to start making this industry responsible for the impact of its product. When we look back, we will wonder how we allowed ourselves to carry on extracting fossil fuels in an unlimited way and putting them into the market without the Government having a policy on that aspect of the problem.
This amendment is designed to introduce a policy that would make the extractors of fossil fuels—the oil, gas and coal producers—responsible for the greenhouse gas impact of their product. A requirement to bury back the greenhouse gases arising from those products would be phased in over time. If the industry cannot find sufficient carbon capture and storage opportunities to permanently store those greenhouse gases, it should be paying a buyout price of £200 per tonne of CO2, representing what is expected to be the social impact price of carrying on this unlimited extraction.
Should the UK be seeking to do this in what is essentially a global market? The international dimensions are at the core of why we need to do it. At the moment, as individual countries and companies, we all tell ourselves that it is important to extract every last gram, ounce or therm of gas, oil and coal out of our economy because others are going to have not to use theirs. Everyone is incentivised to think that they will be the one burning the last therm and the last tonne. Continuing with that approach is a collective international suicide pact. If every country carries on extracting to the very last atom of carbon left in our oil and gas fields, we will go well beyond 1.5 or 2 degrees. In doing so, we will remain hooked on this commodity. It will remain cheap, affordable and available. We will not make the break from fossil fuels that we know we need to in order to address not just climate change but the security, resilience and efficiency of our energy systems.
It is important that we start the debate about government policy on the continued extraction of fossil fuels in this way. At the moment there is no policy. That is why it falls to the planning inspectors to decide whether we should have a new coal mine and to other regulators to keep exploiting the economic value of the North Sea for oil and gas without reference to its future unsustainability. It is not sustainable now. We need to signal a move and acknowledge that this industry needs to adapt. If it wants to pursue carbon capture and storage, let us oblige it to do so.
I am perfectly happy with the Government supporting the first carbon capture and storage projects to get them started and for cost discovery, but there should not be a continued subsidy of that solution. We should oblige the industry to do it. In making it responsible for the impact of its products, it will discover whether it is cost effective, whether it can be done cheaply and whether carbon capture and storage is real. Let us allow industry to discover that. If we give it the obligation, everyone will move forward together on an equal playing field. We could take the responsibility away from the taxpayer and the bill payer and give it to the industry. Quite frankly, at the moment it has more than enough resources and profits to be able to invest in that and to find the least-cost solutions.
Admittedly, Amendment 40 is a big thing to introduce on Report. I am simply seeking to start a debate about this. I hope that I receive some support and that it will be considered in the other place. I look forward to the Minister’s comments. I beg to move.
Baroness Sheehan (LD)
My Lords, I have added my name to Amendment 40 tabled by the noble Baroness, Lady Worthington—I hope I can refer to her as my noble friend. I have done so in solidarity with her and in acknowledgement of her dexterity and expertise in handling the excesses of the oil and gas sector, rather than from a steadfast conviction that the carbon take-back scheme is the deterrent needed to curtail the enthusiasm of the financial markets in their continuing and increasing support for the sector.
I want to find out more about the scheme and to raise some questions posed by it. I get that this novel scheme is cleverly devised, accounting for not just the carbon neutrality of the production of fossil fuels but their deployment, subsequent combustion and release into the atmosphere as greenhouse gases. I support that, but I also have concerns.
Baroness Blake of Leeds (Lab)
I will speak to Amendment 40 in the name of the noble Baroness, Lady Worthington. I acknowledge that this will be her last meeting for some time; I think I am allowed to say that. In my relatively short time here, I have come to value her passionate interjections and her incredible knowledge on the subjects on which she has spoken. I wish the noble Baroness well in her temporary visit overseas and look forward to when she is able to come back and join us. I hope that we can keep in contact in the meantime.
While we do not support new fossil fuel extraction licences, we have to be mindful of existing licences and renewals. We have to take these issues seriously.
It is fair to say that we do not want to turn off the taps, so there will be merit in reducing carbon emissions from those existing licences. To what extent are the Government considering geological storage as a solution? I am sure we have all received briefings giving us the background on how successfully CO2 has been stored over many years. There is an opportunity, but how much can be stored, and can we make full potential of the opportunities that are presented to us off the shores of this island?
Lord Callanan (Con)
I also pay tribute to all the work that the noble Baroness, Lady Worthington, has done. It is indeed a great mystery to all of us why she seemingly wishes to swap the lovely, warm, calm weather of southern England for California, but I suppose that will become clearer over time. I thank her for the contribution she has made, and I am sure that we will hear a lot more from her in the future.
I am happy to contribute to this debate on Amendment 40 and the issue of the carbon take-back obligation for fossil fuel extraction. The concept of such an obligation is indeed worthy of debate, but the noble Baroness will understand when I say that its inclusion in the Bill is a little premature. Our primary instrument to decarbonise the UK economy is the emissions trading scheme, which provides a market price for emissions of carbon dioxide, incentivising investment in decarbonisation and ensuring that it happens wherever—and however—it is most cost effective to do so.
Introducing a carbon take-back obligation now, at such a pivotal time for the development of CCUS in the UK, could create uncertainty for industry and have a detrimental delaying effect on investment, resulting in investors looking to opportunities that exist in many other countries—perhaps even in California; one never knows. Such an obligation could also increase the costs of CCUS, making UK production of steel, chemicals, refinery products and other industrial products more expensive than that of their competitors, potentially impacting on our industrial competitiveness. All these issues need further detailed policy consideration before further legislation can be considered.
As I mentioned to the noble Baroness before the debate, the CCUS Council is the Government’s primary forum for engaging with representatives across the CCUS sector, and we have indeed asked the council to consider and provide advice on carbon take-back obligations. The concept indeed warrants further consideration, but I am sure the noble Baroness will accept that it is not for this Bill at this time. With that explanation, I hope she will feel able to withdraw her amendment.
Baroness Worthington (CB)
My Lords, I am grateful to noble Lords who have spoken in this debate, to the noble Baroness, Lady Sheehan, for adding her name, to the noble Baroness, Lady Blake, for her support, and to the Minister for his comments. This is indeed my last outing before I depart after recess. I want to say thank you to everyone who has made me feel so welcome in the 12 years I have been here on and off, intermittently, on different Benches. It has been a privilege and I will genuinely miss it. When things are coming to an end, often you value them even more. Hopefully, I will be back—in the words of Arnold Schwarzenegger.
On the amendment, I am encouraged that this idea is being picked up by the CCUS Council. It seems that it will be difficult for the oil, gas and coal sector to come forward with this as a united voice, but it would definitely be good for it. It would give it clarity and certainty and enable it to take back control of its choices of projects or investments. It would be able to do it from the private sector, knowing that it is obliged to do it, and it would create a market mechanism through which it could operate, which I believe would reduce costs overall to the consumer and to industrial customers. Industry is very good at finding solutions: give it an obligation, get the engineers on it and it will find solutions. It will determine whether the price will come down or whether indeed it will be better for it to pivot fully into a cleaner system based on electricity and clean electricity rather than continuing to take things out of the ground and burn them.
I have some sympathy with the belief that it is probably high time we stopped burning things and moved on, especially as we—Great Britain, the United Kingdom—have grown rich on the back of the industrial revolution that seems to be dragging on. However, we now know that there are alternatives. There is a cleaner, cheaper, more efficient system available to us using electricity wherever it is possible, and where it cannot be used, deriving clean fuels from that electricity. That is the future. The chemical industry and the chemical-based energy system will decline because it will not be able to compete with that manufactured clean alternative. We have to manage that decline and it is incumbent on Governments to help manage it fairly and transition us out of it. This sort of policy would do that, and the industry should embrace it. I hope that the other place will debate it and that a campaign will emerge around it. I look forward to watching that from sunny California, and I wish your Lordships all the best of luck with the end of the Bill. Thank you. I beg leave to withdraw my amendment.
Lord Callanan
Member's explanatory statement
This amendment and Lord Callanan’s amendment at page 91 line 6 revise the definition of “relevant infrastructure” for the purposes of Clause 99.
Member's explanatory statement
This amendment and Lord Callanan’s amendment at page 90 line 21 and first amendment at page 90 line 25 revise and clarify the description of the power conferred by subsection (1).
Member's explanatory statement
See the explanatory note for Lord Callanan’s amendment at page 90 line 19.
“(4A) Regulations under subsection (1)—(a) may confer functions (including discretions) on any person;(b) may confer jurisdiction on a court or tribunal;(c) may create criminal offences or impose civil penalties;(d) may make other provision about enforcement;(e) must provide for any offences created by the regulations to be triable —(i) only summarily, or(ii) either summarily or on indictment.”Member's explanatory statement
See the explanatory note for Lord Callanan’s amendment at page 90 line 19.
“(4B) Where regulations under subsection (1) impose a civil penalty, they must also provide for a right of appeal against the imposition of the penalty.”Member's explanatory statement
This amendment provides that regulations under Clause 99(1) that contain provision imposing a civil penalty must also include provision for a right of appeal against the imposition of the penalty.
Member's explanatory statement
This amendment ensures that the correct defined term is used for the Gas and Electricity Markets Authority.
“(7) In this section “relevant infrastructure” means—(a) a site for the geological storage of carbon dioxide that is situated in a regulated place, or(b) a pipeline, situated in a regulated place, which is used or intended to be used to convey carbon dioxide to a site falling within paragraph (a),and any associated installations, apparatus or works.(8) For the purposes of this section a site or pipeline is situated in a “regulated place” if it is situated—(a) in the United Kingdom, or (b) in, under or over—(i) the internal waters of the United Kingdom,(ii) the territorial sea adjacent to United Kingdom, or(iii) waters in a Gas Importation and Storage Zone (within the meaning given by section 1 of the Energy Act 2008).(9) In this section “geological storage” has the same meaning as in Part 1 (see section 55).”Member's explanatory statement
See Lord Callanan’s amendment at page 90, line 10.
Lord Callanan
“(A1) Scheme regulations that, by virtue of section 106(3), provide that a person is liable to a financial penalty must also provide for a person to have a right of appeal to a court or tribunal against the imposition of the penalty.”Member's explanatory statement
This amendment requires regulations under Clause 101(1) (low-carbon heat schemes) that make provision for the imposition of financial penalties to include provision for a right of appeal.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 97, line 16, which makes provision about appeals against the imposition of a financial penalty.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 97, line 19, which makes provision about appeals against the imposition of a financial penalty.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 97, line 16.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 97, line 16.
Energy Bill [HL]
Tuesday 28th March 2023
(1 year, 7 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 86-I(a) Amendment for Report (Supplementary to the Marshalled List) - (27 Mar 2023)
Lord Teverson
Member’s explanatory statement
This amendment, along with the amendment in the name of Lord Teverson to leave out Clause 112, would remove the Hydrogen Grid Conversion Trials from the bill.
Lord Teverson (LD)
My Lords, the intention of my amendment is quite stark and seeks to take out those provisions which allow the so-called hydrogen village experiments to take place. Why? Primarily to save British taxpayers a huge amount of money on something which is clearly, as one would colloquially say, a white elephant. Even if we had the trials—which I suspect might not happen anyway for various reasons—the lessons from those would show us that this should not be rolled out.
In order to have clean hydrogen, it has to be produced by electrolysis. There are other ways of producing hydrogen, as we know, and there are all the different colours, but at the end of the day we have to use electrolysis in the long term to produce hydrogen that is seen as a renewable fuel. The cost of that hydrogen is estimated by scientists to be something like five times the cost of the electricity used to generate an equivalent amount of heat through an efficient heat pump—it is five times more expensive. Even if we talk about economies of scale, there is no way that that cost is going to come down; in fact, it would come down only in relation to the cost of renewable electricity itself, which is its source of energy.
I suggest that we scrap this plan because clearly science says that this is not the way to use hydrogen for heating. I am a great fan of hydrogen, as I am sure most people in this House are, and it needs to be used for certain applications for which it is very difficult to use other renewable resources. We know what those are: they include a number of industrial processes and heavy transport, and it may be used for trains in certain areas and for heavy goods vehicles for some while. It is important that we use hydrogen for those purposes. It can never ever be used as a grid gas as methane is at the present.
Let me give an example of what perhaps is an even better way of achieving what we are doing. Down in my own neck of the woods, in Cornwall, we have a scheme financed by the fag end of ERDF funding. A village called Stithians has put in ground source heat pumps as a street utility, much as you would with a gas grid. I suspect that this is far more economical, and it is also liked by the residents. There have been demands for other streets in the village to have the same application.
This is in contrast to the towns in these experimental areas. As I judge it—my postbag says this to some degree, although I hear it from others as well—there is a mounting resistance to these trials going ahead. There is no great trust in hydrogen as a domestic fuel because of its properties—its ability to escape and its high flammability. These amendments take out Clauses 111 and 112, so that we can stop these trials and use hydrogen far more effectively. The money saved can also be used more effectively for decarbonisation in other areas as well. There is consumer resistance.
Assuming that the Minister is not going to accept this amendment, I have tabled another amendment arising from conversations with people involved in these trials. Many people want to opt out of them, and I fully sympathise with that. In Committee, the Minister said that households could opt out. What would the compensation be in such a case? Will the Government ensure that households can keep gas or methane, as at present? Can they guarantee this? If not, will they provide other forms of heating appliances, either electrical or an alternative form of heat and energy? Can they guarantee that there will not be forced entry into homes to make sure that the conversion takes place? I will be interested to hear from the Minister the alternatives to participating in the trial, as will people in the trial villages.
I cannot see that these trials will go ahead. There is considerable consumer resistance, and all the science genuinely says that this cannot work on a larger scale. Even if the trials do go ahead, there is no way that hydrogen is going to replace methane in the national grid or in large local heating systems. This can be done in far better ways, and the Bill allows for that. Let us call a halt to this now, save money, ease local concern and concentrate hydrogen in the areas where it can contribute and is important for our transition to a net-zero economy. I beg to move.
Baroness Sheehan (LD)
My Lords, I realise that I am a little late arriving for this debate. Having been here from the start of this afternoon’s proceedings, I hope that the House will allow me to make my contribution.
I will speak to Amendments 53, 54 and 57, in the name of my noble friend Lord Teverson. I support Amendment 56 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I will not bore your Lordships’ House with the details of why my name appears on Amendment 56 in the Marshalled List with a line through it. Suffice it to say, I support the measures in it.
However, I support even more strongly Amendments 53, 54 and 57, which aim to get rid of the hydrogen trials altogether. Although hydrogen has a role in decarbonising our future in many sensible ways, domestic heating is categorically not one of them. I would recommend anyone who is not convinced by that statement to look at the work of the Hydrogen Science Coalition, a group of independent academics, scientists and engineers who give their time voluntarily and have no public or private vested interests. Its briefing is very clear on how it arrives at its conclusion that there is overwhelming evidence against the use of hydrogen for heating homes in the UK and in favour of using heat pumps and district heating networks. Equally, it makes a well-argued case against the provisions of Clause 111 that compel consumers to take part in hydrogen heating trials, not least because the introduction of hydrogen into UK homes will significantly increase the risk of serious explosions and fires, as well as increasing exposure to NOx emissions, which pose a significant public health risk.
To back up its own analysis, it cites the overwhelming techno-economic evidence against the use of hydrogen for heating buildings compared with other sources. There have been 37 independent studies on the use of hydrogen for heating since 2019, by organisations such as the IPCC, the IEA, McKinsey, Imperial College London, the Potsdam Institute, the University of Manchester, the Wuppertal Institute, Element Energy, the International Council on Clean Transportation, the Energy Transitions Commission, et cetera. Every one of these studies has ruled out hydrogen playing a major role in heating buildings because it will be too expensive and inefficient compared to other clean alternatives such as heat pumps and district heating. Too expensive is putting it mildly; it will be six times more expensive than going down the heating networks route.
Chris Skidmore, chair of the net zero review, said in a recent article in the Times that he
“did not think the UK should embrace the idea of repurposing gas networks to run hydrogen boilers, a proposal that is being trialled at a pilot project at homes in Ellesmere Port in Cheshire.”
The House of Lords Environment and Climate Change Committee recently said that hydrogen is
“not a realistic replacement for natural gas”
and is “not a serious option” for heating. A House of Commons Science and Technology Committee report in December 2022 said that hydrogen is likely to play only a limited role in home heating and is not a panacea. Lastly, in a report in January 2022, the International Renewable Energy Agency—IRENA—said that residential heating is the lowest-priority application for hydrogen
“because heat pump solutions and district heating options already exist.”
I apologise for labouring the point but it is important for the people in the trial villages of Ellesmere Port and Teesside. The provisions of the Energy Bill that give gas companies a new power of entry into homes to cut residents off the gas network without their consent are particularly worrying. The bottom line is that the Bill should not be promoting hydrogen heating trials that expose consumers to health and safety risks and excessively high energy costs.
Baroness Worthington (CB)
My Lords, I will speak to the amendments in this group but I do not propose to detain the House for long. My views on hydrogen are relatively well known, and we had a good debate in Committee on Clauses 111 and 112. I support the previous speeches and the approaches taken to get the Government to think again about the need for these trials to be included in the Bill.
I welcome government Amendment 55, which would provide for regulations that would make some rules for the trials a “must”, rather than a “may”, which is at least an acceptance that this is a prerequisite. We need clear regulations setting out the rules that must be adopted and followed by anyone involved in these trials. But I do not think that goes far enough, because there are still a number of unaddressed issues. Therefore, I am quite sympathetic to the idea of simply removing this from the Bill and thinking again. I am also sympathetic to the proposal by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, who have suggested that the Government ought to undertake a certain number of measures before they embark on a decision about these trials, including involving statutory agencies such as the Environment Agency in the trials, and the Health and Safety Executive on safety issues, so that we can properly assess their environmental impact—so that we actually are using them to trial something.
Baroness Bennett of Manor Castle (GP)
My Lords, I offer Green support for the amendments in the names of the noble Lord, Lord Teverson, and the noble Baroness, Lady Sheehan. The economic arguments for why hydrogen as a home heating mechanism makes no sense at all have already been very clearly made. I aim not to repeat anything that has been said but simply to add a couple of points to it. I very much agree with the point made by the noble Baroness, Lady Worthington, about prepayment meters; that was written in very large letters on my paper, but I have now crossed it out since it has already been covered.
In this debate we have not perhaps highlighted the degree of physical disruption. The noble Baroness, Lady Worthington, referred to receiving many expressions of distress from the affected villages; I have also received those. In the Government’s own terminology, research shows that it will
“undoubtedly result in some physical disruption to the property.”
Those are the Government’s own words. What that actually means is that we will have to see pipework surveyed and possibly changed; gas meters replaced; boilers, gas hobs and gas cookers replaced, as well as four-inch ventilation holes in the area of the boiler and the appliance to make it compatible for 100% hydrogen. The biggest challenge of all, perhaps, is the small in-house pipes that may frequently be embedded in walls or underneath floors. Think about the kind of disruption in an older house; just tracking those down, finding where they are and establishing whether they are adequate for hydrogen is massively disruptive. Every home will have to be checked and double-checked to make sure it is safe before hydrogen can be piped into it.
The other safety point that has not been raised yet, but I think really should be, is that burning hydrogen in the air produces nitrous oxides, which are a pollutant in their own right. It is often said that when you are using hydrogen, water is the only by-product, but that is the case only when hydrogen is used in fuel cells. Nitrogen dioxide is a key air pollutant that is harmful in its own right and is a precursor to other concerning materials including fine particulate matter and ozone.
I have just one final thought. I understood the considered narrative of the noble Baroness, Lady Worthington, about how we got to where we are, but when I go around your Lordships’ House and see the people who are propounding the idea of hydrogen for home heating, I notice that it is of course the existing industry and the vested industry interests. That cannot be how we decide our energy future, in so many areas but perhaps particularly obviously in this one.
Lord Lennie (Lab)
My Lords, I thank the noble Lord, Lord Teverson, and all other noble Lords and Baronesses who have spoken. While I may agree with the noble Lord, Lord Teverson, that these trials are not a good thing, they are upon us and therefore we have to deal with what we face rather than what we might not have faced had we stopped the trials in the first place. I do not think the Government are about to abandon the plan, and therefore we have some concerns about the plan as it goes ahead.
Clause 111 makes certain modifications to the Gas Act 1986 so that the person running the trial has clear grounds to enter property. That causes me concern that they can carry out essential works and safety checks and disconnect gas supply. Can the Minister deal with some questions? He may not be able to deal with them tonight and may want to write to me later. When can property be entered? What safeguards will be in place? What burden of proof will be applied on entry? When can a property not be entered? Will future guidance be published and, if so, when can we expect it to be with us? The Labour amendment
“requires the Secretary of State to take a number of steps with regard to the areas and people affected by hydrogen grid conversion trials and to make arrangements for Ofgem to provide information, alternative heat sources and offer the right of opt out (which would disapply the right of gas transporters to enter premises to disconnect). It would also require the Environment Agency to monitor and report on hydrogen escape, and the Health and Safety Executive to monitor safety implications.”
Subsection (1) provides the Secretary of State with a power to make regulations by statutory instrument to require a person conducting the trial to follow specified steps to ensure consumers are appropriately informed about the trial and the need for them to be disconnected from their gas supply before it happens. This clause also provides the Secretary of State with a power to make regulations to introduce consumer protections for people who are, or are likely to be, affected by the trial, and a list of examples is provided.
Our amendment sets out a number of reasonable steps, ensures that people are not disadvantaged, whether they participate or take an alternative, and ensures an alternative is offered and they can opt out. The trials are much more popular in Redcar, I am led to believe, than they are in Whitby. An exchange of correspondence took place between Graham Stuart, the Minister at DESNZ, and Justin Madders MP and Louise Gittens, who is the leader of Cheshire West and Chester Council. To quote from the letter from Graham Stuart, he said:
“I fully agree that local support for the trial is essential … However, we will only go ahead with a trial in an area where there is strong local support … I do agree it is very important this context is set out clearly, particularly for the communities in the areas across the country served by the gas networks which the networks are assessing.”
If that is true, certainly in Whitby, I do not think a trial will proceed, but I may be wrong. I would welcome the Minister’s assessment of the correspondence and what he makes of it in relation to the trial. It is not so much about cost, although there is a cost, and it is not so much about safety, although there is a safety issue; it is about local democracy and whether they want the thing to go ahead in the first place.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
I thank all noble Lords who have contributed. I start by addressing the point raised by the noble Lord, Lord Lennie. This is a matter for which I have ministerial responsibility, so I am familiar with all the issues. I too am getting, not a massive stream of correspondence, but a lot of correspondence from the people in the two trial areas. I have met Justin Madders, the MP for the Whitby trial area, Ellesmere Port, and of course I know Jacob Young very well from Redcar. The point that Graham Stuart made in that letter is still absolutely valid. We are waiting for the submissions of the two rival networks, which we should receive later this month. A lot is happening this week; it is a busy week. One of the factors that we will carefully take into consideration is precisely the point that Graham Stuart set out in his letter: the degree to which there is local support. Clearly, one way to measure that is to talk to the local Members of Parliament and the local authorities; that will be critical in any decision-making.
Let me also address the question from the noble Baroness, Lady Worthington, on the costs of the trial. I cannot give the noble Baroness an overall cost yet because we have not received the final submissions from the networks, but I can say that consumers in the trial location will not be expected to pay more for their heating than they would have if they had remained on natural gas. They will also not be expected to pay for the installation and maintenance of either any hydrogen-capable appliances or any alternative heating option that they wish to go for.
Let me now address Amendments 53, 54 and 57, tabled by the noble Lord, Lord Teverson and the noble Baroness, Lady Sheehan. As noble Lords will know, decarbonising heat in buildings and industry is essential if we are to deliver net zero. One of the great things about this country, but also one of our problems, is the massive diversity and age of buildings in the UK, as a product mainly of the industrial revolution, and the diverse consumer needs. I think most reasonable people would accept that no single solution can provide the best option for everyone. I agree with the noble Baroness, Lady Worthington, that the majority of the solution will probably be electrification, but there will be some properties for which it is not suitable.
Baroness Worthington (CB)
I want to press on the question of what is being trialled. The Minister mentioned feasibility, benefits and costs, but what about the environmental impacts of this trial? We are talking here about a global warming gas, and a very slippery gas because it is the smallest element—it escapes everywhere. Will the regulations contain measures to monitor the environmental impact of both the NOx emissions in the home and the greenhouse gas impact of the hydrogen, which will leak when it is distributed that widely? Can that be included in the trial so we can also assess those disbenefits?
Finally, it is true that the only reason really that some houses might not qualify for a heat pump is if they are not very efficient. It is ironic that, for safety reasons, the leakier the house, the more likely it is to then be able to take hydrogen. This precious commodity, which is very expensive to produce and will be very inefficient, is being used in houses which are leaky and being made leakier to be made safer. It seems just so counter to everything we want to achieve on efficiency, resilience and climate change. I hope there will be a trial of the environmental impacts on air quality, climate change and energy efficiency, not just the benefits to the gas industry.
Lord Callanan (Con)
I know the noble Baroness has strong views on electrification but let me reassure her that this is precisely the purpose of the trial. We need to use an existing network to find out what happens to hydrogen in an existing network. Clearly, environmental monitoring and checking for leaks and so on is a crucial part of it. It is one of the reasons we need to do it on an existing network in an existing community, to find out what happens outside of theoretical lab experiments where it is very easy to set up a trial with new pipework, new valves and new equipment. I have visited hydrogen demonstration houses up in Gateshead, my home area. It works very well but these are brand new properties, constructed with hydrogen appliances and new pipework. That is not a very good trial as to how it would work in the real world in existing communities. That is why we need to do the trial. The things that the noble Baroness asked about are exactly what we need to be checking and monitoring to judge the effectiveness of any hydrogen experiments in the real world.
I turn to Amendment 56, tabled by the noble Lords, Lord Lennie and Lord Teverson, and the noble Baroness, Lady Sheehan. This amendment covers several aspects which I fully agree are important for the safe and effective delivery of the village trial. However, I assure noble Lords that the evidence that this amendment seeks to gather through a statutory consultation is already being gathered and will be reviewed by the department as part of our assessment process, following the submission of final proposals at the end of this month. As I said, in May 2022, we sent a joint letter with Ofgem to the gas networks setting out an extensive list of requirements that proposals for the trial should meet. This included requirements mentioned in the amendment, such as local support, costs, environmental impact and consumer protections, as well as many other important areas.
After the gas networks submit their proposals for the trial—later this week, as I said—the department will undertake a thorough assessment against the full list of requirements set out in the letter. That process will involve expert input from the various statutory bodies involved, including the Health and Safety Executive and Ofgem. We will publish the result of that assessment later this year, including the relevant evidence to explain our decision, and that will be available to all noble Lords. I reassure the House that we fully understand the importance of conducting the trial properly.
I touched on this earlier but the noble Lord, Lord Teverson, raised the point about local support for the trial. I reiterate that we will go ahead with a trial only in an area where there is strong local support. The gas networks are working closely with local authorities, communities and Members of Parliament as they develop their trial proposals. My officials also meet regularly with the relevant local authorities. Final proposals for the trial will need to contain evidence of strong support from the local community, validated by an independent external source, such as a local council. Again, I am happy to meet the local Members of Parliament.
The networks are extensively consulting local residents to develop an attractive consumer offer tailored to the community. They have opened drop-in centres in both Whitby and Redcar where anyone can engage directly with them and ask questions about what the project means for them, and have held a number of public events.
Safety is of course fundamental, which is the point made by the noble Baroness, Lady Sheehan. Before any community trial can go ahead, the Health and Safety Executive will need to be satisfied that the trial will be run safely. No trial will go ahead until all necessary safety assessments have been successfully carried out. I hope noble Lords will accept my reassurances on that.
If it goes ahead, the trial will start in 2025 and provide vital evidence that will be required to enable the Government to make decisions in 2026 on any potential future role for hydrogen in decarbonising heat. I hope noble Lords will accept that undertaking another formal consultation would duplicate the work that the department and the gas networks are already doing, and could delay important milestones for ultimately meeting net zero.
I agree that the trial must be conducted properly, and I have already spoken about the additional consumer protections that will be in place for the trial. Those protections, which must be met by the gas networks, also mean that the trial must be delivered with minimal disruption to consumers.
I hope I have been able to reassure noble Lords that the department will carefully consider all these factors in coming to a decision on the trial. Importantly, we will be closely examining the evidence and outcomes of the gas networks’ engagement with local authorities and consumers in the trial areas. I hope that, with the reassurances that I have been able to provide, the noble Lord, Lord Teverson, will consider withdrawing his amendment.
Lord Lennie (Lab)
Could the Minister please write to me about the questions I asked about entering properties and whether further guidance will be published and available?
Lord Callanan (Con)
As I said, the powers that we propose to provide are essentially similar to those that the networks already have on the basis of essential safety works. Still, I am happy to provide the noble Lord with further information and details.
Lord Teverson (LD)
My Lords, when the IPCC report on the global warming challenge came out last week, and it gave a pretty dire view, the Secretary-General of the United Nations, António Guterres, who I think had just been watching the Oscars, said it was
“everything, everywhere, all at once”—
but I do not think he would have included the village hydrogen trials within that broad definition. I understand what the Minister has said, and I welcome all his assurances to local citizens about how the trials will work, but, frankly, the science clearly says that hydrogen sent through the gas pipe network to a range of residential properties does not work, does not make sense and is not going to happen in the future.
Lord Callanan
Member's explanatory statement
This amendment requires regulations under Clause 112 (regulations for the protection of consumers: hydrogen grid conversion trials) that make provision for the imposition of financial penalties to include provision for a right of appeal.
Lord Callanan
“Treatment of recycled carbon fuel and nuclear-derived fuel as renewable transport fuelAfter section 131C of the Energy Act 2004 insert—“131D Recycled carbon fuel and nuclear-derived fuel(1) An RTF order may—(a) designate as recycled carbon fuel a description of liquid or gaseous fuel which is produced wholly from waste derived from a fossil source of energy;(b) designate as nuclear-derived fuel a description of liquid or gaseous fuel which is produced wholly using, or by a process powered wholly by, nuclear fuel.(2) Where a designation under subsection (1) is in force, the recycled carbon fuel or nuclear-derived fuel is to be treated for the purposes of this Chapter and any RTF order as renewable transport fuel.””Member's explanatory statement
This amendment, which inserts a new clause in Chapter 3 of Part 3 of the Bill, provides for recycled carbon fuel and fuel derived from nuclear energy to be treated as a renewable transport fuel for the purposes of renewable transport fuel obligations under Chapter 5 of Part 2 of the Energy Act 2004.
Lord Foster of Bath
“Review into fire risks of photovoltaic panels and lithium-ion batteriesThe Secretary of State must, as soon as reasonably practicable, lay a report before Parliament considering the fire risk of photovoltaic panels, lithium-ion batteries storage facilities and similar technologies that the Secretary of State considers appropriate.”
Lord Foster of Bath (LD)
My Lords, in Committee, I tabled an amendment that proposed to extend the zero VAT that is offered for some green energy items to the batteries used to improve the efficiency of solar panel arrays. Unfortunately, the Minister was non-committal, but, having written to the Chancellor, I found that he was rather more enthusiastic, and I was delighted to see in the recent Budget that that measure will now go ahead, so I have not had to bring that amendment before your Lordships’ House again.
However, because of my involvement with solar panel arrays and batteries, quite a number of people got in touch with me to draw attention to their concern about some safety issues with solar panels and lithium-ion batteries, not least in relation to fire. For example, Zurich Insurance recently did some research that showed that, during the last year, fire crews across England were called out 10 times a month, on average, to deal with solar panel-related fires. It gave an example of a claim that it had to deal with in 2020 for a solar panel fire in a block of flats in Kent which left 30 people temporarily homeless and caused £1.5 million-worth of damage.
But there is a much bigger problem with lithium-ion batteries, which you find in many household products, of course—our mobile phones, for example, and even those singing birthday cards that we sometimes get. Perhaps most significantly, more and more of them are in the increasingly large number of e-scooters and e-bikes. As there is a growing number of those batteries, there are growing fire problems, because lithium batteries provide high energy densities, which mean that they can create severe fires with very high temperatures and exothermic reactions, creating significant challenges for our firefighters. Research, again from Zurich Insurance, found that there has been a 149% increase in the number of e-bike and e-scooter fires since 2021. Research shows that fires resulting from other devices powered by lithium batteries has increased by 63% in that time.
Zurich Insurance has sent me details of several incidents involving lithium batteries, including an £84,000 claim for a scooter that went up in flames in a garage and a £13,000 claim for an e-bike that exploded in a customer’s bedroom. AXA, the insurance company, has given me evidence that shows that, in just the two months of June and July last year, it was involved in claims of around half a million pounds.
The London Fire Brigade and other fire brigades have expressed concern. In June 2021, 60 London firefighters were needed to tackle a blaze on the 12th floor of a tower block in Shepherd’s Bush caused by a faulty e-bike battery. In July of that year, five people in Walthamstow were hospitalised by a fire started by an e-bike.
The other fascinating thing is that, until recently, the number of fires in waste disposal sites had been going down. Sadly, that trend has now been reversed, and the evidence shows that somewhere in the region of 48% of all landfill site fires are now caused by lithium batteries. The cost to the waste disposal people and the fire brigades is something in the region of £158 million a year to deal with just that.
Clearly, there are very significant problems which need to be addressed, but we do not want to stop using these technologies; indeed, we want to move rapidly forward, exploring ways to capitalise on how best we can make use of them as sources of new clean energy. However, as we increasingly use these green energy sources, we have to acknowledge that new and emerging risks are coming down the track.
I accept that there are many rules and regulations that already govern the sale and use of these products, but the warning signs are there that the regulations we currently have—those designed to keep us safe—are not keeping pace with the real-world application of these new technologies.
Interestingly, the National Fire Chiefs Council recently said, very significantly, that
“the problem has ‘blind sided’ conventional systems processes and solutions”.
In other words, we need to look for a new way forward—and that is all that the amendment I am proposing does. It asks the Government to look into the issue and to bring forward a report as soon as possible. Nothing could be simpler than that, but it is what a lot of people would like to see happen. I beg to move.
Baroness Blake of Leeds (Lab)
I thank the noble Lord for bringing this information to our attention. Some interesting reports documenting the risks are available, and I refer particularly to the report from the Institution of Fire Engineers on solar power fire risk and to batteryfiresafety.co.uk.
I have a couple of points to add to the comments already made as to whether it would be worth directing information about the storage of the batteries. It should be highlighted in particular that batteries are often stored in garages next to parked cars, which can have similar battery systems, and will not always be easily accessible.
The risks of lithium ion batteries from a fire safety perspective apparently have been well documented. However, the other element is that the risk with lithium ion batteries is not just fire. Once the battery fails—I think the term is “runs away”—the cells usually start to give off smoke. Thermal runaway is the chemical process within the battery which produces heat, as well as flammable toxic chemical gases, very quickly, often before any flames arise.
I think it is fair to say that, although the information is out there, it has not been properly documented. I wonder whether the health and safety considerations of the increasing use of these batteries and solar panels have been taken on board. Does the Minister think that there is a problem and, if the answer is yes, what does she propose to do about it?
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I thank the noble Lord for his amendment on requesting a report into the fire risks of photovoltaic panels, lithium ion battery storage facilities and similar technologies. I was delighted to hear of his welcome in the Budget for the VAT exemptions.
First, I reassure the noble Lord that the health and safety regimes surrounding net-zero technologies are a priority for the Government. All electrical equipment requires safe installation and use. The Government recognise the importance of net-zero technologies such as electricity storage and solar PV in their ability to help us to use energy more flexibly and decarbonise our electricity system cost-effectively.
The data collected so far indicates that the risk from solar PV fires is low. However, it is right that we work with the industry to understand why any incidents happen and help to stop future occurrences. Over a three-year period and an overall cost of £135,000, the Government commissioned the Building Research Establishment to develop new guidelines for PV system installers, designers and the fire services, with the aim of making solar PV even safer. In February this year, the RISC Authority, the Microgeneration Certification Scheme and Solar Energy UK published an updated joint code of practice on recommendations for fire risk prevention in UK solar systems. Grid-scale lithium ion battery energy storage systems are covered by a robust regulatory framework, which requires manufacturers to ensure that products are safe before they are placed on the market and installed correctly, and that any safety issues found after products are on the market or after installations are dealt with.
In 2018, the Government set up an industry-led electricity storage health and safety governance group, which is responsible for ensuring that an appropriate, robust and future-proofed health and safety framework is sustained as the industry develops and electricity storage deployment increases. The Government are currently working with the group to support the development of a product and installation publicly available standard for domestic small-scale battery storage and guidance for grid-scale storage. They will both be published this year.
Most of the specific issues of e-scooters and bicycles fall within the remit of the Office for Zero Emission Vehicles, and I shall ask it to write to the noble Lord. I can also confirm that Defra will soon publish a consultation on battery recycling.
I do not believe that a specific report on fire risk of photovoltaic panels, lithium ion battery storage facilities and similar technologies mandated by the Secretary of State is necessary. While I welcome the noble Lord’s intention, we believe that working alongside industry and the fire services to manage specific risks is the appropriate way forward. It ensures that these vital technologies are installed, operated and decommissioned in a safe way, while still delivering the best outcomes for consumers. I hope that the noble Lord can recognise the Government’s sustained commitment to enabling the deployment of net-zero technologies in a safe and sustainable way.
In addition, on the concerns expressed by the noble Baroness, Lady Blake, about lithium ion batteries and their ability to combust, I visited last week a very clever packaging firm called Tri-Wall in Monmouth, which has developed packaging specifically for lithium ion batteries to be transported by air safely. The packaging itself will detect any change in heat in the batteries that it contains and change the structure of the packaging into water that will put the fire out before it even gets out of the packaging. Very clever technologies are being developed specifically around lithium ion battery transport and storage.
I hope that, with those few reassuring remarks, we can ask the noble Lord to withdraw his amendment.
Lord Foster of Bath (LD)
My Lords, the time is late; I shall be very quick indeed. I was well aware, of course, of the work that has been done looking at the package of arrangements around solar panels and their batteries. I really wanted to use it as a peg on which to hang the wider issue of all forms of lithium batteries, in particular. I am pleased to hear about the 2018 established group. It would be very helpful if we could see some of the output of that. I am grateful, too, to hear that there are going to be new standards, but the truth is very simple: you can have all the standards you like, and the products may be okay, but if they are not used appropriately and not decommissioned appropriately, then real problems exist, and that is what is happening. There are a huge number of fires in our landfill sites because people are not doing what they are meant to do in disposing of batteries. We have to find a way forward. That is why I wanted a report. I am disappointed that the Minister is not prepared to go further, but at this stage I beg leave to withdraw the amendment.
Energy Bill [HL]
Monday 17th April 2023
(1 year, 7 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 86-II Second marshalled list for Report - (13 Apr 2023)
17:23 - Division on Amendment 97 - Ayes: 227 / Noes: 194 - Amendment 97 agreed.
18:25 - Division on Amendment 131 - Ayes: 197 / Noes: 194 - Amendment 131 agreed.
18:37 - Division on Amendment 133 - Ayes: 208 / Noes: 182 - Amendment 133 agreed.
18:49 - Division on Amendment 134 - Ayes: 197 / Noes: 186 - Amendment 134 agreed.
Lord Teverson
“(1A) The person designated under subsection (1) must be a public body with no other roles or interests in the energy sector.”Member’s explanatory statement
This amendment ensures that the ISOP is a public body, not an individual or a private company, and has no conflicting interests.
Lord Teverson (LD)
My Lords, Amendment 59 is about the independent systems operator and planner, which we know as the future system operator. I have three amendments in this group—Amendments 59, 61 and 62—and I shall briefly speak to all of them. It is a big gap in the Bill as written at the moment that the so-called independent systems operator and planner is not actually independent in any way, which is why this amendment is down. I also very much support the amendment in the name of the noble Lord, Lord Lennie. For the ISOP to be independent, I believe it is fundamental that it needs to have an independent revenue stream. That is why my Amendment 61 would enable it to raise its own money; it should not come through Ofgem. We all know that the person who pays the piper calls the tune, and the future system operator needs to be independent of Ofgem. Lastly, Amendment 59 would ensure that the ISOP is a public body. I beg to move.
Lord Lennie (Lab)
My Lords, my understanding is that the Minister will confirm the Government’s support for an independent ISOP, as suggested by the noble Lord, Lord Teverson, and this being the case, we know no longer need to divide the House on our amendments. So, rather than listening to me putting forward the argument in favour of achieving this, I think we would be better served to listen to the Minister in his reasoning for an independent ISOP: I thank him for his time over the weekend, when we reached this position.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
Let me first thank all noble Lords for their amendments, and I thank the noble Lord, Lord Lennie, for the time he gave to discussing this matter. As always, there were valuable contributions from all parts of the House.
On the details of the amendments, Amendment 60, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, seeks to establish an industry-led advisory board for the ISOP. In the original consultation, the respondents strongly indicated that the body should be independent of energy sector interests, and I think that is a view shared by the Opposition. The Government therefore remain concerned that inserting in legislation a formal oversight role, as is being suggested, will place decision-making back in the hands of the energy sector and go against the reasons and mechanism for creating an independent ISOP in the first place. This could make the ISOP risk-averse or unwilling to take action that is potentially challenging to market participants but could be on the side of consumers, even if that action might be beneficial to the system itself.
We are therefore concerned that, rather than enhancing independence, members of such an advisory board would likely hold various energy sector conflicts. There are many ways this could crystallise, including resistance to systemic reform, more strident advice in favour of compensation for energy sector participants, or incumbent bias, for instance seeking to frustrate new market entrants which could stifle the innovation that I think everyone, in all parts of the House, is agreed that we need to reach net zero.
Establishing an industry-led advisory board for the ISOP would be similar to establishing one for, for instance, the Climate Change Committee—an organisation which, in our view, also needs to remain independent of industry interests. I hope noble Lords would agree that we need genuine, independent, expert thinking, rather than vested interests. Thankfully, this amendment is not required to ensure board independence; the Government intend to require that a number of sufficiently independent directors—or SIDs, to use the acronym—sit on the ISOP’s board. A SID is a board member who meets certain criteria to ensure that, as well as being skilled, knowledgeable and experienced, they are impartial, with restrictions including on certain shareholdings in the energy industry. Requirements in the ISOP’s licence will set a minimum number of SIDs to ensure that the ISOP’s board has strong representation from those outside the ISOP and is unconflicted by the interests of the energy industry.
To ensure effective scrutiny of the appointment of the ISOP’s chair, we are also asking the Office of the Commissioner for Public Appointments and the new departmental Select Committee, once established, to conduct pre-appointment scrutiny. Energy sector experts will have opportunities to input to the ISOP’s work, of course. For instance, the system operator’s business plan submissions, assessed by Ofgem, will continue to be open to consultation with market participants, including members of the specific industry forums mentioned in this amendment. Finally, through its price control process, Ofgem will ensure that the FSO is fully resourced to fulfil its objectives and obligations, including the funding of its statutory duties towards consumers, energy security and net zero.
Turning to Amendments 59 and 62, tabled by the noble Lord, Lord Teverson, again we agree with the sentiment of the noble Lord’s amendments, and the Government remain resolute that the ISOP shall be an independent public body. We continue to act to make this so. However, it is critical that the ISOP remains a dynamic organisation capable of adapting and evolving to the future conditions of the energy sector. I therefore hope the noble Lord will agree with me that it is preferable not to constrain the ISOP pre-emptively in legislation at this fairly early stage but to maintain some flexibility. With the rapid deployment expected in the energy sector, reasonable circumstances may arise in which the ISOP is well placed to take on some future energy sector role or interest.
Regarding the specifics of Amendment 62, I believe there are already significant controls and limits upon the Secretary of State in acting as the sole shareholder. These will include limits in the framework agreement, which we will of course make public. These controls will ensure that the ISOP’s operational independence is protected.
Legislating for the ISOP to “be independent” does not, in my view, appear to offer a material benefit beyond the controls already established in Part 4 of the Bill and the framework documents, but it risks preventing the intended corporate composition of the ISOP, thereby undermining its effectiveness.
Finally, on Amendment 61, also tabled by the noble Lord, Lord Teverson, the Government agree that it will be important to ensure that the ISOP is fully resourced to fulfil the objectives and obligations set out in its licence. In our view, the most effective funding mechanism to achieve this and realise our vision for an independent ISOP is for it to be funded by consumers through price control arrangements, much like the current gas and electricity system operators are today.
Levies placed on licensed bodies can be expected to filter through to consumers. However, we are concerned that the requirement to establish an audit board risks duplication with the current well-understood and transparent regulatory model established under Ofgem. Without a price control process run by the regulator, there is also a risk of poor consumer value for money. As with other regulated bodies in this sector, the ISOP will have the operational freedom it needs to manage and organise itself to effectively deliver its roles and objectives. We also intend the ISOP to sit outside the regime of Cabinet Office controls on spending, which bodies funded by taxes and levies are required to operate under.
With the explanations and reassurances that I have been able to provide, I hope that noble Lords will agree not to press their amendments.
Lord Teverson (LD)
My Lords, I am very encouraged by the Minister’s response on the control of the board and the ISOP. I am disappointed about the funding flows, but I guess that it will work out as it works out. I think that is unfortunate, but I have no intention of pressing the matter. I beg leave to withdraw my amendment.
Lord Callanan
Member’s explanatory statement
This amendment ensures that the amendment made by paragraph 8 of Schedule 9, in relation to section 105(1)(a) of the Utilities Act 2000, dovetails correctly with the amendment to that provision made by paragraph 5 of Schedule 5 to the Bill.
Lord Callanan
“(7) Where by virtue of subsection (6)(c) tender regulations provide for the imposition of a financial penalty, they must also include provision for a right of appeal against the imposition of the penalty.”Member’s explanatory statement
This amendment requires regulations under section 6CA of the Electricity Act 1989 (tender regulations: power to require information) (inserted by Schedule 13) that provide for the imposition of civil penalties to include provision for a right of appeal.
Lord Teverson
“(1A) Those standard conditions must contain provision by which the holder of the MPI licence will contract with the relevant transmission licensee for the connection of offshore distribution networks, generating stations or offshore installations to the multi-purpose interconnector.”Member’s explanatory statement
This amendment seeks to clarify whether the regime for MPI licences will operate in a similar way to the Offshore Electricity Transmission regime in that generation and demand users will have contracts with the system operator, who will in turn enter into back-to-back arrangements with the MPI licensee.
Lord Teverson (LD)
My Lords, I will be brief on this group, but I believe these are important issues which we did not reach in Committee. I speak first to Amendments 65, 66 and 67 on multipurpose connectors.
Multipurpose connectors are intended to provide links between the electricity transmission systems in the UK and other jurisdictions while simultaneously connecting new offshore generation, such as offshore wind—a key part of our energy strategy—and demand, such as oil and gas installations. Ofgem is bringing together an interim regulatory framework, but I believe that there is a lack of flexibility. There is a potential difficulty in the existing interconnector/offshore transmission operator licensee being able to carry out its functions as an MPI—that is, a multipurpose connector—licensee. These amendments aim to clarify the situation.
Amendments 125 and 129 in this group are about the decarbonisation of offshore oil and gas installations. In the North Sea Transition Deal, published in March 2021, the UK Government committed to reduce greenhouse gas emissions from North Sea oil and gas activities by 50% from 2018 levels by 2030—I very much welcome these targets—and, of course, to achieve net zero for the basin by 2050. The electrification of offshore production facilities is the route to achieving this. It is generally agreed that that is the way to do it.
The annual volume of carbon dioxide-equivalent greenhouse gas emissions produced by offshore oil and gas installations is some 10 million tonnes, which is roughly a tenth of the total emissions from UK energy supply. It is far from insignificant, but there is a narrowing window of opportunity to achieve these targets due to the life of these installations and the constant decommissioning programme. They just stop being economic in terms of those investments. We need action now, but there are a number of obstacles: uncertainty around how offshore networks will be treated by regulators, questions around the offshore transmission owner and well-known issues around connections to the UK grid—hence these amendments.
Lord Whitty (Lab)
My Lords, I have a small amendment in this group—Amendment 68—which deals with electricity storage. This very comprehensive Bill looks a bit different from the one that we first saw, and I am not absolutely confident that I have inwardly absorbed the implication of every government amendment that we have had in the last few months. But I am pretty sure that one dimension of investment in the system that has not been fully spelled out is that of electricity storage.
We have obviously dealt with it as a way of subsidising and encouraging investment in generation and there are big changes which are welcome, by and large, in relation to carbon capture and storage, and slightly more controversial in relation to hydrogen. But one of the key things about the new system—which will be much more decentralised than previously and dependent on different forms of generated electricity—is that we need some real investment in electricity storage. We need it partly because those who have always opposed some renewables stress that they are variable and there is occasional intermittence. That will happen, but investment in pipes, pylons and wires may not be sufficient to avoid some faults and breakdowns in the system.
We need to be able to call on electricity which is stored in some form to ensure that supplies are continuous. I am not sure why this has not appeared in the strategy. It needs to be somewhere. I attended part of a seminar over at the Institution of Mechanical Engineers a few weeks ago which explained the different technologies that exist for electricity storage. There are obviously some old-fashioned ones such as hydroelectric power, where you keep the water back, but there are many new technologies that could be developed for a significant investment in electricity storage. The common assumption is that it will be batteries in some form or another, but batteries in themselves raise considerable problems. In particular, a significant installation would involve problems of maintenance and of the critical materials needed for large-scale battery storage.
There is the possibility of storage in hydrogen—and that may raise other problems with hydrogen—and there is storage in ammonia and storage in compressed air. Any of these technologies need to be pursued, but we do need some system of storage. The least I would hope for from the Minister today is an acceptance that part of the strategy will be to ensure that we have cutting-edge technology in electricity storage, and an indication of how that will be financed, what the government incentives are and what the regulatory structure will be. If the Government can give me that general assurance, I will be happy.
Lord Ravensdale (CB)
My Lords, I declare my interest as a project director and engineer working for Atkins in the nuclear industry. I also chair the cross-party group Legislators for Nuclear.
In Committee, my previous amendments in this area—they were originally put forward by the noble Baroness, Lady Neville-Rolfe, before she joined the Front Bench—aimed to define nuclear as taxonomy-aligned within the UK’s green taxonomy. Naturally, I was delighted to see the Government commit to this in the Spring Budget, pending a consultation,. I shall speak briefly to my resulting Amendment 137.
Following the green taxonomy announcement and progress on the renewable transport fuel obligation, there remains one glaring aberration in the treatment of nuclear in the Government’s financing frameworks: the current exclusion of nuclear from the UK green financing framework, which describes how the UK Government plan to finance expenditures through the issuance of green gilts and the retail green savings bonds. Now that nuclear is due to be specified as taxonomy-aligned, I am sure that the Minister would agree, for consistency if nothing else, that it should also now be eligible under the green financing framework. This would have many benefits in ensuring the availability of vital extra funding for nuclear projects to enable the decarbonisation of our energy system.
I would be grateful if, in summing up, the Minister could state when the Government intend to address this issue.
Baroness Bennett of Manor Castle (GP)
My Lords, I will speak briefly to Amendment 68 in the name of the noble Lord, Lord Whitty, to which I have attached my name. I will also make a couple of other comments on this group.
I can probably predict some of what the Minister will say about the amendment from the noble Lord, Lord Whitty. I note, as I am sure all Members of the House have, that, three days ago, the Government announced £30 million for experimental or first-stage renewable storage projects. We have pump thermal, thermal and compressed air, and a number of other schemes. What is really important about this amendment is the context of the report to Parliament in six months. This is something that is absolutely crucial to the renewables transition, and we really need to see democratic oversight of where it is going.
I particularly make the point that this must be a strategy. Instead of one-off projects here and there, we need a whole integrated system. One thing that is really unconsidered is vehicle-to-grid storage. As we have more and more electric cars, if we have innovation in management we can use those cars as storage when people do not need them for transport. This is a way in which we would need much less resources—the Government are themselves saying that we could save £10 billion by 2050 by reducing our need to generate electricity.
I have just a couple of comments to make on the other amendments in the group. It will not surprise anyone in your Lordships’ House to hear that I oppose Amendment 137 in the name of the noble Lord, Lord Ravensdale. However, its very existence is a demonstration of the way in which new nuclear can be a distraction from the renewables investment that is our energy future.
On the amendments in the name of the noble Lord, Lord Teverson, on electrifying and decarbonising oil and gas facilities, I am afraid that the term “greenwash” has to appear at this point. I have an amendment in a later group asking for no new oil, gas or coal. Any reduction in energy use on a new oil rig because it has some solar panels on top of it does not take us anywhere like where we need to go in this climate emergency.
Baroness Blake of Leeds (Lab)
My Lords, I will speak briefly to the amendments in this second group, starting with Amendment 65 from the noble Lord, Lord Teverson. All I can do is echo his clear requests for confirmation that the Government will be more flexible and for clarity around multipurpose interconnectors, particularly with regard to the relationships between Great Britain and other jurisdictions. Will the interconnectors operate in a similar way to the offshore electricity transmission regime? I hope that the Minister will be able to give the reassurance and clarification that the amendments in the name of the noble Lord, Lord Teverson, ask for.
I thank my noble friend Lord Whitty for tabling Amendment 68, on an issue that he feels passionately about and comments on whenever the opportunity arises. We know that, as the electricity network develops new facilities and new renewable sources of generation, there will be a need for more storage capacity. As we have said, there is a non-exhaustive list of technologies, and new ones coming on stream that we might not have considered so far, and so comments must extend beyond batteries. The important part of this amendment to consider is a commitment from the Government to give support to assist with developing the storage capacity that we need.
The further amendments, led by the noble Lord, Lord Teverson, look to remove legislative barriers to the electrification and decarbonisation of oil and gas facilities, and to work towards a green financing framework. We must be mindful of the uncertainty of costs, going forward. When considering these amendments, it is important to consider decarbonisation, which is critical to the Bill, but also affordability and ensuring that energy is within the reach of every person in the country.
We know that the zero-carbon electricity system is possibly 19% cheaper than gas-based facilities, and that UK gas power is currently estimated to be nine times the amount of renewable power. Driving down energy costs means that we need cheap, clean power. We must take this rare opportunity presented by the Bill to ensure that we use the legislative framework to drive measures that will, in the short-term, reach towards action to decarbonise the electricity system and bring down costs.
The passage of the Bill through the House has been quite lengthy, but we really must take the opportunity presented to us to ensure that we make the progress that is required.
Lord Callanan (Con)
My Lords, I thank all Members who have contributed to the debate.
I completely agree with the last point made by the noble Baroness, Lady Blake. It is very important that we use the powers to do exactly what she suggested: to drive the decarbonisation agenda. Despite some of the criticisms, we are making excellent progress in this country—much better than most other G7 countries. However, we must be very conscious of the cost to consumers.
Amendments 125 to 129 were tabled by the noble Lord, Lord Teverson. I was amused to see that he has incurred the wrath of the noble Baroness, Lady Bennett, in trying to come up with pragmatic, sensible solutions for the energy system of this country. All I can say is, “Welcome to the club”.
I will start with his comments on the North Sea Transition Authority. We are engaging with industry to ensure the delivery of the North Sea transition deal emissions reduction targets and the successful rollout of electrification, which we all want to see. We are also considering how to utilise the Secretary of State’s existing powers, if needed, to support electrification. We are confident that, in this area, additional primary legislation is not required. As the noble Lord mentioned, the North Sea transition deal commits the offshore oil and gas sector to reducing emissions from operations to 50% of 2018 levels by 2030. As I have said repeatedly in this House, during the transition there will be an ongoing need for existing oil and gas resources, but it makes sense to extract them with the minimum possible carbon emissions.
Lord Teverson (LD)
My Lords, I thank the Minister for his long and detailed response to my amendments. One always knows in this House that you are in big trouble when Ministers start talking about unintended consequences of amendments, so I accept that. Having said that, I am mortified that we cannot, at this stage, change the name of the Oil and Gas Authority; just a promise of a Third Reading amendment would have made my day, but there we are. It is obviously far too difficult. But I take encouragement from the Minister; I think he suggested that that is a work in progress and will happen at some time. In the meantime, I beg leave to withdraw my amendment.
Lord Whitty
“(A1) Within six months of the day on which this Act is passed the Secretary of State must place before each House of Parliament a strategy for a significant increase in the provision of electricity storage facilities to enhance the resilience and flexibility of electricity supply.(B1) This strategy must cover all forms of electricity storage, including battery, hydrogen, ammonia, adiabatic compressed air energy storage systems, and hydroelectric storage; and cover potential licensing, planning, regulation, subsidy and taxation considerations.”Member’s explanatory statement
A future electricity network based largely on renewable sources of generation will require significantly increased storage capacity – which could be based on multiple technologies and is likely to require some form of government support in its development. This amendment would ensure that this dimension is considered and reported to parliament.
Lord Whitty (Lab)
My Lords, I beg to move Amendment 68, and if my voice holds out I will also speak to Amendment 74. I appreciate that the Bill is primarily about the system, the capital investment and the totality of the supply of electricity, but, as the Minister recognised in his reply to the first group, the issues among the public are, “How much does it cost?”, “What effect does this have on my standard of living?”, and, in particular for the more vulnerable consumers, “Can I afford to keep my family and my house warm?”. There is no mention of any new initiatives in the Bill.
The Deputy Speaker (Lord Russell of Liverpool) (CB)
My Lords, I think the noble Lord may think that he is on the following group of amendments; this is the amendment in the previous group that I suspect he did not want to move. He is perhaps a touch premature.
Lord Whitty (Lab)
Oh! My apologies to the House and to the Deputy Speaker. I will return to the subject.
Lord Whitty
“Introduction of a social tariff for vulnerable energy customers(1) Within six months of the day on which this Act is passed, the Secretary of State must prepare a plan in relation to bringing forward a social tariff for vulnerable energy customers and lay that plan before Parliament.(2) The Secretary of State may by notice in writing require the economic regulator to introduce a social tariff for energy that satisfies the following conditions—(a) it is additional to the Warm Home Discount and Default tariff price Cap,(b) it is mandatory for all licensed electricity and gas suppliers,(c) it is targeted on households that are in or at risk of fuel poverty,(d) it is set at a level that is below the market price, and(e) it automatically enrols eligible households onto the tariff.”Member’s explanatory statement
An amendment to give the Secretary of State the power to introduce a social tariff for energy and place a duty on the UK Government to prepare a plan for the introduction of such a tariff.
Lord Whitty (Lab)
My Lords, I will now move this amendment properly. I will not repeat what I just said, but the fact is that in this massive Bill, which gives the strategy for the energy sector for the next 10 years, the social dimension of that strategy and its effect on consumers are not entirely but largely ignored.
I moved a similar amendment in Committee and the Minister was not particularly interested. He claimed that we were already looking after the interests of vulnerable consumers. A couple of years ago, or slightly more, I did a small job for Energy UK, looking at the effect of the energy system on vulnerable consumers. To be fair, as a result of that both the trade body and some individual companies significantly improved their consumer service to the more vulnerable consumers, but they have not dramatically changed the tariff structure in favour of those who are least able to pay or who require a rather larger amount of energy than average because of their family condition, health, age, mobility and so forth.
A simple requirement that energy suppliers must include in their tariffs a social tariff for identified vulnerable consumers seems the most obvious and straightforward way forward. We have the warm home discount and the major intervention, using taxpayers’ money, to off-set the effects of the gas price rise, which I fully recognise is the biggest intervention the Government have made on this front, but this would be an obligation on the companies to ensure that they have a social tariff. This is because the present structure of tariffs is unfair and discriminates against more vulnerable consumers. Anybody who does not pay by direct debit is at a disadvantage with almost all the energy-supplying companies. A failure to pay by direct debit means that you pay more.
At a more extreme level even than that, those who are on prepayment meters—we have seen the scandals that have appeared in the last few months—systematically pay significantly more than those who pay by direct debit. This is not right. Those consumers are the most vulnerable. In many cases they are put on prepayment meters because they find it difficult to meet the cost. I appreciate that the Government have intervened to ensure that the more draconian measures to force people on to prepayment meters have been tackled, and I thank them for that, but it is still the case that the most vulnerable consumers, using the easiest method for them to pay, pay more than the rest of us on higher incomes. That is wrong. The easiest way to get out of that is to require all companies to have a social tariff, and to ensure that the system of the priority service register, which in theory exists to identify those customers, actually leads to an offer and a supply of a differentially favourable tariff.
The priority registration system was originally to make sure that they were not hit by shortage of supply. It has been used by companies to identify those who are most vulnerable, but it is differentially effective. Our study found that the level of signing up for the priority service was very different region by region and company by company. Also, the use to which it was put was not at all systematically clear. The large number of people who do not know of the register, or that they could perhaps use their presence on it to ask for a different tariff, means that, in essence, people who perhaps are not digitally literate or do not have time to compare the market—or “Compare the Meerkat” or whatever—are doubly disadvantaged with respect to the systems of pricing and tariffs available to them.
Lord Teverson (LD)
My Lords, I was pleased to add my name to the amendment from the noble Lord, Lord Whitty. There is no easy answer to the question of a social tariff—all solutions to fuel poverty have downsides—but the industry feels that this is the direction of movement and consumer groups agree, so I will be interested to hear the Minister’s response. I have also tabled two amendments in this group: Amendments 70 and 71 about prepayment meters. This is a particularly important area to me. I will not take up the House’s time by going through the arguments again, but I would be interested to hear from the Minister where the Government stand now on prepayment meters and self-disconnection.
Baroness Bennett of Manor Castle (GP)
My Lords, I have attached my name to a number of amendments in this group in the names of the noble Lords, Lord Whitty and Lord Teverson. The arguments on prepayment meters put by the noble Lord, Lord Teverson, are very clear; we have seen that all over the media.
The noble Lord, Lord Whitty, referred to the fact that this is a long-term issue, but it is worth highlighting that, since we debated this in Committee, the Government’s own figures have come out. They show that the fuel poverty level in the UK increased to 13.4% over the course of 2022 and predict that it will reach 14.4% by 2024.
Of course, these figures use the highly questioned government definition of fuel poverty, which does not allow for anyone living in a home above D classification to be classed as fuel poor even if they simply cannot afford to heat that home. According to the National Energy Action definition of fuel poverty—households spending more than 10% of their income after housing costs on energy bills—there were 7.39 million households in that condition in 2022, and the NEA estimates that this year, after April, 8.4 million people will be in households in fuel poverty.
These measures would be highly targeted to address the poorest. They are simply common sense, enabling people to live and be healthy in our society.
Lord Lennie (Lab)
My Lords, this group of amendments from the noble Lord, Lord Teverson, my noble friend Lord Whitty and the noble Baroness, Lady Bennett, consider the circumstances of some of the vulnerable customers in the energy market, and the actions the Government might take to protect them from the vagaries of the market. Such actions range from a social tariff through to inhibiting the exploitation of current prepayment meter customers and a prohibition on the installation of prepayment meters unless specifically requested by a customer. These amendments would collectively offer protection for these customers, who are often regarded as problems by billing companies.
As was said by the noble Lord, Lord Teverson, Ofgem recently announced a stop to companies forcing their way into premises to fit prepayment meters. This practice was commonplace and saw such customers paying more in energy costs as companies passed on the costs associated with the fitting and maintenance of prepayment meters. The ban was originally due to last until the end of March and has now been made indefinite.
The call for a social tariff has been advocated by Citizens Advice and is supported by the Social Market Foundation. It comes in a report that follows a long period of consultation with industry leaders, civil society and the general public. Last year, National Energy Action also argued for a social tariff for low-income households, highlighting the double bind of energy costs and rising bills coupled with paying more due to the poverty premium. A targeted social tariff would limit the impact of these circumstances, as well as help accelerate a fair transition towards net zero. I repeat the question asked by my noble friend Lord Whitty: are the Government able to give an indication that they might review the current tariff structure with a view to making it fairer, in favour of vulnerable customers, including prepayment meter customers?
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, this group covers amendments tabled regarding support and protections for the most vulnerable energy consumers. First, I thank the noble Lords, Lord Whitty and Lord Teverson, and the noble Baroness, Lady Bennett of Manor Castle, for their amendment to introduce a social tariff for vulnerable energy customers.
I am all too aware of the context for the noble Lords’ amendments, as energy bills have dramatically increased for all households over the past 18 months. This, coupled with the wider cost of living, has put the budgets of vulnerable households under considerable pressure. Noble Lords will be aware that the Chancellor set out in the Autumn Statement that the Government would work with consumer groups and industry to explore the best approach for consumer protection from April 2024. He also said that the Government would assess options, including a social tariff. These discussions are already well under way and are ongoing.
As set out in Powering Up Britain: Energy Security Plan, the Government have committed to consult this summer on options to provide better targeted support for those who need it most. In addition, the Chancellor announced in the Spring Budget that the energy price guarantee will be extended at £2,500 for an additional three months to the end of June 2023. This is in addition to the expanded warm home discount scheme, which has been extended until 2026 and which provides £475 million in support per year in 2020 prices.
The amendments tabled by the noble Lord, Lord Teverson, and the noble Baroness, Lady Bennett of Manor Castle, relate to the smart prepayment meter rollout and the restriction of the use of prepayment meters. The Government want to see the highest possible levels of smart meter coverage across the country, including for prepayment. Energy suppliers are each being set annual minimum installation targets and large suppliers are required to publish their performance against those targets, broken down by credit and prepayment.
This amendment would go further, effectively mandating the replacement of legacy prepayment meters by the end of 2025. This would present significant logistical challenges, including the need for energy suppliers to obtain warrants to enter consumers’ homes. I think we can all agree that that would not be a satisfactory outcome. Prioritising the replacement of legacy prepayment meters may have the unintended consequence of creating disincentives for suppliers to install smart meters for vulnerable credit customers. Data from Ofgem indicates that around 70% of those with disabilities pay by direct debit and may therefore benefit from the automated readings which smart meters deliver.
I understand the sentiment that lies behind the noble Lord’s calls for measures aimed at ending self-disconnections, such as a social tariff. However, his amendment is not the way to achieve this. The best way is through the work under way to explore the best approach for consumer protection, which I outlined earlier.
Regarding the noble Lord’s second amendment, the Government agree that the recent findings in the Times in relation to customers of British Gas having prepayment meters forcibly installed were both shocking and unacceptable. It is critical that our most vulnerable energy users are protected, and that is why the Government acted quickly to tackle this issue of inappropriate prepayment meter use. The Secretary of State wrote to energy suppliers insisting they revise their practices and improve their action to support vulnerable households.
Following that, all domestic energy suppliers have agreed to cease the forced installation of prepayment meters, and the remote switching of smart meters to prepayment mode, while Ofgem and industry agree and implement a code of practice to improve consumer safeguards. Ofgem will then start a formal statutory consultation process to modify suppliers’ licence conditions in line with the code, which will allow Ofgem to use its full enforcement powers to enforce compliance with the code.
I am pleased that the Chancellor has acted through the Budget to remove the premium paid by prepayment meter customers. That will happen from July initially, through the energy price guarantee, with Ofgem bringing forward options for longer-term solutions to be implemented by April 2024.
Prepayment meters can continue to play an important role in the market. They are a useful tool for some customers to prevent debt building up, and a complete ban on prepayment meters would likely see a move to using debt enforcement via the courts and bailiffs, which is not a desirable outcome. However, it is important that the rules around their use are sufficient and properly enforced. That is why Ofgem is undertaking a review to consider how prepayment meters are handled across the market. The Government will continue to review progress to ensure that these processes lead to positive changes for vulnerable consumers.
Amendment 74 tabled by the noble Lord, Lord Whitty, relates to protecting heat network consumers. Robust consumer protection rules are of paramount importance, which is the primary reason that the Government are regulating the heat network sector. Schedule 16 provides for regulations to make the regulator’s principal objective to protect the interests of existing and future heat network consumers. That mirrors Ofgem’s principal objectives regarding existing and future gas and electricity consumers.
I would like to provide more detail on what that principal objective will mean in practice. It will ensure that the regulator prioritises enforcing rules that ensure that heat network consumers receive fair prices and reliable supplies of heat. The regulator will have powers to investigate and intervene where prices appear unfair or are significantly higher than comparable heating systems. The regulator will also introduce heat supply standards of performance, including adequate compensation for consumers who experience outages. That will ensure that heat network consumers receive comparable standards to gas and electricity consumers.
We are introducing these measures through secondary legislation and authorisation conditions, as with gas and electricity consumer protections, to ensure that rules can be updated more easily as the market matures and decarbonises. The Government will consult on the specific consumer standards that need to be met, and I encourage the noble Lord to consider that consultation once it is published later this year.
I hope that noble Lords are reassured by this explanation and feel able not to press their amendments.
Lord Whitty (Lab)
My Lords, I thank the noble Baroness for that considered reply and the recognition in her remarks that there is still a serious problem. She referred to Ofgem coming up with something in relation to the way in which prepayment meters operate. In this new era, with a new structure following the Bill, it would be useful if Ofgem and the Government looked at the totality of structures for all forms of supply of energy, and particularly at the impact on more vulnerable consumers—Ofgem would need to take the lead, I guess. I hope the issues that I raised on the structure of tariffs in relation to the priority service register and the impact on vulnerable consumers would be included. I am watching this space. The noble Baroness has moved some way towards recognising that there is an issue.
I refrained from commenting in detail on heat networks because my voice was going. There is a problem. I very much welcome the fact that this is one bit of consumer protection in the Bill; it has been extended to the users of district heating. District heating has been convenient and is usually quite cheap but is now faced with real problems. I hope that the consultation will cover it.
Lord Callanan
Member's explanatory statement
This amendment makes regulations under Clause 167 (which contains a power to amend certain definitions relating to heat networks) subject to the affirmative procedure.
Lord Callanan
Member's explanatory statement
This amendment removes a reference to Scotland in connection with installation and maintenance licences (which do not apply in relation to Scotland).
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 341, line 7.
“(2A) Where regulations make provision by virtue of paragraph 37(2)(c) for the imposition of a penalty on a relevant person, the regulations—(a) must also include provision enabling the relevant person to challenge the penalty in legal proceedings;(b) may, in particular, specify the grounds on which and the time within which a penalty may be challenged and the remedies that may be given.” Member's explanatory statement
This amendment requires regulations made by virtue of paragraph 37(2)(c) of Schedule 16 (heat networks regulation: methods of enforcement) that provide for the imposition of a penalty to include provision for challenging the penalty in legal proceedings.
Member's explanatory statement
This amendment corrects an error in paragraph 40(1)(f) of Schedule 16.
“(3) In this paragraph, “the appropriate authority” means—(a) in relation to England and Wales and Scotland, the Secretary of State;(b) in relation to Northern Ireland, the Department.”Member's explanatory statement
This amendment provides a definition of “the appropriate authority” for paragraph 50 of Schedule 16 (to match the definition in paragraph 61 of that Schedule).
Lord Callanan
“(1) The first regulations to be made by the Secretary of State under section 170 are subject to the affirmative procedure.”Member's explanatory statement
This amendment clarifies that the first regulations made by the Secretary of State under Clause 170 are subject to the affirmative procedure.
Member's explanatory statement
This amendment clarifies that the list in Clause 171(2) of cases in which the affirmative procedure applies relates to regulations made by the Secretary of State (as opposed to regulations made by the Department for the Economy in Northern Ireland).
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 141, line 38.
“(iv) any provision of Part 8 or 9 of Schedule 16, or(v) paragraph 56 of Schedule 16;”Member's explanatory statement
This amendment adds regulations relating to step-in arrangements, special administration regimes and powers of entry to the list of the kinds of regulations under Clause 170 that are subject to the affirmative procedure.
“(2A) Any other regulations made by the Secretary of State under section 170 are subject to the negative procedure.”Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 141, line 38.
“(4) The first regulations to be made by the Department under section 170 may not be made unless a draft of the regulations has been laid before and approved by a resolution of the Northern Ireland Assembly.”Member's explanatory statement
This amendment is part of a rearrangement of procedural provision in Clause 171 relating to regulations made by the Department for the Economy in Northern Ireland, aimed at mirroring the corresponding provision in that clause relating to regulations made by the Secretary of State.
Member's explanatory statement
See the explanatory statement relating to the amendment in the name of Lord Callanan at page 142, line 16.
“(iii) any provision of Part 8 or 9 of Schedule 16, or(iv) paragraph 56 of Schedule 16;”Member's explanatory statement
This amendment makes provision in respect of regulations made by the Department for the Economy in Northern Ireland corresponding to that made by the amendment in the name of Lord Callanan at page 142, line 8 in respect of regulations made by the Secretary of State.
“(6) Any other regulations made by the Department under section 170 are subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954 (c. 33 (N.I.)).”Member's explanatory statement
See the explanatory statement relating to the amendment in the name of Lord Callanan at page 142, line 16.
Lord Callanan
Member's explanatory statement
This amendment provides that regulations under Clause 173(1) (which confers power to designate the Gas and Electricity Markets Authority as the licensing authority for the purposes of the Heat Networks (Scotland) Act 2021) are subject to the affirmative procedure.
“(4) Regulations under this section are subject to the affirmative procedure.”Member's explanatory statement
This amendment provides that regulations under Clause 174 (which confers power to make provision about the enforcement of conditions of heat network licences issued in Scotland) are subject to the affirmative procedure.
Member's explanatory statement
This amendment omits provision that would have enabled heat network zones regulations to require a person to comply with the provisions of a non-legislative document.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 153, line 14.
“(1A) Zones regulations made by virtue of section 181(2)(c) or 184(2)(c) must include provision for a right of appeal against the imposition of a penalty.”Member's explanatory statement
This amendment requires zones regulations made by virtue of Clause 181 (requests for information) or Clause 184 (enforcement of heat network zone requirements) that make provision for the imposition of a penalty, to include provision for a right of appeal.
Lord Ravensdale
“PART 7ALocal Area Energy PlansDuty to provide guidance(1) The Secretary of State must publish guidance for local authorities on local area energy planning within 12 months of this Act being passed.(2) The guidance in subsection (1) may include, but is not limited to, guidance on—(a) contributing towards meeting the targets set under—(i) Part 1 of the Climate Change Act 2008 (UK net zero emissions target and budgeting), and(ii) sections 1 to 3 of the Environment Act 2021 (environmental targets);(b) adapting to any current or predicted impacts of climate change identified in the most recent report under section 56 of the Climate Change Act 2008 (report on impact of climate change);(c) the data and assumptions used in creating a local area energy plan;(d) the roles and responsibilities of those involved in creating a local area energy plan;(e) the minimum standards for a local area energy plan.(3) Local authorities must have regard to the guidance produced under subsection (1) when developing local area energy plans.(4) In this section, “local authority” has the meaning given in section 178.”Member's explanatory statement
This amendment provides guidance for local authorities to help them produce Local Area Energy Plans. It aims to widen the roll out of Local Area Energy Plans among local authorities and help better define the role of local authorities in delivering the future energy system.
Lord Ravensdale (CB)
My Lords, I declare my interests set out earlier and add my interest as a director of Peers for the Planet. I also thank the noble Baroness, Lady Bennett, for her support on Amendment 94. I will keep my remarks brief, but first I thank the Minister and his Bill team for meeting me and for all of the engagement on this important issue over the last few months.
I feel that one of the key missing pieces in the net-zero puzzle before us is in better defining the role of local authorities within the whole governance structure. We all know that local authorities have a vital role to play, but there is limited definition of this. I think that local area energy plans are at the core of fixing this. Local area energy planning is a data-driven and whole-energy-system evidence-based approach, which sets out to identify the most effective route for a local area to contribute towards meeting the national net-zero target, as well as meeting its local net-zero target. Its proven methodology is a well-trodden path which has been effectively used in a number of other countries.
I wanted to return to this issue on Report as I strongly feel that there is a missed opportunity within the Bill to set out the role of local authorities more clearly. There have been some developments since Committee. In particular, the Skidmore Mission Zero report was published, which recognised the issue and aligns with what I am asking for in this local area energy planning amendment. This was brought out strongly in the report, as one of the 25 key actions for 2025 was for the Government to provide guidance on local area energy planning. The Committee on Climate Change also recognises the need for this.
The amendment does not ask for much; it asks only for guidance to be published, and it does not mandate the approach in any way. It simply asks for the Government to publish guidance for local authorities to use in local area energy planning—this step has already been taken by the devolved Governments in Scotland and Wales. So it will provide much-needed clarity to local authorities on how they should approach energy planning, and it will also send the important signal that the Government are behind the approach to help to increase the rollout of these plans. So I look forward to the Minister’s response, and I hope he can provide me some reassurance on this point. I beg to move.
Baroness Boycott (CB)
My Lords, I will speak to Amendments 134 and 135, about community energy. In the midst of an energy crisis, when cheap and clean home-produced energy has never been more vital, as we have heard in this debate, we are far behind where we could be with the amount of small-scale renewable energy, especially community energy schemes, which are simply community-owned and community-run renewable energy projects. Our limited number of schemes has been massively welcomed by politicians of all parties because they provide cheaper and greener power, and they distribute benefits locally, rather than up to the big power companies.
The feed-in tariff briefly created rapid growth in these schemes, but that has dwindled to almost nothing—despite renewable technologies being cheaper than ever. The lack of growth is largely the result of the prohibitive cost that the small-scale generators face. The problem is well recognised, and 318 MPs from all major parties back the Local Electricity Bill, which would enable community energy schemes to sell electricity they generate to their local customers.
The potential is enormous. According to the Environmental Audit Committee, community energy could grow by 12 to 20 times by 2030, power 2.2 million homes and save 2.5 million tonnes of CO2 emissions every year. This would take our renewable energy generation from community schemes to almost 10% of our entire needs, and the substantial benefits of enabling this can barely be overstated. However, community energy has seen a trickle of minimal growth, amounting to less than half a per cent.
The problem can be solved without subsidy, and this seems to be the key point. Small-scale renewable energy generators need to receive only a guaranteed fair price for the electricity they contribute to an energy system in desperate need of homegrown energy, as we have heard. Amendment 134 establishes a
“Community and Smaller-scale Electricity Export Guarantee Scheme”.
It would provide a guaranteed income for the electricity from small-scale low-carbon energy generators, with “small” defined as “a capacity below 5MW”. This would mean that communities get properly remunerated for their contribution to the system, and they can therefore go to their banks and raise the funds to expand or establish. This guaranteed price could be set by regulations, revised annually by Ofgem, with the initial contract guaranteed for at least five years—not that long.
Amendment 135 establishes a
“Community and Smaller-scale Electricity Supplier Services Scheme”.
This, again, would allow community schemes that registered under the electricity export guarantee scheme also to sell the electricity they generate locally. No requirement is placed on community schemes to do this, so, if they wish, they could operate simply using the proceeds of the export guarantee. For some, such returns would be sufficient to encourage local people to invest in new energy schemes—such was the case when we had a feed-in tariff.
But, if a community wants, it can sell the electricity it generates directly to households and businesses in its community. It can do so, for example, as an additional incentive for local people to invest or because it believes it can offer a lower tariff to the less well off in the community—this point was made on previous amendments this afternoon. This means that the community, which knows its people and what is going on, can flex its tariffs, and everyone can buy in to the project.
As with the clause created by Amendment 134, this would all be monitored by Ofgem and reported on annually. This is a nationwide campaign backed by a coalition of over 80 organisations—the Church of England, the CPRE, the Energy Saving Trust et cetera; I will not name them all—and 100 councils have already stated their support. Four of the six major distribution network operators—basically, our regional energy grid monopolies: Electricity North West, SP Energy, UK Power and Western Power—are supportive. As has been mentioned before, the Skidmore review supports all such organisations and ideas that will help green renewable energy, so I am completely puzzled as to why Ministers are not falling over themselves to make this thing happen.
In Committee, the Minister, the noble Lord, Lord Callanan, said that the amendments would create a subsidy to community energy schemes. However, we need to be really clear—in saying this, I want to pre-empt a response from the Minister—that the amendments do not establish subsidies for community energy schemes. Renewable energy can stand on its own two feet now; it has been successful in cutting costs over the last two decades and is now completely viable without the need for feed-in tariffs. We just need to set up the right market system for the energy for people to buy it and for people to be responsible for it. I will be completely puzzled if the Minister does not accept that, and I warn him now that I intend to test the opinion of the House later.
Baroness Bennett of Manor Castle (GP)
My Lords, the three amendments have been extremely ably introduced by the noble Lord, Lord Ravensdale, and the noble Baroness, Lady Boycott. It is a pleasure to speak after them, having attached my name to all three amendments.
I will briefly sum up what they seek to achieve. Amendments 134 and 135 are about community energy, which is where people can get together as a community, decide what they want their local energy system to look like and deliver it. There is no need for any involvement from Westminster or big multinational companies; it is a chance for communities to get together. Surely, as the noble Lord, Lord Lucas, has signed both Amendments 134 and 135, this would be seen to be utterly in line with Conservative approaches. I note that, in the other place, among the hundreds of signatories is Sir Graham Brady, so if you want a full political spread, perhaps from me to Sir Graham Brady will pretty well cover the breadth of support for community energy.
On Amendment 94, we know that there is huge concentration of power and resources, and that the reins are held very tightly by Westminster. As the noble Lord, Lord Ravensdale, set out, Wales and Scotland have already seen the importance of local decision-making to solve local problems to ensure that they are able to deliver renewables, with local people making the decisions about where they go, what they look like and how they are distributed. Indeed, as the noble Baroness, Lady Boycott, said, this could be a local poverty alleviation issue and a levelling-up type of approach.
I acknowledge that the Minister has very kindly had meetings with us to discuss the amendments. We keep being told that this is something that the Government would like to do eventually but it is all too difficult. However, I think it is all worked out and set out in the amendments. Clearly, many people in the other place and here have been convinced that now is the time to go for community energy.
I will offer a final reflection. I happened to be in a bed and breakfast in Norfolk this morning, chatting across the table to some residents of Herefordshire who had just driven across the country and were about to drive back. They asked me, “Where are all the solar panels? We can’t see solar panels where we know we should see solar panels.” I said that the answer to scale this up quickly could be community energy.
Baroness Young of Old Scone (Lab)
My Lords, I support Amendments 134 and 135, so ably led by the noble Baroness, Lady Boycott. I had hoped that my name would be added to them, but something happened along the way.
It is true that everybody is saying that there is real importance in community energy, but the proof of the pudding has to be in the eating. After that initial burst of schemes that the feed-in tariff encouraged, we have really not seen any major growth and the government measures that have been put in place simply have not worked. The amendments are important for two reasons. First, they would enable improved financial predictability and viability for community energy schemes, because, at the moment, there are a number of hurdles that such schemes have to cross. If financial viability and predictability are not there at the start, they lose heart very rapidly in approaching the other hurdles. The second is the issue that has already been touched on: that is the whole business of community “joie de vivre” around energy generation schemes. A surefire way of not having local schemes is where there is a scenario of “all pain and no gain”—where there is a bit of local environmental disruption and a little adjustment to the view. Local communities very rapidly turn off those schemes if they do not see any value for themselves. That is happening more and more at the moment. Local community generation schemes are not very popular since there is landscape blight and no direct benefit. In fact, the figures show that more solar farms were turned down in 2020 at planning stages than had been turned down in the previous four years.
The presence of a local community scheme may even lead to dialogue locally about increased uptake of energy efficiency measures. People become interested in both energy efficiency and demand-side and supply-side issues. That is exactly the sort of community engagement we need if we are really going to see net zero hit. Indeed, Chris Skidmore in his much-quoted net-zero review urged the Government to produce a community energy strategy and to break through the current regulatory and legislative funding barriers. He supported the provisions of the Local Electricity Bill, which these amendments have largely reproduced.
As has been said, the noble Lord, Lord Callanan, assured us in Committee, in his letter of 22 December and in subsequent meetings that the Government want to see more community energy schemes. We are really asking him what in effect will be done, as, so far, government measures have not worked. To echo the noble Baroness, Lady Boycott, we are not seeking subsidy; we are looking for a fair price varied by government, as advised by Ofgem—an increased price, perhaps, where schemes need to be encouraged and a reduced price, perhaps, if scheme growth is going gangbusters. It is about a guaranteed floor price, similar to the contracts for difference from which other renewable sectors benefit.
I thank Octopus and other major suppliers for tackling some of these issues. The reality is, however, that they are not creating the volumes that are required. It is quite a telling fact that Octopus, through Unity, its subsidiary, is now responsible for one-third of all the community energy sector schemes. If one company, busting a gut, can actually be involved in one-third of the community energy sector, it seems to imply that it is not moving very fast. We are not seeing the volume of schemes being created. Other barriers need to be tackled, particularly access to the grid, lack of early-stage feasibility funding and planning complexities, but to accept these two amendments would go a long way to encouraging the community energy sector and to removing the most fundamental barrier, which is the economic one.
It would also be good if the Minister could tell us what the latest timescales are for the review of the electricity market arrangements, because that is another area where the whole business of how renewable energy competes is going to be fundamental. Can the Minister tell us today—if he is not going to accept these amendments, as I am sure he will not do—what the Government are going to do that will be effective in getting the community energy sector off its knees, where it is at the moment?
Baroness Meacher (CB)
My Lords, I will not take the time of the House to repeat comments that have already been made. The noble Baroness, Lady Boycott, and others have made a very powerful case for these amendments. It is ludicrous for us not to be enabling community energy production when this does not involve a subsidy and when it could create additional energy sufficient for something like the 2.2 million homes mentioned by the noble Baroness, Lady Boycott. This is a completely neglected area; it can be resolved as set out in these amendments in a straightforward way. The main thing is that these community energy projects need to be able to sell their energy to big suppliers in the locality—those with more than 150,000 customers was the figure quoted, I think. So there is very strong support for these amendments and I hope the Minister will be able to accept them. I cannot see any reason why not: it is not going to cost the Government anything.
Lord Teverson (LD)
My Lords, from these Benches I welcome particularly the amendments in the name of the noble Baroness, Lady Boycott. I will not detain the House except to say that it is quite clear that community schemes have not operated effectively for many years. I should declare that I am an insignificant shareholder in a local community scheme in my own home area, which was set up under the feed-in tariffs. The schemes as put forward are not a kind of feed-in tariff regime: they are really looking for stability of price and are not around subsidy. I just say to the Minister that the Government’s overall target is decarbonisation of the grid by 2035: let communities play a big part in that, because one thing that is really important here is that community schemes allow for communities, individuals, households, families and small businesses to participate in the decarbonisation of our economy and net zero. They can be a part of it and that is why these amendments are so important.
On the amendment in the name of the noble Lord, Lord Ravensdale, it is indeed very important that local authorities are involved and are movers in this area. All I can say is that I have to learn from him: he has the ear of the Government and the Minister far more than I do, and perhaps I could have some lessons afterwards about how to be successful in getting amendments into Bills.
Baroness Blake of Leeds (Lab)
My Lords, I declare my interest as a vice-president of the Local Government Association. It will come as no surprise to Members of the House that I support all these amendments, particularly Amendment 94 in the name of the noble Lord, Lord Ravensdale. Going by my personal experience, not giving a broader role to local authorities is such a missed opportunity and I cannot understand why these amendments would not be supported, particularly since it is, in all honesty, such a mild request: better definition of local authorities’ role; and asking for guidance, which is a perpetual demand from local authorities, I have to say, in trying to move things forward. As we know, other key reports and reviews have recognised just how important it is to get local buy-in and to get local stakeholders involved.
I turn to the amendments in the name of the noble Baroness, Lady Boycott, and signed by others. It is essential that we bring these elements together. What we are talking about, without repeating the technical issues that have been raised so powerfully today, is that we need to aim to have a framework that will support the growth of community and smaller-scale energy schemes and also provide regular reporting so that everyone knows how things are progressing. I have to say that all we are asking for is the following of an evidence-based approach. We can look at the success of other, related schemes in these areas that have been successfully led by local authorities. These include the rollout of electric vehicles, with local authorities leading by example in changing their fleets to electricity. District heating is another example where, when you have very strong local buy-in, the success moves forward. What we are asking for here is the ability to inform, shape and enable key aspects to deliver energy decarbonisation.
I believe very firmly in involving local stakeholders from the beginning; they are far more likely to come on board with schemes that might have aspects that they find work against their interests if they understand and are included in the bigger picture. Many people will make compromises when they understand the greater good, and the opportunity has been highlighted over the past year by the dramatic increase in energy prices and the risk of energy scarcity. I think the landscape has changed in this regard. Let us give confidence to local people and communities by developing the framework for the growth of communities and smaller-scale energy schemes. It is regrettable that more progress has not been made so far. The role of Ofgem in this, giving clear methodology and quality standards, is essential and will give the credibility that is needed, as the noble Baroness, Lady Boycott, so eloquently pointed out.
Through the involvement of local communities, we are asking for a more effective and better targeted delivery of national priorities; and we all know that we need more determination to deliver on the ground. I hope we will see some movement in this area and can only echo other comments: if we fail to make progress, this is such wasted potential, and I hope we will hear some positive comments with regard to these amendments.
Lord Callanan (Con)
I thank all Members who have contributed, particularly the noble Baronesses, Lady Boycott and Lady Bennett, for Amendments 134 and 135—the noble Lord, Lord Lucas, proposed them but sadly is not in his place. I am grateful to noble Lords who met me and officials recently to discuss this matter and give us a chance to talk through the departmental thinking.
As I said when we met, the Government recognise the role that community and local renewable energy schemes can play in supporting our net-zero targets. But we continue to believe that small-scale, low-carbon electricity generation should be brought forward through competitive, market-based solutions. A key feature of the smart export guarantee regime is to allow suppliers to set both the tariff level and the structure and for suppliers themselves to determine the value of the exported electricity alongside all the associated administrative costs. Any move to introduce a regulated price for exported electricity has the potential to limit the overall scope for innovation and export tariff packages. This would fundamentally undermine the principles of the supported export guarantee policy objective, which looks to encourage a market-driven approach.
Furthermore, the amendments as drafted are unlikely to result in better outcomes for consumers compared with other tariffs that would be available from suppliers. First, there would be initial set-up and ongoing delivery costs associated with the scheme for both Ofgem and the suppliers, which we expect would be material. These costs would be recovered via the service fee charged by suppliers and therefore probably reflected in the local tariff price.
Secondly, small-scale, low-carbon generation will, by its nature, be intermittent and unable to supply local consumers at all times. Suppliers would therefore need to buy additional wholesale energy from other sources—for example, during periods of peak demand—and incur all the associated network and system costs. The local tariff would also be required to have regard to the export price paid to the local generator. This would create a somewhat perverse outcome where higher export prices would benefit the generator but also increase the tariff price.
As a result, there is no guarantee that the local tariff would be lower than the current regulated standard variable tariff. In fact, there is some reason to believe that it would actually be higher.
Baroness Bennett of Manor Castle (GP)
Before the Minister sits down, I would like to apologise to the House; I should perhaps have declared my position as a vice-president of the Local Government Association. The Minister referred to the costs of local schemes, but would he acknowledge that there has been historically—and certainly will be in the future—a great deal of voluntary effort and contributions in the administration and running of such schemes, and that that is a net input into communities that does not have a financial cost, which can affect the price?
Lord Callanan (Con)
If organisations take advantage of community-minded individuals prepared to contribute work to their local community, that is something that we welcome. However, what will be critical to those communities is the ultimate tariff that they pay, irrespective of how much voluntary effort goes in. Our concern is that these amendments are being slightly oversold to many communities; they may think that they are somehow going to get a favourable tariff compared to what they would get in the wider market. As currently structured, we do not believe that the amendments would produce that.
Baroness Boycott (CB)
Before the Minister sits down, I think that that is slightly unfair on local communities. A lot of people enjoy being involved in local community schemes and, as the noble Baroness, Lady Bennett, just said, a lot of volunteering work goes into this. It is not just about getting lower prices; it is also about reducing our carbon emissions and being part of the campaign to get to net zero. You cannot just quantify everything in pounds, shillings and pence.
Lord Callanan (Con)
I agree with the noble Baroness, and we are supporting a number of community energy partnerships at the moment. As I say, we are not against the idea in principle, but we need to work through the proper policy implications and ensure that some of these very worthwhile schemes are not piggybacking on to the costs that everybody else pays into the system.
Lord Ravensdale (CB)
My Lords, I thank the Minister for providing that detail on the department’s approach to local area energy planning and for recognising the ongoing work. With the reassurance that has been provided by the Minister, I beg leave to withdraw my amendment.
Lord Callanan
Member's explanatory statement
This amendment ensures that the acceptance by an enforcement authority (under energy smart regulations) of an enforcement undertaking in respect of a person’s act or omission does not prevent the authority imposing a penalty on that person in respect of a different act or omission.
Lord Callanan
“(5A) Energy smart regulations that are not within subsection (5) are subject to the made affirmative procedure if they—(a) are the first energy smart regulations to make provision about a particular description of energy smart appliance,(b) make provision by virtue of section 189(4)(b) imposing requirements of a kind not previously imposed by energy smart regulations,(c) make provision by virtue of section 190(1)(a) or (b) by reference or in relation to a published document, standard or list (as the case may be) in respect of which such provision has not previously been made,(d) confer new powers for the enforcement of energy smart regulations, or(e) make provision by virtue of section 192(2) for the imposition of new civil penalties.(5B) A revised version of a published document, standard or list is to be disregarded for the purposes of subsection (5A)(c) if provision has previously been made in respect of the document, standard or list by virtue of section 190(1)(a) or (b) (as the case may be).”Member's explanatory statement
This amendment provides that energy smart regulations that are not the first energy smart regulations but that include certain kinds of provision for the first time are subject to the made affirmative procedure.
Baroness Hayman
“National Warmer Homes and Businesses Action Plan(1) The Secretary of State must, before the end of the period of 6 months beginning with the day on which this Act is passed, publish an action plan entitled the Warmer Homes and Businesses Action Plan, to set out how His Majesty’s Government intends to deliver on—(a) achieving a low-carbon heat target, of 100% of installations of relevant heating appliances and connections to relevant heat networks by 2035,(b) achieving EPC band C by 2035 in all UK homes where practical, cost effective and affordable,(c) achieving EPC band B by 2028 in all non-domestic properties, and(d) introducing the Future Homes Standard for all new builds in England by 2025.(2) The Secretary of State must, in developing the Warmer Homes and Businesses Action Plan, consult the Climate Change Committee and its sub-committee on adaptation.”Member's explanatory statement
This amendment imposes a duty on the Secretary of State to bring forward a plan with timebound proposals for low carbon heat, energy efficient homes and non-domestic properties and higher standards on new homes.
Baroness Hayman (CB)
My Lords, in moving Amendment 97 I remind the House of my interests as set out in the register. This is truly a cross-party amendment, and I am grateful to the noble Lords, Lord Bourne, Lord Whitty and Lord Foster of Bath, who have added their names to it. The noble Lord, Lord Foster of Bath, has Amendment 98 in this group, and has been fighting the battle on energy efficiency even longer than I have.
I do not need to speak at length on this issue, as I explained the rationale of it in Committee. For any noble Lords who missed that event, I also explained the rationale for amendments to the Social Housing (Regulation) Bill and the Levelling-up and Regeneration Bill. This is an important issue and it goes across many sectors. In the private sector, social housing and owner occupation we have the same problem: our housing stock is old, leaky and draughty—and part of the leaking that goes on is of money. There are also the effects on health and productivity.
There has been no challenge at any time when I have suggested that it is important that we focus on energy efficiency. The analysis that we have a real problem is universally accepted. Indeed, six years ago the Government first set out their own aspiration for as many homes as possible to be EPC band C by 2035. However, I am afraid that, although the aspiration has been there, the achievement has not. Since that aspiration was set out, we have had numerous schemes for home insulation, which in the main have failed. They have been piecemeal and ineffective, and have given no confidence to the industries that we need to deliver those services that there will be long-term investment and that they too can invest and train the workforce necessary to make the inroads we need into the problems.
We have had those sorts of schemes and a string of announcements from Governments. There has been a string of announcements, a string of reannouncements, a string of consultations and, most recently, an announcement that there was a commitment to publish the responses to a previous consultation. What we have not had is the comprehensive, coherent, cohesive plan that would see us able to make real progress in this area.
Everyone else has quoted the Skidmore review so I will too. In that review, Chris Skidmore said that the mission to improve energy efficiency for households
“will not only reduce energy demand and bolster our energy security, but also save consumers money on their bills”.
To that, I add that it will also save taxpayers money because, at the moment, they are subsidising those bills. Good money is literally going up in smoke; we need to stop it now. What we need is a comprehensive, cohesive plan with set times for the achievement of set objectives—something that we have never had.
This is not only my analysis. In its progress review—last month, I think—the National Infrastructure Commission highlighted:
“Government is not on track to deliver its commitments on heat or energy efficiency … A concrete plan for delivering energy efficiency improvements is required, with a particular focus on driving action in homes and facilitating the investment needed”.
We need to take that conclusion very seriously; my amendment seeks to do just that.
I am grateful to the Minister, who found time to discuss these issues with me. He had some concerns about the drafting of the amendment, particularly the words “cost effective”, “practical” and “affordable”. I am trying to make this amendment sensible, cost effective, practical and affordable, but I hope to reassure the Minister that those words were not just plucked out of the air by me. They come from the Government’s own Clean Growth Strategy and were quoted back at me as something that the Government supported by the noble Earl, Lord Howe, in his response to my amendment when we debated it during a debate on the levelling-up Bill.
For those reasons, I hope that these words will not worry the Minister in the way that they did when we had a conversation. If he was still concerned and felt the need to change them at Third Reading, I think we would all be happy to come back and see whether there was a way in which we could accommodate that. Meanwhile, I do not resile from my view that, as a Parliament, we need to say how firmly we believe that the Government have not made enough progress on this issue and that we need a road map to do so urgently.
I beg to move.
Lord Foster of Bath (LD)
My Lords, I am absolutely delighted to support this amendment from the noble Baroness, Lady Hayman, and to speak to my Amendment 98. For those who have not necessarily followed the debate, which has gone on for many years, it is worth pointing out by way of background that the International Energy Agency has repeatedly argued that the best way to tackle the impact of climate change is to reduce our use of energy and that the most cost-effective and environmentally friendly option is to avoid unnecessary consumption. Clearly, the benefits of such an approach are pretty obvious: increased national energy security and reduced carbon emissions, coupled with reduced household energy bills and improved quality of life, not least for those living in old, damp, mouldy homes. There are other benefits too, including, for example, the saving to the NHS in England of £1.4 billion a year—its estimate of the cost of people living in cold homes.
Schemes to deal with this have come and gone. Promises have been made but rarely kept. Existing schemes have been inadequately policed. The Green Deal and the green homes grant schemes came and went. Even the 2019 Conservative Party manifesto promise to invest £9.3 billion of public funding to stimulate energy efficiency up to 2024 appears to have been cut to £6.6 billion, as we see in the document produced in March this year. Measures that are still on the statute book are being inadequately policed, so the assumed impact is not being achieved. For instance, not all properties that should have a display energy certificate do so.
Lord Deben (Con)
My Lords, having been introduced by the noble Lord, I want to try to help the Government. We all know that, first, energy efficiency is the most sensible way of proceeding towards the statutory targets that this Government have supported and this Parliament has voted for. Secondly, we know that every mechanism that we have tried so far has not delivered to the extent that we hoped it would. Thirdly, we know that this is an all-party view; nobody disagrees with it except those who still believe that climate change is not happening. Even if you do not believe in climate change, you must understand the cost of living crisis and, therefore, that doing this is crucial to reduce costs, particularly for those who are least able to bear them. So there is every reason for energy efficiency.
It is therefore not surprising that every adviser of the Government has emphasised this—not just as one among many possibilities but as the most important thing that any Government could do at this time. That is not just the Climate Change Committee but the National Infrastructure Commission and everybody else who has paid any attention at all to this. Yet the Government, in explaining to their supporters why this would not be an acceptable amendment, suggest that somehow or other it would add unnecessarily to the various schemes and programmes that are already in place.
I have to say to the Minister that the Climate Change Committee has looked very carefully at this and it does not actually meet the facts, because none of these other things satisfactorily deals with the reduction of energy use. There is a bit of an argument about how much of a difference you could make but, roughly speaking, if we had real energy efficiency, we could do all the things we are doing at the moment at about half the energy use. This is a hugely important matter.
These particular amendments may well have failings, but that is to remind the Government that they should have brought this forward in the Bill themselves, so that it did not need to be amended. I beg the Minister, whom I hope is in a sympathetic mood, even to statements by me, to take seriously the fact that no one believes that we should not have this amendment or something like it—no one who I can find logically does.
There will be some people who, if it is pressed to a vote, will support the Government because they feel that they must. I am happy to meet any of them and listen to their arguments for not doing this; it will be difficult for those arguments to be effective. I merely ask the Minister to please not put us yet again in the embarrassing position that either we vote against energy efficiency on the side of the Government or we vote against the Government for energy efficiency, which is what every independent adviser advises and which is, I happen to be sure of, actually the view of any Minister who has looked at the facts.
Lord Whitty (Lab)
My Lords, I am glad to follow the noble Lord, Lord Deben; in the way he has spelled it out, it is clear that there is a huge gap in the energy strategy being presented by the Government. You would not believe that from the size of the Bill and the details within it, but the fact is that, unless we have a strand of policy, properly delivered and enforced, that deals with energy efficiency, we are missing the easiest target: to stop households and businesses spending money on energy when relatively simple adjustments to their homes or to the regulations that cover buildings could change that.
I am lost in admiration for the noble Baroness, Lady Hayman, who raises this issue on every piece of legislation going through the House. I am astounded that the Government have not taken it up.
There is something odd about this. More than 20 years ago, I was sitting where the Minister sits, and I was responsible for policies against fuel poverty and for energy efficiency. At the end of the Labour Government, we were doing roughly four times the number of interventions that the Government have done. So when the Minister turns around, as he did in Committee, and says that they are already doing a very substantial amount of stuff—they are doing some stuff; there is a social housing fund for energy efficiency and the ECO scheme, which is not a particularly efficient way of delivering it but does deliver something—at the end of the day, it does not amount to what we were doing 20 years ago. Had we continued doing that for the last 20 years—maybe we would have had to alter it and to update the interventions—then the energy efficiency of our buildings would be substantially greater. The Minister is required to explain to the House why this glaring omission is not in this or any other Bill.
There are relatively simple things you can do which make a dramatic difference, though it is slightly difficult to do it. Why, for example, do regulations on new builds not universally require new-build houses to approximate to a net-zero position? Why, for example, does the planning system tend to favour demolition of buildings, which itself is carbon-releasing and carbon-inefficient, rather than effective retrofitting? Why, in effect, have the schemes that the Government have come forward with in the owner-occupier sector—the green homes grant and the Green Deal—not worked, despite the fact that industry and campaigners have been very much in support of them? The answer is that they have not been made sufficiently attractive and the delivery has not been made sufficiently attractive to businesses—installers and the workforce—to ensure that we have a massive effort on this front.
I am glad that the Government have established a more effective Energy Efficiency Taskforce, but that task force needs to come up rapidly with a strategy which will address all of these issues and deliver for us a contribution to solving the energy-induced part of the cost of living crisis, and at the same time begin to reduce our dependence on energy use and enhance our contribution towards meeting net zero. It is so obvious that I am astounded, as the noble Lord, Lord Deben is, that the Government have not seized this opportunity.
I hope that, before the Bill finishes its turn in this House, we will see a rectification of that and a real commitment to an energy efficiency strategy which makes sense, is attractive and works.
Baroness Altmann (Con)
My Lords, I support these amendments and the concept of improving energy efficiency. I probably cannot express the rationale for that better than the noble Baroness, Lady Hayman, and my noble friend Lord Deben.
I would like to ask my noble friend the Minister if there are particular issues in the wording of these amendments that the Government have a problem with. Is it the EPC ratings or the six months? If there are such issues, would the Government consider coming back at Third Reading with their own version of what seems, universally across the House and across the country, to be so sensible? Given the Government’s excellent record and excellent intentions in improving the energy performance and net-zero performance of the British economy and our country, would they consider these measures?
Lord Lennie (Lab)
My Lords, these welcome amendments in the names of the noble Baroness, Lady Hayman, and the noble Lord, Lord Foster, are concerned with energy efficiency in homes and non-domestic premises. As the noble Lord, Lord Deben said, the Government have set statutory targets aimed at reducing carbon emissions, achieving net zero and improving energy efficiency in homes.
There is consideration under way in the Minimum Energy Performance of Buildings Bill to move EPC ratings for rental properties from band E to C by 2025. The original plan was to ensure that all tenancies were in that band by 2025, but after much lobbying by landlords and others, DESNZ decided to scrap the 2025 target and now have until 2028 to achieve that target.
I want briefly to set out some facts: energy-efficiency measures are now 20 times lower than under the last Labour Government; the UK has the least energy-efficient homes in Europe; domestic energy-efficiency measures have fallen 95% since 2012; and the Resolution Foundation estimates that 9 million households are paying an extra £170 a year as a result of these failings. So we support these amendments, and should the noble Baroness, Lady Hayman, test the opinion of the House, we will support her in that vote.
Lord Callanan (Con)
My Lords, this group covers the two amendments concerning the energy performance of existing premises and of new builds.
I will start with Amendment 97, from the noble Baroness, Lady Hayman, and the noble Lords, Lord Foster and Lord Whitty, which would require the Secretary of State to publish a national warmer homes and businesses action plan six months after Royal Assent. That proposed plan looks very similar to and would duplicate the Government’s existing Net Zero Strategy and the Heat and Buildings Strategy—added to, of course, by the Powering Up Britain publications. Therefore, we feel that it is unnecessary.
On minimum energy-efficiency standards for domestic buildings, the Government agree with the ambition of reaching EPC band C by 2035 for as many homes as possible where that is cost effective, and for commercial properties below EPC band B where that is cost effective. On minimum energy-efficiency standards, these ambitions have already been published in various publications, including the Net Zero Growth Plan. The Government have already set out their timeline to deliver the future homes standard by 2025 and we have accelerated work on its full technical specification. We will consult further on that later this year. Regarding the proposal on heat networks, the Bill already outlines our heat network zoning proposals for England, which details where buildings should be connected to heat networks and gives local authorities the power to implement heat network zones.
On top of all those major commitments, as has been referenced in the debate, we recently launched the Energy Efficiency Taskforce, of which I have the honour to be co-chairman, to deliver our ambition to reduce the UK’s final energy consumption from buildings and industry by 15% by 2030. So there is no difference in ambition from the Government on energy efficiency. I agree with many of the points made on how important energy efficiency is, and we are progressing work to increase it across a whole range of sectors, as I have outlined.
In addition to all that, in the Statement on powering up Britain, which was made just before the Easter Recess and will be repeated here on Wednesday evening, we announced a further insulation scheme—the Great British insulation scheme—to deliver £1 billion in additional investment by March 2026 in energy-efficiency upgrades in some of the least efficient homes, including those in the so-called able-to-pay sector. Furthermore, we announced that we will extend the boiler upgrade scheme until 2028, supporting both domestic and small non-domestic buildings, building on the existing £450 million-worth of funding already committed between 2022 and 2025 to provide the signal that people have been asking for that the scheme will last in the longer term. All of that will help us to reach our ambition of phasing out all new installations of natural gas boilers by 2035, but before we can proceed to legislate for that we must provide effective cheap alternatives; otherwise, the population will, in my view, react badly to being compelled to do that.
I turn next to Amendment 98, tabled by the noble Lords, Lord Foster, Lord Lennie and Lord Whitty, and the noble Baroness, Lady Hayman, with contributions from my noble friend Lady Altmann. I would also like to thank the noble Lord for his important work as chairman of the committee. This amendment would require all privately rented homes to have a minimum energy performance certificate—EPC—rating of band C by December 2028, subject to specified exemptions. The amendments would also require non-domestic privately rented properties to meet EPC B by December 2028.
Again, the Government agree with the principle of increasing the ambition for minimum energy-efficiency standards to help reduce energy bills for tenants and to deliver carbon savings to meet our net-zero and achieve our fuel poverty targets. That was reflected in the Government’s consultation, which has been referred to, on proposals to raise the minimum energy-efficiency standard for privately rented homes to EPC C for new tenancies from 1 April 2025 and for all tenancies by 1 April 2028. We are currently considering the results of that consultation, but, as I have said in the House before, it is not an easy policy to progress. There are already shortages of rented accommodation in many parts of the country, and it is certainly not my ambition to further increase those shortages, so we will have to be careful how we proceed in that legislation. The Government also consulted on a minimum energy-efficiency standard for non-domestic privately rented buildings of EPC C by 2027, and EPC B by 2030.
Under the Energy Act 2011, the Secretary of State already has the necessary powers to amend the PRS regulations to raise the minimum energy-efficiency standards and set the dates by which landlords must comply with the new energy standards. As I explained in Committee, the amendment would not allow us to reflect the immense amount of valuable feedback that we received from the consultation in the final policy design that we are currently working on. This will be essential to ensure that it is fair and proportionate for tenants, of course, but also for landlords themselves. As I said at the time, we intend to publish the summary of responses to this consultation later in the year, as confirmed in the powering up Britain Statement.
I hope that I have been able to reassure noble Lords as to our ambitions in this area. We want to see the same policy outcomes as do many in this House and we are already working on many of these areas. I hope that my reassurances will enable the noble Baroness to withdraw her amendment.
Baroness Hayman (CB)
My Lords, I am grateful to everyone who has spoken on this important issue. The Minister said, in essence, that there is no difference between the Government and my amendment. If that is so, it will not be such a big deal for them to accept it. However, the truth of the matter is that this amendment would mandate action in this area, and in a specific timeframe. I am sad to say that the Government have a credibility problem in this area with their own ambitions, objectives and restatements of policy. I have been very much supported from all Benches—I am particularly grateful to the noble Lord, Lord Deben—and I wish to test the opinion of the House.
Lord Callanan
“(A1) ESOS regulations that provide for the imposition of a financial penalty must also provide for a right of appeal to a court or tribunal against the imposition of the penalty.”Member’s explanatory statement
This amendment requires ESOS regulations that provide for the imposition of financial penalties to include provision for a right of appeal.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 177, line 13, which makes provision about appeals against the imposition of a financial penalty.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 177, line 13, which makes provision about appeals against the imposition of a financial penalty.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 177, line 13.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 177, line 13.
“Marine habitats: reducing effects of offshore wind developments(1) The Secretary of State may, by regulations, prohibit offshore wind developments in marine protected areas.(2) The Secretary of State may, by regulations, prevent consent being granted for an offshore wind development if the mitigation hierarchy has not been followed.(3) “Mitigation hierarchy” means a framework for developers to address harms to biodiversity and ecosystems caused by developments, based on the sequential and iterative application of actions to avoid, mitigate, and then compensate for, such harms.(4) Subsections (1) and (2) apply to—(a) an offshore installation used for or in connection with wind energy generation;(b) offshore infrastructure, including cables and pipelines, connected to such an installation;(c) infrastructure connected to such an installation that is being decommissioned, has been decommissioned, or has been abandoned.(5) Regulations under this section are subject to the affirmative procedure.”Member’s explanatory statement
This new Clause would strengthen protection for marine protected areas from damage related to energy infrastructure and ensure the mitigation hierarchy is followed.
Baroness McIntosh of Pickering (Con)
My Lords, it gives me great pleasure to speak to Amendment 104. I look forward to hearing from other noble Lords with amendments in this group, notably the noble Lord, Lord Teverson, looking at the prohibition of coal mines in Amendment 131. Amendment 124, tabled by the noble Baroness, Lady Sheehan, looks at the prevention of flaring and venting, which causes great concern. The noble Baroness, Lady Bennett of Manor Castle, also has an amendment looking at the
“Prohibition … of new oil and gas fields and issuing of exploration licences, and of new coal mines”.
I will restrict my remarks to the mitigation hierarchy. I start by saying that I welcome the government amendments to the Levelling-Up and Regeneration Bill—Amendments 373A through to 373F—which I understand will add the mitigation hierarchy to that Bill. I thank my noble friend the Minister and his colleagues in DLUHC for listening to the concerns expressed by myself and other noble Lords at earlier stages of proceedings.
However, I will press my noble friend to confirm the extent to which this commitment applies only to new environmental outcome reports. For greater clarity, will this matter relate to all environmental outcome reports or just the new ones that will take effect at that time? Further to that, for my better understanding and to assist the House in considering Amendment 104, to what extent will tests be included within these environmental outcome reports? What will those tests cover? Will my noble friend go as far as to say that the tests will cover the site assessments involved in offshore wind planning?
The purpose of Amendment 104, which I am delighted to have the opportunity to speak to today, is to strengthen the protection for marine protected areas from damage related to energy infrastructure, and to ensure that the mitigation hierarchy is followed. I was delighted to serve on the EU Environment Sub-Committee, chaired by the noble Lord, Lord Teverson, for a short period. We took compelling evidence on the serious disruption caused by both the construction and operation phases of wind farms. So I put to my noble friend the Minister that ample academic and other evidence proves that this damage to sea mammals, seabirds and other creatures—indeed, to all marine life—is substantial.
This is a probing amendment and I do not intend to press it to a vote, but I would be interested to learn to what extent the addition of the mitigation hierarchy, in the amendments that the Government have tabled to the levelling-up Bill, will cover these points—namely, that this will apply to all environmental outcome reports and that this will cover site assessments involved in offshore wind planning. Earlier, I argued that there should potentially be a moratorium—I am sure the Government would not welcome that—on new applications for offshore wind developments, until we understand that the mitigation hierarchy will be followed. With those few remarks, I beg to move Amendment 104.
Baroness Sheehan (LD)
My Lords, I will speak to Amendment 124 in my name, but, before I do so, I will take some time to support my noble friend Lord Teverson’s Amendment 131—I will not say much else until he has had a chance to speak to it. I also support the amendment in this group in the name of the noble Baroness, Lady Bennett, which would stop the issuing of new licences for fossil-fuel exploration and exploitation in the North Sea.
Amendment 124, on “flaring and venting”, follows on quite neatly from the two amendments in the previous group on energy conservation in the home. I am delighted by, and congratulate the noble Baroness, Lady Hayman, on, her decisive win on that issue. The Government ought to have grasped that low-hanging fruit with both hands already, and flaring and venting in the North Sea is more low-hanging fruit that the Government have failed to grasp. It too could use energy that we already generate in a much more effective and efficient manner. A ban on oil and gas flaring and venting in the North Sea is the single most effective action that the Government could take to dramatically reduce methane emissions from that sector.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Baroness, Lady Sheehan, and to offer the strongest possible Green support for her Amendment 124, which would prohibit the flaring and venting of hydrocarbons other than in an emergency. The case has already been very powerfully made, but I will add that this has been a recommendation of the Commons Environmental Audit Committee and what is known as the Skidmore report—the Mission Zero independent review. It is something that other nations are well in advance of us on—a point that forms something of a theme for my remarks.
I also support for Amendment 131, which we have not heard fully set out yet, on no new coal mines. It has broad cross-party and non-party support, and it is obvious that we cannot have new coal.
I shall speak chiefly to my Amendment 138B, which goes further. Very simply, it would prohibit new oil, gas and coal extraction. I tabled a similar amendment in Committee and will not go over the same ground, but I want to briefly make three points. First, in May 2021, the International Energy Agency—not known as a group of radial greenies—called clearly for no new oil, gas or coal. Therefore, my amendment would deliver what the International Energy Agency said had to be done in 2021. We are now in 2023.
Since we were in Committee, we have seen increasing momentum behind the fossil fuel non-proliferation treaty, one element of which is no new oil, gas or coal. Six Pacific nations have issued a joint call to the world to say that this has to happen. The Prime Minister of Vanuatu said that polluting industries would not break from their “business as usual” behaviour without being forced. He said that we had to “explicitly stop the expansion” of production.
We often hear about the Government’s desire to be world-leading. It is actually this week, on 19 April, that the state of California is considering a resolution to formally endorse the fossil fuel non-proliferation treaty, which would deliver no new oil, gas or coal. It is going to have a Senate hearing on 19 April, introduced by the Senate Majority Whip, Senator Lena Gonzalez, and co-sponsored by the Indigenous Environmental Network. If the Government really want to be world-leading, they are going to have to catch up.
Lord Teverson (LD)
My Lords, I commend the noble Baroness, Lady McIntosh of Pickering, for emphasising the mitigation hierarchy in her amendment and for her speech. It is something that is really important to take notice of offshore. I was pleased to add my name to the amendment of my noble friend Lady Sheehan, and I have great sympathy with the amendment from the noble Baroness, Lady Bennett. However, I will speak primarily to Amendment 131.
I guess that if this Bill had come before this House three years ago, I would not have even contemplated putting an amendment down about no more coal, because it would have been totally and absolutely obvious that it would be a really stupid thing for any nation—let alone the United Kingdom—to do. However, we are in the situation where we have the Government saying that a coalmine in Cumbria should actually go ahead. I put this amendment down because I now wonder, if we have one, what else could happen. It is not specifically about Cumbria, but Cumbria is important.
Let us look at Cumbria for a moment. First, the issue does not revolve just around the production of coking coal for steel. That is estimated to be only 15% of production. The other 85% is expected to be exported. Of course, once that coal leaves our shores, we have absolutely no control over it; it is a commercial decision. We have no control over what that coal is used for, and almost certainly it is going to be used for energy and power generation. Even if we take that 15%, which is supposedly for coking coal, we have a situation where the UK steel industry is actually moving away from carbon-intensive methods into green steel. At the moment, we are some way behind our friends and colleagues in the European Union, in that they have some 38 green steel plants under plan and 10 operating at the moment, all mainly green hydrogen produced by electrolysis. The one proposed in the UK is blue hydrogen with carbon capture and storage, but that is the future. The future is not steel produced by coking coal.
So, in a way, the Cumbria mine project should be unacceptable to us, yet Michael Gove, who I had huge respect for when he was Defra Secretary of State and who introduced a huge number of important environmental improvements and plans that are still echoing beyond his tenure in that role, in December last year—only five months ago—approved the plan for that coal mine. Rather cynically, he approved it up to 2049, one year before we have to have net zero in the United Kingdom.
One of the main reasons I have tabled this amendment, apart from the fact that I would not have thought it even possible that the United Kingdom would contemplate opening a new coal mine, is our international reputation. Of course, as Members will remember, we were the president of COP 26. We had a very successful conference in Glasgow and most of us—all of us, probably—congratulated Alok Sharma on the work he did as president of COP 26. During that conference, the UK Government put out a press release about their own success. This was in November 2021, only some 18 months ago, and it heralds:
“The end of coal—the single biggest contributor to climate change—is in sight thanks to the UK securing a 190-strong coalition of countries and organisations at COP26, with countries such as Indonesia, South Korea, Poland, Vietnam, and Chile announcing clear commitments to phase out coal power”.
The end of coal; that is the message.
The BEIS Minister at the time, someone called Kwasi Kwarteng—noble Lords may have heard of him—said:
“Today marks a milestone moment in our global effort to tackle climate change as nations from all corners of the world unite in Glasgow to declare that coal has no part to play in our future power generation. Spearheaded by the UK’s COP26 Presidency, today’s ambitious commitments made by our international partners demonstrate that the end of coal is in sight. The world is moving in the right direction, standing ready to seal coal’s fate and embrace the environmental and economic benefits of building a future that is powered by clean energy”.
I applaud that statement. It is strong, determined and absolutely to the point. Yet we are about to have a coal mine that will produce coal not just for an outdated steel technology but to be used for power generation.
I am very proud of Britain’s reputation on climate change. On my Benches and others we have criticised many aspects, but we have shown, over coalition Governments, Labour Governments and even the present Conservative Government, that we have moved forward—further, in many ways, than our fellow G7 countries. That is why it is absolutely wrong that we should trash that reputation by one decision to open a new UK coal mine. Who knows? If that happens once, it can happen again. That is why this amendment is so important.
Lord Deben (Con)
My Lords, first, I have to say to the last speaker that I did not like that word “even”; this Government have introduced the highest targets of any country in the world. They have led the world in the most remarkable way and we should thank them for it—but that makes the argument against coal mines even stronger.
The Climate Change Committee is very careful not to overstep its mark. Its job is to advise on alternative methods and on the aims that we need to set the targets. Very rarely does it say that a particular measure is unacceptable. Indeed, in dealing with the question of new oil and gas, we have been very clear that the Government have to take into account the geopolitical position: you cannot just talk about the whole issue of the environment, because we are at war in Ukraine. We have a country determined to squeeze freedom out of Europe. We are concerned in all sorts of areas and we have to make very difficult decisions, so I hope my noble friend will remember how careful the Climate Change Committee has been in looking at these issues.
Baroness Blake of Leeds (Lab)
My Lords, I thank all noble Lords for their very important contributions on the amendments in this group. It is an enormous privilege to follow the noble Lord, Lord Deben, with his experience and expertise in the subject matter before us today. I want to keep my comments brief as we have had a lot of opportunity in different discussions and debates, particularly during the passage of this Bill, to try to get across just how strong the feelings are around the House on these matters.
I pay tribute to the noble Baroness, Lady Sheehan, for her amendment on the burning of methane and other hydrocarbons produced during oil extraction. As we have heard, very distinguished bodies have come out against this. In particular, there is a real concern that not taking notice of the need to address this issue undermines the UK’s commitments made at COP 26 and COP 27 under the global methane pledge. We need to take this seriously. We have heard how important the contribution of methane is towards the UK’s net greenhouse gas emissions. Just to add to the statistics around this, during the last decade the UK has wasted £2.6 billion in lost gas sales due to flaring and venting, and released 45 million tonnes of carbon dioxide into the atmosphere. When you put that into the context—as the noble Baroness, Lady Sheehan, did—of what could have been done with that fuel, it is a lesson that needs to be learned.
I concentrate my comments this afternoon on Amendment 131 in the name of the noble Lord, Lord Teverson, and supported by the noble Baronesses, Lady Sheehan and Lady Boycott, and my noble friend Lord Lennie. As we have heard, this amendment is specifically to prevent the opening of new coal mines in England and is a response to the proposed opening of a new coal mine in Cumbria. I have said before that I am really concerned about the message this coal mine sends out. It undermines totally our claim to be an international leader on climate. One only had to look at the press reports from around the world after the announcement was made to understand just how damaging this is.
I fully support the comments from the noble Lord, Lord Deben, on the planning system. I hope that we can move forward on this, so that local authorities and anyone who has a role in making decisions through the planning system have the necessary tools to stand up and not be concerned about the extortionate costs that would come their way if, after having turned down an application, it was turned over on appeal.
The other area that we have not emphasised enough is this: we cannot even claim that the coal mine in Cumbria would provide secure, long-term jobs. That just is not part of the equation here. As we have heard, it will not benefit British Steel. We are already seeing a significant decline in the coal used by the UK steel industry, including a 19% drop in demand for coking coal to run UK blast furnaces. As the noble Lord, Lord Teverson, said, the future is not coking coal.
I am not sure if anyone has mentioned the rather fanciful claim that this mine would be the first carbon-neutral operation of its kind. How can we stand here and say this seriously and honestly, and with particular regard to the fact that, as we have heard, a high percentage of the coal would be exported and so we would have no control over its use.
I am very disappointed that part of the debate around opposing the mine has ignored the far greater opportunities of investing in new green technologies for the local area. It is a perfect area for so many of the possibilities that are coming our way with real, sustainable jobs.
I repeat that Alok Sharma, a former president of COP, said last December that opening
“a new coalmine would send completely the wrong message and be an own goal”.
Surely we should be doubling onshore wind capacity, tripling solar capacity and quadrupling offshore wind capacity. I hope I have made it clear that on our Benches we support the amendment in the name of the noble Lord, Lord Teverson.
Lord Callanan (Con)
I thank all noble Lords for their amendments and contributions.
I will just make an observation first, having listened with great interest to the noble Baroness, Lady Blake. I was actually hoping that the noble Lord, Lord Lennie, would reply to this debate, as a fellow politician from the north-east of England. He will know very well that, in virtually every election that I fought in the region, the Labour Party campaigned against the closing of coal mines. I will be gracious and accept that time moves on, but it was only fairly recently that some of their parliamentary colleagues in the other place were campaigning for the opening of new coal mines and against the closing of old ones. Time moves on in politics but, had you said to me 10 or 15 years ago that I would be standing up in the House of Lords opposite a Labour Party telling me it does not want to see the opening of any coal mines, I would not have believed you.
Baroness Sheehan (LD)
Flaring and venting is something that I am keen on eliminating, and I will use every opportunity in the House to progress the issue further. Therefore, would it be sensible for the Minister to agree to meet with me and other noble Lords who have expressed an interest in this issue, so that we can talk sensibly about it, going forwards?
Lord Callanan (Con)
I did organise a recent meeting with officials to discuss the issue, at the request of the noble Baroness’s Front-Bench colleague, the noble Lord, Lord Teverson. The noble Baroness had the opportunity to attend if she had wished to.
Baroness McIntosh of Pickering (Con)
My Lords, I am grateful for the discussion that we have had on the various amendments in this group, and that my noble friend the Minister referred to the use of coal on heritage railways. I am delighted to say that I am president of the North Yorkshire Moors Railway and hope that we can continue to enjoy the spectacular scenery and days out that heritage railways offer.
I am disappointed that my noble friend missed an opportunity to explain to the House specifically which areas the amendments to the levelling up Bill will cover. Rather than detain the House further at this stage, I will pursue that through Written Questions, where I will have to get an Answer. I beg leave to withdraw my amendment.
Lord Callanan
“(8A) Where regulations under subsection (1) or (5) provide for the imposition of a civil penalty, they must also include provision for a right of appeal against the imposition of the penalty.”Member's explanatory statement
This amendment requires regulations under Clause 246 (arrangements for responding to marine oil pollution) that provide for the imposition of civil penalties to include provision for a right of appeal.
Lord Callanan
“(8A) Where regulations under this section provide for the imposition of a civil penalty, they must also include provision for a right of appeal against the imposition of the penalty.”Member's explanatory statement
This amendment requires regulations under Clause 247 (habitats: reducing effects of offshore oil or gas activities etc) that provide for the imposition of civil penalties to include provision for a right of appeal.
“(9) Regulations under this section are subject to the affirmative procedure.” Member's explanatory statement
This amendment provides that any regulations under Clause 247 (habitats: reducing effects of offshore oil or gas activities etc) are subject to the affirmative procedure.
Lord Callanan
Member's explanatory statement
See the explanatory statement for the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment provides for charges in connection with the carrying out of functions under Part 4 of the Petroleum Act 1998 to be imposed by regulations, rather than by an administrative scheme.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
“(8A) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament.”Member's explanatory statement
This amendment provides for a statutory instrument containing regulations under new section 38C of the Petroleum Act 1998 (inserted by clause 248) to be subject to the negative procedure.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
“(za) in paragraph (a), for the words from “the reference” to “Scottish Parliament” substitute “sections 38C(8A) and 39(6) of the 1998 Act are to be read as if each of those sections imposed a requirement that regulations under the section concerned are subject to the negative procedure (see section 28 of the Interpretation and Legislative Reform (Scotland) Act 2010)”;”Member's explanatory statement
This amendment ensures that where the Scottish Ministers make regulations under new section 38C of the Petroleum Act 1998 (inserted by clause 248), as applied in relation to carbon storage installations by section 30 of the Energy Act 2008, the regulations are subject to negative procedure in the Scottish Parliament.
Member's explanatory statement
This amendment removes amendments to section 30(2) of the Energy Act 2008 that are no longer thought to be needed.
Member's explanatory statement
This amendment is consequential on the amendment in Lord Callanan’s name at page 210, line 23.
Lord Teverson
“Prohibition of new coal mines(1) Within six months of the day on which this Act is passed, the Secretary of State must by regulations prohibit the opening of new coal mines and the licensing of new coal mines by the Coal Authority or its successors.(2) Regulations under this section are subject to the affirmative procedure.”Member's explanatory statement
This amendment will prevent the opening of new coal mines in England.
Lord Teverson (LD)
My Lords, I will just say to the noble Lord, Lord Deben—whose speech I very much appreciated—that, in the first group on the levelling-up Bill tomorrow, I have an amendment to include “net zero” in the planning organisation.
I wish to test the opinion of the House on Amendment 131.
Baroness Hayman
“GEMA general duties relating to climate change(1) In section 3A(1A) of the Electricity Act 1989 (the principal objective and general duties of the Secretary of State and the Authority), for paragraph (a) substitute—“(a) their interests in enabling the Secretary of State to meet the targets set under Part 1 of the Climate Change Act 2008 (UK net zero emissions target and budgeting);”.(2) In section 4AA(1A) of the Gas Act 1986 (the principal objective and general duties of the Secretary of State and the Authority), for paragraph (a) substitute—“(a) their interests in enabling the Secretary of State to meet the targets set under Part 1 of the Climate Change Act 2008 (UK net zero emissions target and budgeting);”.”Member's explanatory statement
This amendment seeks to include within Ofgem’s general duties a specific requirement to have regard to meeting the UK’s net zero emissions target.
Baroness Hayman (CB)
My Lords, we debated this amendment before Easter. At that time, I put forward the case that it was strange that Ofgem, as the regulator for energy, would not have a responsibility for net zero. I explained how many organisations and consumer bodies in the industry supported having such a duty, and asked the Minister why the Government were the odd ones out among all those informed views. I am afraid that he did not give me an answer that I found compelling. Therefore, I wish to test the opinion of the House.
“Community and Smaller-scale Electricity Export Guarantee Scheme(1) Within six months of the passing of this Act, the Secretary of State must by regulations require licensed energy suppliers with more than 150,000 customers (“eligible licensed suppliers”) to purchase electricity exports from sites including those operated by community groups, that generate low carbon electricity with a capacity below 5MW.(2) Fossil fuelled local power plants with a capacity of less than 5MW are not eligible for participation in the Community and Smaller-scale Electricity Export Guarantee Scheme, with the exception of a local combined heat and power plant that generates electricity ancillary to its purpose of providing heat for local heat networks.(3) “Fossil fuel” has the meaning given in section 101(4).(4) Licensed energy suppliers with fewer than 150,000 customers may also purchase electricity exports from the sites defined above provided that they do so on the terms set out by the regulations.(5) The regulations must require that eligible licensed suppliers—(a) offer to those sites a minimum export price set annually by the Gas and Electricity Markets Authority (“GEMA”),(b) offer to those sites a minimum contract period of five years, and(c) allow the exporting site to end the contract after no more than one year.(6) Within six months of the passing of this Act, GEMA must—(a) set an annual minimum export price for those sites that has regard to current wholesale energy prices and inflation in energy prices and the wider economy,(b) introduce a registration system for exporting sites meeting the requirements set out in subsection (1) and wanting to access these export purchases,(c) define specifications for the smart export meters required by such sites, (d) define “low carbon electricity” in such a way that it includes renewable generation technology and may include other technology with extremely low carbon dioxide emissions,(e) define requirements for an exporting site generating low carbon electricity with a capacity of less than 5MW to be registered as a Community or Smaller-scale Energy site, and maintain a register of such sites.(7) To access the export purchase agreements defined in this section exporters must—(a) register their site with GEMA,(b) install a smart export meter that meets specifications defined by GEMA, and(c) notify GEMA if their ownership structure meets the definition of a Community or Smaller-scale Energy site.(8) All licensed suppliers providing such purchase agreements must report annually to GEMA—(a) the number and capacity of Community or Smaller-scale Energy sites that have been offered contracts to purchase electricity and the number of these that agreed those contracts,(b) the total amount of electricity purchased under these agreements, and(c) the price paid for that electricity.(9) OFGEM shall make and publish a report annually on the operation of the export purchase agreements, setting out—(a) the number of Community or Smaller-scale Energy sites contracted with licensed energy suppliers under this section and the total amount of electricity purchased,(b) the licensed suppliers contracting with Community or Smaller-scale Energy sites and the amount of electricity each has purchased,(c) an assessment of how the mechanism is performing and the contribution it is making to delivering secure and low carbon electricity supplies, and(d) recommendations on how the mechanism could be improved.(10) Regulations under this section are subject to the affirmative procedure.”Member's explanatory statement
This and related amendments aim to provide a framework to support the growth of community and smaller-scale energy schemes and provide annual reporting on the success of the framework in increasing the number of such schemes.
Baroness Bennett of Manor Castle (GP)
My Lords, the noble Baroness, Lady Boycott, being unable to be here and following on from our debate earlier, I beg to test the opinion of the House on Amendment 134. In doing so, I note the acknowledgement that Amendment 135 is consequential on Amendment 134.
“Community and Smaller-scale Electricity Supplier Services Scheme(1) Within six months of the passing of this Act, the Secretary of State must by regulations require licensed energy suppliers with more than 150,000 customers (“eligible licensed suppliers”) to offer a Community and Smaller-scale Electricity Supplier Service agreement to any registered Community or Smaller-scale Energy site under section (Community and Smaller-scale Electricity Export Guarantee Scheme) for the purposes of allowing that site to sell electricity to local consumers.(2) The Community and Smaller-scale Electricity Supplier Service agreement will require licensed suppliers to make a community or smaller-scale energy tariff available to consumers local to the exporting site that has regard to the export price paid or that would be paid to that site under section (Community and Smaller-scale Electricity Export Guarantee Scheme).(3) The eligible licensed supplier may limit the total number of consumers the community or smaller-scale energy tariff is available to such that the total annual energy sold under the tariff is broadly equivalent to the total annual energy generated by the site.(4) The eligible licensed supplier will be the registrant for the meters of any local consumer purchasing energy under the community or smaller-scale energy tariff. (5) The eligible licensed supplier may charge a reasonable fee for the provision of services under this section provided that it has regard to distribution, licensing and regulatory costs and any guidance provided by GEMA.(6) The eligible licensed supplier shall return any money raised through the sale of energy under a tariff set up under this section to the Community or Smaller-scale Energy site, save for the fee allowed under subsection (5).(7) Eligible licensed suppliers must report annually to GEMA on—(a) the number and capacity of community energy groups or smaller-scale sites offered Community and Smaller-scale Electricity Supplier Service agreements and the number who have contracted to use them,(b) the total amount of electricity purchased under these agreements, and(c) the tariffs for each agreement.(8) GEMA must—(a) produce guidance on the level of community or smaller-scale energy tariffs and on the reasonable charges that eligible suppliers may charge for Community and Smaller-scale Electricity Supplier Service Agreements,(b) make and publish a report annually on the operation of the export purchase agreements, setting out—(i) the number of community energy projects or smaller-scale sites contracted with licensed energy suppliers under this section and the total amount of electricity purchased,(ii) the licensed suppliers contracting with community energy groups or smaller-scale sites and the amount of electricity each has purchased,(iii) an assessment of how the mechanism is performing and the contribution it is making to delivering secure and low carbon electricity supplies, and(iv) recommendations for how Community and Smaller-scale Electricity Supplier Service agreements could be improved.(9) Regulations under this section are subject to the affirmative procedure.”Member’s explanatory statement
This and related amendments would guarantee small energy generators a stable tariff for selling their energy based on current market rates and establish a local energy supply mechanism to enable community or smaller-scale low carbon generation schemes to sell directly to local people, along the lines of the Local Electricity Bill tabled in the last session of Parliament.
Lord Berkeley
“Renewable liquid fuels for low-carbon heatingWithin six months of the day on which this Act is passed, the Secretary of State must introduce proposals to bring into force a Renewable Liquid Heating Fuel Obligation, setting annual obligations on fuel suppliers to ensure the supply of recognised low-carbon renewable liquid fuels for domestic and commercial heating.”Member’s explanatory statement
This amendment requires the Government to introduce a Renewable Liquid Heating Fuel Obligation (RLHFO) for home and commercial building heating purposes, which would create a scheme that mirrors the Renewable Transport Fuel Obligations Order 2007. This would offer the option to off-gas-grid properties to switch to renewable liquid fuels, as another choice available to decarbonise their heating.
Lord Berkeley (Lab)
Noble Lords will be pleased to know that Amendment 138A in my name is a probing amendment, and I certainly do not intend to divide the House. This issue, which has come to me from a number of people in the south-west, is about the need for parity in the government incentives for heating homes that are off the gas mains. This would require a scheme that mirrors the Renewable Transport Fuel Obligations Order 2007.
I get the impression that the government policy on this is that everyone who is off the gas grid should be able to install a heat pump. When I am not in Scilly, I live in a little village in the middle of Cornwall, where lots of my friends use fuel oil for heating because there is no way that you can put a heat pump in some of these houses. Heat pumps are very good, but, in terms of fairness, about 1.7 million homes—perhaps occupied by 4 million people—are off the gas grid. They all want to decarbonise quicker, but how will they do so? The Government’s statistics show that 20% of off-grid homes are not suitable for heat pumps—again, we quite understand that. There is also the cost of installing them, of about £22,000, which is quite expensive for some people.
I am interested in a recent survey by the Future Ready Fuel campaign, which showed that 90% of people living off the gas grid are concerned about the Government’s current heating proposals, which are treating them unfairly. They would rather a greater choice of low-carbon heating solutions. The amendment asks the Government to investigate this further.
Before I speak about that, and the obvious need for consumer choice in this, it is probably worth explaining what the material—hydrotreated vegetable oil, or HVO—actually is. The easiest way of doing so is to say that it is used vegetable cooking oil, animal fat residue and tall oil—whatever that is—which is a by-product of the manufacture of wood pulp. Most of the time, when we hear about used cooking oil, it is because people have tipped it down the drains and eventually blocked them; it is very nasty for the drainage companies to solve this and take it away.
What surprises me is that the industry data has forecast that, by 2030, the feedstock availability, which is the important resource, is more than enough to meet the transport and non-transport needs, including home heating. The Department for Transport is very keen to use this to get more environmentally friendly airplanes in the sky—we might all have views about that. Production of HVO in the United States is already 10 billion litres and is expected to increase to 22 billion litres by 2025; ditto in Europe, where it is expected to double in the next two years from 5.5 billion litres to 11 billion litres.
This is not suggesting that this is the only low-carbon solution for people who need to heat their homes and who cannot use the existing systems, but it is an important issue for debate. You are telling people that they need to reduce their carbon usage and that the best way is air source or ground source heating, but there is an alternative. I suggest that the Government need to look at this and see whether there is a compelling case to look again at the tariffs. The Minister may say that the Government are doing this already; in which case, I shall say, “Well, that is lovely, but when is the report going to be published?” If they are not, I gently suggest that they should look at it, and I will be happy to facilitate a meeting between Ministers and the group of manufacturers concerned to see how we could take it forward. I beg to move.
Baroness Young of Old Scone (Lab)
My Lords, I will not detain the House. I declare an interest as living in an off-gas-grid property. I am sure that the Minister knows what I will ask him.
There is a lacuna in government communications or policy about the off-gas-grid regulations. These were consulted on extensively but so far, unless I have missed it, they have not resulted in an emanation in government policy. We are in a situation where, if you are one of the folk in an off-gas-grid residence, you do not know what to do. Under the system that was consulted on, it was proposed that, after 2026, if your oil boiler broke down you could not replace it with another oil boiler; as yet, we do not know whether that date is still in currency or not. It would be good if the Minister could tell us exactly what the current policy of the Government is and, if it is to change from something that was consulted on, when we would get an announcement.
The alternative, if they do not adopt the proposition from the noble Lord, Lord Berkeley, is that people need to get themselves an air source or ground source heat pump, but that is not a feasible proposition if you are trying to replace your recently defunct oil-filled boiler that has broken down between Christmas and New Year, when you have the grandchildren or your elderly great-granny in residence. Frankly, from the work done by the Environment and Climate Change Select Committee of this House on the boiler upgrade scheme, it was clear that getting an air source or ground source heat pump not only was an expensive proposition but would take some time. For the most part, it would take a number of weeks, and often a number of months, rather than having a nice man from British Gas or the local oil company coming round to give you a replacement on Boxing Day.
Apart from that, there is a debate to be had about the efficacy of air and ground source pumps in some houses, though I must admit that I probably come from the school that says that, providing you get a big enough one, you can heat almost anything—but that then raises major questions about ongoing energy costs.
Although I welcome the Minister’s statement earlier today about the extension of the boiler upgrade scheme term, it is a real pity that it was a complete failure in terms of numbers in the last financial year, and that most of the money that had been allocated had to be sent back to the Treasury. That is a great regret. My question—which my noble friend Lord Berkeley has given me the opportunity to ask yet again—is when we will get some clarity on the off-gas-grid regulations and what that clarity, if I have missed it, might be.
Lord Ravensdale (CB)
My Lords, I want to offer a few words of support for the amendment from the noble Lord, Lord Berkeley. It is something that the Government should take very seriously if it is to be used in a very specific and limited way for off-grid properties—the key point being the feedstock availability, which needs to be understood in more detail.
On the link with sustainable aviation fuel that the noble Lord, Lord Berkeley, mentioned, there is potentially an important counter-cyclical benefit here, in that jet fuel is dominant in the summer months and heating oil is dominant in the winter months. They are essentially the same fuel, so there is potentially a good economic fit between those two cases, and the relevant departments—DESNZ and DfT—should work together on that.
I would suggest some potential improvements to the amendment, such as limiting it to those off-grid properties that already use heating oil and specifically stating in the amendment that this is only for recycled fuels, to eliminate the unintended consequences of biofuels being eligible. Overall, however, this is something that the Government should take seriously.
Lord Teverson (LD)
My Lords, I certainly echo the question that the noble Baroness asked about the timing of the boiler scheme. There has been a big debate in the past on the use of frying oil, and getting the fiscal measures and the subsidy right so that it can be used as a transport fuel. Those arguments went on for a long time. However, I believe that there needs to be fiscal-incentive neutrality between the different types of renewable fuels, whether they are used within transport or indeed off grid.
Lord Lennie (Lab)
My Lords, I will briefly thank my noble friend Lord Berkeley for this amendment, which is asking the Government to introduce renewable liquid heating fuel obligations that mirror the renewable transport fuel obligations as a choice available for decarbonising heating. I do not know—perhaps the Government know—whether there is any reason why they cannot accept this proposal, given that these fuels can be produced and distributed using industrial facilities that seem to already exist, and in turn using local raw materials, making it possible to diversify the energy base of the country in order to keep moving forward and achieve energy independence. Would it work? If so, why not give it the go-ahead?
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, I too thank the noble Lord, Lord Berkeley, for his amendment, and the noble Baroness, Lady Young, and the noble Lords, Lord Ravensdale and Lord Teverson, for their contributions to this debate. Decarbonising buildings off the gas grid—and I should perhaps declare an interest in that I, too, live in a house that is off the gas grid—using fossil-fuel heating is a key priority for the Government, as they use some of the most polluting fuels. Action on these buildings will help us to reduce our dependence on imported oil and protect consumers from high and volatile energy prices, while keeping us on track for net zero.
In 2021, we consulted on a policy of phasing out the installation of fossil-fuel heating systems in homes, businesses and public buildings in England off the gas grid during the 2020s. We will issue the government responses to these consultations in due course, setting out our plans regarding these policies. I am afraid that I cannot be more specific than that on the timing.
The noble Lord’s amendment seeks to impose new obligations on heating fuel suppliers, to encourage the supply and use of renewable liquid heating fuels. I appreciate his intent to increase the role of renewable liquid fuels in heating to help with the transition to clean heat off the gas grid. However, a number of questions must be answered before we can make decisions on what role renewable liquid heating fuels should play in the future heating mix and develop the policy framework which would support such a role. As he will be aware, sustainable biomass is a limited resource. We will need to prioritise its use in sectors that have the fewest options for decarbonisation and the most potential for emissions reductions. Indeed, the Climate Change Committee argues that the use of biofuels in heat should be minimised as far as possible to enable best use of biomass across the whole economy. Overcommitting in heating risks having effects in other sectors, such as transport, or driving up the prices paid for these fuels. The forthcoming biomass strategy will review the amount of sustainable biomass available to the UK and will then consider how this resource could be best used across the economy to achieve net zero. Policy decisions on the role of renewable liquid fuels will need to reflect this strategy.
Lord Berkeley (Lab)
I am grateful to the Minister for her reply; I will read it with great interest. I think what she was really saying is that further work needs to be done, but the problem is that the zero carbon target date is still there. Perhaps she would not mind if, having digested what she has said and talked to some of my colleagues, we could come back to her and see whether it would be appropriate to have a meeting. In the meantime, I beg leave to withdraw the amendment.
Lord Callanan
“(4A) Where regulations under this Act are subject to the made affirmative procedure, the statutory instrument containing them must be laid before Parliament after being made. (4B) Regulations under this Act contained in a statutory instrument laid before Parliament under subsection (4A) cease to have effect at the end of the period of 28 days beginning with the day on which the instrument is made unless, during that period, the instrument is approved by a resolution of each House of Parliament.(4C) In calculating the period of 28 days, no account is to be taken of any whole days that fall within a period during which—(a) Parliament is dissolved or prorogued, or(b) either House of Parliament is adjourned for more than four days.(4D) If regulations cease to have effect as a result of subsection (4B), that does not—(a) affect the validity of anything previously done under the regulations, or(b) prevent the making of new regulations.”Member’s explanatory statement
This amendment makes provision about the “made affirmative” procedure for the purposes of the amendment in the name of Lord Callanan at page 161, line 15.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 230, line 18.
“(5A) Any provision that may be included in regulations under this Act subject to the made affirmative procedure may be made by regulations subject to the affirmative procedure.”Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 230, line 18.
Lord Callanan
Member’s explanatory statement
See the amendment in the name of Lord Callanan at page 230, line 18.
Lord Callanan
“(ca) section (Treatment of recycled carbon fuel and nuclear-derived fuel as renewable transport fuel);”Member’s explanatory statement
This amendment provides that the new Clause inserted after Clause 113 by the amendment in Lord Callanan’s name comes into force two months after Royal Assent.
Energy Bill [HL]
Monday 24th April 2023
(1 year, 7 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 86-II Second marshalled list for Report - (13 Apr 2023)
The Lord Privy Seal (Lord True) (Con)
My Lords, I have it in command from His Majesty the King and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Energy Bill, have consented to place their interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, I will update the House on the legislative consent Motion process for the Energy Bill. The UK Government are seeking legislative consent Motions from the devolved legislatures for the Bill, in line with the Sewel convention. My officials are working with devolved government officials and will continue to do so throughout the Bill’s passage.
The Scottish Government have requested amendments to the Bill and are currently withholding support for legislative consent. We will of course continue to work with them regarding their concerns. The Welsh Government have not yet laid a legislative consent memorandum. It is not possible at present to obtain a legislative consent Motion from the Northern Ireland Assembly, but the UK Government are engaging with officials in the Northern Ireland Civil Service. The UK Government welcome the interest that the devolved Governments have shown in the Energy Bill and will continue to work closely with them on proposed changes in order to progress legislative consent Motions for the Bill.
Lord Lennie (Lab)
My Lords, this huge Bill leaves the House in far better shape than when it arrived. A combination of Labour, the Liberal Democrats, other parties, individuals and, most importantly, Cross-Benchers have secured measures that should see ISOP’s independence assured, community energy export markets develop, warmer homes and an efficiency plan to achieve that, the Gas and Electricity Markets Authority strengthened, and the ceasing of any further coal mining in this country—thanks to the noble Lord, Lord Teverson. It is to be hoped that the Government will support these changes in the other place and will not bring this Bill back for ping-pong. The range of supporters across the House should be sufficient to convince the Minister to back the changes to the Bill made by this House.
In the meantime, my thanks go to the Minister—remarkably, he has stayed the course while his Government have changed leadership three times and his Secretary of State twice since we began in September 2022—and his advisers from BEIS, and subsequently DESNZ, who have continually briefed and been available to answer questions and clarify intentions as we wended our way through this tome of a Bill.
My appreciation goes to my noble friend Lady Blake for her continuing support and to the noble Lord, Lord Teverson, on the Liberal Democrat Benches, with whom it has been a pleasure to work on the Bill. My thanks are also due to a number of Back-Benchers and Cross-Benchers, mainly drawn from the Peers for the Planet group, particularly including the noble Lord, Lord Ravensdale, the noble Baronesses, Lady Hayman, Lady Boycott, Lady Bennett and Lady Worthington—sadly temporarily departed from this House—and my noble friend Lord Whitty. Thanks also go to the House staff and the doorkeepers for arrangements during delays in advancement of the progress of the Bill, which were not of their making, and for keeping the quick-quick-slow dance rhythm to the Energy Bill.
My biggest thanks go to the remarkable Milton Brown in Labour’s legislative team of advisers for always being up to date with the progress of the Bill, for his liaison with the other place and for his political briefings and judgment, which allowed my noble friend Lady Blake and me to keep focused on this Bill over a long period. We wish it well on the next stage of its journey.
Lord Teverson (LD)
My Lords, one of the things that strikes me most about the passage of the Bill through this House is that it is has been the opposition parties saying to the Government, “Get on with it. We actually need this Bill through to give the powers that we need to meet decarbonisation and modernise the energy production system in this country”. I agree with the noble Lord, Lord Lennie, that the amendments that have been made by this House are absolutely in line with the Government’s decarbonisation objectives. I hope that the Commons, as well as the Government themselves, will consider them as positive rather than negative.
I will not go through the long list of other Peers named by the noble Lord, Lord Lennie. What I will do is to say a great deal of thanks to Peers for the Planet for its work in the House, to the noble Lord, Lord Lennie, and to the noble Baroness, Lady Blake, whom I have enjoyed working with very much indeed. From our own offices, I thank Sarah Pughe and Sarah Dobson.
We look forward very much to not having to play ping-pong on this Bill. Maybe that is too much to hope for but I thank the Ministers, the noble Lord, Lord Callanan, and the noble Baroness, Lady Bloomfield, for their co-operation during the passage of the Bill. I also thank their teams. I look forward most of all to the Bill being implemented, so that the country as a whole can move ahead in its aims and objectives.
Baroness McIntosh of Pickering (Con)
My Lords, I congratulate my noble friend on steering such a major Bill through. I am mindful of the fact that it was originally going to be an energy security Bill. I know that I and a number of noble Lords focused on the environmental aspects, particularly the mitigation hierarchy. I welcome the fact that this is to be enshrined in the levelling-up Bill, and look forward to pursuing it further on that Bill with my noble friend on the Front Bench.
I ask my noble friend to be mindful of the fact that the Scandinavian countries, led by Denmark, have raised a flag about Russian vessels masquerading as fisheries vessels. These are, it is assumed, purposefully undertaking spying operations, particularly to look at the underground cables and the major offshore wind farm operations, notably operated by Denmark. I understand that we are to have a major operation where a lot of this work will co-ordinate around the Dogger Bank, so I urge him to be mindful of the security risk associated with such a major area of the North Sea, where we are extremely vulnerable to such operations by Russian and other forces which may not be so conducive to our energy security as we might wish.
Baroness Liddell of Coatdyke (Lab)
My Lords, I am grateful to everybody who took part on the Bill because I never expected to see carbon capture and storage—I am the honorary president of its association—getting such a good hearing in this House. I put on record my appreciation of the £20 billion that the most recent Budget has decided to expend on carbon capture and storage. We cannot reach the targets on net zero without carbon capture and storage; the noble Baroness, Lady McIntosh, referred to the Danes, who are making fantastic progress on that in their fields. My last point is that we have the capability to capture 7,000 tonnes of carbon in the North Sea and elsewhere. Only Norway has more capacity than that. There is a great future here and, frankly, I am still pinching myself to accept that this House has got behind the Bill. I thank everyone who took part in it very much.
Baroness Hayman (CB)
My Lords, I feel that I should say something as everyone else has. There will be two things and they are very brief. One is to echo the hope that we will not have to fight battles again at ping-pong on issues which are absolutely mainstream and in line with the Government’s objectives. They are common-sense measures, particularly on insulation and energy efficiency, and on the remit of Ofgem. The other is that, in declaring my interest as chair of Peers for the Planet, and simply because this is an opportunity to thank those who give us support, I also record my thanks to Emma Crane, Kyla Taylor and David Farrar at Peers for the Planet for the work that they did on the Bill.
Lord Callanan (Con)
My Lords, let me add my thanks to all noble Lords who contributed to a very detailed and proper scrutiny of the Bill. We received lots of helpful suggestions—some unhelpful suggestions as well, but that is in the nature of the debate. Everybody engaged positively in the process and has been very thoughtful in their contributions. The Bill leaves this House in good shape.
Let me formally thank the Opposition Members, who have co-operated well. It is fair to say that they had no grief with the fundamental structure and idea of the Bill, but, as is the nature of opposition, wanted to make some improvements and push the Government to go a bit further. The Liberal Democrats—particularly the noble Lord, Lord Teverson—along with the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, have engaged really positively in the process and have been constructive. I thank them.
Let me also thank the many Back-Benchers who took part, including the noble Lord, Lord Ravensdale, the noble Baroness, Lady Worthington—who has sadly departed these shores for somewhere sunnier and nicer—and the noble Baronesses, Lady Hayman and Lady Liddell. I assure the noble Baroness, Lady Liddell, that I share her passion for CCUS. She will have seen in the announcement just before the Easter Recess that the Government are moving on with the track 1 negotiations. I am sure she will welcome that. Many across the House have contributed very much to the Bill and I am extremely grateful for all their contributions.
She is sadly not with us today, but let me also thank my Whip, my noble friend Lady Bloomfield, who has kept us all to order and taken a number of groups through herself. We are all immensely grateful that none of us managed to fall asleep during the proceedings and were therefore spared some of her acerbic interventions in such circumstances.
The Bill comes at a critical time for our country. Record high gas prices, Russia’s illegal invasion of Ukraine and the challenge of climate change all highlight why we need to work to boost Britain’s energy independence and security through the development of low-carbon technologies. Secure, clean, affordable energy for the long term depends on a transformation of our energy system.
That, fundamentally, is why we brought forward the Bill—the most extensive piece of primary legislation in a decade. The Bill delivers on our key commitments from the British energy security strategy, the Powering Up Britain paper, which brings together the energy security plan, the net-zero growth plan and the net-zero strategy. All have come together in this legislation. The Bill will help to drive an unprecedented £100 billion of private sector investment by 2030 into new British industries and support around 480,000 jobs by the end of the decade.
I must also thank the House of Lords Public Bill Office, the House clerks, and the Office of the Parliamentary Counsel—Richard Spitz, Lucy Baines and Ben Zurawel—for their extremely hard work drafting the Bill. It is a very long piece of legislation.
My thanks also go to all the policy, analytical and legal officials in the Department for Energy Security and Net Zero, the Department for Environment, Food and Rural Affairs and the Department for Transport, for their expert advice and resilience.
I also thank my Private Secretary, Angus Robson, the senior responsible officer for the Bill, Jeremy Allen, and the expert Bill Team: Jessica Lee, Safia Miyanji, Nicholas Vail, Salisa Kaur, Amanda Marsh, Abi Gambel, James Banfield, Matthew Pugh, Laura Jackson, Anthony Egan and Phaedra Hartley. They are extremely talented public servants. They worked long, hard and tirelessly on this important legislation and we owe them all our thanks.
Let me also thank the Department for Energy Security and Net Zero’s departmental lawyers, in particular the lead lawyers Mike Ostheimer and Martin Charnley for keeping me legally correct. It is a tough job; somebody has to try and do it. They do it nicely, well and tirelessly. That is the end of the debate so far in this House. It is my extreme pleasure to hand it to my ministerial colleague Andrew Bowie, who will commence the debate in the House of Commons.
Energy Bill [Lords]
Tuesday 9th May 2023
(1 year, 6 months ago)
Commons ChamberRead Full debate Energy Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 86-II Second marshalled list for Report - (13 Apr 2023)
The Secretary of State for Energy Security and Net Zero (Grant Shapps)
I beg to move, That the Bill be now read a Second time.
For much of the past 50 years since the oil shock and energy crisis in the 1970s, Britain has enjoyed abundant and reliable electricity. Over these years, some may have traded in their teasmades for barista coffee machines, swapped their electric fondue sets for air fryers or replaced cassette players with Spotify—I do not know why I am looking at the right hon. Member for Doncaster North (Edward Miliband)—but energy has remained largely plentiful for the best part of half a century. In the past 15 months, that secure foundation has been fundamentally shaken, with Vladimir Putin’s brutal invasion of Ukraine and his subsequent attempts to weaponise energy forcing up bills for millions of families.
This Government have stepped in and paid half the typical energy bill this winter, but frankly, those are just stopgap measures. Putin’s war marks a fundamental turning point for Britain and the world’s energy security. After years of growing reliance on fossil fuel imports around the world, this is a moment when the globe has woken up and needs to apply changes to its energy supplies for the future.
Sir Desmond Swayne (New Forest West) (Con)
I know it is early, but will my right hon. Friend allow me to intervene?
Grant Shapps
If my right hon. Friend will give me a moment, I will make a little progress first, and he can be sure that I will give way shortly.
We will replace those oil and gas imports with home-grown renewables and, critically, nuclear power to deliver resilient and reliable energy, powering Britain from Britain. We will reduce wholesale electricity prices to among the cheapest in Europe by 2035, protecting the British consumer from volatile international energy markets.
John Redwood (Wokingham) (Con)
I agree with the Secretary of State that we need more energy independence and more domestic energy, so why does the Bill propose a 140% increase in imported energy through interconnectors, which will make us more dependent and very vulnerable?
Grant Shapps
My right hon. Friend makes an excellent comment, as ever, on interconnectors, but I would point out that with the growing number of interconnectors, particularly electricity interconnectors, last winter, for example, we were able to export 10 TW to France through interconnectors, providing us with income. The answer is that they work in both directions, and in some cases, they provide the reliability of, for example, France’s vast nuclear fleet of 56 reactors. When whose reactors were down last winter—because even nuclear power sometimes has to come offline—we have been able to export our power to France, and it has been a net export. Our mission is to secure the clean and inexpensive energy that Britain needs to prosper.
Sir Desmond Swayne
On clean energy, I am very enthusiastic to see the hydroelectric generator that we used to have on the Avon at Ringwood generating electricity once again. Will my right hon. Friend use the powers afforded to him in clause 273 to take on the huge barriers to entry that prevent community energy generators from selling to customers?
Grant Shapps
My right hon. Friend is absolutely right about the importance of hydroelectricity in the overall energy mix. It is something that we are working on, he will be pleased to know, and I am happy to offer him a meeting with the Bill Minister, the Under-Secretary of State for Energy Security and Net Zero, my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie), to discuss his constituency case in more detail.
Several hon. Members rose—
Grant Shapps
I will give way in a few moments; let me just make a few lines of progress.
All of this is why, earlier this year, I was appointed to lead the new Department for Energy Security and Net Zero. It is why, just 50 days later, we published our ambitious “Powering Up Britain” blueprint for the future of energy security in this country. We are bringing all that work together in the Bill before the House.
Alex Cunningham (Stockton North) (Lab)
We all celebrated the Government’s decision to move the Teesside carbon capture, usage and storage and power project to the next stage. Today in a written ministerial statement, a Government Minister, the hon. Member for Derby North (Amanda Solloway), said that she was delaying by another four months a decision on whether those plans will get planning permission. Can the Secretary of State understand why this delay will set alarm bells ringing on Teesside and how it will impact the project, and can he explain why the delay is necessary?
Grant Shapps
As the hon. Gentleman will know, Ministers must be quite careful when commenting on the quasi-judicial planning decisions that his question goes into, but he should not mistake—nor should anyone in this House—this Government’s determination to get on with things like CCUS and hydrogen. That is why we have announced a £20 billion programme for CCUS, the largest of any country in Europe. As I say, though, and as he well knows, specific planning decisions are matters that the planning inspector advises Ministers on.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
The Secretary of State talks about powering up Britain, but perhaps he could take some lessons from how the Welsh Labour Government and Welsh Labour councils are powering up Wales. The other week, I visited a very important development in Rumney in my constituency, where there is a new mixed housing development. Every single one of those properties has a ground source heat pump, photovoltaics on the roof and an electric vehicle charger on the drive. They are well insulated, they are using sustainable materials, and they are bringing down costs for consumers now, but also contributing to net zero. Is that not the example we should follow across the UK?
Grant Shapps
I am pleased to report that on what is, I think, a largely uncontroversial Bill, we are working very closely with the devolved Administrations and trying to learn lessons from each other, in order to support the whole country in this energy security move. This Bill is the longest and most significant piece of energy legislation to ever come before the House; it is a critical part of making Britain an energy-secure nation. On that point, I thank colleagues across the House for their positive engagement with me and with the Bill Minister, my hon. Friend the Member for West Aberdeenshire and Kincardine, in the lead-up to this debate. I know there is much in the Bill that already has cross-party support.
Sir Alok Sharma (Reading West) (Con)
I commend the Secretary of State for the Bill, and I welcome its key objectives, as I think everyone in this House does. However, a number of amendments were made in the other place, particularly one relating to a net zero duty for Ofgem. Those amendments are now in the Bill. Could the Secretary of State clarify whether the Government will support all of them, particularly the one on Ofgem?
Grant Shapps
I thank my right hon. Friend for his intervention. We will be looking very closely at the proposed amendments—the Bill Minister himself will be addressing those in detail, which is the right way to do it—and of course, the regulator is already very largely focused in that direction. As I often point out, of everybody in this place I have a particular interest in making sure we achieve what we have set out to do, because this House has kindly legislated to send the Secretary of State for Energy to prison if they do not meet the net zero commitments, potentially through contempt of court. We take these things seriously, but my right hon. Friend will wish to hear more on that issue from my hon. Friend the Energy Minister.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is fair to say that the amendment about putting a statutory net zero duty on Ofgem does not need much studying. On the issue of clean, inexpensive energy, Hinkley Point C is now going to cost £33 billion. We know that Sizewell C will cost in the order of £35 billion if that follows, and the existing clean-up for nuclear radioactive waste is in the order of £230 billion, so where on earth does nuclear fit into the definition of clean and inexpensive?
Grant Shapps
We are talking about energy security, and about a tyrant costing all our constituents a fortune, and SNP Members do not want to fix it. They do not want to have reliable nuclear power—they stand against it. They stand against oil and gas. I do not know where they expect all this energy to come from in a reliable way in the future. However, where there are differences, I want to be constructive with the hon. Gentleman and, of course, the devolved Administration. By and large, that is the way in which this Bill has progressed, so on the other issues—the amendments—we will of course try to find ways to work with the House in considering all of them.
Caroline Lucas (Brighton, Pavilion) (Green)
Will the Secretary of State give way?
Grant Shapps
I will make a little progress, and then I will give way again. I just want to say a big thank you to a lot of Members for their work on energy and on considering this Bill, such as the net zero review led by my right hon. Friend the Member for Kingswood (Chris Skidmore); the pre-legislative scrutiny that the Business, Energy and Industrial Strategy Committee carried out on parts of the Bill; the 1922 BEIS Back-Bench committee’s ongoing consideration of the issues we face; and many others in this House.
Caroline Lucas
Will the Secretary of State say a little about hydrogen? As he will know, there is real concern about putting a hydrogen levy on household bills at a time when so many people are already struggling to pay those bills. Will he look again at where to put the funding for hydrogen? Secondly, will he accept that using hydrogen for households—for home heating—is very inefficient? It is expensive, and it brings safety risks. We do need hydrogen for hard-to-decarbonise sectors, but will the Secretary of State rule out using it in homes?
Grant Shapps
It is certainly the case that hydrogen comes with complications when it comes to home heating, which is why we have a couple of different trials ongoing to understand some of the impacts. We will know more once those trials have been carried out. However, the hon. Lady asked specifically about a levy, so I should point out that the Bill will not itself introduce a levy. She is right that we need to see the results of trials before we understand how that should operate, so we will wait a little while.
Several hon. Members rose—
Grant Shapps
I will make a little progress before I give way again.
Turning to the contents of the Bill, I think it is helpful to consider them in three themes. The first is about liberating private investment in clean technologies, helping reduce our exposure to the very volatile gas prices in the long term. For example, the Bill will help us to exploit our absolutely extraordinary potential for carbon capture, usage and storage, as well as low-carbon hydrogen, potentially for industrial use. This country has a vast storage reservoir beneath the North sea, much of it once filled with oil and gas. There could be enough capacity to store up to 78 billion tonnes of carbon. I appreciate that people have difficulty imagining what that would look like—I know I did. The answer is that it is the equivalent weight of 15 billion elephants, if people are better able to imagine that, or to put it another way, an atmospheric pressure roughly the space of 200 million St Paul’s cathedrals. In short, our geology provides us with a lot of space under the North sea, and if we are able to fill the UK’s theoretical potential carbon dioxide storage capacity with CO2, the avoided costs at today’s emission trading prices could be in the region of £5 trillion. We have the potential for a geological gold mine under the sea, and the Bill helps us to access it.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
CCUS is very important to me and to my constituency. EnQuest, the operator at the Sullom Voe terminal, sees the next generation of the use of that terminal involving CCUS, but does that not reinforce the point made by the right hon. Member for Reading West (Sir Alok Sharma), in relation to Ofgem’s remit? Does it not sit very nicely with the recommendations that the Secretary of State has received from Tim Pick, his offshore wind champion, who has also made the point that Ofgem’s mandate must be reshaped to bring it into the appropriate framework for net zero challenges? That remit has not been touched since 2010.
Grant Shapps
The reality is that the Government have committed to those targets, as has the whole House, because the law has already been passed. We have the carbon budgets, one to six; I think we exceeded one, two, three and four, but we are on track for five, and a few weeks ago, I set out in “Powering Up Britain” how we plan to meet carbon budget six as well. The conversation about whether the regulator has an individual duty is an interesting one, but the reality is that in truth, we are all headed towards that cleaner energy system.
Dame Andrea Leadsom (South Northamptonshire) (Con)
My right hon. Friend will recognise that, to keep costs down, to get electricity to the places where it is needed and to avoid us having to pay offshore wind producers to switch off when there is no capacity, we need something like 600 km of electricity wires between now and 2031. Over the past eight years, we have built only about 32 km. Can I press him on the proposal in the 1922 Business, Energy and Industrial Strategy committee report that there should be a new planning allowance to have those cables going down the side of transport corridors such as motorways and train lines?
Grant Shapps
I met my right hon. Friend to discuss some of the ideas in the report and I am grateful for all of them, including the idea of cables running along existing transport routes. I am pleased to let her know that we are taking forward many of the suggestions from that particular committee, as well as those from elsewhere in the House. There is much in the Bill to assist with organising and planning, but there is much more to do as well. I am grateful for her assistance in all this.
By introducing business models, we want to get the advantage of that long-term potential geological storage, with revenues and a potential CCUS industry that could support something like 50,000 jobs, with another 12,000 in hydrogen by 2030. We will also build the market for low-carbon heat pumps to 600,000 installations a year by 2028, and accelerate the transition to ultra-efficient electric heat pumps to reduce our reliance on the volatile global gas market and improve our own energy security in return.
We will also bring forward reforms to test new methods of decarbonising heating, which is where we come back to the hydrogen trials. We will have a first-of-its-kind hydrogen village trial that will convert up to 2,000 properties to hydrogen for heating, instead of natural gas, and repurpose the existing gas network infrastructure for 100% hydrogen. Through that, we can find out about the efficiency, or otherwise, of building a hydrogen heating network. I put on record that I understand there are challenges, which is why we want to test this first.
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
There is a lot in the Bill that is commendable for improving energy security and decarbonising energy production, but where it is perhaps lacking some ambition is in reducing energy emissions, particularly for homes. We know that poorly insulated homes in particular are expensive, at a time of a rising cost of living, to heat, but we also know that we can do a lot more in this area. Will my right hon. Friend accept amendments as the Bill progresses to improve on the loss of energy and heat and on home energy efficiency?
Grant Shapps
My hon. Friend is absolutely right that it is always easier not to expend the energy in the first place, but to save it. That is why we have been pleased to get from something like only 14% of homes having a decent energy rating in 2010 to 47% now, and we will get to more than 50% this year. We have invested more than £12 billion in this work in the last spending period and going forward to 2025-28. We are serious about securing the energy efficiency of homes and he is right to highlight that as a key concern.
Justin Madders (Ellesmere Port and Neston) (Lab)
I hope the Secretary of State will be able to stay on to have the benefit of my constituents’ experience of the hydrogen village trial so far. Can he confirm, as per previous correspondence with Ministers, that the Government will still expect to see strong public support before agreeing to proceed with any trials?
Grant Shapps
I have been following the discussions in Whitby in the hon. Gentleman’s constituency and I want to be clear: we have no desire to trial hydrogen with communities that do not want to see disruption. On the other hand, I know that other communities are keen on it. For the reasons already discussed in this debate, there are clearly pros and cons in switching to hydrogen for household heating and it will not be appropriate everywhere. That is why we want to learn from those trials, but it is also important to recognise that hydrogen for industrial use is a different matter. We are feeling our way into all this. Together with what we learn from the H100 neighbourhood trial in Fife, the village trial will provide critical evidence to inform decisions on hydrogen in heat decarbonisation, which will not be taken until 2026.
Alan Brown
I appreciate the Secretary of State giving way on this matter. Just on the point of hydrogen trials and effectively doing it with consent, one of the clauses in the Bill allows companies to go in and disconnect people from the gas grid to facilitate trials. Surely that is the polar opposite of doing it by consent.
Grant Shapps
That is a misreading of what the Bill does. I absolutely agree with the hon. Gentleman: I refer to the answer I just gave. Given my record of campaigning against what happened with prepayment meters, he will know that that would never be the intention. The element in the Bill is to enable those trials to take place where they would not be able to otherwise, but as I just indicated to the hon. Member for Ellesmere Port and Neston (Justin Madders), that certainly would not be forced.
The second pillar in the Bill will help to strengthen our energy security and minimise cost to consumers. It will pave the way for an independent system operator and planner, or ISOP, whose focus will be on building a better, more reliable energy system. The ISOP will maintain our energy security, operate at the cutting edge of net zero with long-term ambitious plans and bring electricity and gas systems together into a single institution, enhancing our ability to plan for our energy system in the future and to reduce costs.
Andrew Selous (South West Bedfordshire) (Con)
May I bring up the question of clean energy for aviation? In terms of sustainable aviation fuels, can the Secretary of State give us some assurance that we will have a home-grown UK sustainable aviation fuel industry, so that it is something we do here and do not import from overseas?
Grant Shapps
My hon. Friend may know that I helped to establish the Jet Zero Council, which has been working for nearly four years to answer exactly this problem, bringing together academia, industry and government. The upshot of that is that this morning I was honoured to be with His Majesty the King, in his first public engagement since the coronation, at the Whittle Laboratory, where he was turning the first sod to build a new £50 million building that will work primarily on sustainable aviation, including fuels. As Transport Secretary, I also set a 10% requirement for sustainable aviation fuel by 2030, ensuring that we lead the world in the production of this new industry, too.
Several hon. Members rose—
Grant Shapps
I will come back to colleagues, but I will make a bit of progress first. We will also enable a competition in onshore electricity networks, which could see consumers save £1 billion by 2050, and we will protect almost half a million heat network customers, ensuring that smart energy systems are both safe and secure.
The third pillar of the Bill is to deliver a safe, secure and resilient UK energy system. We will not allow malicious actors to affect that. Sometimes that could be dangerous protesters or those using energy as a weapon, as we have seen with the recent disruption, and the Bill helps to address that point.
Stephen Crabb (Preseli Pembrokeshire) (Con)
The Secretary of State is being incredibly generous with his time. On this point about vital fuel resilience, is he aware there is significant concern among refiners and other companies in this space about the breadth of the provisions in the Bill and the powers of direction that the Secretary of State could have over these companies? They have concerns around the commercial and competitive position that puts them in. Will he give a commitment that the Government will continue to look at the phrasing of those provisions in the Bill in Committee?
Grant Shapps
To answer my right hon. Friend directly, I do not have concerns about the provisions, but I hear his concerns, and I will ask my hon. Friend the Member for West Aberdeenshire and Kincardine to meet him to address them.
Several hon. Members rose—
Grant Shapps
Again, I will make a little progress before I take the next set of interventions.
Offshore wind provides a secure and resilient source of energy, and we are already global leaders in offshore wind, with the world’s largest wind farm in the North sea. We also have the world’s second largest wind farm and the third largest. The fourth largest is being constructed now at Dogger Bank, and that will become the largest in the world. In other words, we have become global experts in delivering offshore wind, and that is why this country is now selling that technology and expertise elsewhere in the world. It is also why we have a leadership role in offshore floating platforms; we have both the first and the largest such platform in the world. We are also introducing reforms to assist with security at civil nuclear sites, and we are ensuring that offshore oil and gas regulatory regimes protect habitats as new technologies are developed.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I want to bring my right hon. Friend back to his comments about energy security. The Bill outlines lots of ways in which that will be achieved, but he will be aware that the vast majority of materials needed for renewable energy are processed in China. Are we not therefore in danger of creating the same situation with renewables as we had with fossil fuels and Russia, and what assessment has he made of energy security in those particular areas?
Grant Shapps
I very much share my right hon. Friend’s concerns. I was recently at the G7 in Japan, where we signed an agreement with other nuclear powers from the G7 on exactly this issue of energy security. Of course, we have Urenco—a third owned by the British Government—which is in many ways very advanced on the production, fabrication and other elements of uranium. It is part of the mix and we must ensure we are able to do that, so I thank him for his question.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I am grateful to the Secretary of State for giving way. This goes back—I was standing up a few minutes ago—to the question from the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) and it is on energy efficiency. I have 14,000 households in Oldham that are fuel poor. They have seen their gas bills double, their electricity is up nearly two thirds, and some of them have said to me, “Why are we going through this, and when can we have our houses made more efficient so we’re not having to spend so much on this?” Why could that not be funded by a windfall tax on energy producers, given that, for example, BP said last week that it is making £60 million a day in profits? [Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Just a little reminder that, if colleagues intervene on the Secretary of State, it is customary for them to stay until the end of his speech.
Grant Shapps
Thank you, Madam Deputy Speaker. This does go back a little way, so it is worth reminding the House that we have gone from 14% of homes being A to C—energy secure, essentially—to 47%. Energy company obligation plans were put in place and plans 1, 2, 3 and 4—[Interruption.] The shadow Secretary of State is chuntering along, saying they are not going very well, but I have just explained that nearly half of homes have now been greened up. Primarily, it is social homes that have been taken to that level, so I am very interested and concerned to understand why her own local authority has yet to follow some of those plans, and I look forward to its getting on with the job with all the money being made available to do that. She is absolutely right—I actually agree with her—about the energy producers. That is why we have taxed them at a punitive 75%, and we have handed those billions of pounds to her constituents and businesses, paying roughly half of the typical energy bill in this country.
In addition to the measures already contained in the Bill, we will go even further. Following on from the “Powering up Britain” plan, we will table four sets of amendments to achieve these goals. First, we will amend the Bill to provide Great British Nuclear, a new flagship body, with the power to enable nuclear projects and support the UK’s nuclear industry with a specific role to support Government in rebuilding our civil nuclear industry. I am delighted that my hon. Friend the Member for West Aberdeenshire and Kincardine is our country’s first Minister for nuclear in relation to that plan.
John Penrose (Weston-super-Mare) (Con)
I compliment the Secretary of State on bringing forward this huge, much-needed and excellent Bill. I want to take him back to his point about the Secretary of State’s and other Ministers’ powers of intervention. The scale of investment that these plans will rightly require in whole swathes of the new technologies to be introduced will be vast; a vast amount of cash will be required to be invested not only in the UK, but internationally. Reducing the cost of that investment is essential, and reducing the uncertainty and risk of political intervention will make a dramatic difference to both the efficiency of that investment and the productivity of our economy. Will he please commit to making sure that we improve the regulatory certainty—the legal certainty—in which all those investments will be made by reducing the opportunity for politicians to meddle, be they on our side of the House or those, I hope at some very distant future date, on the other side of the House?
Grant Shapps
My hon. Friend is absolutely right. Yes, I provide that commitment—the Bill attempts to do exactly that in some of the ways I am about to describe—and he is absolutely right about lowering the costs by lowering the uncertainty for investors as well.
Several hon. Members rose—
Grant Shapps
Again, I will just make a bit of progress. I am concerned that others want to speak in the debate.
Unlike wind power, nuclear energy is not dependent on the weather, so by ramping up capacity, we will help a lot. It is worth the House knowing that every single one of the operational reactors in this country was actually commissioned by a Conservative Government. I am delighted that Labour Members are now joining us on this, and I know that they also agree—although not all Opposition Members—that small modular reactors are an important part of our nuclear future. They will boost energy security, unlock thousands of jobs and play a crucial role in stabilising electricity prices in the long term.
Christine Jardine (Edinburgh West) (LD)
The Secretary of State mentioned jobs, and research by Robert Gordon University in Aberdeen has shown that 90% of the highly skilled professionals in oil and gas have skills that could be transferred to adjacent energies. However, there is currently a shortage of people going through higher education. What are the Government going to do to address the skills gap, but also to ensure that we do not lose employment in existing energy sectors in the way that we have in other industries, such as shipbuilding and steel, over the decades?
Grant Shapps
The hon. Lady is absolutely right about skills, and the skills gap is very important. I recently had a summit with our French counterparts that was specific to skills in the nuclear sector, where there are very similar issues. We are working with our colleagues in the Department for Work and Pensions, the Ministry of Defence and the Department for Education on exactly the subject of skills that she raises. My hon. Friend the Member for West Aberdeenshire and Kincardine is working actively with them on this Bill, and I know he would be delighted to discuss that with the hon. Lady.
Chris Grayling (Epsom and Ewell) (Con)
Will the Secretary of State give way?
Grant Shapps
I will just make a small bit of progress, and then I will give way again.
Secondly, we will amend the Bill to deliver on the support package for energy-intensive industries, protecting them from high electricity prices. This will bring prices for UK businesses in line with global competitors, preserving jobs and investment in the strategic foundation industries—steel and chemicals, for example. Bringing down prices will also remove a barrier to those traditional carbon-intensive industries decarbonising, in some cases by switching to electrification.
Several hon. Members rose—
Grant Shapps
I will give way in just a moment. Let me make a little bit more progress.
Thirdly, we will table amendments on hydrogen transport and storage, alongside the hydrogen production measures already in the Bill. Finally, we will propose further amendments related to carbon dioxide storage licensing to help us maximise the extraordinary potential—I talked about it before—under the UK continental shelf, which is so important.
Chris Grayling
My right hon. Friend knows my views on sustainable aviation fuel, and I will come back to that should I catch your eye, Madam Deputy Speaker. On the issue of small modular reactors, there is no way that a country such as France would allow a non-French firm to be the backbone of its nuclear industry. We do not want to take such an isolationist view, but it would be a travesty if the work in this field did not bring jobs, expertise and industrial success to this country. Can my right hon. Friend give me an assurance that he will make sure we do not make the mistakes of the last Labour Government, who sold off our nuclear industry, and will he encourage the development of a domestic nuclear industry?
Grant Shapps
My right hon. Friend will know that the world’s very first civil nuclear reactor was Calder Hall in Cumbria, and we led the world, but, as he said, we switched off or stopped investing in nuclear power. That was a great shame, because we are now having to work to get back to 25%, which is our objective. He is right in another way as well, because for several decades one company has been responsible for running what are essentially small modular reactors in the nuclear Trident fleet under the water, and successfully refuelling once every 25 years. We have a certain lead in this area, and it is very important that we get on with small modular reactors. That is why we are having a very brief competition, with the results coming by October.
Wera Hobhouse (Bath) (LD)
The Secretary of State rightly addresses the need to decarbonise and support industries that have been high users of carbon. The Bill as currently amended includes a ban on opening new coalmines, thanks to the Liberal Democrats in the other place. What possible reason could there be for the Government not to support that?
Grant Shapps
Conservative Members believe in getting on and doing things, which is how we have ended up going from nearly 40% of our electricity coming from coal just 10 or 11 years ago to the position this year, when I expect that to drop to about zero. The Liberal Democrats are still fighting the battles of yesterday. They are still concerned about building more power stations for coal, but no one is doing that. The issue is already in the distant past.
Several hon. Members rose—
Grant Shapps
I want to finish my speech so that other Members can speak, which is only fair. As you will know, Madam Deputy Speaker, the entire UK will benefit from measures in the Bill, bringing jobs, economic growth and clean energy to the whole country. From the outset the Government worked closely with the devolved Administrations and with Members across the House, and I hope they will continue to do so.
Anna McMorrin
I thank the Secretary of State. The Bill is sending mixed messages across the world, issuing 100 oil and gas licences while not ensuring that renewable energy projects are connected to the grid. On the devolved Administrations, when will the Secretary of State speak to and learn from Wales and the Welsh Government about the project I am proud to have introduced, Arbed, and about upgrading our insulation in homes, creating new skills and tackling the urgent climate crisis?
Grant Shapps
As I mentioned before, we are working constructively across the whole UK on energy security. I am not sure I follow the hon. Lady’s first point. She seemed to be saying that we should import oil and gas from elsewhere, using about twice as much carbon, rather than exploiting our own. I want to work as closely as possible on those issues with Members across the House.
Bim Afolami (Hitchin and Harpenden) (Con)
Let me bring the Secretary of State back to the independent system operator and planner. We in this House should always be wary of creating new regulators, and we must be clear about their exact purpose. Will he explain in a bit more detail how the ISOP will operate with Ofgem, and the relationship between the two? Clause 123 states that the ISOP will
“have regard to the strategic priorities set out”
by the Department. We must be clearer about whether Members of the House and the Government will be able to direct the ISOP to do what we want it to do and deliver on the ambitious plans in the Bill, which we hope will be successful.
Grant Shapps
My hon. Friend is right to raise that concern, but he will be pleased to hear that that is exactly the purpose of this structure. The ISOP should be able to take instruction and guidance about its policy, to ensure that we do something that is not really possible at the moment, which is to combine oil and gas input into our network in a much more strategic way. That is required more now than ever, given the extraordinary mix of energy that goes into our network.
Several hon. Members rose—
Grant Shapps
I will make a little more progress, as I am coming to a conclusion.
I started by describing some of the changes of the past 50 years. Who knows what futuristic gadgets will be in the home of the right hon. Member for Doncaster North in the decades to come? Perhaps AI coffee machines that produce the perfect cuppa before he even realises he needs a brew, or intelligent music hubs that decide what he will listen to before he decides himself. There may even be personalised music, invented on the fly. I do not know what those developments will be, but I know that the energy we use to run those services will be far cleaner and much more secure, and that will be thanks in part to measures in the Bill. Just as we once bounced back from the crisis of the ’70s, the Bill will ensure that we never again allow British consumers to be held hostage to the likes of a tyrant such as Putin.
Apsana Begum (Poplar and Limehouse) (Lab)
Will the Secretary of State give way?
Grant Shapps
I will conclude, if the hon. Lady does not mind.
I hope Members across the House will recognise the opportunity that the Bill represents, with the massively increased investment in jobs and economic growth, to support our long-term ambition to lower energy bills and ensure that in future, we power Britain from Britain. I commend the Bill to the House.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. The Secretary of State was generous with his time in taking interventions, not least from Members who wish to catch my eye in the debate. I warn that there will be a time limit, which is likely to be five minutes or less, depending on the other opening speeches. If any Member feels that they may not have notified the Speaker’s Office that they wish to speak, they should let me know, as that will also affect the timings.
I call the shadow Secretary of State.
Edward Miliband (Doncaster North) (Lab)
Thank you Madam Deputy Speaker. I will begin by welcoming the arrival of the Bill to the House. I thank the Secretary of State and his Ministers for their willingness to engage in discussions on the Bill, which, as I will explain, we support. Given his speech, after the next election I look forward to him providing some AI consultancy for my house, once he has some more time on his hands.
For us, the central truth that frames this Bill is, as the Secretary of State said in his speech, the energy bills crisis, with bills still double what they were 18 months ago. This crisis demonstrates the urgency of getting off expensive fossil fuels and moving to clean power. Clean power is the route to cheaper bills, energy security, long-term sustainable jobs and tackling the climate emergency. The peril for Britain is the deep uncertainty about whether the Government are doing what is required to make the transition happen with the urgency needed. Let us look at the last couple of months alone. In March the Climate Change Committee stated that the Government are “asleep at the wheel” on their 2035 decarbonisation target. In the same month the National Infrastructure Commission said that
“movement has stuttered further just as the need for acceleration has heightened.”
The cross-party Business, Energy and Industrial Strategy Committee said in April:
“At the current pace of change, the UK is set to fail to hit its target of decarbonising the power sector”.
The common theme is one we have heard many times about this Government: they act as if this was not the emergency it is. The Bill needs to put that right, so we apply three tests to it: does it represent an all-out sprint for zero-carbon power, the linchpin of a net-zero country; does it provide a proper plan to spread the benefits of cheap, clean power to working families across Britain; and does it provide an industrial policy that means we can win the global race for the jobs of the future? In that context, we will give our support to the Bill, because we welcome many of the measures in it and believe they are long overdue. We have long called for the independent system operator and planner—I will come on to that—as well as the CO2 licensing regime, because, as the Secretary of State said, carbon capture and storage is important for the future. We welcome measures to support hydrogen, nuclear and action on the grid, and a number of other aspects of what we might call “green plumbing”, which is largely what the Bill is about. We also welcome the improvements made in the other place, for which I thank their lordships. I will come on to those in the course of my speech.
But despite the things we welcome, set against the tests I listed we believe that the Bill still lacks the urgency and long-term strategy required. If the pace and scale at which we need to transform our energy system is akin to climbing a mountain, the Bill is a route map to basecamp, but it will not take us to the summit. It is too half-hearted on the zero carbon sprint that we need, it does not take sufficient measures to make working people the priority in the energy transition, and with the pace being set by President Biden’s Inflation Reduction Act—I am sure Members hear this in their constituencies—it does not put Britain enough at the forefront of the race for low-carbon jobs. That is why we will be seeking further improvements to the Bill during its passage.
Let me start with the sprint for zero-carbon power. Last summer, renewables were nine times cheaper than oil and gas. Today, even after the recent fall in gas prices, they remain multiple times lower. However, onshore wind—among the cheapest, cleanest, and most quickly deployed sources of energy available to us—remains effectively banned in England. That is thanks to the decision in 2015 to put it in a unique category of difficulty compared with other local infrastructure, so that one objection can defeat a project. Indeed, it is now far easier to build an incinerator or a landfill site than an onshore wind farm.
This ban has meant that in the eight years since 2015—the Minister for Energy Security and Net Zero was candid about this earlier this year—just three wind farms have been built in the whole of England. Since 2015, we have had five Prime Ministers and just three onshore wind farms. I make that to be three fifths of the wind farm per Prime Minister—that is my great maths. That is quite the record.
Members across the House will have different views on wind farms, but the cost of the ban—[Interruption.] The Minister for Energy Security and Net Zero is chuntering from a sedentary position, but these are his figures, which he said at Energy questions. According to Carbon Brief, the cost of the ban is more than £5 billion. That is £180 per household because of the expensive gas that we are importing when we could be using onshore wind. In future, failing to achieve the doubling of onshore wind deprives us of another 20 GW of power. Any self-respecting energy Bill would lift that ban. Even the right hon. Member for North East Somerset (Mr Rees-Mogg), who is sadly no longer in his place, called for the ban to be lifted when he was briefly Energy Secretary—that was not a glorious time, but he got it right when he argued for bringing that position into line with other infrastructure. In December, in a promise made by the Government, the Communities Secretary said that, by the end of April, the ban would be lifted. We have gone beyond the end of April.
I hate to say this, but the dinosaur tendency in the Conservative party seems to have prevailed once again, and I am afraid that, on this, the Energy Secretary is actually the dinosaur-in-chief. Despite all of the evidence, and despite 78% of the public supporting onshore wind, according to his own Department’s polling, he said in the midst of the energy crisis that he was not in favour of onshore wind because it is “an eyesore”. He is the self-styled TikTok moderniser, but he is more of a pterodactyl nimby stuck in the past on this. [Interruption.] I will take Wallace and Gromit over a pterodactyl nimby.
As well as that drive for all forms of zero-carbon power, we need this. I therefore appeal to right hon. and hon. Members across the House, because this should not be a party political issue. Labour will seek to amend the Bill to bring about the simple position of the right hon. Member for North East Somerset that onshore wind, which is supported 20:1 by the public, should have the same planning rules as other local infrastructure.
Katherine Fletcher (South Ribble) (Con)
The right hon. Gentleman was engaging in palaeontological analysis. If I can bring him to the slightly more recent past, he named the number of wind farms given planning permission since 2015, but could he name the number of Labour Energy Ministers between 1997 and 2010 and how many nuclear projects they commissioned?
Edward Miliband
Actually, I was talking about onshore wind farms that had not just planning permission and consent—[Interruption.] I will tell the hon. Lady simply. In 2006, Tony Blair changed the policy to be in favour of nuclear. When I left office in 2010, we identified 10 new nuclear sites, and there have been 13 years since then. How many nuclear plants had been built and made operational? Precisely zero. The Secretary of State had to talk about the previous Conservative Government, who left office 25 years ago—that is indeed stuck in the past.
Chris Grayling
Given the importance of nuclear and what the right hon. Member has just said, why did the last Labour Government sell off Westinghouse, which was owned by Britain and was the main repository of our nuclear skills?
Edward Miliband
The right hon. Member wants to re-litigate the last Labour Government. Let us talk about the future. We want nuclear to move ahead, and actually the Government have had 13 years and failed to do it.
Edward Miliband
No, I will not.
Let us talk about how we can get an energy system that is fit for purpose. Nowhere is that more true than when it comes to the grid, where the delays that have been allowed to build up are a disgrace. For all of the Conservative party’s boasts, this is what Keith Anderson of Scottish Power says about the delays to the grid:
“The wind farms that are coming online today were approved when Gordon Brown was in power—that’s a long time ago and we need to be much faster to move beyond this crisis”.
The new independent system operator is a step forward, but there are questions remaining about whether it goes far enough in its powers, remit and independence.
What the energy system sorely lacks at the moment—this goes to the question that the hon. Member for Hitchin and Harpenden (Bim Afolami) asked the Secretary of State—is a guiding mind. It is about not simply balancing the system day to day and hoping that the market provides—this is the purpose of the regulator—but planning for the future of the system as we transition. This is the point: at the moment, that planning role is a job for everyone—the Energy Department, Ofgem and the network companies—but the ultimate responsibility of nobody. That needs to change with the ISOP so that we auction offshore wind in the right places, we plan and build the grid in the right places and on the right timescale, and we have the right amount of power in the system in the years ahead. For us, that is the purpose of ISOP, and during the Bill’s passage we will test out whether its proposals for ISOP adequately meet that vision.
If the regime is to work—I concur with the interventions on the Secretary of State—we need a price regulator in Ofgem that supports and never stands in the way of change. I hope that the Secretary of State’s failure to say that he would oppose such an amendment is a good sign, but obviously Ofgem should have a formal net zero duty. I think that was recommended by the net zero tsar, the right hon. Member for Kingswood (Chris Skidmore), and it was rightly inserted by the House of Lords. However—this is boring but very important—we also need to sort out the issues of planning.
The National Infrastructure Commission recently produced an important report about the delays to planning. It said that, in part, that was the fault of Government, who have not updated their energy national policy statements for a decade. It also said that there should be a statutory duty on the Government to review them every five years, and we agree. Here is the other thing that is important: all relevant regulators, including the Planning Inspectorate, should have a net zero duty, because otherwise we will find the system being slowed down and gummed up. Of course, the views of local people are important and must be taken into account, but we must also make progress.
The Bill could achieve those things to speed up the planning process. However, even if we get all the forms of low-carbon power that we need—I think that we should have all of them—and we sort out the grid and planning, there is an obvious question that the Secretary of State did not address. Even if we get all of those renewables and indeed nuclear, the price of electricity is currently tied to the prevailing price of gas. We do need reform of that system. Labour first called for that in January last year, and I say to the Secretary of State that we will be talking about that in the Bill Committee. We believe that there should be a commitment in the Bill to a timetable for that delinking; otherwise, we will get more drift and delay and we will not reap the benefits of the move to zero-carbon power.
On the one hand, we need the drive to zero-carbon power, but we also need a decisive shift away from the high-carbon expensive path—again, that was raised earlier—and unfortunately the Bill does not attempt to make that shift; it is business as usual on fossil fuels.
On coal, the Secretary of State rather dismissed the intervention of the hon. Member for Bath (Wera Hobhouse). Yes, there has been a good record on coal in the last decade. [Interruption.] He says “Thank you”, and he wants to chunter away, but opening a new coalmine drives a coach and horses through that record. [Interruption.] He says that it does not. We cannot go around the world, as did the former President of COP, the right hon. Member for Reading West (Sir Alok Sharma), telling everybody that they have to power past coal, and then say, “But not us,” because that totally undermines our moral authority. Here is the thing: the steel industry in Britain says it will not use the coking coal, it will not provide the long-term jobs that Cumbria needs and it sends utterly the wrong message on climate. That is why their lordships inserted a provision to ban new coalmines. Labour supports that amendment.
Labour will also table an amendment to ban dangerous, expensive, unpopular fracking. I know that Conservative Members want to say the Truss period was a bad dream—Bobby Ewing in the shower and all that. [Interruption.] I am showing my age, that is true. I am a big “Dallas” fan, actually. Labour will table an amendment on fracking.
We also believe—this is an important point—that the Bill should remove the 2015 duty to extract every last drop, the so-called maximum economic recovery, from the North sea. I can do no better than to quote the net zero tsar, the right hon. Member for Kingswood, praised by the Secretary of State, who did a very serious piece of work—Government Front Benchers are nodding. What he said could not be clearer:
“developing new oil and gas fields is incompatible with limiting warming to 1.5°… There is no such thing as a new net zero oilfield.”
Those are not my words, or those of the Liberal Democrats or any other party in this place. [Interruption.] The Secretary of State starts chuntering, but he should talk to his own net zero tsar, who did a brilliant report that he himself praised.
Let me just explain, for the benefit of right hon. and hon. Members, why that is the right position. That approach will have no impact on bringing down bills. How do we know that? Because every previous Energy Minister has said that. Gas and oil are traded on an inter—[Interruption.] Just pipe down for a minute. The price is set on the international market and 80% of our oil is exported. It drives a coach and horses through any possibility of keeping global warming to 1.5°, according to hundreds of leading scientists and the right hon. Member for Kingswood.
Here is the other thing, which is a new part of this. We now know how much the Government are having to shell out to the oil and gas industry to persuade it to make this investment, because it is in the detail of the Budget Red Book: over £11 billion. The current Prime Minister, the previous Chancellor, introduced a windfall tax, but then he introduced an absolutely massive super-deduction—not available now to any other industry, including renewables—of over £11 billion. Massive, massive cost to the taxpayer, no impact on bills, the oil from Rosebank exported, and driving a coach and horses through our climate commitments—no wonder the net zero tsar concluded that it is the wrong policy for Britain. It is. Government Members can carry on pretending that business as usual is consistent with the science and consistent with what we go around the world saying, but it is not and the net zero tsar has rightly said so. Labour will seek to improve the Bill so that it delivers on the zero-carbon sprint we need.
Next, I want to turn to the second part of my remarks —I will try to speed up, Mr Deputy Speaker—on what the Bill can do to ensure the fairness of the transition. We know that the fairness of the transition is essential if we are to take the public with us, and we know there are huge opportunities. I want to come back to the issue of energy efficiency, because Government Members go on and on about their great record on energy efficiency. Here are the facts. In 2010, there were 1.6 million energy efficiency upgrades. In 2022, there were 160,000 equivalent measures. In other words, there were 10 times more when the last Labour Government left office than there are now.
We know why that has happened. The Chair of the Environmental Audit Committee, the right hon. Member for Ludlow (Philip Dunne), has done many important and learned reports on this question. Massive cuts were imposed on energy efficiency schemes when David Cameron said, “cut the green crap” and the investment has not recovered. That is why the UK Business Council for Sustainable Development says it will take almost 200 years at the current rate to get all homes up to EPC C—200 years. That is not just bad for the constituents of my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), who intervened earlier, and the constituents of many others in this House; it also means we import more gas and use more gas supplies. The estimates are that we could cut gas demand by 20% if we got all homes up to EPC C.
Bim Afolami
I thank the right hon. Gentleman for giving way in an unexpectedly amusing speech from the Opposition Front Bench. On gas and fossil fuels, he made a serious point which should be responded to. The International Energy Authority said that even by 2045 fossil fuels will still make up between 28% and 30% of our total energy mix. Fossil fuels will be with us for decades to come, although of course everybody in this House is working to bring their use down as fast as possible. In the transition period, particularly in relation to gas, does he accept that we will have to, as best we can in existing areas that are within our control, improve our energy security and resilience by exploiting our own gas rather than importing more, as he has just referred to?
Edward Miliband
I have great respect for the hon. Gentleman. Let me try to explain the position. Nobody is talking about turning off the taps in the North sea. The question is this: do we defy the International Energy Agency? He cites the IEA. The IEA says, in absolutely clear terms, that if we invest in new fields in the North sea and have new exploration, we will bust way through 1.5°. The point is that every country can say, “Well, we’re going to do it, but you shouldn’t.” But if we do that, we will end up at a 3° world. That is what all the scientists tell us.
One great thing in this House, compared with other countries, is that we have established a cross-party consensus on following the science. But the science could not be clearer. That is why 700 scientists wrote to the newspapers a few weeks ago to say, “This is our view.” That is why the IEA says it. That is why the UN Secretary-General says it. That is why the net zero tsar, when he looked at the evidence, said it. It is not me making it up; it is what the clear evidence is. The hon. Gentleman is right that we will continue to use our existing fields, but to grant new licences and new exploration, defying what all the science tells us, would be a betrayal of future generations. I do not pretend it is easy—I do not—but it is absolutely crystal clear. [Interruption.] They say, “More imports.” No, the answer is to get off fossil fuels and drive towards low carbon.
On fairness, energy efficiency—the Lords have done us a favour and I hope that we keep their amendments in the Bill—is incredibly important. Part of making the transition fair is striking the right balance between levies on bills and public expenditure. When I was Energy Secretary we introduced things through levies, so I am not saying that the Labour Government did not do it, but there is a balance. The Treasury is never keen on investing public money—not just under this Government, although it may be particularly true under this Government—but we have a problem and I have to be honest with the House about it.
If any cost in green investment must be borne through levies, we will pile more and more on to bill payers. Take hydrogen. There is a strong economic case for investing in hydrogen through public investment. That is what the US is doing. Much of the benefit of new investment in hydrogen will go to industry—not consumers directly—which will be at the front of the queue for its use. Putting the cost of hydrogen on consumer bills, as the legislation originally proposed, is not the right way forward. I know that discussions in Government are tricky, to put it mildly, but I say to the Secretary of State that the right thing to do is surely to make public investment, through public expenditure, in hydrogen, not just bung the money on to bill payers. In the course of discussing the Bill, I hope we know how much will be put on to bill payers. We cannot just add levy after levy because the Treasury says, “We don’t want to invest.”
I shall conclude on Britain’s place in the race for the low-carbon jobs of the future. The Inflation Reduction Act has had a massive impact in the US, where nearly 10 times more jobs have been created in low carbon and renewables in seven months than we have seen in the UK over the last seven years. The Bill should be our answer to IRA but, in truth, the Government face a number of different ways: first, they say, as the Secretary of State did, that it is “dangerous”; then they say that we are already doing it; then they say that we will have a response in the autumn. With every day that goes by, we hear another business say, “We are losing the global race.” It may interest the House to know that there are 23 clean steel demonstration projects across Europe. There are none in the UK. Forty gigafactories are due to open across Europe by 2030, but just one is certain in the UK. Where is the national wealth fund in the Bill to invest in our ports, clean steel and gigafactories? It is in the interests of all parties in the House to put pressure on the Government to make the investments to put us in the lead in the race for green jobs. Today, the chief executive of Johnson Matthey said that we have lost the race for gigafactories and are in danger of losing the race for green hydrogen.
Every country that leads the world in renewables has a publicly owned energy generation company. Why doesn’t Britain? This is not a matter of ideology. EDF, Ørsted, Vattenfall and Statkraft all invest in our infrastructure. These are state-owned companies. It is an extraordinary fact that 46% of our offshore wind assets are owned not by foreign companies but by state-owned foreign companies. That means that the proceeds go back to those countries and they build the supply chains. I welcome GB Nuclear, but GB Energy is a much wider version of that. GB Energy is about understanding that reality and saying, “Why not Britain?” This is a moment of peril for Britain in the race for low-carbon jobs. This Bill is not the answer.
It is Labour’s view that the Bill is necessary but not sufficient given the scale of challenge and opportunity that we face. We welcome many of its measures, which are long overdue reforms that will make the delivery of net zero easier. On the basis of the common ground that does exist, we will work constructively with the Government. The Bill will be useful to whoever is in government after the next election, but for all its length, the truth is that it is further proof that Britain will require a new Government to do what is truly needed to lower bills, give us energy security, create jobs and show the climate leadership that we need.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
About 28 people want to speak in the debate, which is quite a lot. I will start with a time limit of six minutes, but after the Scottish National party spokesman has spoken I will be able to work out whether we can stay at that or it will have to go down.
Philip Dunne (Ludlow) (Con)
It is a pleasure to follow the right hon. Member for Southfork—excuse me, the right hon. Member for Doncaster North (Edward Miliband). I was delighted to learn that he will support the Bill, and he is quite right to do so. I was pleased to learn that he reads the report of the Environmental Audit Committee. I commend them to other Members who have not had that opportunity.
I also support the Bill. As the Secretary of State said, it is a monumental piece of legislation—the largest piece of energy legislation in my political lifetime and that of most people in this House, I suspect. Energy is at the heart of our economy. It drives the competitiveness of this country versus our peers. As we have seen from the impact of Putin’s invasion of Ukraine, when things go wrong, those countries that cannot account for their own energy security and resilience are left at the mercy of the autocrats. That is not a position that this country should be in, given our geographic position and access to resources.
The Bill is a vital first step in the journey to the vision that the Secretary of State set out in “Powering Up Britain”, but I may disappoint him slightly by saying that it lacks what is really needed: a vision to get us to 2050. We need a 27-year plan to establish how we will drive electricity generation and get it to the places that it needs to go, in order to achieve net zero Britain. I hope that during the passage of the Bill, if additional comments and suggestions are made to the Front Bench, they will take them in a positive spirit in that direction.
The scale of the challenge is enormous. We need five times the current electricity generating capacity to decarbonise our economy, ignoring any increase in GDP during this period. The UK is trying to do that in a globally competitive environment, as we just heard from the right hon. Member for Doncaster North. This is a time in which international investors, whether state-owned electricity companies or financial investors, are looking for the markets to invest in energy generation that will provide them with the quickest route to completion of the deal, whatever kind of a deal that is. One big challenge that the Bill seeks to resolve is removing some of the barriers to implementation and reducing some of the risk. That is where it has a great deal to offer. The key is to provide confidence to the international community and the domestic supply chain that this country knows where it is going, will facilitate the way to get there and will do it quickly.
I have three quick points to make in my six minutes. The UK has allowed our existing nuclear fleet to age without previous Administrations taking the necessary decisions. The Labour party was completely incapable of taking decisions about nuclear and, frankly, in coalition the Lib Dems were no better, and applied the brakes. I welcome the Government’s having made the difficult decisions to start the process of renewing our nuclear fleet.
I welcome what the Secretary of State has said today on the competition launched to identify two projects by November from a design perspective. I urge him and his nuclear Minister, my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie)—who is very welcome in his place—to ensure that the UK takes advantage of this opportunity to recover our leading position in nuclear technologies, by giving some clarity on what happens after the design competition has made its determinations. We need to maintain the development of novel technological solutions so that the UK once again becomes a nuclear energy hub of expertise.
I wrote to the Secretary of State last week on the subject of solar power. In connection with that, the EAC has launched an inquiry into the grid, which, as others have said, is not in a fit state to cope with the massive electrification of the economy. I encourage external observers and commentators to provide evidence to our inquiry into enabling the sustainable electrification of the UK economy, which will focus on the role of the national grid and reducing barriers to access. The right hon. Member for Doncaster North identified some statistics. Today, attaching an onshore solar farm to the grid in the UK takes 13 years. The queue is that long. As one can imagine, that is something of a deterrent to anybody thinking about doing that. We have to cut that significantly, and planning is a big part of that.
Cutting the time to provide consents while enabling communities to have their say is the Rubik’s cube challenge that the Bill seeks to address. Similarly, we must ensure that we have confidence in supply chains to supply the capabilities that we wish to introduce in this country. As has been said, finance is internationally mobile. The money is there to fund the projects but only if those projects can be delivered.
Finally, I have a quick note on community energy. I declare that I am a member of the Ludlow Hydro Co-operative, which is a very good, small-scale scheme providing electricity to local communities. Their lordships have made some suggestions to encourage other such schemes, and I hope the Minister will look upon them favourably.
Alan Brown (Kilmarnock and Loudoun) (SNP)
For once, I find myself in the unusual position of debating legislation that I do not intend to reject out of hand. I have to admit that I broadly welcome most of the measures in the Bill, particularly those relating to carbon capture and storage and hydrogen models. That said, I must put on record my objection to all the comments that have been made about nuclear. Nuclear is the only energy technology that has become more expensive rather than cheaper over the years, so talk of its making our bills less expensive is collective madness. We need to move away from that. As for the talk about small modular reactors, no design has even been approved for their implementation yet. I do not know how the competition can be judged when there is no approved design for SMRs, and I understand that the process that is going on will take at least another 18 months.
Another aspect of the Bill that I cannot get my head round is the fact that the so- called revising Chamber was deemed to be the right place in which to introduce it. That seems counterintuitive to me, but I will say to the Secretary of State that, if the other place was indeed deemed most appropriate for the purpose, the House should trust the five amendments that were made there and recommend that they should remain in the Bill. Let me say for the record that I support them.
The amendment that would prevent any new coalmines from being opened by the Coal Authority or its successors makes sense if we are serious about net zero. We cannot have the hypocrisy of lecturing developing countries about the use of coal while considering extracting coal ourselves. We cannot have the hypocrisy of Tory MPs’ decrying Germany for using coal while at the same time supporting the new Cumbrian coalmine. We need to end the pretence of a zero emission coalmine that ignores the emissions from the carbon embedded in the coal that is about to be burnt, and we need to end the hypocrisy of arguing for indigenous coal for steel coking in the UK when the coal is generally not suitable for the purpose and 84% of it will be exported to be burnt elsewhere.
As for the amendment to ensure that meeting the UK’s net zero targets becomes a specific part of Ofgem’s general responsibilities, that is just plain common sense. We have heard a number of interventions in support of it, and indeed it is one of the recommendations in the Skidmore review, as well as being called for by representatives of the wider industry including Energy UK, RenewableUK, the Climate Change Committee and the National Infrastructure Commission, and groups such as the Green Alliance. It is logical to assume that, if the Government object to Ofgem’s having a net zero mandate, they are signalling that they are not serious about doing everything possible to meet the net zero target—and when are they ever going to publish the long-delayed strategy and policy statement for Ofgem? For too long they have seemed to suggest that Ofgem should have responsibility for policy considerations when awkward questions arise, when it is clearly their responsibility to set policy decisions for Ofgem in that strategy and policy statement.
For years I have been going on about the unfair transmission grid charging system which penalises Scottish sites where the best load factor and wind resource can be found. As has been re-confirmed by the Green Alliance, the current system, overseen by Ofgem, favours electricity coming from Europe rather than wind farms built in the UK’s windiest areas. On average, according to the alliance, EU electricity generators paid 16 times less in transmission charges to send their energy to England last year than the cost of bringing energy down from Scotland, and Scottish generators are now at a significant disadvantage in comparison with sites in France, the Netherlands, Belgium, Germany, Denmark and Norway. What kind of perverse logic is that?
Worse still, National Grid ESO has confirmed that £4.6 billion was paid in constraint payments last year, mainly owing to the lack of grid capacity between Scotland and England. If ever there was an example of lack of strategy and forward thinking between the Government and the regulator, this is it. Paying wind farm developers to stop generating because of a lack of grid capacity, while either paying fossil fuel generators to ramp up gas generation to meet the demand or importing from the continent at the same time, is madness. Those constraint payments could easily have covered the cost of grid upgrades.
As well as the need for grid build-out to facilitate the renewable energy targets, there is a need for the Government—if they want to deploy renewable energy—to listen to what the industry is saying about the pressures of inflation and how it will struggle to meet the strike rates that have been suggested for allocation round 5. Indeed, some of the biggest developers mentioned by the Secretary of State are struggling to deliver on their AR4 commitments. We need to learn from the Spanish auction, which was a complete failure, to listen to industry and to ensure that that failure is not repeated as we try to deploy renewable energy as quickly as possible.
The Government’s own offshore wind champion has pointed out that they will be well short of the 2030 target of 50 GW of offshore wind. The Government should consider revising the “first come, first served” approach and the ability to hold on to grid consents, which is a prize that companies seek to retain. We need to move away from that system and allow access to the grid for companies that can deploy quickly. The Government rightly talk of speeding up consent processes in England and Wales through the planning system, but we must ensure that Scotland is not left behind. The Scottish Government have made contact with his Department. I am sure he understands that, while Scottish Ministers have responsibility for signing off planning consent for major infrastructure projects, the regulations themselves are reserved to Westminster under section 36 of the Electricity Act 1989. The two Governments need to work together to revise those regulations so that Scotland is not left behind.
Several bodies, including Energy UK and the Climate Change Committee, have called on the Government to apply a net zero test to all policy, regulatory, spending and taxation decisions. I support that, because I know that we need to move away from silo working and ensure that there is a joined-up net zero policy across all Government Departments. I also think that the UK Government should learn from the Scottish Government’s establishment of a Just Transition Commission to place fairness and long-term job creation and transfer at the forefront of net zero, and I call on them once more to match the Scottish Government’s £500 million just transition funding.
I also support the amendment on community energy. As a co-sponsor of the Local Electricity Bill, I support the suggested change to provide a framework to support the growth of a community and smaller-scale electricity export guarantee scheme. It has already been supported by Community Energy Scotland, and 318 MPs now support the Bill, including 125 Back-Bench Conservatives —more than enough to win a vote in the House. The concept is also backed by more than 110 local authorities—including my own, East Ayrshire Council—and more than 80 national organisations.
The organisation Power for People deserves the most credit for getting the campaign to this stage. It is estimated that community energy generation could grow between 12 and 20-fold in size over a decade, which could mean up to 10% of electricity being generated by community-owned projects. That would facilitate additional investment providing returns for communities, building better network resilience with small schemes scattered across the grid—and, of course, that is far better value for money than the £70 billion or so for two large-scale nuclear power stations. In 2021, according to Power for People, community energy groups spent more than half a million pounds on energy efficiency upgrades, helping 21,000 people to reduce their energy bills, while nearly 60,000 individuals were engaged in energy efficiency initiatives. This means reducing energy demand in the entire system. It is clear that the reinvestment of returns by community schemes is a virtuous circle.
A policy that was successful in the past was the feed-in tariff, which secured the deployment of small-scale generation projects, particularly small-scale hydro projects in Scotland. Those projects work: they are proven technology, and last for decades. That is why we need pricing certainty for such generation. Some form of export price guarantee could reinvigorate hydro schemes around the 5 MW capacity, as delivered by companies across the Scottish highlands, such as Green Highland Renewables. It makes no sense for them to have reached maximum efficiency and expertise in terms of designers and contracts, but then to have the rug pulled from under their feet and that expertise lost.
On that subject, I want to put on record again the plea to find a way forward for pumped storage hydropower. I was disappointed that the Minister for Nuclear and Networks, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), said at the Scottish Affairs Committee that that would not happen any time soon. That technology can be deployed right now. It is proven technology that can be deployed fast, and we should be moving forward on it.
On energy efficiency, the Secretary of State was again boasting that the stock of properties rated EPC or above has increased from 14% to 47% since 2010. Yes, that is progress, but it is progress based on addressing the easiest homes first. Clearly, if only 33% of stock has been addressed in 13 years, the target for completing the rest by the target date of 2035 will not be met.
Deidre Brock (Edinburgh North and Leith) (SNP)
My hon. Friend mentioned energy efficiency. Is he as concerned as I am that there was no mention of strengthening minimum energy efficiency standards in the Bill, but measures to create powers for the Secretary of State to remove European performance of buildings regulations in the UK are included?
Alan Brown
I certainly share my hon. Friend’s concerns. It looks as if that is another Brexit dividend in reverse, where we could end up falling behind our European counterparts as those regulations have helped to drive forward standards in the UK.
To return to the Government’s efforts to upgrade stock and meet the 2035 target, we have to bear in mind that, even as house building continues, new housing is not being built to the correct energy efficiency standards, meaning that as time goes on the number of retrofits that will be required will increase. That is completely illogical and needs to be addressed as soon as possible.
On the slippage on targets, simultaneously, energy companies are finding it difficult to find homes that meet the criteria required for ECO4 upgrades. They are struggling to hit targets. It is clear that the Government will have to revise costing proposals for the scheme, or ECO4 will collapse completely. Of course that will mean the supply chain will move elsewhere and it will be hard to recover the situation. I ask the Secretary of the State to have a wee think on that.
Without action on housing and buildings, there is no plausible path to achieving the fifth carbon budget or meeting the 2030 statutory fuel poverty target. The reality is that about 7 million homes are now classed as being in fuel poverty. Energy efficiency requires much greater urgency, especially in the private rented sector. Now is the time for a proper fair social tariff; I would be happy to support amendments in that area in Committee.
There is no doubt that hydrogen production is needed as part of the net zero pathway. It can provide fuel for shipping, aviation and HGVs, for example. It will be vital for decarbonising some energy-intensive industries. However, there is a growing understanding of the reality of the cost of hydrogen production, which means it is extremely unlikely to be part of a large-scale domestic heating switch-over.
I have previously supported the H100 Fife project, which I want to see come to a conclusion as we need to have an evidence base. However, in reality, hydrogen looks to be too costly and is unlikely to be a solution. Low-carbon expert Jan Rosenow, who was a special adviser to the Business, Energy and Industrial Strategy Committee when we looked at heat decarbonisation, has identified and looked at 36 independent studies that do not predict any large-scale use of hydrogen for heating.
I can see the arguments in favour of hydrogen blending and its benefits as an interim measure to reduce the use of methane gas in heating systems, but more than 20 organisations have written to the Secretary of State outlining their belief that it will be too expensive and just another burden on bill payers. We need clarity on what the hydrogen levy will look like. We know the Government want to pass it on to bill payers, but what is the anticipated cost to consumers? How can an additional levy on bills be justified at this juncture? When France and Germany are investing heavily directly in hydrogen development and with the Inflation Reduction Act in the United States, the Government’s levy proposal means the UK will just fall further behind.
Another concern that I have raised with the Secretary of State is about a clause in the Bill that could allow forcible disconnection from the gas network to facilitate hydrogen trials. It is really important that we do not go down the route of forcing people to disconnect, because that is no way to get the public on side.
There is a lack of joined-up thinking. The Government have said they have aspirations for hydrogen blending, but the current health and safety regulations allow a maximum limit of 2% of hydrogen to be blended into the system. At the moment, there are no proposals to change that legislation, so again the Government’s own targets cannot be met because they have other legislation that needs to be changed to make that happen.
Turning to carbon capture and storage, I welcome the legislation for the licensing and funding models, which is long overdue. This is enabling legislation, and it is clear that there are no definitive models proposed yet. There are also no clear funding pathways. We have the £20 billion a year pledge from 2028, but that has no corresponding budget line and it is at the behest of a future Government. This Government always say that they cannot bind the hands of a successor Government, so saying they can guarantee the £20 billion a year pledge is clearly at odds with that.
In the here and now, we still do not have certainty over the track 2 timeline. I ask the Secretary of State once again, when will Acorn get the backing it deserves? The Scottish Government’s 2030 targets cannot be met without it. Without further CCS clusters, the UK will miss its own targets as well. It is no surprise that the Carbon Capture and Storage Association has written to the Secretary of State outlining its concerns.
In conclusion, I turn to devolution. The Bill is littered with comments that the Secretary of State must consult
“the Scottish Ministers, if the regulations contain provision that would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament”.
The requirement only to consult is not good enough. As an absolute minimum, the UK Government should seek to work with and obtain the permission of the Scottish Government where regulations relate to devolved competency. This is another example of a power grab, as the matter is set out in the Bill instead of there being collegiate working. I ask the Secretary of State to think again on this, because it is outrageous that 29 clauses have that wording. That relates directly to what I said earlier about the need to revise section 36 of the Electricity Act 1989 to ensure that the Scottish Parliament has full competency over planning, which should be a devolved matter.
Going forward, these matters need to be addressed, and there are many issues that need a strategic overview. I would be happy to work with the Government on that, and I will certainly bring forward amendments in Committee.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
I call Chris Skidmore to speak for six minutes.
Chris Skidmore (Kingswood) (Con)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
I welcome the Bill. I hope all parties will recognise that the Bill is an important and much needed piece of legislation, which I hope we can find consensus to support tonight. Many across the energy sector have waited too long for the provisions in the Bill; we cannot afford any further delay.
It is to the issue of delay that I wish to speak today. As the former Energy Minister who signed net zero into law and most recently, as has been noted, chaired the independent review on net zero, I believe the greatest threat to our future ambition to deliver on net zero is the endemic and systemic delay in creating the capacity and capability needed to decarbonise our energy systems. We simply cannot will the means, expecting that because we say we will deliver, net zero will happen. It will not. Unless we address the fundamental challenges of grid infrastructure, storage and capacity, we will not get there.
The net zero review set out how the Government can tackle those delays and implement their climate commitments, both by taking action now—the Bill is a huge opportunity to achieve that—and by providing the certainty, clarity, consistency and continuity of long-term policy direction that is needed to unlock future private inward investment. We can provide certainty in this place by working across parties to build on the long-term political consensus for net zero. Indeed, the Climate Change Act 2008, led by the right hon. Member for Doncaster North (Edward Miliband), has been held up globally as a model for what stable political action on climate change can deliver.
Back then, it was the Conservative party in opposition that pushed the Labour Government to go further, to be more ambitious, in their climate leadership on emissions reduction. Thanks to the actions taken by both parties, and across all divides, the UK is a global leader in the G7, having reduced our emissions further than any other industrialised nation, and we can do the same now.
Although many provisions in the Bill are welcome, we can once again, with cross-party support, go further faster and raise our ambitions. The amendments made in the Lords are all welcome additions. Indeed, many were recommended in the net zero review. I therefore support their continued inclusion and, if needed, will seek to re-table many of them. I will also seek to work across the House, as chair of the all-party parliamentary group on the environment, to table additional amendments that I believe are realistic and achievable to help the Government meet both the needs of the energy sector and their own legal and net zero commitments.
It is in that spirit of cross-party consensus that I believe it is our duty as legislators not only to make this Bill the best it can be, but to ensure that we do not delay any further the reforms that are needed to make our regulatory and planning systems, which are holding back net zero, fit for a net zero purpose.
This opportunity to reform our energy system will not come again in this Parliament. For me, as someone whose constituency is being abolished at the next general election and who is standing down, the opportunity will perhaps never come again. I hope the Minister and the Government will recognise that I stand here tonight, and throughout the passage of this Bill, to be helpful, although they might not feel that I am being helpful, and to raise our ambition by amending the Bill. Although they might not thank me today, in time I hope the Minister and the Government will understand that I and others who seek to improve the Bill have no choice, for there is no time left in which to act.
Hilary Benn (Leeds Central) (Lab)
It is a great pleasure to follow the right hon. Member for Kingswood (Chris Skidmore). I agree with every single word he said. If we do not work together on this, we really will be failing our constituents.
I support this big, important and complex Bill, but the test we should apply is very simple: will it give us the tools we need to achieve energy security in a net zero future? As the right hon. Gentleman said, we know exactly what needs to be done. We now need to get on and make it happen.
Some of the policy changes have turned out to be quite simple. The decision to say that petrol and diesel cars cannot be sold after 2030 has been brilliantly effective, because it has led to a huge increase in innovation and to new electric models coming on to the market, but other areas are much more complex.
I will address my remarks to the transition in home heating, which is intensely personal to all our constituents and, indeed, to all of us. There are currently 23 million homes in this country that are dependent on gas for their heating, which we know will have to change because the point will eventually come when no more natural gas comes through the pipes. The policy question is, what will replace that gas? Will it be electric heating, in the form of heat pumps or electric boilers? Will it be district heating? Will it be, for some consumers, hydrogen?
Jim Shannon (Strangford) (DUP)
I support what the right hon. Gentleman is saying. The Government should also consider hydrotreated vegetable oil. We have a depot at Carryduff in my constituency, and the National Trust property at Portaferry and properties in Millisle are using it. It is a proven option. Does he feel the Government need to widen the net and consider HVO as a possibility?
Hilary Benn
I am grateful to the hon. Gentleman, because I think we will need all the current technologies and all the technologies that have yet to be invented to meet this challenge.
Of course, the advantage of heat pumps is that they are extremely efficient. Provided that the electricity comes from renewable sources, and all our electricity will come from renewable sources in the not-too-distant future, they are genuinely zero carbon. They work very well in some houses, but they do not work in others. I think of a row of 40 back-to-back houses in my constituency. The doors open on to the street, so where exactly would they put a heat pump? Well, they would not.
Hydrogen is also zero carbon when it is burned, but for hydrogen to work it has to be made through electrolysis using renewable electricity—so-called green hydrogen. There are other ways of producing hydrogen. There is the blue hydrogen question. Can we truly capture the CO2 and hold it through carbon capture and storage?
The other advantage of hydrogen is that it is “boiler out, boiler in”. Nothing else has to be changed, but there are practical issues, which the Secretary of State mentioned, when it comes to safety and operation. The gas companies are working on that, although it is worth remembering that 50% of coal gas is hydrogen. Many of us lived through the burning of a fuel that is 50% hydrogen, but hydrogen will succeed as a long-term replacement in some cases only if we can produce enough green hydrogen quickly enough, which requires a huge increase in renewable electricity, because the disadvantage of green hydrogen is that it is not very energy-efficient to produce. Three units have to be put in to get one unit of heat, although we currently pay turbine operators to turn off their turbines when the grid cannot take the electricity they would otherwise produce. It is obvious—why do we not use it to produce green hydrogen for storage?
As I said to the hon. Member for Strangford (Jim Shannon), I think we will need all the technologies, in all sizes and colours, to succeed. I do not think it is the Government’s job to pick one or another. The Government’s job is to encourage them all. Where I think the Government have a responsibility is in quickly clarifying how plans to decarbonise home heating in particular places will be pulled together, because with great respect to the new Department, it will not come up with a plan for the city of Leeds and its 800,000 people. The sooner it is clear how the local authority, working with Ofgem, the energy companies and others, will decide what are the appropriate technologies to make the transition, and in which places, the better.
My final point is on the important question of who will pay for this change. My right hon. Friend the Member for Doncaster North (Edward Miliband) made this point in his excellent speech. We cannot have a transition to net zero in which some people end up having to pay, or being asked to pay, huge costs. We all have constituents who can barely pay their gas bill at the moment, and we cannot ask them to pay for the cost of a heat pump, even with one of the Government’s 90,000 grants. Those grants will not convert 23 million homes. Frankly, we are way off the pace when it comes to home heating. That means that when a gas boiler dies, the homeowner, social landlord or landlord will put in another gas boiler because it is currently cheaper than a heat pump.
We have to get to net zero in a way that is fair to people, wherever they live and whatever they do. We cannot lumber them with costs that they simply cannot afford. If we seek to do that, those 23 million homes simply will not be converted. That is why, in this Bill and in many other ways, we need more clarity and more speed. When the Bill completes its passage through this House, I hope it will emerge even better equipped, with all the tools we need to do the whole job.
Bim Afolami (Hitchin and Harpenden) (Con)
It is a pleasure to follow the right hon. Member for Leeds Central (Hilary Benn). I agree with a lot of what he said, particularly his focus on affordability for the people we represent in this House. I will make sure that my remarks address that point.
The first thing we must remember is that we are all on the same side on this Bill; there is huge cross-party support for what we are trying to do. More precisely, we know that for a cleaner, more renewable, cheaper energy system—cheaper for the people we represent—we need to electrify as much as we can and produce that electricity with as much green energy as possible. That includes nuclear power, in order to make sure we have that baseload in place.
I want to talk a little about cost, because until the right hon. Gentleman’s speech, too much of this debate did not address the fact that unless our constituents can pay their bills and businesses can be run affordably, not only do we not have a thriving economy, but we do not have a thriving society. We know what we need to do over the long term to reduce those costs, but we are in a transition, and I will repeat some of the points I made in intervention on the shadow Secretary of State, particularly in relation to gas.
We all support moving to a net zero future, but in the transition to that point we are going to need to expand our gas storage and oil refining capacity in this country. The Bill needs to do even more than it already does in that regard. I say that not because I want to burn fossil fuels, but because in the transition to get to the place that we know we need to get to—we can argue about how best we achieve that—if our constituents see their bills going through the roof, the support for the net zero agenda will plummet. So I am concerned about making sure that, as we go through this transition, we keep bills down for our constituents while making the necessary investments for the longer term.
Other Members have mentioned the need to invest in our grid. I believe it was my right hon. Friend the Member for Kingswood (Chris Skidmore) who said that it is ridiculous if we are taking over a decade to plug in new renewable energy into our grid system. I would like more clarity from the Minister and the Government on how, practically, the measures in the Bill will increase the investment in the grid and the speed with which that will happen, because we do not have forever to wait. All of us will hear examples from our constituencies or elsewhere of that huge delay, and all of our strategies and policies do not mean anything unless we can get them plugged into the grid. That requires real urgency and I look forward to the Government explaining more in that regard.
I wish to make two further points, the first of which is on energy performance certificate standards. This is a small thing on some level but it really matters, because for anyone who owns a home, wants to do the right thing, and can afford to make the investments to make their home more energy-efficient, while reducing the cost of their bills—and why should they not invest to do that?—the EPC we currently have is not fit for purpose, as we all know. I would like more clarity on how we are going to improve it; whether an updated EPC will be focused on the environmental aspect or the bills aspect, or both; and how it will come about. Unless we can do that, businesses, individuals and communities across the country will not know what they need to do, or the investments they need to make and when, to reduce the cost of their energy and the cost for our climate.
The final point I wish to make is about ISOP. I do not want to bore the House, but the detail on that is important and I intervened on the Secretary of State about it. Clause 123(1) explains that ISOP must “have regard” to the strategic policy statement issued by the Government, but subsection (2) then says, “If it can’t achieve a policy aim, it should explain why and how.” We need to beef that up. We need to explain more precisely that when the strategic policy statement is made by the Government, ISOP will be a delivery mechanism, nothing more. This is not the intention of the Government or of anybody in this House, but I fear that unless we can make that clearer, Ofgem will perhaps be doing one thing, ISOP will be thinking it is doing something slightly different, and the Government’s strategic intention will be something different again. We should examine that in Committee.
I should have drawn the House’s attention to my entry in the Register of Members’ Financial Interests, as chair of the Regulatory Reform Group, in that regard. Overall, I support this good Bill and I am glad it has cross-party support.
Dame Nia Griffith (Llanelli) (Lab)
I welcome the Bill, but I must say that I am extremely disappointed by the Government’s paltry efforts on energy to date. It is now a year since the horrific invasion of Ukraine by President Putin, which should have been a brutal wake-up call. Not only do we need accelerated investment in renewables because of the extreme urgency of tackling the climate emergency and ensuring that we reduce our carbon emissions, but Putin’s invasion reminded us of the strategic importance of energy security. We have plentiful natural resources and we can provide ourselves with energy security with wide-ranging investment in renewables. Then we come to the issue of cost, as renewables, particularly onshore wind, are now proving their cost-effectiveness.
So whether it is about tackling the climate crisis, energy security or price, the Government should be making investment in renewables an absolute top priority. Despite the Department’s document citing onshore wind as one of the cheapest and easiest forms of electricity generation, they are still being mealy-mouthed about lifting the ban on onshore wind in England. This bill should include a clear lifting of that ban. We know that business needs certainty in order to invest, and the Bill misses the opportunity to give the onshore wind business that certainty.
Now is a crucial time for industry more widely to be investing in the green technologies of the future. Many industries such as steel and manufacturing face huge transition costs to reach net zero, and they will be making unprecedented investments in new methods of production and new production lines. They will be looking very carefully at which countries offer them the best deal on siting their production lines of the future. Not only is it essential that the Government respond to the game-changing US Inflation Reduction Act, and similar moves by the EU—I do not know why they are dragging their feet, as industry is crying out for information and will simply go elsewhere if it does not get it—but they need to address energy costs.
Time and again, not just our energy-intensive industries but swathes of manufacturing cite high energy costs as a massive disincentive to continuing their operations in the UK. This situation is absurd, and it would be laughable if it were not so tragic that we have so much potential for cheap energy and yet we offer industry sky high prices. The Government need to give industry long-term certainty on cheap, competitive energy prices if we are to have any hope of new production lines being sited here and providing the valuable green jobs of the future.
Make no mistake: if we do not get certainty on consistent, cheap energy prices, we will lose vital investment in the new production lines, with massive jobs losses. Our competitor countries have major state-owned companies pushing forward with renewables, but the UK Government shy away from any such idea. Such a company can really accelerate investment in renewables. The Welsh Government are now establishing one such company and a future Labour UK Government would establish a Great British energy company to do likewise.
Of course it is not just industry that is desperate for cheap energy; householders have been staggered by the price rises in energy this winter. Even when they make determined efforts to cut down on the number of units they use, they are still stung by rocketing standing charges, for which they can see no good reason. It seems completely perverse that the price of electricity produced by cheap renewable generation is linked to the price of gas. That urgently needs reform and, yet again, this Bill is a missed opportunity to tackle the problem. Nor are the Government doing anything to close the windfall tax loophole that allows oil and gas companies to continue to rack up enormous profits while householders struggle in cold and often damp houses.
Of course, that brings me to that other great failure: the Government’s failure to invest effectively in home insulation. If that had been actively pursued by the Government in the past, energy bills for millions of householders could have been reduced by now.
It is also high time that the Government resolve the problems of the national grid’s lack of capacity with the difficulties and delays in connection. It is vital that we have an effective grid to get energy from where it is generated to the areas of population and industry where it is needed. Not long ago we witnessed the fiasco of electricity generated in Scotland failing to reach consumers in England because of the current lack of grid capacity. But it is not enough to catch up with the present. I know that the Minister for Climate Change in the Welsh Government, Julie James MS, has flagged up the huge quantities of electricity that will be generated by offshore wind in the Celtic sea. She has raised with the UK Government the vital work needed to increase the grid capacity to transmit this energy to where it is needed across the UK. I would be grateful for a categoric assurance from the Minister that increasing grid capacity will be an absolute priority.
Community energy schemes can bring great benefit to local communities, so will the Minister, when he winds up, commit to retaining the amendments to help encourage such community energy schemes. I urge the Government: to retain the amendments made in the other place; to support our amendments to deal with grid delays; to expand home energy efficiency measures; to ban fracking, as indeed we have already done in Wales; and to lift the ban on onshore wind in England, all of which would make for a better Bill.
George Eustice (Camborne and Redruth) (Con)
This is a large and technical Bill that sets in place important frameworks, particularly when it comes to carbon capture and storage and the wider deployment of hydrogen and heat networks. I will address my comments, in the time that I have today, to part 3 of the Bill, particularly the support for low-carbon heating schemes and the opportunity that this provides for doing something creative for the off-gas grid homes in this country. It links to the earlier intervention of the hon. Member for Strangford (Jim Shannon) and to a private Member’s Bill that I introduced at the beginning of this year.
At the moment, we have 1.7 million homes in this country that are currently off the gas grid, most of which use kerosene at the moment. Under the current Government plan, which is born out of a strategy that dates all the way back to 2017—several Governments ago—the intention is that all those 1.7 million homes would be banned from having a replacement boiler after 2026 and told that, instead, they must have, effectively, either an air source heat pump or a ground source heat pump. As the right hon. Member for Leeds Central (Hilary Benn) said, there is a role for those heat pumps, but they are not for every home. In particular, in rural and especially coastal areas, air source heat pumps can be prone to rusting and decay. It is also the case that they need a lot of insulation to make them work, and, in some older homes, high levels of insulation mean less ventilation, which can lead to problems with damp, mould and all of the health problems that go with that.
Perhaps, more important than anything, the capital cost of these air source or ground source heat pumps for a single property is around four times that of a conventional boiler.
Alec Shelbrooke
My right hon. Friend touches on a point that I was going to raise later. My concern about the banning of gas boilers from 2024 is the impact that that will have on industry and on farming in particular, especially in relation to those costs. Farming is under a lot of pressure at the moment. Does he agree that this is similar to the argument that he is making about households in 2026?
George Eustice
My right hon. Friend makes an important point. As the right hon. Member for Leeds Central said, we need a diversity of different technologies because it is essential that we have all the tools in the box to achieve our objectives.
There is also a wider problem with the current Government strategy. Just before we get to 2026, we can envisage plumbers and boiler engineers across the land going out to people and saying, “If I were you, I would get a new boiler now because the drawbridge is about to come up.” That will probably mean that we will have a surge of investment in boilers at just the wrong time. On top of that, there is likely to be a “mend and make do” approach that will stretch for many years. All of this means that the objective of making carbon reductions, and getting not just to net zero but to our objectives under carbon budget 5, gets potentially further away, rather than closer.
The good news is that there is a better way. In recent years, the technology and supply of renewable liquid fuels have developed. If we were to use renewable liquid fuels such as hydrotreated vegetable oil, there is a great opportunity for us to get an 88% reduction in our carbon emissions, but far faster than the current Government strategy. It could get us an 88% reduction by carbon budget 5 simply by having an adaptation of those existing boilers.
A pilot in my own constituency has been testing hydrotreated vegetable oil. Residents who have used it report that it burns more efficiently. Some say that the use of the fuel is around 30% lower than with kerosene. The people at the church hall like it because they need intermittent heat, and they can switch it on without having a heat pump running continuously, wasting all that energy. The staff at the school like it because it works for their Victorian building. There is a huge amount to be said for opening the door to the deployment of these renewable liquid fuels. The Government already recognise this, because the renewable transport fuel obligation, introduced in 2007, creates an incentive scheme to require both importers and refiners of fuel to source some of that from renewable sources, such as hydrotreated vegetable oil. The Bill is an opportunity to extend the architecture of the RTFO, a long-standing scheme, to domestic boilers as well so that we can have that incentive.
I know that some officials in the Department argue that we cannot be certain that hydrotreated vegetable oil comes from renewable sources. I do not accept that. There is a British standard—an accreditation scheme for HVO that comes from renewable sources. It would be very easy for the Government, through regulation, to insist that only British standard-certified HVO would be allowed for this purpose. The officials have also raised questions about the supply of renewable HVO, but we are seeing an exponential rise in supply both from the United States and from the European Union and the potential to develop it in this country as well.
I very much hope that the Government will look favourably on amending the Bill—clause 104 of part 3 of the Bill would be key—preferably with their own amendment to give respite to 1.7 million homes in rural locations. If not, I shall seek, if I have the support of the House, to amend the Bill. My private Member’s Bill attracted huge support not just from Conservative Members, but from Members across the House, and the Government should consider it.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
It is a pleasure to speak on Second Reading and to follow the right hon. Member for Camborne and Redruth (George Eustice). Energy policy has been at the forefront of political debate in the UK for many years as policymakers grapple with the challenges that humankind faces with climate change. However, the war in Ukraine and the subsequent huge increases in energy prices over the past year have brought an immediacy to the debate not only from an environmental point of view, but from a social policy point of view. There is general political consensus around the need to decarbonise the UK’s energy system and to vastly increase domestic clean energy generation. There are, of course, differences around the speed of the transition and what technologies to prioritise.
Many consider the Bill to be too timid in its approach, believing that the UK Government should be prioritising renewables over nuclear and using the Bill to make a meaningful push on home energy efficiency. I shall be supporting new clauses 272 and 273 inserted in the other place promoting local electricity production as the Bill proceeds through its stages in this House.
From a Welsh perspective, I would normally use a debate such as this to ask why a country such as mine, which is a net exporter of electricity, a superpower in terms of the percentage of electricity production generated for export—it produces twice our domestic requirements—should suffer from appallingly high levels of household fuel poverty. The latest Welsh Government estimates that I have been able to find puts the figure at 45% of all Welsh households. However, instead of making broader political points in this debate, I want to concentrate on two local issues which I have been dealing with on a constituency basis. One unmistakeable fact facing us on our decarbonising journey is that there will be a requirement to increase electricity transmission and distribution infrastructure capacity significantly. Whether that is infrastructure to transmit electricity from generation sites to the National Grid or infrastructure to distribute electricity to homes to meet the demands of domestic heating and charging the electric vehicles of the future, the impact will be felt acutely in rural areas.
In my own constituency earlier this year, Green GEN Cymru, part of the Bute Energy group, published proposals for a new 132,000-volt double circuit overhead line, supported on steel pylons between the substation on the yet-to-be-approved Nant Mithil Energy Park in the Radnor Forest area in Powys and a new substation to be generated by National Grid on the existing 400,000-volt transmission line near Llandyfaelog at the southern end of my constituency.
We are talking about 60 miles of 27-metre-high pylons from near the English border in mid-Wales through some of the most beautiful scenic landscapes in Wales. Considering that the length of Wales, as you well know, Mr Deputy Speaker, is 130 miles, the scale of the project from a Welsh perspective is clear to all. The line will run right through the heart of the Carmarthen East and Dinefwr constituency, following the route of the majestic Tywi valley.
Carmarthenshire is branded as the garden of Wales and the Tywi valley is its centrepiece. We are blessed in Wales with some of the most incredibly beautiful places in the British Isles and beyond. The Tywi valley is one such area and is designated a special area of conservation. Such is its scenic beauty that the UK Government have supported a levelling-up bid by Carmarthenshire County Council to develop a cycling path between Carmarthen and Llandeilo along a disused railway, which I hope one day will be extended to the top of the valley in Llandovery.
The Tywi valley is home to some of Wales’s most important historical sites: Llandovery, Dinefwr, Dryslwyn, and Carreg Cennen castles, the iron age fort at Gam Goch, Paxton’s Tower, the National Botanic Garden of Wales, Aberglasney Gardens and Gelli Aur and Dinefwr mansions. Beth Davies from Llanwrda writes of the Tywi area:
“It captures the soul the heart and the mind, the beautiful valley that’s one of a kind.”
If the current route continues to be favoured, then it appears to me that undergrounding is the only option that will be supported by the communities of the Tywi valley. Other countries are adopting that approach. In Denmark, all existing 150,000 and 132,000-volt overhead cables are to be undergrounded by 2040. In the United States, I am given to understand that they are encouraging the undergrounding of new electricity infrastructure along existing transport routes such as railways. Germany approved plans in 2015 to underground 1,000 km of high-voltage cables in response to public opposition to new overhead cables.
To achieve its ambitions, Green GEN Cymru has applied to Ofgem for a licence as an independent distribution network operator. It would be very helpful if, when Ofgem considers that application, it takes into account the views of the local community before we move to the planning stage. In relation to this particular project, planning powers are devolved to the Welsh Government. However, Ministers will be aware that the current battle in the Tywi valley will be replicated across the whole UK.
Before I close, I want to touch on changes to the boiler upgrade scheme that have had an impact on a company in my constituency. In February, Ofgem summarily removed certain biomass heating systems from their boiler upgrade scheme product eligibility list, leaving businesses that specialise in the supply and installation of renewable heating systems in rural areas in a very exposed position, unable to fulfil orders. Following concerns expressed by the industry and, I would like to think, my early-day motion, some of the products were reinstated—but not the Klover Smart 120 and Smart 80, which my constituent believes are the best replacement options for the range-style boilers often found in Welsh rural dwellings. Although that point does not apply directly to the Bill, I would be grateful if the Minister bore it in mind.
Alec Shelbrooke (Elmet and Rothwell) (Con)
In the short time I have, I will focus my comments on vehicle propulsion, but first I draw on the comments from my right hon. Friend the Member for Camborne and Redruth (George Eustice) and the right hon. Member for Leeds Central (Hilary Benn) that the cost we pass on to the public must be minimised. I hope the Minister will take note of the points about the hydrogen levy before Committee stage. It is misguided and it is in the wrong place. We have to take the public with us on this—we cannot keep adding to people’s bills to try to make things work. I hope the Minister will take that point away.
Much has been said about energy security and trying to get away from the situations we face with Russian gas, fossil fuels and so on, but I am concerned that we are moving into another area of energy dependence on another autocracy or dictatorship, China. I raised this point with the Secretary of State earlier, and he focused on uranium, but that was not what I was getting at. China has sucked up the processing of many of the materials in the world that are needed to make renewable energy. According to statistics put forward by Morgan Stanley, China refines 59% of the world’s lithium, 80% of the cobalt, 69% of nickel sulphate, 95% of magnesium, 100% of spherical graphite, 69% of synthetic graphite, as well as producing 70% of battery cells, 78% of cathodes and 91% of anodes.
To build on that, the Mercator Institute for China Studies, a German think-tank, says about nickel processing in Indonesia:
“In 2014, Indonesia banned the export of unprocessed nickel, prompting a wave of Chinese investments seeking to secure battery materials. With China’s help, Indonesia plans to boost its share of global nickel production from 28 to 60 percent… Already several multi-billion USD nickel-focused industrial parks are sponsored by Chinese companies.”
On cobalt in the Democratic Republic of Congo, MERICS states:
“The DRC is home to over half of the world’s cobalt reserves and was responsible for two-thirds of mined output production in 2020. Chinese companies control up to 70 percent of the Congolese mining portfolio, but mining contracts…are under review by the DRC.”
MERICS also comments on the Lithium Triangle,
“a region around the borders of Argentina, Bolivia and Chile. It is thought to hold around half of the world’s lithium reserves. Between September and November 2021 alone, four separate Chinese companies announced acquisitions cumulatively worth USD 1.2 billion.”
That is the reality we live in today. A parallel can easily be drawn to what a hostage to fortune it could be if an autocracy or dictatorship took a direction we were not happy with. We have seen that happen in terms of fossil fuels with Russia.
So what do we do about it? The Bill makes some progress here, but I think we must come up with another technology that can work alongside electric vehicles. I want to draw attention to the fact that we do not put enough energy into hydrogen combustion. There is a lot of research going on. I am a big motorsport fan and I have been taking the magazine “Autosport” for over 30 years, so I will quote from its engineering supplement on 16 March 2023:
“‘People think hydrogen infrastructure is complicated and it doesn’t have to be if you look at it in stages,’ reckons Cosworth CEO Hal Reisinger, his company one of many including ORECA to have invested in hydrogen test cells. ‘Internal combustion engines can be very easily converted to hydrogen; put different injectors in, remap the ECU and there’s this entire infrastructure of engines that are available. It’s much easier to establish a hydrogen infrastructure than an electric infrastructure.’”
There are indeed great demands coming if we want to achieve the target number of electric vehicles. By the Government’s own estimate, the global demand for electric vehicle battery materials is projected to increase by between six and 13 times by 2040 under stated policy. World copper production has to double to be able to meet production policy, yet there was a report only last week that not enough new mines are being exploited to reach the current copper production level.
Hydrogen combustion does have issues. The compression of the hydrogen has to be 700 bar. There are questions about how we manufacture and store it. If we get the technology wrong. it produces dangerous levels of nitrogen oxide. That will have to be addressed, and so will the weight.
However, my argument is that there is an alternative that technically can work. I know that other companies, including JCB, have done a lot of research into it. I urge the Minister, when we are looking at development budgets, to start to put some hydrogen combustion development in there. We could refocus the automotive transformation fund, which perhaps has been too focused on electric vehicles and needs to look at other areas. There is a geopolitical and geostrategic effect that is occurring after some of these policies have been written, and we must be able to adapt and move along.
Every hon. Member in this Chamber wants to move towards a net zero society, but if we do not do so sustainably, taking the public with us, we will find that harder and harder to do, as my right hon. Friend the Member for Camborne and Redruth outlined with regard to the buying of gas boilers making the situation worse. Recognising that the supply of the rare earth elements that are needed may provide hostages to fortune with countries such as China, I urge my hon. Friend the Minister to look into how the Government can help companies to research and develop hydrogen combustion.
Mike Amesbury (Weaver Vale) (Lab)
It is a pleasure to follow the right hon. Member for Elmet and Rothwell (Alec Shelbrooke). Like many across the Chamber, particularly those on the Labour side, I rise to call for a more robust response to the climate emergency. My definition of “emergency”—and, I am pretty confident, that of most people in the Chamber—is to do with getting a move on and doing things at pace. Of course, it has been some considerable time since Parliament declared a climate emergency, yet the Government’s track record has been woeful at times.
Having said that, like others, I welcome the Bill’s Second Reading. Like the shadow Secretary of State, my right hon. Friend the Member for Doncaster North (Edward Miliband), and other Labour Members, I would like to see more of a focus on clean energy. Our ambition is to power up the UK with clean energy by 2030. That will mean an end to the ban on onshore wind, an effective ban on fracking, turbocharging solar, and connecting to the grid some of the great projects up and down the country, including, in my patch, tidal energy from the River Mersey and its estuary.
The focus of my speech will be the proposals for a hydrogen levy, adding to already astronomically expensive bills for consumers not just in my constituency but up and down Britain. That is the wrong solution at the wrong time. Such a levy would be yet another subsidy for the fossil fuel industry for a technology that will not work for domestic use. My hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) will expand on that by raising the trial in Whitby. I can assure the Minister that that trial is not going very well at all. My hon. Friend will expand on the reality of that.
My constituency and the surrounding areas have energy-intensive industries such as Ineos-Inovyn; Stanlow, which is just up the road; and Tata Chemicals. Hydrogen can provide a solution in terms of decarbonising at speed—I understand that, and it is recognised in the Bill—but I am fundamentally opposed to hydrogen for use in domestic premises. The evidence is crystal clear. My opposition is based not on emotion but on scientific evidence. A major peer review of 32 independent scientific studies found that none of the pilots and research supported widespread use of hydrogen for domestic heating. Indeed, MCS, a company based in Daresbury, has expressed evidence-based concern as well. The Select Committee concluded the same. The use of hydrogen for domestic use would mean 70% to 80% more on consumer bills, if we look at current gas-based consumer bills, and could result in 45% more gas importation. We should surely be moving away from that. The focus must undoubtedly be on investment in heat pumps—air and ground—for domestic use. That would provide energy at less than half the cost of the current market.
I call on all parliamentarians to make an informed choice, based on evidence, on the domestic use of hydrogen, and to support the amendments to remove it from the Bill.
Chris Grayling (Epsom and Ewell) (Con)
It is a pleasure to follow the hon. Member for Weaver Vale (Mike Amesbury), but I have a different view from his. It is worth remembering that this country has reduced its carbon emissions very substantially over the last decade—twice as fast, in fact, as the European Union. It is worth remembering that when we say that we are not making progress. There is an awful lot to do, as we have heard, and we cannot rule out any options, so legislating against a particular technology is not where the Government should be. We have to be technology-neutral. Frankly, we will need all options if we are to get to net zero; we cannot simply rule out one or the other. We will have houses heated in one way and others in another way; we in this House cannot simply take the decision to blanket refuse a particular approach.
There are things that we should encourage. Frankly, I cannot see why we do not put in place robust rules on building solar into every new building—particularly every new commercial building. We can do things that do not close options but take us a step down the road. The Government should be taking such measures, but they probably fall into the pot of the Department for Levelling Up, Housing and Communities rather than that of the Department for Energy Security and Net Zero.
I will focus in particular on an area of energy that has been touched upon only briefly in an intervention: the whole issue of aviation fuel. If we are to achieve net zero, we need an aviation industry that also moves rapidly towards net zero, and that is not an easy task. It is a particularly difficult task for the aviation sector because the technology is not yet there to make significant progress in that direction. But it is getting there, and we have to do what we can to encourage it, because the aviation sector is hugely important to this country. Both sides of the House have agreed in the past that its importance needs to be supported and protected. That was noted in particular when we voted on the expansion of Heathrow airport: the vast majority of Members supported the industry on that night. We have to continue doing so while accepting that the industry has to transform itself. It cannot simply stand outside the plans to deliver net zero; it has to change.
The industry will change—insofar as we can currently see the technological routes—in two different ways. First, hydrogen will play an important part in the future of the aviation industry. The first very short-haul 19-seater passenger planes with hydrogen technology powering them are already being tested, and that is a positive step forward. There will be some electrification of aircraft, but only at the smallest end of the scale. Given the way in which technology is developing, it is realistic to assume that, by the middle of the 2030s, we will start seeing short-haul passenger aircraft—the A320s and A319s, or their equivalents and successors—powered by hydrogen. However, there is very little prospect any time soon of long-haul aircraft being powered by hydrogen or electricity. We will not abandon travel around the world. That would be disastrous, not just economically but for a whole raft of reasons. If we took away long-haul aviation, serious damage would be done to conservation efforts around the world, for example.
We will need what is called sustainable aviation fuel. The benefit of that fuel is that it can, to a significant degree, be produced from waste. By waste, I do not just mean more biowaste; I actually mean municipal waste. Some of the early projects to create sustainable aviation fuel have used municipal waste—black binbag waste from people’s homes. That is a huge opportunity, but we have to support the development of that industry. We live in a world that is increasingly shaped by what is happening in North America, including the United States’ Inflation Reduction Act—a slightly strangely named piece of legislation if ever there was one—and what will now happen in the European Union as a result. I am a strong free marketeer, but we cannot ignore other countries taking a different path and simply allow important industries, such as the one that will emerge to produce sustainable aviation fuel, to go elsewhere. We will have that fuel anyway. The airlines will buy it and use it, and they will fly to other countries, which will have sustainable aviation fuel to put in the jets. We will have to do the same.
Robert Courts (Witney) (Con)
My right hon. Friend is making a powerful speech focusing on exactly the right issue. As a former aviation Minister and chair of the all-party parliamentary group on aviation, I know that the aviation industry sees this as vital for its future. He touched on the point that, if we do not make SAF, we will still use it and it will be made elsewhere. Will he touch on the economic opportunities for this country, and will we simply lose them if we do not put into that technology now?
Chris Grayling
I am grateful to my hon. Friend for his comments. He is an experienced former aviation Minister and has huge knowledge of this area—he is absolutely right.
This industry is going to happen. Indeed, it is already developing in fledgling form around the world. It will certainly happen in the United States, where huge effort has been put into making it a reality. We have to have that industry here. There is no point seeing yet another industry developing around the world in this new technology and standing to one side and saying, “Well, other people can do it—we will bring it in by tanker.” That would be a betrayal of our aviation industry and a betrayal of the industrial base of this country, and we must not let that happen.
What do we need to do? We need to get this technology —this industry—up and running in the UK with something we have done in a variety of areas. We need a contracts for difference scheme. It is an attainable option, and has been done by Government before. I very much hope that the Government—this Department in partnership with the Department for Transport and the Treasury—will take that road. However, we cannot wait very long. It has to happen soon, and we have to put down a marker that says that we are going in that direction. We need to start doing the work on what a detailed scheme would look like.
The aviation industry is desperate for that to happen. The Minister knows, as do other Departments that have been looking at this—the Department for Transport has been doing so, as has the Treasury—that it does not have to be done at the expense of hydrogen. There are people who say that SAF does not really matter because we are going to do hydrogen, but we need both. We need short-haul planes powered by hydrogen and we need long-haul planes powered by SAF. That is the future of aviation.
I hope that the Minister will be able to give us comfort today, and as the Bill proceeds through the House, that the Government as a whole will deliver that. However, I would put down a marker. If by Report stage we do not have some clear signposts that the Government are going in that direction, I will table an amendment that will mandate them to introduce a contracts for difference scheme in the next 12 months, and I will seek the consent of the House for that. I know that Conservative Members who support my concerns will support such an amendment.
I am lobbing this at the Minister, saying that we need to get on with it, but may I ask him, over the next few weeks, as the Bill goes into Committee, and as he discusses with ministerial colleagues the way forward for the Bill, to seek to make a firm commitment to a contracts for difference scheme for SAF so that we can deliver for this country an industry that will be vital for the future?
Caroline Lucas (Brighton, Pavilion) (Green)
I appreciate that hon. Members want to demonstrate cross-party support for net zero. Yes, by and large, we agree about decarbonisation, but sadly we do not agree about the speed of that process. The UK has a responsibility to go much further and faster than most other countries because we are disproportionately responsible for the cumulative emissions that are already in the atmosphere.
We were the first country into the industrial revolution—the fossil-fuel industrial revolution—and we need to be the first country out of it. I have not heard enough urgency from Members on either side of the House about that this evening. Winning slowly on this issue is the same as losing. The bottom line is that there can be no new exploration for fossil fuels if we are serious about doing our fair share to avoid the worst of the climate crisis. The report by the United Nations environment programme on the production gap states clearly that
“governments still plan to produce more than double the amount of fossil fuels in 2030 than will be consistent with limiting global warming to 1.5°”.
Ministers often seek to justify new oil and gas developments in the North sea in the name of energy security, but that is profoundly misleading. The majority of fossil-fuel projects in the pipeline are for oil, not gas, which will do nothing to boost energy security, given that we currently export at least 80% of the oil we extract because it is not even the type that is used in UK refineries.
That defence also exposes a paucity of imagination and a failure to grasp what true energy security looks like. True energy security is about abundant and cheap renewables. It is about a flexible energy grid. It is about properly insulated homes and it is about better storage. I urge Ministers to grasp this opportunity genuinely to transform the future of our energy system so that it works for people and planet.
What is most striking about the Bill is its failure to wean us off fossil fuels—the very thing that is choking our planet and driving high energy prices. I endorse the Lords amendment on the prohibition of new coalmines. It was simple in its drafting but vital in its importance. The Minister will no doubt note that it does not only cover coal for energy; it covers coal in its entirety, extending its reach to the newly approved Whitehaven coalmine—and so it should, because that stranded-asset coalmine would produce vast amounts of climate emissions. It is neither wanted nor needed by the UK steel industry, and it is not wanted in Europe, which is rapidly moving towards green steel. I urge the Government to retain the amendment to the Bill.
We need to go much further than that, and reduce our wider reliance on all fossil fuels, not just coal. As a first step, that must involve a review of the outdated and dangerous duty to maximise the economic recovery of petroleum from the North sea. It is beyond imagination that at a time of climate crisis we still have on the statute book an obligation to maximise the economic recovery of oil and gas. We need to move away from that. We also need to move away from the extraordinary position on the so-called windfall tax.
David Duguid (Banff and Buchan) (Con)
I am listening to the hon. Lady’s speech with great interest, and want to pick up on one part of it. On moving away from maximising economic recovery, does she agree that we are already less than 50% dependent on our own domestic sources of oil and gas? Does she agree with the Climate Change Committee’s assessment that our dependence on oil and gas will decline more slowly than our ability to replace it, so we will become more dependent on imports? What she has recommended will not stop our use of oil and gas—it will just make us more dependent on imports.
Caroline Lucas
I thank the hon. Gentleman for his intervention, but I totally disagree. The option before us is not to use home-grown fossil fuels versus imported fossil fuels. The choice—[Interruption.] No, it is not. The choice before us is whether we continue to depend on fossil fuels or whether we shift to a green transition much faster. I appreciate why that is difficult for him to understand. Having listened to the right hon. Member for Epsom and Ewell (Chris Grayling), who spoke about the future of aviation, I was struck by the fact that nowhere in his speech was there anything about demand management. People are looking for technical fixes the whole time without recognising that the bottom line is that there are climate limits to what we can do.
Caroline Lucas
No, I will not, I am sorry. Some climate limits mean that we need to change behaviour as well as depending on new technologies.
I was about to talk about the windfall tax and the gaping hole that allows corporations to claim £91.40 for every £100 invested if—perversity of perversities—they reinvest that money in yet more oil. This comes at a total cost to the taxpayer of nearly £11 billion—enough to give an inflation-matching pay rise to every NHS worker and teacher for a year. Instead, the North Sea Transition Authority should have a duty to help meet the UK’s climate commitments and deliver a managed and orderly phase-down of UK petroleum. This, of course, must come with a requirement to support a just transition for oil and gas workers and communities—a clear pathway coupled with financial support to enable them to move into green jobs. Crucially, we need to see no new licences, which means that Ministers must give up any idea of giving a green light to projects such as Rosebank, the UK’s largest undeveloped oil field, which would produce more emissions than 28 low-income countries combined. That would be the definition of recklessness.
The Energy Bill aims to deliver a
“cleaner, more affordable and more secure energy system”,
which is a worthy aim. I very much hope the Government listen to hon. Members on both sides of the House who have talked about introducing a new duty on Ofgem to abide by net zero requirements. The amendment on that tabled in the other place received cross-party support, and I cannot see why the Government would not want to make sure that we retain that.
The Government have repeatedly said that they wish to see more community energy generation, but they objected to amendments on that in the Lords on the grounds that they constituted a subsidy. That is not the case. Rather, those amendments would give community energy schemes fair access to the market. If the Government are serious about community energy, they have to find a way to bring community energy to market, precisely by the kind of mechanism—a fixing of price—that we already use with contracts for difference. I urge the Government to accept retain the amendments on community energy, or offer a workable alternative.
In the very short time I have left, I would love to say more about energy efficiency and the need to insulate our homes properly. The cheapest energy is the energy that we do not need to use in the first place, and I despair of the fact that the Government have still failed to come up with the community-led, local authority-led, street-by-street home insulation programme that would achieve proper progress on this.
In the very few moments that are left I want to say a few words about nuclear. Government support for this nuclear white elephant, formalised by the Bill, is beyond ludicrous. We have already discussed the cost of nuclear—it is massively expensive and going up in price—but it is also massively slow. The Government have accepted the goal of decarbonising the UK’s power system by 2035. Given that it will take eight to 10 years to produce new nuclear, it will make absolutely no difference to that decarbonisation target. It is too expensive, too slow and it needs to come out of the Bill.
Dame Maria Miller (Basingstoke) (Con)
It is a pleasure to see you in the Chair, Madam Deputy Speaker. I rise to support the Bill. I was hoping to hear from the hon. Member for Brighton, Pavilion (Caroline Lucas) a few more of the positive things that this Government have achieved, which are important to acknowledge, so that people can see that progress has been made, not least the fact that half of all our electricity is now generated from renewable energy sources—something we could be forgiven for missing in her speech.
I do not want to repeat what has been said in the debate, much of which I agree with, but I want to bring up two particular issues that I hope the Minister will take note of: fusion power and lithium-ion storage facilities. He will not be surprised by that. They both illustrate the ingenuity of our scientists and the fact that, as our understanding of new energy sources develops, the Government’s response to those energy sources needs to develop and those technologies need different regulation.
Let us take fusion technology first. Last year I visited General Fusion in Vancouver, British Columbia, an incredible Canadian firm working with the Culham Science Centre in Oxfordshire, which will be the home to the firm’s fusion testbed. We should be very proud of that. The Bill fundamentally changes the way in which fusion technology is regulated in the UK, because we understand it much more now. The current regulatory regime characterises fusion in the same way as nuclear, which is just plain wrong. To better recognise the fusion process, the Government are rightly introducing measures in clause 110 to remove fusion from nuclear site licensing requirements. That is very welcome. It is more accurate. It provides confidence to investors, the industry and the public alike, and it is an example of how the Government are recognising the need for regulatory changes.
That is in contrast with the issues around lithium-ion battery storage facilities, which are covered in clause 168—the Minister knows where I am going next. For the first time, the Bill recognises that electricity storage is separate from electricity generation. It is a new sector. In the past, power stations were designed to match consumer demand. With around half of our electricity now generated by wind, it is essential to store electricity to help out when the wind is not blowing, to put it plainly. Over 90% of our UK electricity storage capacity is in lithium-ion batteries, and while recognising energy storage, the Bill is silent on issues that are fundamental to the future of this sector, including fire safety.
Alec Shelbrooke
Does my right hon. Friend agree that a lot more research needs to be done on where these storage facilities are based? Thermal runaway can cause fires that take several days to put out, and some of the chemicals used to extinguish those fires are toxic. There are planning applications coming forward for facilities that are far too close to people’s homes.
Dame Maria Miller
My right hon. Friend is right that there are hundreds of applications coming forward in around 350 constituencies, and I urge Members to check whether any such applications have been made in their patch.
I would like to draw on a slightly different issue, which is that if we do not have the right regulation for lithium-ion battery storage, we will not attract investment into this area in the future, because we will not be encouraging those lithium-ion battery storage facilities to be designed in a way that mitigates the risks we know exist. At the moment, the planning application process takes no account of the proven fire risks that my right hon. Friend just referred to with lithium-ion battery storage plants. Thermal runaway is a chemical reaction caused by overcharging or a design fault, and these fires cannot just be put out; they can only be stopped by cooling with large amounts of water over several days, which creates toxic fumes and polluted water runoff. Even though the use of batteries for this purpose is relatively new and there are currently only 35 such facilities in action, we have already had one major fire in Merseyside in 2019 that took 59 hours to put out.
This new technology is being rolled out at lightning speed, with 473 new sites under way, yet there is still no planning guidance for local authorities, no requirement to obtain an environmental permit from the Environment Agency and no requirement for the fire service to be consulted over designs or locations. The Bill must directly address that gap in regulation. Since I raised the problem with Ministers in July last year, and following a roundtable with five Departments in March, there now appears to be agreement that regulatory change needs to be considered. This Bill is exactly where it needs to be addressed, and I am happy to table amendments to that effect if the Government are not able to do so themselves.
In an open letter to all Hampshire council leaders, Neil Odin, who is the fire chief of the Hampshire and Isle of Wight Fire and Rescue Service, stated that these batteries
“can malfunction and lead to an intense fire, and when they do, pose a significant harm to the environment”.
That is coming from the head of one of the largest fire authorities in the country. I believe they also pose a significant risk to people, including firefighters, and I hope that in advance of Report the Minister will work with me to amend the Bill, so that lithium-ion battery storage can continue to play a hugely important role in realising the Government’s ambitions but with the right regulatory governance in place, not only to ensure the safety of our residents but to encourage insurance companies and those who want to run these facilities to do so in the future.
Justin Madders (Ellesmere Port and Neston) (Lab)
I would like to talk a little bit about the hydrogen village trials and the experience of the process in Whitby, because it has told me—and, indeed, this debate has highlighted—that it is not at all clear that we have the answers yet to how to reach net zero in home heating. Without that certainty, we do not have a hope of persuading people that the disruption, inconvenience and expense they will face is a sacrifice worth making to possibly at some point in the future reach net zero. I say that knowing that the vast majority of my constituents are persuaded of the urgent need to tackle climate change, as am I.
Most importantly, these changes can only be done with people, not to them. That message does not appear to have been understood by those promoting the hydrogen village. Once consultation started, local residents came to me time and again, having been left with the clear impression that they would be forced to switch to a hydrogen supply whether they wanted to or not. People were told that the trial was happening and they had better get used to it—so much for taking people with us.
We have thankfully moved to a point where people now have a choice between staying on natural gas and moving to hydrogen for the duration of the trial. That was what I thought the original proposal was going to be—it is certainly what it should have been—but this last-minute revision to the proposals is too late in the day, as many have already made up their minds. Given that only a few months ago I was being told that allowing people to stay on natural gas was not possible because
“we are aiming to emulate a rollout scenario in which natural gas heating solutions are no longer an option”,
I am more than a little cynical about the reasons for this late change of heart.
Although it is a positive that we have finally reached the point that we should have been at from the outset—that those taking part in the trial will have a genuinely free choice about whether they do so—because of everything we have been through, the take-up of hydrogen is likely to be small, and certainly not be the mass roll-out that was originally planned. As such, the question for the Government is whether all the effort and expense that will go into the trial will be worth it, given the likely low take-up.
We may have already learned the most important lesson, which is that if we do want to decarbonise the domestic energy market, technological change cannot simply be done to people. The Government need to decide which technologies they want to prioritise and then take a lead in persuading people that the choice being made is the right one, both for the individual and for the planet. However, when that choice is made, I ask them to please make sure that they have as many answers to the questions as possible, because my constituents know that, at the moment, the Health and Safety Executive has not signed off the use of hydrogen in the trials. They know that the energy needed to create green hydrogen is currently far greater than that which would be needed for other renewable sources. They know that it will cost them more, and that up until now 37 independent studies have shown that hydrogen is unlikely to play a significant role in home heating.
Even if we do get to a point where the safety and cost concerns are addressed, every week that passes sees another report or study pouring further doubt on the claims that hydrogen is part of the future for domestic heating. When my constituents see those reports, they are bound to ask why they are being put through this, and to ask the question I put to the Minister: if he is persuaded by the increasing number of studies—if he thinks that hydrogen in the home is unlikely to play a part in the future mix—why does he not just call a halt to these trials now? However, if he thinks that the time and money being expended is worth it, I ask him to please say so and be explicit about why the trials are proceeding and what the benefits are, as the majority of my residents have made up their minds that the risks far outweigh any potential benefits.
On the subject of residents’ views, I am pleased that the local council has agreed to my suggestion that a ballot of residents take place, so that there is a genuinely independent measure of public support for the trial. I am pleased that the Government have previously indicated that they will expect to see strong public support as a condition of the trial; I would be even more pleased if that were said explicitly in the Bill.
Returning to the importance of taking people with us, I find the clause in the Bill that gives gas transporters the right to forcibly enter properties in order to conduct the trial deeply concerning and completely against the spirit of what those trials should be about. As it stands, the clause offers sweeping powers for gas network operators to go into properties. It would be welcomed, both by myself and by my constituents, if the Minister could commit that those powers would only be used in an emergency and as a last resort, and say whether anything can be done to amend the Bill to make it clear that that is the case. I do not believe for a minute that the Minister thinks it would be a good idea to send engineers into someone’s home to forcibly change their supply to hydrogen just for the purposes of the trial, so it would be good if the legislation reflected that.
In conclusion, hydrogen certainly has a role in industry. It probably has a role in transport too, but in the home that role seems far less certain. The uncomfortable reality is that we have yet to find the panacea for decarbonising home heating. Moving to unproven, uncertain technologies is not going to wash with the public, especially when they are being asked to make a significant sacrifice, and always when they are not going to be given any choice. Given the money that has been spent so far on persuading people of the merits of hydrogen in the home, the fact that I and the majority of my constituents are now more sceptical about it, not less, should give everyone food for thought about whether this whole exercise is really just a case of selling ice to Eskimos, and whether it needs to continue at all. I believe that Cadent has been given more than enough opportunity to demonstrate that these trials could be a good thing, but it has failed to take that opportunity. That is probably because, at the end of the day, this experiment just does not stack up, and the idea that my constituents would end up paying for it through a hydrogen levy just adds insult to injury.
Elliot Colburn (Carshalton and Wallington) (Con)
In the short time available, I want to focus on an aspect of the Bill that has not yet been discussed in this debate: the new regulations on district heat networks. I am very grateful that the Government have listened to concerns—not just from me, but from colleagues across the House who have district heat networks in their constituencies—about just how damaging those networks’ unregulated nature can be. That can be seen on the New Mill Quarter estate in my constituency, which I have raised a number of times in this place. I will outline briefly why this new regulation is so needed and why it is welcome, but also where I would like the Government to look into potentially going further.
To give a quick bit of context, the New Mill Quarter estate in Hackbridge is heated by a series of insulated pipes that stretch from the incinerator in the north of the constituency across redeveloped farmland to heat those homes, but it has been bedevilled by problems. It is not even online yet: it is currently being powered by a back-up gas boiler system, and it has suffered a number of blackouts and two call-outs from the London Fire Brigade and, practically, seems to have had a huge failure. I do not have time to go into that subject now, but I draw Members’ attention to some of my other contributions in the House on it.
Blackouts are probably the No. 1 reason why regulation is needed. The reliability of district heat networks is a massive problem, and not just in New Mill Quarter in Hackbridge; it has happened across other estates in London, such as Oval Quarter in Lambeth, New Festival Quarter in Tower Hamlets and multiple estates in Southwark—no guessing which party runs those local authorities.
Customer satisfaction is lower for customers on district heat networks, rather than gas boilers. A 2017 survey conducted by the Department for Business, Energy and Industrial Strategy found that district heat network customers were much less satisfied with their service than those with other forms of energy.
Bills are another big issue. The cost of living is a massive concern for all our constituents right now, and the No. 1 concern that comes up time and again when I talk to Carshalton and Wallington residents is meeting the cost of their energy bills. We need to empower Ofgem to force the pricing model of district heat networks to be comparable to the market average. That is incredibly important, and I am grateful to the Government for looking at that in detail and taking steps in that direction. The residents of New Mill Quarter are facing energy bills higher than the market average. They are not protected by, for example, the energy price cap, because it is an unregulated piece of heating. I very much welcome the Government’s measures, which will provide a lot of reassurance not just to residents of New Mill Quarter, but to others living under a district heat network.
The final thing that I welcome the Government taking action on is simply the monopolistic nature of heat networks. Customers cannot change and go to a new supplier, because a district heat network forces those living within it to use that heat network. They cannot shop around for a better deal and they cannot rely on the market—this is important to me as a free-market Conservative—to drive down prices while driving up reliability. Regulation therefore is so important, and I am grateful that the Government are taking steps in that regard.
One area I would like the Government to look at further is future-proofing district heat networks. Many of them are future-proofed by their very nature, but for those that are heated by incinerators, such as the one in Hackbridge, I can see a glaring problem coming down the line. The Government outlined in their waste minimisation strategy that they want to phase out incineration as a form of dealing with waste. All of us across the House support the reduction and stopping of incineration as a form of dealing with our waste. Incineration is only slightly better than landfill—only very slightly. It is not a net zero-conducive form of waste management, as we rely on creating waste to feed it.
The problem we can see in estates such as New Mill Quarter is that we will have an incinerator that becomes less and less needed as the years go on. We then have two options: either we have to import waste to feed the thing and keep the heating going, which obviously is not conducive to any net zero ambitions; or the thing has to be turned off, and what happens then? That entire estate was new build, built specifically with the infrastructure to deal with the incinerator. I might be long dead by the time it happens, but the problem is coming, and we should not leave it to a future generation to solve. We should look at future-proofing that now.
David Duguid
I am interested in what my hon. Friend is saying about heat networks and wonder whether he might agree with something I have learned just recently. It is a proposal from a stakeholder who deals in renewable energy, including hydrolysis to create hydrogen. That generates a lot of heat, and their suggestion is that we declare heat as a utility in a wider form. Would that help his purposes?
Elliot Colburn
My hon. Friend is absolutely right, and it relates to a point that a number of colleagues have made today: we cannot mandate the use of one technology or a very small number of technologies; we need to have that collective option. I urge the Government to err on the side of caution because, under their own ambitions, district heat networks could account for something like two fifths of the UK’s heat provision. Given the problems that have existed in Hackbridge and across multiple estates, and not just in London, I urge the Government not to put all their eggs in one basket by relying on district heat networks as a singular answer. I agree with my hon. Friend. There are plentiful supplies of renewable energy out there. We need to make sure that we are neither mandating nor preventing the use of any one. We should be using all those potentials to reach our net zero ambitions and provide more domestic energy security.
I very much welcome the measures set out in the Bill and urge colleagues to support it. It will certainly have my support tonight.
Wera Hobhouse (Bath) (LD)
Our biggest task worldwide is to get to net zero. We must transform our entire energy system. The Liberal Democrats welcome many of the Bill’s proposals. However, it is simply not ambitious enough. We need bold action now to protect consumers from spiralling costs and to put us on the path to net zero.
The Government continue to protect the oil and gas giants. Typical direct debit customers have seen their annual gas and electricity bills almost double, while oil and gas giants have announced record profits. Last year, Shell forcibly installed prepayment meters in over 4,000 homes while making £32 billion in profit. UK consumers have been among the least protected in Europe. When will this Government put struggling UK citizens first?
The energy price cap is not fit for purpose. The current price cap is set at a high level to incentivise people to switch energy suppliers, but research shows that vulnerable customers who struggle to pay their energy bills are much less likely to switch suppliers. We Liberal Democrats would reform the price cap to protect these customers by bringing in a capped tariff set lower than the existing price cap. I urge the Government to consider this.
The best way to reduce energy bills is to move harder and faster towards renewables. However, a lack of grid capacity is seriously holding back renewable energy projects. Many face delays of up to 15 years. In Wokingham, for example, the Liberal Democrat council has been told that its first ground-mounted solar farm project will only be connected in October 2037, a decade later than originally promised. How can we decarbonise our power system by 2035 when ready-to-go renewable projects cannot get the grid connection they need?
Britain will have to build seven times more transmission lines in the next seven years than it has built in the last 20. This huge task will require a major change in approach by the regulator. Ofgem is not empowered to consider the benefit of long-term investment, as its remit focuses on short-term costs to consumers. This is a major reason behind the lack of grid investment. In the other place, an amendment was agreed to give Ofgem a specific statutory net zero objective. I urge the Government to keep this provision in place.
The Bill, as amended, also now contains a ban on opening new coalmines. Less than two years ago, the Government announced that they were leading an international effort to end the use of coal, yet soon afterwards they gave the greenlight to the Cumbria coalmine, a gateway to allowing more fossil fuels in the UK and flying in the face of our net zero commitments. The Government must ensure that this ban on new coalmines remains part of the Bill if they are to retain a shred of credibility on climate action. Huge changes to people’s lives will be required to get to net zero. We must bring people on board, or there is a risk that people will not accept the necessary changes, making our progress to net zero more lengthy, costly and contested.
Community energy provides cheaper, greener power and distributes benefits locally. The community energy sector has the potential to be 20 times bigger by 2030, powering 2.2 million homes and saving 2.5 million tonnes of CO2 every year. However, community energy projects currently generate just 0.5% of the UK’s electricity. This is because the financial, technical and operational requirements involved in becoming a licensed supplier put initial costs at more than £1 million. The amendments agreed in the other place would rectify this, and they must remain part of the Bill. Ministers have said repeatedly that they want more community energy. Now is the time to show that they mean it.
Some 77% of people say that they would support a new onshore wind farm being built in their area. Our UK communities know that renewables are the solution to our energy crisis. However, this Government continue with their dogmatic opposition to onshore wind and solar. The Bill does not contain provisions to roll out solar power, and the effective ban on onshore wind remains.
Another disappointment is that the Bill does not contain provisions to cut flaring, venting and leakage of methane from gas and oil platforms. Methane is a potent greenhouse gas, with 80 times the warming effect of CO2. It accounts for 13% of global greenhouse gas emissions. The UK has signed the global pledge to cut methane levels by 30%, and a ban on oil and gas flaring and venting in the North sea would dramatically reduce methane emissions. It is supported by the Environmental Audit Committee and the Government-commissioned independent review of net zero. We must mandate monthly leak detection and repair activities. The North Sea Transition Authority must identify and publish a league table of the best and worst performing companies, so that methane emissions can be publicly monitored. We can reduce methane waste by 72%, but the Bill is currently silent about that and needs amending. We still have much to do to protect consumers and reach net zero. The Bill, although substantially improved in the other place, still does not go far enough. As it passes through this House, we must ensure it does not become a missed opportunity.
David Duguid (Banff and Buchan) (Con)
It is excellent to see you in the Chair tonight, Madam Deputy Speaker. Let me say from the outset that the main message I receive from all parts of the energy sector—the Minister will know how many parts of that sector exist in my constituency—is this: let’s get the Bill passed; let’s get on with our job that needs to be done. That said, this is a complex Bill. We have heard about some of that complexity tonight, not least the various conflicting priorities that it is the Minister’s unenviable task to sort through.
I will not go through every part of the Bill as time will not allow—in fact, time probably will not allow me to go through the topics I wish to try to talk about, so I will get on with them. Oil and gas has been spoken about already, but the “inconvenient truth”, to steal a phrase from former Vice-President Al Gore, is that we are not going to get to 2050, keeping the lights on, homes warm and the economy moving, without oil and gas, albeit at greatly reduced demand. It therefore stands to reason that we will not get to net zero by 2050 without carbon capture, usage and storage, and I want to talk about the Scottish cluster in particular.
Before the energy profits levy was introduced, the oil and gas industry was already paying 40% tax, compared with most businesses paying 19%, which rose to 25% last month. With the EPL, the oil and gas industry is now paying 75% tax on oil and gas profits—not on global profits, but profits made in this country. According to the Office for Budget Responsibility, it will pay around £15 billion in financial year 2022-23. That represents a fifth of the UK’s corporation tax receipts, from exploration and production alone.
The Climate Change Committee’s ambitious net-zero pathway profile predicts that demand for oil and gas will decline at a slower rate than domestic supply. It is hugely important that we are able to access our own domestic supplies to meet that continuing, albeit declining, demand. It is also hugely important, as the Minister knows, that the industry is adequately engaged through the passage of the Bill. Oil and gas companies, and their employees, skills, technology and expertise, stand ready to help the Government and this country not only to deliver our energy security needs, but to invest and drive the energy transition that, as should have been said, is at the centre of the North sea transition deal that was signed between the Government and the oil and gas sector in 2021.
The industry and Governments must continue to work together to make the most of our homegrown industry and supply chain in which, crucially, most of the 200,000 oil and gas jobs in the UK exist. With that in mind, I reinforce calls that I know the Minister has already heard from the industry through the trade body Offshore Energies UK. In the immediate term, we need to introduce a clear mechanism, or announce what such a mechanism will be, by which a trigger or a floor price ensures that the 75% tax rate is applied only to company profits that are earned from the excessively high market price environment. In the medium to long term, we must legislate for an effective decarbonisation investment allowance that allows for decarbonisation expenditure, which is essential to delivering the UK’s net-zero ambitions and North sea transition deal emission targets. There are longer-term requests, of which I am sure the Minister is aware.
A huge part of our decarbonisation effort is this Government’s strategy to deliver up to 30 megatonnes of carbon capture and storage by 2030. I welcome the Chancellor’s announcement in the spring statement of £20 billion to help deliver at least that commitment of four CCUS clusters in the UK by 2030, and more beyond that. The £20 billion is for 20 years, from this year. Last month the launch of track 2 of the cluster sequencing process was widely welcomed by industry stakeholders and project developers alike. That includes the Acorn project in my constituency, and the Scottish cluster more generally. Despite continued efforts to downplay the status of that project by SNP Members and Members of the Scottish Government in particular, work on that project has never stopped. In fact, more than £40 million of UK Government money has been directly invested into the Scottish cluster, compared with £80 million promised by the Scottish Government and then withdrawn, with clarity not provided on exactly where that £80 million has gone.
As I said, the sector is impatient to get on with the work to be done on energy security and decarbonisation. Speaking for not only the Scottish cluster but CCUS more broadly, the announced streamlined approach to track 2 is very much welcome, but, as I am sure the Minister realises, even more welcome would be a clear and rapid process for rolling out track 2 clusters, building on the lessons learned from track 1. For example, it would be extremely helpful to award initial capture projects swiftly—and concurrently, if possible—with transport and storage licences. May I also ask for the inclusion of shipping and other non-pipeline transport of emissions, bearing in mind that most centres of industrial activity around the UK do not currently have clarity on what their pathway for decarbonisation will be?
Finally, on CCUS, given direct air capture’s current absence from the Bill as a carbon capture entity, will the Minister clarify what role that will play? Will it need to be included in the context of the appropriate clause—I think it is clause 63—of the Bill? If the Government cannot table that amendment, would it be helpful for me to table such an amendment, as others have offered? I am sure we can discuss that in more detail as Committee approaches.
Ben Lake (Ceredigion) (PC)
It is a pleasure to follow the hon. Member for Banff and Buchan (David Duguid), who was effective in outlining the many complexities inherent in the transition of our energy system from dependence on fossil fuels. It is a complexity that we must bear in mind as we discuss the Bill. I welcome many of the measures in the Bill that are designed to provide a cleaner, more affordable and more secure energy system. However, I am concerned that more is required to address some of the short-term issues that we face.
Of course, I need not remind the House of the widespread concern that households across the UK are particularly vulnerable to any further increases in the cost of energy. We are told that energy bills might increase by some 17% this year. Hon. Members will know as well as I do that many households struggled last winter. They have had to exhaust their savings, and some have had to take out loans to meet the costs of last winter, so they are vulnerable to any further increases that might come next.
Citizens Advice Cymru has seen a sharp increase in the number of people seeking debt advice. It reports that more people are now falling into arrears on essential household bills. The charity saw a 150% increase in the number of people seeking advice on debt relating to energy bills between February 2020 and February this year. That further underlines the vulnerability of so many of our households and how exposed they are to any further increases in the cost of energy. Before I go into some of the Bill’s longer-term measures, I would like to impress on the Government that, before next winter, there is still time to bring forward measures to support some of those vulnerable households and ways of financing them.
Anne McLaughlin (Glasgow North East) (SNP)
Does the hon. Member share my concerns, which I think are widespread, about the plight of people on prepayment meters who are struggling to pay for energy? Does he share my disappointment that nothing has yet made it into the Bill that would protect people on prepayment meters in particular from so-called self-disconnection, where, when they run out of money, they are automatically cut off from all gas and electricity?
Ben Lake
I thank my hon. Friend for making that important point. I think we all agree that customers on prepayment meters are among the most vulnerable consumers of energy and electricity in the country, and they should be prioritised as we look to help households with the cost of energy.
It was mentioned earlier that one way of financing greater support for households could be a new tax on share buybacks. We have read in the news about Shell and its £3.2 billion plans announced in that regard, and we must question whether such funding could be used to increase support provided under the energy price guarantee in advance of next winter. Another round of the alternative fuel payment could be guaranteed, set at a level which better reflects the increase in the cost of alternative fuels experienced by off-grid households. In that regard, I am very grateful that the Government and the Minister are considering additional support for energy-intensive businesses not connected to the mains gas grid. That should be a priority.
Looking beyond next winter, I think Members will agree that the Bill offers a golden opportunity to step up investment in the energy efficiency of our housing stock. In the long term, reducing our energy demand represents one of the most important contributions to forging a more resilient and sustainable energy system, helping to permanently slash energy bills for both households and businesses alike. I have previously called for the £6 billion for energy efficiency measures, committed in the autumn statement, to be brought forward. The spending profile should be brought forward as much as possible. The more we can prioritise the investment of energy efficiency, the better. As chair of the all-party parliamentary group on fuel poverty, I emphasise that point and, in doing so, ask that the Government consider setting clearer pathways for improved energy efficiency standards for our housing stock.
The case for prioritising energy efficiency measures is well made, but for the avoidance of any doubt the New Economics Foundation estimates that had all homes in England and Wales been upgraded to EPC C by October last year, the energy price guarantee would have cost £3.5 billion less during its first six months. A Welsh home installation programme, set out by the Future Generations Commissioner for Wales, could save the Welsh NHS £4.4 billion by 2040 in improved health outcomes.
It is important that current energy company obligation schemes are delivered properly. Between April last year, when ECO4 commenced, and December, approximately 25,000 households received support. Given that that amounts to less than 6% of the 450,000 households ECO4 is supposed to support over its four-year lifetime, we should be concerned about the pace of the roll-out so far. Constituents and installers alike have contacted me to complain about the scheme’s deficiencies, which I believe demand the Government’s urgent attention. In particular, consideration needs to be given to reviewing the eligibility criteria, so that more people can benefit from the scheme. Also important is revision of the scheme’s cost assumptions, so they are brought in line with current supply costs.
Before I bring my remarks to a close, I would like to add my support for clauses 272 and 273, which were added to the Bill in the other place. The current energy and wider cost of living crisis brings into sharp focus the consequences of failing to transition away from fossil fuels. Action must be taken to accelerate the transition. In that regard, community energy projects have a crucial role to play. By establishing an export guarantee scheme for smaller-scale sites that generate low-carbon electricity, and by requiring larger suppliers to work with community schemes, the clauses could unlock the potential of community energy schemes across the United Kingdom, which the campaign group Power for People estimates could grow by between 12 and 20 times by 2030, powering up to 2.2 million homes. This is an important set of clauses that I very much hope the Government will see fit to retain in the Bill.
Alexander Stafford (Rother Valley) (Con)
As chair of the all-party parliamentary group on hydrogen, most of my comments will focus on the hydrogen part of the Bill.
The past winter has epitomised the uncertainty felt across the country about our energy future. However, the Bill will restore certainty and help to deliver energy security and net zero targets, because it will help to unleash our hydrogen potential. Part of the uncertainty for our constituents is a concern about everyday essentials, such as, “How do I clean my home?”, “Do I need a heat pump?” and, even, “What is a heat pump?” Green hydrogen blending uses the same pipe and boiler system already in our homes and is by far the simplest way of cutting our carbon emissions from heat, which currently run at nearly a quarter of our carbon dioxide output. I am convinced that green hydrogen can play a part in decarbonising heating, but I know, as we have heard today, that many across the House and the country are not so certain. That is why the trials that the Bill supports are so important. The point is to allow Government, businesses and, most of all, our constituents, to decide if it is a viable path to decarbonising heating. It is essential that the Bill pushes forward those aspects.
Businesses, too, need certainty that hydrogen will not fall by the wayside. The UK has been a world leader in hydrogen. The hydrogen strategy and last year’s update clearly envision us regaining that title. But policies such as the Inflation Reduction Act and the Net-Zero Industrial Act mean that the US and the EU have become more fertile ground for hydrogen innovation than the UK. Businesses need certainty to invest in hydrogen, knowing that there will be a thriving hydrogen economy for production, storage, transport and use. That is why I am delighted that the Bill will unlock billions in private investment through contracts and business models, not only securing our energy future but bringing jobs and wealth across the country. Although there are concerns about the cost of the schemes, I know that every pound spent on hydrogen today means two pounds or more off energy bills tomorrow. That is surely an easy calculation to support. The provisions in the Bill will boost the UK’s hydrogen economy, and I am glad the Government are, at last, being proactive in this space.
Although the Bill goes a long way, we must go further on hydrogen. It will be the glue that binds our green energy future together. It is a Polyfilla energy, helping to fill the cracks between other sources and plug the holes left by carbon-based energy. It will prove an invaluable tool for tomorrow’s energy mixture. The more we encourage it today, the better. For that reason, I urge the Government to push further and legislate to become the torchbearer for global hydrogen. For a start, although I am glad that community electricity producers will now have the certainty and support that they need to flourish, the provisions in the Bill exclude small-scale hydrogen production, which can be used as storage or directly as an energy source. Will the Minister look at widening those clauses to include all low-carbon energy suppliers?
We can do more to ready ourselves for hydrogen heating. We can require new boilers to be hydrogen-ready by 2026, which will bring down prices to normal levels, provide certainty to manufacturers and smooth the transition towards blended heating systems. What better way of preparing ourselves for clean heat. I call on the Minister to re-examine the case for hydrogen-ready boilers. That will be a shot in the arm for UK manufacturers. Furthermore, although the Government’s dedication to hydrogen is welcomed by all, or by most anyway, there must be enough green hydrogen. Current estimates forecast that we will need about 10 times the hydrogen that we currently produce to reach net zero by 2050. The Government have already kickstarted UK hydrogen by doubling our production target. Will they do that again? Will there be certainty for all the hydrogen that we need? We need to increase and support hydrogen production.
Finally, and most importantly, we must be certain that the hydrogen we use is not damaging our planet, despite its clean reputation. Many of the objections to hydrogen in heating come from uncertainty about the true emissions of producing it. Blue hydrogen in heating is often claimed to emit more carbon than natural gas. We need certainty that the hydrogen we use is not going to be worse than the carbon we are leaving behind. The Government’s current definition of low-carbon hydrogen, at 20 grams of CO2 equivalent per megajoule of hydrogen, is a good start but we must look at lowering it in line with the overall emissions of the grid. Specifically, it must come down to closer to 5 grams to ensure truly environmentally friendly hydrogen. That is the only way to give investors and our constituents the certainty that low-carbon hydrogen is indeed low carbon. I appreciate that blue hydrogen and others are clearly transitional to get to green hydrogen.
It will be obvious to the House that I am certain that there is no green future without hydrogen, but thanks to the Bill and the certainty that it provides to our constituents, businesses and investors, I believe that the Government agree. I know work will be planned to incorporate some of the suggestions I put forward today, but the Bill goes a long way to creating the certainty in hydrogen that we need. However, we must go faster. We used to be the world leader in hydrogen production and manufacturing, whether from buses such as Wrightbus or diggers such as JCB. All across the sector, we need to go further and faster with hydrogen. It is not the silver bullet to all our net zero needs but it is the Polyfilla that will make sure that, when other areas fail, hydrogen will step in.
Alex Cunningham (Stockton North) (Lab)
Let me begin by drawing attention to my roles as chair of both the chemical industry all-party parliamentary group and the all-party parliamentary group on carbon capture, utilisation and storage.
I welcome the Bill’s progress. It is long overdue and essential, although I feel that it lacks the necessary ambition to deliver all the Government’s stated aims of making the energy system fit for the future, ensuring the safety, security and resilience of the UK’s energy system, and leveraging private investment in clean technologies.
Ministers have said that there is no way for us to achieve net zero without carbon capture and storage. The target set by the Government is to capture and store 20 to 30 million metric tonnes of carbon dioxide a year—including removals—by 2030, but while that is welcome, I personally believe that there could be an even higher target to benefit our country. The Carbon Capture and Storage Association says that the UK’s CCUS project pipeline would be able to store some 70 million tonnes of CO. The industry is ready to deliver, and we need to let the industry get on with it.
I have been banging the drum for CCUS deployment for quite some time now. Support from the Government has been shaky in the past, with several false dawns—funding whisked away, or not provided at all—so I am pleased to see what looks like real progress, although today’s delay in planning permission for our Teesside project is a worry. Teesside is a vital area for the net zero agenda. Its proximity to offshore wind sources and its cluster of energy-intensive industries that require decarbonisation make it a good location for hydrogen production and carbon capture. I was certainly pleased when the Department selected a handful of carbon capture projects on Teesside to progress to the next stage of development, but I was very disappointed that of the 40 longlisted projects only eight are going forward. and that many in the east coast cluster, including one in the Humber, are missing out. What, I ask the Minister, will happen to them next? That said, I welcome the Government’s statement that the Bill
“will introduce state of the art business models for carbon capture usage and storage…and hydrogen”.
Now they must prove it, and prove it quick.
I know from speaking to industry representatives, especially those in the Teesside cluster, that investors see the timely passage of this legislation as critical to maintaining confidence and momentum in the sector after a decade of those false dawns and U-turns. Representatives of the Chemical Industries Association tell me that their sector also wants the Bill to be passed, pointing out that, while it is imperfect, it contains some fundamental provisions. They say that it will give the sector certainty, including the provisions relating to hydrogen and CCS business models, network charges and Ofgem's remit to include net zero, and they like it. Essentially, however, they are asking for a net zero energy transition at the lowest possible cost, creating competition in the energy market to minimise the risk of domestic and non-domestic consumers’ picking up the cost. How, I ask the Minister, will that be delivered?
Of course, the quickest, cheapest and best answer for our national energy security is a clean energy sprint. New renewables are nine times cheaper than gas. They would not only fight the climate crisis but increase our energy security and sovereignty, bring down bills, and create jobs. However, at this crucial moment for our country and our planet, the Bill does not provide the clean energy sprint that we need, so perhaps the Minister could tell us why the ban on onshore wind—the cheapest, cleanest, quickest energy available—remains. Furthermore, the Bill does not deliver the “green plumbing” measures that are necessary to accelerate the deployment of low-carbon power and grid management, failing to solve the grid connection problems, leaving our planning system unreformed, and failing to add a net zero duty to relevant regulators such as Ofgem. It is certainly not the complete answer to all our needs.
We do not just need renewables; we need renewables done well, and, as the Campaign to Protect Rural England suggests, that can be achieved by empowering communities to decide what is appropriate for their local area, and guaranteeing that they benefit from these schemes. The Countryside Charity has long highlighted community energy projects as the gold standard for renewables done well.
The Bill provides a real opportunity to put financial structures and a programme in place to secure for the 19 million homes in our country that are below EPC band C the upgrades that they need. That is what Labour would do, but there is no plan in the Bill to insulate the homes that need it, which is costing each of those households up to £1,000 a year. Disappointingly, there is no plan to remove the windfall tax loophole or de-link electricity and gas prices so that the cheap power promised by renewables can be passed on to families and businesses rather than being paid out in windfall profits. We should be providing public support to develop our hydrogen industry, but the Government’s preference is to load the cost of subsidy on to household bills.
A number of amendments to the Bill were introduced by the Lords: moving the hydrogen levy away from customer bills; establishing a net zero duty for Ofgem; banning new coalmines; introducing a local electricity Bill; and mandating reporting on EPC standards for homes. I trust the Government will welcome those amendments. I will also support further changes, such as ending the onshore wind ban, banning fracking, expanding targets on the energy efficiency of homes and dealing with grid connection delays.
It is exam season and the Government are facing big tests—I would give them about six out of 10 for now. The Bill has come some way, but we know that in its current state it does not go far enough. Our industry and people depend on us getting this right.
Greg Smith (Buckingham) (Con)
I welcome many of measures contained in the Bill, not least the clear step forward in embracing nuclear. Indeed, I consider it an act of national vandalism and a huge part of our difficulties on energy cost and supply since Putin’s invasion of Ukraine that previous Governments failed so badly on nuclear.
First, I wish to focus my remarks on community energy. It is an absurdity that the community energy sector has seen minimal growth in recent years, accounting for less than 0.5% of total UK electricity generation capacity, not because of the cost of technological development or even deployment, but because of energy market and licensing rules. That should be easily fixable, so I add my voice of support for clauses 272 and 273 to enable community schemes to sell the electricity they generate locally.
These seem to be straightforward, pro-competition, pro-consumer reforms, and my central ask is that they should be adopted as part of the Bill. If my hon. Friend the Minister is minded not to support them, what will he propose to open up the huge community energy sector opportunity that the Environmental Audit Committee’s 2021 report identified could grow by 12 to 20 times by 2030, powering 2.2 million homes?
I turn to the challenges facing rural off-grid households. According to the latest census, 15% of my constituents—and, for transparency, this applies to my house too—use oil-fired boilers for central heating, compared with 3% nationally, and a further 4% use tanked or bottled gas, compared with 1% nationally. As it stands, such households are looking down the barrels of massive expenditure when their boilers need replacing. A troubling direction of travel means that, as soon as 2026, these oil-burning boilers will be banned and groupthink will be directing us to worship at the altar of the heat pump.
Not only are these things horrendously expensive, but for many rural homes they just will not, and never will, work. The Government’s own data shows that some 20% of off-grid households simply cannot use them. Many rural or older homes, built out of stone, cob or “Whychert”, which is unique to the Vale of Aylesbury, are less energy efficient, more expensive, more difficult and, in some cases, impossible to insulate. It is essential that the Government drop ambitions to ban people from using systems that actually work for their homes. Instead, they should ensure there is the best variety of choices available to households to choose how to decarbonise in a way that will not leave them broke, indebted and cold.
The best way of moving forward would be to adopt the provisions in the Renewable Liquid Heating Fuel Bill, introduced by my right hon. Friend the Member for Camborne and Redruth (George Eustice), into this Bill. That would enable people to transfer to the use of hydrotreated vegetable oil at a fraction of the cost of a heat pump and associated works—we are talking hundreds of pounds to convert, rather than tens of thousands of pounds for the alternative.
That leads me to a wider ask on the future of fuel. It is hugely welcome that, with this Bill, the Government are seeking to recognise recycled carbon fuels in legislation by extending the eligible fuel types under the renewable transport fuel obligation orders to include two new low-carbon fuels. As it is inconceivable that the future of aviation and maritime will ever be without the need for a liquid hydrocarbon, the challenge is what that liquid hydrocarbon looks like. My central argument is that, by using drop-in biofuels, which are more easily and financially scalable, in the short term and fully synthetic fuels in the medium to long term, the choice extended to aviation and maritime can equally be enjoyed, with much wider access, across other heavy-duty applications, such as agriculture and construction machinery, road haulage, rail, motorsport and, linking back to my second theme, the very fuel we use to heat rural and off-grid homes in a manner that does not leave people poorer and colder.
This is about developing new fuels for what we already have, not spending billions of pounds on reinventing the wheel, or at least that which makes the wheels and propellers turn. Perhaps such fuels will even be the saviour of the road car as we know it, as even the European Commission is proposing to allow e-fuels in combustion engines after its zero emission cut-off date in 2035.
Petrosynthesis, as Paddy Lowe, the pioneer of one synthetic manufacturer, Zero, calls it, creates a balanced, circular and sustainable future of indefinite timescale—the industrial version of the natural carbon cycle. This Energy Bill should be the vehicle to embrace this evolution right here in the United Kingdom. Across transport and domestic energy, synthetics offer so much. We just need to get fully behind them.
Peter Aldous (Waveney) (Con)
I welcome you to your place, Madam Deputy Speaker.
This Bill is welcome, and it can play a key role in delivering a cheaper, cleaner energy system, promoting investment in clean technologies and enhancing our energy security by deploying more home-grown power. The UK has been a global leader in promoting renewables such as offshore wind, but we cannot rest on our laurels. If we do nothing, we will be left behind in the race to attract global investment, which is very much footloose.
The US Inflation Reduction Act and the EU green deal industrial plan throw down the gauntlet, to which we must respond, not necessarily with like for like but by ensuring that we have a regulatory and policy framework that gives investors confidence and certainty. At the same time, we must not forget the demand side. We should be doing better, and we are still searching for the catalyst that will unleash a retrofitting revolution.
I will briefly go through some of the initiatives that are needed to provide the clarity and certainty everyone seeks. First, a duty is needed for Ofgem to consider net zero. It is vital that we keep costs as low as possible for consumers, but expanding Ofgem’s remit to include net zero would unlock more anticipatory investment, which would enable grid reinforcement. This is currently particularly important in East Anglia.
Secondly, introducing a competitive market for major onshore electricity transmission networks is welcome and can deliver real consumer benefits by driving both innovation and downward pressure on costs. Thirdly, the establishment of an independent system operator and planner with responsibility for whole energy system strategic planning is a positive and welcome step towards an improved governance framework.
Fourthly, we need to remove the obstacles that currently block community energy schemes from realising their full potential, and I thus urge the Government to give full consideration to retaining clauses 272 and 273, which were introduced by amendments in the Lords. One of the great challenges of transforming our energy system is that so many people and communities feel as if something is being done to them—as if a burden is being imposed. Community energy schemes enable local people to be part of the solution by participating in the benefits, thereby showing that we are all in it together. As we have heard, hydrogen will be crucial to achieving net zero, and locally, in East Anglia, it has a key role to play. It is very much the new kid on the block. We do not yet know the precise role it will play and, as we have heard, there is a dispute as to who will pay the hydrogen levy. Different views are being expressed on that and it is necessary to consider carefully how best to proceed.
It is also important to send a strong signal to investors by introducing a sunset clause on the powers assigned by the Secretary of State in the Energy Prices Act 2022, which have had an impact on investor confidence, with companies falling out and leaving the sector. The Bill provides an opportunity to amend that Act so as to enable the Government to respond quickly in the short term without unnecessarily impacting on investor confidence in the long term.
My final point comes back to demand-side measures and the need to address the challenge presented by our leaky buildings. Clause 204 is the result of an amendment in the Lords and gives the Secretary of State six months to publish a comprehensive plan to improve UK buildings’ energy efficiency. I urge the Government to commit to doing that and providing firm policies to incentivise improvements across all domestic and commercial buildings.
In conclusion, there are many issues the Government need to clarify, but it is vital, as Energy UK points out, that this Bill is passed with the utmost haste. The pressing need for reasonably priced electricity, for enhanced energy security and to meeting the challenge of climate change head on, together with the opportunity to create exciting and sustainable new jobs in coastal communities such as the one I represent, means that there is no time for delay.
Selaine Saxby (North Devon) (Con)
The Bill is a crucial piece of legislation for delivering a cheaper, cleaner energy system and increasing investment in clean energies. As the new Department is named the Department for Energy Security and Net Zero, one hopes it will deliver on both. I do not need to rehearse the challenges we face in respect of how being overly reliant on imported gas has created higher energy prices. Much more needs to be rapidly done to improve our energy security. If we create the right legislative framework, and invest in renewable and sustainable energy supplies, we should ensure that we also achieve the goal of moving towards net zero.
There is much to welcome in the amendments from the other place. In particular, I wish to speak to clauses 272 and 273, formerly in the Local Electricity Bill, which are backed by 318 MPs, including 125 Conservatives. These measures seek to enable community groups to sell electricity to local customers. It is still bewildering to me, as someone who lives somewhere sunny, windy and with a huge tide, why this has not progressed sooner. Clause 272 sets up a community and smaller-scale electricity export guarantee scheme to provide a guaranteed income for the electricity from small-scale renewable energy generators with a capacity below 5 MW. Surely, with dramatically rising energy prices and a system still reliant on fossil fuel imports, new local, secure, low-carbon generation must be desirable.
Clause 273 sets up a community and smaller-scale electricity suppliers services scheme, which would enable them to sell the electricity generated to the local community if they wish to do so. That would facilitate a community energy tariff that can be offered to consumers local to the site. Locally generated electricity would reduce our dependence on imported energy and increase the resilience of our domestic energy supply. It could help cut bills and save emissions. There is huge support for these clauses across this House, and I hope that Ministers will ensure they remain in this Bill. Ministers have previously opposed them on the basis that they amount to a subsidy. However, that would be the case only if the guaranteed price were many times the prices of other sources, but that is not what these clauses mean, with a suggested rate of about 5p to 10p per unit.
Bizarrely, these same Ministers are still happy to subsidise the burning of trees for woody biomass, creating one of the biggest emitters of carbon dioxide in the country. We are subsidising that to the tune of £1.7 million per day. Even advisors to the provider of this plant have detailed that it should
“reassess its criteria for determining carbon neutrality”.
We are seemingly keen to subsidise this polluting form of energy at a time when I am sure we are working towards net zero, yet there seems to be far less subsidy for some of the genuine renewables that we could make use of, for instance right here in the Celtic sea—I declare an interest as chair of the Celtic sea all-party group. But this year’s contracts for difference auction is expected to deliver less than half the renewable capacity we need to hit our 2030 offshore wind target, all due to an administrative strike price not keeping pace with rising supply chain and financing costs and a Department that said that it did not believe the industry’s figures.
As the Crown Estate gets ready to launch its next leasing round in the Celtic sea, aiming to catch 4 GW of floating offshore wind, I hope that we will be able to help get these floating offshore wind turbines out to sea rather than subsidise the burning of trees to secure our future energy supply. It is inconsistencies such as this that make me support new clause 271, which would place a duty on Ofgem to consider net zero. Investment and subsidy decisions would hopefully then ensure that the true environmental impacts of the energy produced were considered.
Clause 204, on improving energy efficiency standards in our homes, is hard to argue with. However, the practicalities of the issue have already seen long-term landlords change to short-term holiday lets in locations such as my beautiful North Devon constituency. We need to ensure that any move to improve energy efficiency applies to short-term holiday lets as well long-term rentals —we still use energy and emit CO2 when we are on holiday.
However, I have concerns about a blanket imposition. In rural and coastal Britain, our housing stock is older and draughtier, and it is harder to bring up to the standards of newer homes given planning restrictions. We need to better understand rurality. I will support any amendments that my right hon. Friend the Member for Camborne and Redruth (George Eustice) tables, as it seems bewildering to me that we are requiring all off-grid properties to adopt air source or ground source heat pumps when we could enable those with oil boilers to convert to hydrogenated vegetable oil at a fraction of the cost. The cost of such fuels is currently prohibitively expensive, but given that the Government have long recognised the value of renewable fuels, such as hydrotreated vegetable oil in the transport sector through the renewable transport fuel obligation, surely it is possible to devise a similar incentive mechanism, extended to the use of renewable fuels in domestic boilers for off gas grid properties. This could be achieved by some tweaks to clause 10, in part 3 of the Bill.
We should be able to support community energy generation given the abundance of renewable energy sources, particularly in the rural south-west. We must focus scarce subsidies on fuels that are truly renewable and work to harness the wind in the Celtic sea, which, in turn, will support the UK’s longer-term energy security strategy.
There is much to commend in the Bill, but I hope that Ministers will look favourably at these amendments and recognise that, while energy security is vital, we also need to work towards net zero. Frankly, though, some of the current subsidies risk delivering the opposite outcome.
David Johnston (Wantage) (Con)
I wanted to speak in this debate for three reasons. First, like every Member of this House, I am sure, I would like to see an energy system such as the Government are seeking to create—one that is more resilient, keeps cost down and keeps us on track for our net zero aim. The Government have spent a huge amount of money paying the equivalent of half the average household’s energy bill, which has been very welcome given what Putin has done to weaponise energy supply, but it is clearly an unsustainable position for the country to be in. Although we have made great strides in cutting emissions—cutting them by more than 40% and cutting them faster than any other country in the G20—we have more to do on our energy system.
The second reason is that my constituency is home to Harwell science and innovation campus, which was hidden from ordnance maps in the late ‘30s and early ‘40s, but was where atomic energy was developed. Harwell campus is now the home to £3 billion of science infrastructure, including an energy tech cluster, which, alone, has 80 companies in it. My constituency is also home to Milton Park, which has 270 companies predominantly working in science and tech. They include Tokamak Energy, which will be key to our fusion future. What the Bill seeks to do in supporting the Government’s aims on carbon capture and storage, on hydrogen and on fusion is important not just for the country as a whole, but for businesses in my constituency.
The third reason I wanted to speak in this debate is that I am the lead sponsor of the Local Electricity Bill, which various hon. Member have commented on. It has the support of 318 MPs—125 of them Conservatives—113 councils, nearly 90 national organisations and four of the six distribution network operators, not to mention countless members of the public who have written to many of us to endorse it.
We have not made enough of community energy and its potential. The Environmental Audit Committee found in 2021 that it could power 2.2 million homes by 2030. Instead, we have gone from 249 MW to 331 MW over a five-year period, from 2017 to 2022. We could be doing much more than that. We have not seen a single community energy supplier get to market through the Licence Lite scheme, which it was hoped might enable them.
The truth is that the set-up costs are too high: they are estimated to be £1 million or more, which for a small-scale generator of community energy is far too much. I pay tribute to the driving force behind the Bill, Power for People, and in particular Steve Shaw, whom many of us have worked with on this. Power for People is very flexible and adaptable and, as the Minister knows, the Bill has moved a considerable way, from seeking to make the costs of joining the network for community energy suppliers proportional to their size to proposing that we let them team up with larger suppliers so that they can sell their energy at a fair price and access the metering and maintenance capabilities of those larger suppliers.
I understand that is still not a position that the Government support, but I say to the Minister, “Work with me and the other supporters of this Bill as it progresses, to get to a position that the Government are comfortable with.” Community energy is hugely popular. People often disagree on nuclear, on which renewable source we should put more money into and on how long we will need to use fossil fuels, but almost everybody supports community energy. Indeed, the Government have consistently said that they support the development of community energy. I urge the Minister to work with us to try to find the right mechanism to get some money behind it, because it is high time we found the right mechanism to enable it to flourish.
Duncan Baker (North Norfolk) (Con)
When Russia invaded Ukraine and the energy crisis started, nobody would have thought that a small village called Bacton on the rural North Norfolk coast would play a central role. North Norfolk is home to Bacton gas terminal, a hydrocarbon gas processing plant supplying up to one third of the UK’s gas supply. As well as importing and exporting gas from Europe, Bacton acts as an important interconnector between Belgium and the UK.
Since the start of the war, Bacton has shot to prominence and has been working overtime. I mention it this evening to place on record its importance to the UK energy revolution, and to the hydrogen sector in particular. Bacton’s potential is absolutely enormous. It plays and it will continue to play a very significant role in the future of our energy security, specifically in the future of blue and green hydrogen production.
Already there are plans to launch a £1.3 billion project by Hydrogen East to transform Bacton into a hydrogen hub of the future. That hub in that little village in my constituency has the potential to power London and all of the south-east into the future. That is how significant it is. As the Secretary of State and the Minister know, they are warmly invited to see for themselves why leaders in the sector are looking seriously at this project and the potential it offers.
We know that the Energy Bill will make provision to secure our energy production and regulation, instead of subjecting the UK to volatile international markets, but a transition to hydrogen is also estimated to deliver 12.9 million tonnes of CO2 reduction. Not only will that provide us with 25% of what is needed to reach net zero, but the economic situation must not be overlooked. Importantly, it will generate up to £11 billion in private investment and more than 12,000 new jobs by 2030.
As many have said, hydrogen production will be the backbone of our transition away from fossil fuels, and it is vital that we accelerate our move towards those greener alternatives. Bacton and its £1.3 billion project could, as a terminal into the hydrogen energy of the future, heat up to 20 million homes for decades to come, with long-lasting impacts. So what is the problem? Well, all we need now is for the Government to sit up, take notice and give us the momentum, the investment and the support. By repurposing the existing infrastructure, we could, according to many of the projections, see hydrogen production in Bacton fully up and running by 2030, putting the UK on a world-leading path.
My coast already provides some of the highest concentration of wind farms in the world. It is not too far out of the question to say that North Norfolk has the ability to do that again, and—with Bacton set for the hydrogen energy revolution—it could be one of our country’s capitals of the secure energy future. We just need the Minister to help us with that. Bacton gives us our own secure energy production facility, long-lasting security and a greener future, and it certainly enables the UK to be a main player in this market.
Dr Alan Whitehead (Southampton, Test) (Lab)
We have had a good, calm and well-informed Second Reading debate. Indeed, we have heard contributions from across the House emphasising the point that the Bill is necessary but not necessarily sufficient.
My right hon. Friend the Member for Leeds Central (Hilary Benn) asked who will pay the changed levies as far as heating is concerned, and spoke about the need to undertake that properly for customers.
My hon. Friend the Member for Llanelli (Dame Nia Griffith) pointed us towards the rise of state-controlled companies’ investment in new energy arrangements, and was adamant about the Bill lifting of the ban on onshore wind.
My hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) made a strong contribution on the role of hydrogen in heating and, in particular, on the hydrogen trials that he has experienced. Perhaps we can assure him that we will certainly pursue an amendment to the Bill along the lines that he suggested.
My hon. Friend the Member for Stockton North (Alex Cunningham) spoke strongly about carbon capture and storage, about the importance of CCS in the Teesside industrial cluster, and about the importance of ensuring that the industrial clusters can play their role in CCS as they develop further,
In the spirit of general cross-party support for the Bill, I think it also worth mentioning selected contributions from hon. Members who are not on the Labour side. Unfortunately, if everyone stuck to the contributions from their own side, those of the hon. Member for Brighton, Pavilion (Caroline Lucas) would not be mentioned by anybody, but she made a strong contribution about the future of coal, about the need to support the amendment on coal tabled in the other place, and about the ludicrousness of continuing to maximise the economic production of oil, echoing many of the sentiments of my right hon. Friend the Member for Doncaster North (Edward Miliband).
The right hon. Member for Ludlow (Philip Dunne), who chairs the Environmental Audit Committee, spoke strongly about the need for security of investment in this market, and the length of arrangement that would secure those investments and confidence in markets for the future.
Finally, the right hon. Member for Kingswood (Chris Skidmore), author of the net zero report, spoke enormous sense about delays being the biggest threat to net zero in future. He supported the retention of Lords amendments to the Bill, as did many other hon. Members, on community energy changes and other things that are part of the Bill that we are debating in the Commons.
Wera Hobhouse
Does the hon. Gentleman think that it is important that we do something about methane flaring and venting, which I raised in my contribution?
Dr Whitehead
Yes, I am happy to acknowledge that that is an important issue in the transition to net zero for the oil and gas industry, and that it is ripe for further legislation to outlaw it in the not-too-distant future.
It is fair to say that hon. Members across the House went along with the theme that we have tried to establish on the Bill: it contains a great deal to support, and it is a Bill that is necessary to introduce things that are essential to the development of a low-carbon economy, to the achievement of the many targets on low-carbon energy and renewable deployment, and to the new forms of energy management that the Government have already put in place and on which they are seeking to succeed.
The Bill establishes mechanisms and business arrangements for carbon capture and storage, and for the manufacture and deployment of hydrogen as a low-carbon fuel for the future. It starts to delineate how energy systems are going to be governed and managed for the future, with the establishment of the independent system operator. For the first time, it introduces a proper system of heat network regulation, and it takes the planning and development of heat networks further. It heralds some of the essential elements of energy market reform. In short, it undertakes a great deal of what I would call necessary “green plumbing”, which has to be done now if our low-carbon energy system of the future is to work effectively.
The Opposition have some serious differences with the Government about how to go about those changes, but we acknowledge and support the generality of those “green plumbing” measures, not least because their establishment will undoubtedly help the new Labour Government greatly as we embark on our far more ambitious programme of energy decarbonisation and energy efficiency from 2024 onwards. Indeed, one of our substantial criticisms of the Bill is how long it has taken for us to get to the point of establishing the legislation that will guide the next stages of our energy decarbonisation.
As we have heard, the Bill has been with us for 10 months in its almost finalised form. Yes, the Government have sought to add amendments to the Bill in another place, and there will be further amendments in the Commons, but the measure could have been on the statute book many months ago—and time is of the essence in getting going with the next stages of decarbonisation. Instead, last autumn we were treated to the spectacle of the then Secretary of State for Business, Energy and Industrial Strategy pulling the Energy Bill from its established progress after just two sessions of debate, and sitting on it for over three months for no apparent reason while the legislative process stalled completely. That led to the remarkable situation of the Opposition writing to the new Minister during that period of stasis demanding that the Bill be recommenced as soon as possible. I know about that because I was the person who wrote the letter. [Interruption.] Indeed, I did a very good job there.
Yes, this Bill is necessary, but many Members have asked whether it is sufficient, and we think it is certainly not. There are many missed opportunities to legislate for many aspects of the green transition that are or will become necessary shortly. There are many instances where the green plumbing in the Bill looks, frankly, fairly faulty and could do with beefing up. For example, the Bill fails completely to lift onshore wind back into place as a key element of our low-carbon energy armoury. The Bill fails to redefine Ofgem’s remit to start from a low-carbon imperative. The Bill fails to address another key part of that armoury—community energy—in any sort of meaningful and enabling way.
The Bill fails to address the very real changes in regulatory machinery that will need to accompany the transition from oil and gas to a predominantly low-carbon energy environment. The Bill continues to propose soaking customers for the support of future infrastructure when we require entirely new forms of support that recognise both the breadth of the work that has to be done and the institutions that we will need to support investment and development.
There are many areas where we can say, “Yes, but” to this Bill and put forward the measures that will enable it to rise to the challenge of decarbonisation in a comprehensive way. That is why we will embark on that task as the Bill goes into Committee by tabling the amendments that will make the Bill so much more robust for the challenge of the future, and we hope the Government will be receptive to those proposals. That process has been started, with a number of very well-thought-out additions made to the Bill in the other place on Ofgem, hydrogen, coal, community energy and home retrofitting. We will seek to defend those changes in this place, and we hope the Government will see the wisdom of them and not seek to overthrow them.
This is a necessary but not sufficient Bill that we want to get on the statute book, preferably with the added heft of our proposed changes to it in Committee, so that it becomes more on the sufficient end and less just necessary. We will not seek to divide the House on Second Reading but instead will give conditional support and assistance as far as we can with an early emplacement on the statute book.
Labour has an ambitious low-carbon energy programme for government, with a fully decarbonised power system by 2030, including a doubling of present onshore wind deployment; a grid that is fit for enabling and delivering a low-carbon economy; Great British Energy, an investment company that can do so much to speed the energy transition along; a massive programme to retrofit 19 million homes over 10 years to reach our energy efficiency targets; and serious planning of the energy transition, so that it is a just transition both in the North Sea and elsewhere. All these plans will benefit from many of the measures that are in the Bill, but they could be so much more supportive, and that is why we want to see an extended and more robust version of the Bill on the statute book as soon as possible.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
I begin by thanking Members for their considered contributions to the debate. It has been encouraging to hear broad support for the Bill—I hope it sets a precedent—and that reflects the meetings I have had with Members of this House and the other place and with the devolved Administrations over the past few months. I will try to address as many of the questions and issues raised as possible.
Let me remind the House why the Bill matters: it is a critical part of securing the clean, inexpensive energy that Britain needs to prosper. It will do that by leveraging investment in new technologies and by securing clean home-grown industries that can reduce our exposure to volatile gas prices in the long term. We are already world leaders. We have reduced emissions more than any other country in the G7, but this Bill will allow us to go further. It will enable reform of our energy system. It will protect consumers from unfair pricing, and it will make Britain an energy-secure net zero nation.
I turn to the points raised in the debate. Several Members asked how the Government are increasing investment in the grid and supporting grid capacity. I will make no bones about it—this is one of the biggest challenges our country faces. I get it; we get it. That is why, following the British energy security strategy, the Government worked with Ofgem on its work to accelerate strategic transmission investment. Following Ofgem’s decision on that in December, approximately £20 billion of investment across Britain has been accelerated by regulatory efficiencies. On grid capacity, increasing competition in networks is expected to encourage greater inward investment into those networks, ensuring sufficient network capacity for demand needs in Great Britain. Further work on that issue is ongoing as we speak.
My hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) and others raised issues about the independent system operator, or the future system operator. To be clear, the independent system operator and planner will be an expert, impartial body with responsibilities across both the electricity and gas systems to drive progress towards net zero while maintaining energy security and minimising costs for consumers. We are confident that we have struck the right balance on that issue.
The hon. Member for Ellesmere Port and Neston (Justin Madders) raised the issue of the hydrogen village trials—I was pleased to meet with him recently to discuss those trials. The Government have always been clear that the gas network delivering the trial must engage with residents to develop an attractive consumer offer for everyone in the trial area. This must include alternative options for consumers who do not wish to connect to hydrogen or cannot do so, such as for electric cookers and heating systems. We will not go ahead with a trial without demonstrable, strong, local support.
The hon. Member for Kilmarnock and Loudoun (Alan Brown), who I am sorry to see is not in his place just now, raised the issue of forced disconnections. All consumers will have the right to refuse trialling hydrogen. The powers of entry cannot be used to forcibly change the meter type for a consumer. Gas distribution networks will only ever use their extended powers of entry as a last resort—to ensure consumer safety, for example.
The right hon. Member for Doncaster North (Edward Miliband) and the hon. Member for Llanelli (Dame Nia Griffith) raised issues surrounding onshore wind. The UK already has almost 15 GW of onshore wind, the most of any renewable technology, with a strong pipeline of future projects incoming. The Government have consulted on making changes to the national policy planning framework in England so that local authorities can better respond to their communities when they wish to host onshore wind infrastructure. The Government will, of course, respond in due course.
My right hon. Friend the Member for Camborne and Redruth (George Eustice) raised the issue of renewable liquid heating fuel. Decarbonising off-gas-grid properties is a key priority for this Government. I was pleased to meet with my right hon. Friend recently to discuss this issue, and I look forward to working with him and others on ways to ensure that the transition to clean heat will be fair and affordable for all. As we must acknowledge, however, sustainable biomass is a limited resource. Policy decisions on the role of biomass in heat will need to reflect the outcomes of the forthcoming biomass strategy, which is due to launch later in 2023.
My right hon. Friend the Member for Basingstoke (Dame Maria Miller), as well as touching on the role of fusion—which will be critical in the decades ahead, and we are leading the world in that technology—raised concerns surrounding the planning, health and safety, and environmental issues involved in the development of lithium-ion battery storage. I was pleased to meet with her recently, along with colleagues from the Department for Levelling Up, Housing and Communities, and would like to reassure her that the Government are committed to working with her, the fire services and ministerial colleagues towards a suitable way forward on this important issue, which I know many people are concerned about.
My right hon. Friend the Member for Epsom and Ewell (Chris Grayling) raised the issue of sustainable aviation fuel. In October 2022, the Department for Transport commissioned Philip New to lead an independent evaluation to identify the conditions necessary to create a successful UK SAF industry. Last month, we published that report, alongside a Government response setting out what actions are already being taken to address many of the report’s recommendations. We are keen to continue making progress, and I would be delighted to meet with my right hon. Friend on that point as we move forward.
Henry Smith (Crawley) (Con)
May I have an assurance that the five sustainable aviation fuel plants that our right hon. Friend the Member for Welwyn Hatfield (Grant Shapps) previously announced will be going ahead in time for 2025? It is critical that the UK is in the forefront and leading in the SAF industry, because otherwise, we face being left behind by Europe and the United States.
Andrew Bowie
I will write to my hon. Friend on that specific issue immediately following the debate, once I have the answer from both the Department for Transport and the Department for Energy Security and Net Zero. However, we are committed to implementing the recommendations in the report. It is a policy of the Department for Transport, but I will discuss the matter with officials in that Department.
A number of Members raised the issue of the hydrogen levy. The purpose of the hydrogen levy is to provide long-term funding for the hydrogen production business model. I reiterate that the provisions in this Bill will not immediately introduce a levy. We will consult on the detailed levy design, and the decision to introduce a levy will take into account the affordability of energy bills.
Many Members raised community energy schemes, which I strongly agree have a role to play in tackling climate change. While it would not be appropriate to mandate suppliers to offer local tariffs, and this should not be a commercial decision for suppliers, I reassure the House that my officials are actively looking into what further support we can offer the sector. I have already met, and I am sure will meet again, my hon. Friend the Member for Wantage (David Johnston) to discuss how we can work together to move that forward.
Several hon. Members rose—
Andrew Bowie
I will not give way, due to time. Members expressed concerns about coal. I reassure Members that we are committed to ensuring that coal has no part to play in our future power generation, which is why we are planning on phasing it out of our electricity production by 2024. We are leading the world on this, and can be proud of the action we have taken on coal. On fracking, the Government have confirmed that we are adopting a presumption against issuing any further hydraulic fracturing consents.
On offshore wind, again where we are leading the world, the offshore wind environmental improvement package in the Bill will support accelerated offshore wind deployment and reduce consenting time while protecting the marine environment. A number of Members made broadly supportive comments on the UK’s nuclear sector, although, as is to be expected, not those on the SNP Benches. New nuclear has an important role to play in reducing greenhouse gas emissions to net zero in 2050, but we have always been clear that any technology must provide value for money for consumers and taxpayers. Great British Nuclear will address constraints in the nuclear market and support our new nuclear builds as the Government work to deliver our net zero commitments.
I could not finish without referring to my constituency neighbour but one, my hon. Friend the Member for Banff and Buchan (David Duguid). I agree with him on many issues, and he is absolutely right in his comments on oil and gas. The transition to non-fossil forms of energy cannot happen overnight, as recognised by the independent Climate Change Committee. While we are working to drive down demand for fossil fuels, there will continue to be UK demand for oil and gas, and we will be net importers of both.
I thank Members from all parts of the House who have contributed to today’s debate. I have tried to address all the points, and I apologise that I have not addressed every point. I will write and offer meetings to those to whom I have not responded. I am encouraged by the broad support for this Bill and look forward to continuing my engagement with Members in our many Committee sittings and beyond. The measures that this Bill contains will not only determine our future energy security, but will shape our environmental security, consumer security and economic security. As my right hon. Friend the Member for Ludlow (Philip Dunne) said at the beginning, we cannot ever be at the mercy of autocrats. That is why we now have a dedicated Department for Energy Security and Net Zero. It is why we will deliver the reliable, affordable and clean energy that are needed to power energy’s future under the next Conservative Government and beyond. I therefore commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Energy Bill [Lords] (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Energy Bill [Lords]:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 29 June 2023.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Julie Marson.)
Question agreed to.
Energy Bill [Lords] (Money)
King’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Energy Bill [Lords], it is expedient to authorise the payment out of money provided by Parliament of:
(a) any expenditure incurred by the Secretary of State by virtue of the Act,
(b) any expenditure incurred by the Gas and Electricity Markets Authority by virtue of the Act,
(c) any expenditure incurred by the Competition and Markets Authority by virtue of the Act, and
(d) any increase attributable to the Act in the sums payable under any other Act out of money so provided. —(Julie Marson.)
Question agreed to.
Energy Bill [Lords] (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Energy Bill [Lords], it is expedient to authorise:
(1) provisions by virtue of which persons may be required—
(a) to make payments, or to provide financial collateral, to an administrator;
(b) as holders of licences issued under the Gas Act 1986 or the Electricity Act 1989, to make payments of sums relating to costs associated with heat networks;
(2) the imposition, by virtue of the Act, of charges under licences issued to T&S companies (as defined in Chapter 4 of Part 1 of the Bill);
(3) the imposition, by virtue of the Act, of charges for or in connection with the carrying out by the Secretary of State of functions under Part 4 of the Petroleum Act 1998; and
(4) the payment of sums into the Consolidated Fund.—(Julie Marson.)
Question agreed to.
Energy Bill [ Lords ] (First sitting)
Tuesday 23rd May 2023
(1 year, 6 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 23 May 2023 - (23 May 2023)
The Chair
I welcome the Committee to this first sitting of line-by-line consideration of the mighty Energy Bill. Even though most of the Committee will be experts in these matters, it might be helpful for me to run through a few parish notices first. Those of you who are not familiar with Bill Committees should let me know, but if I am teaching granny to suck eggs, forgive me.
The Bill is as you see it before you. If any member of the Committee, whether from the Government side or the Opposition, wishes to table amendments to it, they must do so by close of business—when the House rises—on the Thursday for formal consideration on the Tuesday, or by close of business on the Monday for formal consideration on the Thursday. If amendments are not laid by that time, they will not feature in our considerations until a later stage.
The amendments as laid are grouped together—by me in theory, although in fact by my learned friends the Clerks, with my approval—into convenient debates. Amendments that might be spread all over the Bill are brought together in one grouping to be considered by the Committee in a debate. However, decisions on individual amendments are taken at the appropriate stage in the Bill, when those amendments come up, so the vote is not taken at the time that the amendment is debated, but later on in consideration, when they come up in the Bill. Of those speaking on amendments, the first person whose name is at the top of the amendment speaks first; others may speak as they wish throughout the debate.
Just a small word: the standards of behaviour in Committee are precisely identical to those in the Chamber, in terms of dress, drinking coffee and all those other things. I am a bit of an old-fashioned stickler on such matters, so forgive me, but I warn you in advance that I tend to be on the conservative side on them.
We will consider first the programme motion, which stands in the Minister’s name. It was discussed yesterday in the Programming Sub-Committee.
Ordered,
That—
1. the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 23 May) meet—
(a) at 2.00 pm on Tuesday 23 May;
(b) at 11.30 am and 2.00 pm on Thursday 25 May;
(c) at 9.25 am and 2.00 pm on Tuesday 6 June;
(d) at 11.30 am and 2.00 pm on Thursday 8 June;
(e) at 9.25 am and 2.00 pm on Tuesday 13 June;
(f) at 11.30 am and 2.00 pm on Thursday 15 June;
(g) at 9.25 am and 2.00 pm on Tuesday 20 June;
(h) at 11.30 am and 2.00 pm on Thursday 22 June;
(i) at 9.25 am and 2.00 pm on Tuesday 27 June;
(j) at 11.30 am and 2.00 pm on Thursday 29 June;
2. the proceedings shall be taken in the following order: Clauses 1 to 16; Schedule 1; Clauses 17 to 21; Schedule 2; Clauses 22 to 32; Schedule 3; Clauses 33 to 52; Schedule 4; Clauses 53 and 54; Schedule 5; Clauses 55 to 98; Schedule 6; Clauses 99 to 132; Schedule 7; Clause 133; Schedule 8; Clauses 134 to 137; Schedule 9; Clauses 138 to 158; Schedule 10; Schedule 11; Clause 159; Schedule 12; Clause 160; Schedule 13; Clause 161; Schedule 14; Clauses 162 to 167; Schedule 15; Clauses 168 to 174; Schedule 16; Clauses 175 to 203; Schedule 17; Clauses 204 to 239; Schedule 18; Clauses 240 to 254; Schedule 19; Clauses 255 to 259; Schedule 20; Clauses 260 to 273; new Clauses; new Schedules; Clauses 274 to 279; remaining proceedings on the Bill;
3. the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Thursday 29 June.—(Andrew Bowie.)
The Chair
The Committee will therefore meet again this afternoon at 2 o’clock and twice every sitting Thursday and Tuesday until 29 June, unless we complete before then, which depends on the Committee. We now have to consider written evidence.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Andrew Bowie.)
The Chair
Copies of written evidence received by the Committee will therefore be circulated to members by email and published on the Bill website.
We now proceed to line-by-line consideration of the Bill.
Clause 1
Principal objectives and general duties of Secretary of State and economic regulator
Dr Alan Whitehead (Southampton, Test) (Lab)
I beg to move amendment 75, in clause 1, page 3, line 11, at end insert—
“or who seeks to be a party to arrangements for the use of sequestered and transported carbon dioxide”.
This amendment seeks to refer specifically to the “use” of carbon dioxide, as well as arrangements for transport for the purpose of disposal.
The Chair
With this it will be convenient to discuss the following:
Amendment 76, in clause 2, page 3, line 35, at end insert—
“(c) the use of sequestered and transported carbon dioxide.”
This amendment seeks to provide an additional area of activity prohibited on an unlicensed basis.
Amendment 81, in clause 57, page 51, line 19, at end insert—
“(d) a carbon capture use revenue support contract.”
This makes explicit the case of a contract for the use of carbon capture.
Dr Whitehead
It is a pleasure to serve once again under your chairmanship, Mr Gray. We have served in Committee together on a number of occasions, and I know that you will keep us closely to the subjects in hand as we go through the Bill, which I am sure will be a good thing for its progress.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I thank the hon. Gentleman for giving way. I want to make a personal point: may I ask him to speak up slightly? I am hard of hearing and I am already struggling to hear what he is saying. I thank him.
Dr Whitehead
I appreciate that point. A moment ago, I was just making a personal aside to the Chair. I will try to address the Committee in a more expansive manner.
This group of amendments would put the full definition of carbon capture, usage and storage into the Bill. As Members know, this Bill chapter is about various activities that go on with carbon capture, usage and storage, but unaccountably the detail in the Bill talks about only carbon capture and storage. We may think that is the definition of what we are talking about, but it is not just a process of sequestering the carbon that arises from, say, a power station or cement works. Various carbon capture and storage arrangements will have to be made for the sequestering of carbon dioxide in many uses, both industrial and energy-based, throughout the country.
Then, so the story goes, that carbon dioxide is transported, by either pipe or barge, and is sequestered at a suitable site. The Secretary of State for Energy Security and Net Zero waxed lyrical recently about just how much sequestering space there is around the UK waters. His view, which I think is absolutely correct, is that the sequestration of carbon dioxide as an industrial activity in the UK, with all the preparation that goes with it, is not just a necessary feature for the end of the carbon capture and storage process but something that the UK can offer to many countries around the world for their carbon sequestration, making a substantial plus-industry for the UK out of the process.
That is the end of the carbon dioxide story—how it goes from capture, either by chemical means or by extracting it from flue gases or whatever, to being put on its journey. In my long history of engagement on carbon capture and storage, I have always said that that is the case, but a number of years ago the Government added an important rider to that process in the definition that we use: CCUS, not CCS. CCUS is important because it is not just an uninterruptable process of carbon going into the transportation and sequestration arrangements, having been captured in the first place; there are points in the process whereby the carbon can be taken out of the transportation and sequestration process. Depending on the quality of the carbon dioxide that has been captured, it can be put to secondary use, before being captured again in the process, as it goes round again.
There are considerable opportunities in making the cycle go round twice, or several times, before the sequestration takes place. That is potentially an important part of getting best value out of the carbon capture and storage process. One of the first uses of the process that I came across was quite a while ago, when I paid a visit to one of the world’s first operational carbon capture and storage plants at the Boundary dam in Saskatchewan. The energy company in Saskatchewan was capturing the carbon output from a fossil fuel energy plant and diverting the carbon that was being captured in the first instance to the process of repressurising wells in oil fields to enhance the recovery of oil. Of course, the carbon was then recaptured after that point but, importantly, that cycle had been broken and something else had happened.
That is just one use, but there are many other uses that we could think about putting carbon dioxide to. It can be used in the chemical industry in the production of methanol, in metalworking to harden the casing of moulds, or in the petroleum industry to optimise the yield of oil wells. It has a substantial use in healthcare and in horticulture. As we know from junior-school biology, plants can increase their size and output by having a carbon dioxide-rich atmosphere in which to grow, and there are substantial opportunities to use carbon dioxide under those circumstances.
Those are not significant interruptions, as it were, in the carbon-capture cycle. Indeed, the use of carbon under those circumstances is beginning—or will begin—to be programmed into the carbon capture and sequestration process. Of course, programming it in is important in terms of the arrangements being set out in the Bill for the circumstances under which licences can be granted.
We will hear a lot about licences in the passage of this Bill. As we know, certainly in the energy sphere, pretty much everything that can or cannot be done is licensed in one way or another, and there is a great deal of legislation for that purpose—for example, the Petroleum Act 1998 and the electricity and gas Acts, which set out the circumstances under which licences should be granted. Indeed, as we will see in the first part of the Bill, there is a restated imperative that people cannot carry out these things on an unlicensed basis; they really must have a licence at all stages of carbon capture—a licence to capture, a licence to transport and a licence to sequester.
The hole in the Bill is in what happens when the process is interrupted. I do not use the word “interrupted” in a derogatory sense; it is very positive that we can make the most use of carbon dioxide in its passage. Having invested a lot of money in capture, it is a good idea to try to recycle the process as much as we can, but for reasons I am not quite clear on—the Minister may be able to enlighten me—the wording of the Bill does not appear to account for that particular sphere of CCUS activity.
It may be that I have missed something and that the use of carbon should not be included in the licensing and licensable arrangements. The Government may be quite satisfied that the interruption of the process is perfectly okay to leave alone. I do not think that is the case because, as I have set out, it is part of the whole process. If we are to take carbon capture and storage seriously, we will want to know that carbon dioxide use, as part of the process, goes back into the cycle of capture and storage in the long term, and that carbon is not just captured but used for a particular purpose in the way I described. After that, it disappears back into the atmosphere, presumably to be captured again at a future date.
It is important that the licensing arrangement is complete as far as the passage of carbon is concerned. Amendments 75, 76 and 81 would add the use of carbon dioxide to the various clauses that relate to the overall process. The amendments would provide a definition of carbon capture use, and additional wording for the process of licensing and of use itself. We would not want to move the amendments separately; they are rightly marshalled together in today’s proceedings. I move the amendments together, as they are grouped in the selection list, because, as I have said, they are essentially concerned with the question of use.
I am sure the Minister will provide us with a suitably inspired reply, so that we can be reassured either that this has all been thought about, and our amendments are therefore superfluous, or that there is a problem and, whether or not he accepts the amendments this morning, the process will be looked at to ensure that we have the full definition, and the full process is in hand as far as the passage of carbon capture and storage is concerned.
The Chair
Technically speaking, the Member has moved only amendment 75. The other two amendments will be decided on when we reach the relevant clauses. He cannot move all three together; he has moved amendment 75. I call Taiwo Owatemi.
The Chair
Sorry. I thought you were waving your hand. If people could stand up and make it plain to me that they wish to speak, I will call them. If they wiggle an eyebrow, raise a hand or otherwise, I will not see them and therefore will not call them. I call Olivia Blake.
Olivia Blake (Sheffield, Hallam) (Lab)
Thank you, Mr Gray. It is a pleasure to serve under your chairship and to follow my hon. Friend the Member for Southampton, Test. Having spoken to researchers at the University of Sheffield, and understanding that carbon capture and storage is more complicated than just the big carbon capture and storage programmes, I think his amendment is crucial. Modular and small carbon capture is really important, but where the captured CO2 then goes is really important too. Having a CO2 hub provider in this space is important for the circular economy of products, which, although not within the Bill’s exact remit, is fundamental to reducing carbon in the environment.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
As ever, it is a pleasure to serve under your chairmanship, Mr Gray, and particularly for the first time as a Minister on a Public Bill Committee. I am sure you will keep me on the straight and narrow over the next few weeks. I look forward to working with you and members of the Committee as we scrutinise this landmark and, as you described it, mighty Energy Bill.
To begin, I want to remind Members of the purpose and background of the Bill. The Energy Bill will provide a clearer, more affordable and more secure energy system. It will liberate private investment in clean technology, reform our energy system so that it is fit for purpose, and ensure the safety, security and resilience of the energy system.
I turn first to amendments 75, 76 and 81, tabled by the hon. Members for Southampton, Test and for Bristol East. Amendment 75 seeks to expand the definition of a transport and storage network user in clause 1 to refer additionally to users who may seek to use carbon dioxide taken off a transport and storage network, not just those who are seeking to transport and store carbon dioxide for its permanent geological storage.
Although there are many uses for carbon dioxide across industrial sectors in the UK, including fertiliser production, cement, lime, and food and drink, as the hon. Member for Southampton, Test set out—indeed, there was little in what he said with which I found myself disagreeing—not all these applications result in the permanent abatement of carbon dioxide. For some of those products, the carbon dioxide is ultimately released back into the atmosphere.
The Government’s aim in prioritising support for the deployment of carbon capture and storage in the UK is to incentivise large-scale, permanent abatement of carbon dioxide and the establishment of a transport and storage infrastructure, which is essential to achieve net zero emissions. Carbon capture and usage technologies resulting in the permanent abatement of carbon dioxide could represent only a small abatement potential as compared with carbon capture when the carbon dioxide is disposed of by geological storage. For those seeking to use captured carbon dioxide, alternative options are likely to be available, such as off-taking carbon dioxide directly from an emitter before it enters a transport and storage network. For those reasons, the Government do not consider the amendment to be necessary or appropriate.
Clause 2 establishes a prohibition on operating at a geological carbon dioxide storage site or providing a service of transportation of carbon dioxide by pipeline without a licence. Amendment 76 seeks to expand the scope of this licensing requirement to include licensing the use of carbon dioxide that has been captured and transported. The licensing requirement in clause 2 is intended to establish a regulated investment model for the transport and storage of carbon. This is a “user pays” economic regulation model that involves the network users—power and industrial emitters—paying for the transport and geological storage of the carbon dioxide that they produce. Licensed transport and storage companies will be able to recover their investment in the transport and storage network through the fees charged for transport and storage services. This model provides long-term revenue certainty for investors to pool through the invested needed to establish and scale up carbon dioxide transport and storage infrastructure here in the UK.
As pipeline, transport and storage assets have monopolistic characteristics, oversight by Ofgem, the independent economic regulator of carbon dioxide transport and storage, will ensure that users are protected from anti-competitive behaviour and that costs are economic and efficient. A model of economic regulation for delivering carbon dioxide transport storage was identified as the preferred option following the Government’s 2019 consultation on business models for carbon capture, usage and storage.
Alan Brown (Kilmarnock and Loudoun) (SNP)
The Minister mentioned Ofgem. What discussions were had with Ofgem about its capability, expertise and resources to deal with what is going to be a whole new suite of competencies for Ofgem?
Andrew Bowie
Of course, none of this is without its challenges, and Ofgem recognises that. However, I have regular conversations with Ofgem and the Department is happy that it is indeed scaling up its capability, to enable it to deal with not only the new carbon capture utilisation and storage procedures that we are discussing but the whole range of areas in which Ofgem will have a role as we move towards a net zero future. Given the aims and purpose of the economic licensing framework that clause 2 establishes, I hope that the hon. Member for Southampton, Test will agree to withdraw his amendment.
Amendment 81 seeks explicitly to include within the scope of the term “revenue support contract” a contract for the use of carbon capture. We understand that to mean a contract to support carbon capture and usage. The carbon capture revenue support contracts are intended to support the deployment of carbon capture technologies. The Bill allows for carbon capture revenue support contracts to be entered into with eligible carbon capture entities. Broadly, a carbon capture entity is a person who, with a view to the storage of carbon dioxide, carries on activities of capturing carbon dioxide that has been produced by commercial or industrial activities, is in the atmosphere or has dissolved in seawater.
Storage of carbon dioxide is storage with a view to the permanent containment of carbon dioxide. It is important to emphasise that provisions in the Bill may therefore allow for a broad range of carbon capture applications, including those carbon capture entities that utilise the carbon dioxide, resulting in the storage of carbon dioxide with a view to its permanent containment. Decisions on which carbon capture entities will receive Government support are to be made on a case-by-case basis. Prioritising support for carbon storage is considered essential to help deliver our decarbonisation targets.
Alec Shelbrooke
Will my hon. Friend describe the actual mechanisms of the carbon dioxide storage, geologically? How will that be done—for instance, will that be out into the North sea, using old oil platforms?
Andrew Bowie
I thank my right hon. Friend for his intervention. I would be happy to give a thorough explanation of exactly how the carbon capture and storage will proceed; I am sure we will get to that in the course of our debate on the Bill, and in other places. However, I am not sure where that would fit within the context of this debate, other than to say that the technology being developed by companies, organisations and clusters around the UK is world leading. When it comes to being able to store in the future the carbon dioxide being produced in the UK now, the North Sea is of course the greatest asset that we have as a country. The oil and gas industry will be able to play a pivotal role in that development as we move forward.
Given the reasoning I have set out, I hope that the amendment tabled by the hon. Member for Southampton, Test will be withdrawn.
Dr Whitehead
I appreciate what the Minister has said this morning. Frankly, though, I am not wholly convinced that the processes have been fully accounted for. I emphasised the various uses of carbon dioxide. The Minister is right that not all those uses lead to eventual sequestration. However, most of the uses that do not lead to additional sequestration do, on occasions, sequester the carbon dioxide in the process itself.
For example, carbon dioxide used in horticulture is substantially sequestered during the process of growing the plants. There is potentially an important use of carbon dioxide in processing hydrogen and in producing sustainable aviation fuel. Those processes sort of sequester the carbon in producing a different product, which is itself then burned. We then have to sequester the whole lot again, but the product has been used in the meantime.
It is important to concentrate on aligning the processes within carbon dioxide use as closely as possible with the process of sequestration, not simply allowing the carbon dioxide to escape. One thing that concerns me is the use of carbon dioxide in the process of the enhanced recovery of oil, because unless that carbon dioxide can be sequestered at the point it is injected into a well, although it produces greater amounts of oil it leaks into the atmosphere again, so we have a net negative outcome. We have produced more oil, but arguably it should have been left where it was in many instances.
Alec Shelbrooke
That leads to the question that I asked the Minister. The issues that the hon. Member for Southampton, Test is raising show that there is a research and development need for sequestration in, for instance, licensing oil and gas. That will need a large investment, so does he agree that it is important that the oil and gas industry uses some of its large profits to ensure that it can do the R&D available to sequester carbon dioxide, and does that call into question the idea of scrapping the return on profits—often criticised by the Opposition—because we need R&D to achieve this?
Dr Whitehead
All right, I won’t be.
The key point that I am trying to add to this morning’s debate is that a number of systems could be greatly enhanced in their operation by, for example, having a much greater supply of carbon dioxide available to them than is the case at the moment. The Minister may remember that we had a mini-crisis a little while ago: one of the factories that was producing industrial-use carbon dioxide closed down and we were left in the UK with one factory producing carbon dioxide. There was then a considerable run on it, which meant that, going to the heart of our civilisation, carbonating fizzy drinks was potentially under threat.
Having much greater availability through the carbon capture and storage process of carbon dioxide that could be used in industrial processes could be very good for industry, and indeed for the security of the processes that we continue to need carbon dioxide for. At the same time, that process needs some supervision to ensure that we are not undoing what we have started to do in carbon capture by making the product more widely available. Although I do not intend to push the amendment to a vote, I hope that the Minister will take onboard the idea that this is a substantial area, which we need to pay close attention to. We need to regulate it so that it points in the same direction as the carbon capture and storage process and so that the whole system is not undone by what is available.
Katherine Fletcher (South Ribble) (Con)
I am listening carefully to the hon. Gentleman. If I understand our historical regulatory regime, it was about prevention from harm—we would regulate cyanide, but not necessarily CO2. Does the hon. Gentleman have the right balance? Net zero is a systemic challenge; if we seek to regulate every single individual piece of it, we risk clogging the system with regulation.
What I see is a Government trying to make sure that carbon capture and storage has not turned into some fool’s errand, with some Shylock allowing carbon to come out of the other side of the mine. We are finding the right balance and not over-regulating an industry—
The Chair
Order. Interventions must be brief; Members should not ramble on for half an hour. I call Alan Whitehead.
Dr Whitehead
The hon. Member is right that we should not seek to regulate everything out of existence. As she says, provided that the basic position is in place many industrial and commercial processes do not actually do harm, and there are all sorts of ways of making sure of that; then we can leave them alone.
My only point is not about separately regulating something that has otherwise been completely unregulated, but that this is an overall process and we need to make sure that, overall, the processes all point in the same direction. That is, one way or another, that we produce less carbon dioxide, allow less carbon dioxide to escape into the atmosphere and do what we can to use sequestered carbon dioxide in the best way. Normally, that means transporting it, for which we need regulations to make sure that there are no leakages, for example.
At the moment, we are considering a number of different options when it comes to the transportation of carbon dioxide. As the hon. Member for South Ribble will know, that does not just consist of trying to put down pipelines to deliver the carbon dioxide to the port of exit before it is put into the storage site. Obviously, sites themselves need proper regulation so that they are safe for the purposes of storage.
Earlier, the right hon. Member for Elmet and Rothwell questioned the process of storage. It is vital that the storage itself is suitable. We know, from what we have to rely on, that the storage is likely to be sound—that means, frankly, that once we have put the stuff underground it stays there and does not leak out subsequently. That is quite a science in its own right. A great deal of the time spent looking at storage sites is about being absolutely sure that the site is as we thought it was in order to avoid disaster once we have committed ourselves to storage on the site. Given the different kinds of storage site, considerable work is under way, all of which needs to be regulated properly.
We have to consider alternative forms of storage—saline aquifers, for example. It is not just a question of storing carbon dioxide in depleted oil or gas fields; a number of other geological formations appear to be suitable for the purpose. Whether those alternative formations can be used for storage onshore as well as offshore is a particular concern. People may raise the issue of carbon dioxide leaking out onshore—as well as offshore, potentially.
Throughout, there is a need to regulate how the process works. With respect to the hon. Member for South Ribble, I do not think that it is over-prescriptive to say that we need some regulation of the use of carbon dioxide—after all, in theory at least, using the carbon for the best purpose is an essential part of the process—hence the amendments that we have tabled, which I hope are constructive.
Olivia Blake
There are two points to this, are there not? There is a set amount of carbon at the moment, which is increasing annually. Usage allows us to reduce that—instead of new forms of carbon going into the atmosphere, we would reuse what we have. That is why the amendment is key. I hope that the Government take it away to look at again. It is also basic chemistry that if we are putting CO2 into a chemical reaction, we will not get CO2 coming out the other end until the product degrades, so it is a falsehood that it will all immediately leak—
Olivia Blake
Sorry, Mr Gray. There are two points there that I think the Minister has not considered fully.
The Chair
Dr Whitehead, perhaps you will be brief. We have already given this group quite a long debate.
Dr Whitehead
Thank you, Mr Gray. My hon. Friend makes an important point about the distinction between what we do now with carbon dioxide and what we might do with it in future. At present—I mentioned a carbon dioxide factory that closed down—we are actually purposely making carbon dioxide in other processes, where it was previously sequestered among the molecules or whatever of the raw material. In future, we will take the carbon dioxide that we have captured in a different form to replace the manufactured carbon dioxide. It is important to understand the difference and to have a positive effect on the arrangements for carbon dioxide used for industrial purposes by substituting the creation of carbon dioxide with the use of carbon dioxide already going through the system.
I agree, Mr Gray, that we have had a good debate. We do not wish to press the amendment to a Division, but I am sure that although the Minister has not exactly been taking copious notes, he will be assured of the purpose of the amendment and can consider whether anything further needs to be done to ensure that such processes are integral to the system as a whole. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
New clause 33—Purposes—
“(1) The principal purpose of this Act is to increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing.
(2) In performing functions under this Act, the relevant persons and bodies shall have regard to—
(a) the principal purpose set out in subsection (1);
(b) the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets) and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change;
(c) the desirability of reducing costs to consumers and alleviating fuel poverty; and
(d) the desirability of securing a diverse and viable long-term energy supply.
(3) In this section “the relevant persons and bodies” means—
(a) the Secretary of State;
(b) any public authority.”
This new clause and NC34, NC35 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.
New clause 34—Strategy and policy statement—
“(1) The Secretary of State may designate a statement as the strategy and policy statement for the purposes of this Act.
(2) The strategy and policy statement is a statement prepared by the Secretary of State that sets out—
(a) the strategic priorities, and other main considerations, of His Majesty’s Government in formulating its energy policy for Great Britain (“strategic priorities”);
(b) the particular outcomes to be achieved as a result of the implementation of that policy (“policy outcomes”); and
(c) the roles and responsibilities of persons (whether the Secretary of State, a relevant public authority or other persons) who are involved in implementing that policy or who have other functions that are affected by it.
(3) The strategy and policy statement must have regard to the considerations listed in subsection (2) of section [Purposes].
(4) The Secretary of State must publish the strategy and policy statement in such manner as the Secretary of State considers appropriate.
(5) For the purposes of this section, energy policy “for Great Britain” includes such policy for—
(a) the territorial sea adjacent to Great Britain, and
(b) areas designated under section 1(7) of the Continental Shelf Act 1964.
(6) A relevant public authority must have regard to the strategic priorities set out in the strategy and policy statement when carrying out regulatory functions.
(7) The Secretary of State and a relevant public authority must carry out their respective regulatory functions in the manner which the Secretary of State or the relevant public authority (as the case may be) considers is best calculated to further the delivery of the policy outcomes.
(8) A relevant public authority must give notice to the Secretary of State if at any time the relevant public authority concludes that a policy outcome contained in the strategy and policy statement is not realistically achievable.
(9) A notice under subsection (8) must include—
(a) the grounds on which the conclusion was reached; and
(b) what (if anything) the relevant public authority is doing, or proposes to do, for the purpose of furthering the delivery of the outcome so far as reasonably practicable.”
This new clause and NC33, NC35 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.
New clause 35—Strategy and policy statement review—
“(1) The Secretary of State must review the strategy and policy statement if a period of 5 years has elapsed since the relevant time.
(2) The “relevant time”, in relation to the strategy and policy statement, means—
(a) the time when the statement was first designated under section [Strategy and policy statement], or
(b) if later, the time when a review of the statement under this section last took place.
(3) A review under subsection (1) must take place as soon as reasonably practicable after the end of the 5 year period.
(4) The Secretary of State may review the strategy and policy statement at any other time if—
(a) a Parliamentary general election has taken place since the relevant time;
(b) a relevant public authority has given notice to the Secretary of State under subsection (8) of section [Strategy and policy statement] since the relevant time;
(c) a significant change in the energy policy of His Majesty’s Government has occurred since the relevant time; or
(d) the Parliamentary approval requirement in relation to an amended statement was not met on the last review (see subsection (12)).
(5) The Secretary of State may determine that a significant change in His Majesty’s Government’s energy policy has occurred for the purposes of subsection (4)(c) only if—
(a) the change was not anticipated at the relevant time, and
(b) if the change had been so anticipated, it appears to the Secretary of State likely that the statement would have been different in a material way.
(6) On a review under this section the Secretary of State may—
(a) amend the statement (including by replacing the whole or part of the statement with new content),
(b) leave the statement as it is, or
(c) withdraw the statement’s designation as the strategy and policy statement.
(7) The amendment of a statement under subsection (6)(a) has effect only if the Secretary of State designates the amended statement as the strategy and policy statement under section [Strategy and policy statement].
(8) For the purposes of this section, corrections of clerical or typographical errors are not to be treated as amendments made to the statement.
(9) The designation of a statement as the strategy and policy statement ceases to have effect upon a subsequent designation of an amended statement as the strategy and policy statement in accordance with subsection (7).
(10) The Secretary of State must consult the following persons before proceeding under subsection (6)(b) or (c)—
(a) a relevant public authority,
(b) the Scottish Ministers,
(c) the Welsh Ministers, and
(d) such other persons as the Secretary of State considers appropriate.
(11) For the purposes of subsection (2)(b), a review of a statement takes place—
(a) in the case of a decision on the review to amend the statement under subsection (6)(a)—
(i) at the time when the amended statement is designated as the strategy and policy statement under the previous section, or
(ii) if the amended statement is not so designated, at the time when the amended statement was laid before Parliament for approval under subsection (7) of the next section;
(b) in the case of a decision on the review to leave the statement as it is under subsection (6)(b), at the time when that decision is taken.
(12) For the purposes of subsection (4)(d), the Parliamentary approval requirement in relation to an amended statement was not met on the last review if—
(a) on the last review of the strategy and policy statement to be held under this section, an amended statement was laid before Parliament for approval under subsection (7) of section [Strategy and policy statement: procedural requirements], but
(b) the amended statement was not designated because such approval was not given.”
This new clause and NC33, NC34 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.
New clause 36—Strategy and policy statement: procedural requirements—
“(1) This section sets out the requirements that must be satisfied in relation to a statement before the Secretary of State may designate it as the strategy and policy statement.
(2) In this section references to a statement include references to a statement as amended following a review under subsection (6)(a) of section [Strategy and policy statement review].
(3) The Secretary of State must first—
(a) prepare a draft of the statement, and
(b) issue the draft to the required consultees for the purpose of consulting them about it.
(4) The “required consultees” are—
(a) the relevant public authority,
(b) the Scottish Ministers, and
(c) the Welsh Ministers.
(5) The Secretary of State must then—
(a) make such revisions to the draft as the Secretary of State considers appropriate as a result of responses to the consultation under subsection (3)(b), and
(b) issue the revised draft for the purposes of further consultation about it to the required consultees and to such other persons as the Secretary of State considers appropriate.
(6) The Secretary of State must then—
(a) make any further revisions to the draft that the Secretary of State considers appropriate as a result of responses to the consultation under subsection (5)(b), and
(b) prepare a report summarising those responses and the changes (if any) that the Secretary of State has made to the draft as a result.
(7) The Secretary of State must lay before Parliament—
(a) the statement as revised under subsection (6)(a), and
(b) the report prepared under subsection (6)(b).
(8) The statement as laid under subsection (7)(a) must have been approved by a resolution of each House of Parliament before the Secretary of State may designate it as the strategy and policy statement.
(9) The requirement under subsection (3)(a) to prepare a draft of a statement may be satisfied by preparation carried out before, as well as preparation carried out after, the passing of this Act.”
This new clause and NC33, NC34 and NC35 are intended as a suite of purpose and strategy clauses for this Bill.
Andrew Bowie
New clauses 33 to 36 would insert provisions for the review of the strategy and policy statement, and procedure requirements for the designation of such a statement.
The Bill already contains a number of measures to deliver a cleaner, more affordable and more secure energy system for the long term, as set out by the long title, so there seems to be little to be gained from the proposed new clause 33. The Government’s approach to these matters will be informed by the strategy and policy statement provided for under the Energy Act 2013, on which we are currently consulting.
I turn to new clauses 34, 35 and 36. The 2013 Act introduced a power to designate a strategy and policy statement setting out the Government’s strategic priorities for energy policy in Great Britain, the roles and responsibilities of those implementing such a policy and the policy outcomes to be achieved. The strategic priorities of the Government’s energy policy are to be taken as a whole. They include, but are not limited to, our targets under the Climate Change Act 2008, reducing costs for consumers, tackling fuel poverty, and securing a diverse and viable long-term energy supply. The strategy and policy statement power in the 2013 Act is not specific to the measures contained in any specific Act. The power is wider, and it enables the strategy and policy statement to cover any or all of the Government’s strategic energy priorities, wherever they are set out.
On 10 May 2023, the Government published their consultation on a draft strategy and policy statement for energy policy in Great Britain. We are seeking responses until 2 August, and we intend to designate a final strategy and policy statement by the end of this year. Designation of a strategy and policy statement will ultimately be a decision for Parliament, not for the Secretary of State. I hope that hon. Members are satisfied by those reassurances.
Alan Brown
Will that be a wider strategy and policy statement that goes to Ofgem? An overarching energy policy has long been outstanding.
Andrew Bowie
I believe that that was made clear. As I said earlier, we are working with Ofgem to ensure that it has the capabilities to deal with all of this. In terms of a national policy statement for Ofgem moving forwards, there will be a series of announcements over the next few months and, indeed, the year that will enable Ofgem and the future service operator to get into a position where they are able to deal with what we introduce through the Bill and other statements.
Clause 1 establishes Ofgem as the economic regulator for carbon dioxide transport and storage. It also establishes the principal objectives and statutory duties for both the Secretary of State and Ofgem in carrying out their functions under part 1 of the Bill. Transport and storage networks will act as the enabling infrastructure for carbon capture and storage from a range of sources, including power plants, industrial facilities, low-carbon hydrogen production and, potentially, direct air capture.
The economic regulation model provides long-term revenue certainty for network operators while protecting network users from monopolistic behaviours, as has already been described. The Government consider that Ofgem is the most appropriate body to act as the economic regulator for carbon dioxide transport and storage, due to its experience and expertise in the economic regulation of the overall energy sector. The selection of Ofgem as the regulator has received broad support from the industry. The principal objectives set out in clause 1 reflect the balance of considerations for a nascent carbon dioxide transport and storage sector.
Dr Whitehead
Clause 1 concerns the appointment of Ofgem as a regulator for these activities—in particular, carbon capture and storage. The new clauses that we have tabled seek to gather together what is in the Bill and provide it with a purpose clause, and to suggest to the Secretary of State that the Bill’s contents might be encapsulated, for future direction and use, in a strategy and purpose document.
The Chair
Order. Let me interrupt the hon. Gentleman. New clauses would normally be discussed towards the end of the Committee’s debates. We took the view that, because these new clauses deal with strategy and purpose, they might by that time be out of order. We therefore thought it reasonable to allow His Majesty’s loyal Opposition to have a full debate on them now, rather than towards the end of our consideration, as would happen normally.
Dr Whitehead
Indeed, Mr Gray; thank you for reminding the Committee of that. I am grateful to you and to the Clerks for your careful consideration of how we should proceed with these new clauses. As you say, the normal procedure—indeed, I have taken part in a number of Bill Committees where this has happened—is that new clauses are put at the end of the selection list. I can see that a number of new clauses have been selected for debate right at the end of our consideration of the Bill. By the way, I am slightly less pleased to see that the changes to the Bill that were wrought in the other place have been placed, by and large, in a new section at the end. I assume that those will be debated—
Dr Whitehead
Indeed. They will be debated at the same time, at the end of our consideration of the Bill.
As you rightly say, Mr Gray, new clauses 33 to 36 may have be surplus to our discussions, should we have debated them at the end of proceedings rather than at the beginning. I am pleased that we are able to debate them now, given that they are concerned with our discussions on the early part of the Bill.
As has been widely trailed, the Bill is one of the most extensive that has come before this House, certainly in the energy sphere, and is probably one of the most extensive and substantial Bills in recent history. It seeks to do an enormous number of things. Although we do not think it does enough, by and large the things that it does are all necessary for the passage of our energy economy from a high-carbon to a low-carbon basis, with all the things that go with that, which we will discuss later in the Bill, such as carbon capture and storage, hydrogen, new forms of management of grid systems—all the things that point in a green, low-carbon direction. It is essential to put them into legislation by means of what I would describe as the green plumbing of the system. A great deal of the Bill is not about high-flown rhetoric on why we should decarbonise our structures, but about getting down to the real business of doing it as quickly as possible.
I think we can agree that the Bill lists a disparate series of things that are fit for our discussion and ready to go. Indeed, in a famous recent TikTok video, the Secretary of State stood against a wall with individual pages of the Bill stuck on it and said that it is the largest Bill on energy in history. I tweeted a response to the effect that the Government have been really good at getting the largest bills in history into the laps of customers—that was a bit of levity in response to the Secretary of State’s more serious point. The Bill is extensive, for deliberate purposes, which all point in the same direction.
There is perhaps cause for a little concern. When Bills seek to do such extensive plumbing work, it is easy to lose sight of what that plumbing is actually about. We need to be clear that we do not have a series of actions that might or might not be taken in respect of the various subject headings in the Bill; they are all actions that have to be taken in pursuit of what should be the overall purpose of the Bill, which is to secure us a low-carbon future. The Conservatives and Labour agree that those actions are not in dispute; they are essential for the purposes that we think are important for the future of our low-carbon economy.
The idea of a purpose clause is not something dreamt up by the Opposition as an interesting diversion during the early stages of discussing the Bill. A number of pieces of legislation have purpose clauses; they have fallen out of fashion in more recently, but if one looks back over a reasonable period, one sees that many Acts have such sections at the beginning. They recapitulate what comes after and put it in context, so that people who have not been subjected to our detailed discussions in Committee can say, “That is what this Act is about. There are provisions in the Act that point in this direction, and I should look at and respond to the Act in the light of that overall purpose.” That is a good and important thing.
Purpose clauses are not just nice things to have at the front of a Bill. They are quite useful for those who seek to interpret an Act at a later date—lawyers and the like. They may have opinions about what a particular part of the Act does, but they will be guided by the purpose clause at the front of the Act. For the Ministers who implement the terms of an Act, it is useful to have a clear statement of what Parliament thought we were doing when we put the Act on the statute book and of the framework in which the rest of the Act should be read.
The purpose clause that we have tabled, new clause 33, states:
“The principal purpose of this Act is to increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing.”
That is a good summation of the Bill’s purpose. Members may want to add or subtract bits, but it is reasonable summation of where we are and where we want to go. Subsection (2) seeks to ground the Bill in other important legislation and states:
“In performing functions under this Act, the relevant persons and bodies”—
that is, people who are interpreting the Act’s principal purpose—“shall have regard to” certain matters, including, most importantly,
“the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008…and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change.”
The new clause therefore grounds the Bill firmly in the historic Climate Change Act 2008, sections 1 and 4(1)(b) of which provide for the target in the reduction of carbon dioxide and greenhouse gas emissions that the Secretary of State is supposed to ensure that we achieve by 2050. What will happen to whoever is the Secretary of State in 2050 if they are unable to deliver that target is debateable, but I think we can agree that the Act has really stood the test of time.
Andrew Bowie
I thank the hon. Member for his careful and considered contribution, which reflected the careful and considered discussions that His Majesty’s loyal Opposition and the Government have been having on the Bill and on the wider issue of net zero and energy security over the past few months and years. He is absolutely right: this is not a partisan debate, and there is very little to distinguish the Opposition’s approach to this issue from that of the Government. We all agree that our overarching aims, though this Bill and through the other actions that we as a country are taking, are to reduce emissions, reduce bills, strengthen our energy security, and create and secure new British jobs in the process, which will be to the benefit of this country and help us to lead the way in the world.
The hon. Member spoke with great purpose. I find very little to disagree with in the substance of what he said about the purpose clause, but he also admitted that the Bill is stuffed full, to use his phrase, of clauses that explain exactly what we are striving to do. For that reason, I suggest that despite the good intentions behind this specific purpose clause, it would be superfluous to the Bill at this stage. However, it is something that we are willing to consider moving forward.
With regard to the hon. Member’s comments on the strategy and policy statement, the power of the 2013 Act was not specific to the measures contained in that Act but covered all of the Government’s strategic energy priorities. That is why we published the consultation on an SPS just 13 days ago.
Andrew Bowie
Well, we got around to it eventually. The hon. Member for Kilmarnock and Loudoun asked whether the strategy and policy statement covers Ofgem. Yes, it does, and Ofgem will have regard to the SPS consultation that we are working on right now.
As I said, we intend to designate a final strategy and policy statement by the end of this year. That will be a decision for Parliament, not the Secretary of State, whichever party the Secretary of State happens to be from at the time. The new clauses are therefore superfluous to the Bill, despite the fact that they are well intentioned and that there is very little in their contents that I can disagree with. That is why I ask the hon. Member for Southampton, Test not to press his new clauses.
The Chair
It would be difficult for him to do so, as they will be considered when we come to the relevant part of our discussion on the Bill. The question for now is that clause 1 stand part of the Bill.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Prohibition on unlicensed activities
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clauses 2 to 6 relate to the licensable activities for carbon dioxide transport and storage.
Clause 2 establishes the prohibition on the transport of carbon dioxide by pipeline and its geological storage without an economic license regulated by Ofgem. As carbon dioxide pipelines for storage and site infrastructure are likely to be operated as regional monopolies, a framework of economic licensing and regulation is designed to prevent anti-competitive behaviours. Licensable activities will initially include the transportation of carbon dioxide via onshore pipelines and offshore pipelines, and the operation of an associated geological storage facility. The clause enables other methods of transportation of carbon dioxide to become licensable activities, should that be considered appropriate as the carbon capture and storage market evolves.
Non-pipeline methods of transportation—shipping, road or rail—are expected to form part of wider carbon dioxide transport and storage networks. These methods of transport are particularly important for dispersed sites, where there are emitters who wish to have their carbon dioxide captured and transported for permanent storage, but are not suitably located to join a transport storage network by pipeline.
While non-pipeline methods of transport will have an important role in the development of carbon capture and storage networks, the Government consider that there is currently insufficient evidence to justify economically regulating non-pipeline methods of carbon dioxide transport. As those methods of transportation have differing characteristics from pipelines, with a potential lower cost of entry and an ability for multiple asset-running in parallel, competitive regional markets may emerge naturally for non-pipeline transportation of carbon dioxide. However, should competitive markets not emerge as anticipated, that may be rationale for future regulatory intervention. The ability of the Secretary of State to bring activities within the scope of the licensing framework is particularly important, given the financial support provided by the Exchequer to support carbon capture facilities and to ensure appropriate and effective protections can be put in place for users of the network.
I turn to clause 3. Any future use of the power established in clause 2 to extend the economic regulation framework to other methods of transporting carbon dioxide, should that be considered appropriate, would be subject to statutory consultation, as provided for in clause 3. Under the provisions of the clause, the Secretary of State is required to give notice of their intention to make regulations to extend the licensing framework to other methods of carbon dioxide transportation. That would include statutory consultation with the economic regulator to confirm the rationale for market intervention and consultation with the devolved Administrations.
Clause 4 sets out the territorial scope of the economic licensing framework for carbon dioxide transport and storage. The economic regulatory regime established by chapter 1 and part 1 of the Bill will extend to all parts of this United Kingdom. The licensing regime and economic regulation will also apply to transport and storage activities offshore, both in the UK’s territorial seas and in waters designated as a gas importation and storage zone under section 1(5) of the Energy Act 2008.
Clause 5 provides for the Secretary of State to grant exemptions from the requirement to hold a carbon dioxide transport and storage licence. That provision is important to ensure that the prohibition established by clause 2 operates effectively and as intended and does not, for example, impact or inhibit activities that it is not considered appropriate to economically regulate.
For example, exemptions are a means by which a small-scale operator would not be burdened by licensing costs and obligations that could be considered disproportionate to the scale of their operation. However, exemptions should not enable a competitive advantage over licensed operators. Exemptions will be set out in the way of regulations and may be granted either to a class of persons or to an individual person. A statutory consultation process is set out in the clause, to ensure that appropriate notice is given ahead of making exemption regulations and to allow for representations to be made.
Clause 6 provides for the Secretary of State, by way of regulations, to be able to vary, withdraw or revoke exemptions from the licensing requirements that have been granted under the provisions of clause 5. As market circumstances change, it is conceivable that certain activities, categories or classes of activity that are appropriately exempt from economic regulation in the early years of CCUS deployment may, as the sector matures, be considered more appropriate for licensing and regulation, or the particular activity that was subject to exemption may itself develop or change. That will ensure that any exemptions granted remain appropriate as the UK CCUS industry matures. I hope that the Committee will agree that clauses 2 to 6 should stand part of the Bill.
Alan Brown
Thank you, Mr Gray. It is a pleasure to serve under your chairmanship. I will just ask the Minister a few brief questions.
In clause 3, the consultation on proposals for additional activities sets a 28-day timeframe in which objections or representations can be made, and the clause details that the Secretary of State must consider those. However, there is no timeframe for the Secretary of State to respond, and there is nothing that actually details the process of how representations will be considered and responded to. Could the Minister give a bit more information on that?
Clause 3(3)(b) is about notice given to Scottish Ministers relating to devolved competences, so could the Minister give examples of the types of activities he envisages that covering? Also, what process will the Secretary of State follow in taking the views of the devolved Administrations?
That goes to the wider concern that I have already expressed about the UK Government having powers to interfere in what would usually be devolved competences. I know that it is slightly nuanced in this case, but I just want to flag that I do not want to later have lodge loads of amendments and force votes on replacing “consult” with “approval”. I know that it is slightly different at this stage, but could the Minister give details of what he thinks the activities would be? The same question applies to subsections of clause 5 and 6.
The Chair
I presume that His Majesty’s loyal Opposition wish to say something. I remind the Committee that when you wish to catch my eye, it is important to stand up and make it plain that you wish to speak. If you do not do so, I will not call you. I call Dr Alan Whitehead.
Dr Whitehead
Thank you, Mr Gray, and I appreciate that undertaking. My knees do not necessarily work in the way that I would ideally like them to in my advanced years, but I will attempt to do that.
The clauses provide a pretty good start point on prohibition on unlicensed activities. Indeed, clause 2 states:
“It is an offence for a person to carry on an activity within subsection (2) unless the person is authorised to do so by a licence.”
Again, that is the whole licensing arrangement that pervades the energy sector. The clause then specifies the activities, including
“operating a site for the disposal of carbon dioxide by way of geological storage”,
and
“providing a service of transporting carbon dioxide by a licensable means of transportation.”
We tabled an amendment on the use of carbon dioxide, but we were assured by the Minister at that time that that would be effectively covered by the scope of this clause.
That is a great start, but then we move on to not just the consultations but, in clause 5, the exemption from prohibition. Interestingly, clause 5 states:
“The Secretary of State may by regulations grant exemption from the prohibition under section 2(1).”
It does not actually specify what those exemptions might be; it just states that the Secretary of State may by regulations grant exemption. I therefore presume that, within that secondary legislation, the Secretary of State will unpack and set out the exemptions, and indeed how far those exemptions might run. It is interesting that the Bill states:
“An exemption may be granted…unconditionally, or subject to such conditions as may be specified.”
I presume that those conditions will be specified in the regulations that the Secretary of State will be required to introduce in secondary legislation. It also states:
“An exemption may be granted…indefinitely, or…for a period specified in, or determined by or under, the exemption.”
That will also presumably be in the regulations.
Kerry McCarthy (Bristol East) (Lab)
I know that this is a lengthy Bill, and there is a lot to get through, but I slightly had trouble keeping up with the breakneck speed at which the Minister introduced the clauses, so I am glad to have an opportunity to question him. He said that although there will be instances where licences are not needed, the situation might change and a licence may be needed. It would be helpful to have some examples of those scenarios to illustrate when the Secretary of State might invoke these powers. Does my hon. Friend agree?
Dr Whitehead
Yes, indeed. My hon. Friend has read my mind, as she often does.
This clause is procedural, as I have illustrated, and essentially says: “There may be exemptions. We don’t know what they are or what they might consist of, but don’t worry about it. The Secretary of State will think about that in due course and produce regulation that we hope—but we don’t know—might set that out in greater detail.” It is important that the Minister sets out today what might be in his mind when he makes those regulations, as far as exemptions are concerned. Is he a wide exemption Minister or a narrow exemption Minister? If he is a wide exemption Minister, what is the scope of the exemptions that he will be thinking about? If he is a narrow scope Minister, how does he interpret subsection (7), which states that an exemption may be granted indefinitely, given what he just said about how things may change in the future?
I know that there are things that we thought were indefinite in legislation that have turned out not to be—most importantly because Parliament cannot decide what the previous Parliament thought. However, it seems to be a hostage to fortune to put the word “indefinitely” in this legislation in the way that we see in clause 5(7).
I would be grateful if the Minister could provide us with some thoughts on what exemptions might look like and what his intentions are as far as regulation is concerned. I have not looked yet at the end of the Bill to see how any regulations might be considered by Parliament, but when the Secretary of State makes regulations on exemptions, I would expect those to be put forward under the affirmative rather than the negative procedure so that we have an opportunity to examine what they consist of.
Kerry McCarthy
Clause 5(6) refers to “Notice of an exemption” being given. It would be helpful to have clarity on the reference to
“Other persons who may be affected by it.”
I am not sure how that would be decided. It is really important that we have transparency and accountability in these processes. Does my hon. Friend agree?
Dr Whitehead
Yes, I do agree. Again, I appreciate that the wording of this Bill might be regarded as necessarily fairly vague, because of the fact that—in the words of Donald Rumsfeld—there are known knowns, known unknowns, unknown knowns and unknown unknowns about the future. However, it is important at least to have on the record something that guides us in a more positive way on who might be the “other” people affected and on indefinite exemptions and so on. It would be a good idea if that could at least be included in the discussion of the Bill.
By the way, our proceedings in Committee are of course recorded, and they are used on occasion in law to determine what the purpose of particular clauses was and what was thought to be in the mind of legislators when they introduced them. So it would be helpful, not just for our discussions today but perhaps for the future record, if the Minister was able to clarify these matters in a suitable way.
Alec Shelbrooke
It is a pleasure to serve under your chairmanship, Mr Gray, for what will be a long and detailed consideration of the Bill.
I want to focus on these clauses, because they provide an overall setting for the entire agenda. As the hon. Member for Southampton, Test outlined, the Bill is perhaps one of the most important pieces of legislation to come before the House in the 21st century, as we look at how we deal with these issues for the rest of the 21st century—it really is that significant.
To draw on the hon. Gentleman’s comments about unknown knowns and so on, we have to be careful at this early stage that we do not regulate to the point that we choke off innovation and research. A complaint is often made at several levels about how difficult it can sometimes be in this country for innovators and entrepreneurs to move forward without getting tied up in huge amounts of red tape. Given the global competition that exists in the field of climate change, environment and green energy, we want to have a competitive advantage.
I am sure we will discuss later areas such as tax credits and how research and development can be expanded in this industry. The Bill is so wide-reaching, across so many Departments—indeed, you might rule us out of order as we consider it, Mr Gray—that I expect to be told once or twice that some provision is not the responsibility of the Minister. The Bill ties up so many areas of Government, including the Department for Business and Trade, the Treasury and the responsibilities of the Minister.
Therefore it is important that we do not try to license every possible outcome that we may consider at this stage. That would delay the process. Often, it is important to allow a Minister to make a reasonably quick decision as something comes to the fore, whether through secondary legislation or a delegated decision. If we look at America’s Inflation Reduction Act or the EU’s response to it, we know that we are in a highly competitive, subsidised market. I do not believe in the heavy subsidisation of companies; I believe in being able to exploit their intellectual capability to be innovative, to be world leading and to get things to market as quickly as possible. Having said that, later clauses of the Bill concern things, such as battery storage, about which I have great concerns and on which we probably need a bit more legislation. That is one of those areas that may well fall under a different Department, but it will be important to raise those issues in the context of the Bill.
I understand the desire to say, “We must try to use the Bill to offset any health and safety concerns that may come along, because we are in such a new technological area.” But when we look at the granting of licences in this part of the Bill, we would not want to choke off the innovators for which this country is well regarded in so many countries around the world. We are an innovative nation. We have the lead on innovation. China steals IT and reduces the cost of producing materials through poor wages and a disregard for health and safety, but it is not an innovator, which is what our universities and sectors work so well towards being.
The hon. Member for Sheffield, Hallam mentioned that she had spoken to the institutions in her great city. In a previous life, when I worked for the University of Leeds, I was involved in the early days of nanotech. We joined up all our seven major universities, including the universities in the hon. Lady’s city, and that accelerated Yorkshire’s ability to lead in nanotechnology. We could do that because we could draw those things together, bring the expertise together and accelerate it. Innovation hubs formed out of those universities in the early 2000s and gave us a leading edge, which we have used.
As legislators, we must try to ensure that we provide a framework for companies, innovators and researchers to work within. But that should not be prescribed in such a way that, when a product is ready to take to market, needs extra investment or needs to be able to work elsewhere, we have put a very tight pair of handcuffs on the ability to do those things. The premise of the Bill gives direction, but my hon. Friend the Minister should not make it so tight that we choke off the very things that we are trying to do.
We all talk about the huge potential investment in the green economy, about the green investment bank and about the massive changes that have taken place in the Treasury in recent years. Of course, we talk about having a smooth transition when there is a potential change of Government. That is why the Bill is so important and why I pushed to be on this Committee. The Bill is a major change that will stand this country—and indeed the world, if we can export some of the technology—in good stead in terms of achieving the better society we are trying to achieve on climate change. It is important that we go down this road, but let us not make the provisions so restrictive that we choke off the innovation at which this country excels.
Andrew Bowie
I thank right hon. and hon. Members for their contributions. I agree completely with my right hon. Friend the Member for Elmet and Rothwell. Indeed, one example for an exemption would be to ensure that the regime is not overly burdensome—for example, smaller operators for whom a requirement to hold a licence, if operated, would be overly onerous. That is why the power is intended to allow exemptions from the requirement to hold a licence when an activity would otherwise fall into the prohibition that we do not think it would be technically or economically necessary to require a licence. That is not an original thought: it is the exact situation in the gas and electricity markets, as they stand right now. I cannot give any other specific examples, because we intend to engage with the market and with industry on potential classes of exemption before we bring forward the secondary legislation in that area. Under the provisions in the Bill, we will conduct a formal consultation process ahead of laying exemptions regulations.
On the consultation process, as the hon. Member for Kilmarnock and Loudoun pointed out, there is no timeframe for the Secretary of State to respond; however, he is obliged to consider any representation or objection made. I am sure that the Department—especially myself—will be keen to keep him updated on progress with any response to the consultation.
On consultation with Scottish Government and Welsh Government Ministers regarding the Bill, we will cover that in greater detail as we proceed through the Bill. I have already met my counterpart in Edinburgh and yesterday met virtually my counterpart in the Welsh Government. We are discussing how best to proceed with consulting on the nature of the Bill. As I referred to earlier, the differences between the UK Government and the devolved Administrations mirror the differences between the Opposition and Government, in that we are all very much in agreement on the broad scope of the Bill and on a huge majority of what we seek to do through it. I look forward to working constructively with Ministers and colleagues in Holyrood and Cardiff, so that we can get the balance right and move forward in a way that is good for the entire United Kingdom. That is why I recommend the Committee to agree that clauses 2 to 6 stand part of the Bill.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clauses 3 to 6 ordered to stand part of the Bill.
Clause 7
Power to grant licences
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 7 provides the economic regulator, Ofgem, with the power to grant licences that permit the carrying out of carbon dioxide transport and storage activities and charging for transport and storage activities. It is the Government’s intention that in the enduring regulatory regime, Ofgem is responsible for rewarding carbon dioxide transport and storage licences. The Government’s CCUS cluster sequencing process will identify the first CCUS clusters eligible for government support and the first transport and storage operators to be granted an economic licence.
Through clause 16 and schedule 1 the Bill provides for the Secretary of State to grant the first licences. That is appropriate, given that Exchequer support will be available to the first clusters. Although it will be the Secretary of State who makes the decision to grant the first licences, once a licence has been granted Ofgem will assume full regulatory oversight of the licences. Following the initial cluster sequencing process, our procedure for future licence applications is expected to be developed, taking into account learnings from the sequencing processes that have gone before. That is provided for in the next clause.
Ordered, That the debate be now adjourned.—(Joy Morrisey.)
Energy Bill [ Lords ] (Second sitting)
Tuesday 23rd May 2023
(1 year, 6 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 23 May 2023 - (23 May 2023)
Dr Alan Whitehead (Southampton, Test) (Lab)
I do not have anything much to say about clause 7 standing part. I will have some things to say about some of the clauses that follow, but the power to grant licences is pretty unexceptional, and we do not have anything to add or take away from the clause.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Unusually, I will speak for longer than the hon. Gentleman—I say that just as everybody was getting excited. I understand that clause 7 and subsequent clauses on granting licences and the economic models are critical to getting carbon capture up and running. Obviously, I want these provisions in place, but I ask the Minister for a bit more detail.
Clause 7 is all about the grant of licences, which is to be undertaken by the regulator. That will be Ofgem, as was said earlier in response to an intervention. The Minister assures us that it has the expertise and resource to do all the additional licensing work, but we discover in the explanatory notes for clause 7 that under clause 16, for an interim period, it is actually the Secretary of State who has responsibility for granting licences. Why is that? Why have the interim period? What expertise is available to the Secretary of State in-house when they are granting these licences? Who will oversee that? How long does the interim period last? From what I can see in schedule 1, it lasts until the Secretary of State passes regulations to end the interim period. I would like a bit more clarity on how long the interim period will last.
Is the interim period and the granting of licences by the Secretary of State a mechanism to speed up the grant of licences for track 1 projects that have already been selected by the Government? Does that not potentially give them an unfair financial advantage? The Minister touched, in his opening remarks, on competition for licensing and keeping everything competitive. How does he square these two things?
When does the Minister envisage the first licences being granted by the Secretary of State, and when does he envisage them being granted by the regulator? How will the licences that are issued in the interim period be compliant with clause 12, which is still to come and is all about standardisation? That helps to keep things competitive and transparent.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
I thank the hon. Gentleman for his multiple questions. Given the number of them, I will write to him with greater detail, but the point at which the Secretary of State’s power to grant licences is transferred to Ofgem will depend on developments in the market in the early years of the operation and the evolution of carbon capture, usage and storage. We are in the nascent stages of this technology. It is standard practice for the Secretary of State to have a power over something like this before it is transferred across to Ofgem. As I said, the timing will depend on market forces as the technology develops and matures.
The hon. Gentleman asked when the first licences will be granted. Licences will be granted to transport and storage operators for track 1 CCS clusters for deployment in the mid-2020s, subject to the final decision of Ministers. The final decisions on any Government support will be taken only if a CCS cluster represents value for money for the consumer and the taxpayer. He referred to subsequent clauses that deal with these issues directly; we will come to his other questions when we debate those clauses, and I will be happy to engage in more detail then.
Alan Brown
What is going on when it comes to the Department and Ofgem building up and sharing expertise? They are both looking at licensing. As the Minister said, with this nascent technology, there is a whole ramping up, so we need to ensure that the right resource is allocated to the right place to move forward.
Andrew Bowie
I completely agree. We will share expertise with Ofgem as we move forward. This is a whole new technology being deployed in the United Kingdom, and the expertise being developed in the Department will of course be shared with Ofgem, so that when the regulator takes responsibility for licensing, it will have at its fingertips the ability to conduct the processes properly.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8
Power to create licence types
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause enables different types of carbon dioxide transport and storage licences to be granted. That will enable the economic licensing framework for carbon dioxide transport and storage to evolve as the market grows and matures.
For the first carbon dioxide transport and storage networks, a cluster-based approach is being taken. Under that approach, the licences for the first transport and storage networks are expected to cover the full network, which includes a set of onshore pipelines, the offshore pipeline and associated offshore storage facilities. As the market matures, however, we recognise that it may become desirable to licence separately constituent parts of a network, such as an onshore pipeline network or an offshore geological storage site. It may be appropriate for licence conditions to look quite different for different transport and storage activities. Providing for that will allow operators to specialise in provision of different transport and storage services. The delegated power under the clause enables the regulatory regime to respond to market developments by allowing different licence types to be created and granted for different types of transport and storage facility. I commend the clause to the Committee.
Dr Whitehead
My knees get worse as the afternoon goes on.
The clause is, as the Minister said, about the power to create a licence type. I appreciate that that is in the gift of the Secretary of State in the first instance; the power will be transferred subsequently, as we said when debating clause 7. This clause, however, appears to do two things, and possibly goes far wider than the Minister envisages. It allows for regulations so that
“different types of licence may be granted…in respect of different descriptions of activity falling within section 2(2).”
Clause 2(2), as we have discussed, defines activities that are prohibited if unlicensed. Those are:
“operating a site for the disposal of carbon dioxide by way of geological storage”;
and
“providing a service of transporting carbon dioxide by a licensable means of transportation”.
We mentioned the possibility of an amendment that would have covered carbon dioxide usage as well, as the Minister will be aware. The power under clause 8 would allow different licence types within that overall framework. As the Minister said, different activities may emerge. Various activities will fall well within clause 2(2), and others will be to the side of that.
As far as I can see, the power in clause 8 allows the Secretary of State to sweep up what is both central to and to the side of the activities in clause 2(2). That may be good for the Secretary of State, but it is not good for the companies developing carbon capture and storage, who are not sure whether this power will or will not sweep them up—they do not know. They are not sure whether the activity they are carrying out on the margins of the licensing arrangement is non-licensable, or will become licensable if and when the Secretary of State decides by regulation that different kinds of licences can be provided. A lot of that depends on what the regulations say. If they are broad, as this power to create licence types appears to be, companies will not have any assurances about what they are doing. When the regulations come out, they might prefer a menu of the different licence types in the Secretary of State’s mind.
I appreciate that we are in the realm of known knowns, known unknowns and unknown unknowns, but a menu of different licence types that are reasonably close to licensability in the mind of the Secretary of State would be very helpful for companies operating in this sphere. Will they be more or less likely to need to apply for a license? Would the licensing situation hold up their activities in any way, or could they go ahead with what they were doing on the margins, not within the new license type? Could the Minister comment on what is in his mind about the regulations? Will he provide that menu? If so, what might it consist of?
Andrew Bowie
I thank the hon. Member for his questions. I do not think the former Defence Secretary of the United States would have expected to be mentioned so much in the UK’s Energy Bill Committee—we have talked about known knowns, known unknowns and unknown unknowns. The hon. Member is correct: we are dealing with a lot of unknown unknowns when we talk about exactly how and when the industry and technology will develop. As they develop, a decision will be taken at an appropriate point about what will and will not be licensable, and what types of licence will and will not apply.
The hon. Member talks about the regulations and whether there will be a menu of options. Clarity is good for everyone, especially when developing a new technology and deciding whether to invest in carbon capture, usage and storage. We will be as clear as we can in regulations about what will and will not be licensable and what licences will apply. However, I would not like to be drawn at this stage on what will be in the regulations. That will be for Government and industry to work up together as we move toward the date when they will apply.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Clause 9
Procedure for licence applications
Dr Whitehead
I beg to move amendment 77, in clause 9, page 10, line 6, after “the Secretary of State” insert
“must ensure that licences are only granted to fit and proper persons, and”.
The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.
The Chair
With this it will be convenient to discuss the following:
Amendment 78, in clause 18, page 19, line 33, at end insert—
“(c) may only be transferred to a person the Secretary of State considers to be a fit and proper person for this purpose.”
The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.
Amendment 79, in clause 43, page 39, line 16, at end insert
“provided that the transferee is considered by the Secretary of State to be a fit and proper person for this purpose”.
The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.
Amendment 80, in clause 50, page 45, line 35, after “any” insert “fit and proper”.
The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.
Amendment 82, in clause 61, page 54, line 16, after “given to a” insert “fit and proper”.
The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.
Amendment 83, in clause 61, page 55, line 5, at end insert
“provided that the transferee is considered by the Secretary of State to be a fit and proper person for this purpose”.
This amendment refers specifically to the need for the hydrogen counter party to be a fit and proper person. The aim of this amendment is to put the onus on the Secretary of State to personally deem the individual as “fit and proper”.
Amendment 87, in clause 82, page 71, line 42, at end insert—
“(l) for the certification by the Secretary of State that the transferee is a fit and proper person.”
If the Secretary of State needs to find a new counterparty this amendment obligates that they must ensure they are a fit and proper person.
Dr Whitehead
Amendment 77 concerns licences being granted to fit and proper persons; the other amendments relate to matters such as the transfer of licences. Members may think that the application of the term “fit and proper” to licensing arrangements is pretty obscure, but I will try to disabuse them of that notion. The term “fit and proper” can apply to both a real person and a person in law, which can be a company or an organisation. It appears in a number of laws and regulations where the Government or a regulator have a responsibility for appointing or licensing individuals or companies.
Andrew Bowie
I thank the hon. Gentleman for his amendments. They seek to place responsibility on the Secretary of State to ensure that individuals obtaining a carbon dioxide transfer and storage licence are fit and proper. The amendments would affect the licence application, the licence transfer, the special administrative regime and transfer schemes.
It is clear that the Opposition and the Government share the same desire here, requiring the utmost standards for those wishing to engage in the transport and storage of carbon dioxide, in support of the Government’s ambitions to scale up the deployment of CCUS and its important role of achieving our net zero target. I therefore support the hon. Member for Southampton, Test’s aim; however, as addressed in the other place, the specific inclusion of “fit and proper” within the drafting of clauses across part 1 is actually unnecessary. That assurance is already inherent within the Secretary of State and the economic regulator’s role within the licensing regime. Despite sharing the desire, I ask for the amendment to be withdrawn because I believe that it is superfluous in this instance.
Amendments 82, 83 and 87, which were also tabled by the hon. Member for Southampton, Test, seek to make the Secretary of State responsible for ensuring that an individual designated as a hydrogen production counterparty is deemed “fit and proper”. The Government anticipate that the Low Carbon Contracts Company Ltd, or LCCC, which is the existing counterparty for contracts for difference and the planned counterparty for the dispatchable power agreement, will be the counterparty for the low-carbon hydrogen agreement, subject to its successful completion of administrative and legislative amendments.
In taking the decision to proceed with LCCC as the counterparty to the low-carbon hydrogen agreement, the Secretary of State considered, among other things, LCCC’s ability to deliver the required functions and its experience and track record in contract management. Those considerations would bear on any future decisions, which would also be subject to normal principles of public decision making. Again, I agree with and share the same aim and desire as the hon. Member for Southampton, Test, but the amendments are superfluous. I politely ask that he withdraw his amendment.
Dr Whitehead
Naturally, the fact that the Minister did not eagerly grasp and endorse the substance of the amendments and run off to the Table Office is disappointing, but I accept that he has perhaps looked in detail at how the legislation will work and is satisfied that an equivalent of the “fit and proper person” test can effectively be carried out under the provisions of the Bill. However, that has not been the judgment of other parts of Government, which have found that particular wording to be of great help in underlining what their responsibilities are. It also ensures that the judgments that they make in exercising their responsibilities are fairly bomb-proof: if the Secretary of State presses the “fit and proper person” button, there is not too much an aggrieved party can do about it. I appreciate that that is different for different licences.
The Government have effectively decided that the LCCC, which I think is a fit and proper person, will be the hydrogen counterparty, although that is still to come in legislation—so we are legislating for something that we think will happen later, but not right this minute. I leave that with the Minister. He has not agreed to amendment 77; he thinks it superfluous. I slightly disagree—I think it would be useful—but that is to some extent a matter of judgment. Perhaps in a few years’ time, when a Minister becomes seriously unstuck with a particular appointment, we will get together again and see what can be done about it. For now, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Andrew Bowie
I beg to move amendment 1, in clause 9, page 10, line 15, leave out subsection (10) and insert—
“(10) Section 10(6) (meaning of ‘appropriate devolved authorities’) applies for the purposes of subsection (3) of this section as it applies for the purposes of section 10(3).”
This amendment corrects a drafting error in the definition of “appropriate devolved authorities”.
Andrew Bowie
I thank the hon. Member for Southampton, Test and share his optimism that in a few years’ time we will be in a position to continue with appointments in relation to what we are legislating for today.
Amendment 1 corrects a drafting error in relation to the statutory basis on which the devolved Administrations are to be consulted in relation to regulations that may be made under the powers in part 1. The amendment ensures that the statutory basis for consultation is consistent across the drafting of the relevant clauses.
I turn to clause 9. The Government’s CCUS cluster sequencing programme is under way to identify the first CCUS clusters eligible for Government support. The first transport and storage licences will be granted through that process. The enduring regulatory regime will need a licence application process, and clause 9 provides for such a process to be set out in regulations. The process includes the procedure for licence applications, the conditions under which the applications may be made and the procedure for objecting to licence applications.
Kerry McCarthy (Bristol East) (Lab)
I was waiting for the Minister to mention the word “fee”, and he did not. I apologise for coming in right at the last moment, but clause 9 says that a fee would be payable. I know that the Minister spoke earlier about the need to avoid unnecessary burdens on some of the smaller companies that might come forwards. Does he envisage that the fee would be proportional to the size of the enterprise or would a fixed amount apply to everybody? Is that being considered?
Andrew Bowie
I can confirm that it is very much being considered. It will certainly be proportional to the size of the entity that might be applying for such a licence.
Amendment 1 agreed to.
Clause 9, as amended, ordered to stand part of the Bill.
Clause 10
Competitive tenders for licences
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 10 enables the future allocation of carbon dioxide transport and storage licences to be determined on a competitive basis. The Government’s current carbon capture, usage and storage cluster sequencing programme is a fair and transparent process. It determines which operators of carbon dioxide transport and storage projects are eligible to be granted a transport and storage licence and any associated Government support according to published criteria.
The future process for granting licences will need to balance a range of considerations and, depending on the evolution of the sector, it may be appropriate for it to be carried out according to competitive procedure. The power to make regulations in clause 10 enables that. It is a discretionary power; while a competitive approach may bring overall value for money and benefits for taxpayers and consumers—
Alan Brown
Can I ask about the overall sequencing? We have the track 1 costs at the moment, but we still do not have certainty on track 2. We are talking about future tenders and competitiveness. Clearly, at the moment only the ones in track 1 can effectively apply for licences. If we are looking for overall value for money, surely we need to completely open the field, as it were, so that we have more companies and projects competing and pushing each other on that competitive cost base as well.
Andrew Bowie
As the hon. Gentleman knows, we have launched a track 2 process; there will be an update on timings in the summer. Of course, we want to open up the process to as many companies and organisations seeking to get into this technology as possible, but it is really important that the appropriate steps are followed to get to that stage. That is why we are proceeding at pace with track 2 and why we will update everybody concerned with that in the summer.
Whether a competitive process is appropriate in the enduring regime will depend on how the CCUS market develops, including the anticipated number of market participants—that relates to the answer I just gave to the hon. Member for Kilmarnock and Loudoun. Any regulations that may be made under the power would first be subject to consultation with the economic regulator and the devolved Administrations, and they would be subject to the affirmative procedure.
Dr Whitehead
This is a bit unsatisfactory, to be honest. I appreciate that the Minister has very carefully said that this is a discretionary power for the future and the Department may, as the CCUS market develops, consider making—I presume—some licences viable on a competitive basis, and that the Government may do that by regulation; I am pleased to hear that the regulation will be subject to the affirmative procedure, should the Government do that. Nevertheless, that seems to leave huge gaps in the procedure by which competitive licences might be determined. Is the determination based on, for example, how much money a company gives for the licence, and would the competitive licence mean that the highest bidder won the licence regardless of their suitability for the purpose?
Would the judgment on the creation of the licence be subsumed in other factors such as finances, or would the competitive licence be tendered on the basis of who is geographically most able to do something in terms of the viability of the body or company complying with a licence? Would there be a financial test? Once a competition has been entered into and the terms are not carefully set, we may get to a situation of “Beware your wishes; they may come true.” What we get as an outcome of a competitive tender may not be what we wanted to happen, but if we set it in train through the competitive process and have not defined it carefully enough, there will be no going back at that point.
It will be necessary to think through this way of doing things very carefully before proceeding, even with discretion being exercised. I am concerned that there is not enough in the legislation to guide us on how that thinking process might be carried out. Perhaps the Minister will give us a little guidance on the sort of things that would be to the fore should the competitiveness process be undertaken, and indeed the things that he would not consider in such a process. I am delighted to see that he has received bit of guidance on the matter. That may well help us all.
Andrew Bowie
I thank the hon. Member, and completely understand his concerns and where he is coming from. Ultimately, however, the appropriateness of a competitive approach to licence allocation will be considered, taking into account the learning from both the track 1 and the ongoing track 2 licence allocation processes, as well as the wider developments in CCUS markets and technology. This is not without precedent. In gas and electricity, Ofgem runs different processes for allocating different licence types. Some are allocations that are run competitively, such as offshore transmission licences, and other licence types are not.
The power in clause 8 also enables consequential amendments to be made to the Bill should they be considered necessary to facilitate the making of different licence types, but as the hon. Member pointed out, and as I said, the power is discretionary, and it should be for the Secretary of State to choose whether to exercise such powers.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clause 11
Conditions of licences: general
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 11 makes general provisions regarding the conditions of transport and storage economic licences. The licence allows an operator to charge network users for delivering and operating the network. The licence conditions will set out the allowed revenue that the licence holder is entitled to receive, which will reflect its efficient cost and a reasonable return on its capital investment. The conditions of the licence will also include requirements on the licence holder that they must comply with or consent to.
In order that the economic regulator may cover the cost of administering the licence, the clause additionally confirms that the licence may contain conditions requiring a payment to be made to the economic regulator during the term of the licence. Any money received by the economic regulator pursuant to the conditions must be paid into the consolidated fund.
Alan Brown
I thank the Minister for giving way; I noticed an eye-roll, though.
Alan Brown
The Minister referred to the regulator assessing the allowable rate of returns in a fair chance model. How does that square with the interim period when the Secretary of State will grant licences? How do you make that assessment of value for money and fair returns, and will there be any scope to revisit that? If we look at networks and transmission systems, Ofgem had to reduce the allowable rate of returns in the next investment period, because it had been allowing network companies to make too much money. What safeguards are there to ensure that there is a review following an initial assessment of what would be a fair rate of return?
Andrew Bowie
The hon. Gentleman makes reasonable and sensible points. He is right that we have to ensure that the same regulations that will apply to Ofgem when it administers the process in future apply also to the Secretary of State and the Department when administering it in the interim. He is right, too, that there need to be safeguards and that Parliament overall will have responsibility for holding the Department to account—as it does the Government, in every respect, when it comes to making such decisions. I commend the clause to the Committee.
Question put and agreed to.
Clause 11 accordingly ordered to stand part of the Bill.
Clause 12
Standard conditions of licences
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
A number of conditions will be appropriate to include as standard in all licences of the relevant type. The power in clause 12 enables the Secretary of State to specify what those standards are. The Secretary of State will be required to publish the standard conditions in an appropriate manner once they have been determined, and they will then be automatically included when a licence is granted.
To allow for the possibility that the standard conditions may need to be tailored to the circumstances of a particular licensee, the clause also enables standard conditions to be either excluded or amended in an individual licence. That can be done only if both the licence holder in question and other holders of the same licence type would not be unduly disadvantaged as a result.
Notice must be given of the intent to modify or exclude standard conditions in an individual licence, setting out the proposed modifications or omissions and the reasons for them, with sufficient opportunity for representations or objections to be made. Any objections or representations must be fully considered. I commend the clause to the Committee.
Dr Whitehead
The Minister has set out what the standard conditions of licences are likely to be and how they are going to be determined by the Secretary of State, but the clause goes a bit further than that. It says in subsection (2) that
“the Secretary of State must”
—that is a good thing—
“publish any standard conditions determined under subsection (1)”,
which says:
“The Secretary of State may determine the conditions that are to be the standard conditions of licences”,
and subsection (2) then says the Secretary of State must publish the conditions
“in whatever manner the Secretary of State considers appropriate.”
That is a bit of an odd formulation. I am more used to the idea that the Secretary of State must publish any standard conditions determined under subsection (1)—full stop.
The question of publication has always been important when conditions are to be published that licence applicants will be expected to look at and know about. The onus is, or should be, on the Department to publish those conditions as widely as possible, whereas this power appears to narrow that substantially. I am not suggesting that in any way the Minister would seek to restrict the public’s free access to information, but under this formulation it is possible that, just as publications are set up specifically for the purpose of obscuring the publication of various things from the general public, the Secretary of State could decide to publish the conditions in something like The Competitors Journal. Indeed, they could be published as—I don’t know—a TikTok video, as I mentioned earlier, or in some other way that is inappropriate to the circumstances under which their publication should appear, which should give those who apply for licences the maximum amount of, and ease of access to, the information that would be necessary to inform their application.
We have not moved an amendment to strike out the second part of subsection (2), but I would like from the Minister at least an assurance that he will place an emphasis on the first part, which requires the Secretary of State to publish the conditions, and that, in pretty much all circumstances, “publish” means that the publication is widespread and easily accessible in the public domain, so that it can be digested and read by all concerned.
Andrew Bowie
I am happy to give that assurance that the information will be published, widespread and easily accessible while that power resides with the Secretary of State. Of course, as has already been said, it will be up to Parliament—as is the case with every other piece of legislation—to hold the Government and the Secretary of State, whoever may be in that post at the time, to account when that time arises.
Question put and agreed to.
Clause 12 accordingly ordered to stand part of the Bill.
Clause 13
Modification of conditions of licences
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clauses 13 to 15 relate to the modification of licences for carbon dioxide transport and storage.
Clause 13 enables the economic regulator to modify the conditions of a licence after it has been granted. That is to ensure that licence conditions can keep pace with the evolution of the market. It also enables the economic regulator to undertake periodic reviews of the amount of allowed revenue an operator can receive, which will then be set out in the licence. In economically regulated sectors, price controls are a method of setting the amount of allowed revenue that can be earned by network companies over the length of a given period. Regulated companies then recover their allowed revenues through the charges they set.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Does my hon. Friend agree that clause 13 is about precisely what I was touching on earlier? It is important to have the flexibility in the legislation to adapt as technology and innovation adapt too.
Andrew Bowie
Yes, I agree with my right hon. Friend. It is precisely about what he was touching on earlier: we are able to provide in the legislation the flexibility to allow the technologies for which we are legislating the space to grow, develop and become commercially viable. That is why it is essential to strike the balance between regulation and ensuring freedom for companies to operate. That is exactly why we would like the clause to stand part of the Bill.
As I was saying, allowed revenues must be set at a level that covers the companies’ costs and allows them to earn a reasonable return, subject to their delivering value for consumers, behaving efficiently and achieving their targets as set by the economic regulator. The amount of allowed revenue that an operator is able earn is set out in the licence conditions, which will need to be updated to reflect the outcomes of the periodic regulatory reviews and to keep pace with the evolution of the market more broadly. The power provides for the economic regulator to make such licence modifications, subject to an appropriate consultation process.
Before making any modifications to licence conditions, the economic regulator must give notice of the proposed modifications, the rationale for them, and an appropriate timeframe within which representations may be made. Any representations that are made must be duly considered. As Exchequer support will be available to certain users of the networks, the Secretary of State must be consulted on licence modification proposals and retains the power to direct that a modification may not be made.
Should the Secretary of State object to a particular modification, the economic regulator would need to consider whether to pursue the modification in an alternative form, which would require restarting the process of notifying and consulting on the new proposals. As is the case in other regulated sectors, licensees should have the right of appeal regarding modifications that are made to licences after they have been granted. The Bill provides for that later in chapter 1.
Clause 14 requires that, where the economic regulator has made a licence modification under clause 13 to a standard licence condition, the standard conditions of all future licences of that type should similarly be modified. That ensures a consistent approach to standard conditions across licences of the same type.
Clause 15 makes provisions for the Competition and Markets Authority or, as may be the case, the Secretary of State, to modify licence conditions in specific circumstances in relation to company mergers. Where there is a merger between licensed entities, that may necessitate licence modifications to ensure compliance with competition law. The power enables the CMA or the Secretary of State to modify licence conditions accordingly. I commend the clauses to the Committee.
Dr Whitehead
I have a question more than anything. Will the Minister state on the record this afternoon who the economic regulator actually is? The reason why I ask is that there does not seem to be any definition in the Bill of who the economic regulator is. It appears to be the CMA, but it might not be, because clause 20, on “Appeal to the CMA”, is under the heading “Appeal from decisions of the economic regulator”, so those do not appear to be the same thing in the Bill’s construction. It is not further defined, so perhaps the Minister will clarify that for us.
Andrew Bowie
I am happy to clarify that the economic regulator to which I and the Bill refer is of course Ofgem. Appeal to the CMA relates to what I have just discussed: occasions when there is a merger between two licensed entities, which may necessitate modifications. That is where the CMA comes into it. To be absolutely clear, Ofgem is the economic regulator.
Dr Whitehead
I point out, therefore, that there are inconsistent references to Ofgem, to the CMA and to the economic regulator. They are one and the same but referred to in different ways in different parts of the Bill. That might be a drafting issue more than anything else.
Andrew Bowie
I have just been reminded by my hon. Friend the Member for Beaconsfield that clause 1 sets out that the economic regulator to which we refer is Ofgem.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Clauses 14 and 15 ordered to stand part of the Bill.
Clause 16
Interim power of Secretary of State to grant licences
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 2.
That schedule 1 be the First schedule to the Bill.
Andrew Bowie
The clause and schedule 1 provide the Secretary of State with the power to grant carbon dioxide transport and storage licences during an interim period, as has been discussed already this afternoon.
In the enduring regulatory regime, we expect the economic regulator to take decisions on who should be granted a carbon dioxide transport and storage licence. That is provided for by clause 7. However, it is the Secretary of State who will determine the first carbon dioxide transport and storage networks to be granted a licence—through the Government’s CCUS cluster sequencing programme—and the terms and conditions of those licences. That is appropriate given the Exchequer support available to the first CCUS clusters.
The CCUS cluster sequencing process is specifically designed for first-of-a-kind projects. The interim period during which the Secretary of State has the power to award licences will end on a date to be set in regulations, once the industry is sufficiently mature. After that interim period, the economic regulator will have sole power to grant licences.
Government amendment 2 corrects a cross-reference and renumbers a subsection in schedule 1 to ensure that the schedule is read correctly. Schedule 1 provides the Secretary of State with the power to grant carbon dioxide transport and storage licences during an interim period. The interim period during which the Secretary of State has the power to award licences will end on a date to be set in regulations made under schedule 1, once the industry is sufficiently mature. I think that answers some of the questions asked by the hon. Member for Kilmarnock and Loudoun earlier. After that interim period, the economic regulator, Ofgem, will have sole power to grant licences. I commend the clause and the schedule to the Committee.
Dr Whitehead
The clause itself is brief, but refers to schedule 1 and to the interim power of the Secretary to State to grant licences. As the Minister said, that power will come to an end on a date to be determined at a point when the industry is well established and the Secretary of State therefore no longer has to exercise the interim power. Who decides when the industry is well established? If that is the Secretary of State, is it not a rather circular way of bringing to an end the power of the Secretary of State to grant licences on an interim basis? If the Secretary of State decides that the industry is not that well established, he or she will presumably continue to grant interim licences forever.
Presumably, we want to reach a point when the Secretary of State does not grant licences in his or her own right and Ofgem or the economic regulator does, but we do not appear to have any mechanism in the Bill, other than something to be determined at a particular date, whereby the Secretary of State switches off his or her own power and switches on an Ofgem power. It would be helpful if the Minister could clarify that. There may be something in the legislation that I have not noticed, but it appears from schedule 1 and the clause that there is not a clear switch-off mechanism, other than the intention to do so when the market is mature.
Alan Brown
To follow on from that point, and the point that I made earlier, I know that the Minister said that he would write to us, but I am interested in how he envisages the sequencing and the interim period coming to an end. Although he said that in terms of value for money it is up to Parliament, and us as parliamentarians, to hold the Government to account, if the interim period goes on for a long while and individual licences are granted effectively on an ad hoc basis, it will be almost impossible for parliamentarians to hold the Secretary of State to account. We will continually be told that the information is commercially sensitive, so we will be unable to access it. I want a bit more clarity on how this will all come together in a more transparent manner.
Andrew Bowie
To address the points made by the hon. Members for Southampton, Test and for Kilmarnock and Loudoun, we recognise that visibility and clarity are of the utmost importance when talking to industry and, indeed, the wider country about where we are headed regarding CCUS. I can think of nothing that the Secretary of State, whoever that might be, would like more than to be able to give the power to Ofgem to determine licences. However, that depends on just how mature the sector is and the stage at which the Secretary of State determines it to be right.
The point about clarity, which I have just mentioned, is important. That is why my right hon. Friend the Member for Kingswood (Chris Skidmore) mentioned in his net zero review in March the need for a road map for CCUS. The Department agrees that that is important. We have committed to setting out a vision for the CCUS sector. That work is ongoing, and we will keep stakeholders and parliamentarians updated as we work up our road map and increase the clarity on where we are headed, and to what timescale, and when we expect such a transition period, during which the Secretary of State will hold that power, to come to end.
Question put and agreed to.
Clause 16 accordingly ordered to stand part of the Bill.
Schedule 1
Interim power of Secretary of State to grant licences
Amendment made: 2, in schedule 1, page 245, line 31, leave out from beginning to second “the” in line 32 and insert—
“(d) after subsection (10) insert—
‘(10A) For the purposes of subsection (5)’”.—(Andrew Bowie.)
This amendment corrects a cross-reference and renumbers a subsection.
Schedule 1, as amended, agreed to.
Clause 17
Termination of licence
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The terms and conditions of the economic licence will set out the circumstances in which the regulator would revoke or terminate a carbon dioxide transport and storage licence. Such circumstances may include those where a licence holder has contravened or failed to comply with enforcement orders, ceased to carry on as a transport and storage business, or sadly become insolvent.
The clause requires that where a licence termination scenario has arisen, or is likely to arise, the regulator must notify those who are most likely to be affected by a decision to terminate a licence. That will include notifying the relevant carbon storage licensing authority—which may be either the North Sea Transition Authority or Scottish Ministers, Welsh Ministers, or the Department for the Economy in Northern Ireland—where a storage licence is also in place.
It also includes notifying the Secretary of State who, depending on the circumstances, may consider it to be in the public interest to use the powers in chapters 4 or 5 of the Bill to secure the continued operation of the network. Those powers enable the Secretary of State to enact a statutory transfer scheme to transfer the licence and its associated property and rights to another operator to maintain ongoing operations.
If the licence is to be terminated due to company insolvency, the Secretary of State has the option to apply to the courts for a special administration order. I commend the clause to the Committee.
Dr Whitehead
The clause concerns termination events, stating:
“If the economic regulator considers that a termination event has arisen, or is likely to arise, the economic regulator must notify the persons mentioned in subsection (2) as soon as reasonably practicable.”
The Minister has given company insolvency as an example of a possible termination event, but I am sure he will agree that there are a number of others.
Subsection (5) says that a
“‘termination event’ means a state of affairs in which the economic regulator is authorised to revoke the licence.”
That explains precisely nothing; it does not give examples of termination events or explain the circumstances in which the economic regulator is authorised to revoke a licence. It does not take us very far.
Is there a roster of termination events? Is there a list of likely termination events that the Minister could put into a menu? Insolvency is one such event, but I can think of a number of other circumstances in which termination may take place either voluntarily or involuntarily. For example, a company may request that the regulator terminate its licence, stating that it cannot carry on with its licence arrangement for reasons other than insolvency.
The clause does not list any circumstances that could constitute a termination event. Is the Minister satisfied that the rather circular definition in the clause is sufficient? Or does he think that more clarity on what a termination event could constitute and how one might be dealt with is required?
Andrew Bowie
I understand the hon. Gentleman’s point. However, I think it is fairly well recognised and understood within the industry that the termination of a licence will come in the event that a licence holder ceases to carry on as a transport and storage business and therefore no longer requires a licence; if it becomes insolvent; or if it contravenes or fails to comply with enforcement orders made by the economic regulator or, in certain situations, the courts. I am not sure what would be added by setting that out in the Bill. I suspect that it is fairly well understood across the industry.
To answer the question of what would happen in the event of licence termination, the Bill provides certain step-in rights for the Secretary of State in a licence termination scenario to be able to transfer the ongoing operation of the transport and storage network to another operator or, where that is not possible, to ensure the safe decommissioning of the infrastructure. If a licence is terminated because of the insolvency of a transport and storage company, the Bill enables the application of a special administration regime to support the ongoing operation of the transport and storage network, prioritising its rescue as a going concern and securing the ongoing safety and security of the network. I reassure the hon. Gentleman that a great deal of consideration has gone into this specific element of the Bill, and we are happy that it is clear in its intent.
Question put and agreed to.
Clause 17 accordingly ordered to stand part of the Bill.
Clause 18
Transfer of licences
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
We are powering our way through this afternoon. Clause 18 enables carbon dioxide transport and storage licences to be transferred from one legal entity to another, subject to the consent of the economic regulator, Ofgem. Carbon dioxide transport and storage licences will be granted to a legal entity, and they cannot be bought or sold separate from that legal entity. Circumstances may arise in which it is appropriate or necessary to transfer a licence to another legal entity, and the clause provides for that. For example, a licence may need to be transferred as a result of a company merger or acquisition, or a company restructuring, where the legal entity that is proposed to carry on the licensable activity is not the same legal entity to which the licence was awarded. A transfer may relate to the whole or any part of the licence. The regulator’s consent is required for any licence transfer.
Clause 19 sets out the process that the economic regulator must follow before giving consent to any transfer. That includes public notice of the regulator’s intent to consent to a licence transfer, the reasons for it, any conditions to be attached to the consent to transfer, and a time period within which objections or representations can be made. The economic regulator must also notify the Secretary of State of an intended transfer, and the Secretary of State has the right to direct that a transfer may not be consented to. That is appropriate, as there may have been contractual financial support agreements in place between the Secretary of State and the current licence holder pursuant to the licence.
Dr Whitehead
The clauses deal with transfer of licences when, as mentioned in the previous clause, a termination event takes place. Subsequent to such an event, the licence will have to be put into action again and will be transferred. I am interested to see whether I can get the words “termination event” into common language, so that I can say to people, “That is a bit of a termination event”. However, I will not do that this afternoon.
The transfer of licences under such circumstances, as we have emphasised, needs to be put under the general heading of “fit and proper people”, whether we explicitly say that or not. A termination event may have occurred because someone has proven not to be a fit and proper person—for example, if they were gambling the company’s proceeds on local casinos—and therefore the company or person has been determined not to be able to carry out the term of the licence. The licence therefore needs to be transferred at least to a better kind of person.
Will the Minister expatiate briefly on the circumstances under which transfers will be judged? We need to be sure that when a licence needs to be transferred after a termination event, no one can say, “You over there—you will do. We are in a bit of a fix as far as the licence is concerned, so you get on with it.” I am sure that that is the last thing on the Minister’s mind, but it could conceivably happen if someone wished to cut corners and keep a licensed line of activity going. If the Minister could give an assurance about how licences will be transferred, that would be helpful.
Andrew Bowie
I am glad that we are not going to focus too much on termination or even extermination events during our debate. Indeed, it is to be hoped that we will not need to refer to this aspect of the Bill very much, if at all. However, we have to legislate in the expectation that at some point, there may be termination events for a licensed entity. That is why we have set out the provision for a licence transfer in the Bill.
The hon. Member for Southampton, Test referred to his earlier point regarding the inclusion of the phrase “fit and proper person”. As I said, we believe that the Bill sets out exactly how the Government will determine that a company or an individual is well placed to be a licence holder and carry out their duties as they relate to the Bill. However, let us say that they are not—we hope that that will not be the case—and a transfer takes place. A new licensee will be found, and if they intend to commence the licensable activity shortly after consent is granted, the regulator—Ofgem, in this case—may ask them to demonstrate, for example, that arrangements to accede to relevant codes by the proposed transfer date are in place. I understand why the hon. Member asks these questions, and it is right to do so. It is right that we state on the record today exactly what we expect in the event that a termination event takes place in regard to a licensed entity.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19 ordered to stand part of the Bill.
Clause 20
Appeal to the CMA
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 21 stand part.
That schedule 2 be the Second schedule to the Bill.
Clauses 22 to 25 stand part.
Andrew Bowie
I will now speak to clauses 20 to 25, which relate to appeals in relation to licence modification decisions made by the economic regulator for carbon dioxide transport and storage. I will start with clause 20. To ensure that sufficient safeguards for licensees are in place, this provision of the Bill provides for licence modification decisions to be appealable to the Competition and Markets Authority. That is consistent with the CMA’s role in appeals in other economically regulated sectors, including gas and electricity. The CMA’s permission is required to bring an appeal, and the specific grounds on which the CMA may refuse to allow an appeal are set out in the clause. They include, for example, grounds for appeal that are “trivial or vexatious”.
Clauses 21 to 25 and schedule 2 set out the process and procedures for appeals to the CMA. Schedule 2 sets out the detailed process by which appeals to the CMA regarding licence modification decisions must be made, including matters to be considered by the CMA and timeframes within which the CMA must determine outcomes. To ensure a fair process and in order that the CMA may make a fully informed decision, schedule 2 establishes a right for the CMA to require the production of documents and written statements, and for persons to attend to give oral evidence. It establishes an offence of failure to comply with a notice to provide information, and it allows the CMA to make a costs order relating to the appeal. The provisions of schedule 2 are consistent with the process and provisions for appeals to the CMA in relation to gas and electricity licence modification decisions made by Ofgem.
Clause 22 sets out the matters to which the CMA must have regard when determining an appeal against a licence modification decision. It also sets out the circumstances in which the CMA may allow an appeal. In determining an appeal, the CMA must have regard to the same matters to which the economic regulator must have regard in carrying out its principal objectives and statutory duties in relation to carbon dioxide transport and storage. The CMA may allow the appeal if it considers that the decision being appealed does not sufficiently have regard to, or give sufficient weight to, matters covered by the principal objectives and statutory duties set out in clause 1; is legally wrong; is based on a factual error; or does not achieve its stated objectives. If the CMA does not allow the appeal on any of those grounds, the original decision made by the economic regulator stands.
Clause 23 sets out the powers of the CMA to remedy a licence modification decision where an appeal has been allowed. Where an appeal has been allowed, the CMA can quash the decision or require the economic regulator to reconsider it. If the appeal relates to a price control decision, the CMA additionally has the option to substitute its own decision for the economic regulator’s decision. These powers mirror those that exist for the CMA in gas and electricity licence modification appeals.
Clause 24 sets out time limits within which an appeal to the CMA must be determined. An appeal against a licence modification decision must be determined by the CMA within a period of four months from the date on which permission to bring the appeal was given. For appeals against price control decisions, the CMA has a period of six months to make a determination. Where representations on timing are made and the CMA considers that there are special reasons why the time limits cannot be met, it may have an extra month for its decision. In such circumstances, the CMA must inform the parties of the time limit and publish it in such a manner as it considers appropriate to bring it to the attention of parties who may be affected by the determination.
Bim Afolami (Hitchin and Harpenden) (Con)
I want to add a note of caution in relation to this set of clauses—a word for those on the Treasury Bench and the Minister, who is a good friend and a good parliamentarian, and who is doing a fantastic job on the Bill and in his role.
There is a hidden danger in the Secretary of State and, indeed, the Department not having the ability, outside of an interim period, to intervene at all in the process vis-à-vis licences. If I have misunderstood anything, I stand corrected, but as I understand it, once we have gone past the interim period—in peacetime, so to speak—the regulator, Ofgem, will make a decision. That decision can be, rightly and very understandably, scrutinised. Appeals can be made to the CMA, which is the right place, but there is no provision for the Secretary of State to involve themselves in that process.
If my understanding is right, and it may be wrong, there is no ability for the Secretary of State to intervene in that process. That strikes me as dangerous in the event that there is an emergency, the economic situation changes hugely or the broader political environment changes to the point that the regulator has a very different view of the issue from that of the Department. I should have referred Members at the beginning to my entry in the Register of Members’ Financial Interests: I am chair of the Regulatory Reform Group.
My point is not a dry, technical one that has no real political or economic bearing; it could be hugely significant over the coming years. I urge the Minister and his officials to consider whether we should retain some ability for the Secretary of State to intervene directly in the process if that were required, although I suspect that most of the time it would not be.
Dr Whitehead
I was going to make a slightly different point from that made by the hon. Member for—
Dr Whitehead
I remembered the Hitchin bit, but I could not remember the Harpenden bit; I am sure that the hon. Member treats both parts of his constituency with equal reverence.
Dr Whitehead
I was tempted to refer the hon. Member to the Energy Prices Act 2022, which was recently passed—I think, to paraphrase the Minister, not on his watch. The Act allows the Secretary of State to do pretty much anything that he or she wants in the energy sphere. I do not know whether that applies to the circumstances that the hon. Member for Hitchin and Harpenden suggested, but we are particularly concerned about the powers in that Act, and whether they need to be rowed back a little in this Bill.
I draw the Committee’s attention to the process of appeal from the economic regulator to the CMA. It appears to be a linear process. The appeal is set up by the CMA, effectively, and there is no going back afterwards. There is not a circumstance in which the economic regulator can say, “Actually, we think the CMA didn’t work as well it should in terms of casting that appeal. Can we appeal the appeal—not necessarily the substance of the appeal, but the way in which it has been carried out?”
What is apparent in terms of the CMA’s powers regarding appeals is that they give the CMA a lot of ability to misstep. Clause 20(4) states:
“The CMA may refuse permission to bring an appeal only on one of the following grounds”.
The CMA, actually on fairly wide grounds, can therefore refuse to bring an appeal. It appears to have pretty widespread powers to make a determination without any comeback. For example, clause 22(4) states:
“The CMA may allow the appeal only to the extent that it is satisfied that the decision appealed against was wrong on”
various grounds, including, among others,
“that the decision was based, wholly or partly, on an error of fact”.
Various things in the clauses emphasise the linear nature of the appeal process—that is, the CMA decides, and no one is looking at what the CMA is doing in terms of its appeal processes. I would like to hear whether the Minister thinks that that is adequate or whether a little more attention ought to be paid to what the CMA is doing in those circumstances, and whether the relationship between the CMA and the economic regulator under those circumstances is as good as it could be.
Andrew Bowie
Turning first to the points made by my hon. Friend the Member for Hitchin and Harpenden, who does treat both parts of his constituency with equal diligence—having visited, I have seen that at first hand—he is right: the Secretary of State does not have the power to directly modify licence conditions once they are granted, but he does have a veto over Ofgem decisions. That is set out in clause 13(6).
I genuinely understand the concerns of the hon. Member for Southampton, Test, but the provisions and procedures directly mirror the appeals process in respect of electricity and gas licence modification, set out in the Gas Act 1986 and the Electricity Act 1989. We believe that it will ensure consistency of approach for the economic regulator Ofgem and, indeed, the Competition and Markets Authority, which will provide confidence for the sector, and indeed sectors, as we move forward.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21 ordered to stand part of the Bill.
Schedule 2 agreed to.
Clauses 22 to 25 ordered to stand part of the Bill.
Clause 26
Provision of information to or by the economic regulator
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 26 allows the economic regulator to request information from, and provide information to, other bodies with carbon capture, usage and storage regulatory or statutory functions, in circumstances where the sharing of information may be appropriate to facilitate the effective functioning of the respective regulatory regimes.
The clause permits the sharing of information between the economic regulator and the relevant bodies with statutory functions in respect of CCUS listed at subsection (2). The clause also allows for sharing of information with any other person the economic regulator considers appropriate if they have statutory powers or duties that the economic regulator considers relevant to the exercise of its functions. That could include, for example, the counterparty to any contracts providing consumer or taxpayer support for associated carbon capture activities. The clause limits information requests to those that the economic regulator considers necessary to facilitate the exercise of its functions.
These information-sharing provisions are intended to enable information to be shared between relevant regulatory authorities, not to permit public disclosure. Information shared with the economic regulator will remain protected under the Data Protection Act.
Alan Brown
What happens if any of the bodies do not give information to the economic regulator in the requested timeframe?
Andrew Bowie
They would be subject to the same stringent actions as have been set out, and in the interim the Secretary of State would determine what action should be taken in that respect.
Clause 27 gives the Secretary of State a power to require information directly from a carbon dioxide transport and storage licence holder, to ensure that he has access to information needed to support the effective conduct of his CCUS functions. The clause does not enable the Secretary of State to share or publish the information. To ensure protection of sensitive information, information provided to the Secretary of State will remain protected under the Data Protection Act, and an information request cannot be made to obtain information protected by legal professional privilege or, in Scotland, confidentiality of communications.
Dr Whitehead
The Minister’s final few words appear to show—the hon. Member for Kilmarnock and Loudoun may have a few things to say about this—that there are different conditions for disclosure or production in legal proceedings in England and Wales and in Scotland. I am not a lawyer, so I do not know exactly what the difference is likely to be, but it appears that there is greater protection for the licence holder with respect to information provision in Scotland than in England and Wales. Perhaps I am reading that wrong. Is it the case that, in effect, the two conditions are the same and the wording of the Bill just bows in the direction of the formulation in Scotland, or is there a material difference?
Andrew Bowie
There is no material difference at all. As the hon. Member suggests, it is just a reference to the different regulations that apply in Scotland and in England and Wales, as a result of the devolved legislature in Edinburgh legislating slightly differently from the way that we have for the rest of the United Kingdom. That is the only difference. As this is a pan-UK Bill that affects each area of the United Kingdom, we have to make clear in the Bill the different regulations that will have to be conformed to. That is why the language of clause 27 is as it is.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clause 27 ordered to stand part of the Bill.
Clause 28
Monitoring, information gathering etc
Andrew Bowie
Thank you very much, Mr Gray. I fear that you will be hearing my voice in your sleep tonight.
Andrew Bowie
Clauses 28 to 31 relate to other functions of the economic regulator. Starting with clause 28, as I have already said, carbon capture, transport and storage are nascent industries in the UK and, indeed, globally.
The economic regulation framework for carbon dioxide transport and storage, established by part 1 of the Bill, is focused on the transport of carbon by pipeline for the purposes of geological storage. Through that framework, our aim is to both provide certainty for investors and protect user interests.
As the CCUS market becomes established, we may need to keep the framework under review—for example, on how it is applied to non-pipeline forms of carbon transportation and the most appropriate licensing structure for different types of onshore and offshore infrastructure. To help inform such considerations, clause 28 requires the economic regulator to keep the carbon dioxide transport and storage market under review.
The economic regulator may collect information for the carrying out of such monitoring functions. The regulator is also obliged to share relevant information with the Secretary of State or the CMA if requested to do so, to assist their competition and market functions. Clause 29 establishes the procedure for requesting such information and establishes a penalty if a licence holder does not comply with a request for relevant information.
Where the economic regulator is considering implementing proposals that may have a significant impact on licence holders, on others who are involved in related CCUS activities, on the general public or on the environment, clause 30 requires that the economic regulator carries out an impact assessment ahead of implementing the proposals. The economic regulator is required to carry out and publish an assessment of the likely impact of implementing the proposal or set out why it considers it unnecessary to carry out such an assessment.
An impact assessment for a proposal must be published in an appropriate manner and provide an opportunity for those who are likely to be significantly affected by the proposal’s implementation to make representations. In its annual report, the economic regulator must report on the impact assessments undertaken in the relevant financial year and the decisions taken as a result of those assessments.
Lastly, to ensure transparency of decision making, clause 31 establishes that, for certain decisions, the economic regulator and the Secretary of State must give reasons for the decisions taken. The reasons must be set out in the published notice and sent to the relevant licence holder. Before publishing a notice, the economic regulator or the Secretary of State must give regard to the need to exclude information that could seriously and prejudicially affect the interests of an individual or body.
Dr Whitehead
I must say that these passages are so dry that I may be hearing the Minister’s voice in my sleep this afternoon, rather than tonight. Having said that, I assure you, Mr Gray, that I am wide awake and listening to what is being said.
When considering any piece of legislation, I always think that the first thing we should look at is the impact assessments, because they have to tell the truth about what is going on. It is, therefore, always useful to have impact assessments. Indeed, it is important that an impact assessment is available as often as possible both for Bill Committees and for secondary legislation.
Clause 30, however, appears to be rather vague about whether impact assessments should actually be undertaken. On the duty to carry out impact assessment, it states that
“the economic regulator is proposing to do anything for the purposes of, or in connection with, the carrying out of any function exercisable by it under or by virtue of this Part, and…it appears to the economic regulator that the proposal is important”,
but the clause does not specify what is meant by “important”. It goes on to say:
“but this section does not apply if it appears to the economic regulator that the urgency of the matter makes it impracticable or inappropriate for the economic regulator to comply with the requirements of this section.”
In other words, if the economic regulator thinks that an issue has some significance—subjectively judged, I assume, by the economic regulator—it may carry out an impact assessment. On the other hand, if there is no time to do it or it does not appear to be terribly appropriate to the economic regulator, it does not have to do it anyway. Therefore, we might get an impact assessment, or we might not.
There are a number of grounds in the process under which the impact assessment can be voided or avoided. Although subsection (2) attempts to define what “important” means in connection with a proposal, it also states:
“A proposal is important for the purposes of this section only if its implementation would be likely to do one or more of the following”.
and thereby further downgrades the question of what is still a rather subjective view of what constitutes importance.
I assume that the Minister shares my view that impact assessments are really important not just for important subjects but for most things. Although we have not tabled an amendment, will the Minister consider tightening the wording so as to ensure that carrying out impact assessments is the norm and not something to be decided by the regulator? To use the word “important” again, it is important that we are clear about impact assessments. Indeed, that has been set out in guidance to Ministers, who should seek to undertake impact assessments at all times, where possible, and should not hide behind speed issues or other circumstances in order to avoid them. However, it appears that that is not the case for the economic regulator, and that is not satisfactory.
Andrew Bowie
The Government are always open to suggestions and ideas about how we can improve legislation. As I said earlier, it is important for the industry, nascent as it is, that there is as much clarity as possible about how it is governed and about the regulatory process that it must follow. We must also understand that, as the market and the technology grow, evolve and develop, we will need to keep that under review. However, I am happy to give a commitment to the hon. Member that we will consider whether it is possible to tighten up the language so that exactly what is meant is made clear to industry.
Kerry McCarthy
As we have heard, there could be subjective interpretations regarding the importance and urgency of an impact assessment, and questions raised over whether one is appropriate or impracticable. I think the Minister will share my concern that the broadly worded clause could result in people seeking judicial review if they feel that the economic regulator should have carried out an impact assessment. I do not know what the process would be for bringing such a review, but does he share my concern that the vaguer the language, the more open it is to challenge?
Andrew Bowie
I also do not know the exact procedure that would lead to a judicial review in this instance, but I agree that we need to be clear and give certainty to the industry. Where we can, we should look at what we can do to tidy up the language so as to ensure that we do not end up in that situation.
Question put and agreed to.
Clause 28 accordingly ordered to stand part of the Bill.
Clauses 29 to 31 ordered to stand part of the Bill.
Joy Morrissey (Beaconsfield) (Con)
I beg to move, that further consideration be now adjourned—or, as one might say, be a termination event. [Laughter.]
The Chair
That is, of course, entirely out of order.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Energy Bill [ Lords ] (Third sitting)
Thursday 25th May 2023
(1 year, 6 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 May 2023 - (25 May 2023)
The Chair
Before we begin, I remind Members that Hansard colleagues would be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Could you please switch electronic devices to silent? Tea and coffee are not permitted during sittings; the only thing allowed is the water that is liberally sprinkled around the room.
I understand that the Government wish to move a motion to amend the programme order agreed by the Committee on 23 May, to cancel this afternoon’s sitting. Because this motion has not been agreed by the Programming Sub-Committee, it may proceed only if everyone is content. Does anyone object to the motion? No takers?
Ordered,
That the Order of the Committee of Tuesday 23 May be amended, in paragraph 1(b), by leaving out “and 2.00 pm”.—(Andrew Bowie.)
Clause 32
Enforcement of obligations of licence holders
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 3 be the Third schedule to the Bill.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
It is a pleasure to serve under your chairmanship, Dr Huq.
I rise to speak to clause 32. To ensure that the economic regulation framework operates as intended, the economic regulator requires appropriate powers of enforcement to ensure licence conditions are adhered to, and there must be appropriate redress for regulatory breaches. The clause gives effect to schedule 3, which enables the economic regulator to enforce the conditions of licences and other obligations on licence holders. These enforcement powers are equivalent to those available to the economic regulator in the enforcement of conditions of gas and electricity licences.
Schedule 3 sets out the procedural and other requirements relating to the conduct of licence enforcement in relation to the economic regulation of carbon dioxide transport and storage. It includes the procedure that Ofgem should follow when making an enforcement order; limits on the size of financial penalties that may be applied for breaches of licence conditions or other relevant requirements; the method by which penalties may be appealed; and, in the case of the non-payment of penalties, the use of civil proceedings to recover the penalty and any interest as a civil debt. I commend the clause to the Committee.
Dr Alan Whitehead (Southampton, Test) (Lab)
It is a pleasure to serve under your chairmanship, Dr Huq. Hopefully, the passage of the rest of the Bill will be pacific and friendly under your chairmanship and that of the other Chairmen. Members know how closely I was kept to order by the Chairman we had earlier this week, and I am sure you will do exactly the same, Dr Huq, although I do not intend to stray off today’s exciting business.
The clause and schedule are concerned with the enforcement of licence holders’ obligations. The schedule goes into greater detail about how that enforcement works. I do not have any particular objections to them, but I would like to know from the Minister what the process for a final order under the schedule will be. We talked in Committee previously about termination events, and the subject raises its head again this morning. As I understand it, a final order under this schedule may or may not precipitate a termination event. Is that right?
There is a process in the schedule for provisional orders and final orders. A final order is presumably where a termination event occurs. Perhaps the Minister can say something about whether there are any procedures beyond that final order for the persons to whom the order has been served. We will come to some of the reasons why orders may be made in the next clauses, but it is important to clarify at what point that final order is operational, what happens then and what happens up to a termination event. I would be grateful for the Minister’s clarification.
Andrew Bowie
I thank the hon. Member for his questions. It is important to get the definition absolutely right. When Ofgem is satisfied that a regulated person has contravened or is contravening any relevant condition or requirement, it may impose a financial penalty or, in the words of the Bill, issue a “final order”. In terms of the appeal process, before imposing that financial penalty or issuing the final order, the economic regulator must publish a note stating its intentions and the relevant condition of requirements to be imposed. The notice should also specify the act or omissions that, in the economic regulator’s opinion, justify the penalty, and there should be a period of at least 21 days from publication in which objections can be made. The economic regulator must consider any objections made before imposing the penalty.
Schedule 3 provides for regulated persons to be able to appeal to the courts against the imposition of a penalty by Ofgem, the amount of the penalty or the timeline within which any penalty is required to be paid. An appeal must be made within 42 days of the penalty notice.
Question put and agreed to.
Clause 32 accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 33
Making of false statements etc
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
To ensure that the Secretary of State and the economic regulator can secure the provision of information necessary to conduct their respective functions in relation to carbon dioxide transport and storage, the clause establishes an offence if a person, either knowingly or recklessly, provides false information. A criminal sanction ensures that there is suitable redress for the making of false statements and should act as a disincentive to doing so. This is important and necessary as falsifying information could conceal issues or concerns that would otherwise be material to the decision making of the economic regulator or Secretary of State. Without knowledge of such information, there could be less effective decisions and less effective protections for users of the networks.
Dr Whitehead
Yet again, the clause appears to be relatively straightforward, but I would like to unpack the meaning of “false statements”. The Minister has given a general outline of what it means, but as far as I can see it potentially concerns the making of false statements or declarations, or whatever, at all stages of the licensing process. Presumably, that could be where a false statement is made in order to receive a licence, and the false statement comes to light after the licence has been provided. In that case, I presume the licence would be terminated on the basis of the false statement. Alternatively, it could apply to false accounting or false statements during the carrying out of the licence. Does the clause concern false statements made at the commencement of a licence or the granting of a licence, or does it concern false statements made during the operation of the licence as well? What procedure does the Minister envisage for those false statements coming to light?
The clause states that a person who makes a statement that that person
“knows to be false in a material particular, or recklessly makes any statement which is false in a material particular, is guilty of an offence”,
and is liable on summary conviction to a fine. Presumably the question of whether a false statement is sufficient for a process leading to a conviction is in the hands of the regulator. That is, if the regulator is worried about a false statement, it presumably has some discretion about the extent to which that false statement invalidates the process of the licence. Is that the Minister’s understanding? Is the process on a conveyor belt, as it were, such that a statement that appears to be false leads absolutely to a conviction? Or are there shades of grey about what a false statement is, how false that statement might be and how material that is to the continuation of the licence?
Andrew Bowie
Again, I thank the hon. Member for his questions. On his question about when a false statement might be made, it can be throughout the entire licence. On when an offence might be deemed to have occurred, it would be at the point that the statement was made. Schedule 2(10)(4) establishes that it is an offence to wilfully alter, suppress or destroy a document that the Competition and Markets Authority has required a person to produce as part of considering an appeal against a licence qualification decision by Ofgem. I think that what we seek to define as an offence and when we expect that offence to have been determined to have been made are quite clear.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Clause 34
Liability of officers of entities
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Part 1 establishes certain criminal offences in relation to the economic licensing of carbon dioxide transport and storage, where transport and storage activities can take place both onshore and offshore. Clause 34 clarifies that, where an offence is committed by a corporate entity with either the consent or collusion of an officer of the company, or as a result of neglect by an officer, that officer, as well as the company itself, is culpable of the offence. The clause defines a company officer as any director, manager, secretary or similar officer of the body corporate, or any person purporting to act in that capacity.
Clause 35 clarifies that proceedings under part 1 can be brought anywhere in the UK. That ensures that an offence arising by virtue of the provisions of this part that is committed in an offshore place may be prosecuted in the United Kingdom. Criminal proceedings in relation to offshore activities may be instituted only by the Secretary of State or by, or with the consent of, the Director of Public Prosecutions.
Dr Whitehead
This is another fairly straightforward clause about criminal proceedings, but we ought to focus on the statement at the end of clause 35 about the definition of “offshore place”. Obviously, in the context of carbon capture and storage, there will be considerable concern about offshore places as well as onshore places, because presumably criminal offences can be committed during the transportation and sequestration of the carbon dioxide. As we know, those offshore places may be in repositories that are fairly far offshore but within the UK zone as far as, in principle, jurisdiction is concerned. However, as the Minister will know, there are different definitions of the territorial waters of the United Kingdom. Indeed, the Bill describes them as
“the territorial sea adjacent to the United Kingdom”.
Andrew Bowie
I thank the hon. Member for his pertinent and important question. For the purposes of the Bill and the industry we are discussing, the territorial sea is up to 12 nautical miles. The Gas Importation and Storage Zone (Designation of Area) Order 2009 sets that out, which is why we have taken the step of disapplying, for the purposes of the Bill, section 3 of the Territorial Waters Jurisdiction Act 1878. That section requires the consent of a principal Secretary of State, or a Governor in the case of the dominions and overseas territories, to institute proceedings for criminal offences within scope of the Territorial Waters Jurisdiction Act 1878. Disapplying section 3 enables proceedings for an offence that is alleged to have been committed in an offshore place to be instituted without the consent requirement. As set out in the 2009 order, offshore waters are defined as up to 12 nautical miles.
Dr Whitehead
That is a bit of a worrying definition, because it suggests that outside the 12-mile zone, the offence would not be prosecutable. A lot of carbon capture and storage installations are in the UK economic zone but outside the territorial zone, so there appears to be a bit of dissonance between what the Bill says about offences that may occur at any stage of proceedings, and these provisions, which, as the Minister says, cover the territorial 12-mile zone. Of course, the 1878 Act did not take any account of economic zones. Territorial waters were closely defined under that Act, but since then, we have moved considerably on what we might regard as territorial waters for the purpose of economic activity; that might not be the same as territorial waters as defined by the 12-mile limit. Is there a gap there that needs filling?
Andrew Bowie
I thank the hon. Gentleman for his question. While I understand the concern, it is important to stress that the zone, which is up to 12 nautical miles from shore, is a continuation of the gas importation and storage zone as designated under the 2009 order. It would be outwith the scope of the Bill to change the 2009 definition, because that is the definition with which the industry has been working since then.
Dr Whitehead
That does not address the fact that carbon capture and storage, and the repositories for it, are way out to sea. Putting a pipe at the bottom of those repositories, and connecting it to an evacuated oil field or whatever, may mean that there is a platform at the head of the pipe on which offences could be committed. The Bill does not appear to get up to speed with where carbon capture and storage will take place, where the repositories will be, and what the jurisdiction of the UK will be in those circumstances. Is that not a problem? Does the definition require further amendment?
Andrew Bowie
It is important to stress that the definition in the Bill is not only a continuation of the definition in the 2009 order, but the same as that used for other gas activities in the North sea. It is important that we stick to the same definition.
Andrew Bowie
Yes.
Question put and agreed to.
Clause 34 accordingly ordered to stand part of the Bill.
Clause 35 ordered to stand part of the Bill.
Clause 36
Functions under the Enterprise Act 2002
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Ofgem has the power, concurrently with the Competition and Markets Authority, to carry out market studies and make market investigation references in relation to the gas and electricity markets in Great Britain under part 4 of the Enterprise Act 2002. Other sectoral regulators have the same powers in relation to the sectors for which they are responsible. Under the Enterprise Act, the CMA and Ofgem may undertake market studies in relation to the gas and electricity markets in Great Britain, and may make market investigation references to the chair of the CMA for the constitution of a CMA group to conduct an in-depth market investigation of competition in the market or markets concerned. The purpose of those investigations is to examine the markets and implement appropriate remedies where competition problems are identified.
Clause 36 confers the same powers on Ofgem in its capacity as the economic regulator for carbon dioxide transport and storage. That will enable Ofgem to undertake market studies and make market investigation references to examine potential distortions that may give rise to restrictions in competition in relation to carbon dioxide transport and storage. As provided for in clause 38, neither the CMA nor Ofgem shall exercise functions under part 4 of the Enterprise Act in relation to any matter if such functions have been exercised in relation to that matter by the other. Clause 37 additionally provides for the economic regulator to exercise certain functions under the Competition Act 1998 concurrently with the CMA. Enabling the exercise of those Competition Act functions allows the economic regulator to deal with anti-competitive agreements or abuses of a dominant position in the carbon dioxide transport and storage sector.
To ensure that the powers are used efficiently, clause 38 requires the economic regulator and the CMA to consult each other before exercising the functions. Clause 38 is also clear that the power may be used only by either the economic regulator or the CMA in relation to a particular matter. If there is a question as to whether the economic regulator has concurrent powers under clauses 36 or 37 in relation to a particular case, this clause provides for the Secretary of State to make that determination.
Dr Whitehead
Try as I might, I cannot find much at fault with this chapter of the Bill. On the contrary, I actually think it is rather well drafted. I am happy to sit down, having said nothing about these clauses whatsoever, and allow business to proceed.
Question put and agreed to.
Clause 36 accordingly ordered to stand part of the Bill.
Clauses 37 and 38 ordered to stand part of the Bill.
Clause 39
Forward work programmes
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
As these are significant clauses, I will speak for slightly longer than I have done thus far this morning. Clause 39 provides for the economic regulator to publish the transport and storage forward work programme before each financial year. This will generally contain a description and objectives of the relevant projects that the regulator intends to undertake. A forward work programme should include estimates of the expenditure that will be incurred in connection with the programme.
Before publishing the forward look programme for any year, the regulator must give notice containing a draft of the transport and storage forward programme, and must specify the time in which representations on the proposals may be made. The regulator must consider any representations or objections that are submitted.
Clause 40 provides for the economic regulator to publish a document setting out required information relating to the carbon capture, usage and storage strategy and policy statement. This document must include information about the strategy that the economic regulator intends to adopt to further the delivery of the policy outcomes in the statement, and how the strategy will be implemented. The clause also confirms the circumstances in which that duty does not apply, and the circumstances in which the economic regulator may choose not to include certain information in a forward work programme for a particular financial year. That includes circumstances in which the economic regulator does not think it is reasonably practicable to publish the document before the next required time, or circumstances in which the economic regulator has included that information in the forward work programme.
The Secretary of State may give notice to the economic regulator, Ofgem, that the statement’s designation will be or is expected to be withdrawn before the beginning of the year. That will exempt the economic regulator from the duty to publish information in relation to the CCUS strategy and policy statement.
Clause 41 provides for the economic regulator to make a report to the Secretary of State at the end of each financial year. This annual transport and storage report must include information on progress made during the year on the objectives in the forward work programme, and a summary of orders made and penalties imposed, and may cover any other matters that the Secretary of State may require. The economic regulator must also include an assessment of how it has contributed to the delivery of the policy outcomes set out in the CCUS strategy and policy statement, if such a statement has been designated.
If the economic regulator has failed to do anything that was set out in its forward work programme, it must explain why, and say how it intends to remedy that. The economic regulator must exclude, where necessary, any matters relating to the affairs of a particular individual or body of persons, in order to protect their interests.
The Secretary of State must lay a copy of each annual transport and storage report in each House of Parliament and share a copy of the report with Scottish Ministers, Welsh Ministers and the Department for the Economy in Northern Ireland. The report must also be published in a manner that the Secretary of State considers appropriate. I urge that clauses 39 to 41 stand part of the Bill.
Dr Whitehead
As the Minister says, these clauses are important in establishing reporting requirements relating to carbon capture and storage strategy and policy statements, and the requirement to report how the policy is going and what the problems are. It is important that we establish proper mechanisms for ensuring that the report is properly brought before Parliament. Given the interest of Members in the progress of CCUS, they may well want to debate the report in the House, and to have the Minister answer questions on it.
Clause 41(7) states:
“The Secretary of State must”—
it is nice that the provision has the word “must” in it—
“lay a copy of each annual T&S report before each House of Parliament”.
As the Minister will know, the phrase “lay before” has a lot of possible interpretations, just as “publication” does; we discussed the general question of publication in a previous sitting. Just laying a report before each House of Parliament has, potentially, a number of problems attached to it. Is it likely to be flagged up in any way that the report has been laid before Parliament? Is the onus on every Member of Parliament to find out whether that has happened? Do the Government intend to be proactive about laying reports before Parliament, and in offering opportunities to debate the report, or at least answer questions on it? Those are all extensions of the idea of laying a report before the House.
I do not want to say that the wording is inadequate, because it is the general wording on laying reports before the House, but the Minister will appreciate and understand that some legislation enters into greater detail on how a report is to come before Parliament. It would be helpful if the Minister gave his interpretation of the provision and said how he intends to transfer or convey the policy report from the regulator to the Floor of the House.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Dr Huq. I will make only a few comments. I will not object to these clauses, which I realise are important, but I share the concerns expressed by the hon. Member for Southampton, Test. It is critical that we have confidence in proper parliamentary oversight, and in Parliament being able to hold the regulator and particularly the Secretary of State to account. I am slightly concerned that the clauses give the regulator too much power to decide what they report on, how they report and what information they bring forward. As the Minister described, it is up to the regulator to explain why they have not brought forward a statement, for example. We need more than that. It should not be at the whim of the regulator whether to bring forward a statement; if they do not bring one forward, they should say why. It is for the Secretary of State to make sure that these things happen, obviously with parliamentary oversight.
Subsection (2) says:
“That description must include the objectives of each relevant project.”
Clearly, we need a lot more than just the objectives; we need to know how the objectives are being met. I know that the Minister will not want to make the Bill too prescriptive about what goes in the report, but we need that to include, for example, details of the efficiency of the project. Cynics say that carbon capture does not capture enough of the emissions, whereas obviously the industry says that we can capture 95% of them. I want to see how efficient projects are, and how they contribute to meeting net zero.
There are concerns that carbon capture might lead to the burning of more fossil fuels, so we need to understand the level of extraction of fossil fuels, what the inputs and outputs are, the emissions from any extractions of fossil fuels, and where the fossil fuels come from, including whether they come from other countries; we need to know that when it comes to meeting that wider net zero objective. Those are the things that I would want set out, so that I could question the Secretary of State in Parliament on them and make sure that we have confidence in how these objectives will be met.
Andrew Bowie
I thank the hon. Members for Southampton, Test, and for Kilmarnock and Loudoun for their questions.
I am very glad that the hon. Member for Kilmarnock and Loudoun has spoken, because it gives me a chance to congratulate him on his team’s success last night, which probably staved off their relegation from the Scottish premier league. They are not quite making Europe, as some other teams did last night, but that is still quite good. On his questions about what should be in the annual report, that is already set out. It should be: progress on activities described in any forward work programme for that year; the extent to which activities proposed in the forward work programme for the previous year had not been delivered, and the reasons for that, as well as the proposals to remedy that; how the delivery of the programme’s functions have been contrary to any strategy and policy statement that has been designated; and any enforcement action pursued by the economic regulator.
Of course I share the concerns that both hon. Members expressed that any report laid before Parliament should be open, accessible and visible. Of course, there is precedent for this; reports are laid before Parliament by Government all the time. Of course, it is incumbent on Parliament to hold the Secretary of State to account once the report is laid before Parliament. It is in the gift of this Parliament to call any Secretary of State to the Floor of the House, as we have seen over the course of the past six years in particular, to explain in detail any reports that have been laid before Parliament and to take any questions from any Member of the House from any party. That process, which is well established in our Houses of Parliament, is the one by which we will proceed with this report.
Question put and agreed to.
Clause 39 accordingly ordered to stand part of the Bill.
Clauses 40 and 41 ordered to stand part of the Bill.
Clause 42
Transport and storage administration orders
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
I am happy to speak to clauses 42 to 49. Chapter 4 of the Bill provides for a special administration regime for licensed carbon dioxide transport and storage companies. In the unlikely event that a carbon dioxide transport and storage company becomes insolvent, the Secretary of State, or the economic regulator with the Secretary of State’s permission, may apply to the courts for the appointment of a special administrator. The objective of the administrator would be to ensure that services continue until it is unnecessary for the administration order to remain in force for that purpose.
Given the importance of carbon dioxide transport and storage networks to support carbon reduction from a range of emitters—many of which will be supported by Government—the importance of those networks in delivering net zero and the need to ensure that networks are maintained and decommissioned safely, in a company insolvency scenario the interests of creditors, which usually take priority in a normal administration, may not align with the public interest in keeping the network operating. The ability to apply a special administration regime in the event of a carbon dioxide transport and storage network company insolvency would enable services to continue for emitters connected to a network.
Clause 42 defines some of the relevant terms for this chapter that are necessary for the effective functioning of the legislation. It also requires that the relevant administrator must perform its functions as administrator to achieve the objectives set out in clause 43.
Clause 43 establishes that the objective of transport and storage administration is to secure that the activities authorised by the licence commence or continue in a manner that is efficient and economical, and that ensures the safety and security of the transport and storage network, or the part of the network to which the licence relates, until the company can be rescued as a going concern. The administrator also has the option to transfer all or parts of the undertaking to run as a going concern. Special administration is intended to act as an interim solution, rather than a long-term fix. If the ongoing operation of the transport and storage network is no longer viable in its form, the Secretary of State may wish the Government to take ownership and/or transfer the network assets to facilitate a restructuring or the safe decommissioning of the assets, using the statutory transfer scheme provided for in chapter 5 of this part of the Bill.
I turn to clause 44. Under the proposed special administration regime, if a carbon dioxide transport and storage company is running out of funds or likely to become insolvent, the Secretary of State, or the economic regulator with the consent of the Secretary of State, can apply to the High Court for a special administration order, which will allow a special administrator to be appointed. The Energy Act 2004 provides for special administration regimes in the energy sector. In order to establish the process and procedure for carbon dioxide transport and storage administration orders, the Bill extends the provisions of the Energy Act 2004 to transport and storage administration, with the appropriate modifications. As provided for by these amendments, the detailed procedural rules governing the establishment of a transport and storage administration will be set out in secondary legislation.
At present in the energy sector, section 159(3) of the Energy Act 2004 applies the power in section 411 of the Insolvency Act 1986 to make separate insolvency rules for each of the supply, network and smart meter communication device company special administration regimes. Clause 45 amends section 159(3) of the Energy Act 2004 to allow the Secretary of State additionally to make company insolvency rules for carbon dioxide transport and storage.
Clause 46 enables the Secretary of State to modify the conditions of a carbon dioxide transport and storage company’s economic licence while an administration order is in force. As the Secretary of State may provide financial support to a transport and storage company that is subject to an administration order to secure the objectives of the special administration regime, the power is intended to allow the Secretary of State to recover any financial support provided. Under that power, the Secretary of State may modify the licence to include conditions relating to the recovery of amounts owed to the Secretary of State in relation to financial assistance given while an administration order is in force, and the raising of funds for the purpose of meeting expenses arising in relation to the administration order. Before making any licence modifications, the Secretary of State must consult the economic regulator and any relevant carbon storage licensing authority.
The Enterprise Act 2004 conferred powers on the Secretary of State to make consequential amendments to insolvency legislation. As the special administration regime for carbon dioxide transport and storage companies contains several provisions from the ordinary administration and insolvency regimes, the use of those powers in the Act may affect the special administration regime in the Bill. Clause 47 therefore extends the power of modification or application conferred on the Secretary of State in sections 248, 254 and 277 of the Enterprise Act to make such consequential amendments to chapter 4 as the Secretary of State considers appropriate in connection with any other provision made under those sections of the Act. That will ensure that the special administration regime for carbon dioxide transport and storage is maintained as broader insolvency law evolves, and that it adopts the same approach taken in other recent special administration regime legislation. Not providing for such a power could have detrimental impacts on the operability of the special administration regime in the event of a relevant company’s insolvency.
Alan Brown
The Minister mentioned special admin-istration regime legislation. Given the Government’s review, I wondered how the special administration regime process worked for Bulb Energy, and what lessons had been learned? Has that had an impact on the legislation?
Andrew Bowie
I can confirm to the hon. Gentleman that it has had an impact. Obviously, we continue to assess the impact of the special administration regime in the instance that he refers to. Lessons learned from that process and procedure feed directly into how we have thought about and developed the process for the Bill.
Clause 48 grants the Secretary of State the power by regulations to apply or make modifications to existing insolvency legislation in relation to this chapter of the Bill. The power will help to ensure that the special administration regime for carbon dioxide transport and storage networks fulfils its purpose to protect users of the network.
The power enables the Secretary of State to make modifications to insolvency legislation should, for example, practical experience highlight difficulties in the application of the regime, or should a change in general insolvency law necessitate a change to the special administration regime. The ability to do that is important given the expected long operational lifetime of a licensed carbon dioxide transport and storage network, and the potential for changes to broader insolvency law during this time.
Clause 49 defines relevant terms for interpreting chapter 4 of part 1 of the Bill. The terms refer to definitions in relevant existing primary legislation where it is appropriate. I commend clauses 42 to 49 to the Committee.
Dr Whitehead
We are now dealing with orders that follow from material we have considered previously in relation to false statements, the insolvency of companies and various other things. Clause 42 provides for orders to be made through the court that effectively place the licence holder into administration.
Under what circumstances can a transport storage and administration order be made? In view of what we have discussed, I assume that in addition to the insolvency of a company, a number of offences could lead to such an order. Normally, if a company cannot meet its obligations under the licence and therefore has effectively wound itself up, or seeks to do so, an order will be made through the courts to set up the regime that the Minister has described.
However, I am not entirely clear about the triggering point at which an order will be applied for and put before the court, who does that or the criteria under which the order is put into action. There are a number of circumstances in which one might concede that an order may be appropriate, but it might not have been applied for yet. The question that needs some clarification is when one might think that such an order is appropriate. Under what criteria may an order be offered before the court?
It will be pretty straightforward when a company has completely gone bust and someone has to rescue it, its assets or its operations. However, other circumstances under which an order may be required are less clear. Although this chapter provides that an order may lead to the rescue of the company as a going concern, other provisions—particularly clause 42(3)—show that an order may be used to transfer the operation of that company to another company. That is reasonably standard in provisions concerning the administration of a company, but it is not entirely clear how the treatment of the company will be decided. The court will make an order, but a decision will have to be made about whether the company should be salvaged or its assets transferred to another company.
We had a similar debate in the Bill Committee for the Nuclear Energy (Financing) Act 2022. We discussed what happens when a company that is developing a nuclear reactor goes bust during development or operation, and how we may have to deal with different circumstances surrounding the transfer of assets and ongoing activities depending on which stage the company is at. That will be more complicated during a production and operation phase than in a development phase.
It is important to be clear about the decision making process for what is done with each company, and it does not seem to me that the Bill gives the courts a view. I presume it is more likely that the Secretary of State or the regulator will say, “It looks like the assets need to be transferred to another company, rather than the company being salvaged, and that is how we will proceed.”
That leads to a further issue. If a decision is made to transfer the licence to another company, or to two or more companies, who decides which companies will take it over? Is that done on a tender, or is it done administratively by the appointment of a company to take over the licence arrangement? If the latter, who takes the administrative decision to appoint that company, and what are the criteria by which it is appointed? The provisions do not quite run to a fit and proper persons test, but they constitute a test on the suitability of a company to take over. Presumably, the scrutiny of that is in the purview of the Secretary of State, but it may be for the regulator or a combination of both.
Finally, I echo the point that the hon. Member for Kilmarnock and Loudoun made in his intervention about the status of the special administration regime. Before I do that, it has been remiss of me not to congratulate him on the relative success of his team.
Dr Whitehead
I was about to say that. I can reveal that the hon. Member for Kilmarnock and Loudoun was seen in the Library yesterday evening wearing a Kilmarnock shirt, which attested to his slight nervousness and fervour for his cause. I would not have worn a Southampton shirt in the Library, bearing in mind our ignominious exit from the premier league this year, but we will let that pass.
I want to mention the lessons learned from the special administration regime as it applied to Bulb. The Minister was not in post then, but I spent a lot of time tabling successive written questions to try to get some clarity and transparency about the process. I appreciate that under those circumstances, and quite possibly under these, considerable matters of commercial confidentiality and various other things might be involved in an order, including a transfer to another company, but I found the special administration regime as it applied to Bulb to be completely non-transparent.
We did not know what the Government’s liabilities were for the special administration regime; we did not know when it was likely to come to an end; we did not know how the decisions on the assets and arrangements related to Bulb were going—that is important, in terms of transfer to another company—and I got pretty frustrated trying to get any light into the proceedings. I would not like to think that that is how these arrangements might be conducted if it were necessary to transfer assets to another company. Indeed, the opacity of the Bulb proceedings led to an unsuccessful High Court challenge from several companies that felt they had been excluded from the transfer of liabilities and assets.
A clear intention that these proceedings will operate with the utmost transparency would help the progress of the Bill. The lesson that may be learned from Bulb is that it is generally not a good idea to undertake proceedings as if they were a state secret. On the contrary, disclosure and transparency, within the limits of commercial confidentiality, should be the watchword for such proceedings. When the Minister undoubtedly enlightens us with comments on my previous points, will he also reflect on how the regime might work best?
Andrew Bowie
Let me answer the hon. Gentleman’s questions in order and, I hope, in enough detail to satisfy him and the Committee. The aim is for a special administration regime to be used only in the instance of an insolvency. As we all know, it allows for the protection of essential services in a company solvency scenario to ensure that those services continue.
It is worth reflecting on the fact that in the absence of such a regime, if a carbon dioxide transport and storage company were to become insolvent, an administrator or liquidator working under the standard objectives—they include achieving a better result for creditors than winding up—would not necessarily have cause to keep transport and storage services running, or to secure the ongoing safety and security of the network. That is why we believe an SAR is relevant, and it would only be used in the instance of insolvency.
The Chair
With this it will be convenient to discuss the following:
Clauses 51 and 52 stand part.
Schedule 4.
Andrew Bowie
The regulator will have the power, under clause 17 of the Bill, to terminate a carbon dioxide transport and storage licence in certain circumstances. The circumstances in which the economic regulator can terminate a licence will be set out in the licence itself. Those circumstances could include where a licence holder has contravened or failed to comply with enforcement orders made by the regulator, or by the courts where the licence holder has ceased to carry on as a transport and storage business or has become insolvent.
If a licence is being terminated due to company insolvency, the economic regulator or the Secretary of State have the option, under the provisions of chapter 4, to apply to the courts for a special administration order, as we have just discussed. Where a licence is to be terminated for non-insolvency reasons, clause 50 allows the Secretary of State the option to make a statutory transfer scheme. A transfer scheme would allow the Secretary of State to transfer relevant property, rights or liabilities of a licence holder either to another appropriate body or to the Secretary of State himself.
The aim of the transfer scheme is to secure the ongoing operation of the network, so that emitters that are attached to a network can continue to have their carbon dioxide emissions transported and stored in an economic, safe and secure manner. Where the ongoing operation is no longer viable, a transfer scheme would enable the Secretary of State to ensure that the safety and security of the network is maintained. As set out in clause 50, the Secretary of State cannot make a transfer scheme without the consent of the current licence holder and the persons to whom the licence and associated property, rights or liabilities are proposed to be transferred.
Clause 51 states that, before making a statutory transfer scheme under clause 50, the Secretary of State must consult both the licence holder—the transferor—and the person to whom the licence and associated assets are to be transferred—the transferee. If the proposed transferee is not a public authority, the Secretary of State must consult the economic regulator and other listed public bodies before making such a scheme, as well as the relevant carbon storage licensing authority. That is intended to ensure that the proposed transferee is able to meet the requirements of the licensing authorities.
Clause 52 gives effect to schedule 4, which makes further provision about transfer schemes made under clause 50. Schedule 4 sets out the scope and obligations for any statutory transfer that is made by the Secretary of State in relation to a carbon dioxide transport and storage licensed company. The schedule sets out that a scheme is capable of transferring property, rights and liabilities, including those that would not otherwise be capable of being transferred or assigned.
The provisions of the schedule enable transfers that are affected by the scheme to take effect as if there were no requirement to obtain a person’s consent under the relevant contract, licence or permit that is being transferred, and the transfer will not create any liability due to the apparent contravention of restrictions on transfer that would ordinarily apply. The exception to that is that the transferor and transferee company would be required to provide consent to a transfer. The intention is that, in effect, a transfer scheme is capable of seamlessly parachuting the transferee in the place of the transferor.
On the day on which a scheme comes into force, which would be the date appointed in the scheme, the transferee or transferees must pay to the transferor, or the transferor must pay to the transferee or transferees, such sums as may be agreed.
Dr Whitehead
Yet again, there are some sound provisions in the Bill on transfer schemes and how they might work. We have had the debate about how transfer schemes might follow from orders and how that all works through. As I have said, it is important, however, to think about the circumstances under which transfer schemes might arise. Normally, as the Minister has outlined, transfer schemes will come about because the company was unable to fulfil its obligations as the licensee because it did not exist any more or was in such a dire financial situation that it could not be seen as properly carrying out its licence obligations.
As I have said, there are other circumstances under which a transfer scheme could arise. Clause 51 sets out the question of consultation on transfers and that the company that is subject to having its assets and activities transferred has to be consulted. Obviously, if the company no longer exists, it might be difficult to consult that company. Clause 50 goes further and states in subsection (5):
“The Secretary of State may not make a scheme without the consent of…the licence holder”.
It appears that the licence holder—the company having the assets transferred from it—has a veto on whether the transfer scheme goes through.
If a company exists in reasonable working order, but it has contravened its licence for reasons that are not wholly to do with insolvency, that company might be pretty aggrieved about the process of the transfer. Under those circumstances, it might simply refuse to co-operate. The clause appears to confirm, in the way it is written, the potential non-co-operation of that company.
I do not know whether there is anything elsewhere in the Bill that modifies this statement, but it does look rather stark as it stands:
“The Secretary of State may not make a scheme without the consent of”
that company. I do not know whether that needs to be looked at, or whether there are circumstances—say a company is unreasonably refusing to co-operate or unreasonably withholding consent—in which that can then be overcome. I frankly do not know whether those circumstances or arrangements exist.
Deep in the recesses of schedule 4 is paragraph 10, on compensation for third parties. It deals with circumstances in which an innocent third party, as it were, has had dealings with the licensee that has gone bust or otherwise failed to carry out the terms of its licence, and is financially or otherwise inconvenienced—or has a loss attached to it—as a result of a transfer scheme.
For those who are desperate to read it, paragraph 10(1) on page 269 says that, under those circumstances,
“the third party is entitled to compensation in respect of the extinguishment of the third party’s entitlement.”
That means that when the third party had a reasonable expectation that something was going to happen as part of the licence arrangement, which has been extinguished because of a transfer scheme, and, I assume, it has not proved possible for the entitlements and expectations to be transferred to, say, another company that will undertake the licence activities, with all the procedures we have discussed, that third party is entitled to compensation.
Further down in the schedule, though, we see where that compensation comes from. Paragraph 10(3) states:
“A liability to pay compensation under this paragraph falls on the Secretary of State.”
Does it not in any way fall on the recovery of some of the assets of the company that failed to carry out its licence? Are there procedures whereby that might be done first, perhaps by the Secretary of State? Or is it an absolute requirement that if compensation is required, that is the end of the involvement of the company that is losing its licence and the Secretary of State must find that compensation, howsoever that has been arrived at? I do not know the answer to that—I am not asking the Minister a trick question—but it seems to me that a company that is losing its licence should be expected to provide at least some of the compensation to which the third party is entitled.
Andrew Bowie
I thank the hon. Gentleman for his questions, which again are pertinent and important to the Bill’s passage and implementation. I will answer them in turn.
When the Secretary of State considers making a transfer scheme, he may opt to do so when a network operator’s licence is expected to revoked. The purpose would be to transfer the ongoing operation of the transport and storage network to another operator. Pertinent to that is the hon. Gentleman’s question about the balance of power between the economic regulator and the Secretary of State. He asked whether they will both have the power to initiate a transfer scheme. Only the Secretary of State has the power to make a statutory transfer scheme under the provisions of chapter 5. Unless the Secretary of State is proposing to bring the assets within his own control, he must consult the economic regulator, Ofgem, when making a transfer scheme under the provisions of chapter 5.
On the question of whether the provisions go against the rights of a private company to which the assets belong, clause 50 confirms that the transfer scheme should take effect only with the consent of the transferor and the transferee. The consent of a licence holder to a statutory transfer scheme in the event of a licence termination, and the basis for the valuation of any compensation in the particular circumstances, is expected to be agreed to as part of the licence condition.
Dr Whitehead
With respect, that slightly misses the point about the question of the consent of the pre-existing licence holder. My question was: does the fact that the Bill says the Secretary of State
“may not make a scheme without the consent of”
the pre-existing licence holder mean that the pre-existing licence holder effectively has the whip hand as far as any subsequent scheme is concerned? In other words, if the licence holder simply says, “No, I’m not going to consent,” is that the end of the matter, or are do other things happen? I am not clear about that. If other things can happen, how can they?
Andrew Bowie
The hon. Gentleman asks another appropriate question. It is my understanding that, under the Bill, that would be the end of the matter. However, as he says, there is a more general point, and we will be working to add more detail to the procedure in future. I am happy to keep in touch with the hon. Gentleman as we do that over the next few months.
Andrew Bowie
I am terribly sorry; I missed the hon. Gentleman’s question about the schedule.
Dr Whitehead
I was getting so into the weeds that that is not surprising. My question concerns compensation for third parties and the extent to which the Secretary of State appears to be liable for that compensation, rather than at least attempting to involve the previous licence holder, who may have assets that could add to that compensation. Schedule 4 appears to provide that the previous licensee has no part in the proceedings. It states at paragraph 10(3):
“A liability to pay compensation under this paragraph falls on the Secretary of State.”
Are there circumstances in which the force of that particular statement may be mitigated? Alternatively, does the Minister regard it as good practice that, as far as the previous licensee is concerned, that is the end of it?
Andrew Bowie
As with my answer to the hon. Gentleman’s previous question, there are details that still need to be worked through. On his specific question, there will be mitigations in terms of the responsibility being wholly on the Secretary of State and in terms of whether the previous licence holder should be responsible for paying that compensation. I will keep in touch with the hon. Gentleman about the issue as we work up the specifics of the provision.
Question put and agreed to.
Clause 50 accordingly ordered to stand part of the Bill.
Clauses 51 and 52 ordered to stand part of the Bill.
Schedule 4 agreed to.
Clause 53
Cooperation of storage licensing authority with economic regulator
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 53 inserts new sections into the Energy Act 2008 to provide for co-operation and information sharing between the economic regulator and a carbon dioxide storage licensing authority. As both an economic licence and a carbon storage licence will be required to operate a carbon storage site, the provision is intended to support the exercise of the functions of the economic regulator.
The clause ensures that a storage licensing authority must inform the economic regulator if it becomes aware of circumstances that have arisen, or are likely to arise, that may affect the activities carried out under the economic licence. In particular, it requires carbon storage licensing authorities to notify the economic regulator if a carbon storage licence, or a storage permit granted under the storage licence, that is held by a licensed transport and storage company may be terminated. That is important and necessary because a carbon storage licence or permit revocation would remove the right to operate a storage site.
Dr Whitehead
I think we have identified the relevant notifications on the termination event. The clause seems to be an admirable way to do it, particularly in respect of the co-operation with the economic regulator. I am happy for it to stand part of the Bill.
Question put and agreed to.
Clause 53 accordingly ordered to stand part of the Bill.
Clause 54
Amendments related to Part 1
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 5 be the Fifth schedule to the Bill.
Clause 55 stand part.
Andrew Bowie
Clause 54 gives effect to schedule 5, which makes amendments to other Acts that result from measures in part 1 of the Bill.
Schedule 5 makes consequential amendments to existing legislation to reflect the functions and powers conferred on Ofgem as the economic regulator of carbon dioxide transport and storage under part 1. They include amendments to the Utilities Act 2000 to make it clear that requirements in that Act relating to Ofgem’s work programming and annual reporting functions do not include the functions in relation to carbon dioxide transport and storage conferred on Ofgem by the Bill. That is necessary because the Bill makes separate provision for Ofgem to prepare a forward work programme and annual report on its transport and storage functions, as we discussed earlier.
The restriction on the disclosure of information in section 105 of the Utilities Act is amended to provide that the unauthorised disclosure of information obtained under the provisions of part 1 is a criminal offence, except where disclosure is for the purpose of facilitating the performance of Ofgem’s statutory functions under part 1. Amendments are also made to the Enterprise Act 2002 to reflect the market investigation powers being given to Ofgem in respect of the carbon dioxide transport and storage sector. The Enterprise and Regulatory Reform Act 2013 is amended to ensure that appeals to the CMA in relation to licence modification decisions are heard by a specialist panel. That will ensure that people with the most appropriate expertise are involved in an appeal.
Clause 55 sets out the definitions of terms used in part 1, including include technical definitions relating to the geological storage of carbon dioxide, which are consistent with definitions used in the existing carbon storage licensing legislation.
Dr Whitehead
We come to the part of the Bill where we go through all the definitions and talk about the various amendments that have been made to other pieces of legislation. I always worry slightly about that, in as much as that without actually referring to those bits of legislation, we do not quite know whether someone has smuggled through the revocation of our rights under Magna Carta or whatever in a small amendment to a Bill far away. As far as I can see, everything is in order and the Bill does the right thing to tidy up all the relevant ends, so I am very happy for it to proceed.
Andrew Bowie
I confirm that we are in no way revoking the hon. Gentleman’s rights under Magna Carta.
Question put and agreed to.
Clause 54 accordingly ordered to stand part of the Bill.
Schedule 5 agreed to.
Clause 55 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Energy Bill [ Lords ] (Fourth sitting)
Tuesday 6th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 6 June 2023 - (6 Jun 2023)
The Committee divided: - Ayes: 7 / Noes: 5 - Question accordingly agreed to.
Dr Alan Whitehead (Southampton, Test) (Lab)
On a point of order, Mr Gray. Before we proceed with the impressive first group of amendments and new clauses, may I use your offices to inquire about other new clauses that it was indicated to me, in a meeting with the Minister just before we started proceedings, would be tabled at an early date? Two sets of new clauses have appeared on the amendment paper, but another two, pertaining to Great British Nuclear and assistance for energy-intensive industries, have not yet been tabled, although we are now well into our deliberations on the Bill. Have you had any indication that they are about to be tabled, and if so could you share that information?
The Chair
I am most grateful to the hon. Gentleman for that point of order and for giving me advance notice of it, which gave me the opportunity to discuss the matter —unofficially of course—with officials. They tell me that both new clauses will be tabled imminently—one today, I think, and one very shortly. I hope that satisfies him.
Clause 56
Chapter 1: interpretation
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
I beg to move amendment 23, in clause 56, page 50, line 15, at end insert—
“‘carbon dioxide transport and storage counterparty’ has the meaning given by section 59(3);
‘carbon dioxide transport and storage revenue support contract’ has the meaning given by section section 59(2);”.
This amendment and Amendment 28 substitute new labels for existing labels and are consequential on NC29 and NC31.
The Chair
With this it will be convenient to discuss the following:
Government amendments 25, 24 and 26 to 28.
Clause stand part.
Government amendments 29 to 35.
Clause 57 stand part.
Government amendments 36 to 54.
Amendment 111, in clause 61, page 55, line 6, leave out subsection (8).
Whether or not a producer is an eligible low carbon hydrogen producer should be determined solely by the revenue support regulations, which should reference, among other things, the Low Carbon Hydrogen Standard. If the producer meets the objective criteria to be set out in the regulations, it should not be open to the Secretary of State to determine that that producer will not contribute to a reduction in emissions.
Government amendment 55.
Amendment 112, in clause 62, page 55, line 28, leave out subsection (4).
Whether or not a producer is an eligible low carbon hydrogen producer should be determined solely by the revenue support regulations, which should reference, among other things, the Low Carbon Hydrogen Standard. If the producer meets the objective criteria to be set out in the regulations, it should not be open to the Secretary of State to determine that that producer will not contribute to a reduction in emissions.
Government amendments 56 to 58, 60 and 70 to 74.
Government new clause 29—Designation of hydrogen transport counterparty.
Government new clause 30—Direction to offer to contract with eligible hydrogen transport provider.
Government new clause 31—Designation of hydrogen storage counterparty.
Government new clause 32—Direction to offer to contract with eligible hydrogen storage provider.
Andrew Bowie
I confirm to the hon. Member for Southampton, Test that the new clause on energy-intensive industries will be tabled tomorrow, and the new clause on Great British Nuclear will be tabled early next week. It is a delight to return to the Committee and to serve under your chairmanship again, Mr Gray.
The amendments that I will outline are consequential on the amendments made to introduce hydrogen transport and hydrogen storage business models. Hydrogen business models are required to encourage investment in, and the development of, hydrogen transport and storage infra-structure, alongside the existing provisions in clauses 61 and 62 for hydrogen production business models. The development of hydrogen transport and storage infrastructure, such as pipelines and salt caverns, represents the next critical step in the growth of the hydrogen economy.
Government amendment 23 makes it clear that existing references in clause 59 to transport and storage relate to the transport and storage of carbon dioxide and not to hydrogen. New clauses are to be added to make specific provision for hydrogen transport and storage. Government amendments 28, 29, 36, 38, 40, 42 to 52, 60 and 73 are consequential on Government amendment 23. The amendments substitute new definitions for existing definitions to distinguish carbon dioxide transport and storage from hydrogen transport and storage. Clause 56 provides the meanings and definitions of various terms used in chapter 1.
Government amendment 30 supports the establishment and operation of revenue support contracts as part of the hydrogen transport and hydrogen storage business models. That amendment, alongside other amendments to chapter 1 of part 2 of the Bill, provide the Secretary of State with the power to make regulations to enable hydrogen transport and storage revenue support contracts to be put in place. Those revenue support contracts, as part of the business models, will remove market barriers, most notably high up-front costs and uncertain financial investment returns. The overcoming of those barriers should encourage investment in, and the development of, hydrogen transport and storage infrastructure.
Clause 57 provides the Secretary of State with a power to make regulations about revenue support contracts, which will be known as revenue support regulations. A number of provisions throughout the chapter set out matters that regulations made under the overarching power in clause 57(1) may cover. Revenue support regulations are intended to underpin relevant business model schemes and to help to ensure that revenue support contracts are allocated and managed effectively, and that stable funding flows are in place.
Government amendment 53 seeks to clarify that contracts can be offered only to eligible low-carbon hydrogen producers and that, after the point of contract signature, it is for the contracts to stand on their own two feet and to set the parameters of the ongoing support that they provide. That approach is similar to that of the contracts for difference for renewables, in respect of which it has worked to great success. The amendment ultimately helps to ensure that projects and their investors are absolutely clear on the terms of their support and should help to inspire significant confidence in the new regime. Government amendments 26, 32, 33, 54 and 55 are consequential on Government amendment 53.
Government amendment 56 seeks to clarify that contracts can be offered only to eligible carbon capture entities and that, after the point of contract signature, it is for the contracts to stand on their own two feet and to set the parameters of the ongoing support that they provide. That approach is similar to that of the contracts for difference for renewables, in respect of which, again, it has worked to great success. The amendment ultimately helps to ensure that projects and their investors are absolutely clear on the terms of their support and should help to inspire significant confidence in the new regime. Government amendments 25, 34, 35, 57 and 58 are consequential on Government amendment 56.
Government new clause 29 will enable the designation of a counterparty to administer hydrogen transport revenue support contracts. The delivery of the hydrogen transport revenue support contracts is intended to be via private law contracts between eligible hydrogen transport providers and a hydrogen transport counterparty. The counterparty, which is the subject of the new clause, will manage the contracts and act as a conduit for funding.
The proper functioning of a revenue support counter-party is fundamental to the stability of the revenue support contracts. As the counterparty will be responsible for managing large amount of funds to meet its payment obligations, it is essential for the Secretary of State to exercise a degree of control over how it operates. Government new clause 29 allows the Secretary of State to designate a consenting person to be a counterparty for hydrogen transport revenue support contracts.
Government new clause 30 confers powers on the Secretary of State to issue a direction to a hydrogen transport counterparty. The counterparty will offer a contract to a hydrogen transport provider with a proposed project that the Government wish to support. That will enable a hydrogen transport provider to receive revenue support, which will help to remove market barriers associated with its infrastructure project. In turn, this should see the deployment of hydrogen transport infrastructure in the UK, thereby further supporting the hydrogen economy.
Government new clause 30 will ensure that revenue support regulations can make further provision about a direction, such as the terms that may or must be specified in said direction. Those regulations must include the meaning of “eligible” in relation to hydrogen transport providers with whom the counterparty may enter into a contract. Additionally, the powers are expected to be exercised in relation to successful projects that apply for revenue support under the hydrogen transport business models.
Government new clause 31 will enable the designation of a counterparty to administer hydrogen storage revenue support contracts. The delivery of the hydrogen storage revenue support contracts is intended to be via private law contracts between eligible hydrogen storage providers and a hydrogen storage counterparty. The counterparty, which is the subject of the new clause, will manage the contracts and act as a conduit for funding.
The proper functioning of a revenue support counterparty is fundamental to the stability of the revenue support contracts. As the counterparty will be responsible for managing large amount of funds to meet its payment obligations, it is essential for the Secretary of State to exercise a degree of control over how it operates. Government new clause 31 allows the Secretary of State to designate a consenting person to be a counterparty for hydrogen storage revenue support contracts.
Government new clause 32 confers powers on the Secretary of State to issue a direction to a hydrogen storage counterparty. The counterparty will offer a contract to a hydrogen storage provider with a proposed project that Government wish to support. That will enable a hydrogen storage provider to receive revenue support, which will help to remove market barriers associated with its infrastructure project. In turn, this should see the deployment of hydrogen storage infra-structure in the UK, thereby further supporting our growing hydrogen economy.
Government new clause 32 will ensure that revenue support regulations can make further provision about a direction, such as the terms that may or must be specified in said direction. The regulations must include the meaning of “eligible” in relation to hydrogen storage providers with whom the counterparty may enter into a contract. Additionally, the powers are expected to be exercised in relation to successful projects that apply for revenue support under the hydrogen storage business models.
I commend to the Committee the Government amendments, Government new clauses 29 to 32 and clauses 56 and 57.
Dr Whitehead
Most of the provisions in this group deal with the establishment and terms of a hydrogen counterparty. The establishment of the counterparty is clearly important in the raising and distribution of the hydrogen levy, which we will discuss later. The raising of the levy goes through the counterparty—that is, the counterparty will be responsible for raising the demands of the levy upon whoever is liable to pay it. The counterparty has a substantial role in holding those amounts and distributing them to those who are developing, in this instance, hydrogen production. Of course, that is why it is called the hydrogen production counterparty.
It is a method similar to that adopted by the Low Carbon Contracts Company for arranging to levy charges on, in that instance, the electricity suppliers, and then distributing that to those in receipt of that levy. Those in receipt will primarily get money coming to them through the counterparty by means of the difference between the strike price for what it has been decided to levy on and the reference price—the general price for electricity after the strike price has been agreed. We do not yet have an indication of what the strike price for hydrogen production will be, but we have in front of us the experience of the likely reference price for electricity, which is likely to pertain over the years when the hydrogen levy will be administered by the hydrogen contracts counterparty.
The experience of the Low Carbon Contracts Company is that it is not always the case that money simply comes in and is then disbursed, because on occasions, and indeed on recent occasions, the LCCC has found itself in the position where the reference price and the strike price have inverted—that is, the organisations responsible for paying into the LCCC no longer get a payout from the LCCC because the relationship between the strike price and the reference price is positive. In this instance, then, the LCCC is actually accumulating amounts that it would normally not put into its funds because it would return them straight to the people who have contracted for a difference between the strike price and the reference price but at that point have an obligation to pay into, rather than expect to collect out of, those funds.
There has been some issue with the LCCC in terms of what happens to the money that goes into its funds but is not distributed out. Does that money accumulate in the funds of the LCCC perpetually? Or is it redistributed? If it is redistributed, to whom is it redistributed and on what terms? I do not see any provision for that sort of arrangement to take place, or, indeed, for it to take place in a secure way in the particular interests of consumers—we will talk about the interests of consumers later—in the Bill or in the Government amendments we have debated this morning.
It is important that as soon as the counterparty is in place, the full set of contingent and possible arrangements for the operation of that counterparty are clearly set out. Depending on how electricity prices change over the next few years, the hydrogen production counterparty may well, at a fairly early stage, be in the same sort of position of accumulating additional funds that the LCCC has been in recently. It is therefore important that there are clear provisions, preferably spelled out in the Bill, as to what the counterparty does under those circumstances. Have the Minister and his Department thought about that eventuality? If they have, how does the Minister envisage the hydrogen production counterparty operating under those circumstances? Why has he decided not to put anything in the Bill that gives us greater guidance as to how the counterparty will function?
Andrew Bowie
Let me clarify for the hon. Gentleman that later this morning we will come to clause 67, which specifically enables regulations to make provision for amounts to be paid to levied market participants by the relevant counterparty or hydrogen levy administrator. That includes the pass-through of payments received by the relevant counterparty under revenue support contracts, such as payments made by a hydrogen producer to a hydrogen production counterparty. I hope that answers the hon. Gentleman’s questions in more detail. We will return to this matter later this morning.
Amendment 23 agreed to.
Amendments made: 25, in clause 56, page 50, line 21, for “63(3)” substitute “64(4)”.
This amendment is consequential on Amendment 58.
Amendment 24, in clause 56, page 50, line 21, at end insert—
“‘eligible hydrogen storage provider’ is to be interpreted in accordance with section (Direction to offer to contract with eligible hydrogen storage provider)(4);
‘eligible hydrogen transport provider’ is to be interpreted in accordance with section (Direction to offer to contract with eligible hydrogen transport provider)(4)”.
This amendment adds definitions to the list in clause 56 in consequence of NC29 and NC31.
Amendment 26, in clause 56, page 50, line 23, for “61(3)” substitute “62(4)”.
This amendment is consequential on Amendment 55.
Amendment 27, in clause 56, page 50, line 36, at end insert—
“‘hydrogen storage counterparty’ has the meaning given by section (Designation of hydrogen storage counterparty)(3);
‘hydrogen storage provider’ has the meaning given by section (Designation of hydrogen storage counterparty)(7);
‘hydrogen storage revenue support contract’ has the meaning given by section (Designation of hydrogen storage counterparty)(2);
‘hydrogen transport counterparty’ has the meaning given by section (Designation of hydrogen transport counterparty)(3);
‘hydrogen transport provider’ has the meaning given by section (Designation of hydrogen transport counterparty)(7);
‘hydrogen transport revenue support contract’ has the meaning given by section (Designation of hydrogen transport counterparty)(2);”.
This amendment is supplementary to NC29 and NC31.
Amendment 28, in clause 56, page 51, leave out lines 3 to 6.—(Andrew Bowie.)
See the explanatory note relating to Amendment 23.
Clause 56, as amended, ordered to stand part of the Bill.
Clause 57
Revenue support contracts
Amendments made: 29, in clause 57, page 51, line 16, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 30, in clause 57, page 51, line 16, at end insert—
“( ) a hydrogen transport revenue support contract (see section (Designation of hydrogen transport counterparty)(2)),
( ) a hydrogen storage revenue support contract see section ((Designation of hydrogen storage counterparty)(2)),”.—(Andrew Bowie.)
This amendment adds hydrogen transport revenue support contracts (see NC29) and hydrogen storage revenue support contracts (see NC31) to the definition of “revenue support contract”.
Amendment 31, in clause 57, page 52, line 5, after “60(3),” insert
“(Direction to offer to contract with eligible hydrogen transport provider)(2) or (4), (Direction to offer to contract with eligible hydrogen storage provider)(2) or (4),”.
This amendment provides for regulations under the specified powers to be subject to affirmative procedure.
Amendment 32, in clause 57, page 52, line 5, leave out “61(3)”.
This amendment is consequential on Amendment 53.
Amendment 33, in clause 57, page 52, line 6, after “62(2)” insert “or (4)”.
This amendment is consequential on Amendment 53.
Amendment 34, in clause 57, page 52, line 6, leave out “63(3)”.
This amendment is consequential on Amendment 56.
Amendment 35, in clause 57, page 52, line 6, after “64(2)” insert “or (4)”.—(Andrew Bowie.)
This amendment is consequential on Amendment 56.
Clause 57, as amended, ordered to stand part of the Bill.
Clause 58
Duties of revenue support counterparty
Amendments made: 36, in clause 58, page 53, line 2, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 37, in clause 58, page 53, line 3, after “counterparty,” insert
“hydrogen transport counterparty, hydrogen storage counterparty,”.
This amendment and Amendment 39 make provision for ensuring that hydrogen transport counterparties and hydrogen storage counterparties can meet their liabilities under revenue support contracts.
Amendment 38, in clause 58, page 53, line 4, after “any” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 39, in clause 58, page 53, line 5, after second “contract,” insert
“hydrogen transport revenue support contract, hydrogen storage revenue support contract,”.
See the explanatory statement for Amendment 23.
Amendment 40, in clause 58, page 53, line 8, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 41, in clause 58, page 53, line 8, at end insert—
“(aa) a hydrogen transport counterparty (see section (Designation of hydrogen transport counterparty)(3));
(ab) a hydrogen storage counterparty (see section (Designation of hydrogen storage counterparty)(3));”—(Andrew Bowie.)
This amendment adds hydrogen transport counterparties and hydrogen storage counterparties to the definition of “revenue support counterparty”.
Question proposed, That the clause, as amended, stand part of the Bill.
Andrew Bowie
Clause 58 sets out the duties of a revenue support counterparty and the Secretary of State’s ability to exert control over the activities of a revenue support counterparty, given that its role is critical to the effectiveness of a revenue support contract. It includes, for example, a duty for a counterparty to act in accordance with revenue support regulations and a power for the Secretary of State to specify in regulations things that a counterparty must, can, or cannot do.
The proper functioning of a revenue support counterparty is fundamental to the stability of the revenue support contracts. The counterparty will be responsible for managing large amounts of funds to meet its payment obligations under a contract. It is therefore important for the Secretary of State to exercise a degree of control over how it operates. I therefore commend clause 58 to the Committee.
Dr Whitehead
The clause does indeed provide for a number of duties of the revenue support counterparty. I particularly note the requirement that it
“must exercise the functions”
conferred on it
“by virtue of this Chapter so as to ensure that it can meet its liabilities under any revenue support contract to which it is a party.”
In order to do that, as the Minister has said, the counterparty must be buoyantly funded—shall we say—both in terms of the money coming in and out and the money to enable it to perform its functions.
What regulation is there on the counterparty to ensure that it is carrying out its obligations with its funding, in such a way that there is not too much in the bank, and not too little in the bank to meet its liabilities? As the Minister has said, we will later debate on how that works in with the possible restitution of funds from the counterparty at particular junctures. Is the Minister satisfied that the regulation of the counterparty is sufficient to ensure that it actually operates in that economical way, as far as the use and disbursal of its funds is concerned?
Andrew Bowie
I thank the hon. Member for his question. Again, it is a very pertinent, sensible and serious question, and one on which I am happy to give more clarity. The Government anticipate that the LCCC, which is the existing counterparty for contracts for difference, will be the counterparty for the hydrogen production, industrial carbon capture and waste industrial carbon capture business models—subject to successful completion of administrative and legislative arrangements, obviously.
The LCCC already has experience in similar types of contract management from its role as counterparty to contracts for difference; it is already established in that respect. The LCCC is also anticipated to be the counterparty for the carbon dioxide transport and storage revenue support contracts—again, subject to successful completion of administrative and legislative arrangements.
To address the specific point, in taking the decision to proceed with LCCC as the counterparty, the Secretary of State considered, among other things, its ability to deliver the required functions, and its experience and track record in contract management. Those considerations would be made on any future decisions, which would also be subject to normal principles of public decision making.
The envisaged greenhouse gas removals business model would also require a counterparty to manage the contracts, and the Department for Energy Security and Net Zero is currently assessing options as to the most appropriate organisation to perform that function.
Question put and agreed to.
Clause 58, as amended, accordingly ordered to stand part of the Bill.
Clause 59
Designation of transport and storage counterparty
Amendments made: 42, in clause 59, page 53, line 14, after “for” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 43, in clause 59, page 53, line 15, leave out “‘transport” and insert “‘carbon dioxide transport”.
This amendment is consequential on Amendment 23.
Amendment 44, in clause 59, page 53, line 17, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 45, in clause 59, page 53, line 19, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 46, in clause 59, page 53, line 22, leave out “‘transport” and insert “‘carbon dioxide transport”.
This amendment is consequential on Amendment 23.
Amendment 47, in clause 59, page 53, line 28, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 48, in clause 59, page 53, line 30, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 49, in clause 59, page 53, line 32, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 50, in clause 59, page 53, line 36, after “any” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 51, in clause 59, page 53, line 38, after first “a” insert “carbon dioxide”.—(Andrew Bowie.)
This amendment is consequential on Amendment 23.
Question proposed, That the clause, as amended, stand part of the Bill.
Andrew Bowie
Initial licensed carbon dioxide transport and storage companies are expected to be supported by a revenue support agreement, which is a contractual arrangement to be entered into by a counterparty. The clause will enable the Secretary of State to designate a consenting person to be a counterparty for carbon dioxide transport and storage revenue support contracts. A counterparty will be responsible for managing the contracts and making payments to the contract holders, as well as collecting any necessary payments from contract holders, as set out in the contracts.
Clause 60 confers a power on the Secretary of State to issue a direction to a carbon dioxide transport and storage counterparty to offer to contract with an eligible person. It also ensures that revenue support regulations can make further provision about a direction—for example, the terms that may or must be specified in a direction. I commend the clauses to the Committee.
Dr Whitehead
The clause designates a transport and storage counterparty to perform a similar function to that of the hydrogen production counterparty or, indeed, to that of the LCCC. In the case of the hydrogen production counterparty, the Government’s intention is to roll the function in with the LCCC, so that the LCCC has an expanded role. I am not quite so clear about the Government’s intention for the carbon dioxide transport and storage counterparty. Is it the Government’s intention that that counterparty will also be rolled into the LCCC? If so, does the Minister not think that that will be a rather giant organisation responsible for different streams of funding in different ways? In such circumstances, are the Government satisfied that the streams could be sufficiently separate from each other to ensure the efficient running of all the different strands that will increasingly come under, in effect, one counterparty company?
Andrew Bowie
The hon. Gentleman is right to point out the inherent risks in the model. However, it is incumbent on the Secretary of State, the Department, the Government and indeed Parliament to assess and to keep watch continually on the arrangements to ensure that they are fit for purpose as we proceed and develop our hydrogen industry to the extent that we want to in future. The LCCC already does similar types of contract management in its existing role as the counterparty to the contracts for difference, so I do not envisage that as being as big a challenge as the hon. Gentleman sets out, but I accept the inherent risks, in particular in what we will be doing under the Bill, which is something completely new. Of course it is right for Parliament to have a role in scrutinising the Government to ensure that the model that we establish keeps pace and is fit for what we seek to do in future.
Question put and agreed to.
Clause 59, as amended, accordingly ordered to stand part of the Bill.
Clause 60
Direction to offer to contract
Amendment made: 52, in clause 60, page 54, line 3, after “a” insert “carbon dioxide”.—(Andrew Bowie.)
This amendment is consequential on Amendment 23.
Clause 60, as amended, ordered to stand part of the Bill.
Clause 61
Designation of hydrogen production counterparty
Amendments made: 53, in clause 61, page 54, line 18, leave out from second “contract” to “was” in line 22 and insert—
“to which a hydrogen production counterparty is a party and which”.
This amendment modifies the definition of “hydrogen production revenue support contract”.
Amendment 54, in clause 61, page 54, line 25, leave out subsection (3).—(Andrew Bowie.)
This amendment is consequential on Amendment 53.
Andrew Bowie
I beg to move amendment 3, in clause 61, page 55, line 8, after “on)” insert “in the United Kingdom”.
This amendment and Amendment 4 provide that activities by virtue of which a person qualifies as a “low carbon hydrogen producer” must be carried on in the United Kingdom (including the specified offshore areas).
The Chair
With this it will be convenient to discuss the following:
Government amendment 4.
Clause 61 stand part.
Clause 62 stand part.
Andrew Bowie
Government amendments 3 and 4 relate to the territorial application of chapter 1 of part 2 of the Bill. As drafted, the existing provisions do not expressly set out the territorial application of provisions establishing the framework for hydrogen production revenue support contracts and counterparty. Government amendment 3 makes it absolutely clear that a “low carbon hydrogen producer” must carry out activities in the UK, in line with Government intentions for the hydrogen production business model to be applied on a UK-wide basis.
Government amendment 4 operates in conjunction with amendment 3, and relates to the territorial application of chapter 1 of part 2 of the Bill. As drafted, these provisions do not expressly cover hydrogen production activities carried out in offshore areas. Although the low-carbon hydrogen industry is nascent, the Government are aware of the potential for low-carbon hydrogen production to be located offshore, for example, co-located with offshore wind farms.
Government amendment 4, therefore, makes it clear that a low-carbon hydrogen producer must carry out activities in the United Kingdom, which is to be defined in subsection (9) as including activities in, above or below: (a) the territorial sea adjacent to the United Kingdom; and (b) waters in a renewable energy zone, within the meaning of chapter 2 of part 2 of the Energy Act 2004.
Turning to clause 61, the delivery mechanism for the hydrogen production business model is intended to be private law contracts. Those contracts are intended to be between eligible low-carbon hydrogen producers and a hydrogen production counterparty. The clause will enable the Secretary of State to designate a consenting person to be a counterparty for hydrogen production revenue support contracts. A counterparty will be responsible for managing the contracts and making payments to the contract holders, as well as collecting any necessary payments from contract holders, as set out in the contracts.
Clause 62 confers a power on the Secretary of State to issue a direction to a hydrogen production counterparty to offer to contract with an eligible low-carbon hydrogen producer. It also ensures that revenue support regulations can make further provision about a direction, for example the terms that may or must be specified in a direction. Clause 62 also requires regulations to make provision for determining the meaning of “eligible” in relation to a low-carbon hydrogen producer. The powers under clause 62 are expected to be first exercised in relation to the successful projects coming through the ongoing electrolytic hydrogen allocation round and carbon capture, usage and storage cluster sequencing process. In future, the expectation is that hydrogen production revenue support contracts will be awarded by way of a more competitive allocation process. Provisions to achieve that are also provided for in the Bill.
Dr Whitehead
The Minister kindly wrote to me a little while ago about the questions raised in this Committee about the UK seabed, which is the subject of Government amendment 4. I was grateful that he wrote to me so quickly after that debate, but his letter did not entirely set my mind at rest about the problem we raised on that occasion, which is also pertinent to hydrogen production.
As the Minister stated, it is entirely possible and feasible that hydrogen production could take place at sea, either on energy islands, converted rigs or specific platforms set up for that purpose, in conjunction with offshore wind farms. A number of those wind farms and installations will be well beyond the limits of the territorial sea adjacent to the United Kingdom.
My question in the previous debate that prompted the Minister’s letter to me was: what is the jurisdiction in relation to what is in the UK economic zone up to 200 miles, but beyond the 12-mile territorial sea adjacent to the United Kingdom? In his letter, the Minister effectively repeated the idea that the territorial sea adjacent to the United Kingdom was indeed the 12-mile zone. Does the Minister have any further clarification this morning about the relationship of the two different zones, and how they interact in terms of effective jurisdiction for these activities?
Andrew Bowie
I do indeed have an answer for the hon. Gentleman. As the hon. Gentleman and I have set out in Committee and in the letter, the territorial sea adjacent to the United Kingdom is the sea that extends 12 nautical miles from the low-water line along the coast, as defined in section 1 of the Territorial Sea Act 1987. However, the renewable energy zone extends from the boundary of the territorial sea to an area within the UK’s exclusive economic zone.
Andrew Bowie
I beg to move amendment 7, in clause 63, page 55, line 33, after “be” insert “(a)”.
This amendment is supplementary to Amendment 9.
The Chair
With this it will be convenient to discuss the following:
Government amendments 8, 9, 5 and 10.
Amendment 84, in clause 63, page 56, line 26, leave out
“that has been produced by commercial or industrial activities”.
This amendment seeks to ensure that Direct Air Capture technologies and other engineered greenhouse gas removals are not excluded from these measures so that we leave open the option to include these technologies in revenue support contracts in the future.
Government amendment 6.
Clause stand part.
Clause 64 stand part.
Government amendment 11.
Andrew Bowie
Government amendment 5 relates to the territorial application of chapter 1 of part 2 of the Bill. As drafted, the provisions do not expressly set out the territorial application of provisions establishing the framework for carbon capture revenue support contracts for counterparties. Amendment 5 therefore makes it clear that a carbon capture entity must carry out activities in the UK in line with Government intentions to support the deployment of CCUS across the UK.
Government amendment 6 relates to the territorial application of chapter 1 of part 2 of the Bill and works in conjunction with amendment 5. As drafted, the provisions do not expressly cover carbon capture activities carried out in offshore areas. While the carbon capture industry is nascent, the Government are aware of the potential for carbon capture activities to be located offshore. Amendment 6 makes it clear that a carbon capture entity must carry out activities in the United Kingdom, to be defined in the subsection that it will insert—clause 63(9)—as including
“activities in, above or below”.
Greenhouse gas removal technologies will have an important role to play in reaching net zero to mitigate the impact of residual emissions from hard-to-abate sectors, and the Government have been very clear on their intention to capitalise on the economic benefits from that emerging sector. Government amendment 9 will enable the Government to assign the most appropriate counterparty to oversee contractual support to GGR developers over the coming decades as the technologies and their corresponding regulation evolve. That avoids the risk that the resignation of a single counterparty negatively impacts other carbon capture and business models choosing to remain with their originally designated counterparty. The amendment forms part of our broader approach to uphold our commitments and scale up engineered GGRs to deliver new export opportunities, unlocking high-quality green jobs across the UK.
Alongside other measures in the Bill, Government amendment 10 seeks to clarify the language used in the title section of the Bill to reflect that multiple forms of carbon capture, including greenhouse gas removals, can be enabled under the legislation. The amendment forms part of our broader approach to uphold our commitments and scale up engineered GGRs to deliver new export opportunities, unlocking high-quality green jobs across the UK. Government amendments 7 and 8 are consequential on amendment 10 and enable the appointment of a counterparty for any of the types of carbon capture revenue support contract.
Turning to clause 63, the delivery mechanism for the industrial carbon capture business models is intended to be private law contracts. The contracts are intended to be between eligible carbon capture entities and a carbon capture counterparty. Direct air carbon capture and storage—DACCS—is another form of carbon capture intended to fall under clause 63. The Government are minded to develop a GGR business model covering DACCS based on a revenue support contract model. The legislation is needed to ensure that we can facilitate a contractual arrangement to be entered into by a counterparty.
The clause will enable the Secretary of State to designate a consenting person as a counterparty for carbon capture revenue support contracts or for any one or more descriptions of carbon capture revenue support contract. A counterparty will be responsible for managing the contracts and for making payments to the contract holders, as well as for collecting any necessary payments from contract holders, as set out in the contracts.
Clause 64 will confer a power on the Secretary of State to issue a direction to a carbon capture counterparty to offer to contract with an eligible carbon capture entity. It will ensure that revenue support regulations can make further provision about a direction, such as the terms that may be specified in it. Clause 64 also requires regulations to make provision for determining the meaning of “eligible” in relation to a carbon capture entity
The powers under clause 64 are expected to be first exercised in relation to the successful projects coming through the ongoing CCUS cluster sequencing process. The current expectation is that, in future, industrial carbon capture business model revenue support contracts will be awarded by way of a more competitive allocation process, enabled by provisions that are also in the Bill.
I therefore beg to move that Government amendments 5, 6, 7, 8, 9, 10 and 11 be made and that clauses 63 and 64 stand part of the Bill.
The Chair
Order. I am sorry for nit-picking, but technically the Minister is only moving Government amendment 7. The other amendments will be moved once we get to the appropriate point.
Dr Whitehead
I presume that I will, notionally, be invited to debate it at the appropriate point.
The Chair
You are invited to debate it now. This group is being debated whole. The point on which I was bringing the Minister up is simply that he is not moving all the Government amendments now; he is moving amendment 7 now, and can move the others when we get to the relevant part of the Bill. You are, of course, absolutely entitled to debate all the new clauses and amendments in this group.
Dr Whitehead
Thank you, Mr Gray.
Opposition amendment 84 would amend the definition of “carbon capture entity” in clause 63(8). We tabled it because we considered that definition insufficient to encapsulate what is now increasingly likely to be at least part of carbon capture and storage activity: DACCS, which involves carbon that has been captured from the air, or indeed from the sea. The DACCS process is up and running in the UK on an experimental basis and will undoubtedly become quite a substantial element of carbon capture in future, so we thought it important that direct air capture technologies should be included within the definition of “carbon capture entity”.
I thought we might have a bit of discussion about that point this morning, but I observe that, subsequent to our tabling amendment 84, the Government have tabled amendment 10, which results in similar wording. My first point is a positive one: well done to the Government on that. My second, slightly less positive point is, “Why couldn’t you have done that in the first place?”
My third point is one for the record: it may be that the Government and the Opposition’s thoughts were running along entirely parallel lines at precisely the same moment. Alternatively, it may be that the Government looked at our amendment and thought, “Oh, we haven’t done that—maybe we ought to, but of course we can’t accept an Opposition amendment, so we’ll have to use our own.” It might have been nice for the Government to say, “You’re absolutely right, so we’ll accept your amendment,” but I am fairly graciously saying that I am pleased that they have managed to table amendment 10. On that basis, it does not seem necessary to proceed with our amendment 84 this morning. We can rest satisfied that we maybe played a small part in the general progress of the Bill through the House.
Andrew Bowie
All I would say to the hon. Gentleman is that, of course, imitation is the most sincere form of flattery. While I do not deny that the Government and the Opposition were thinking along the same lines at exactly the same time, and therefore came to the same conclusion, I am glad that he is not going to press amendment 84 to a vote, and that he accepts that the definition in our amendment covers the definition of direct air capture and carbon storage. We share the view that greenhouse gas removal technologies will be essential to reach net zero, and I am glad that, as has so far been the case with most of the Bill, there is broad cross-party agreement about where we are headed, and definitions required to get there.
The Chair
The cliché that sprang to mind was, “Great minds think alike,” although I would not necessarily add the second part, which is, “though fools seldom differ.”
Amendment 7 agreed to.
Amendments made: 8, clause 63, page 55, line 33, at end insert—
“(b) a counterparty for any one or more descriptions of carbon capture revenue support contract.”
This amendment enables the Minister to designate a person to be a counterparty for particular descriptions of carbon capture revenue support contracts.
Amendment 56, clause 63, page 55, line 34, leave out from second “contract” to “was” in line 1 on page 56 and insert
“to which a carbon capture counterparty is a party and which”.
This amendment modifies the definition of “carbon capture revenue support contract”.
Amendment 57, clause 63, page 56, line 4, leave out subsection (3).
This amendment is consequential on Amendment 56.
Amendment 9, clause 63, page 56, line 10, leave out from “may” to end of line 17 and insert—
“(a) exercise the power under paragraph (a) of subsection (1) so that more than one designation has effect under that paragraph;
(b) exercise the power under paragraph (b) of that subsection so that more than one designation has effect in respect of any description of carbon capture revenue support contract.”
This amendment removes limitations on the Minister’s ability to designate more than one counterparty for carbon capture revenue support contracts, and supplements Amendment 8 by confirming that there may be, at the same time, more than one counterparty for a particular description of carbon capture revenue support contract.
Amendment 5, clause 63, page 56, line 25, after “on)” insert “in the United Kingdom”
This amendment and Amendment 6 provide that activities by virtue of which a person qualifies as a “carbon capture entity” must be carried on in the United Kingdom (including the specified offshore areas).
Amendment 10, clause 63, page 56, line 25, leave out from “on)” to end of line 27 and insert
“, with a view to the storage of carbon dioxide, activities of capturing carbon dioxide (or any substance consisting primarily of carbon dioxide) that—
(i) has been produced by commercial or industrial activities,
(ii) is in the atmosphere, or
(iii) has dissolved in sea water.”
This amendment widens the definition of “carbon capture entity” to bring within it capturing carbon dioxide from the atmosphere or from sea water.
Amendment 6, clause 63, page 56, line 29, at end insert—
“(9) In subsection (8) the reference to carrying on activities in the United Kingdom includes carrying on activities in, above or below—
(a) the territorial sea adjacent to the United Kingdom;
(b) waters in a Gas Importation and Storage Zone (within the meaning given by section 1 of the Energy Act 2008).”—(Andrew Bowie.)
See the explanatory statement relating to Amendment 5.
Clause 63, as amended, ordered to stand part of the Bill.
Clause 64
Direction to offer to contract
Amendment made: 58, clause 64, page 57, line 5, leave out subsection (4) and insert—
“(4) Revenue support regulations must make provision for determining the meaning of “eligible” in relation to a carbon capture entity.”—(Andrew Bowie.)
This amendment is consequential on Amendment 56.
Clause 64, as amended, ordered to stand part of the Bill.
Clause 65
Appointment of hydrogen levy administrator
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendments 12 and 59.
Amendment 117, clause 66, page 58, line 26, leave out from “regulations,” to end of line 27 and insert
“including but not limited to—”
This amendment seeks to define relevant market participants on a wider basis than purely gas suppliers, electricity suppliers and gas shippers.
Clause 66 stand part.
Government amendments 61 to 69.
Clauses 67 and 68 stand part.
Andrew Bowie
This group concerns clauses 65 to 68, regarding the hydrogen levy. Let me turn first to clause 66 and Government amendments 12 and 59.
Government amendment 12 will overturn the amendment to the levy provisions made on Report in the other place. The amendment would have ensured that the funding for the hydrogen production business model could be provided through the Consolidated Fund. However, the financial assistance power in part 2 already enables Exchequer funding of low-carbon hydrogen production. Indeed, I remind members of the Committee that the hydrogen production business model will initially be funded through the Exchequer.
The Lords amendment would also restrict where a hydrogen levy could be placed, thereby removing the option to levy gas and electricity suppliers and providing that a levy could be placed only on gas shippers. Investor confidence and developer confidence are critical to realising the potential benefits of the UK hydrogen economy, which could support more than 12,000 jobs and unlock up to £11 billion in private investment by 2030.
CCUS-enabled hydrogen projects are also expected to play a key role in the Government’s plans to deploy CCUS in four industrial clusters by 2030. Other countries are investing heavily in hydrogen and CCUS, and it is important that we do not miss this opportunity to deliver high-quality jobs and growth.
Government amendment 59 will expand the existing levy provisions to allow the Secretary of State to make regulations to establish a levy to fund hydrogen transport and hydrogen storage revenue support contracts, and associated costs, in addition to the hydrogen production business model.
The Government have not reached a decision on how the hydrogen transport and storage business models will be funded, but the powers in the Bill enable both Exchequer and levy funding options. That approach will ensure that there are robust, reliable options available to fund the business models. That will help to support investor and developer confidence in the future of the UK’s hydrogen infrastructure, encouraging private investment, which is critical to kick-starting and growing the hydrogen economy.
The Chair
Technically speaking, the Minister need only move that clause 65 stand part of the Bill. That is the first debate in the group.
Dr Whitehead
We have two concerns about this group. One relates to Government amendment 12, and the other to amendment 117, which we seek to advance. Amendment 117 simply seeks to widen the definition of relevant market participants beyond purely gas suppliers, electricity suppliers and gas shippers. There are other relevant market participants that might actually come under the definition, and we feel that the current wording in the Bill, which effectively says that only the market participants set out here can be included, is overly restrictive. We suggest in our amendment that the words should state that those participants—gas suppliers, electricity suppliers and gas shippers—should be included, but that the definition should not be limited to them. We have therefore added the words
“including but not limited to—”
to the definition in the Bill. I would be grateful for the Minister’s response to the amendment, whether we move it formally or not. Some reassurance on the limitations perceived to be there at the moment would be helpful.
I will turn to the main issue in this part of the Bill. As the Minister states, Government amendment 12 seeks to overturn what passed in the other place, which is that their lordships felt that the idea of pursuing a hydrogen levy by means of a levy on customers, essentially, was not a good one. I would go rather further than that: I think it is an absolutely suicidal one.
Their lordships considered an amendment to the Bill at that point, which made it clear that there would be a limitation on who could be the levy payers as far as the hydrogen production levy is concerned, and that that limitation should be the Consolidated Fund or gas shippers. Arguably, gas shippers would have an effect on customers’ bills in the future, and the Consolidated Fund has an effect on taxation levels, but not on bills as such.
Where we had got to when the Bill came to this House is that a consolidated part of the Bill was actually a restriction on who could be levied as far as the hydrogen levy is concerned. I, for one, thought that was a very wise restriction to place in the Bill, and I know from their statements, particularly on Second Reading, that a number of members of this Committee also thought at the time that that was a pretty wise move.
That is why I am really disappointed this morning to see that the Government are seeking to overturn the restriction that was placed on levy raising in the other place. I am not the only person, of course, who is worried about this issue, as far as levy payers are concerned. I refer, for example, to the MailOnline on 4 June, which stated:
“Grant Shapps is poised to ditch a plan to add around £120 to Brits’ energy bills to fund the transition to hydrogen.”
The article continued:
“The Net Zero Secretary is understood to be ‘not at all convinced’ that the levy should go ahead, after fierce criticism from Tories.”
Of course, it is MailOnline, so it does not say that there has been fierce criticism from the Labour party as well, but there you are. The article went on to say:
“The government has been accused of heaping more pain on struggling consumers with the proposals for a charge to fund the fledgling industry.”
Obviously, I have got to know the Minister quite well while we have been considering the Bill, and indeed beforehand, and we have a very good relationship. I, for one, would not like to see him being hung out to dry by his Secretary of State on this issue. Whether it is a wise thing for the Minister and his career to advance this amendment right at this minute is something that we will leave for others to judge.
However, the substantive point I want to make is this: just what will be the effect of a levy payment, in the way that this amendment suggests, on the development of hydrogen itself? The Government have quite rightly targeted 10 GW of hydrogen production by 2030 and they have put in place in the Bill arrangements for a system similar to that for offshore wind, with strike prices, reference prices and so on being involved in the process of levying whoever it is that will be levied.
Determining what the strike price is likely to be will be difficult. The Government have indicated—well, the then Department for Business, Energy and Industrial Strategy gave an indication in November 2022—that they would assume a strike price of about £100 per MWh for hydrogen production. Once that is established, it is important to look at what the difference is likely to be with the prevailing electricity price, since they are contracts for difference. With electricity prices as they are at the moment, the difference between the £100 strike price and the electricity price might be fairly small, but if we assume a more reasonable difference—what the selling price of hydrogen will be in the market at that point and based on gas as a comparator—we can come to something like £55 per MWh, which is the prevailing gas price and a premium on carbon pricing within gas. The difference between the £100 per MWh strike price and the likely reference price of £55 gives us a gap of £45, which would be the financial support for the 10 GW of hydrogen production by 2030 that would be fundable through a hydrogen levy. What that gap actually means is that some £53 billion over a 10-year period would be required.
That funding would not be flat because the hydrogen levy would be levied on a rising amount of production over the period. Initially the cost of the gap would be reasonably low, starting at about £700 million per annum between 2025 and 2030, but by 2030 it would be about £3.5 billion per year and then would continue through the period of 15-year contracts. The support that will be necessary—£3.5 billion per year by 2030—can then be translated into what it is likely to cost the bill payer per year as a proportion of that cost. If we divide the number of paid units by the amount per year by 2030, the cost on bills is likely to be in the region of £118 to £120 per year. That is a levy that dwarfs all previous levies.
The total amount of green levies, which are not being paid at the moment because the Government are covering them during the energy crisis—and not a much longer period, I suspect—is about £165 in total. So what is being proposed here this morning is a plan that will add two thirds to those levies over the period running up to 2030. Other levies are proposed in the Bill, and we have agreed to a number of others that are coming down the road—well, I say we agreed to them, but I unsuccessfully attempted to obstruct them. For example, the nuclear regulated asset base will come in as a levy, and there will be further levies under the Government’s—and, indeed, the Opposition’s—plan to quadruple offshore wind and, if we have our way, double onshore wind by 2030. If we continue trying to add levies for everything to customer bills, they will increase hugely by 2030, not because the prices of electricity or gas have gone up or because Mr Putin has invaded anywhere else, but because of conscious policy design and the way the Government set up the levy system.
Dr Whitehead
I agree, Mr Gray. It is not a good idea, and I will bring my remarks to a close.
My kind advice is that the Minister should think very carefully before proceeding with the amendment. We have a good Bill overall, which has been strengthened by the decision made in the other place and it sits well with the Bill as it stands. Why can we not just leave it like that? Let us continue to discuss the Bill on the basis that we can all agree on that structure for the future. I fear the Minister may not take that advice. If he does not, we will certainly try and force a Division to make sure that that advice is well taken. The way to do that is simply to vote against the Government’s amendment.
Dr Whitehead
If the Minister does pursue this, that is what we would propose. I would just add, finally, that I think there is considerable support for that in this Committee. The right hon. Member for Elmet and Rothwell—
Dr Whitehead
He said:
“We have to take the public with us on this—we cannot keep adding to people’s bills to try to make things work.”—[Official Report, 9 May 2023; Vol. 732, c. 276.]
That was well said, and I hope that that view will be reflected in the decisions taken by this Committee this morning.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I thank the hon. Member for Southampton, Test for what was almost a warm-up act to introduce me to the stage. I agreed with every word: we do have to take the public with us, and a movement is building in the country against net zero and an increase in bills. There are many issues, as he has outlined.
I have good news and bad news for you, Mr Gray: I have quite a lot to say, but the hon. Member has covered a few of those things by setting out the financial implications, using some well-researched material that is available to the Committee, so I shall leave some of that aside.
One problem is that it is a little bit of lazy economics to come along with a new area of energy generation—renewable generation—and just say, “Well, we’ll add another tax to do it.” I hope to set out some alternative ways of doing it. There are some considerable potential uses of hydrogen, which I will come on to describe. If we take them in turn, they could suggest areas where the focus could be changed.
My hon. Friend the Minister is a dear friend of mine, and I will try to be gentle with him. He commented that the Bill will enable funding streams that are not yet decided. However, I say to him in all good heart that conversations in the background have opened with the comment, “Well, if we don’t do this, how are we going to pay for it?” That would suggest that decisions have already been made about the levy coming into place. I find that exceptionally disappointing, within the brief that the Minister has been given, because I do not want to see him hung out to dry.
Where I think the Minister has a very valid argument is in what he said about discussions taking place in the background. I have been led to believe that the Government are trying to work on alternatives for Report; I hope very much that that is true. The hon. Member for Southampton, Test quoted my comments on Second Reading; he will have noticed that my comments were not unique, as many colleagues on the Government Benches had similar concerns. I think that it is the view of the House, overall, that there are concerns about Government amendment 12. There is therefore an imperative on the Government to come along and find a way to make hydrogen work without a direct taxation on people’s bills.
Here is the reality. I have some figures and comments from the Library. Costs to consumers due to Government policy are known as policy costs. They consist of the renewables obligation paid on electricity bills to support large-scale renewables; the feed-in tariff paid on electricity bills to support small-scale renewables; contracts for difference paid on electricity to support low-carbon generation; the energy company obligation paid on both electricity and gas to support household energy efficiency; the warm home discount paid on both to provide a discount to vulnerable households; assistance for areas with high electricity distribution costs paid on electricity; and the green gas levy, which funds the green gas support scheme, paid on gas bills.
Based on the Q2 2023 price cap, the breakdown of annual costs annually is as follows: the renewables obligation is £80.26; the feed-in tariff is £18.70; the energy company obligation is £43.87; the warm home discount is £20.60; assistance for areas with high electricity distribution costs is £1.45; and the green gas levy is 45p. That shows that a significant number of green levies are already applied to people’s bills.
Katherine Fletcher (South Ribble) (Con)
My right hon. Friend is making a powerful case around what many of us hear on the doorstep. Does he agree that being able to define exactly what any levy would be for is a really important part of explaining something when people are fearful of their energy bills? Some have concerns about the hydrogen levy: “What hydrogen is it? Is it green hydrogen produced by wind? Is it blue hydrogen produced from carbon fossil-fuel sources with associated carbon capture and storage?” Blue hydrogen still contains some contaminants. Does he believe that “hydrogen” has been defined enough to allow us to explain things to the general public?
Alec Shelbrooke
My hon. Friend touches on an important point, drawing on comments made by the shadow Minister, the hon. Member for Southampton, Test. We are being asked to add a levy before we know how it will be used or what type of hydrogen it will generate. I do not think that people like signing open cheques without the way forward being defined.
I want to develop the argument for why hydrogen is an important step and to look at its applications in the automotive industry. The reason I say that is purely—
The Chair
Order. I am reluctant to interrupt the right hon. Gentleman, whose speeches I always greatly enjoy, but he is now launching us into a Second Reading-type debate on the benefits of hydrogen. We are discussing a very specific series of amendments, so perhaps he will return to the group under discussion.
Alec Shelbrooke
I am grateful, Mr Gray. What I am seeking to do is set out alternatives that can be used instead of putting the hydrogen levy in place.
The Chair
Order. We are discussing a Bill. It is possible to discuss the Bill itself or the amendments proposed to it; it is not possible to discuss things that are not in the Bill, even if the right hon. Gentleman thinks that they might be a good idea. Will he therefore please discuss either the Bill or the Government or other amendments in this group? He may not discuss things that are not in the Bill.
Alec Shelbrooke
I take your advice, Mr Gray. One tries to push one’s luck, but I take your comments on board.
To summarise the comments I was going to make, which can wait until subsequent stages, there are several alternatives within the energy market that can be used to achieve some of the things we are hoping to achieve with the blunt tool of yet another tax on energy. Hydrogen will play an important part in the energy progress that we make going forward. These things will need capital funding to help set them up, similar to many things that were done when the North sea was first exploited. Government subsidies and underwriting helped to get that under way.
These are important areas. We must not be blind to the fact that the public are losing faith in the climate agenda overall. There are many reasons why that may be happening. It may well be just algorithms on social media that draw certain people together, but we cannot be blind to the fact that there is a growing movement against net zero. There is a growing movement in this House to talk about having a referendum on whether we want to achieve net zero. Some colleagues are now pushing that forward.
We have to act carefully and diplomatically, and show people that there are huge advantages to be had from this technology and this energy going forward. The Government raise a lot of revenue off energy production, as the hon. Member for Southampton, Test and I have outlined. I therefore feel that Government amendment 12 would be a mistake. However, the Minister has indicated that work is taking place in the background, and I have had indications that amendments may be brought in on Report. If the amendment is pushed to a Division today, I shall not vote against it, but I shall abstain.
Olivia Blake (Sheffield, Hallam) (Lab)
It is a pleasure to follow the right hon. Member for Elmet and Rothwell. I know that this is not really a declaration of interest, but my mother, Baroness Blake, was actually the person who moved the amendment in the other place. It is interesting that mother and daughter are both working on this Bill in different ways.
Olivia Blake
Possibly a record. Who knows?
I rise to defend the amendments made in the Lords and to speak against Government amendment 12, predominantly because of the aims of the Bill that the Secretary of State outlined when it was brought forward. Those aims were about security, but also about tackling fuel poverty. The facts about fuel poverty in the UK at the moment are very telling. I will cite the End Fuel Poverty Coalition’s numbers: 1,000 people died in 2022 as a result of living in cold, damp homes, unable to heat them because of costs. We also know that 7 million people in the UK last winter were living in fuel poverty. Taken together, those are staggering numbers, and it is important that they are at the forefront of our minds when we discuss the levy.
It is telling that there seem to be unified voices against the policy. The figure of £118 that the shadow Minister mentioned came from Onward, which is a Conservative think-tank. The discussion is also about who has the broadest shoulders to help with the changes that desperately need to be made to our energy system. I completely agree with the shadow Minister that the Bill gives the public all the risk and potentially none of the benefits.
There are 37 independently published reports that set out that they do not believe that the UK will move fully to hydrogen for home heating. Obviously there are massive benefits for steel—Sheffield is the city of steel—that could be unlocked through hydrogen, and there are many benefits for industry, but it seems wrong for Government amendment 12 to remove the protections given in the other place to the levy to prevent that cost from falling so dramatically on households. As the right hon. Member for Elmet and Rothwell set out, it is really important that we bring the public with us.
Government amendment 12 is almost a wrecking motion for net zero, because the opposition to this will be huge. I ask the Minister to think hard about whether the Government want to champion such a burden on households when it is not clear whether the benefit will ever fall on households. We do not yet know the questions about hydrogen, let alone the answers, or what the benefits to home heating will be, if that is the path we go down as a nation when there are many alternatives growing at speed, as we have discussed. I think the Government’s amendment is very challenging. I urge them to think again for the benefit of all those who struggle to pay their energy bills now and for those who may struggle in future if the levy comes in.
Kerry McCarthy (Bristol East) (Lab)
I want to add to what has been said on both sides of the Committee Room today about how unwise it is for the Government to go down this path. I do not agree with what the right hon. Member for Elmet and Rothwell said about how we should not conflate public feeling about net zero with public concern about energy bills; the green transition and the move towards renewables will bring in cheaper energy and enhance our energy security, so I do not accept his arguments. However, if I were to argue that point with him, you would quite rightly say that I was broadening the debate beyond the parameters of the Bill, Mr Gray, so I will save my remarks for this afternoon’s Westminster Hall debate on the Government’s approach to net zero.
At the heart of the issue is what the shadow Minister, my hon. Friend the Member for Southampton, Test, said: consumers want to know how this will come to us. I share the concerns—my hon. Friend listed the other green levies in legislation, but the difference is that we can see a benefit from investment in such fields—but the hydrogen levy will mostly be to the benefit of energy-intensive, hard-to-decarbonise industries, and consumers will rightly feel that they are paying for something from which they will not receive the benefit.
We know that there is huge concern. The right hon. Member for Elmet and Rothwell said that there is fear in people’s eyes about how they will meet their energy bills. There is—I have seen that concern. In my public communications about how energy bills were predicted to rise, I was very worried about making constituents even more scared. It was a balance: I wanted to warn people about what is to come, but given the stress that they were under, I felt that it was important not to be alarmist. It is a difficult position to hold. As has been said, it could put about £118 on bills. Documents from the Department state that after 2030, the impact on consumer bills will ramp up even further:
“Once introduced, we expect its impacts will ramp up as we look to deliver our 2030 hydrogen ambitions to improve energy security.”
This is a deeply regressive move.
I do feel a bit of sympathy for the Minister, because he has to defend to the hilt something on which, given the reaction on Second Reading, he will end up having to U-turn. He will get all the flak, and his boss will get all the credit for having listened to people and changed his mind.
Somebody mentioned the think-tank Onward, which has contributed a piece to “ConservativeHome”. Onward has also said:
“The Government is walking into a trap with the hydrogen levy. It would be a mistake that risks stalling the development of a British hydrogen economy. It would also be unfair to ask households that won’t benefit from hydrogen directly to pay for it. The Government should think again. And the Treasury should get off the fence and back the role hydrogen can play in the economy.”
Clearly this is not an anti-hydrogen move. It is about ensuring that the people who will benefit bear the majority of the cost.
Andrew Bowie
I will start by speaking to amendment 117. I assure the hon. Member for Southampton, Test that the Government carefully considered the possible levy payers listed in the Bill when it was introduced in the other place. Levies on electricity and gas suppliers have been successfully used to support the deployment of low-carbon electricity and to increase the proportion of green gas in the gas grid. Those funding mechanisms are well understood by the private sector and can help to bolster investor confidence in the viability of funding for hydrogen.
Gas shippers were included as another possible option for the levy design, which allows for a greater range of options for a future levy design while appropriately narrowing the scope. The amendment in the other place was also intended to enable Exchequer funding of the hydrogen business model, but the powers in the Bill already provide for that arrangement. The hydrogen production business model will initially be Exchequer-funded. That aspect of the amendment would therefore introduce redundant provisions to the Bill.
Let me turn briefly to the thoughtful and serious comments made by the shadow Minister, the hon. Member for Southampton, Test, as well as my right hon. Friend the Member for Elmet and Rothwell and the hon. Members for Sheffield, Hallam and for Bristol East. I thank the hon. Member for Southampton, Test for bringing to the Committee’s attention the fact that the Government do care about and recognise the huge pressure that has been put on everyone in this country as a result of Vladimir Putin’s invasion of Ukraine, and the highly fluctuating gas markets and huge increase in energy bills that we have seen as a consequence. I thank him for reminding the Committee that this Government stepped up late last year to pay half of everybody’s energy bills—that is £1,500 per person. We consider very much the impact of any policy decision, any action taken by the Government and any action taken by forces outwith our control on people’s energy bills, particularly this year, when people across the country have been paying record amounts.
I recognise the experience that my right hon. Friend the Member for Elmet and Rothwell spoke so powerfully about; when knocking on people’s doors earlier last year, there was a genuine fear about the impact that the rise in energy bills would have on individual circumstances. That fear was not confined to those people who were sadly already worried—it was across the piece. We have got to pay close attention to that and bear it in mind when we reach any decision in Government that may affect those bills even further.
I say to all the Members who have expressed an opinion today, and to all those engaged in the debate outside this place, that the design of the hydrogen production levy is ongoing, and discussions as to what form that levy will take—or whether it will exist—continue. Those discussions will take into account all relevant considerations, including the affordability of energy bills, which I hope I have made clear the Government take incredibly seriously. We will continue to have discussions and consult on the future design of the said levy as we move forward.
Question put and agreed to.
Clause 65 accordingly ordered to stand part of the Bill.
Clause 66
Obligations of relevant market participants
Amendment proposed: 12, in clause 66, page 57, line 25, leave out “the Consolidated Fund or gas shippers” and insert “relevant market participants (see subsection (8))”.—(Andrew Bowie.)
This amendment reverses the amendment to clause 66 made at Report stage in the Lords, so that a levy may be imposed on gas suppliers or electricity suppliers as well as on gas shippers.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss the following:
Clause 70 stand part.
Clauses 71 to 76 stand part.
Andrew Bowie
Clauses 69 to 76 concern the allocation of contracts. Clause 69 enables the Secretary of State to appoint one or more persons to act as allocation bodies. They will be responsible for administering competitive allocation processes for hydrogen production and carbon capture revenue support contracts. While initially, to support an emerging market, business model contracts are expected to be awarded bilaterally, it is the ambition of this Government to transition to more competitive allocation processes for hydrogen production and carbon capture revenue support contracts. For the hydrogen production business model, our ambition is to move to price-based competitive allocation from 2025, as soon as legislation and market conditions allow.
Clause 70 gives the Secretary of State the power to issue and revise standard terms of hydrogen production revenue support contracts and carbon capture revenue support contracts. The power also enables the Secretary of State to designate particular standard terms as terms that may not be modified under clause 74.
Clause 71 sets out how an allocation body can notify a hydrogen production or carbon capture counterparty of an allocation decision and enables the design of the allocation process to change over time. Clause 72 builds on clause 71, enabling the Secretary of State to make regulations setting out how hydrogen production and carbon capture revenue support contracts are to be allocated as part of a more competitive process. That includes allowing the Secretary of State to make regulations conferring a power on the Secretary of State to set the rules of allocation in an allocation framework. The expectation is that an allocation framework will be produced and published for allocation rounds and will act as a rulebook for how allocation rounds will operate.
Clause 73 sets out how a hydrogen production or carbon capture counterparty must act upon a notification from an allocation body under clause 71. Any offer to contract is required to be on the standard terms, or on the standard terms as modified in accordance with the procedure provided for in clause 74. This clause enables further regulations to be made that may include setting out the time in which the offer must be made or what happens if the eligible person does not enter into a contract as a result of the offer.
Clause 74 enables a hydrogen production or carbon capture counterparty to agree modifications to the standard terms with low-carbon hydrogen producers or carbon capture entities. These adjustments may be required because it is not possible for the standard terms to anticipate every technology or project-specific issue. Clause 75 clarifies that regulations made using powers in clauses 71 to 74 may include, for example, requirements for how allocation is to be determined competitively, as well as procedures that should be followed and consideration of specified matters and the opinions of specified persons when making any determinations under the regulations. For example, the clause could enable a counterparty to determine whether an applicant has provided sufficient information and evidence that a modification of standard terms is both minor and necessary.
Clause 76 makes clear that a gas system planner licence may include conditions aimed at facilitating or ensuring the effective performance by the independent system operator and planner of any hydrogen production allocation body functions. It also provides that where the Gas and Electricity Markets Authority proposes to add, remove or alter such a condition that relates to Northern Ireland, GEMA must notify the Department for the Economy in Northern Ireland. With those explanations, I beg to move that clauses 69 to 76—
The Chair
For clarity, I group various things together in one group when it is convenient to discuss them together. The Minister moves only the first clause in that group. Therefore, in this case the Minister moves only clause 69.
Dr Whitehead
These are all riveting clauses, which seem to be pretty well put together. We have nothing to say about them, other than that we trust they will be part of the Bill.
Question put and agreed to.
Clause 69 accordingly ordered to stand part of the Bill.
Clause 70 ordered to stand part of the Bill.
Clauses 71 to 76 ordered to stand part of the Bill.
Clause 77
Further provision about designations
Amendments made: 70, in clause 77, page 66, line 35, after “59,” insert “(Designation of hydrogen transport counterparty), (Designation of hydrogen storage counterparty),”.
This amendment together with Amendments 71, 72 and 74 make supplemental provision about designations under NC29 and NC31.
Amendment 71, in clause 77, page 67, line 3, after “59,” insert “(Designation of hydrogen transport counterparty), (Designation of hydrogen storage counterparty),”.
See the explanatory statement for Amendment 70.
Amendment 72, in clause 77, page 67, line 9, after “59(1),” insert “(Designation of hydrogen transport counterparty)(1), (Designation of hydrogen storage counterparty)(1),”
See the explanatory statement for Amendment 70.
Amendment 73, in clause 77, page 67, line 12, after “a” insert “carbon dioxide”.
This amendment is consequential on Amendment 23.
Amendment 74, in clause 77, page 67, line 12, after “counterparty,” insert “hydrogen transport counterparty, hydrogen storage counterparty,”.—(Andrew Bowie.)
See the explanatory statement for Amendment 70.
Question proposed, That the clause, as amended, stand part of the Bill.
Andrew Bowie
Clause 77 enables the Secretary of State to revoke a counterparty designation by notice. A designation will also cease to have effect if the counterparty withdraws consent to the designation by giving not less than three months’ notice in writing to the Secretary of State. Subsection (4) enables the Secretary of State to make provision in regulations enabling a person who has ceased to be a revenue support counterparty to continue to be treated as such a counterparty, including provision about the circumstances in which, and the period for which, such a person may be so treated. I recommend that clause 77 stand part of the Bill.
Question put and agreed to.
Clause 77, as amended, accordingly ordered to stand part of the Bill.
Clause 78
Application of sums held by a revenue support counterparty
Dr Whitehead
I beg to move amendment 86, in clause 78, page 67, line 31, at end insert—
“(4A) Revenue support regulations may make provisions for the return of sums held by a revenue support counterparty that have been secured from gas shippers over and above necessary reserve levels to energy supply customers.”
This amendment would guarantee that, where shippers have above what is in reserve provision, the difference would be restored directly to customers from the shippers (in contrast to the way the LCCC works with retailers/customers now).
The amendment follows on from the discussion that we had earlier in Committee about the role of the hydrogen production counterparty in administering the sums that may come its way. We have already had some discussion about the counterparty, which will potentially be enormous in terms of its likely new duties both in hydrogen production and in carbon capture and storage. The counterparty will have a very large amount of money coming in and out, and possibly staying in its reserves and being allocated for the purposes of what the counterparty is being set up for—to develop hydrogen production in this instance, but also carbon capture and storage development.
What is the position at the moment with the LCCC, which, as we have agreed, is likely to be the designated body for the counterparty for various things? The position at the moment is that there is no position on what the LCCC does with sums over and above what is necessary for it to hold in reserve or as contingency for the pay-out of sums to hydrogen production bodies, which is an important omission, because there is no specific guidance or legislative certainty. In practice, the LCCC hands over money greater than its reserves where it has accumulated additional sums of money because of the periodic inversions of strike price and reference price—hence there is money coming into it, rather than being paid out of the LCCC. It does pay those sums out, but there is no certainty as to where they go. Indeed, there is no certainty that anything should be paid out. At the moment, it would be quite possible for the LCCC to say, “We need more reserves, so we’re not paying any money out,” or it could pay that money back to industry or to certain parts of industry. I understand that the LCCC pays out that money to energy suppliers, but, again, there is no certainty that even the money paid out by the LCCC to those energy suppliers ever reaches the customer.
For surpluses over and above what is necessary for reserves and operational costs of the LCCC—the counterparty—if the principle is that the customer pays the levy, which we sincerely hope it is not, but if it is, should there be surpluses within that levy, the customer should get the money back one way or another. Similarly, if the Consolidated Fund is the source of a levy, the Consolidated Fund should get that money back one way or another. It should not be used for other purposes or sit in a bank account somewhere. It should be actively used, either for restitution of customer bills or for further use via the Consolidated Fund for the future.
The amendment would ensure that the revenue support regulations provide for the return of sums held by a revenue support counterparty, which have been secured over and above necessary reserve levels, to energy supply customers. It makes a very specific directional instruction, as it were, in the Bill, about what the destination of those funds should be over and above the reserves for the counterparty. I think that is a useful addition to the Bill and a useful clarification of what levy money for the future we are contemplating entrusting this very large body with.
It is a clear instruction as to what that body should do. It is a clear instruction from the Committee of what it wants to ensure happens when the Bill becomes an Act of Parliament. That is why we have tabled this amendment. I think the Minister will agree that the situation at the moment with the LCCC is a little shadowy, although it works okay in practice. That allows us to be much clearer for the future about not only how these things will work in practice but how they should be directed in principle.
Andrew Bowie
I thank the hon. Member for his amendment. I probably would not use the same language and describe the LCCC as a shadowy organisation, but I understand the spirit in which he makes those comments. The Opposition are absolutely right to focus on ensuring that the Bill can make provision for fair and efficient payment and reconciliation arrangements. However, I would like to reassure the Opposition and anybody else following our proceedings today that the existing provisions in the Bill already enable regulations to provide for such arrangements.
As previously discussed, clause 67 explicitly enables regulators to make provision for the amount to be paid to levied market participants by a relevant counterparty or hydrogen levy administrator—in this case the not-shadowy LCCC. That includes the pass-through of payments received by a relevant counterparty under revenue support contracts, such as payments made by a hydrogen producer to a hydrogen production counterparty. We would expect that in such instances the levied market participants would pass these payments on to their customers.
However, to provide extra assurance on this matter, subsection (3) of clause 67 also enables the Secretary of State to make regulations requiring that the customers of levied market participants benefit in accordance with those regulations. I hope this provides the hon. Member for Southampton, Test with the assurance he requires to withdraw his amendment.
Dr Whitehead
I think it is incumbent on me to ask the Minister a question. Yes, the Minister will have the power to make regulations, but will he commit himself to making those regulations should the Bill pass? As he knows, making regulations is something Ministers may do, but they can sometimes sit on their hands and not make them. It is important to be clear on that.
Andrew Bowie
I am suggesting that the Secretary of State make regulations. I am not quite the Secretary of State, but maybe one day. The Government are committed to working to ensure that the design of the levy enables fair and efficient payment and reconciliation arrangements. Work on the detailed design of the levy, including decisions related to calculation, is ongoing. We will consult on the detailed design of the levy before laying the regulations that introduce it.
Dr Whitehead
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 78 ordered to stand part of the Bill.
Energy Bill [ Lords ] (Fifth sitting)
Tuesday 6th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 6 June 2023 - (6 Jun 2023)
The Committee divided: - Ayes: 7 / Noes: 5 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
The clause enables revenue support regulations to allow for the provision and publication of information and the giving of advice. For revenue support contracts to function effectively, flows of information and advice may be needed among—but not limited to—the Secretary of State, a revenue support counterparty, an allocation body, a hydrogen levy administrator and any other person or description of persons specified in the regulations. The regulations will help ensure that information and advice required for the functioning of the business model schemes is provided to the bodies requiring it at appropriate points. The clause also enables revenue support regulations to make provision governing the use and protection of such information to ensure it is handled in an appropriate manner.
Dr Alan Whitehead (Southampton, Test) (Lab)
indicated dissent.
Question put and agreed to.
Clause 79 accordingly ordered to stand part of the Bill.
Clause 80
Enforcement
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Thank you, Mr Gray. I was unable to finish my mint imperial; I was rather hoping that the Opposition might have something to say on the previous clause.
The clause enables regulations to make provision for the Gas and Electricity Markets Authority and the Northern Ireland Authority for Utility Regulation to enforce hydrogen levy requirements imposed on relevant GB and Northern Ireland market participants respectively. It will allow the regulators to, for example, issue orders to secure compliance, impose financial penalties and, where other enforcement measures are insufficient, consider possible licence revocation. It is critical that the levy is supported by a suite of enforcement measures. This will help reduce the risk of defaults on levy payments and help ensure that the levy administrator can collect the moneys required to fund the hydrogen business models.
The clause also provides the Secretary of State with the power to make provision in regulations for the Gas and Electricity Markets Authority to enforce requirements that may be imposed on the independent system operator and planner as a hydrogen production allocation body. That may include requirements that relate to Northern Ireland. The clause helps ensure a consistent regulatory regime for the independent system operator and planner.
Dr Whitehead
I am sorry, Mr Gray, but I am going to have to leave the Minister with a mint imperial in his mouth as I do not have anything to say on this clause either.
Question put and agreed to.
Clause 80 accordingly ordered to stand part of the Bill.
Clause 81
Consultation
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Mint imperial completed. The clause requires the Secretary of State to consult the Department for the Economy in Northern Ireland and Scottish and Welsh Ministers before making revenue support regulations where the matter being consulted on is within the legislative competence of the relevant devolved legislature. In addition, the Secretary of State must consult other persons as they consider appropriate. This provides an opportunity for those directly affected by the regulations and those with special expertise to express their views on their design. The clause also requires the Secretary of State to consult those persons he considers it appropriate to consult before publishing standard terms under clause 70.
Question put and agreed to.
Clause 81 accordingly ordered to stand part of the Bill.
Clauses 82 and 83 ordered to stand part of the Bill.
Clause 84
Shadow directors, etc
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
I will keep this brief. Clause 84 makes it clear that in exercising their functions under chapter 1 in relation to a revenue support counterparty, neither the Secretary of State nor an allocation body are to be deemed to be managing or controlling a counterparty in a way that would class them as, for example, “shadow directors”.
Clause 86 caters for a scenario where the independent system operator and planner—also known as the ISOP—is appointed as the hydrogen production allocation body. The clause will allow the Secretary of State to modify the electricity system operator and gas system planner licences expected to be held by the ISOP, as well as related documents, for the purposes of facilitating or ensuring the effective performance of hydrogen production allocation and related functions.
Question put and agreed to.
Clause 84 accordingly ordered to stand part of the Bill.
Clauses 85 to 87 ordered to stand part of the Bill.
Clause 88
Financing of costs of decommissioning etc
Dr Whitehead
I beg to move amendment 88, in clause 88, page 79, line 4, at end insert—
“(9A) Guidance by virtue of this section shall have regard to the circumstances under which a prospectively decommissioned carbon capture and storage facility came to be established and what relation that point of establishment had with provisions under part 4 of the Petroleum Act 1998.”
This amendment seeks to clarify the position of decommissioned oil and gas plants that are not fully decommissioned before they are transitioned to a carbon capture usage and storage plant, and where financial responsibility then lies at the end of the CCUS lifecycle when it is due to be decommissioned. This amendment says that the Secretary of State must have regard for this complexity and assess where the responsibility lies.
We now come to chapter 2 of part 2 of the Bill, which deals mainly with decommissioning of carbon storage installations. That is likely to be of concern rather later in the day than currently, but it is important to get it right from the outset. Many carbon capture and storage installations will not have been set up just for the purpose of carbon capture and storage; they will have been recommissioned from a previously decommissioned oil and gas facility, or one that was not entirely decommissioned but put to use as a repository for carbon dioxide, usually offshore. As we go through that sequence, there will be many circumstances where what we had in place previously with respect to North sea oil and gas decommissioning, and the responsibilities of the company that has been producing oil or gas in a particular field as it moves to decommissioning, may become a little blurred.
Abandonment of offshore installations is covered by part IV of the Petroleum Act 1998. There is a lot in there about the circumstances under which those who operate offshore oil and gas facilities have a legacy duty to decommission the well from which they have been producing. They have responsibilities in that respect. They have to decommission the well to proper standards, ensuring that it is properly capped and that the plant has gone from the production platform. The platform itself may be towed away and scrapped in a Norwegian yard somewhere. The cycle is therefore complete as far as that oil and gas decommissioning is concerned.
One increasingly apparent issue is that we no longer want that to happen completely if we are to have successful carbon capture and storage facilities, under the North sea in particular. We want to see to what extent we can take those installations and turn them to another purpose—carbon capture and storage. They are adaptable for such purposes, and we will certainly use a lot of transferred facilities. I imagine that we will produce little in the way of brand-new carbon capture and storage facilities, but for some infrastructure—pipelines and so on. The pattern for carbon capture and storage has already largely been laid down by what we do in the North sea now.
One task for the future will be unrolling some of the decommissioning activity, which is a big business now, with a lot going on. One concern is that if the decommissioning of infrastructure continues at the pace it is going at the moment, when we come to concentrate our production in the North sea into smaller fields that have already been discovered but not yet exploited, we might well find that a lot of the infrastructure for the larger fields that we have decommissioned will have to be recreated all over again to allow the economic exploitation of the smaller fields, which are effectively in existing fields that have had the infrastructure stripped from them already.
That is one reason why we should not continue the decommissioning regime exactly as it is. The second reason, which is as or more important, is the extent of the infrastructure as a whole. I emphasise that this is a question not just of capping off oil wellheads and leaving the field alone when it is exhausted, but of trying to keep the infrastructure in place to allow for the transportation, landing and all the rest of the carbon capture activity to take place within the framework that was there before.
At the very end of the decommissioning process—for example, once a carbon capture and storage institution created from a depleted field is full, which I appreciate is quite a long way off—we will have to have a decommissioning programme in reverse. The question then arises: what sort of legacy duty will arise for those people who used the field in other circumstances, if it has been extended for carbon capture purposes and must then be decommissioned? Is there a joint legacy duty between the previous oil and gas users and the current carbon capture and storage users, or do the carbon capture and storage users take over completely the legacy duty for the previous field as far as decommissioning is concerned? Is there some kind of shared responsibility?
The amendment seeks to instruct guidance on such matters to have regard to those kinds of circumstances. I will read its exact wording:
“Guidance by virtue of this section”—
that is, clause 88, on decommissioning—
“shall have regard to the circumstances under which a prospectively decommissioned carbon capture and storage facility came to be established and what relation that point of establishment had with provisions under part 4 of the Petroleum Act”.
The amendment would link the carbon capture and storage activity straight back to the Petroleum Act, so that there is a continuous skein of commissioning, use and decommissioning, with the responsibilities that go with all that.
Andrew Bowie
Amendment 88, tabled by the Opposition spokesperson, seeks to expand the scope of guidance on the decommissioning fund. He has explained why he is presenting this amendment, and we should acknowledge his point about the complexities where a former oil and gas installation is repurposed for carbon storage purposes. It is important to get the question of who is responsible for decommissioning right.
The Petroleum Act 1998 is the principal legislation governing decommissioning offshore and the decommissioning of offshore carbon capture, usage and storage infrastructure, and provides a framework for the decommissioning of offshore pipelines and installations. However, it is not necessary to rely solely upon the guidance we are setting out in the Bill to deal with the situation in the North sea, because of what I have just set out: the existing law in the 1998 Act, combined with amendments to sections 30 and 30B of the Energy Act 2008 provided for by clauses 91 and 92 of this Bill. We believe that those already provide the necessary safeguards, because under part 4 of the Petroleum Act, the Government can call upon the previous owner of an asset to fulfil the decommissioning obligation if the current owner is unable to do so. That creates a chain of liability throughout the asset’s life, which would extend into carbon capture, usage and storage if an asset is reused. Previous oil and gas owners therefore continue to be liable for decommissioning a repurposed asset, unless the Secretary of State has designated the asset as eligible for change of use relief and other qualifying requirements are met.
The conditions to qualify for change of use relief are set out in sections 30A and 30B of the Energy Act 2008. In turn, it is proposed that sections 30A and 30B be updated by clauses 91 and 92 of the Bill. The amendments made by clauses 91 and 92 mean that, to qualify for the relief, the previous oil and gas owner would need to pay a top-up amount into the decommissioning fund to reflect the decommissioning liability that that previous owner is being relieved of. In addition, a decommissioning notice under section 29 of the Petroleum Act 1998 must have been served on other persons, such as the CCUS operator who will ultimately have to decommission the carbon storage installation at the end of its life.
The Government do not rule out the possibility of guidance providing additional explanation and detail on that and other matters pertaining to it, but we do not believe that it needs to be stated in the legislation, for the reasons that I have given. I therefore humbly ask the hon. Member for Southampton, Test to consider withdrawing his amendment.
Dr Whitehead
The Minister has set out admirably the sub-controls and clarifications that can be provided by texts outside part IV of the 1998 Act, but with respect, those address circumstances in which the operator of a carbon capture and storage facility cannot meet their liabilities and obligations. In those circumstances, as the Minister says quite correctly, the previous owners will have some liability to step into the breach. By and large, as the new owners of carbon capture and storage facilities invest in them, they will not want to have liability, unless they go bust—that is effectively what the Minister is saying—and they presumably do not intend to go bust during the life of the carbon capture and storage plant. If their only lifetime guarantee from the repurposed body is that someone will come to their aid if they go bust, that is not really sufficient to establish the chain throughout the whole process. That is essentially what we are seeking through our amendment.
I appreciate that the Minister thinks that that can be done outside the Petroleum Act, but I would like an assurance that he has taken my point on board. When additional guidance is supplied, it should address the whole cycle, ensuring a good outcome for everybody, rather than a distressed outcome for certain people. If the Minister can give that assurance, I will be happy withdraw the amendment.
Andrew Bowie
As I said, additional guidance will be forthcoming. We do not believe it necessary, in this Bill, to legislate for what we are discussing. These are serious points, and in speaking to clauses 88 and 89, I will go into more detail about subsequent support for decommissioning, who is responsible, and so on. I hope that that is acceptable for the hon. Gentleman and that he feels able to withdraw his amendment.
Dr Whitehead
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 88 gives the Secretary of State the power to make regulations on the provision of security for the decommissioning costs of CCUS transport and storage networks. That includes enabling the Secretary of State to make regulations requiring CO2 transport and storage companies to establish decommissioning funds for each of their storage sites and associated transport networks. We must ensure that CCUS is prepared for decommissioning in an appropriate way to mitigate any long-term impact on our environment. Clause 89 sets out supplementary provision, including regulations made under clause 88, relating to the financing of the decommission of CCUS assets.
The Petroleum Act 1998 is, as I have set out, the principal legislation governing the decommissioning of offshore oil and gas. In addition, section 30 of the Energy Act 2008 allows for the decommissioning of carbon storage installations. Clause 90 makes several amendments to section 30 of the 2008 Act by clarifying how the part IV decommissioning regime applies in a CCUS context.
Industry has identified certain barriers to the repurposing of certain CCUS structures, which the Bill will address. Specifically, under the 1998 Act, the Government can reach back to current and previous owners of an installation or pipeline to carry out the decommissioning of that asset. That will create a chain of liability through the asset’s life, and may act as a barrier to repurposing. Owners of oil and gas assets may consider the relative uncertainty of CCUS decommissioning liabilities too great a risk to carry.
Clause 92 mirrors the effects of clause 91 but relates to change of use relief for pipelines, rather than for installations. Clause 93 builds on the previous clauses 91 and 92, relating to change of use relief. Clause 93 inserts a new section 30C into the Energy Act 2008. It enables the Secretary of State to make regulations about obtaining and sharing information, for the purposes of the Secretary of State’s functions regarding change of use relief. Clause 93 also makes an amendment to section 105 of the 2008 Act, consequential to the amendments in clauses 91 and 92. On that basis, I ask that clause 88 stand part of the Bill.
Question put and agreed to.
Clause 88 accordingly ordered to stand part of the Bill.
Clauses 89 to 93 ordered to stand part of the Bill.
Clause 94
Designation of strategy and policy statement
Andrew Bowie
This group of clauses deals with designating a carbon capture, usage and storage strategy and policy statement. Although day-to-day regulatory decisions will be made independently by the economic regulator, policy direction for carbon capture and storage will continue to be directed by the Government. Clause 94 provides that the Secretary of State may designate a strategy and policy statement for CCUS, which the economic regulator must have regard to in carrying out its functions. Such a statement would set out the strategic priorities for CCUS policy, the particular outcomes to be achieved as a result of the implementation of that policy, and the roles and responsibilities of persons who are involved in implementing that policy or who have other functions affected by it.
Providing for a strategy and policy statement to be designated is consistent with the approach in other economically regulated sectors, including the energy sector. Given that there is potential for a CCUS strategy and policy statement and an energy strategy and policy statement to overlap in certain areas, in preparing a CCUS strategy and policy statement the Secretary of State must take account of any energy strategy and policy statement that has been designated.
Clause 95 requires the economic regulator to have regard to the strategic priorities set out in a CCUS strategy and policy statement and to carry out its CCUS-related functions in a way that aims to achieve the policy outcomes set out in the statement. In carrying out its functions in the manner best calculated to achieve the policy outcomes, the economic regulator remains subject to the application of the principal objectives in clause 1 of the Bill. As defined in this clause, in carrying out certain functions—those related to the determination of disputes and to competition—the economic regulator should not be required to take account of a CCUS strategy and policy statement. Nor do the duties set out in relation to a CCUS strategy and policy statement affect or override any other legal obligation or duty upon Secretary of State or the economic regulator under this Bill or any other Act. If the economic regulator considers that a policy outcome contained in the strategy and policy statement is not realistically achievable, it must inform the Secretary of State.
Clause 96 establishes timeframes and circumstances for reviewing a CCUS strategy and policy statement. The process of setting policy direction should not occur more often than once a Parliament. That reduces the risks associated with frequent change to policy priorities, and ensures a stable and predictable regulatory landscape for investors. However, there should be scope to review outside that timeframe if, for example, a general election has taken place outside this cycle, in order to ensure the strategy and policy statement reflects the priorities of the Government of the day. A review may result in a new statement, revisions to the existing statement or the conclusion that the existing statement remains relevant and appropriate. This is consistent with the approach in any other regulated sector and with the reviewing of an energy strategy and policy statement, as set out in the Energy Act 2013.
Clause 97 sets out the procedure the Secretary of State must follow before a CCUS strategy and policy statement can be designated. This process provides for consultation and parliamentary approval of a CCUS strategy and policy statement. The procedure set out in this clause follows the procedure for designating a strategic policy statement under part 5 of the 2013 Act. Therefore, I ask that clause 94 stand part of the Bill.
Dr Whitehead
I have no particular objections—indeed, I strongly support the strategy and policy statement and everything that goes with it as far as the CCUS is concerned. As the Minister has pointed out, this does not cut across any other strategy and policy statement; conversely it should be guided by other strategy and policy statements where appropriate. Later, we will debate the extent to which the regulator, Ofgem, may have a strategy and policy statement of its own that gives it a carbon reduction net zero imperative in its operations. I assume that under those circumstances this particular strategy and policy statement would be subject to that strategy and policy statement as far as its operation is concerned. Will the Minister confirm that?
Andrew Bowie
I am happy to confirm that. The economic regulator, Ofgem, would be required to take into account the strategic priorities set out in any CCUS strategy and policy statement when carrying out its CCUS-related functions. Clause 40, which we have already debated, requires Ofgem to publish a document as soon as is reasonably practicable after a strategy and policy statement has been designated, setting out the strategy it intends to adopt to further the delivery of the policy in the statement and how that will be implemented. I am very happy to confirm that that would be the case.
Question put and agreed to.
Clause 94 accordingly ordered to stand part of the Bill.
Clauses 95 to 97 ordered to stand part of the Bill.
Clause 98
Specified provisions in carbon dioxide storage licences
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 98 will allow the Oil and Gas Authority, whose business name is now the North Sea Transition Authority, to consider a proposed change of control of a holder of a carbon storage licence before it takes place to ensure that the governance, technical and financial capability of such a licensee remains appropriate. At present, the NSTA issues licences to give the right to store carbon dioxide in offshore geological formations; prior to issuing the licences, the NSTA satisfies itself that the prospective licensee company and any parent company are fit to hold the licence and will meet the obligations.
At times during the life of a licence, the ownership and control of a licensee may pass to a new parent company or person. An undesirable change of control could undermine investor confidence in the commercial environment, making the UK continental shelf a less attractive place for investment. Currently, the NSTA is able to take remedial action regarding a change of control of licence holder only after such a change has occurred. This is seen by both the NSTA and the wider industry as being inefficient and of limited effectiveness in preventing harms to the wider industry, the Government and the economy. The existing remedy is also time-consuming, typically taking a year or more, during which a potentially undesirable owner of a licensee could harm investor confidence in the commercial environment.
A requirement will therefore be introduced through schedule 1 to the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010 for current and future licensees to apply in writing to the NSTA for consent to a change of control at least three months before the planned date of the change. Following receipt of an application, the NSTA may give unconditional or conditional consent, or indeed refuse consent to the proposal. Conditions imposed may be financial, relate to the timing of the change of control, and relate to the performance of activities permitted by the licence. In the case of conditional consent or refusal, the NSTA must give the licensee the opportunity to make representations and it must consider those representations. The measure will also allow the NSTA to revoke a licence where its prior consent has not been obtained for a change of control. The NSTA will therefore be able to regulate the suitability of carbon storage licensees in a more robust and timely manner.
Clause 98 also sets out how provisions inserted into a carbon storage licence by schedule 6 may be altered or deleted. Clause 99 clarifies that where a carbon storage licence is revoked, the NSTA also has the power to revoke the permit. Without this clause, an undesirable investor might argue that they are able to continue to operate under the permit, and investor confidence in the commercial environment will be harmed.
Where the NSTA is the licensing authority under section 18 of the Energy Act 2008, it also approves and issues storage permits. The granting of a licence allows the licensee to carry out various activities in the licensed area; to carry out storage of carbon dioxide or to establish and maintain installations for the purpose, a storage permit must also be issued. Clause 98 will create a requirement for carbon storage permit holders to seek consent from the NSTA at least three months before a change of control is due to occur. Where that procedure has not been followed and a change of control has occurred without its prior consent, the NSTA will be able to revoke carbon storage permits.
Together, clauses 98 and 99 will ensure that the new approach will apply for both licences and permits, as is intended. This will ensure that the basin continues to attract investment while protecting the taxpayer from funding liabilities not met by potential undesirable investors.
Clause 100 inserts a new subsection into section 23 of the Energy Act 2008, ensuring that a licensee does not commit an offence due to a failure to obtain the prior consent of the NSTA in relation to a change of control. Section 23 covers offences relating to carbon storage licences, including setting out that a licence holder commits an offence if
“a thing is done for which the licence specifies that the prior consent of the licensing authority or any other person is required, without that consent first having been obtained”.
Section 23 was designed to address situations where the action of seeking consent from the NSTA and the “thing” being done is within the licensee’s full control. Applying section 23 to a change of control of licensee would be inappropriate, because often a licence holder cannot prevent such a change of control or have any control over the timing of such a transaction. For example, section 23 could be applied to those who have control over the company, such as directors or high office holders. However, in relation to a change of control event, a director may have no control over such a transaction taking place, and it may be the case that they had no way to prevent the change of control or influence the timing. This clause will amend the existing legislation by clarifying that section 23(1)(a) or (1)(b) will not apply in respect of a change of control of licensee. Without that clarification, directors or high office holders of a carbon storage licence holder could be fined up to £50,000 and/or jailed for up to two years for failing to obtain the consent of the NSTA prior to a change of control occurring.
Clause 101 will allow the NSTA to request that a relevant company or person provide it with any information it may require in exercising its functions in relation to a change or potential change of control of a licensee. Currently, the authority does not have information-gathering powers to assist it in considering a change of control in respect of a carbon storage licensee. In some instances, the authority is therefore limited in conducting proper due diligence to determine whether a change of control of a licensee is undesirable.
The information will help the NSTA to consider the financial and technical capability, operational and commercial plans, and governance and fitness of the licensee in relation to its proposed controlling entity. That will provide the authority with the necessary information to appropriately consider an application for consent, or when considering whether to revoke a licence where a change of control has occurred without consent.
Information that would be protected from disclosure or production in legal proceedings on grounds of legal professional privilege or, in Scotland, confidentiality of communications is not included under this clause.
Dr Whitehead
I congratulate the Minister on his speed-reading abilities this afternoon, which help the progress of the Committee considerably. I do not object to the clause, but we ought to be clear about the nomenclature used in it. The Minister invoked the name of the North Sea Transition Authority on a number of occasions in connection with carbon capture and storage provision. Of course, the North Sea Transition Authority is just the North Sea Transition Authority in name. It is not the North Sea Transition Authority in law; it is the Oil and Gas Authority in law.
Indeed, it has a whole lot of responsibilities specified by the Energy Act 2016, which include, among other things, overseeing the maximum economic extraction of oil and gas in the North sea. One might say that the provision of carbon capture and storage and maximum economic extraction of oil and gas in the North sea do not necessarily fit well together. Indeed, this is a debate we will come to later in our consideration of the Bill, but we need to be clear that as things stand, the supervision, licences and so on that are set out in this clause appear to rely on a slightly inappropriate authority. That does not necessarily mean that it is not going to work okay, but it does mean that it would be a good idea to have the actual name of the North Sea Transition Authority in law, as well as in characterisation.
After all, let us say that someone called Andrew Bowie decided that he wished to be known as Ziggy Stardust in future. Provided he could get people to agree that he really was Ziggy Stardust, that would be fine, except under circumstances where the law came to be applied. Mr Ziggy Stardust would find that under those circumstances, he had to refer to himself as Andrew Bowie. That is where we are with this transition authority at the moment. It is intention rather than fact, and it concerns me that we are writing into the Bill a number of references to the Oil and Gas Authority as if it were the North Sea Transition Authority, when the North Sea Transition Authority is an authority in name only. As I say, this is not something that one goes to the wall on—we do not oppose the clause—but I think it would be a good idea if the Government at least took some steps towards regularising the legal name and the daily name of the Oil and Gas Authority, so that its future purpose fits its legal position. Obviously, this is a bit of a precursor to a debate we will have later.
Andrew Bowie
I will not be drawn on whether or not a certain individual will be changing their name, and what position that would give them legally. However, I get the hon. Gentleman’s point regarding the legal entity that is the Oil and Gas Authority and the references we are making to the North Sea Transition Authority in the Bill, and indeed in other pieces of legislation. I agree with him: there should be some clarification to that effect. I will have to go away and explore exactly what work would have to be done, presumably through legislation—primary or secondary—to effect a legal name change from the OGA to the NSTA, but I think it would help us all if that were undertaken. I will explore how exactly that would take place and the work that would have to be done.
In terms of whether an organisation that was set up following the oil price crash in 2014-15 with the explicit aim of supporting the oil and gas industry and maximising economic recovery can work, and can have within its purview licences being issued for carbon capture, usage and storage, I disagree: I think that they are perfect bedfellows. One complements the other; in fact, the skills and requirements of the companies involved in oil and gas extraction are very much involved in the operation, or potential operation, of CCUS and other connected technologies. Therefore, I think that the OGA, the NSTA—call it what you will—is the perfect authority that should hold the power to issue those licences and have regulatory control over that industry as we move forward.
Question put and agreed to.
Clause 98 accordingly ordered to stand part of the Bill.
Clauses 99 to 101 ordered to stand part of the Bill.
Clause 102
Access to infrastructure
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Regulations are in place governing access to carbon dioxide transport and storage infrastructure. The regulations set detailed requirements on how user access to transport and storage networks should be managed, including any disputes arising. This clause enables the Secretary of State to make new regulations regarding access to carbon dioxide transport and storage infrastructure that may amend, revoke or replace the existing regulations, which were implemented using the powers in section 2(2) of the European Communities Act 1972. Regulations made under this power may confer functions on any person, and may make provision regarding enforcement in relation to access rights. In relation to enforcement, regulations may create criminal offences or impose civil penalties, and may confer jurisdiction on a court or tribunal. Where regulations impose a civil penalty, they must also provide for a right of appeal against the imposition of the penalty. I commend clause 102 to the Committee.
Question put and agreed to.
Clause 102 accordingly ordered to stand part of the Bill.
Clause 103
Financial assistance
Andrew Bowie
I beg to move amendment 21, in clause 103, page 97, line 19, leave out
“, out of money provided by Parliament,”.
This amendment leaves out words that are not considered necessary. Leaving out the words also ensures consistency with the approach taken by clause 134 in relation to the power under that clause to provide financial assistance.
Andrew Bowie
Government amendment 21 amends the financial assistance power in clause 103 by removing the words
“out of money provided by Parliament”.
Those words are not considered necessary, and their removal ensures a consistent approach with the power to provide financial assistance under clause 134.
Clause 103 enables the Secretary of State to incur expenditure and provide financial assistance for the purpose of encouraging, supporting or facilitating activities for carbon capture, transport and storage, the production of low carbon hydrogen, and the transport and storage of hydrogen. This will enable the Government to deliver on their commitment of £20 billion investment in CCUS and support the establishment and subsequent expansion of the first two industrial clusters by the middle of this decade, and a further two CCUS clusters by 2030. Government support for CCUS will incentivise private investment, economically benefit our industrial heartlands and support in the region of 50,000 jobs by 2030.
It will also help enable the Government to deliver on their ambition for up to 10 GW of new low-carbon hydrogen production capacity by 2030, subject to value for money and affordability. That has the potential to unlock up to 12,000 jobs and £9 billion of private investment and could play a critical role in the UK’s commitment to net zero by 2050. It could be supported by the development of hydrogen transport and storage infrastructure, which represents the critical next step in the growth of the hydrogen economy to meet our levelling- up ambition. I commend Government amendment 21 and clause 103 to the Committee.
Dr Whitehead
I am a bit puzzled. Government amendment 21 takes the words
“out of money provided by Parliament”
out of clause 103(1). It would then read: “The Secretary of State may provide financial assistance to any person for the purpose of encouraging” and so on. Those purposes are the transportation and storage of carbon dioxide, carbon dioxide capture facilities, low carbon hydrogen production and so on—all the things we have been talking about. The implication of taking those words out is that the Secretary of State may, from other money, provide this assistance. So it will come from somewhere else.
I would have thought that it is not particularly superfluous to actually set out where the money is coming from, which is Parliament, as it should be. It may be that in the Minister’s zeal to simplify the Bill, which it certainly needs, he has gone a bridge too far with the amendment. That may allow a construction to be placed on the Bill that might not be what he intended, or what I would intend, but could be read into the Bill in the future.
I do not know where the Minister might get money from if not from Parliament—certainly not in the sums necessary to provide this kind of assistance—but we could conceivably say that the Minister might get the money from, for example, a large overseas donor. It is important that we specify where the money is coming from, and “provided by Parliament” does that. I do not think it is superfluous. We do not want to go to the wall and divide on the amendment, but I have some questions about it, and I think the Minister ought to have some questions in his mind as well.
Andrew Bowie
I thank the hon. Gentleman for his questions. The reason why we no longer consider the wording necessary is because, subject to parliamentary agreement of the Bill’s provisions, clause 103 will provide for expenditure from the public purse on carbon capture, carbon dioxide transportation and storage, low-carbon hydrogen production, and hydrogen transport and storage. It is not necessary to specify that such expenditure will come from moneys provided by Parliament, so it is simply a case of simplifying the Bill. Financial assistance may be provided through grants, loans, guarantees or indemnities, or by provision of insurance, and it may be provided subject to conditions provided under a contract, but we feel that the wording in the Bill is superfluous, given that such assistance will be agreed, through the Bill, by Parliament in the first instance.
Amendment 21 agreed to.
Clause 103, as amended, ordered to stand part of the Bill.
Clause 104
Low-carbon heat schemes
Dr Whitehead
I beg to move amendment 89, in clause 104, page 98, line 35, at end insert
“which must include provision for—
(a) a ban on the installation of unabated gas boilers in new properties from March 2025; and
(b) a ban on the sale and installation of unabated gas boilers in all properties after March 2035.”
This amendment would mean that any scheme the Secretary of State wanted to bring in would have to be based on the above timescales for banning the use of gas boilers by 2025/2035.
We now come to a new part of the Bill, which concerns new technology. The chapter that we are discussing concerns low-carbon heat schemes, and the clause allows the Secretary of State, by regulation, to make
“provision for the establishment and operation of one or more low-carbon heat schemes.”
The clause also talks about targets and so on in relation to low-carbon heat schemes.
We think it might be a good idea—not that this is our policy—for the targets to which the clause refers to be specified in terms of what the Government have determined as their targets on the sale and installation of unabated gas boilers between March 2025 and March 2035. After all, those targets are in the public domain. The Government have stated them in the future homes strategy, the future homes standard and the energy security strategy. The Government have stated the targets in two forms: one is a ban on the installation of unabated gas boilers in new properties from March 2025, and the other is a ban on the sale and installation of unabated gas boilers in all properties after March 2035.
As things stand, those targets, which the Government have explicitly stated and which we would certainly go along with—we might want them to be a little more advanced, but we think they are about right—do not have any force. They are just aspirations. We think that putting them on the face of the Bill—after all, they are already Government policy—would not be hard for the Government to accept, but would enhance the validity and scope of those targets by ensuring that they are in the part of the Bill on low-carbon heat schemes, so that we can see everything together. It is a very modest and friendly suggestion, which I am sure the Government will have no problem adopting.
Andrew Bowie
As ever, I thank the hon. Gentleman for his well-thought-out remarks. The amendment would require that, in order to introduce a low-carbon heat scheme such as the planned clean heat market mechanism, the Government would also have to legislate for a ban on the installation of gas boilers in new build and existing properties respectively.
Committee members will know that the Government are introducing a future homes standard in 2025, which will require that new properties be equipped with low-carbon heating and high levels of energy efficiency from the outset, avoiding the need for future retrofitting. In addition, the Government have set out clearly the intention to phase out the installation of new natural gas boilers from 2035 in existing properties. There is therefore no disagreement that fossil fuel heating appliances have no long-term role. The recent volatility in global natural gas markets only makes that logic more apparent—on that, I think we are all in agreement.
However, the Government are firmly of the view that it would not be appropriate or helpful to make the ability to make regulations to launch a low-carbon heat scheme conditional on an entirely separate legislative measure such as an appliance ban, as the amendment proposes. Creating such a dependency would risk delaying or even forestalling the introduction of the planned clean heat market mechanism scheme altogether. Perversely, that would have the effect of constraining the development of the very markets and supply chains whose growth would be a prerequisite of phasing out natural gas boilers. I therefore respectfully and humbly urge the hon. Member to withdraw his amendment.
Dr Whitehead
I hear what the Minister has said. I am a little sorry that the Government cannot place their own policy in the Bill, but I hear that they will make plans to take that into account, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Dr Whitehead
I beg to move amendment 90, in clause 104, page 98, line 35, at end insert—
“(1A) In making provision for the establishment of one or more schemes under subsection (1), the Secretary of State must produce a plan for low carbon heating in homes in which it is uneconomic or impractical to install heat pumps.”
This amendment ensures that, when the Secretary of State is making a low carbon heat scheme, they have to provide a plan for low carbon heating in homes in which it is uneconomic/unfeasible to have a heat pump (large, rural, off-grid homes etc).
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Clause 105 stand part.
Dr Whitehead
The amendment concerns a different aspect of clause 104. When the Secretary of State establishes one or more low-carbon heat schemes under subsection (1), they must produce a plan for low-carbon heating in homes in which it is uneconomic or impractical to install heat pumps.
There is considerable debate about exactly how efficacious heat pumps are. Some people consider that about 40% of heat pumps will not work very well or at all in certain kinds of housing, particularly poorly insulated homes, rural off-grid homes and some very large homes where quite a lot of additional work has to be done to facilitate the flow of central heating around the home. The heat pump itself may simply be unable to keep up with the inefficiency of the home in question, particularly in very large homes. Therefore, the heat pump is slaving away all hours of the day and night but never quite gets to the required room temperature.
One solution would be to retrofit all UK properties in such a way as to make them all very energy efficient. Therefore, heat pumps would pretty much work anywhere, but that is not the case at the moment. Other people say that there is a very small area within which heat pumps do not work, and there is also a debate about the size of heat pumps put in. Under certain circumstances, hybrid heat pumps can be installed where a boiler is working in conjunction with the heat pump so that the run-up is relative to the use of the two devices, rather than the heat pump trying to slave away all by itself.
There are all sorts of issues in the current debate about the extent to which heat pumps can or cannot do the entire job. Within that debate, whatever the final assessment of the points at which heat pumps really do not work, we know that, under some circumstances, some heat pumps do not, and pretty likely never will, work. For those properties, it is therefore important that, rather than leaving them as they are, they have other low-carbon plans available so that we do not decarbonise most heat in properties throughout the country but leave behind a residual that does its own thing with its current heating arrangements and the carbon implications.
Andrew Bowie
I thank the hon. Gentleman for his comments on his amendment. The Government have been clear that a range of low-carbon technologies will be needed to play a role in decarbonising heating and reducing the nearly 50% of UK fossil fuel gas demand that heating represents. District and communal heat networks with low-carbon heat sources have an important role to play in all future heating scenarios, as do heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting parts of gas networks to supply 100% hydrogen, for example, for heating. Other technologies such as solid biomass and liquid biofuels, as well as direct electric heating where appropriate, may also play a supporting role.
Although the proportion of UK buildings technically suitable for heating with a heat pump is very high—indeed, an estimated 90% of UK homes are technically capable of being heated by heat pumps—there is a small proportion of buildings for which a heat pump would not be an appropriate solution. The Government are working to develop strategic and policy options for all these technologies and for different building types. That work includes: trials and research and development to build towards strategic decisions on the role of hydrogen for heat in 2026; work on heat network zoning; and the forthcoming biomass strategy, which will assess the amount of sustainable biomass feedstocks available in the UK, including for biofuels, and the most strategic uses of those across the economy. It also includes action such as the green heat networks fund to scale up key markets where that is of strategic importance in all scenarios.
The clean heat market mechanism provided for by this measure is another key part of our policy action. Ultimately, it will be for the market—and consumers and building owners—to determine the best solutions and combinations of technologies within the performance standards and market signals that it is the role of His Majesty’s Government to provide. Through establishing a strategic approach to developing that policy framework while building up key supply chains, the Government’s “Powering Up Britain” plans have set us on track for net zero. Another plan seeking somehow to prescribe the right solution for every property is not what is needed right now. I therefore respectfully urge the hon. Member for Southampton, Test to withdraw the amendment.
Together with clauses 105 to 113 in this chapter, clause 104 provides for the establishment of a low-carbon heat scheme to encourage the installation of low-carbon heating appliances, such as electric heat pumps. As nearly half the UK’s fossil fuel gas consumption each year is used to heat buildings, it is important that we accelerate the transition to clean, efficient alternatives, thereby bolstering our energy security.
The Government back the dynamism of industry to meet the needs of British consumers, which is why we are taking a market-based approach that puts industry at the heart of leading a transformation of the UK heating market, while keeping consumers in the driving seat with choice. Through the planned low-carbon heat scheme—the clean heat market mechanism—we will provide the UK’s world-leading heating appliance industry with a policy framework that provides the confidence and incentive to invest in low-carbon appliances. That will make heat pumps a more attractive and simpler choice for growing numbers of British households.
Similar to other such market-based mechanisms, such as the UK emissions trading scheme, this provision enables targets to be set so that companies can act to develop the market. That will allow them to build up key supply chains with the confidence that all actors in the market are facing the same incentives and policy conditions. Together with wider policy action, the clean heat market mechanism will help to create the conditions for rapid innovation and investment in the sector. That will support the creation of new products and services that work for British consumers and building owners, and help to encourage companies to find efficiencies in time and cost as this and other markets grow.
In addition to providing the overarching regulation-making power, the clause also establishes a set of relevant low-carbon heating appliances to which such a scheme could apply. The subsequent enacting regulations for a scheme will then determine whether that scheme will apply to all the appliances in the clause or just a subset of them. As has been recognised by respondents to the first policy consultation on the proposals, a low-carbon heat scheme as provided for in this measure has the potential to kick-start a transformation of the heating market in the United Kingdom. That will mean that by the end of this decade, it is easier for millions of households to slash their energy consumption by making their next heating appliance an ultra-efficient electric heat pump.
The purpose of clause 105 is to require regulations that establish a low-carbon heat scheme to make certain provisions as to the scope of the new scheme. It also allows regulations to make further provisions in relation to how a scheme will apply to parties that are in scope. In particular, it requires the regulations to set out the scheme participants to whom targets will apply, the types of low-carbon heating appliance that will qualify towards meeting those targets, and the period or periods of time for which targets will be set.
Relatedly, clause 105 also enables the scheme regulations to specify circumstances in which credit for activities carried out outside a given period may be allowed to qualify in that period. That would, for instance, allow for an approach taken in several comparable trading schemes, where a degree of credit carry-over and target carry-over from one period to another is sometimes allowed, which is sometimes referred to respectively as “banking and borrowing”. This and similar scheme design features could help to maximise the opportunity for scheme participants to successfully meet the scheme standards and build the heat pump market. That, of course, is a core aim of His Majesty’s Government.
Dr Whitehead
I do not think I have anything further to say. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 104 and 105 ordered to stand part of the Bill.
Dr Whitehead
We do not particularly want to adjourn.
Motion made, and Question put, That further consideration be now adjourned.—(Joy Morrissey)
Energy Bill [ Lords ] (Sixth sitting)
Thursday 8th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 8 June 2023 - (8 Jun 2023)
The Committee divided: - Ayes: 6 / Noes: 6 - Morrissey, Joy
The Chair
Before we begin, I remind Members that Hansard colleagues will be very grateful for speaking notes to be emailed to hansardnotes@parliament.uk. Please have all electronic devices on silent. Tea and coffee—none of you are sinning today—are not allowed during sittings; the only refreshment permitted in Committee is water.
I understand that the Government wish to move a motion to amend the programme order agreed by the Committee on 23 May and amended on 25 May, to change the order of consideration of the provisions of the Bill.
Motion made, and Question proposed,
That paragraph 2 of the Order of the Committee of Tuesday 23 May (as amended on 25 May) be amended—
(a) by leaving out “132; Schedule 7; Clause 133; Schedule 8; Clauses 134 to 137; Schedule 9; Clauses 138” and inserting “131; Clauses 140”;
(b) by inserting, after “273;”, “Clause 132; Schedule 7; Clause 133; Schedule 8; Clauses 134 to 137; Schedule 9; Clauses 138 and 139;”. —(Andrew Bowie.)
Dr Alan Whitehead (Southampton, Test) (Lab)
The Government motion will remove some of the discussion we would have had this morning on the independent system operator from this part of the Bill to the end of it, in effect—in terms of our proceedings. I have no objection to that happening, but I would like to know why.
While we are on matters of procedures, I also ask the Minister about his intentions for the new clauses tabled yesterday. They are clauses on the support of—
The Chair
Order. Dr Whitehead, I query whether that is in scope of this particular motion.
The Chair
I think that would be better. The Minister will respond to the substantive point.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
The hon. Member for Southampton, Test was right to ask for an explanation. The motion is to delay consideration of clause 132, schedule 7 and so on, which might otherwise have been reached in the course of today were we to proceed as planned originally. The Ways and Means resolution agreed by the House immediately after Second Reading needs to be supplemented before the Committee can consider the provisions. I understand that the Ways and Means resolution will be tabled as soon as possible in the coming days.
The Chair
The motion has not been agreed by the Programming Sub-Committee, so it may be proceeded with only if everyone is content. Does anyone object to the motion being considered? No objection.
Question put and agreed to.
Dr Whitehead
On a point of order, Ms Nokes. I was trying to slip this into our previous conversation, but I am happy to do it as a point of order. By the way, welcome to chairing the Committee; it is a pleasure to serve under your chairmanship. You are my next-door neighbour in Southampton, Ms Nokes—sorry, not Southampton, but near Southampton—
Dr Whitehead
A little bit—a road at the top of my constituency has you, Ms Nokes, as MP for half of it, while I am the MP for the other half. We are indeed close neighbours.
As has been discussed, the Government have kindly tabled a number of new clauses relating to Great British Nuclear and energy-intensive industry assistance. That brings to four the number of areas on which the Government have introduced new clauses while the Bill has been proceeding. This is beginning to resemble those episodes where people book a holiday in Spain, thinking they have a nice hotel, only to get there and find that it is a building site, with no rooms booked in sight.
That aside, given that the clauses have been tabled, it would be helpful to have an indication of when the Government intend to consider them. I say that because the Opposition need to properly scrutinise them, and may want to introduce amendments. The Minister will know that the deadline for tabling such amendments is today, so if the Minister was considering dropping those clauses into the Bill next week, that would obviously prevent us from tabling amendments in the usual manner. I would be grateful if the Minister clarified his intentions.
Andrew Bowie
I guarantee that the new clauses will be debated at the end of our process in Committee. I am sure there will be adequate time to debate them in depth. It may resemble a building site, but we are on the route to building a luxury, all-inclusive, five-star resort through this Bill, so he has nothing to worry about in that regard.
The Chair
I remind the Minister that it is not for him to make guarantees about when amendments might be grouped, but for the Chair.
The Chair
We resume consideration of the Bill with amendment 91 to clause 106, with which it will be convenient to debate clause 106 stand part. I call Dr Whitehead to move the amendment.
Dr Whitehead
I do not wish to move or speak to amendment 91 because it is factually deficient. I have a few words to say in the clause stand part debate.
Question proposed, That the clause stand part of the Bill.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I know that the shadow Minister said he did not want to speak to amendment 91, but for pure indulgence I would like to say a few things. The shadow Minister admitted that the amendment is not quite factually correct. It is clear that it was actually more on message for the Government than the Government are themselves in terms of heat pump installations. If it had been moved, I would have supported the amendment because it would set a much more ambitious target for the installation of heat pumps: at least 600,000 per year by 2025, instead of the Government’s target of 2028, which is completely out of kilter with the recommendations of the Climate Change Committee. I urge the Government to reconsider that and adopt a more ambitious programme.
Will the Minister say how many heat pumps were installed in 2022? What is the plan to get up to the Government’s target of 600,000 heat pump installations a year? This is an important Bill but it also shows the need for the Government to think in the round in terms of legislation. The clause and the amendment are all about heat pump installations. We are still awaiting the future homes standard. Will the Minister outline what will happen with that? Last year more than 200,000 houses were built in the UK—the largest number completed since the 2008 housing crash—and the majority of them are going to be connected to the gas grid and will not have heat pumps installed. Year in, year out, the number of houses that will need to be retrofitted with heat pumps will increase until the Government bring forward the future homes standard. I would like more clarity from the Minister on that, and about targets the Government are looking to set to drive it forward.
Dr Whitehead
The clause relates to the question of the installation of heat pumps, as the hon. Member for Kilmarnock and Loudoun correctly drew attention to. The intention of the amendment, had it been moved, was to place the Government’s own targets in the legislation. There is a question about the difference between those targets and what has actually happened so far with the boiler upgrade scheme, for example, with 30,000 heat pumps per year being underwritten for a three-year period, leaving a difference between the target and the number of heat pumps likely to be installed under that scheme of more than 500,000.
There is a considerable difference between Government targets, how many heat pumps have already been installed and how many heat pumps are likely to be installed over the next few years. One of the purposes of the amendment, which was not moved, was to stiffen the Government’s resolve in that respect by placing those targets on the face of the Bill, so that the question of how the gap is made up is rather more focused in the minds of the Government now and, indeed, any future Government.
It is important that we start the process of filling in the gap between target and actuality. I would be grateful if the Minister could give us a few brief views on how that might be done, and what he intends to do, possibly on the basis of this legislation, to make that gap clearly reachable and incorporate it into the progress that has already been made with heat pump installations.
Andrew Bowie
To answer the hon. Gentleman’s substantive point on why we are not incorporating the Government’s own target of 600,000 heat pumps per year by 2028, there are compelling reasons why we believe it would be unwise to set any particular target in the enabling powers in the Bill. The setting of scheme targets is best suited to the making of regulations. That is in part because that is when the best assessment of the relevant market conditions can be made, so that targets do not exceed what is viable and result in unintended consequences, which we would be worried about had we put the target on the face of the Bill.
Andrew Bowie
I will come to the hon. Gentleman’s questions in a moment, if he will be so patient. It is also because it is very possible that the scheme, under those powers, might be best focused not on any entire ambition for the deployment of one or more low-carbon heating technologies, but on a particular subset of that overall aim, such as retrofit properties but not new builds. That would ensure flexibility.
Alan Brown
I understand that the Minister does not want the targets to be on the face of the Bill; does that mean the Government plan to bring forward secondary legislation to facilitate the targets?
Andrew Bowie
That will be a matter for secondary legislation. I am sure that the hon. Gentleman and other Committee members cannot wait for the Secondary Legislation Scrutiny Committee to debate the detail of that.
I will answer the hon. Gentleman’s original questions. He asked why the Bill does not introduce the 900,000 heat pump installations recommended by the Climate Change Committee’s balanced pathway to net zero. Indeed, he asked why our aim is to introduce two thirds of that number, 600,000. The Government’s ambition for developing the heat pump market this decade is strategically compatible with all future heating scenarios, including those where hydrogen plays a major role. I know that the hon. Gentleman is fully aware of that, given his interest in hydrogen.
The CCC pathway, which suggests a market of 900,000 installations by 2028, assumes a minimal role for hydrogen in 2050. By contrast, it is interesting that the CCC’s hydrogen-led pathway suggests a much more modest deployment rate of heat pumps in earlier years. The Government believe that the step-change ambition for building a heat pump market as set out, which does not pre-empt wider strategic decisions in the middle of this decade, is the most prudent approach to this investment.
In answer to the hon. Gentleman’s second question, the building regulations will continue to set a performance-based standard, rather than mandating or banning the use of any technology if we do not want to head down that route. However, homes built under the future homes standard will be zero-carbon ready, with low-carbon heating and high levels of energy efficiency. I can confirm that 70,000 heat pumps a year are now being installed in the United Kingdom.
Question put and agreed to.
Clause 106 accordingly ordered to stand part of the Bill.
Clause 107
Further provision about scheme regulations
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
It is a pleasure to serve under your chairmanship, Ms Nokes. Clauses 107 to 113 detail the administration, enforcement, penalties and appeals related to the low-carbon heat schemes. Clause 107 sets out the various operational, administrative and monitoring features of the scheme that the regulations may provide for. As set out in a recent second policy consultation, the Government believe that it is important that the scheme enables participants a degree of flexibility to meet the targets. To that end, the clause allows the regulations to specify how scheme participants may meet or partially meet targets, other than directly selling low-carbon heating appliances themselves, such as through trade in certificates with other parties. The clause also provides for regulations to specify the consequences and options for scheme participants who fail to meet a target under the scheme.
Clause 108 enables the appointment in regulations of an administrator for a low-carbon heat scheme and the conferral of functions on that scheme administrator. The clause sets out that one or more public authorities may be appointed as scheme administrator. That would include the Secretary of State, as well as public bodies and regulators such as the Environment Agency and Ofgem. The clause also provides for regulations to authorise an appointed administrator to arrange for functions to be carried out by a third party.
Clause 109 provides for the assessment, enforcement and sanctioning of non-compliance with a low-carbon heat scheme. It enables the administrator to conduct a range of enforcement activities and provides for the regulations to establish sanctions for non-compliance, such as the failure to produce the required documentation or to make a necessary payment. That could be in the shape of both civil penalties, and potentially criminal offences where warranted. Clause 110 sets out that regulations may determine how any payments made by virtue of the penalties set out in clause 109, or by virtue of the payment framework provided for by clause 107, are to be used.
Clause 111 provides for the regulation to establish an appeals process against decisions by the administrator of a low-carbon heat scheme, or against penalties or other enforcement action taken for non-compliance by a scheme participant. Such an appeals process is relatively commonplace for obligations and trading schemes of that kind, so that disputes can be settled, enhancing confidence in decision-making processes related to scheme administration.
Clause 112 establishes procedural requirements for the making of low-carbon heat scheme regulations. The affirmative parliamentary procedure will be used for statutory instruments that first establish a low-carbon heat scheme. The affirmative procedure will also apply for regulations that make substantive changes to the fundamental parameters of a scheme—that is to say, the parties in scope of the targets or the heating appliances that the scheme is designed to encourage. Where the regulations are more administrative in nature, and the fundamental elements of a scheme are not being altered, the negative resolution procedure will apply. That will include, for instance, adjustments to the requirements for the keeping or provision of information, year-to-year adjustment of targets, or adjustments to the rules around the certificate trading between parties.
The clause also stipulates a requirement that before making scheme regulations the Secretary of State must consult the relevant Ministers in the devolved Administrations, so far as the regulations apply in relation to those respective nations. The Government have constructive engagement with our counterparts in the devolved Administrations at both official and ministerial level on the development of the clean heat market mechanism. We look forward to continuing to work closely and consultatively as we move forward with the scheme’s development. Finally, clause 113 provides definitions of key terms within the chapter.
Dr Whitehead
These are sensible provisions, following the initial clauses about low-carbon heat schemes, and they will help greatly with the regulation of the schemes generally. I have nothing to say about the clauses, other than that I was so excited by the Minister’s oratory a moment ago that I knocked my glass of water over.
Andrew Bowie
I will respond only to compliment the Opposition Whip, the hon. Member for Coventry North West, on the great job that she did clearing the water up.
Question put and agreed to.
Clause 107 accordingly ordered to stand part of the Bill.
Clauses 108 to 113 ordered to stand part of the Bill.
Clause 114
Modifications of the gas code
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss:
Amendment 118, in clause 115, page 106, line 23, at end insert—
“(4A) Provision under subsection (4), where a gas transporter is conducting a trial involving a fully alternative grid for the purpose of hydrogen delivery, must include guaranteed installation of other forms of low carbon heating by the gas transporter where a household does not wish to take part in the hydrogen grid conversion trial.”
This amendment seeks to ensure that no household will be forced to take part in the trial and will be given an alternative heating solution by the gas transporter (the DNO).
Clause 115 stand part.
Andrew Bowie
The clause defines what we mean by a hydrogen grid conversion trial and expands the duty of the gas transporter running the trial to participants to undertake work without charge. It also extends certain powers of entry contained in the Gas Act 1986 so that they apply for the trial. That will facilitate the effective and safe delivery of a large village hydrogen heating trial by 2025, which will provide crucial evidence to inform future decisions on the role of hydrogen in heat decarbonisation.
Taking timely strategic decisions on heating is critical to meeting future carbon budgets and the UK’s net zero target. Subsection (1) allows the Secretary of State to designate a hydrogen grid conversion trial and ensures that both clause 114 and clause 115 are narrow in scope and would apply only for the purposes of such a trial. Clause 114 also makes certain modifications to the Gas Act 1986 to build on existing provisions concerning powers of entry. That will ensure that the organisation running the trial has clear grounds to enter private properties to carry out any essential works, including replacing appliances and installing and testing safety valves; undertake inspections and tests for the trial, such as safety checks; and safely disconnect the gas supply in a property.
Gas transporters already have powers of entry into properties through the Gas Act. We are extending those powers in a very limited way to conduct the necessary work to set up and deliver the trial. Gas transporters will use the extended powers only ever as a last resort, once all other attempts to contact property owners and reach an agreement are exhausted. The existing rules on powers of entry requiring the gas transporter to obtain a warrant from a magistrates court will continue to apply. No one in the trial location will be forced to use hydrogen.
The gas transporter delivering the trial will develop an attractive consumer offer for participants, as well as viable alternative options such as electric cookers and heating systems, for consumers who do not wish to or cannot participate in the trial. Finally, I draw the Committee’s attention to the fact that most responses to the Department’s 2021 public consultation on facilitating a hydrogen village trial were broadly supportive of our proposals to change the legislation in this way.
Clause 115 focuses on establishing consumer protections for people taking part in this first-of-its-kind hydrogen village trial. It will do so by giving the Secretary of State two delegated powers to make regulations that require the gas transporter running the trial to follow specific processes to engage and inform consumers about the trial and ensure that consumers are protected before, during and after it.
Consumer engagement and support are vital for the successful delivery of the trial. The Department is working closely with the gas transporters as they develop their plans for consumer engagement and protection. Regulations will ensure that the gas transporter running the trial takes the necessary steps to inform consumers about how they will be impacted. That means that people will have the information they need to make an informed choice about whether to connect to hydrogen or accept the alternative offer during the trial. The gas transporter will also need to give adequate notice about the requirement to disconnect properties from natural gas.
The power to introduce regulations for consumer protections will work alongside existing protections such as the Consumer Rights Act 2015 and the Gas (Standards of Performance) Regulations 2005. I am sure that Members of the Committee will agree that the provisions in clause 115, which were well received by stakeholders when we consulted on them in 2021, are crucial to ensure the fair treatment and protection of people in the trial area. The powers will also allow the Department to set out the enforcement requirements for the regulations, which may include civil penalties but will not create any new criminal offences.
Dr Whitehead
The clause addresses some very important issues with the process of hydrogen trials, which are in fact already under way in a couple of parts of the UK. It relates to the first part of the ambition that the Government set out in the energy security strategy: to have village trials, leading perhaps to town trials later and, by the end of the decade, a city trial. Of course, to some extent that is subject to what may be decided in 2026 about whether hydrogen will go into heating systems in general. Even if the decision ends up as a negative and the Government decide not to universalise hydrogen for heating at that stage, the trials will of course be necessary should there be circumstances in which hydrogen can be used on a grid-isolated basis for heating in particular places, and it will be necessary to have the appliances and equipment capable of taking that hydrogen. The Minister will be aware that a number of boiler companies are already producing hydrogen-ready boilers and the like, some which are being used in the village trials.
There are two village trials under way at the moment: one in Ellesmere Port and one in Redcar. Interestingly, public appreciation of those trials is markedly different. One is trying to get everybody on board straight away. In the other, the company running the trial has taken a different approach to universal involvement. We might think that all the properties in a particular area need to be in the trial for it to be entirely valid, but that is not necessarily the case. One company is intending, at rather a late stage of the trial, to introduce a separate hydrogen main into the area. The other trial company is trying to get people on board without modifying the main and will use what was the gas main for carrying the hydrogen. That creates a considerable issue for participation in the trial.
The Minister said that no one would be forced to take part in trials, but at the same time spoke about enhanced powers of entry and various other things, which suggests that the powers could be used to force everyone to take part. That is what amendment 118 is concerned with. It states:
“where a gas transporter is conducting a trial involving a fully alternative grid for the purpose of hydrogen delivery”.
If we wish to adhere to the principle that not everybody has to take part in a trial—there might be many good reasons why people do not want to do so—there must be guaranteed arrangements for the installation of other forms of low carbon heating or indeed for no low carbon heating at all if an alternative main is put in place for people who do not wish to take part in grid conversion trials. Under subsection (4), the amendment would require companies undertaking trials to guarantee the installation of other forms of low-carbon heating, such as heat pumps or low-carbon gas heating. That would enable the trials to bring valid results, and give people in those areas the ability not to take part if they do not wish to do so.
Olivia Blake (Sheffield, Hallam) (Lab)
It is a pleasure to serve under your chairship, Ms Nokes. I rise to support the amendment, because this is a fundamental issue. The Minister talked about households only, but will the offer that he outlined be available to businesses? That is important, because businesses have different energy needs, even in residential areas.
It is important that we take people with us. They must have the option to say no to such trials and get low-carbon heating by another means. That is all I wanted to say on the amendment.
Alan Brown
There is another hydrogen trial ongoing—the H100 project in Fife, which is the world’s first trial of green hydrogen for heating and hot water. Like the hon. Member for Southampton, Test, I hope that that experiment is successful.
That trial in Fife highlights the issues that we are debating today. Will the Minister update the Committee on the number of properties signed up to H100? Investigative journalists have reported that the £1,000 sign-up offer was not enough of an inducement to make households sign up. That is the conundrum: it is fine to say that there will be a financial incentive or a consumer offer—the Minister says that we will never need to resort to using the powers in these clauses—but it is clear that some people are reluctant to sign up. If the financial inducement is not enough, how will the Government and the gas operators take those people with them and get this over the finishing line?
It is absolute critical that we take people with us. It is critical that consumers understand the offer they are getting, the risk and the way that the hydrogen trials are being undertaken. It is important that there is transparency in the reporting of the trials. In particular, we need to understand how risks and leakages will be reported. The worst thing that can happen is for rumours or wrong perceptions to circulate.
Amendment 118 is intended to give people an alternative to being part of a hydrogen trial. I support that principle, but that still leaves us with the dilemma of what happens if a household says, “I don’t want to be part of a hydrogen trial and, by the way, you can forget these heat pump things. I am quite happy with my methane gas, thank you very much.” What would happen in that circumstance?
That brings me to the Minister’s argument on Second Reading that the powers will not be used to either force people into the hydrogen trial or leave them disconnected from the gas network. What happens if not enough people are signing up? Frankly, the Government will then have a dilemma. If they want to facilitate these hydrogen trials, they need enough people on the hydrogen network, otherwise the trials will not be sufficient to get an understanding of, or see, the proper operation and benefits of hydrogen.
What will the Government do if not enough people are signing up? How will they facilitate people signing up without forcing them, and how will they get these powers to be successful in terms of mass criticality? There is the old phrase, “You can’t make an omelette without breaking some eggs.” It might well be that the Government are going to upset some people, but they will have to be honest about it. Just saying, “There is no way we will use the powers in the Bill” might be unintentionally disingenuous. I am curious what the Minister’s thoughts are. It is fine to say that the Government will not use them, but that remains to be seen.
Andrew Bowie
I thank hon. Members for their comments. The hon. Member for Kilmarnock and Loudoun is absolutely right that there is a third village trial, which has not been referenced this morning. That is, of course, the H100 trial in the kingdom of Fife. I will endeavour to get an answer to him on how many households have chosen to take part in that. I do not have the figure to hand, but I will write to him with an updated number.
On the other two trials, final decisions have yet to be made on the locations, and details of the exact processes are a matter for the companies and operators engaging in the trial. I thank the hon. Member for Southampton, Test for his amendment. It is very important that we discuss the issues he raised. We have always been very clear that nobody will be forced to use hydrogen, and alternative heating solutions and appliances such as electric heating systems and cookers will be offered for those who do not take part in the trial. As my noble Friend Lord Callanan confirmed in the other place, all consumers in the trial location will have the right to decide whether they use hydrogen or an alternative heating solution for the duration of the trial.
The requirement was clearly established in a joint letter from the then Department for Business, Energy and Industrial Strategy and Ofgem to the gas transporters, which set out the requirements that will have to be met before any funding is provided to the next stages of the trial. It is on the shoulders of the operator to prove that they have community consent to proceed with the trial in a given location. This is a fundamental requirement for the trial. The gas transporters need to demonstrate that they have a viable plan for providing alternatives, otherwise His Majesty’s Government will not proceed with the trial proposal. This obligation will also form part of any future funding agreement.
Alan Brown
I think that goes to the heart of what I was getting at. The Minister is saying that the Government will not proceed if not enough people sign up and give consent to the gas network companies. Are the Government basically saying that people effectively get their own referendum or mandate to decide whether the Government’s trials on hydrogen go ahead? It seems to me that it is fundamental to Government policy to test this out, but they are actually saying that by default citizens will decide whether the trials are going ahead or not. That could completely derail Government policy.
Andrew Bowie
I hasten to suggest that what we are doing through this Bill is legislating to facilitate for the operation of those trials within the United Kingdom. The merits of such trials and the procedures through which operators convince or make the case for those trials going ahead will be a debate following our establishment of the frameworks through which we would like to see the trials develop. That is what we are debating through the Bill today.
I would like to say again that there is already an effective way to ensure that the networks provide an alternative to hydrogen. As such, we do not believe that adding to the Bill is necessary for the success of any of the trials. I fully appreciate the intention of the hon. Member for Southampton, Test to ensure that the trials are conducted properly, with alternative systems offered to those who take part.
I realise that I have not answered the hon. Member for Sheffield, Hallam’s question; the same offer will be made to businesses as households. Businesses will be protected in the same way as individual households are as a result of how we have drafted the Bill. I hope hon. Members are reassured that there are already steps in place to ensure that everybody is protected and that there is a choice. I hope the hon. Member for Southampton, Test will find it within himself not to press his amendment to a vote.
Question put and agreed to.
Clause 114 accordingly ordered to stand part of the Bill.
Clause 115
Regulations for protection of consumers
The Chair
I would like to check with Dr Whitehead whether he wishes to move his amendment formally?
Dr Whitehead
I would like to move the amendment formally and explain briefly why the Opposition would like the amendment.
The Chair
The debate has already taken place. It is down to you, Dr Whitehead, to move the amendment formally.
Amendment proposed: 118, in clause 115, page 106, line 23, at end insert—
“(4A) Provision under subsection (4), where a gas transporter is conducting a trial involving a fully alternative grid for the purpose of hydrogen delivery, must include guaranteed installation of other forms of low carbon heating by the gas transporter where a household does not wish to take part in the hydrogen grid conversion trial.”—(Dr Whitehead.)
This amendment seeks to ensure that no household will be forced to take part in the trial and will be given an alternative heating solution by the gas transporter (the DNO).
The Chair
In accordance with precedent, I give my vote to the Noes.
Question accordingly negatived.
Clause 115 ordered to stand part of the Bill.
Clause 116
Fusion energy facilities: nuclear site licence not required
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 51— Fusion energy facilities: nuclear site licensing—
“The Secretary of State must consult on and establish a revised nuclear site licence regime for fusion energy which will not be subject to the full range of safeguards associated with the use of fissionable materials but must have regard to the residual radioactivity of the proceeds of fusion activity.”
Andrew Bowie
Clause 116 clarifies the regulatory framework for fusion energy facilities by explicitly excluding them from nuclear site licensing requirements. That will provide certainty for the public, regulators, and fusion developers and investors. We are acting now to deliver on the Government’s fusion strategy, which was published last year and set out how the UK aims to commercialise fusion energy, which could provide a source of low carbon, safe, secure and effectively unlimited energy.
The UK is widely recognised as a world leader in the most promising fusion technologies. For example, the UK’s ambitious spherical tokamak for energy production programme—STEP— aims to develop and build a fusion prototype powerplant in the UK by 2040. That is only 17 years away. We announced in October 2022 that the site for STEP would be at West Burton in Nottinghamshire, which will help to bring high-skilled jobs and investment to that region.
Experimental fusion facilities currently operating in the UK are regulated under a framework that is separate from the nuclear site licensing regime. Under that framework, the Environment Agency and the Health and Safety Executive have, since 1983, successfully regulated the Joint European Torus, which is currently the most powerful operational fusion device in the world. It is run by the UK Atomic Energy Authority in Oxfordshire, which I have had the pleasure of visiting.
Following consideration of the responses from last year’s consultation on fusion regulation, the Government have decided that this framework would provide proportionate and appropriate regulation of future fusion energy facilities. It is a position supported by the current regulators. Clause 116 makes the UK the first country in the world to legislate for fusion energy. It will enable the sector to plan with confidence, based on a regulatory framework that will continue to maintain public and environmental safety, helping to encourage investment and accelerating the commercialisation of fusion energy.
Dr Whitehead
This is a bit of a stand-alone clause, in as much as it seeks to separate fusion energy from fission energy in terms of its future regulation. As the Minister set out, it is a pretty negative clause, in as much as it appears to suggest that fusion energy is equivalent to worrying about regulation for a warehouse or a general industrial site, as opposed to what is, in the Nuclear Installations Act 1965, a very systematic programme of regulation and care taken for the installation of nuclear plants.
Katherine Fletcher (South Ribble) (Con)
This summer, along with colleagues on the Science and Technology Committee, I had the opportunity to visit the Torus at Oxford—a particularly impressive site—and to hear from not only academic scientists but private businesses, and they were calling for this measure. Having seen as a little girl, and worked in, the nuclear fission industry in Sellafield, I can assure the hon. Gentleman that these are two completely separate processes. The stripping of electrons to produce a plasma—while nuclear, in that it is engaging with nuclear atoms in the centre—is not the same as splitting large amounts of, say, uranium and creating by-products that could be injurious to human health and require an enormous amount of regulation, such as alpha and beta radiation. Does he agree that it is possible that in seeking to be mega safe, we risk choking off an energy source that could be the answer for all our futures, and one in which Britain is genuinely recognised as a global leader?
Dr Whitehead
The hon. Member is right that the processes are quite different—I was about to put forward a few reflections on that—but they are not completely unconnected. As she mentioned, fusion is essentially about containing a very high-temperature process of the fusion of molecules into other molecules—
Dr Whitehead
Into a plasma within a contained vessel. The processes of producing that plasma for the purposes of electricity generation are indeed very different from producing steam, effectively, for electricity generation through the decay of radioactive isotopes within a controlled reactor. However, what happens when that plasma is produced is that a very large amount of neutrons are released, which bombard the sides of the vessels within which the whole process is contained so that, over a period of time, the atomic structure of those vessels starts to change and there is considerable radioactivity contained within the vessels, which, when the site is decommissioned, would have to be taken down and probably stored in a repository in the long term because of its enduring radioactivity. The hon. Member is also right to say that the life of the radioactivity that is produced in the plasma process is a question of, among other things, tritium.
Katherine Fletcher
Is the hon. Gentleman suggesting that an individual neutron is a body that can further emit a radioactive source? That cannot be true. Radioactivity, by its nature, is the smaller bits that come as a co-product. While I accept that there is a need to make sure that any industry is responsible and can look after itself, it is about making sure that the industry is being properly regulated, but perhaps not regulated as a fission nuclear site. I am sure he will agree that although the containment vessel is important in the process, it is actually about the generation of the electromagnetic fields that contain the plasma, which is the subject of much research at the moment and would prevent the problem he is describing—of neutron leaking into both the concrete and steel containers. Will he clarify that point? A neutron, in itself, can only decay into quarks. That is what the clever guys at CERN do when they smash things together at speed.
Dr Whitehead
The hon. Member is of course right to say that neutrons, in their own right, cannot produce radioactivity, but that is not what I was saying. What I was saying is that the process by which neutrons are released to bombard the vessel in which the process is contained indirectly produces radioactivity through changes in the structure of that outer casing. Perhaps I can inform the Committee briefly by setting out the description in a recent note from the Bulletin of the Atomic Scientists, which says:
“To produce usable heat, the neutron streams carrying 80 percent of the energy from deuterium-tritium fusion must be decelerated and cooled by the reactor structure, its surrounding lithium-containing blanket, and the coolant. The neutron radiation damage in the solid vessel wall is expected to be worse than in fission reactors because of the higher neutron energies. Fusion neutrons knock atoms out of their usual lattice positions, causing swelling and fracturing of the structure. Also, neutron-induced reactions generate large amounts of interstitial helium and hydrogen, forming gas pockets that lead to additional swelling, embrittlement, and fatigue. These phenomena put the integrity of the reaction vessel in peril.”
I think the hon. Member will be clear from that that it is not the neutrons that are the issue; it is the radiation.
The Chair
Both your previous interventions have been quite long. Perhaps you might consider making a full contribution when Dr Whitehead has come to the end of his remarks.
Dr Whitehead
I hope we have established that it is not the case that fusion activity is much more advantageous than fission from a safety and waste point of view. It is not, in itself, radioactive neutral. Additionally, the process produces a relatively small amount of tritium—much more of which is produced in fission reactors—which clings to the vessels and can get into the waste stream and produce radioactive water. Although that is not a big concern, it certainly needs to be taken into account as far as safety features of the overall plants are concerned. The case that I am trying to make is that, though it is important to progress with fusion—which is a much safer and, as the Minister said, potentially much more abundant source of energy—we should not be blind to its side effects.
As I have described, the side effects are not just about the problem of the potential embrittlement of the casing and the need to treat that casing in due course, the need to stop tritium release through lithium blankets around the sphere core and the difficulty of making those blankets completely sealable. All those things suggest that the sorts of actions in the nuclear installation regulations and the Nuclear Installations Act 1965 are rather more pertinent than we might have thought, than the Minister suggested or than the clause seems to provide. I suggest a modest revision of the clause so that, instead of dismissing the safety concerns about and operational arrangements for fusion, it brings forward a revised, and perhaps acceptably less rigorous, process that nevertheless falls within overall nuclear guidelines for fusion activities.
In any debate on fusion, it has always been said that fusion is a very bright future for us but that it is 40 years away. Well, it is not 40 years away now; it is much closer to being realised. As the Minister said, in the UK, spherical tokamak for energy production is potentially producing good results, so we could be a few years away from having to get this regime right, and it is right that we do so now. Our new clause 51, which—for the guidance of those who have given up going through all the amendments and new clauses in the amendment paper—is to be found right at the back on page 58, states:
“The Secretary of State must consult on and establish a revised nuclear site licence regime for fusion energy which will not be subject to the full range of safeguards associated with the use of fissionable materials but must have regard to the residual radioactivity of the proceeds of fusion activity.”
That is a sensible alternative that will not, or should not, in any way impede the development of fusion, but will provide a clear understanding as to what we are dealing with as far as fusion is concerned. It would be a programme of appropriate and proportionate safeguards—yes, associated with nuclear safeguards in the background—that makes clear the very different circumstances under which fusion works. That would be helpful.
Andrew Western (Stretford and Urmston) (Lab)
I am listening carefully to the debate that is unfolding. We appear to be heading towards a binary position—fulfilling all the requirements under the Nuclear Installations Act 1965 or effectively removing all the requirements as the fusion process comes in. Does my hon. Friend agree that actually the balance of risk is not binary in that way—that fusion can activate the walls of the plasma vessel as he has set out and that therefore, although we all agree that we should seek to step down some of the licensing requirements, it would indeed be prudent to have some process, subject to broader restrictions around nuclear, that would place us within the realms of acting in a way that is “better safe than sorry”?
Dr Whitehead
My hon. Friend has put forward very well a potential problem that we are moving towards here—a problem that the new clause, which I am sure he will support, is designed to get us out of. This is a specific solution to the potentially binary nature of the debate. It is to accept that some safeguards are necessary, that there is some radioactivity, that it is not of the same nature or extent as under fissionable arrangements and that it is not necessary to put in place all the same safeguards as for fissionable activity, as if fusion were just a subset of fissionable activity. I recognise that that is not the case and that the safety regime need not be the same as for everything related to fissionable activity.
This morning, I heard the Minister say that the Government are perhaps thinking about some form of regulation that would go beyond what appears to be the negative nature of this particular proposal, but at the moment I cannot see any moves in that direction. The new clause would, I think, give us the best of both worlds. It would allow us to proceed with fusion activity with safety clearly uppermost in our minds, but we would not be impeding the process by the way we regulated. We would all want this to happen. It is a proper arrangement as far as safety is concerned, and would enable proper progress as far as fusion is concerned.
Once again, if the Minister is not more forthcoming in moving away from the position of this particular new clause, we may want to divide on it: it is an important principle that we should get regulation right, from the start of the fusion process. I agree with the Minister that it could mean an exciting future, but it needs to have the proper safeguards in place for it to work in all our interests in the years to come.
Katherine Fletcher
Thank you, Ms Nokes, and I apologise for not prosecuting my arguments procedurally in the correct way earlier. I want to respond to what the hon. Member for Southampton, Test has said. I completely accept that he has tabled his new clause in the spirit of public safety, but I do think that this is an area that could be better understood by the public. I gently suggest to him that there might be a slight misapprehension in some of the material that he just quoted from.
What the hon. Gentleman was describing was neutrons degrading a physical structure, as a by-product of the plasma. There is an analogy here: it is almost like it getting shot at or water going through a concrete structure and then causing rust and degrading the steel within it. That is not necessarily the creation of a nuclear radioactive source; that is something being peppered with neutrons. And that is why it is not a commercially viable facility at the moment—because there are still things to be worked out, not least how we ensure that we do not build a very expensive thing that, by its own nature, then degrades over time and use. But that is not the same as creating a radioactive source.
The hon. Gentleman mentioned deuterium and tritium, which are different types of naturally occurring hydrogen elements. Tritium sounds, to my ear, almost like something that the Terminator would be using to do something particularly exciting. In fact, it is only a hydrogen that occurs in nature and that has a single proton and two neutrons within the nucleus, so it is a bit bigger and heavier than is typical. What that means is that it is a little more unstable. The natural half-life of tritium is 12 years, whereas the nuclear regulations that the hon. Gentleman seeks to apply or partially apply in this instance are designed to deal with things that have half-lives of thousands of years. Someone will tell me that I have this wrong, but with uranium-238 we are talking about very different orders of magnitude—
Olivia Blake
I am a biomedical scientist by background, so I come to this with a medical perspective. The issue with tritium is that it produces beta waves, which are a more damaging form of radiation to human tissues—only in a minor way, as it has a score of 1 compared with 20 for alpha waves, but there is an underlying risk. Exposure of the workforce to that level continuously could put DNA stability at risk, because it is an ionising form of radiation. If there is a problem—containment is always a big challenge that gets raised by scientists—hopefully we will overcome it, but it is right to have the protections, particularly for the workforce. That is why I welcome new clause 51.
Katherine Fletcher
I thank the hon. Lady for her intervention. Of course beta radiation is produced when a nucleus is separated, when the neutrons in tritium move away. For me, it is a question of proportionality and risk. At the moment, there is no viable commercial solution, so there is not a workforce but a research community, which is publicly and privately funded. On that becoming a workforce solution, I agree with her that ensuring that people are safe at work is vital but, should this come about, the Health and Safety Executive will not leave it unmonitored. However, new clause 51 is not about workplace safety; it is about putting something that is fundamentally not nuclear fission, as opposed to nuclear fusion, into a set of regulations designed to deal with such things.
I wondered about the criteria, given that the hon. Member for Sheffield, Hallam mentioned radioactivity occurring in the fusion environment. What percentage of Cornwall, with its radon gas, might be caught up in the thresholds? I will be interested to pursue on Report what we are actually talking about. As a scientist, the hon. Lady knows that 100 is very different from 1, even though 1 poses some risk.
I am grateful to the hon. Member for Southampton, Test for tabling the new clause, but given the opportunity for clean, net zero energy—which really could be the panacea for the world, as tree-huggers like me would say—in the UK we should look to tread lightly, but carefully, with any regulation of an industry that has such a level of potential and to which the UK has contributed so much already. He mentioned torus structures, but those are only one of a series of different potential generational tools—torus might be the research tool, not the commercial tool, so his concerns could disappear with a completely different production facility, perhaps based on electromagnetic rather than physical containment.
With regret, because I understand the genuine and heartfelt nature of the hon. Gentleman’s new clause, I think it is important that we do not stifle a nascent industry with regulation. I will therefore support the Government’s position.
Andrew Bowie
I thank my hon. Friend and Opposition Members for a fascinating discussion of the clause and new clause 51, and of how we proceed with regulation of this nascent industry—a technology in which we are leading the world, as has been said multiple times. Such comments have also been made in various legislatures around the world, including the US Senate, in which a wish was recently expressed to match the progress being made in the United Kingdom and to have a framework such as the one in which we have allowed fusion technology to be developed.
The Government’s plans are about working up from the frameworks that apply to existing fusion sites, rather than working down from them. We believe that the new clause could stifle the development of the technology that we have been exploring in depth this morning. It is vital to stress that we are not—definitely not—trying to make fusion energy facilities avoid licensing requirements. Nor are we seeking to water down any regulations. For a fusion energy facility to be developed and operated in a lawful way, it must go through permitting and consenting processes governed by the relevant regulators. In England, those are the Environment Agency and the Health and Safety Executive. This is consistent with how other facilities with radioactive materials such as cyclotrons and large-scale industrial irradiators are regulated for at the moment.
The regulatory process that we have right now requires fusion energy facilities to go through various approval stages as well as ongoing compliance and engagement. The requirements associated with those regulatory obligations are proportionate to the hazard associated with the fusion energy facility. I should also say the legislative consent motion procedure has been invoked. We have already consulted the Scottish Government on the procedure and they raised no concerns; obviously, there are separate regulations and bodies responsible for the issue in Scotland.
We do not believe that fusion energy facilities should require nuclear site licences. That is what we are discussing this morning. They should not go through the process requiring nuclear site licences because, following consultation, we believe that that would be disproportionate to the hazards associated with fusion. Such hazards, as various hon. Members have explained in greater detail than I would ever be able to, are significantly lower than with nuclear fission, and the regulatory frameworks required for fission would therefore be too burdensome for the technology.
The Government agreed with the majority of the consultation respondents that the existing regulatory processes of consenting and permitting would be proportionate and appropriate for fusion energy facilities. That was all set out in a full consultation that preceded the introduction of the Bill. We see no need to consult again on the same issue at this time. I hope I have been able to set the minds of the hon. Member for Southampton Test and others at rest following their justifiable, reasonable and well thought through questions on this matter. I hope that he will feel able to withdraw his amendment.
The Chair
The new clause has been debated, but we will not be taking a decision on it at this point.
Question put and agreed to.
Clause 116 accordingly ordered to stand part of the Bill.
Clause 117
Treatment of recycled carbon fuel and nuclear-derived fuel as renewable transport fuel
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Transport is the largest emitting sector of greenhouse gas emissions, producing 26% of the UK’s total emissions in 2021. Low carbon alternatives to traditional fuels such as petrol and diesel will play an important role in our energy transition. The renewable transport fuel obligation and the forthcoming sustainable aviation fuel mandate supports our policy on decarbonising transport by encouraging the production and use of renewable fuels that do not damage the environment.
Clause 117 will enable two types of low carbon to be treated as though they were renewable for the sole purpose of those schemes, helping the UK to further decarbonise transport. The two low carbon fuels are recycled carbon fuels, produced from otherwise unrecyclable waste plastics or industrial waste gases that cannot be avoided, reused, or recycled, and fuels derived from nuclear energy.
Currently, powers under the Energy Act 2004 only permit renewable fuels to be supported. The clause has been carefully drafted so that it does not classify recycled carbon fuels and nuclear-derived fuels as renewable fuels, ensuring these fuels are treated as though they were renewable for the sole purpose of part 2, chapter 5 of the Energy Act 2004. That allows schemes such as the renewable transport fuel obligation and forthcoming sustainable aviation fuel mandate to support the use of those types of fuels. It does not grant them wider consideration as renewable fuels.
Both fuel types have the potential to deliver significant carbon savings over traditional fossil fuels and are a vital replacement for difficult-to-decarbonise sectors such as commercial aviation and heavy goods vehicles.
Dr Whitehead
I have nothing to say on the clause, but I believe that my hon. Friend the Member for Sheffield, Hallam does.
Olivia Blake
I have a few concerns about clause 117, which would, as the Minister outlined, allow fossil fuel waste to be reclassified as renewable energy in the form of fuels for policies including the proposed sustainable aviation fuel mandate, which is currently being consulted on by the Department for Transport. It seems the Department would like to be able to include recycled carbon fuels, including unrecyclable plastic, as eligible fuels under the sustainable aviation fuel mandate. That is why the Bill will permit recycled carbon fuel to be treated as renewable, to help us to meet our sustainability targets.
Andrew Bowie
I thank the hon. Member for Sheffield, Hallam for her questions. As well thought through and well meaning as they are, the renewable transport fuel obligation already requires that fuels meet strict eligibility criteria to ensure that they are sustainable and provide minimum greenhouse gas savings compared with traditional fossil fuels such as petrol or diesel. In respect to recycled carbon fuels, we are currently consulting on a detailed methodology to ensure that the emissions associated with their production and use are correctly quantified. Using nuclear energy to produce hydrogen, for example, has very low operational and full life cycle carbon intensity, with no indirect land use impacts.
The hon. Lady also asked about the potential that this may, by accident, incentivise or perpetuate the creation of plastic waste or industrial processes that generate waste gases. Recycled carbon fuels are fuels produced from fossil waste that cannot be avoided, reused or recycled, and have the potential to reduce greenhouse gas emissions relative to petrol or diesel. I know that she understands that.
In line with the principles of the waste hierarchy, our recent consultation on introducing recycled carbon fuels into the renewable transport fuel obligation set out eligibility criteria to ensure that recycled carbon fuels would not be produced from recyclable material. Other schemes, such as the sustainable aviation fuel mandate, will have similar criteria to ensure that the production of waste is not incentivised by this. For solid recycled carbon fuels to be eligible for support, suppliers must be able to demonstrate that the waste is derived from facilities that have adequate separation processes to remove recyclable plastics. We believe that converting non-recyclable waste plastic into recycled carbon fuels can achieve a greater energy recovery than disposing of the waste via conventional means. I hope that answers the hon. Lady’s concerns.
Question put and agreed to.
Clause 117 accordingly ordered to stand part of the Bill.
Clause 118
Climate Change Act 2008: meaning of “UK removals”
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
This is a very short clause. The purpose of the clause is to enable engineered removals of greenhouse gas emissions to count towards our carbon budgets by amending the definition of UK removals in the Climate Change Act 2008. This amendment follows a direct recommendation from the Climate Change Committee in their sixth carbon budget report on greenhouse gas removals. In the net zero strategy, we set the ambition of deploying at least 5 million tonnes of CO2 per year of engineered removals, such as bioenergy with carbon capture and storage and direct air carbon capture and storage, by 2030, in line with assessments made by the Climate Change Committee and the National Infrastructure Commission. This amendment provides for these removals to be included in the calculation of carbon budgets.
Dr Whitehead
This is another stand-alone clause. We have discussed the question of DACCS and other forms of mechanical greenhouse gas removal before, and our consensus of understanding was that potentially this could be quite an important element of carbon removal in the future. It is therefore important that it is included in definitions and calculations, and we certainly support the change to achieve that outcome.
Alan Brown
I will be quick. I am quite happy to support the clause. Bill Gates said just the other day that the technology has moved much quicker than even he believed. The Minister will be well aware that one of the possible technologies that will be deployed in the Scottish cluster is direct air capture. With this clause and the Bill coming through, it makes it even more imperative that the Scottish cluster is given the support it needs and the track 2 timeframe is confirmed, so that we can get the legislation in place and deliver the carbon savings that the Government want to see.
Andrew Bowie
I do not disagree. As the hon. Member knows, I am a passionate advocate of carbon capture, utilisation and storage and the clusters emerging across the United Kingdom. As I know he supports and champions, we have already spent over £40 million supporting the Scottish cluster as a UK Government.
Question put and agreed to.
Clause 118 accordingly ordered to stand part of the Bill.
Clause 119
The Independent System Operator and Planner (“the ISOP”)
Dr Whitehead
I beg to move amendment 95, in clause 119, page 108, line 34, at end insert
“including the oversight of efficiency and loss reduction in cabling”.
This amendment would give the Independent System Operator oversight of cabling efficiency and loss reduction in cabling.
The Chair
With this it will be convenient to discuss the following:
Amendment 96, in clause 119, page 109, line 3, at end insert
“and of distribution systems in conjunction with licenced distribution system operators”.
This amendment would include certain distribution systems in the functions of the ISOP.
Amendment 97, in clause 119, page 109, line 5, at end insert
“and of distribution systems in conjunction with licensed distribution system operators”.
This amendment would include certain distribution systems in the functions of the ISOP.
Clause stand part.
Clause 120 stand part.
New clause 37—Assurance of independence of system and distribution operators—
“(1) The Secretary of State must appoint a supervisory and advisory board of at least eight suitably qualified independent energy figures to assist the person designated as the ISOP under section 120.
(2) The purpose of the board appointed under subsection (1) is to assure the independence of transmission and distribution system operators through independent oversight of and advice to the ISOP.
(3) Energy UK and the Energy Networks Association must be consulted on the appointment of the board under subsection (1).
(4) The Secretary of State may make provision of financial assistance to enable the board to carry out its functions.”
This new clause aims to ensure the independence of system and distribution operators.
Dr Whitehead
We come to a section of the Bill that I heartily approve of. I have long championed the idea that we set up an independent system operator in this country. It is really important in our next phase and where we go in renewing our infrastructure, and ensuring there are delivery mechanisms to cope with the renewable energy that we hope will be the mainstay of our carbon production. It is important not only that those systems are in place, but that they are in place as soon as possible. There will be discussions in this section about the best way of ensuring that the ISOP is set up in such a way that it can perform that function.
As the Minister will know, the independent system operator has been in gestation for a while, in terms of the separating of National Grid ESO from the National Grid itself. National Grid ESO now performs something of the function I have started to describe, but without the remit to do so. What we need over the next period is not just National Grid ESO, nor something with a different name from National Grid ESO, but something that is much closer to a system architect in upgrading our systems for renewable purposes. That is how I see the development of the ISOP. It is important that in our first go at what the ISOP does, as it were, we get the best combination of things it is responsible for and that we get right its ISOP set-up.
In the development of the grid so far, certainly as far as renewable energy connections are concerned, there is no real distinction between the high-level grid, which was the historic purview of National Grid and ISOP, and the lower-level grid, which is still pretty powerful but is in the hands of the distributed network organisations. Sometimes a false distinction is made between what is happening at National Grid level and what is happening at a more regional or local level. There is no real distinction now, because renewable sources, in particular, are seeking to substantially connect to 123 kV cables to a far greater extent than they are seeking to connect to high-level grid 440 kV cables. Consequently, some of the biggest backlogs in connection dates are not just in the high-level grid.
The Minister will be aware—we have discussed this previously in the House—that a number of large wind farms are getting connection dates to bring ashore and distribute the electricity they are producing not just a few years away, but in 2036. As I have mentioned previously in the House, that is one year away from when the Government have indicated they wish to see a predominantly renewable energy system in place. We may well have the tools to have the low-carbon energy system in place, but if we cannot deliver the electricity from those tools to anybody, we do not have a low-carbon energy system in place in the end. It is important that we get the system properly in place, so that it can deliver the connections and the offshore re-cabling. That way we will have a decent grid highway with anticipatory investment.
Alan Brown
On the hon. Member’s comments about offshore green infrastructure, does he share my concern that offshore developers in Scotland are now being told that they need to connect to the grid in Blyth because the connections are not available in Scotland? It just seems counterproductive and clearly adds additional costs to these projects.
Dr Whitehead
Indeed. The hon. Member makes an important point about where we connect and the facilities for connection, which I will consider briefly in a moment. This is also a substantial problem with DNOs, as we know from published data on local junction boxes and various other things. How long a local or a regional connection will take is determined by whether the system is red, yellow or green in terms of its local connections within the DNO network. We are seeing similar waiting times for smaller connections and the sort of large offshore connections that the hon. Member mentioned. Obviously, that is difficult in helping to ensure that onshore electricity is delivered as well as offshore electricity. That is one reason why the distinction between the high-level grid and the lower-level grid in the circumstances of our renewable, low-carbon future is not as great as has hitherto been the case.
The hon. Member for Kilmarnock and Loudoun rightly draws attention to the fact that some Scottish-based offshore schemes are now being asked, on a point-to-point basis, to connect south of the border, because the facilities for delivering from those connections, were they to be north of the border, are not as good as they should be. Interestingly, the Government are presently considering a bizarre series of arrangements called marginal cost pricing, which will deter certain people from taking particular views about where they should connect because there will be a price differential in connecting. As I am sure the hon. Member will agree, the solution is not to start messing about with theoretical market considerations about who might connect where, but to build the stuff so that people can connect to it properly, where they are and where they want to be, with a certainty that there will be a connection in a short period of time and that what they have connected to gets to where we want it to be. Those are all reasons why the ISOP will be so important.
Through these amendments we want in no way to undermine, but rather to enhance, the substance of the ISOP. Our amendments, which are on page 5 of the amendment paper, seek to do several things regarding the structure and operation of the ISOP. First, we think that the ISOP should have oversight not just of the cabling itself, but of the cabling efficiency and loss reduction in cabling as it goes around the country. That is a potentially important issue for the future. I am sure that hon. Members know how much electricity is lost just by the transmission function.
Katherine Fletcher
I believe it is about 6% in standard main lines, which presents a huge opportunity for us to be more efficient with the energy we generate and transmit.
Dr Whitehead
The hon. Member is absolutely right. I think the figure is around 6%—sometimes a bit higher—but part of the issue with that loss is not just the general inefficiency of the system; under certain circumstances, we are using cables for transmission that are much less efficient than they should be.
I visited—this shows the exciting things that I do as shadow Energy Minister—a test site of a highly efficient cable system. I will not mention the company’s name, but as far as I know it is pursuing a much more efficient cable system with a number of DNOs. When I got to the site, there was not very much to see because the cable had been buried underground; I was pointed to a field. There was, however, in the corner of the field, a hut in which calculations on how the cable was performing, and how it would perform in conjunction with other forms of cable, were being undertaken. I was able to see for myself an increase in the efficiency of the cable of about 15%, just by having that cable design as opposed to others.
It seems to me quite important that the cabling introduced to our new system be as efficient as possible. It needs to be clear to the companies that will put the closed cables in that that is what will be expected of them. That is why we would like an additional function to be added to the ISOP’s concerns: oversight of efficiency and loss reduction in cabling.
We have tabled other amendments, which concern the relationship with the DNOs. It is important that we do not make an artificial distinction in terms of what we are doing with the ISOP in the high-level system and others. I am afraid that the Bill, whether intentionally or not, appears to create that divide. The DNOs can get on with their activities, and the high-level grid will have a different system of governance and management. That is why amendment 96 would add
“and of distribution systems in conjunction with licenced distribution system operators”
to the end of line 3, in clause 119. Amendment 97 would add the same words. That would create a much better system of co-operation and collaboration between the DNOs and the new system operator.
I appreciate that we will not vote on new clause 37 today. It is important for the independent system operator really to be independent, and not a creature of either the energy companies or the Government, so that it has its own ability to look at the system, to produce recommendations and arrangements, and to oversee the development of the system as its own master within that.
We therefore suggest in new clause 37 that an independent advisory board be set up to ensure the independence of the ISOP. There are other ways of doing this, but we are suggesting one particular way of ensuring that the ISOP operates in the genuinely independent way that we all want it to in pursuit of the future of grids and connections.
I hope that the Minister and the Committee understand that our amendments and new clauses all seek to help with the ISOP. I hope that the Minister will respond positively by saying that there are different ways of achieving what we want to achieve with the ISOP’s powers, or that, although he might not be able to accept the amendments today, he is actively minded to have a good think about them. By the way, I am grateful for the note that the Minister wrote to me last night about the fact that the Government have done just that with one particular amendment to the Bill. That sort of process could easily be followed in such circumstances in future.
Andrew Bowie
Before I expand on the Government’s position and explain why we will not accept new clause 1 or the hon. Gentleman’s amendments, I will acknowledge absolutely that connections and connection timelines are the biggest challenge we face—for electrification to grid, for driving our economy forward in the way we seek to and for reaching our net zero goals. Every single day for the past few months, but in particular this week, I have been engaging with DNOs, transmission operators, Nick Winser who conducted the independent review, Ofgem and the National Grid ESO about what we can do to drive down those timelines. At a critical point, part of that will be the creation of the ISOP. For the benefit of those who might be slightly confused, that is what we refer to outside the Bill as the future system operator—ISOP and the future system operator are one and the same thing.
I will now turn to the question asked by the hon. Member for Southampton, Test about why an advisory board would make ISOP risk-averse and not fully independent. We are concerned that, rather than enhancing independence, the members of such a board would likely hold various energy sector conflicts. That could crystallise in many ways, including resistance to systematic reform, advice to pay compensation to energy sector participants or an incumbent bias that would seek to frustrate new market entrants. Establishing an industry-led advisory board for the ISOP would be similar to establishing one for the Climate Change Committee—it is not required for an organisation that needs to remain independent, such as the Climate Change Committee, which we are using as the basis for how we proceed.
A prime consideration of the ISOP consultation was that the body should be independent from day-to-day Government control and from other energy sector interests. That is why we need to ensure that the ISOP is a trusted and independent voice within the energy sector.
Alan Brown
Again, I am in favour of the ISOP and happy to support that, but will the Minister give us some timescales? How soon after the Bill receives Royal Assent will the ISOP be up and running to authorise the independent operator?
Andrew Bowie
I am happy to answer the hon. Gentleman. The aim and the ambition is for the FSO/ISOP to be up and functioning by the middle of next year.
I turn to amendments 95, 96 and 97, tabled by the hon. Member for Southampton, Test. The Government agree that those are all things that the ISOP needs to bear in mind, but we think that the balance in part 4 would be distorted by calling them out in the high-level illustrative list of the ISOP’s initial functions in the clause.
On amendment 95, matters already of concern to the existing system operator will continue to be a concern to the ISOP, in particular as it seeks to promote system efficiency under clause 121. On amendments 96 and 97, we understand that a closer relationship between the system operator and the distribution system operators—indeed, closer relationship across all energy networks—will allow for better co-ordination and ensure optimal system-wide planning. However, we do not think that such things should be included in the high-level illustrative list of the ISOP’s initial functions. A new collaboration duty is not necessary as that lies at the very heart of our vision for the ISOP. The importance of co-ordination across networks is made clear by clause 121(4)(a) and the whole systems duty in 122(1)(c).
Clause 120 empowers the Secretary of State to designate the ISOP, doing so by granting a power to the Secretary of State to make the first designation of a person as the ISOP and, if needed, to revoke that designation and issue a new one. I commend clauses 119 and 120 to the Committee.
Energy Bill [ Lords ] (Seventh sitting)
Thursday 8th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 8 June 2023 - (8 Jun 2023)
The Committee divided: - Ayes: 5 / Noes: 6 - Question accordingly negatived.
The Chair
I remind the Committee that with this we are discussing the following:
Amendment 96, in clause 119, page 109, line 3, at end insert
“and of distribution systems in conjunction with licenced distribution system operators”.
This amendment would include certain distribution systems in the functions of the ISOP.
Amendment 97, in clause 119, page 109, line 5, at end insert
“and of distribution systems in conjunction with licensed distribution system operators”.
This amendment would include certain distribution systems in the functions of the ISOP.
Clause stand part.
Clause 120 stand part.
New clause 37—Assurance of independence of system and distribution operators—
“(1) The Secretary of State must appoint a supervisory and advisory board of at least eight suitably qualified independent energy figures to assist the person designated as the ISOP under section 120.
(2) The purpose of the board appointed under subsection (1) is to assure the independence of transmission and distribution system operators through independent oversight of and advice to the ISOP.
(3) Energy UK and the Energy Networks Association must be consulted on the appointment of the board under subsection (1).
(4) The Secretary of State may make provision of financial assistance to enable the board to carry out its functions.”
This new clause aims to ensure the independence of system and distribution operators.
Dr Alan Whitehead (Southampton, Test) (Lab)
We had a good debate, Ms Nokes, on the principles of the independent system operator and planner. From what the Minister said, I detect that we are both pretty broadly in agreement about what we want the ISOP to do and how we want it to exercise its functions. Should Labour get into government, we would be interested in the idea of introducing regional ISOPs, which are the subject of two amendments that are on the amendment paper but were not selected for discussion today. I will not go into that in any depth, because I am sure that you, Ms Nokes, as our esteemed Chair, will rule me entirely out of order.
We have set down where we want the ISOP to go and I hope that the Minister will go along with that. When it is up and running—in perhaps a year and a half, I am pleased to hear—it will be just in time for a new Labour Government to run with the ISOP in a really positive way and to get all those things built in a timely fashion. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 119 and 120 ordered to stand part of the Bill.
Clause 121
Duty to promote particular objectives
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
Clause 121 sets out the ISOP’s main objectives—on net zero, security of supply, and efficiency and economy—and introduces the concept of a relevant activity. The conflict in Ukraine, the climate crisis and rising fossil fuel energy costs all underline the serious need to transition and decarbonise our energy system in an efficient and secure manner. The ISOP will play a central role, as we have all agreed so far, in helping us to meet these challenges and fulfil our energy ambitions.
The clause imposes a duty on the ISOP to carry out its functions in a way that it considers will best achieve the three central objectives. It does not give any weighting to any objective relative to any other, so the ISOP will have discretion to make appropriate trade-offs where they conflict. It is worth noting that the ISOP will not be a final decision-making body on policy. Making high-level strategic trade-offs between the objectives will be for Government, but it will be for the ISOP to balance them at an operational level and to advise Government or the regulator on them.
The first of the three objectives is net zero. The ISOP will drive net zero outcomes by proactively identifying and creating opportunities to facilitate the transition through its functions. The second objective is to ensure the security of supply, which refers to the ISOP’s core function of keeping the lights on. It will ensure that electricity and gas supply can meet demand and that they are appropriately resilient, including the consideration of national and cyber-security. The third objective is focused on promoting an efficient, co-ordinated and economical electricity and gas system. That is a continuation of the existing statutory objectives for the network operators and will become increasingly important to ensure that consumer bill payments are kept as low as possible.
Subsection (5) defines “relevant activity”. The definition allows ISOP to consider a wider set of business actors, including those relating to hydrogen and carbon capture, usage and storage, which we fully expect to be important in future.
Clause 122 sets out specific matters to which the ISOP will be required to have regard when carrying out its functions. Those include: the need to facilitate competition; the desirability of facilitating innovation; and the energy system as a whole. Some regulated activities in the energy sector are monopolies. However, the Government’s view is that where competition is possible, it should be introduced and fostered. ISOP will have a duty to think about how to make competition more effective where it exists, and to consider whether it should be introduced where it does not. That will underpin ISOP’s potential role as a tender body for electricity network competition.
It is worth clarifying that in this clause the Government are not referring to “consumer impact” as the need to deliver value for money to consumers. That is addressed by the “efficiency and economy” objective in clause 121. Rather, ISOP will need to have regard to two key matters: first, how consumers are affected, or likely to be affected, by the behaviour of those energy sector businesses engaged in “relevant activities”; and secondly, the impact of consumers’ behaviour on those activities. ISOP is also to be cognisant of the kinds of products and services that consumers want, and the effects of consumer behaviour on products, services and the markets in which they operate.
The intent of the duty relating to the whole-system impact is to enable ISOP to take a more joined-up approach across the whole energy system, including electricity, gas—onshore and offshore—and other emerging markets. On the innovation duty, the intention is for ISOP to be alive to the possibilities of new and better ways of doing things. Examples could include working with industry on the improved collection and use of data and various digital technologies to improve consumer experience and outcomes.
Finally, clause 123 imposes a duty on ISOP to have regard to the strategy and policy statement defined in part 5 of the Energy Act 2013. This duty helps to clarify the link between ISOP and the Government’s energy priorities. The intention is that ISOP will act independently, but in the context of wider energy sector policy and the Government’s objectives. The Government will use the SPS, once designated, as a tool to provide strategic focus to ISOP and ensure that it, and Ofgem, are aligned with the strategic priorities of the Government’s energy policy.
Clause 123 also imposes a requirement on ISOP to notify the Secretary of State if at any point it thinks that a policy outcome in the SPS will not be met. The notice must include the reasons behind the conclusion and any steps that ISOP will or might take to deliver the policy outcome. The Secretary of State also has an obligation to consult the ISOP when reviewing or preparing the SPS. The SPS is expected to set out a number of priorities for both Ofgem and ISOP, and it is not anticipated to fundamentally change the organisation. I commend clause 121 to the Committee.
Dr Whitehead
This debate enables us to count off a few clauses—clauses that are all good stuff. They clarify and facilitate the role, function and activity of ISOP. We have indicated that we would like ISOP’s remit to be widened as far as possible. On the high-level objectives in clause 121, an objective on net zero could shape the widening of ISOP’s responsibilities, because obviously that is what we are all about now, as far as the grid and various other things are considered. A wider remit for ISOP in facilitating net zero is clearly to be desired; that may be a basis on which to build on ISOP’s powers and activities in future.
Alan Brown (Kilmarnock and Loudoun) (SNP)
As I said earlier, I support the principle behind ISOP, and I support clauses 121 to 123, and will not vote against them. I want to explore a point with the Minister. The explanatory notes on the clauses highlight possible conflicts and tensions between the role of ISOP and the impact of Government policy—of what the Government do. For example, paragraph 345 of the explanatory notes outlines that there is
“a duty on the ISOP to carry out its functions in a way that it considers is best calculated to promote…net zero”.
It also acknowledges that while ISOP is not making decisions on generation mixes, it should still be
“proactively identifying and creating opportunities to facilitate the transition”
to net zero.
Paragraph 347 to the explanatory notes confirms the imposition of a duty on ISOP
“to carry out its functions in a way that it considers best calculated to promote a coordinated electricity and gas”
grid in the interests of the efficiency and economic operation of the grid. Paragraph 352 says:
“The ISOP will take a whole-system approach to coordinating and planning Great Britain’s energy system”.
That is all very logical, and I agree with the principles set out there—they are certainly the most important functions of ISOP in many ways—but how does the Government regulator allow for that, and how do the Government take into account the ISOP’s recommendations?
The Minister rightly pointed out the differences between what the ISOP is looking at and the fact that policy and implementation is the role of Government. To give an example, the National Grid Electricity System Operator already predicts that there will be less nuclear in the grid in any future scenarios compared with what the Government are promising about new nuclear, and that in 2024-25 a quarter of electricity generation will be from nuclear. The reality is that that will not happen. The National Grid ESO does not allow for that in future scenarios, yet the Government still tell us that that is their policy. That is already a clear conflict before the ISOP is up and running.
What if the ISOP says to the Government that instead of spending £35 billion to £40 billion on a new nuclear station at Sizewell C it could much better balance the system by recommending extra energy efficiency measures, battery storage, pumped-storage hydro or a smarter grid, which we keep hearing about in the plan going forward? What if the ISOP says that we should upgrade the grid urgently between Scotland and England, which would help to better balance the system and deploy renewables better, and get rid of the £4.6 billion in constraint payments that National Grid ESO paid last year to turn windfarms off because there was not sufficient grid capacity? How do the Government deal with the recommendations of the ISOP? Some of the suggestions that I have outlined would meet the aims outlined in clauses 121 and 122 and in the explanatory notes.
We are still to come to clause 131, but in this context it puts a duty on the ISOP to monitor and review developments, including technological changes and Government policies. It seems to me that the Government can make policies that undermine the ISOP’s recommendations; then the ISOP has the responsibility to review Government policy and start all over again. That does not seem very efficient, so the Minister needs to give a bit more clarity on that.
Clause 123 is on the strategy and policy statement, which is long overdue from the Government. On 30 March, in answer to a written question that I submitted, I was advised:
“The Government has consulted Scottish and Welsh Ministers on a draft SPS and taken their comments into account. The Government intends to publicly consult on an updated draft soon.”
When will we get that draft, given that clause 123 reiterates the responsibility of the Government to provide that strategy and policy statement?
Andrew Bowie
I thank the hon. Gentleman for his questions. There is not a conflict of interest between the ISOP and Government policy. The ISOP will not be solely, or even primarily, responsible for delivering net zero. That is the responsibility of the Secretary of State and the Department for Energy Security and Net Zero—or any future iteration of it. Delivering on the net zero targets will require a comprehensive approach across a range of policy areas, and the ultimate responsibility will lie with Ministers across Government. However, their decisions will be informed by information and analysis from the ISOP, and the ISOP’s own decisions will make a contribution—for example, in areas such as electricity and gas network design, or the development of new balancing or ancillary services. I know the hon. Gentleman agrees that net zero is a whole-economy project.
In answer to the hon. Gentleman’s question about how the ISOP will be held accountable, the ISOP will be a limited company, and the Secretary of State is the sole shareholder, holding ultimate responsibility for the effective corporate governance of the organisation. The Secretary of State will appoint the chair of the board, who will be responsible for leading the strategic direction of the ISOP.
The hon. Gentleman asked why it was decided not to extend the advisory role to the devolved authorities, and about the strategy and policy statement. The Bill relates to energy, which is a reserved matter, as he knows. We therefore consider that going beyond UK Government and Ofgem for a statutory duty to provide advice would create an undue burden on the new ISOP. Any costs to the provision of advice will fall on bill payers across Great Britain; the provision of advice should be focused on achieving benefit for all GB bill payers. As the hon. Gentleman knows, we are upgrading the grid between Scotland and England; it is a priority of this Government to upgrade the grid across the entire United Kingdom. In answer to his last question, the strategy and policy statement is forthcoming soon.
Question put and agreed to.
Clause 121 accordingly ordered to stand part of the Bill.
Clauses 122 and 123 ordered to stand part of the Bill.
Clause 124
Licensing of electricity system operator activity
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause amends the Electricity Act 1989 for four main purposes: first, to define the new electricity system operation licensable activities; secondly, to create the ISOP’s new electricity system operator licence and empower the Secretary of State to grant the first licence; thirdly, to ensure that the holder of the electricity system operator licence also holds the gas system planner licence; and finally, to ensure that if a person ceases to hold the gas system planner licence, they cease to hold the system operator electricity licence.
Clause 125 also relates to licensing. It is too early to determine the best course of action to create the ISOP’s electricity system operator licence. The Government consider it prudent to ensure that they have flexibility to ensure a smooth and efficient transition to the ISOP. One option is to revoke the existing licence and grant a completely new electricity system operator licence, but this clause offers another approach. It empowers the Secretary of State to direct that an existing transmission licence becomes the ISOP’s electricity system operator licence. If that power is used, the Secretary of State can make appropriate modifications to the existing licence when making such a direction, and the direction must be published.
Clause 126 covers the licensing of gas system planning activity. It makes amendments to the Gas Act 1986 that mirror the electricity licence in clause 125, but in respect of a gas system planner licence.
Clause 127 empowers the Secretary of State or Ofgem to make changes to licences and codes and revoke licences in preparation for, in relation with or in consequence of the designation of the ISOP.
Clause 128 sets out the process and rules for making licence modifications under the power in section 127. Before making any modification to licences or codes, the Secretary of State or Ofgem is required to publish a notice explaining the reasons for the changes, the proposed modifications and when they will take effect. The persons listed in subsection (2) must be notified, and their representations, if made within the specified period in the notice or before the changes take effect, need to be considered.
Dr Whitehead
This is all terrific stuff. I do not have much to say on this, other than that I was struggling to keep up with the Minister’s speed reading; I think I just about made it.
Question put and agreed to.
Clause 124 accordingly ordered to stand part of the Bill.
Clauses 125 to 128 ordered to stand part of the Bill.
Clause 129
Provision of advice, analysis or information
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause imposes a duty on the ISOP to provide advice, analysis or information requested by the Government or Ofgem. The Government and Ofgem will have to make important policy and regulatory decisions across many areas of the energy system to enable progress towards net zero. As a trusted independent entity, the ISOP will be well placed to provide expert and technical advice to decision-making bodies.
There are no provisions in legislation that oblige the current electricity and gas system operators to provide advice to the Secretary of State on request. Ofgem currently has more generalised powers to request information from its regulated bodies, but only for the purposes of monitoring and enforcement. The content of the advice, analysis or information requested should be on matters related to the ISOP’s functions, main objectives or matters that the ISOP must have regard to. The requestor should be able to provide some reasonable terms in respect of when and how the advice, analysis or information should be provided, which the ISOP must comply with in its response.
The Government recognise and agree with calls from respondents to the future system operator consultation that the ISOP’s expertise will be useful to the wider energy industry and consumers. That is why the Government plan to build on the existing responsibilities of the ISOP in licences or associated documents to enable the ISOP to share expertise and provide guidance to others where it considers it beneficial to consumers.
Clause 130 provides the ISOP with a power to request information, including data, where it is needed to help it fulfil its functions. Information can be requested from those engaged in, or those whom the ISOP reasonably considers intends to engage in, relevant activities as defined in clause 121(5).
Clause 131 imposes a duty on the ISOP to keep under review information about any policy initiatives or other developments in the energy sector that may be relevant to its functions. The clause is drafted by reference to the ISOP’s functions, and the obligation it imposes will align with those functions. We must ensure that the ISOP is horizon scanning and monitoring how markets and regulation may develop in the shorter or longer term. As discussed in the debate on clause 123, the ISOP will be required to have regard to five-yearly strategy and policy statements. The duty to keep under review is important for the ISOP to keep up-to-date with developments in the intervening five years. I commend the clause to the Committee.
Dr Whitehead
I have nothing to add. I am happy to agree to the clauses.
Question put and agreed to.
Clause 129 accordingly ordered to stand part of the Bill.
Clauses 130 and 131 ordered to stand part of the Bill.
Clause 140
Designation of codes etc
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Part 5 of the Bill deals with the governance of gas and electricity industry codes. The energy codes are documents that contain the detailed rules of the electricity and gas systems. The rules cover everything from how buyers and sellers must interact in commercial markets, to the technical specifications required to connect to the grid. The codes are currently governed by industry parties such as electricity suppliers and gas transporters. The Government will create a new governance framework for the energy codes, which will move that responsibility to one or more newly created code managers. The code managers will be directly accountable to Ofgem rather than industry, which will allow Ofgem to drive strategic change across the codes, for the benefit of consumers and competition.
Clause 140 plays a central role in establishing the new framework, by allowing the Secretary of State to identify which codes and engineering standards fall within its scope. It does so by granting the Secretary of State the power to create and amend lists of documents that are critical to the operation of our electricity and gas systems. Once a document has been designated, all the enduring functions of the new governance framework will immediately go live for that document. At the same time, all the transitional powers granted to the Gas and Electricity Markets Authority by schedules 10 to 12 will cease to apply.
The Secretary of State may only designate documents that are maintained in accordance with the conditions of specified gas and electricity licences. The Secretary of State will not be able to expand the scope of the new governance framework beyond the gas and electricity sectors in Great Britain without a legislative change.
Clause 141 defines a “code manager” as the holder of a code manager licence in relation to a document that has been designated by the Secretary of State. Code managers are intended to replace the industry-led bodies that currently govern the code change process. The clause also defines a “code manager licence” as a licence under new section 7AC of the Gas Act 1986, or new section 6(1)(g) of the Electricity Act 1989. Once those sections are added to those Acts by clauses 136 and 137, it will become a criminal act for any person to manage a designated document without a licence or an appropriate exemption. The GEMA will be empowered to grant the two types of code manager licence—one in connection with electricity and one in connection with gas.
Clause 142 empowers the Secretary of State to identify which central systems fall within the scope of the governance framework in this part of the Bill. It does so by granting the Secretary of State the power to create and amend lists of relevant central systems, and enables the Secretary of State to identify the person responsible for operating, or procuring the operation of, those systems.
A “central system” is defined as an IT system that either supports the operation of an energy code, or processes, transmits or stores data in connection with the operation of that code. Once a system has been added to the list, the only practical effect will be to make the body responsible for operating the system eligible to receive directions from the GEMA, to ensure that the body complies with its obligations under the codes and, where necessary, takes steps to ensure the efficient operation of the code. The enforcement of the directions will be made possible by the amendments in schedule 10, which will allow the GEMA to treat relevant bodies as regulated persons in this specific context.
The Bill specifies that the Secretary of State may only designate central systems that support the operation of a designated document, such as an electricity or gas code. All changes to the initial list of designations will require receipt of an appropriate recommendation from the GEMA. As the market continues to adapt and evolve, it is likely that new systems will need to be developed, and that existing systems may need to be decommissioned. The Secretary of State’s ability to create and maintain a list of central systems will help to future-proof the framework. I commend the clauses to the Committee.
Dr Whitehead
We now turn to energy codes and their managers, probably one of the most baffling and tedious parts of the entire energy spectrum. I understand that people who have gone into codes and code managers have on occasion subsequently been found miles from home in a distressed state, unable to remember their name or how they got there. The Minister has been speaking in a pretty chirpy voice, though, so he might not fall into that category, or perhaps he has not got too far into codes.
I seek some elucidation from the Minister. One purpose of clause 140 is to facilitate the bringing together of codes and the operation of those codes under new licensing—ownership, we might say—arrangements. That needs to be put in the context of where we are at the moment with codes. We have no fewer than 11 different codes for different parts of the industry, including the balancing and settlement code, the connection and use of system code, the distribution connection and use of system agreement, the grid code, the system operator transmission owner code and, more recently, a consolidated retail energy code under a new company called the Retail Energy Code Company—an imaginative name for such a firm.
The point about all those disaggregated and sometimes very much stand-alone codes is that they are owned by different actors. Some of the code management ownership is in the hands of companies that are active in the energy field, some in semi-free-standing, not-for-profit organisations, and some in entirely free-standing, not-for-profit organisations. There is no consistency in who manages the codes at the moment.
I hope that, as a result of these clauses being passed, the Government will have the opportunity systematically to make a much more coherent and integrated system of codes. It is important, however, to have a principle in that process for who will actually own the code management system. I hope and expect that the Minister will say that that will, at the very least, be independent, free-standing, not-for-profit companies or organisations, rather than at least part of the code management being kept in the hands of the industry that is itself bound by the codes. That looks a bit circular.
If the Minister is able to elucidate on that a bit, then I think we will be happy to ensure that this part of the Bill passes in an expeditious manner.
Andrew Bowie
The hon. Gentleman is absolutely right. We do not want to introduce anything that makes reaching our net zero goals or the future governance of the energy system any more complicated or circular—to use his word—than it already is. He went through some of the 11 codes and engineering standards: the balancing and settlement code; the connection and use of system code; the distribution connection and use of system agreement; the distribution code; the grid code; the retail energy code; the smart energy code; the system operator transmission owner code; the security and quality of supply standard; the uniform network code, and the independent gas transporters uniform network code. It would be wrong to do anything that further complicates an already complicated area; he is right in what he says about finding ourselves miles from home, forgetting our own name.
Andrew Bowie
It gives me great pleasure to speak to clauses 143 to 147. Clause 143 establishes code management as a licensable activity within the gas sector. The primary responsibility of the code managers, once licensed, will be to make arrangements for the governance of their respective codes. The GEMA’s ability to license code managers is a central feature of the new governance framework established by this part of the Bill. Clause 143 makes it possible for the GEMA to license code managers by making three sets of amendments to the licensing regime in the Gas Act 1986. Clause 144 serves the same purpose for the Electricity Act 1989, and the two should be seen as working together to establish the new licensing framework.
The first set of amendments makes it a criminal offence to perform the activity of code management in the gas sector without a licence, unless an exemption has been granted. That is necessary to ensure that no more than one person is able to make lawful arrangements for the governance of a gas code at the same time. The second set of amendments makes it possible for the GEMA to grant code manager licences to qualifying persons through the code manager selection processes established elsewhere in the Bill.
Finally, the third set of amendments will require the GEMA to grant licences for codes that contain both gas and electricity provisions at the same time. That requirement will prevent inadvertent breaches of the prohibition on code management in the electricity sector, which is set out in the clause 144. Without the combined effect of these three sets of amendments, it would not be possible for the new code governance framework established by this part of the Bill to function as a licensable activity.
Clause 144 establishes code management as a licensable activity in the electricity sector. The responsibilities of these code managers will be the same as those licensed in the gas sector, as outlined in clause 143. Clause 144 makes it possible for the GEMA to license code managers by making three sets of amendments to the licensing regime in the Electricity Act 1989. Those amendments serve the same purpose as the three outlined in the previous clause to the Gas Act 1986.
My arguments in recommending clause 143 apply equally to clause 144, so I will not labour those points. Without the combined effect of these sets of amendments, it would not be possible for the new code governance framework established by this part of the Bill to function as a licensable activity.
Clause 145 empowers the GEMA to select code managers on a competitive or non-competitive basis. The selection method will be informed by regulations that may be made by the Secretary of State. It is important that the GEMA has the flexibility it needs to select the right body for each role.
Code managers will play a central role in the new governance framework. Their primary responsibility will be to make arrangements for the governance of their respective codes. They will support the delivery of any strategic direction published by the GEMA. Any person who is selected for the role will need the right mix of code-specific knowledge and expertise to be effective.
Due to the differences between the codes, it may be difficult to determine a single best-fit selection method. Some codes may benefit from a competitive tender process, whereas others might find a direct selection process to be more efficient. That variation exists because the codes have evolved independently to occupy unique positions in the market. It would be beneficial for the selection options available to the GEMA to be equally varied.
The Secretary of State may wish to inform the GEMA’s choice of selection method by specifying in regulations the criteria that it would need to apply. Those regulations will allow the Government to ensure that the selection process will produce suitable candidates, while enabling the GEMA to make the final decision on which selection method to use and, indeed, who to select. The details of the regulations are still subject to public consultation. Potential criteria could include minimum conditions that a body must meet to qualify for selection.
The GEMA’s ability to select and license code managers is a central element of the new governance framework. To ensure that the process works as expected, it will be vital for the Secretary of State to have the option of creating regulations to inform how code managers are selected and who should be eligible for the role.
Clause 146 empowers the Secretary of State to make regulations about the non-competitive selection of code managers by the GEMA. Those regulations may be used to make provision about the selection of code managers other than by competitive tender, such as who may or may not be eligible for selection.
Clause 147 allows the GEMA to draft regulations about the selection of code managers by competitive means, which would then require approval by the Secretary of State. Those regulations would be used by the GEMA if it ever decided to select a code manager by running a competitive tender process.
Dr Whitehead
I have no comments on the clauses. I am happy for them to stand part of the Bill.
Question put and agreed to.
Clause 143 accordingly ordered to stand part of the Bill.
Clauses 144 to 147 ordered to stand part of the Bill.
Clause 148
Strategic direction statement
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 148 places a duty on the GEMA, which is getting quite the airing this afternoon, to publish an annual strategic direction statement about the codes. It also sets out various process requirements and empowers the Secretary of State to supplement the list of required content via regulations.
The purpose of the strategic direction statement is to set out how the codes will or may need to evolve over the following 12 months. At a minimum, it will be required to include a strategic assessment of Government priorities and wider developments in the energy sector relating to codes. The Secretary of State will have the ability to add to the minimum list of content by regulations.
The publication of the annual statement will serve as a framework for code managers when they develop their annual delivery plans. It will also provide interested parties and the Government with information regarding pending code changes, allowing insight into the overall direction of travel. Finally, it will be the primary vehicle by which Government policy priorities are factored into the future development of the energy codes. That will be achieved by regulations, whereby the Secretary of State may add to the list of content that the GEMA must include in its statement. However, any decisions regarding what decisions to take based on that content will always remain with the GEMA.
The clause also sets out the processes that the GEMA must follow when drafting and publishing the statement, including a requirement to consult with all persons who are likely to be affected and to send notice to various consumer-focused organisations. The strategic direction statement is a central element of the new governance framework. To ensure that it continues to meet these purposes, it is important that the Secretary of State has the option to update the list of required content over time.
Clause 149 allows the Secretary of State to permanently transfer the GEMA’s new duty to produce an annual strategic direction statement to the ISOP through regulations. This power has been included to future-proof for a scenario in which the ISOP may emerge as the most suitable entity to take on this duty. While the GEMA is currently the best placed organisation to publish the strategic direction statement, the ISOP, created by part 4 of the Bill, which we discussed earlier, may emerge to be better placed to take on the duty in the future.
Once it is fully established, the ISOP will have various advisory capabilities, an overview of the full energy system, and dedicated planning functions. That may make it a better candidate to publish a strategic direction statement for the codes. However, when the ISOP is first established, it may not have the capabilities or operational maturity in its system-wide strategic and planning functions to take on such a duty. The electricity system operator may therefore remain a code administrator for multiple codes—at least until a new code manager is selected for them. This role could therefore present an undesirable conflict of interest were the ISOP to write the strategic direction early on in the process. As a result, any transfer would be unlikely to take place until the ISOP is fully established and the wider code reforms are complete.
The Secretary of State may make regulations to effect the transfer in duty. Clause 149 sets out the specific changes to legislation that those regulations must make to update references from the GEMA to the ISOP in clause 148. The wording of the clause will ensure that the regulations are used only for a specific purpose, which is important given that they would modify primary legislation. The Secretary of State will be required to consult with the GEMA, the ISOP and other affected parties before making any regulations. In addition, the regulations would need to be laid using the affirmative procedure to ensure the appropriate level of parliamentary scrutiny.
Dr Whitehead
We certainly have no objections to the clauses. I commend to the Committee clause 149, which enables the transfer of functions on strategic direction between the GEMA and the ISOP. That is a wise and prudent element to include. I accept what the Minister says about the maturity of the ISOP in its early years to carry out the functions. That provision means that the changes can be made at the right time, and on a permanent basis, and I welcome that.
Andrew Bowie
I welcome the hon. Gentleman’s welcome.
Question put and agreed to.
Clause 148 accordingly ordered to stand part of the Bill.
Clause 149 ordered to stand part of the Bill.
Clause 150
Modification of designated documents by GEMA
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 150 empowers the GEMA to modify codes directly in certain circumstances to ensure the smooth operation of and transition to the new governance framework. It also empowers the Secretary of State to make regulations setting out how and when the power may be used, and to act as a necessary backstop to clarify and frame the scope of the use.
Clause 151 sets out the practical steps that the GEMA must follow before it can make a direct modification under the circumstances set out in clause 150. Clause 152 empowers the GEMA to issue directions to the bodies that are responsible for operating, or procuring, the critical IT systems that underpin the energy system. Clause 153 sets out the procedural steps and associated controls that the GEMA must follow when making a direction to a central system delivery body, under the powers granted in clause 152.
Dr Whitehead
I have no comments on the clauses, and commend them to the Committee.
Question put and agreed to.
Clause 150 accordingly ordered to stand part of the Bill.
Clauses 151 to 153 ordered to stand part of the Bill.
Clause 154
Principal objective and general duties of Secretary of State and GEMA under Part 5
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 154 extends the principal objectives and general duties set out in the relevant sections of the Gas Act 1986 and the Electricity Act 1989 to all the new functions granted to the Secretary of State and the GEMA under this part of the Bill. The extension includes an obligation on both the Secretary of State and the GEMA to carry out their new functions in a way that protects the interests of existing and future consumers. That obligation will place consumers at the heart of our new code governance framework.
Clause 155 updates the GEMA’s reporting requirements so that it must include an overview of any developments or decisions relating to codes in its annual report. It does that by inserting relevant provisions into the list found in section 5 of the Utilities Act 2000.
Question put and agreed to.
Clause 154 accordingly ordered to stand part of the Bill.
Clause 155 ordered to stand part of the Bill.
Clause 156
Regulations under Part 5
Dr Whitehead
I beg to move amendment 98, in clause 156, page 135, line 26, after “section” insert “146 and”.
The section presently is all under negative SI formation, with the exception of clause 149, which is positive. However, other sections in the part, including section 146, look as if they should have affirmative treatment because of the Secretary of State powers in respect of those sections. As such, this amendment seeks to include it as an affirmative exemption from the rest of the part.
The Chair
With this it will be convenient to discuss the following:
Clauses 156 to 158 stand part.
That schedules 10 and 11 be the Tenth and Eleventh schedules to the Bill.
Clause 159 stand part.
That schedule 12 be the Twelfth schedule to the Bill.
Dr Whitehead
I will speak strictly to the amendment. I advise Members not to go anywhere near schedules 10 to 12, because they might not come back in the same state in which they started to read them.
Amendment 98 is part of my largely forlorn mission to ensure that Parliament is fully involved in decision making, with regulations being made on an affirmative rather than negative basis. The Committee will observe that, in clause 156, the affirmative procedure is specified for regulations only as far as clause 149, which we have already briefly discussed and relates to the transfer of functions from GEMA to the ISOP for strategic purposes. However, it seems to me that there are other clauses in this area that Members ought to have more of a say in, at least in terms of the product of those clauses coming before them through the affirmative procedure, and thus to be debated in the House before being put into place. For example, the selection of a code manager on a non-competitive basis by GEMA might be something that Members might like to have a rather more serious look at, rather than the process being done under the negative procedure, whereby, if a Member is lucky, they might spot that it has been published and then have a certain number of days in which they can do anything, but otherwise the regulations will just go into force.
I think it would be a good idea to extend the protections for Parliament, as it were, under clause 156 to some of those other clauses. It is not something that I would want to go to the wall on, but I hope that the Minister will have a look to see whether he thinks that some of those being subject to the affirmative procedure rather than the negative might be a better way to proceed.
Andrew Bowie
I thank the hon. Gentleman for his amendment. The regulations established in part 5 will be technical in nature, with a focus on describing the different types of direct selection options, such as appointment of an existing licensee and any constraints on their use. In determining the suitable procedure, we have considered the impact on parliamentary time and the precedents in similar regulations in other areas of statute. For example, similar powers for the Gas and Electricity Markets Authority under section 6C of the Electricity Act 1989 have no parliamentary procedure in relation to offshore transmission owner tenders.
The regulations will provide for variations of the direct selection route already spelled out in the Bill. We do not think that parliamentary time will be effectively used by subjecting these regulations to the affirmative procedure. I hope that the hon. Member feels suitably reassured and will therefore be content to withdraw his amendment—notwithstanding what he just said a few minutes ago.
I will now turn to clauses 156 to 159. Clause 156 confirms that the regulations established under part 5 will be subject to the negative or the affirmative procedure. Clause 157 identifies several key terms that are used throughout part 5 and explains which sections contain the corresponding definitions. It is therefore intended solely as an aid to interpretation. Clause 158 introduces schedules 10 and 11 to the Bill, which contain various transitional provisions that may be exercised in connection with this part. It is intended solely to convey that the contents of those schedules exist and will be critical to the implementation of energy code governance reform.
Clause 159 introduces schedule 12, which contains details of various amendments required to other Acts as a consequence of this part of the Bill. The purpose of schedule 12 is to set out the details of the relevant amendments, which deal with one of two topics. The first topic relates to clause 152, which, as we have already heard, empowers GEMA to issue directions to the bodies that are responsible for operating, or procuring the operation of, the critical IT systems that underpin the energy system. I therefore commend the clauses to the Committee.
Dr Whitehead
The Minister has not entirely satisfied me on this. In general, regulations should be affirmative, unless there is a good reason for them to be negative—not the other way around. The Minister has suggested this afternoon that the other way around appears to be the default for his Department in this respect. I do not think that that is good practice for legislation in general, but who am I to take on the entire forces of parliamentary legislation writers all by myself? I hope that we can perhaps get a better outcome for such things in future, but I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 156 to 158 ordered to stand part of the Bill.
Schedules 10 and 11 agreed to.
Clause 159 ordered to stand part of the Bill.
Schedule 12 agreed to.
Clause 160
Competitive tenders for electricity projects
Dr Whitehead
I beg to move amendment 99, clause 160, page 136, line 20, at end insert—
“(2) Strategic transmission network projects that are—
(a) identified in the Electricity Networks Strategic framework,
(b) built ahead of need whilst long term good value for money, and
(c) in the opinion of the Secretary of State essential to support renewable and energy security objectives,
are not subject to Schedule 13 of this Act.”
This amendment seeks explicitly to exempt certain strategic transmission network projects from the provisions of Schedule 13.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
That schedule 13 be the Thirteenth schedule to the Bill.
Clause 161 stand part.
That schedule 14 be the Fourteenth schedule to the Bill.
Dr Whitehead
We come to the first section of part 6 of the Bill, which deals with market reform and consumer protection. The first clauses in this part relate to developing far greater competition for electricity generation, networks and so on.
The idea that there should be greater competition in the development of networks and other such things is not in dispute. Indeed, one argument in favour of the principle is that some of the delays in the development of the network from its previous centralised, spine-outwards approach, to a decentralised, spine-inwards approach, are due to the rather sterile ways in which the new network was commissioned. Having greater competition will not only bring potential new investors into the process, but may in certain circumstances speed the process up. It would certainly be a much better vehicle for bringing forward the anticipatory investment that is necessary to get the grid going in the way that we need it to go. However, what is happening with new grid development appears to point in the opposite direction.
Ofgem published its “Decision on accelerating onshore electricity transmission investment” in December 2022, concerning the extent to which investment in certain projects should not be subject to competition. As I am sure the Minister is aware, that relates to the accelerated strategic transmission investment programme that Ofgem has been pursuing. It will identify all the big strategic network challenges and projects to decide how important and strategic those projects are likely to be and how important they are to the realisation of the other ambitions of the network, and decide through the ASTI programme which ones will be accelerated up to 2030, which ones may be considered for after 2030, and which ones stand outside the system as a whole. As we have previously touched on, those standing outside the system as a whole may well be those of less strategic significance—maybe at a distribution network operator level—although they are no less important, even though they are below the very highest level of grid generation.
Following Ofgem’s intervention in this field, we now have a situation where most of the large onshore transmission investment framework and, indeed, some of the framework that goes offshore as well as onshore, will effectively be handed over to the National Grid to develop before 2030. There may well be an argument—quite an important argument, I think—that, right now, our grid structure is in such a bad way that we are saying, “Go away and get on with it. Do it as soon as possible. We will back you in doing it.” Obviously, a lot of additional things must be added to that decision to get on and do it, such as accelerated planning and deciding whether some routes may give more value for money in the long term—by going partly underground, for example. Even though they are more expensive, they actually overcome some of the objections in the process so that the whole thing can be done at a rapid rate.
There are substantial arguments in that direction, but it could be that the overall need for speed means that the ASTI programme would be extended beyond the 2030s and to a wider range of projects, at which point the provisions in the Bill and the actual provisions undertaken on the ground will pull in two quite different directions. It is important that we are able to bring those two together so that we have a clear distinction between what we are and are not competing for in terms of speed and direction.
Other questions are involved here, particularly about the financing of such projects and whether the company now undertaking to bring forward these truly nationally strategic investment projects will actually be able financially to run them in parallel rather than in sequence. That is an important consideration in terms of what is in the legislation and what we are trying to do strategically to get out of the current position, where we are moving too slowly for the development of low-carbon systems. We do not have major concerns about the competition process itself, other than those we expressed in this amendment, which aims to do roughly what Ofgem has started to do, but in a way that makes a clear distinction between what is and is not competition for future strategic purposes. I hope that the amendment will be seen as helpful, but there may be other ways that that sort of outcome, with the strains we have upon us that I have described, can be successfully negotiated.
Andrew Bowie
I thank the hon. Gentleman for his amendment, which I believe is intended to be helpful—as are all of his amendments. However, I gently disagree with him that we might be heading in the wrong direction on this.
The Government recognise the importance of clarifying which projects are within the scope of competition and which are to be exempt, and steps have already been taken to provide that clarity. We are already seeking powers for the Secretary of State to set criteria to determine whether projects are eligible for competition through clause 160. The underlying guiding policy in their design is whether there is a consumer benefit to competing any given project.
The Government recognise that their application could cause some uncertainty in the immediate term. That is why, last year, we committed to exempting certain strategic projects from competition. Ofgem, the independent regulator, published in December 2022 a decision on which projects are exempt—projects worth approximately £20 billion—and is working with industry to accelerate those network projects so they are ready for 2030.
Therefore, I believe that, sadly, the amendment is unnecessary. It would duplicate existing policy work to exempt certain strategic projects and would create an unnecessary avenue for exemptions, beyond the existing criteria that Ofgem will apply to determine eligibility for competition. For those reasons, I hope the hon. Gentleman feels able to withdraw this amendment.
Clause 160 gives effect to schedule 13 to the Bill, which sets out the mechanism for enabling competitive tenders to take place in onshore electricity networks. To ensure energy security for Great Britain, significant investment is needed in our electricity network to meet an estimated doubling in demand up to 2050. The electricity networks strategic framework, published in August 2022, sets out the estimated additional £100 billion to £240 billion of investment required in the onshore network to meet net zero.
Under the current system, network companies that are regional monopolies build, own and operate our network. They are regulated to do so efficiently through Ofgem’s price control processes, but it is vital that we guarantee value for money by ensuring that network investment is cost-efficient and strategic. That is why clause 160 is important.
I turn now to clause 161 and schedule 14. The first part of the clause introduces schedule 14, which establishes the new energy network special mergers regime. The regime is designed to enable the Competition and Markets Authority to assess whether a merger between certain energy network enterprises in Great Britain substantially prejudices Ofgem’s ability to carry out certain regulatory functions. Specifically, it relates to the price control process by which Ofgem determines how much energy network companies can spend and, therefore, how much they will pass on to consumers through energy bills.
The Government have estimated that introducing the regime could save energy consumers up to £420 million over 10 years by avoiding excess profits for energy network enterprises.
Dr Whitehead
The Minister may well be right—I do not say that very often, but I will say it on this occasion. This amendment, by the way, was initially drafted in the long-distant period when the Bill first emerged over the horizon, beyond the timeframe of most of our memories now, and it has been superseded at least partly by what Ofgem has been doing as far as ASTI is concerned. I am happy to withdraw it on that basis, but I hope we will keep that clear distinction for the future. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 160 ordered to stand part of the Bill.
Schedule 13 agreed to.
Clause 161 ordered to stand part of the Bill.
Schedule 14 agreed to.
Clause 162
Licence required for operation of multi-purpose interconnector
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 163 to 167 stand part.
That schedule 15 be the Fifteenth schedule to the Bill.
Andrew Bowie
Multi-purpose interconnectors are assets that combine electricity interconnectors between Great Britain and other jurisdictions with electricity transmission connections for offshore wind. They can help us achieve our net zero target by further integrating renewables into the grid. However, the existing legal framework does not enable the operation of a multi-purpose interconnector. Without a legal definition, there is a lack of clarity over their treatment.
Clause 162 introduces the definition of a multi-purpose interconnector into the Electricity Act 1989. It also amends that Act to ensure that a person who operates a multi-purpose interconnector will be required to hold a licence or exemption. To minimise conflicts of interest, the clause also ensures that the same person may not hold a multi-purpose interconnector licence while simultaneously holding a licence for electricity generation, transmission, distribution or supply. It also prohibits the same person from simultaneously holding multi-purpose and standard interconnector licences.
Multi-purpose interconnectors are a nascent technology, and the clause ensures that the definition of a multi-purpose interconnector is broad enough to account for the range of technologies involved in their operation, including future technologies. For example, although early multi-purpose interconnectors look to combine electricity interconnection with offshore wind, future multi-purpose interconnectors may link with energy islands or include the electrification of offshore oil and gas and CCUS platforms.
Clause 163 introduces the requirement for the Secretary of State to set the standard conditions for the multi-purpose interconnector licence, ensuring Government oversight. It outlines the requirement for the Secretary of State to publish the standard conditions, with the publication to be done in the manner considered appropriate by the Secretary of State. The clause contains a provision for specific standard conditions included in the multi-purpose interconnector licence to not have effect until brought into operation. It also includes a provision for the suspension of the effect of specific standard conditions included in the multi-purpose interconnector licence, as well as a provision to reintroduce the effect of suspended standard conditions. That may be necessary due to changes in trading arrangements, for example.
To ensure the standard conditions determined by the Secretary of State are incorporated, clause 163 will amend the Electricity Act 1989. That amendment will need to be commenced by secondary legislation to allow sufficient time for development of the standard licence conditions. Once commenced, the Secretary of State will not be able to further modify the standard conditions; however, they may veto proposals made by the Gas and Electricity Markets Authority to modify the standard licence conditions. The procedures detailed in the clause are in line with those that were introduced for interconnector licences.
Clause 164 amends the Electricity Act 1989 by inserting new section 10NA, which ensures that any person who operates a multi-purpose interconnector has been certified by Ofgem to be independent from electricity generation and supply activities, reducing the risk of conflicts of interest. That Act already provides for standard interconnectors to receive certification from Ofgem, and it is thus considered appropriate to extend that provision to multi-purpose interconnectors. Certification is a necessary precursor to the award of multi-purpose interconnector licences.
Clause 165 details the power of the Secretary of State to grant MPI licences to existing operators developing pilot project MPIs. The Government and Ofgem have continued to support pilot MPI projects to develop, as it is the Government’s intention to encourage operators to move towards a more co-ordinated and efficient offshore network. The clause enables the Secretary of State to grant an MPI licence to existing operators who hold an interconnection or offshore transmission licence for the purposes of developing a multi-purpose interconnector. That licence will replace operators’ existing interconnector or offshore transmission licence.
The clause also reads in minor modifications to the Electricity Act 1989, so that relevant sections will apply to the exercise of the Secretary of State’s power in this clause. It also includes a requirement for the Secretary of State to consult the potential MPI licensee and the Gas and Electricity Markets Authority prior to granting a licence. Furthermore, this provision mirrors existing powers that were brought forward through the Energy Act 2004. Those powers allowed the Government to grant interconnector licences to persons who were operating interconnectors under transmission licences. Reflecting that standard, clause 165 will allow the Government to grant MPI licences to persons who are operating MPIs under interconnector or transmission licences.
Clause 166 essentially enables the Secretary of State to amend existing legislation to ensure that multi-purpose interconnectors are not accidentally impacted by current laws. As MPIs—as I have already said—are a nascent technology, there is the potential for some aspects of the regulatory frameworks, market trading arrangements, and operational processes to transform once MPI activity commences.
The full detail of any possible necessary changes is difficult to identify at this stage. Following the pilot MPI projects, the Government will be in a better position to understand the full range of changes needed. The Secretary of State must consult GEMA before bringing forward any regulations. Any regulations will be subject to the affirmative procedure. In this way, the Government can adequately balance the need to be flexible in a changing landscape with the need to ensure that there is appropriate parliamentary scrutiny.
Clause 167 introduces schedule 15, which makes minor and consequential amendments to existing Acts. The majority of the consequential amendments will be made to the Electricity Act 1989, which makes provision regarding the supply, generation and transmission of electricity. Other Acts affected include the Energy Act 2004, the Utilities Act 2000 and the Civil Contingencies Act 2004. The changes will ensure that the legal framework for multi-purpose interconnectors functions properly alongside existing legislation.
I commend the clauses to the Committee.
Dr Whitehead
The Minister obviously had to read all that stuff out, so I will try to simplify it a bit for the Committee. At the moment, we have a number of interconnectors, which basically go from A to B. They go from Norway, Belgium, Holland and France and between England, Wales and Ireland. They are very much A to B, two-way connectors. When I say that they come from Norway, France and so on, it is a potential two-way process.
However, under regulation, the interconnectors have very much stayed exactly as that. For the next stage of our development, as far as low-carbon renewables are concerned, we need interconnectors that can actually take what is coming from, say, the North sea and bring it on board to the interconnector—possibly via an energy island, as the Minister said—and then send the resulting electricity in any direction. Currently, that is effectively banned. A two-way interconnector cannot be interrupted for that purpose. Having multi-purpose interconnectors not only enables that, but, as we try to develop a much better grid system in the North sea, it enables a great deal of use to be made of those interconnectors. That means being used not only for the purpose of landing offshore wind, but, as the Minister said, for, for example, repowering North sea oil and gas rigs. In other words, that means integrating all the things happening in the North sea into a big energy endeavour. Multi-purpose interconnectors are absolutely vital for that.
I very much welcome the clauses, but I would say just one thing. I am pleased to hear that the Minister will pursue an iterative process in developing regulation for multi-purpose interconnectors, or MPIs, as we will call them from now on, but interconnectors go between two jurisdictions and sometimes have to deal at both ends with slightly different electricity markets in order to carry out the functions of the two-way electricity flow—that is the same for gas interconnectors, by the way. We may therefore get into the position where they will straddle different jurisdictions in terms of their operability to gather and collect what is going to that interconnector, but without landing directly and then going to another country. For example, MPIs may well interface between the UK and Norwegian offshore zones, while potentially straddling UK and Dutch offshore zones, and so on. Therefore, the matter of who is responsible for what is coming into and out of the system could be much more complicated than it is at the moment with the current A to B interconnectors. Multi-purpose interconnectors could even serve several different countries’ territorial areas across the North sea.
Andrew Bowie
There is very little of what the hon. Member said that I disagree with. I thank him for that contribution to the debate. We will be looking at this nascent technology in the years to come as it develops, in order to grow, support and regulate for that industry. As is the case throughout the Bill, these clauses set out the regulatory framework upon which these industries can build and expand in this country, and this Government can support them through that. I thank the hon. Member for his comments.
Question put and agreed to.
Clause 162 accordingly ordered to stand part of the Bill.
Clauses 163 to 167 ordered to stand part of the Bill.
Schedule 15 agreed to.
Clause 168
Electricity storage
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Electricity storage can enable us to use energy more flexibly and decarbonise our energy system cost effectively. For example, it can help to balance the system at lower cost, maximise the use of intermittent renewables, and reduce the need for network upgrades and new generation. However, the regulatory framework for electricity was not built with technologies such as electricity storage in mind; they did not exist. Without a definition there is a lack of legal clarity over its treatment, which can disincentivise investment and hence the deployment of storage.
The clause clarifies that electricity storage is a distinct subset of generation in the Electricity Act 1989. It also defines storage as energy that was converted from electricity, and is stored for the purpose of its future reconversion into electricity. The measure removes current ambiguities and provides long-term clarity over electricity storage’s treatment within the existing frameworks and possible future frameworks. By doing so, it facilitates the deployment of storage.
Dr Whitehead
All I can say is: hooray! I have spent quite a lot of time on previous occasions attempting to get the House to legislate on separate electricity storage licences—freestanding without the current restrictions on storage. It is regarded as being both in and out, and therefore potentially subject to separate licences. An important change will come about as a result of this clause.
To go back to our previous discussion on codes, quite a lot of energy storage is likely to be further hampered by the existence of the codes themselves, which are very restricted to battery storage, long-term storage and the arrangements that go with that. It is important that we look at those codes at the same time to ensure that they are as up to date as possible, in line with new licences that may be put out. However, the fact that we at last have a category for storage in licensing, which will greatly facilitate the rise of particularly long-duration storage, is only to be applauded.
Question put and agreed to.
Clause 168 accordingly ordered to stand part of the Bill.
Clause 169
Payment as alternative to complying with certain energy company obligations
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause enables the Secretary of State to introduce a voluntary buy-out mechanism under the energy company obligation—ECO—scheme, through amending the Gas Act 1986 and the Electricity Act 1989.
Under the ECO scheme, there is currently an exemption for energy suppliers with fewer than 150,000 domestic customer accounts. The exemption is contentious, and the Government committed to consulting on how it could be reduced without smaller suppliers incurring disproportionate costs. We are proposing to do so through a buy-out mechanism. The clause provides the powers to create buy-out, with secondary legislation required to establish the details of the said mechanism. The measure enables small suppliers to meet their ECO obligations by simply making a payment to an approved third party for an approved purpose.
The clause also enables the Secretary of State to determine and publish the buy-out price, which can be set differently for different periods or scheme phases. By doing so, it ensures that the buy-out price is based on the most up-to-date information on the estimated cost of the promotion of measures. The final part of the clause sets out that the Secretary of State and Scottish Ministers can impose criteria for approving third parties and purposes. There are no limitations in primary legislation on such criteria, because the use of the buy-out will depend on the wider policy goals behind the administration of future schemes, which are subject to change over time.
By introducing the buy-out mechanism and obligating more suppliers under the ECO, the costs of meeting the obligations will be shared across a larger customer base. That will result in a fairer energy market by reducing any current distortions between obligated and non-obligated suppliers, and it will spread the cost of the ECO more equally across customers’ bills.
Question put and agreed to.
Clause 169 accordingly ordered to stand part of the Bill.
Clause 170
Smart meters: extension of time for exercise of powers
Dr Whitehead
I beg to move amendment 100, in clause 170, page 146, line 7, at end insert—
“(5) Within six months of the date of this section coming into force, the Secretary of State must produce and lay before Parliament a report setting out options for securing a guaranteed roll-out of smart meters to at least 70% of premises in all regions and nations of the United Kingdom by 2025.
(6) The report under subsection (5) must consider, among other options—
(a) obligatory smart meter installation,
(b) transfer of responsibility for smart meter roll-out to Distribution Network Operators, and
(c) time limits for phasing out meters which are not smart meters.”
The purpose of a report under this amendment is to emphasise that the Government should be aiming for at least 70% coverage in all regions and nations of the UK by 2025.
Dr Whitehead
The amendment relates to clause 170, which is very much another stand-alone clause; it concerns smart meters, and nothing else in the Bill relates to smart meters. We think that there ought to be a rather more serious approach to the question of smart meters and their present position in the energy firmament than the clause provides. I want to amplify that for a moment.
Where we are with smart meters is nothing short of a creeping long-term disaster as far as the UK energy economy is concerned. I am sure that Members will be aware that the introduction of smart meters came about through a 2012 piece of legislation with a view to starting the roll-out in about 2013 or 2014. The Minister responsible for the 2012 legislation said that the roll-out would start in 2014 and would be complete by 2019, when we would have 100% smart meters across the country. Ever since the 2012 legislation and the beginning of the roll-out, there have been repeated returns to the legislative process, including the Smart Meters Act 2018, which among other things included various measures on the Data Communications Company, about which I perhaps should not say too much for fear of becoming upset.
The thrust of that Act was to extend the timescale during which there would be jurisdiction over the process by the regulator, various other people and the DCC from 2019 to 2023. And here we are in 2023, having a further go at doing exactly the same: extending the exercise of powers from November 2023 to 1 November 2028. It is as though, if we continue to flog the dead horse for another five years, maybe the horse will miraculously come back to life again and we will all have the smart meters installed.
Katherine Fletcher (South Ribble) (Con)
I can speak from my own personal experience about why the horse is not dead and is benefiting from new technology. I wanted to have a smart meter and I could not, because the mobile phone signal was not good enough in the north of England. We have made great strides since 2019, so I think that horse still has a breath of life as technology, especially gigabit coverage, expands.
Dr Whitehead
My dead horse was perhaps something of an over-dramatic metaphor, but at the very least the horse is pretty sickly. That is partly because the smart meter wide area systems in the north of England are different from those in the south of England; the roll-out of smart meters in the north of England and in particular regions has been much slower and more problematic than has been the case in the south of England.
When we see the roll-out of smart meters now being 56% of all meters in Great Britain, the figure hides a number disturbing points, one of which I think the hon. Member for South Ribble will certainly want to worry about: that the roll-out in certain parts of Great Britain—strictly speaking, statistics are not provided on a regional basis, so I am citing evidence gathered by other means—could be as low as 30-odd per cent. in certain regions of the UK.
That is important not just because it is a good idea to have a smart meter that reads bills so that people do not have to continue to send their reading in, and not just because someone can look at their meter and see what sort of energy they have used and therefore can economise —although those are important things. One of the overwhelmingly important parts of the smart meter roll-out has always been and will always be the extent to which the smart meter network gives the country the opportunity to move forward radically with different forms of managing its electricity structures, including: a demand-side basis equivalent to the supply-side basis; ensuring that systems are resilient in terms of the information the smart meters are giving out; and enabling both prosumers and consumers to come closer together when it comes to what is going in and out of the smart meter via self-generation or other devices. There are all sorts of things, including half-hourly settlements, that will collectively make our energy system much greener, much better and much more resilient.
Indeed, the ability of smart meters to aggregate data—another area that we might want to consider—means they can read in real time the nation’s electricity activity. In the context of the roll-out of electric vehicles and all that goes with it, and all sorts of other things such as heat pumps, the ability to gauge in aggregate electricity demand at particular times, including where that demand may stress the system, means that activities can be undertaken that will divert from that and use the system much more effectively. That all depends on what is happening with smart meters and the information they give out. It is about—Daily Mail, take note—not capturing people’s personal information but capturing aggregate information that comes out of smart meter use as a whole. And that is where we are in a potentially disastrous position for the future, because the 55% roll-out does not mean 55% of all meters; as I have said, there are big regional divergences. I am very pleased that the hon. Member for South Ribble has got her smart meter in—[Interruption.] She has not.
Katherine Fletcher
Unfortunately, I have only an electricity one now, after the mobile phone signal was upgraded; the gas cannot take it, because of the construction of the house. There are a number of practical problems that we have to get over. The issue is not just consumer desire.
Dr Whitehead
Indeed. That was why I was pretty dubious about the 2G system, essentially, being used for this purpose in the north of the country. It is not fit for purpose and will not be fit for purpose in the future. It needs to be substantially revised.
Dr Whitehead
Yes. The various retail energy companies that have been responsible for the roll-out have in many instances tried their hardest, but they have been overcome by the sort of obstacles that the hon. Member mentions. For example, in an urban environment, meters may be in the basement of a block of flats and then somehow the smart meter is supposed to communicate from the 7th floor to the meters in the basement—the arrangements between the meter and the householder. That is over and above the problems with radio signals and phone signals that there have been in the north of England.
The roll-out is 55% after nine years of active operation, so let us say that that goes on at the same rate, although it very probably will not, because we have captured all the low-hanging fruit as far as smart meters are concerned, and smart meters are getting more and more difficult to install.
Charlotte Nichols (Warrington North) (Lab)
My hon. Friend the shadow Minister is making an important point about where smart meters cannot always be installed and some of the difficulties that there have been in this process. I am sure that both he and the Secretary of State will be aware of the situation in the area around RAF Fylingdales, for example, where, because of the strength of some of the radio technology used there, people cannot get a smart meter in something like a 40-mile radius of the airbase. Does he think that the Government considered such things when they put in the 2019 target that they have so spectacularly failed to hit?
Dr Whitehead
My hon. Friend is absolutely right: the Government did not consider that. There were discussions at the time of the earlier smart meter roll-out about radio systems that could get over precisely those problems by patching in—that is, going on the back of a good radio signal and patch in on the next radio signal, where the overwhelming radio signal is against signals operating properly. But that decision was not made at the time. It was a one-frequency signal for the south of England and phone arrangements for the north of England, with the results that we now see.
Halfway through the roll-out it was decided to change the specification of the meter itself. Because the process of changing the specification was so slow, a number of retail companies that had large stocks of the original meters continued to install the SMETS1 meters long after they should have stopped installing them—just because they had those stocks, which the new specification had not got round to replacing because of the delays in the so-called SMETS2 meters coming on to the market and being installed. Consequently, a number of meters are still not operating in smart mode, because they are either awaiting update or replacement so that they can go into the smarter system. Of the 31.3 million smart and advanced meters that are currently in homes, only 28.1 million are operating in smart mode. The roll-out is worse than it looks from the overall statistics.
What do we do about all that? The Government have put a clause in the Bill that simply says to retail companies, “Okay, we are going to give you more of the same. We are going to regulate you and give you targets”—which, by and large, the retail companies are not achieving—“and if you don’t achieve those targets we are going to fine you and whip you harder to ensure you achieve them.” Frankly, if we go on in the present direction we will get to 2028, and we do not need detailed maths to demonstrate that we will not be much further forward in the roll-out.
That is important because, in terms of the use of smart meters across the board to collect aggregate data for marking our system as a whole, we probably need about 70% penetration to get the figures right under the circumstances. We are way away from that, and we will be for a quite some time. We may well have a situation where our smart systems are racing ahead, but the means of communication on those smart systems are not, thus the smart system itself is compromised in the medium to long term.
Amendment 100 seeks to put some options in front of the Government. It states that
“the Secretary of State must produce and lay before Parliament a report setting out options for securing a guaranteed roll-out of smart meters to at least 70% of premises in all regions and nations of the United Kingdom by 2025.”
That is a reasonable target to try and aim for. Not that we would necessarily adopt this approach right now, but the amendment then states that the report must consider, among other options, different ways of rolling out smart meters for the future.
Members may push back substantially on obligatory smart meter installation. Do we transfer responsibility for the remaining smart meter roll-outs from the retail companies, perhaps to distribution network operators? That would put an end to the current system, in which literally four or five installers could go up the same street on the same day to try to install smart meters on different premises, depending on what retail company the person was with. There would instead be one body that would be installing smart meters in the various regions, and doing so in a much more systematic way. By the way, a lot of the to-ing and fro-ing that goes on when someone switches supplies to their smart meter, and how that can be transferred in an operable way, would be ended as well.
I am on record from about 2015, I think, saying that it was not a bright idea to have given the roll-out of the smart meter system to energy retailers, and that it should have been given to distribution network operators at that particular point. That is now a widespread view, and, looking back with the wisdom of Captain Hindsight, it is something that we should have considered. We can still consider it now because smart meters are not owned by the companies that install them. They pretty much all employ third parties, which actually own the meters in people’s homes, to run them. We could relatively easily —without transferring the ownership of the smart meters from those third parties—transfer the contracting agent from energy retail companies to district network operators.
The Minister is a little less advanced in years than I am, and may not remember the switchover in television lines from 405 to 625. That was basically accomplished by saying, “You can keep a 405 line television—you don’t have to have a 625 one—but it might not work in a few years’ time if you have kept your 405 TV.” The switchover was accomplished pretty much in good time, and universally. We are asking the Government for a report that considers all the different options for getting us out of the hole that we are in regarding the smart meter roll-out, to ensure that smart meters can fully play the role that we want them to play in our future low-carbon energy economy, and that we have the means to do that and can confidently come back with something better than the flog-a-sickly-horse routine in the amendment.
I hope the Minister will have a positive response to the amendment. I feel so fed up with yet again considering a Bill that just seeks more of the same that I am tempted to press it to a Division if he is unable to come substantially towards what we are saying regarding the future of smart meters. It is that important. I am trying to ensure that some Government Members go home so that we can win, but obviously it is up to the Minister how far he can come towards that view regarding the future of smart meters.
Olivia Blake (Sheffield, Hallam) (Lab)
The amendment is eminently sensible. I speak with the experience in my constituency before Christmas of what is now referred to as the great gas flood of Stannington. Hundreds of millions of litres of water entered the gas system, causing 3,000 properties to have water ingress, in some cases it was so harsh that water was coming through gas appliances and hitting the ceiling with force, or wrecking the whole interior of people’s properties. I mention that because almost every property involved in the crisis had to have its meter replaced. To the exasperation of some of my constituents, their smart meters had to be replaced with refurbished meters. We had issues with the second-hand meters that were put in.
I am still carrying out conversations with the energy companies because there were differences in the units of some of the meters. Some measure cubic metres and some measure cubic feet, which means that some people are getting a very good deal at the moment on their energy, because their energy company does not know that they changed the unit, and some people are getting awfully ripped off. It is very complicated, but because Cadent, which did a fantastic job during the crisis to make people’s homes safe and to ensure that the faulty gas meters were immediately replaced—I have no problem with that—did not have any agency providing smart meters, there was a missed opportunity to upgrade or keep them.
We have actually seen a decline in the number of smart meters in my constituency because of that major incident. We know that such incidents will probably become increasingly likely and with climate change there are likely to be more problems with water ingress—although hopefully not at the scale we had in my constituency, which left constituents without hot water and gas for many weeks during a very cold snap when there was snow on the ground.
Andrew Bowie
I thank Members for their contributions on amendment 100. The situation in the hon. Member for Sheffield, Hallam’s constituency over the winter period sounds dreadful. My heart goes out to all those affected and I would be happy to arrange meetings with the relevant Minister in the Department for Energy Security and Net Zero, if she has not already had one, because it cannot be that we find ourselves in that situation again, should that event take place—we hope not—in her constituency or, indeed, in any other constituency throughout the country. That has to be addressed.
On the amendment more widely, I like to think of myself as a glass half-full, positive guy. I think we should be celebrating the fact that more than 32.4 million houses, homes and residences in the United Kingdom now have smart meters. That is nearly 54% of homes and we should celebrate that. Indeed, on the point about older smart meters not being able to connect to the network, I am happy to tell the Committee that more than 12 million SMETS1 meters have now been connected to the Data Communications Company’s network, which enables communication with all energy suppliers so that consumers regain and retain their smart devices. That work continues at pace and, indeed, I can inform the Committee that through the wonders of modern technology the upgrade is happening remotely without consumers needing to take any action themselves. That is all good stuff and I hope people can join me in being positive and congratulate the work of officials and everybody in the industry who has been in charge of the roll-out thus far.
I thank the hon. Member for Southampton, Test for his amendment. I know that it comes from the right place and that he wants to see an increase in the pace and scale of our smart meter roll-out in the United Kingdom, for all the reasons he set out. I reassure the Committee that His Majesty’s Government have already taken measures to normalise smart metering as the default meter offer across Britain. Indeed, under the smart meter targets framework, which began only in 2022, energy suppliers have minimum annual installation targets for smart meters until the end of 2025. We believe that will drive the highest possible levels of smart meter coverage. I know, however, that the hon. Gentleman disagrees. Those targets are binding and Ofgem is responsible for regulating suppliers against them, with a range of enforcement tools at its disposal.
Energy suppliers have a long-standing obligation to take all reasonable steps to install a smart meter when a meter is fitted for the first time or an existing meter needs to be replaced. Their installation targets for 2022 and 2023 have already been set and, as the Committee may be aware, we have recently consulted on suppliers’ minimum installation targets for 2024 and 2025—here is a number that we can all cheer about—at coverage levels over and above the 70% called for in the amendment. We are currently considering the evidence provided by stakeholders and industry, and the Government will issue their response in due course. That work supersedes the need for the report requested in the amendment.
The amendment also calls for the report to consider the transfer of responsibility for the smart meter roll-out to distribution network operators. The Committee might recall that the option of a DNO roll-out was carefully considered and consulted on in 2009, at the start of the smart meter programme, when another party was in government. It was discarded as an inappropriate model for a roll-out that has, rightly, always prioritised consumer benefits. Who am I to question the decisions of the then new Labour Government?
A supplier-led roll-out will deliver more benefits for Great Britain. Metering has also been the responsibility of energy suppliers which, unlike network operators, have an existing direct relationship with their consumers. To change the approach at this stage would slow down roll-out progress considerably, reducing the crucial resultant benefits for consumers and our energy system.
Finally, the amendment proposes mandating smart meters or a date-limited phase-out of non-smart meters. You will be interested to learn, Ms Nokes, that such an approach to installations would present considerable practical barriers. For those who refuse, energy suppliers would in practice need to obtain forced powers of entry, which would be costly and highly intrusive for consumers.
I have already described the comprehensive regulation in place that is driving industry to deliver the highest levels of smart coverage, without mandating consumers. There remains good consumer demand for smart meters and, as I have explained, making smart meters mandatory is unnecessary and counterproductive, given the current high levels of uptake. I hope that, given the reassurances I have provided, the hon. Member for Southampton, Test will feel able to withdraw his amendment.
Let me turn briefly to clause 170. As I have said, 32.4 million energy meters in homes and small businesses across Great Britain were smart by March 2023. That is a significant achievement in one of the most ambitious upgrades to our energy infrastructure for a generation, but there is still more to do.
On 1 November 2023, the regulatory powers that the Secretary of State has in relation to smart metering are due to expire. Those vital powers have been used by the Government to establish and develop the framework necessary to support a successful smart meter roll-out across Great Britain, giving households and small businesses the information they need to feel in control and manage their energy usage. Clause 170 would extend by five years, from 1 November 2023 to 1 November 2028—we will be coming to the end of this period of Conservative government then—the period within which the Secretary of State can exercise the powers in relation to smart metering contained in the Energy Act 2008, the Electricity Act 1989 and the Gas Act 1986.
The powers provide Government with the ability to modify energy licence conditions and documents maintained in accordance with the energy licence conditions—for example, industry codes—and create new licensable activities or veto a proposed transfer of the whole or any part of a smart meter communication licence. The clause does not change the nature of the existing powers. So far, the powers have enabled the Government to drive significant progress in the smart meter roll-out, realising huge benefits for consumers and our energy system. They have been used to require energy suppliers to use smart meters that are interoperable and meet robust security requirements, and to ensure that consumers receive energy efficiency advice at the point of installation.
Clause 170 will also enable us to deliver the four-year targets framework for smart metering through to December 2025, ensuring that energy suppliers’ smart meter installation targets remain robust and effective, after which we must maximise the long-term benefits of a Great Britain-wide smart metering system, following a post-implementation review.
There is robust evidence from the roll-out to date that consumers are achieving sustained savings using their smart meters and in-home displays. Unleashing the full potential of smart systems and flexibility in our energy sector will reduce the costs of managing Britain’s energy system by up to £10 billion a year by 2050. I therefore commend the clause to the Committee.
Dr Whitehead
The Minister is not just a glass half-full guy; he is a glass overflowing and going down the side of the glass on to the table kind of guy. I am not sure I can work out the best metaphor. This is like someone being just over halfway round a marathon course and noticing that all the officials have gone home and everyone else has packed up. This person is unlikely to complete the course because everybody has gone and they are not quite sure how to get to the end, but then they sit by the side of the road and say, “Yippee, I have done 14 miles. That is a great achievement. We should all be proud of ourselves for doing that.” That was never the purpose of the smart meter roll-out; the purpose was to get full smart meter coverage in the shortest time. That was what the Government said at every stage of the process.
Some very early consultations took place when the last Labour Government were in office, but no legislation was passed and no formal material about legislation was published until the Conservatives had been in power for two years. I really do not think it is much to do with the previous Labour Government, though it was a good try.
I am disappointed, to be honest. The Minister has given us a Panglossian version of the smart meter world, but I am sure he knows that things are not well at all in that world. There is no gainsaying the really hard work of officials, companies, installers and everyone who has done such good, hard work to get the roll-out complete—I am not saying anything about them. I am saying that the original goal of the smart meter programme is so far off beam now as to make it really difficult to achieve its original purpose in the time that is left for us to get our act together and get those smart meters in place.
I know we are all about to go home—I hope we are all about to go home—so I hope the Committee will not feel too bad about being detained for another five minutes to have a brief Division on this amendment, because it is important that we put on the record that we really want something more to happen in respect of smart meters than is currently happening. I am sure, Ms Nokes, that you will be in the unenviable position of having to decide on the tie and where we go next. That is an exciting duty. [Interruption.] Oh yes, sorry—the SNP spokesman slipped out unnoticed; that is not like him at all. We would still like to push the amendment to a vote, even though it is likely to be negatived, for the reasons I have outlined.
Question put, That the amendment be made.
Energy Bill [ Lords ] (Eighth sitting)
Tuesday 13th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Chair
Order. We resume consideration of the Bill. I am speaking slowly in the hope that the shadow Minister may appear at the last moment—
The Chair
Hopefully, then, he will be here very shortly.
We will resume our marathon consideration of the Energy Bill this morning with the Question that clause 171 stand part of the Bill. That, of course, is grouped with a number of other things: clauses 172 to 174, amendment 101, schedule 16, clauses 175 to 179, and new clause 39. To remind the Minister in case he slips again, the Question will be that clause 171 stand part of the Bill.
I welcome the shadow Minister to his place—all I have done so far is announce the first group. I call the Minister to speak to it.
Clause 171
Relevant heat network
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 172 to 174 stand part.
Amendment 101, in schedule 16, page 335, line 37, at end insert—
“(aa) their interests in systems that deliver heat efficiently;”.
This amendment defines consumers’ interests expressly to include efficient heat delivery in order to ensure that regulation covers systems that are operational but are operating inefficiently to the detriment of customers.
That schedule 16 be the Sixteenth schedule to the Bill.
Clauses 175 to 179 stand part.
New clause 39—Guarantee for consumer protection—
“(1) Within three months of the day on which this Act is passed, Ofgem must set out a new licence to operate for heat networks that guarantees equivalent protections for heat network customers compared when compared with electricity and gas customers.
(2) Protections under subsection (1) must include but are not limited to—
(a) a price cap for heat network customers;
(b) a licence condition to “treat customers fairly”, analogous to Licence Condition 0 of the electricity and gas supplier licences; and
(c) a licence condition addressing “ability to pay”, analogous to Licence Condition 27A of the electricity and gas supplier licences.”
This new clause would guarantee that heat network customers receive equal treatment to electricity and gas customers.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
Thank you, Mr Gray. It is a pleasure to serve under your chairmanship yet again in this marathon but exciting and engrossing Committee.
Part 7 of the Bill relates to heat networks. The purpose of clause 171 is to define a heat network, clarifying the scope of heat networks regulation. As well as defining “relevant heat network”, the clause includes definitions for both communal and district heat networks.
A heat network provides heating, cooling or hot water to a building or collection of buildings, and its users. A communal heat network supplies heat to one building whereas a district heat network supplies two or more buildings. In both cases, the network must serve separate consumers or premises within the building or buildings to be considered a heat network. The clause provides a clear distinction between communal and district heat networks, which may require different legislative approaches. The definitions explicitly include networks that use heat pumps.
Clause 172 appoints the Gas and Electricity Markets Authority—Ofgem, for the avoidance of doubt—as the heat networks regulator for England, Scotland and Wales, and the Utility Regulator as the regulator for Northern Ireland. The Secretary of State—or, in Northern Ireland, the Department for the Economy—can, via regulations, change the regulator or change who carries out some of the regulator’s functions, assigning them to another body. For ease and clarity, whenever I refer to “the Department” in relation to heat network clauses, I am referring to the Department for the Economy in Northern Ireland.
Clause 172 also provides consequential regulation-making powers for the Secretary of State and the Department to amend this part of the Bill if the regulator is changed or some of its functions are reassigned. This is important to ensure that heat networks regulation remains agile.
Clause 173 provides the Department for the Economy in Northern Ireland power to amend the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 to provide for the regulator in Northern Ireland to be the competent authority for the purpose of those regulations. Amendments made under this power would enable the regulator in Northern Ireland to appoint a body as the alternative dispute resolution body in Northern Ireland.
The purpose of clause 174 is to allow the Secretary of State or the Department to regulate relevant heat networks and grant powers to those carrying out activities related to building or maintaining heat networks. Schedule 16 provides further details on the planned use of those powers. Under the clause, the Secretary of State or the Department will be required to consult on any changes before making any regulations under clause 171. Clause 174 also requires UK Ministers to consult Scottish Ministers when legislating in areas that are devolved to Scotland.
Alan Brown
I thank the Minister; he almost invited the intervention. This is about consultation on matters that are fully devolved. We had a meeting, and the Minister expressed sympathy for our position on the need to find a way to strengthen the “consult” language so that it is not the Secretary of State imposing something. I wonder if he has any further information on that.
Andrew Bowie
I thank the hon. Member for his question. I received a letter from the Energy Minister in the Scottish Government, Neil Gray, just last week—I am formulating a response just now—on the very issue of consultation and consents. Discussions are ongoing as to the exact form that will take.
Clause 175 outlines the parliamentary procedures required for the regulations made under clause 174.
Clause 176 establishes that the Gas and Electricity Markets Authority—commonly referred to as GEMA—and the Northern Ireland Authority for Utility Regulation can recover the costs of regulating heat networks using gas and electricity licence fees. The Bill allows the recovery of costs for other bodies operating within the regulatory framework, such as the code manager and other bodies appointed to administer specific functions in regulation. The Government previously consulted on their proposed approach to cost recovery and received broad stakeholder support. The clause will facilitate the implementation of that approach and ensure that heat network regulation is sustainably and fairly funded.
Clause 177 provides power for the Secretary of State to designate, via regulations, GEMA as the licensing authority for the purposes of the Heat Networks (Scotland) Act 2021. The Scottish Government and other stakeholders have agreed to Ofgem being the regulator across all of Great Britain.
Clause 178 enables the Secretary of State to amend, via regulations, the Heat Networks (Scotland) Act 2021 to give the licensing authority compliance monitoring and enforcement powers under that Act. We intend to designate Ofgem as the licensing authority. That designation and the regulations will allow Ofgem to carry out this regulatory role in Scotland. Regulations under this clause must provide that offences created by the regulations are triable summarily only and punishable by a maximum of three months in prison or a fine not exceeding £200, or both.
Alan Brown
I thank the Minister for giving way again. He mentioned the possible imprisonment of up to three months. That seems to cross over into the Scottish justice system, because the Scottish Government have effectively set a presumption against short sentences. This would clearly be a short prison sentence, so how would that work in reality, against the wishes of sentencing legislation in Scotland?
Andrew Bowie
The hon. Member makes a good point. As I said, the Scottish Government have agreed to Ofgem being the regulator across Great Britain. I will go away and find a detailed answer to his point, which is well made—indeed, it is important to my constituents—about how the crossover will work with the Scottish justice system. It is a completely devolved competency, which we, of course, respect.
Clause 179 provides definitions for the interpretation of this chapter’s clauses. The clause defines “the Department” as the Department for the Economy in Northern Ireland and “the NIAUR” as the Northern Ireland Authority for Utility Regulation.
Schedule 16 covers heat network regulation. Part 1 of the schedule provides definitions of the terms used in the schedule. Part 2 allows the Secretary of State to make regulations about the regulator’s objectives. The main objective of the regulator will be to protect the interests of current and future heat network consumers. Part 3 covers heat network authorisations. The authorisation regime will ensure consistent standards across the industry, raising consumer protections. To carry out regulated activities, persons will be required to comply with conditions of authorisation, and the regulator will have the powers to enforce compliance.
Part 4 covers code governance in relation to heat networks, and part 5 covers the installation and maintenance of licences. Holders of licences will have the additional powers required for installing and maintaining heat network equipment. The regulations may require the regulator to be satisfied that the person applying for the licence is suitable, as well as the criteria they must use when making this judgment.
Part 6 covers the enforcement of conditions in licences or authorisations. The regulator is able to issue orders and penalties when a person is likely to contravene or has contravened a condition. Orders can be used to require compliance with a condition. If breaking a condition has caused damage, loss or inconvenience for a consumer, the regulator can make a consumer redress order.
Part 7 covers the regulator’s powers of investigation. Although it is not considered appropriate to introduce a price cap on the cost of heat provided by heat networks now, the Government do intend to provide for the regulator to investigate whether the prices charged are disproportionate. That enables the regulator to take enforcement action against authorised persons charging disproportionate prices.
Part 8 covers step-in arrangements. The purpose of the arrangements is to facilitate the transfer of a regulated activity in relation to a heat network to a new entity, should the old entity no longer be able to carry on that activity. Part 9 covers the special administration regime. Similar to the provision for other essential services such as gas and electricity markets, this alters the normal administration process to allow for the continued supply of heat. It provides the ability to deploy a backstop should other actions to protect heat supply fail.
Part 10 allows regulations about the supply of heat to premises, including new connections and the metering of supply, and part 11 covers protections for consumers. Part 12 covers payments from the sector to support the special administration regime. It allows for regulations that will authorise the regulator to charge heat networks, via their authorisation conditions, to fund the regime. In that way, the regime spreads the cost of a firm failing across all companies. This is a fair and proportionate way of funding the regime.
Finally, part 13 covers a range of topics, including consultation and co-operation, the objectives of the Secretary of State and Departments across the UK in carrying out their functions, and the creation of offences. I hope Members agree that heat networks play an important role in decarbonising heat and supporting the delivery of our net zero commitments.
The Chair
There is no interest from elsewhere. The Question therefore is—[Interruption.] If the shadow Minister wishes to take part in the debate, he needs to let me know; otherwise, we will move on.
Dr Alan Whitehead (Southampton, Test) (Lab)
I did raise my hand, but it was my left hand rather than my right hand.
Dr Whitehead
I should start by apologising to you, Mr Gray, for being marginally late. Those who know me will know that although I am usually rather close to the line in getting to my seat, I am rarely not actually there in time. I apologise for that slight problem this morning; I blame the lifts in Parliament.
The regulation of the whole system of heat networks, and combined heat and power for district heating schemes, is an important part of the Bill, which is long overdue in its arrival. Members will be increasingly familiar with district heating schemes in their constituencies, which provide heat, power and sometimes cooling both to properties and to industrial and commercial premises within a network scheme.
District heating schemes are by no means new. A number of them have been operating for many years, such as the system in Pimlico—the system in Westminster has been going for many years. Partly because such schemes have been going for many years, they have fallen out of the spotlight in terms of regulation and bringing their provisions into line with what customers expect from elsewhere in the energy system, particularly in relation to customer-facing retail and so on.
Because district heating schemes are enclosed, they are essentially monopoly providers of heat within their own area. They are generally advantageous to customers because they provide reliable heat, usually at a considerably lower price than the general market. The Government are seeking to promote the idea of local authorities extending heat networks for precisely those reasons. They are potentially very low carbon, and agnostic in terms of heat sources for the network. The key is that the network goes around a particular area, providing heat directly to people’s homes, and, as I said, to offices and industrial premises.
In many ways the schemes just do not fit: they stand aside from what customers are normally expected to pay attention to these days, and the energy, gas, heat and power that they receive. As I said, that is because the heat networks in this country, and indeed the combined heat and power systems relating to heat networks, quite often provide electricity as a by-product of the heat-engine process. But they predominantly provide heat for customers.
A number of problems relate to the customer arrangements, and customer expectations, regarding that closed system. Because each of the individual extant networks in the country is effectively a mini-business in its own right, they have at their heart an arrangement whereby a company, not-for-profit or local authority, in some instances, that runs a scheme is responsible for procuring the fuel as if it were a retail energy company for the network, and then supplying it to customers through the heat engine and the network that goes into people’s homes.
The issue for customers is quite often, first, whether the company that is providing supplies for the heat network has procured them in a reasonable and cost-efficient manner. Secondly, is the system that is delivering the heat for customers efficient in its own right? Particularly in older schemes, there are a number of circumstances in which the system provides heat to customers, but not efficiently. The pipework may be old, furred up and not functioning well. Of course, it is extremely difficult for the customer to recognise whether the system is efficient. Sometimes its inefficiency comes to light only when people start being charged unreasonably large bills. The company that is providing the service will then go through its reasoning about the supplies coming in and the service being provided, but not the efficiency of the service.
There is little customer redress in the systems because they generally are not regulated. They have voluntary regulation, run by the Association for Decentralised Energy, whereby heat networks sign up to a redress programme, but currently it covers only a minority of the total heat networks in operation. Bearing all those things in mind, as well as the system’s likely future, the system is long overdue being regulated in a way that delivers for customers the certainty of a good service, redress where the service is not so good, and access to an understanding of how the system as a whole works, and what the companies that provide the service are doing—hopefully in the interests of customers, but in some circumstances not.
The system as a whole works pretty well: most of the companies that run heat networks are honourable organisations, often set up on a not-for-profit basis to provide a district heating scheme. The issue is at the margins of those schemes that do not run their service particularly well, or that do not provide decent redress for their customers and have a monopoly situation as far as their supply is concerned.
Alan Brown
It is a pleasure to serve under your chairmanship, Mr Gray. Like the shadow Minister, I broadly welcome these clauses and the principles behind them. I made a couple of interventions on the Minister. I cannot quite remember, but I have a feeling that clause 174 is not one of those referenced in the letter from Neil Gray, the Energy Minister in Scotland. I will go back and check that. The Scottish Government have concentrated on some of the key clauses, but I will check and reserve the right to come back on this issue on Report if need be. I appreciate that the Scottish Government are working with the Minister. I also appreciate the Minister saying he will come back on my query on clause 178.
As the shadow Minister said, heat networks have been debated in this place for a few years. I have found a couple of speeches of mine from two years ago, when matters were raised in Westminster Hall—primarily by Tory MPs—so this is welcome. If the Committee wants, I can give the thrust of my two speeches from back then, because it is still relevant, or I can just condense them if the Committee prefers. I will take the Chair’s guidance on that.
Alan Brown
Why do we need this? This is why I also support new clause 39. As far back as 2017, the then director of the Department for Business, Energy and Industrial Strategy director stated that
“whatever you do you end up with 17- 24 per cent district heating”.
That means that some 6 million homes will have district heating, so it is important that we actually facilitate that to allow the transition to net zero. It is even more important that we provide protection for those 6 million homes, or people will not accept the principle of district heating and we will not get to net zero. At the moment, around half a million homes have some form of either district heating or communal hot water.
The numbers we are talking about mean that I agree with new clause 39 that a price cap is needed. It would give surety and protection to customers, and help avoid bad news stories as well. Even when I spoke two years ago, consumers and landlords were reporting price rises of up to 700%, according to a Heat Trust report. That illustrates the need for a cap and protection, so that people cannot just continue to ramp up costs.
Amendment 101 is a simple amendment, and I hope the Government will consider accepting it. It is almost administrative, but it does have qualities. I have in the past reported the fact that communal heat networks sometimes operate inefficiently because they are not subject to technical standards. Some contractors choose to complete heat system installations that come at the lowest form of capital cost, rather than the more efficient, longer-term operational systems that give whole-life savings. I wonder if amendment 101 would protect against that. Could the Minister advise us on how the new regulations will ensure that it is the most efficient systems that will be installed, to the benefit of customers and consumers?
Previously, the Government’s green energy support programme had to address the fact that some people in district networks were classified as commercial customers. That was because, as the shadow Minister has said, it is in effect small independent companies that operate these networks. We need to ensure that those classified as commercial customers are protected as much as domestic customers. I should have intervened on the shadow Minister, but I hope that new clause 39 would provide that protection. We welcome the provision, but in order to convert people to district heat networks, we really need wider, joined-up Government policy.
Andrew Bowie
I welcome the broad welcome given by His Majesty’s official Opposition and the Scottish National party to the clauses. I tend to agree with the hon. Members for Southampton, Test and for Kilmarnock and Loudoun. These measures are long overdue, so I thank them again for their positive responses.
I will turn to the points made by the hon. Member for Kilmarnock and Loudoun regarding consent and consult. Notwithstanding my commitment to get an answer for him regarding the criminal justice system in Scotland and how it will interact with these new regulations and their administration in Scotland, I confirm that in the recent letter from the Energy Minister, Mr Gray, the Scottish Government have in fact dropped consent requests on heat networks, so they are very happy to proceed as drafted here. I wanted to give confirmation of that. I will turn to the hon. Gentleman’s other points later.
I thank the hon. Member for Southampton, Test for his amendments, which provide an opportunity to discuss in detail what we are doing here today and why we are not going as far as he suggests we should.
I turn to amendment 101. If not designed and built to high standards, heat networks can experience inefficiencies such as heat losses from the pipes that deliver hot water from the energy centre to homes and businesses. That can lead to consumers paying higher prices and experiencing unreliability of heat supply, as the hon. Member for Southampton, Test said. I reassure him and others that we already have a robust plan to address that issue. The Bill provides for the introduction of technical standards on the design and build of heat networks, which we committed to implementing as part of a regulatory framework in our 2020 heat networks regulation consultation. That will require all new heat networks to be designed and built to minimum standards, and existing networks to make efficiency and performance improvements over time.
As a regulator, Ofgem will enforce the requirement. Heat networks will be required to submit documentation to Ofgem demonstrating that their compliance with technical standards has been certified. As I have set out, the Bill and subsequent secondary legislation will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be disproportionate compared with systems and similar characteristics, or if prices are significantly higher than those consumers would expect to pay if they were served by an alternative heating system. Ofgem will also enforce minimum standards on the reliability and quality of the heat supply. I hope that reassures hon. Members, including the hon. Member for Southampton, Test, that the Government are already taking steps to improve efficiency on heat networks and—to address some points made by the hon. Member for Kilmarnock and Loudoun—to protect consumers from high prices and unreliability.
I turn to new clause 39, which was tabled by the hon. Member for Southampton, Test. Ensuring heat network consumers are protected from high prices and unreliability is our principal reason for introducing heat networks regulation, so I am pleased to see hon. Members recognising the importance of addressing the issue. I appreciate that they will want to see the sector regulated as soon as possible, which is one of the reasons we are progressing the Bill at this pace. However, it would not be possible nor sensible to ask Ofgem to require a licence regime within three months of the Bill receiving Royal Assent. Secondary legislation authorisation conditions are needed to enable Ofgem to operationalise as a regulator. We will conduct public consultations with industry and consumer groups on secondary legislation and authorisation conditions before they come into force. We expect heat networks regulation to come into force shortly after that.
I recognise that hon. Members want to ensure that heat network consumers do not pay disproportionate prices. However, we do not believe that a price cap is suitable for the sector, given its nascent and incredibly diverse state across the country. A price cap also risks heat network insolvencies prior to step-in arrangements being embedded into the regulatory framework. The Bill provides the Secretary of State with powers to introduce a price cap in future, should one become appropriate once the market has matured. I reassure hon. Members that we are taking steps to tackle high prices across the board.
Alan Brown
Can the Minister give us more information on the mechanisms in the Bill that allow the Government to bring forward a cap in future?
Andrew Bowie
As has been set out in the Bill and explained this morning, the powers will be given to the Secretary of State, determined at a point in future when the sector matures, which is exactly the process by which he can introduce a price cap. I think we have gone through that this morning.
Alan Brown
Will the Minister write to me to give a little more detail on that?
Andrew Bowie
Yes, I am happy to write to the hon. Gentleman and provide more detail on exactly that point.
The Bill and subsequent secondary legislation will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be disproportionate compared with systems with similar characteristics. It will also be able to investigate and intervene if prices are significantly higher than those consumers would expect to pay if they were served by an alternative heating system. We are taking action to address current high prices in the heat network sector. The energy bills discount scheme, which runs from 1 April 2023 to 31 March 2024, provides support to heat networks with domestic end consumers.
On conditions around treating customers fairly and ability-to-pay assessments, I am pleased to inform hon. Members that the Government already plan to consult on introducing comparable levels of service and protection to consumers in other regulated utilities as part of a public consultation on heat network consumer protection rules. We will publish that consultation in due course. I hope that reassures hon. Members that the Government are already taking steps to deliver regulation and tackle high prices in this sector. I therefore ask the hon. Member for Southampton, Test not to move his amendment 101.
Question put and agreed to.
Clause 171 accordingly ordered to stand part of the Bill.
The Chair
We now come to the Question on clauses 172 to 174 stand part—we have just debated them. With the leave of the Committee, I will take them together.
Dr Whitehead
Do you want to know whether I am going to withdraw amendment 101, Mr Gray?
The Chair
No. The hon. Gentleman should not interrupt me while I am putting the Question. In answer to him, however, his amendment 101 comes after the decision on clauses 172 to 174. I thank him for his intervention, but he is wrong.
Clauses 172 to 174 ordered to stand part of the Bill.
Dr Whitehead
I will include an indication of our position on new clause 39, Mr Gray, although I understand that any vote on the new clauses will take place at the end of our proceedings and not today. That is right, is it not? I will also say something on amendment 101.
The Chair
The hon. Gentleman has already spoken to amendment 101 as part of the group that we have just debated.
Dr Whitehead
Yes. I am seeking to state why I might wish to withdraw amendment 101, or otherwise, and in so doing I was seeking clarification, Mr Gray. My understanding is that new clause 39, which is included in the group, will not be up for a vote now, because that would come at the end of our proceedings.
The Chair
That is correct. New clauses come at the end of proceedings. If the hon. Gentleman wishes to move amendment 101, he may do so now. Immediately after that, we will come to the Question on schedule 16 —that is the next thing to happen. The Question on new clause 39 comes at the end of our proceedings, so is for a decision later. Right now, the only question is whether he wishes to move amendment 101.
Dr Whitehead
Right.
On amendment 101, I do not think that there is anything explicit in schedule 16 relating to the position of efficiency in regulation. Having had a look at the schedule again, I am confirmed in that view. I take what the Minister said about the intention to ensure that that is part of regulation, but I am afraid we are a little in the hands of what the Minister may decide about the regulations as far as efficiency goes. The Minister is an honourable one, so I am sure that he will seek to carry out what he has said today to the letter. I am therefore happy not to move amendment 101, but I note that that was one of the purposes of regulation should have been made rather more explicit in the schedule.
The Chair
The amendment is therefore not moved.
Schedule 16 agreed to.
Clauses 175 to 179 ordered to stand part of the Bill.
Clause 180
Regulations about heat network zones
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Chapter 2 of part 7 covers heat network zoning in England. Heat network zoning is a key policy to deliver the scale of expansion of heat networks required to meet net zero. The process brings together local stakeholders and industry to identify and designate areas within which heat networks are expected to be the lowest-cost solution for decarbonising heating.
The clause provides a definition of heat network zones, gives the Secretary of State the general power to make regulations about heat network zones, and outlines the parliamentary procedures that must be followed when doing so.
Regulations made in relation to any of the following three matters will be subject to the negative procedure: first, any requirements on zone co-ordinators to consult on zone designations, revocations, or reviews; secondly, reviews of the designation of areas as heat network zones by zoning co-ordinators or the heat network zones authority; thirdly, any requirements for zone co-ordinators and the authority to consult on the zoning methodology, and reviews of the heat network zoning methodology by the Secretary of State. All other regulations will be subject to the affirmative procedure.
Dr Whitehead
I do not have much to say other than that we now move on to heat network zones as opposed to heat networks themselves, and we will be debating what the term means and how the zones work. Clause 180 sets the stage, and as we will be debating amendments on a future clause, I have nothing further to say about this one.
Question put and agreed to.
Clause 180 accordingly ordered to stand part of the Bill.
Clause 181
Heat Network Zones Authority
Dr Whitehead
I beg to move amendment 102, in clause 181, page 152, line 27, after “the Secretary of State” insert
“or the Gas and Electricity Markets Authority”.
This amendment is to ensure that the Gas and Electricity Markets Authority may be designated as the regulator for heat network zones.
The Chair
With this it will be convenient to discuss the following:
Amendment 115, in clause 181, page 152, line 30, at end insert—
“(5) The Heat Network Zones Authority shall be responsible to and regulated by the regulator.”
This amendment makes the regulator responsible for Heat Network Zones.
Clauses 181 and 182 stand part.
Dr Whitehead
We have tabled two amendments to clause 181. As far as I understand it, the clause adds to the heat network system, which, as I have said, has evolved over the years into a number of heat networks in various parts of the country.
A good idea for future heat network development would be to have a much more systematic approach and an understanding of where our heat networks may be most appropriately sited and the best conditions for them to be established. We know a number of potential good and bad conditions for heat networks. For example, a certain density of population, buildings and so on is needed for heat networks to be efficient, although there are in existence small heat networks that serve very small communities. Indeed, heat networks can range from being marginally larger than a few properties to covering large parts of cities.
There are five major heat networks in my city of Southampton, one of which serves the whole city centre and surrounding areas, and has an 18 km heat delivery pipe network. It is connected to a geothermal scheme in the city centre, so it efficiently provides heat to that whole area. It is connected not just to domestic properties but to a number of commercial users, which I think includes the nation’s only geothermally heated supermarket, civic centre, health authority centre, and so on.
One component of a decent heat network is what is in the network to validate the load that is supplied. A heat network may be just for domestic properties, as is the case in some housing developments in Southampton, but that is not the most efficient way of developing a heat network because the load from domestic properties changes seasonally. If a heat network is connected both to a number of properties—an estate or whatever—but also has industrial or commercial users, the load can be spread out and equalised over the years.
The Southampton schemes operate quite efficiently within the right places for zones. Nevertheless, it is—or should be—a function of local circumstances that heat networks are more likely to be applied in constituencies where there is a considerable gathering of industrial and commercial activities and population zones, and are less applicable in large rural constituencies, although there are some heat networks in small towns and villages. Within that zone understanding, there may be arrangements that pertain to local circumstances: for example, zones may be organised in such a way that ensures the likelihood of success for the heat network is relatively high.
I understand that this section of the Bill seeks to ensure that local authorities are required to look at research, to consider where it would be good to have a heat network and to produce a heat network zone plan, so that as we develop heat networks for the future we have a much better picture of where the schemes would work well, where investment may best go and the extent to which success is likely to be high, rather than someone perhaps taking a flyer on something that probably will not work well for the future.
We are happy with the idea of heat network zones being put into the Bill, that we approach them in the way that I have described and that they complement the regulation of the system in as much as the whole system now is much more in the mainstream of energy planning and energy futures as a whole. I hope that our amendments are complementary to the general scheme of things. They simply try to align the regulation of the heat zone development process with that of heat zones themselves, proposing that the process of heat zone discovery and development should be regulated by the same regulator that regulates heat as a whole: the Gas and Electricity Markets Authority.
It is important that there should be a regulator for this particular activity so that it does not stand alone from everything else happening as far as heat networks are concerned. I do not think that would impede the development of heat networks—on the contrary, it would assist them by making sure that the way we were bringing forward heat zone arrangements was generally of assistance to heat networks as a whole.
What if a local authority or similar body involved with developing heat network zones were not interested in heat networks? It might locally regulate heat zones in a way that did not take seriously the whole question of heat network development. The regulation of heat zone arrangements under the circumstances that I am discussing would ensure that there was a pretty uniform approach as far as heat network development was concerned. Those engaged in it would know that someone was looking over their shoulder to make sure that they were doing the job properly. That is all we want to add to the measure and I think the Minister will agree that it is a pretty positive addition. It certainly does not detract in any way from the validity of the heat network process and the idea that there are right and wrong places for heat networks. We must get them in the right places so that they can succeed for customers as well as they possibly can.
Andrew Bowie
I thank the hon. Member for his amendments, all of which are designed to ensure that the regulatory frameworks for heat networks and the building-up of capacity in this country for heat network zoning gets to a place that will support the growth of the industry in the future. I resist the amendments only because I feel that the powers in the Bill meet the required level of engagement and regulation necessary at this stage for what is currently a nascent but will in time become an incredibly important part of the wider energy mix.
I turn first to amendment 102, which relates to designating GEMA as the heat network zones authority. The zones authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.
As for who could fulfil the zones authority role, clause 181(3) is explicit that
“The Secretary of State may, but need not, be designated”
as the zones authority. Therefore, the clause, as drafted, already provides that regulations may appoint GEMA as the zones authority.
The zones authority will fulfil a different function from the heat network regulator, which we propose, as set out in clause 172, should be fulfilled by GEMA for Great Britain. That role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England.
We will specify the zones authority’s functions and responsibilities within the regulations when they are brought forward. That will be subject to further consultation in due course as we continue to develop our policy proposals, and we look forward to engaging with Parliament on that. Appointing the zones authority in regulations will allow for amendment, should that be required, as and when its functions change over time and as heat networks become more established throughout the United Kingdom. I hope that has helped to clarify our proposed approach and the scope of the powers already provided for in the Bill.
I turn to amendment 115, regarding the relationship between the Heat Network Zones Authority and the heat network regulator. As I have said, we intend for GEMA to fulfil the heat network regulator role in Great Britain. The zones authority will be a national body responsible for certain zoning functions. We will consult on who should fulfil the zones authority role in due course, but we do not consider that the zones authority should itself be subject to oversight by the heat network regulator. I hope this has helped to clarify our proposed approach regarding the zones authority and how its role relates to the heat network regulator, and I therefore ask the hon. Member for Southampton, Test to find it within himself to withdraw his amendment.
Dr Whitehead
Once again, the bona fides of the Minister are not in any question at all, but what he is saying to us relies quite a lot on the regulations that will follow from the Bill and how the Secretary of State may designate under clause 181 a person to act as the Heat Network Zones Authority. If the Secretary of State decides that there should be a Heat Network Zones Authority, we are not sure exactly how that will come about. It may be that we do not have an authority as such, but the Department effectively operates as the authority, or a complete Heat Network Zones Authority could be set up with offices and civil servants or quasi-civil servants, although that might be a bit bureaucratically overbearing.
Again, the Bill does not specify how that authority, whatever it is, will be tucked into the system as a whole. The Minister says, “I’m sure it will be, because we are sensible people and we will make sure we do it,” but that has not been put on the face of the Bill, which is always good practice. Whatever our intentions may be today in this Committee—and they are good intentions—a piece of legislation has to stand in circumstances where those intentions may not be so good under a future Government. That is why we tabled our amendment, but I hear what the Minister has said, and that is on the record. Given my boundless trust in the Minister’s good intentions for the future, I hope that he will do what he has said regarding heat network zones authorities, and their regulation and operation. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 181 and 182 ordered to stand part of the Bill.
Clause 183
Identification, designation and review of zones
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 183 gives the Secretary of State the power to make regulations to establish the process for creating heat network zones, which we have just discussed. In the legislation that is referred to as identifying and designating a zone. The clause also gives the Secretary of State the power to make regulations to establish the process for the review of zone designations. A review of zones could lead to changes in the boundary—for example, making the zone larger or combining two existing zones.
Subsection (2) provides that the regulations must require the identification of zones to be done in accordance with the zoning methodology, which is established under clause 184. Subsection (3) outlines further matters that the regulations may specify in relation to the designation of areas as zones. Subsection (4) outlines what may be specified in regulations regarding changing or revoking zone designations. Subsection (5) outlines regulations that can be made about the review of zone designations.
Clause 184 gives the Secretary of State the power to establish a methodology for identifying heat network zones. The methodology will standardise the identification of zones nationally. Proposals for the use of, and approach to, that national methodology received widespread support from stakeholders during the Government consultation.
Clause 185 allows the Secretary of State to make regulations about the ability of the zones authority and zone co-ordinators to request the information required to support the national methodology for the identification, designation and review of heat network zones. The clause, and the regulations that follow, will facilitate the zones authority and zone co-ordinators in requesting and receiving the necessary information to ensure that heat network zones are situated in the right locations. As I discussed in the context of zone reviews under clause 183, the location of heat network zones can be changed as necessary to reflect the impact of changing technologies and neighbourhoods over time.
Dr Whitehead
The Minister reflects that circumstances may change over time so it is necessary to have such a power. He is right that circumstances are not static; indeed, we may well miss a lot of good opportunities if we place too much emphasis on the static nature of what we have designated for the future. I think that we will debate, in a future clause, circumstances concerning the development of heat networks within zones, but on the changes that may be necessary in order to keep heat network zones up to date, this is a sensible provision that we support.
Question put and agreed to.
Clause 183 accordingly ordered to stand part of the Bill.
Clauses 184 and 185 ordered to stand part of the Bill.
Clause 186
Heat networks within zones
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 186 allows the Secretary of State to make regulations about heat networks within heat network zones. That includes specifying which buildings may be required to connect to a district heat network within a designated zone. Subsections (2)(a) and (2)(b) allow regulations that specify the types of buildings within zones that will be required to connect to heat networks, when they must connect, and how they are notified of that requirement.
Subsection (2)(c) allows the regulations to specify when and how the zone co-ordinator can grant exemptions from the requirement to connect to the heat network. Subsections (2)(e) to (2)(h) allow regulations to make provision about requiring heat sources in zones to connect to a heat network. Subsections (2)(i) and (2)(j) allow regulations that provide for the zoning co-ordinator to set local limits on emissions from heat networks and any grace period to comply with that limit.
Subsection (5) allows regulations to specify when the zoning co-ordinator may or must ask a heat source to connect to a heat network, the types of heat source that can cover, and how the heat source owner can appeal against the requirement to connect. Subsection (6) allows regulations to specify how local limits on emissions from heat networks in zones are set. Subsection (7) provides details about what regulations can be made about grace periods for local emissions limits.
Clause 187 allows the Secretary of State to make regulations about the delivery of district heat networks within heat network zones. Those regulations will give structure to the zoning co-ordinator’s role and responsibilities. “Delivery” refers to the design, construction, operation and maintenance of heat networks. His Majesty’s Government recognise that there are several feasible models for delivering heat networks in zones depending on local circumstances, including the level of involvement of the zone co-ordinator. The clause, and the regulations that flow from it, aim to provide a flexible approach to zone delivery.
The engagement we have had with the heat network industry and with local government has highlighted a desire for flexibility in how heat networks are delivered within zones, as there are a range of ownership and delivery models that could be employed in the future. The Government’s expectation is that the regulations will define what decisions zoning co-ordinators and other bodies can take regarding zone delivery, with guidance from the zones authority to help inform their decisions. The clause provides that regulations may determine when zone co-ordinators may decide what heat networks are delivered in their zones, and by whom, including circumstances in which the zoning co-ordinator may deliver heat networks themselves.
The Government recognise that there is a risk that leaving decisions about zone development solely in the hands of zone co-ordinators could risk a heat network zone not being developed. Therefore, subsection 5(g) allows regulations to define the circumstances in which zone co-ordinators may lose the ability to make decisions about heat network delivery in zones. The intent is that that will happen if the zone co-ordinator has not taken certain steps to develop the zone following a set period after the zone designation.
Dr Whitehead
Clause 186 rather reminds me of Bertrand Russell’s definitions of propositions that are automatically members of their own class and propositions that are not automatically members of their own class, but I do not think we will debate that to any great extent this morning.
Dr Whitehead
For no other time, probably. Clause 186 is a relevant and necessary proposition concerning the development of heat zones and heat zone authorities, but one thing that does rather concern me is that although it is important that heat networks are able to develop in the most appropriate way and under the most appropriate circumstances, it is also important that the connections between heat networks can develop in the most appropriate way within a particular area.
I mention that point because there are circumstances in which heat networks may develop independently in parts of cities. The geographical and other siting considerations could lead to the development of interconnections between heat networks so that their joint efficacy is improved. If an extensive heat network, such as the one in Southampton, has a number of independent networks relatively nearby that have developed under different circumstances but are providing the same thing, there is considerable advantage in ensuring that they are interconnected so that they can share heat production and, if necessary, heat network inputs.
As I am sure the Minister is aware, heat networks are agnostic as to the fuel that goes into them. It could be from a heat engine, a geothermal source or a low-carbon source—hopefully, we will develop those to a much greater extent—such as multiple ground source heat pumps or hydrogen engines, which are already in existence and can replace gas engines in heat networks.
Andrew Bowie
I thank the hon. Member for his questions. He made mention, almost in passing, of heat network zones doing their own thing within zones. It is important to point out that in clause 186 there are several protections against heat network zones doing their own thing. Zones will inherently represent areas where heat networks are expected to provide the lowest-cost low-carbon heating solution. Customers will be able to apply for exemptions from the requirement to connect where it would be inappropriate. Ofgem’s consumer protection framework will provide protection for domestic consumers and microbusinesses, and we will consider consulting on whether protections should be extended to other consumer groups, such as larger non-domestic consumers, which are in scope of the requirement to connect to a heat network. I know that the hon. Member’s points were not specifically directed at that issue, but he mentioned zones being able to do their own thing, and it is important to ensure that consumer and business protections are built into the regulations.
We talked about hospitals, albeit in passing. We are not setting out specifically which buildings will be required to connect to a network, but we can require certain buildings in zones to connect to a heat network. Doing so encourages investment in the heat networks and accelerates the deployment of low-cost, low-carbon heat. The categories of buildings chosen to connect will strike a balance between this investment certainty and individual consumer choice. That will develop as the heat network market in England grows. We may need to refine these categories. This is a nascent industry in the early stages of its development, so describing them will provide that flexibility. The Government will consult later this year on which types of buildings can be required to connect and in what circumstances.
On the hon. Member’s substantive point about why the Bill does not make provision about heat network delivery in zones, we are providing that zone co-ordinators shall have powers to decide what heat networks are built in zones and by whom. There are many ways in which heat networks could be delivered in zones and many ways in which zone co-ordinators could exercise their decision-making powers around delivery. As set out in the green finance strategy, we envisage heat network zoning bringing forward a significant increase in private sector investment in heat networks in England. Decisions around delivery may have significant implications for the scale of heat networks built in a zone, the pace at which networks are built and the effect on consumers. The Government intend to consult later in the year on how a zone co-ordinator may take those decisions, so that we get it right. Again, I emphasise that we will be consulting on this later this year.
Also, the way in which decisions are made may need to change over time, reflecting how the market matures and, indeed, learning from experience. The regulations will, of course, be subject to the affirmative procedure, which will allow for parliamentary scrutiny. I am sure that the hon. Member will play his part in such scrutiny, as will his colleagues.
Question put and agreed to.
Clause 186 accordingly ordered to stand part of the Bill.
Clause 187 ordered to stand part of the Bill.
Clause 188
Enforcement of heat network zone requirements
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
These are quite a simple couple of clauses. Clause 188 will allow the Secretary of State to make regulations about enforcing the requirements to apply within zones. It will support the previous two clauses on the delivery of heat networks in zones and the requirements placed on networks, buildings and heat sources within a zone. The clause includes the ability for the zoning co-ordinators to issue notices to people if they are suspected of not complying with the relevant requirements; to issue notices to outline what the person must do to satisfy the requirement; and to issue penalties to those who do not comply with the notices.
Clause 189 will allow the Secretary of State to make regulations about the penalties that apply for not complying with zone requirements under clauses 186 and 187 or for not complying with an information request under clause 185. That includes regulations about the maximum penalty amounts, the process for issuing a penalty, grounds for appeal, recovery of penalties, and to whom the penalties are paid.
Question put and agreed to.
Clause 188 accordingly ordered to stand part of the Bill.
Clause 189 ordered to stand part of the Bill.
Clause 190
Records, information and reporting
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
This is another simple clause. The Government consider that various types of data will be essential for the identification and designation of areas as heat network zones and for the development of heat networks within them. Clause 190 will allow the Secretary of State to make regulations about zone co-ordinators and the zones authority collecting, storing, and sharing information about zones, including information relevant to identifying areas that would be suitable for the construction and operation of one or more district heat networks, as well as areas designated as heat networks under clause 185. It also includes information requests made to owners of thermal heat sources under clause 186. Information gathered by the zone co-ordinators and the authority, when carrying out activities related to the wider heat network regulations, would also be in scope of these regulations, as would information gathered in relation to the zoning methodology, including its review and update.
There are two circumstances in which information may be shared. First, a zone co-ordinator may be able to share zoning information with other zone co-ordinators, the zones authority and the regulator. Secondly, the zones authority may be able to share zoning information with zone co-ordinators and the regulator.
Question put and agreed to.
Clause 190 accordingly ordered to stand part of the Bill.
Clause 191
Interpretation of Chapter 2
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 191 is the final clause in chapter 2, which concludes part 7 and the clauses on heat networks. The clause covers definitions for the heat network zoning clauses.
Dr Whitehead
I have nothing to add, other than “Hooray, we’ve got to the end of that part!” We now have lots of regulations in place, which is a good thing.
Question put and agreed to.
Clause 191 accordingly ordered to stand part of the Bill.
Clause 192
Energy smart appliances and load control
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 192 introduces part 8 of the Bill, which relates to energy smart appliances and load control. It defines the key concepts relating to that part, namely energy smart appliances, energy smart function, load control signals and load control.
The smart energy market is in its early stages but is growing rapidly, as we discussed in detail on Thursday. As the take-up of electric vehicles and other devices such as heat pumps increases, we need to remain agile in responding to new developments in the market. This is to ensure that we maintain grid stability and protect consumers from cyber-security risks. Transitioning to a smart and fully flexible electricity system will play a vital role in decarbonising the power system by 2035. Such a transition could reduce costs by up to £10 billion a year by 2050.
I will briefly set out some key definitions. Energy smart appliances are electrical consumer devices that are communications-enabled and capable of responding automatically to signals such as energy price changes. In response to such signals, they can adjust their electricity consumption or production in line with consumer choice and cost preferences. Load control refers to the act of sending and receiving those signals and adjusting the consumption of the product in response.
Subsequent clauses in part 8 will limit powers to make regulations to products with functions such as refrigeration, cleaning, battery storage, electrical heating, and air conditioning or ventilation.
Dr Whitehead
We have now moved smoothly and efficiently to the question of energy smart appliances and load control; I will have something to say about load control later. The arrangements for energy smart appliances are important, given the increasing range of activities that appliances can now undertake. The specified purposes set out in clause 193—refrigeration; “cleaning tableware”, or dishwashing; “washing or drying textiles”, or using washing machines; and energy storage—are all circumstances in which things can be added to devices to allow them to operate independently, to operate at particular times and to respond to dynamic demand requests. For example, a chip can be put in a refrigerator to allow the appliance to respond to signals from outside saying, “Switch yourself off between 3 am and 4 am,” which will save some power or regulate the power in a better way.
Appliances increasingly have the potential to operate as mini-computers in their own right: they have IP addresses and various other things. It is possible to capture a series of washing machines that are smart-enabled and use them as locks under certain circumstances. Indeed, I think there was a recent prosecution of some young men who had done just that; I am not quite sure for what purpose, but they secured a number of smart devices in order to operate them in concert. It is important that we have energy smart regulations that enable us to deal with such circumstances and get them in hand. Of course, this is potentially a subset of the debate about AI and the extent to which our devices in the home may be subject to the control of other authorities entirely.
From the customer’s point of view, it is important that they know that they are in control of their own devices. Smart appliances offer various exciting advantages such as allowing people to change central heating controls before they get home, by pressing a button when they are 50 miles away, but the principle behind the security arrangements should be that the customer—the person in the home—is the eventual arbiter of how those things work. Does the Minister think that the way the clause is drafted will ensure that the customer—the person who is operating those smart systems, or who thinks they are—actually has eventual control, and particularly the consent for the operation of those smart devices in the way that we have described?
Alan Brown
I realise that this is an introductory clause and the Minister was doing some scene setting. The clause mentions load control signals and digital communications. I draw the Minister’s attention to my written parliamentary question No. 186867, submitted following a meeting I had with representatives of the Energy Networks Association. They tell me that to take forward a proper smart grid, the energy network companies need additional radio spectrum access. The Government need not just to put in place regulations, but to facilitate that radio spectrum access.
In response to my question, the Minister for Energy Security and Net Zero, the right hon. Member for Beverley and Holderness (Graham Stuart), said that the Government are moving forward on the issue with a study and a calculation of costs. I know that the Under-Secretary cannot write a blank cheque, but the reality is that radio spectrum access will be needed. I just put that on his radar.
Andrew Bowie
I thank hon. Members for their questions and points. The hon. Member for Kilmarnock and Loudoun is right that this is just an introductory clause; we will talk about the regulations in much more detail during the rest of the morning and this afternoon. I thank him for putting that point about radio spectrum access on my radar.
The smart energy market is at an early stage. That is why we are regulating. We need to ensure that consumers and businesses, and indeed the grid and access to it, are protected. We intend to regulate in close consultation with industry and in a way that allows the market to evolve and supports innovation.
Question put and agreed to.
Clause 192 accordingly ordered to stand part of the Bill.
Clause 193
Energy smart regulations
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clauses 193 to 198 establish the regulatory regime for energy smart appliances.
Clause 193 provides powers to introduce energy smart regulations in Great Britain. The regulations will mandate that energy smart appliances with specific purposes must comply with a set of requirements. The appliances that will need to comply with the requirements include those with specific purposes, such as electric vehicle charge points, or devices that are used in connection with the following specific purposes: refrigeration; cleaning battery storage; electric heating or ventilation, and air conditioning or ventilation.
Subsection (3) sets out a number of factors that the Secretary of State must have particular regard to when making regulations. Those include, for example, ensuring that the energy smart function does not undermine the delivery of a consistent and stable supply of electricity. Where an energy smart appliance does not meet the requirements set by the regulations, its placing on the market may be prohibited.
Clause 194 builds on clause 193, setting out that energy smart regulations may refer to technical standards and published documents. Energy smart regulations may also refer to requirements imposed under Acts of the Scottish Parliament. The clause establishes that prohibitions imposed by energy smart regulations may extend to load control for appliances that are not compliant with the regulations, and to any appliances modified in a way that would make them non-compliant with the regulations.
Energy smart regulations may prohibit the placing on the market of appliances that do not comply with the requirements of the regulations. The regulations may also prohibit the placing on the market of non-smart electric heating appliances and electric vehicle charge points. Finally, the clause specifies that energy smart regulations do not provide for enforcement action of any kind against the end user of an energy smart appliance.
Clause 195 makes provision for the enforcement of the requirements of energy smart regulations. The clause allows the Secretary of State to designate enforcement authorities that will ensure compliance with the requirements or prohibitions made under the regulations.
Alan Brown
Before the Minister goes on too far, what timescale does he anticipate for the introduction of regulations under clauses 193 and 194 to mandate smart appliances?
Andrew Bowie
I am not able to give any firm dates right now, but the Government’s hope is that we will move quickly to consultation on the regulations as soon as the Bill receives Royal Assent.
Relevant economic actors will be required to monitor and report on their compliance with the terms of the regulations, as well as to take specified steps to remedy any non-compliance. Clause 195(2) includes provision for a range of investigatory powers to track and assess non-compliance for use by enforcement authorities. Those include powers of entry, inspection, search and seizure, and powers to enable the testing of energy smart appliances by enforcement authorities. Finally, the Secretary of State may make payments or provide resources to the enforcement authority for the purpose of enforcing the energy smart regulations.
Clause 196 establishes that energy smart regulations may impose a range of sanctions for non-compliance. A full list of offences will be set out in the final regulations, on which the Government will consult publicly and which will be subject to debate in both Houses. I hope that answers the question from the hon. Member for Kilmarnock and Loudoun. The clause sets out several offences, including contravening requirements imposed by enforcement authorities or knowingly providing false information to enforcement authorities. Punishments for such offences will be provided for in regulations. The punishments will not include imprisonment. Regulations may also allow enforcement authorities to recover their costs by means of civil fines.
Clause 197 makes provision for the regulations to include a right of appeal to a court or tribunal against a requirement or civil penalty made by an enforcement authority. The right of appeal to a court or tribunal against a requirement or penalty for non-compliance, as set out in energy smart regulations, can include, but is not limited to, provisions set out in subsection (2). The right of appeal can be extended by the regulations beyond those parties against whom the requirement has been imposed. The Secretary of State may revoke or amend subordinate legislation, including an Act of the Scottish Parliament or the Senedd, where they consider it appropriate for the purpose of any provision falling within subsection (2).
Clause 198 sets out the procedure by which energy smart regulations will be made. The clause begins by setting out that energy smart regulations made under clause 193 may provide for exemptions or exceptions in their coverage. It requires the Secretary of State to consult before making regulations that subject a specific type of energy smart appliance to regulations or that amend the list of relevant purposes in clause 193. It also sets out the cases in which the affirmative scrutiny procedure is to be used when making regulations under clause 193. I commend the clauses to the Committee.
Question put and agreed to.
Clause 193 accordingly ordered to stand part of the Bill.
Clauses 194 to 198 ordered to stand part of the Bill.
Clause 199
Power to amend licence conditions etc: load control
Dr Whitehead
I beg to move amendment 160, in clause 199, page 170, line 3, at end insert—
“(f) regulate or prohibit the provision of load control in relation to appliances that are provided by high risk vendors.”
The Chair
With this it will be convenient to discuss the following:
Amendment 161, in clause 199, page 170, line 21, after “section” insert
“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.
Clause stand part.
Clauses 200 to 203 stand part.
That schedule 17 be the Seventeenth schedule to the Bill.
New clause 40—Designated load controller—
“(1) The Secretary of State may give a designated load controller direction only if the Secretary of State considers that—
(a) the direction is necessary in the interests of national security; and
(b) the requirement imposed by the direction are proportionate to what is sought to be achieved by the direction.”
This new clause ensures that load controllers undergo national security checks to establish the nature of connections to potentially hostile actors and the threats they may pose.
Dr Whitehead
We now come to the section of the Bill concerning licensing of load control. Load control is very much associated with the previous debate, inasmuch as it relates to how energy smart appliances operate overall, and such appliances will often operate under the aegis of a load controller—a body or person who is responsible for the network within which they work. It is important that we regulate and license not only the appliance but the bodies and people that control the load arrangements that smart appliances potentially give rise to.
Alec Shelbrooke (Elmet and Rothwell) (Con)
On a point of order, Mr Gray. I apologise to the hon. Member for Southampton, Test, but I want to make this point of order before the sitting concludes. We will shortly move on to discuss energy performance certificates and insulation of privately rented properties. In the past, I have been advised that I did not have to register the fact that my wife has a rental property and that her family have rental properties, but I seek your advice, Mr Gray, for the next sitting: will I have to make some sort of declaration before I comment on those areas of the Bill? I wanted to get that in now, so that a ruling can be made for this afternoon.
The Chair
If the interests are declared in the Register of Members’ Financial Interests and the right hon. Gentleman believes that they are relevant to the debate, it would be prudent for him to call the Committee’s attention to the register. That is not enforced entirely, but the question is whether there might be a perception of bias. Therefore, if the Member has interests that he believes might be of importance, it is probably worth his calling them to the attention of the Committee before he speaks.
Dr Whitehead, will you be concluding in the next 20 seconds?
The Chair
In that case we will adjourn, it being as close to 11.25 am as it can possibly be.
Energy Bill [ Lords ] (Ninth sitting)
Tuesday 13th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Chair
Before proceedings commence, may I indicate that I am very relaxed and if Members wish to remove their jackets, that is fine by me?
Dr Alan Whitehead (Southampton, Test) (Lab)
On a point of order, Ms Nokes. It has come to my attention that an article published today by Politico says that the Secretary of State has
“signaled a coming U-turn on the government’s plan to put a levy on household energy bills to support the nascent hydrogen gas sector in the U.K.”
The article reports the Secretary of State as saying that
“while hydrogen was a ‘great opportunity’ for the U.K. it was ‘unlikely’ that the gas would be a major future source of domestic heating.”
Pertinent to this Committee, he said that the Government did not want to see
“a situation where a levy is penalizing people who don’t use it”
—almost the exact words that were discussed in Committee—and added that hydrogen would be
“a better bet for heavier industry”
and transport.
The Secretary of State was also reported as saying:
“We’ll look at ways to create a levy or a financing that works for everybody as best as possible”.
What I take from that is that the Government are actively looking at ways to undertake a form of levy different from the one we discussed in Committee recently. You will recall, Ms Nokes, that you had to cast the deciding vote on the relevant amendment. I am sorry that the Minister was unable to give us the information that the Secretary of State has given us in that article, in particular that the Government are actively looking at developing an alternative levy arrangement. It is more than conceivable that had that information been available to the Committee at the time, that vote may have had a different outcome. In particular, the convention of the Chairman casting the deciding vote in favour of the status quo, which you quite correctly did at that time in your position as Chair, Ms Nokes, could have meant that a vote could have been cast for a different status quo—that is, one in which the Government were actively looking
“at ways to create a levy or a financing that works for everybody as best as possible”.
The original formulation in the Bill would therefore have fallen, in effect.
Ms Nokes, do you have any guidance on how we could rectify this problem? Might we invite the Government to table a new clause, which could be discussed at the end of our deliberations on the Bill? As Chair of the Committee, would you accept a new clause later in the Bill that might allow a debate to take place in the light of the information we now have before us? It is entirely in your hands to decide, Ms Nokes.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Further to that point of order, Ms Nokes. It is great to serve under your chairmanship. I am sure the hon. Member for Southampton, Test recalls the comments that I made in the fourth sitting when I abstained on the vote. Hansard will confirm the exact language that I used, but I believe I said that the Government had said to me that they were actively looking to table an amendment on Report. The article that has been produced today ties in with the comments that I made on the record a few sittings back, and I am relieved to hear that because it shows that we are moving forward. I do not believe there is any material change in what has happened because, as I said, I was told that the Government were actively looking at making an amendment on Report.
Dr Whitehead
Further to that point of order, Ms Nokes. I thank the right hon. Member for Elmet and Rothwell for his point of order, which related to mine. Far be it for me to downplay his importance in proceedings but, although he is quite right, the material difference is that I was quoting what the Secretary of State said, even though the right hon. Gentleman was clearly well informed in what he said to the Committee.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
Further to that point of order, Ms Nokes. I said in Committee at the time, in response to contributions from the hon. Member for Southampton, Test and other right hon. and hon. Members, including on the Government Benches, that we are listening and carefully considering the situation regarding that specific clause. We are listening to all the concerns raised in Committee, on the Floor of the House on Second Reading and in the other place. I gave that commitment in this Committee and see nothing that contradicts that in what the Secretary of State said to Politico this morning.
The Chair
In response to Dr Whitehead, I want to confirm that what I cannot do as Chair of the Committee is go back in time. It is of course open to the Government to table further amendments in the later stages of the Bill, and I think we have had an indication from the Minister that that is potentially what might happen. I will say no more than that.
Clause 199
Power to amend licence conditions etc: load control
Amendment moved (this day): 160, in clause 199, page 170, line 3, at end insert—
“(f) regulate or prohibit the provision of load control in relation to appliances that are provided by high risk vendors.”—(Dr Whitehead.)
The Chair
I remind the Committee that with this we are discussing the following:
Amendment 161, in clause 199, page 170, line 21, after “section” insert
“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.
Clause stand part.
Clauses 200 to 203 stand part.
That schedule 17 be the Seventeenth schedule to the Bill.
New clause 40—Designated load controller—
“(1) The Secretary of State may give a designated load controller direction only if the Secretary of State considers that—
(a) the direction is necessary in the interests of national security; and
(b) the requirement imposed by the direction are proportionate to what is sought to be achieved by the direction.”
This new clause ensures that load controllers undergo national security checks to establish the nature of connections to potentially hostile actors and the threats they may pose.
Dr Whitehead
It seems rather a long time since I got through the first half of my remarks on this clause, but I am happy to continue. I will recapitulate briefly what is in the clause, and then we can move on to the next business.
Members will recall that, with amendments 160 and 161 and new clause 40—I appreciate that it will be voted on later in proceedings, not today—we are drawing attention to the possible risks attached to certain load controller activities relating to appliances that are under the authorisation of load controllers. As we have discussed, appliances that are used in smart energy networks may be able to undertake autonomous information and data transmission activities—and, indeed, activities relating to their own operation—independently of the consumer or the person who installed the device.
I previously drew attention to a company that secured a 6% or 7% share of the market in SMETS2 smart meters by putting its price 30% below the market average, thereby ensuring that energy companies have an interest in commissioning third parties to purchase and install that brand of meter. I pointed out that that company, Kaifa Technology, has very close links to—indeed, is controlled by—the state-owned China Electronics Corporation, which has been sanctioned by the United States regarding high-risk activities concerning data and electronics. Kaifa smart meters are not available for installation in the United States as a result of that sanction, yet in the UK we are apparently going ahead with no concerns whatsoever.
I am not saying that Kaifa smart meters are necessarily a source of the possible transfer-link use of data. I pointed out this morning that there are remote-switching facilities within smart meters, so it is possible that a smart meter could be switched off by an outside agency, or that its data could be transferred for not necessarily very good purposes. We have a pretty strong regulatory regime, which was recently strengthened by an information security Act. I am certainly not pointing the finger at Kaifa smart meters and saying that they are definitely not to be pursued, but we do not have any method in our current legislation—nor, indeed, in this Bill—that would enable scrutiny to be brought to bear on companies such as Kaifa in relation to national security and resilience, so that our questions can be answered. We should be as certain as possible that, should these things come to be a part of our smart energy network environment they do not, as it were, just slip in under the carpet. It should be done consciously through a review of what they mean as far as our energy security is concerned and, indeed, in respect of the security of smart energy networks.
Alec Shelbrooke
The hon. Gentleman is making an important point about energy security and the ability for outside players—certainly, if we consider this from a Chinese perspective—to take control. On energy security, does he share my concern about the fact that 98% of the materials used in renewable energy come directly out of China? Does that not in itself represent a similar security risk to the one he is outlining?
Dr Whitehead
I thank the right hon. Member for his intervention, but I do not quite share his implied view that everything that comes out of China needs to have that level of security clearance. There are concerns about the proportion of our solar panels that are made and manufactured in China, for example, and a concern that one particular country has effectively captured the market in solar panels. It would be a good idea for those purposes, not for the purposes I am talking about, to rectify that situation. China is also increasingly manufacturing components for wind turbines and various other renewables, so yes, it would be a very good idea to have a much more diverse supply chain for renewables. As far as China is concerned, that is an issue of commerce; I am talking about a potential issue of national security and resilience. Yes, it involves the same country, but there are different concerns and, indeed, concerns about other countries that may be in the same position as I outlined as far as their smart energy technology offerings are concerned.
Andrew Bowie
It is an absolute pleasure to serve once again under your chairmanship, Ms Nokes. I thank the hon. Member for Southampton, Test for his amendments; he is of course right to consider the security impacts of load control devices. We share his concern that grid security should be protected, which is why I am happy to reassure him that we have already spent considerable time preparing means to manage the risks associated with hostile actors and the transformation of our energy system.
The outcome of our recent consultation on delivering a smart and secure electricity system confirmed our intent to regulate all organisations that remotely control large electrical loads, using the Network and Information Systems Regulations 2018, or the NIS regulations. Under those regulations, load controllers would be required to take appropriate and proportionate security measures to manage risks to their network and information systems. They would also be required to report to the relevant authority incidents that disrupt the continuity of services and take action to rectify those incidents.
The application of the NIS regulations in the energy sector in Great Britain is based on outcome-focused principles, using the cyber assessment framework developed by the National Cyber Security Centre. This approach focuses on proportionate risk management. Moreover, the licensable activities established through the powers in the Bill could impose security requirements on those organisations within its scope. The licence would complement our separate enhancements to the NIS regulations made through the Bill.
Finally, the National Security and Investment Act 2021 includes a broad range of powers enabling the Secretary of State to intervene in transactions that give rise to national security concerns. That includes the power to scrutinise transactions based on national security risks for electricity purposes. That incorporates acquisition of ownership of load controllers, who control electricity on behalf of their customers. On that basis, a power to direct a load controller on national security grounds, which new clause 40 would introduce, would be excessive in comparison with the rest of the electricity sector.
The Secretary of State does not have powers to direct private companies outside of an energy emergency or crisis scenario. Establishing such a precedent may risk undermining the development of the sector, with little compensatory benefit in additional security protections. Given our existing measures to control foreign investment, and our intentions to increase the cyber-resilience of load controllers, an additional power for the Secretary of State to direct on national security grounds would be disproportionate.
Amendments 160 and 161 centre on alleviating any security risks posed at the device level in the provision of load control. Amendment 160 would give the Secretary of State the power to regulate or prohibit the provision of load control by or to appliances supplied by vendors that are deemed to be high risk. Amendment 161 would define that group as
“vendors of appliances that pose potential or actual security and resilience risks to energy networks”.
I assure the hon. Member for Southampton, Test that measures to maintain the security of energy smart appliances are already in place. For example, the Electric Vehicles (Smart Charge Points) Regulations 2021, which are already in effect, require most private charge points for domestic and workplace use to meet minimum device-level cyber-security requirements. In addition, we committed through our response to the consultation on delivering a smart and secure electricity system to ensure that licences for the purpose of domestic and small non-domestic load control should include cyber-security requirements. We are confident that, taken together, the existing regime is sufficiently robust and that a further power to amend the licensing condition is unnecessary. I hope that with those reassurances the hon. Member will be able to withdraw his amendment.
Clause 199 sets out how the Secretary of State may modify conditions of licences granted under the Electricity Act 1989 and certain licences granted under the Gas Act 1986 for purposes of load control. It also provides powers for the Secretary of State to modify industry codes that are maintained under those licences for such purposes. More generally, the powers give the Secretary of State the flexibility to amend existing regulatory arrangements to reflect the introduction of a new licensing regime for load control. That new licensing regime will be introduced using the powers provided for in schedule 17.
Clause 200 sets out the process that the Secretary of State must follow before making changes to the conditions of licences, or documents maintained under them, for load control or related purposes, as set out in clause 199. The requirement to consult the parties listed in subsection (1) before making changes to licence conditions or documents maintained reflects standard practice in such cases and is consistent with other clauses. When modifying the conditions of a licence, the Secretary of State must specify the date on which the modification will take effect and publish the details of any modifications as soon as reasonably practicable after they are made.
Clause 201 establishes that the Secretary of State may make a modification to a standard condition of a licence using clause 199. It also establishes that that does not prevent any other part of the condition from continuing to be regarded as a standard condition. In essence, the power will allow the Secretary of State to make targeted changes to parts of a licence, without changing the overall status of that licence, or changing any other standard conditions to that licence. When the Secretary of State makes changes, the Gas and Electricity Markets Authority will amend future licences so that the amended standard conditions apply to future licensees. The authority will also publish the modification to the licence.
Clause 202 extends the regulatory provisions in relation to licensing that were established in the Gas Act and the Electricity Act to load control. The clause amends the Gas Act, the Electricity Act and the Utilities Act 2000 to apply several provisions of those Acts to the Secretary of State’s exercise of regulatory powers to load control. More specifically, the clause will extend several of the duties and obligations on GEMA within the Acts, particularly those in relation to protecting the interests of current and future consumers of electricity. GEMA would need to apply to the Secretary of State when exercising powers under clauses 195 to 197. Finally, clause 202 defines “gas licence” and “electricity licence”.
Clause 203 introduces schedule 17, which makes provision for the regulation of the load control of energy smart appliances. Schedule 17 amends the Electricity Act, allowing the Secretary of State to make regulations that amend the list of activities subject to the licensing framework to include activities connected with load control. The schedule sets out the terms of that regulation-making power, including the extent to which the regulations can make consequential or transitional provisions.
Dr Whitehead
I heard what the Minister had to say about the amendments. I am pleased to hear that the Government are taking this seriously, and I hope that the measures that he suggests by which they will do so are sufficient for the purpose. I think that the Secretary of State in question for the National Security and Investment Act is the Chancellor and not the Secretary of State for Energy Security and Net Zero, so the option to do anything about it will be at one remove from his Department, although I am sure the Secretary of State would be able to communicate with the Chancellor were there serious issues.
On the understanding that the Government are going to pursue this as a serious issue as part of the development of energy smart networks, and will incorporate that view at the heart of the arrangements, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 199 to 203 ordered to stand part of the Bill.
Schedule 17 agreed to.
Clause 204
National Warmer Homes and Businesses Action Plan
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The Government have carefully considered the effect of the clause, which was added on Report in the Lords. On 17 May, I tabled an amendment indicating my intention to oppose the clause. The Government do not consider that it would be effective in helping to deliver our commitments to improve the energy performance of buildings and to deliver net zero. However, I know that opinions among Committee members differ, and I look forward to the discussion that we may well be about to have.
The heat and buildings strategy, published in autumn 2021, sets out how the Government plan to reduce emissions from buildings and provides a clear long-term framework to enable industry to invest and deliver the transition to low-carbon heating. The Climate Change Committee already plays a key role, providing independent advice and scrutiny, and holding the Government accountable by publishing statutory progress reports to Parliament. Those are comprehensive overviews of the Government’s progress. The clause would simply duplicate those efforts.
The Government have already set out our aim to phase out the installation of new and replacement natural gas boilers from 2035, in line with natural replacement cycles, while scaling up the installation of low-carbon heating. We recognise that there are many options with the potential to play an important role.
The Government remain committed to the aspiration for as many homes as possible to reach energy performance certificate band C by 2035 where cost-effective, affordable and practical, as set out in the clean growth strategy. There has been good progress towards achieving that aim, with 47% of homes in England having reached EPC band C, up from a measly 14% in 2010.
In our net zero growth plan and energy security plan, the Government announced that we will publish a consultation on options for upgrading houses in the owner-occupier sector by 2023. The content of the consultation has not yet been finalised, and we need to gather further evidence on the potential impacts of interventions in that sector. More time is needed to ensure thorough consideration of options in this area, and the clause would not allow that time.
We are also taking significant steps to encourage businesses to reduce their energy demand through voluntary schemes and regulations. In the 2020 energy White Paper, the Government proposed that the trajectory for the minimum energy-efficiency standard for non-domestic rented buildings should be EPC band B by April 2030, with an interim milestone of EPC band C by April 2027.
We are evaluating the responses to our consultation and will publish the Government response in due course. It is important that the impacts, such as those on business and supply chain readiness, can be fully considered. The clause would pre-empt the response and commit the Government to a timeframe for implementation different from the one that has been consulted on.
The Government have set an aspiration to introduce the future homes standard by 2025. We will publish a full technical consultation for it in 2023. We intend to introduce the necessary legislation in 2024, ahead of implementation in 2025.
I thank Baroness Hayman and Lord Foster of Bath in the other place for raising these matters.
Dr Whitehead
We are in a curious position with this clause, which is a bit akin to my writing to the then Energy Minister to ask him to reintroduce the Bill as soon as possible. The Government at the time seemed not to want to introduce their own Bill as soon as possible, whereas we wanted them to do so. Clause 204 was introduced as an amendment in the House of Lords, so it has come to us as a substantive part of the Bill. We therefore find ourselves in the position—if I can persuade Opposition Members to vote accordingly—that we support the Bill as it stands and the Government apparently do not.
That is made more curious by what the clause actually says. With one small exception to do with dates, it takes things that the Government have already agreed to do—by the way, as far as I know, the future homes standard is not an aspiration; it is something the Government have already said will be mandatory by 2025—and says that the Secretary of State must produce an action plan for how they will be done. That seems to me a pretty good idea in any legislation, and in anything that anybody says will be the case in legislation. It is really not good enough to go around saying that things may well happen and that there might be legislation, and then not have any idea how that legislation can be properly discharged.
The clause puts that right by making sure that there is some kind of plan in place for these things to be achieved. It draws attention to the following targets: achieving
“100% of installations of relevant heating appliances and connections to relevant heat networks by 2035,”
which is in the energy security strategy; achieving
“EPC band C by 2035 in all UK homes where practical, cost effective and affordable,”
to which the clean growth strategy and the heat and buildings strategy contain specific commitments; achieving
“EPC band B by 2028 in all non-domestic properties”—
that is in a consultation that has already taken place, and the Government intend to produce either regulations or legislation to ensure that it happens, as I have mentioned—and introducing
“Future Homes Standard for all new builds in England by 2025,”
which the Government have already said they want to do.
In a sense, the clause is a bit of a break with how things have been done before, but in another sense it is not, because it just recapitulates things that already exist, puts them in order and states that we need some form of plan to ensure that they happen. Frankly, I am really surprised that the Government have decided that they want to knock the clause out. It is not superfluous. In fact, it supports the Government in delivering their plans and ensures that we all know where we stand.
That brings me to the purpose of this Committee. The amendment that the Government tabled to remove the clause has not been selected, which means that the only way for them to achieve their desired outcome is for the Committee to vote against clause stand part. That puts Committee members in a different position from that of voting on an amendment.
The likelihood of anybody having a go at any member of this Committee for voting in favour of this Bill is remote. Therefore, I would have thought that Committee members should be allowed to exercise their own judgment as to whether they support or oppose the clause. By asking us to vote against clause stand part, the Government are in effect asking the Committee to vote against itself. If members on both sides of the Committee support the Government’s targets and aspirations—and I would have thought that everybody does—and if they think that it would be a good idea to encapsulate them in an action plan, I do not think that they should be sanctioned for voting in favour of that and, in a sense, securing Government policy.
That is code for saying that no one should be pulled up by the Whips—although perhaps the Whips have a different idea—if they vote in favour of the Bill. I assume, although I do not know this yet, that every Opposition member of the Committee will vote to retain the clause, and I would hope that every Government member will also—
The Chair
Order. May I gently suggest, Dr Whitehead, that you have moved away from the substance of the clause and are somewhat straying into whipping arrangements?
Dr Whitehead
As always, you are right, Ms Nokes, so I will temper my remarks. I hope that common sense will prevail and that a thumping majority will ensure that the clause is retained so that the Bill can progress to its next stage intact. The clause is important to Government policy, so it should not be taken out and disabled in the way suggested.
Olivia Blake (Sheffield, Hallam) (Lab)
It is a pleasure to serve under your chairship, Ms Nokes. I rise to speak in defence of clause 204, and I agree with the shadow Minister, my hon. Friend the Member for Southampton, Test, that the Government have suggested an interesting tactic.
Our housing stock has been described as the least energy-efficient in Europe. That means we are the least prepared to absorb future price hikes, like those experienced in recent years, and to address future temperature changes. In England alone, more than 13 million homes—59% of them—are below a C rating on the energy performance certificate standard. As a result, housing is one of the main sources of carbon emissions in the UK, accounting for around 20% of total emissions.
We should be making massive efforts and strides to improve in this policy area, yet energy efficiency programmes have been cut and home insulation rates have plummeted over the past decade. In 2013, the coalition cut energy efficiency programmes, after which insulation rates fell by 92%. The number of energy efficiency insulations peaked at 2.3 million in 2012, yet fewer than 100,000 upgrades were installed in 2021. That is rather pathetic, it has to be said.
The Bill and clause 204 in particular provide a golden opportunity to put in place the financial structures and programme to give the necessary upgrades to the 19 million homes in our country that are below band C on the EPC scale. Clearly, that is what a Labour Government would do.
Mark Jenkinson (Workington) (Con)
Has the hon. Lady heard of our ECO4 scheme?
Alan Brown (Kilmarnock and Loudoun) (SNP)
Has the hon. Lady heard of the issues with the ECO4 scheme? The energy companies have not met the target number of properties because it needs to be rewritten.
Olivia Blake
Those are the exact problems. In recent years a number of Government schemes have either failed because they have not had the workforce to deliver them, or experienced challenges because people have been drawn into other roles, particularly in the building sector and in relation to cladding issues and so on. That is exactly why the Opposition would be very pleased if the clause were protected. We need that action plan. Delivery is only worth something when it happens. We cannot just have targets that we repeatedly continue to miss. It would be exceedingly challenging to argue to the public that we should not prioritise getting their bills down by £1,000 a year or come up with an action plan to deliver that.
Katherine Fletcher (South Ribble) (Con)
Yes, the British public would experience significant benefits through bill reductions as a result of insulating their homes, but who is the hon. Lady suggesting should pay for the intervention that would produce that benefit? It would be a significant scheme, especially given that 30% of the housing stock is really old. Who would foot that bill?
Olivia Blake
Moving away from this Bill, Labour has a fully costed plan for achieving that and it is targeted at the 19 million homes.
Andrew Western (Stretford and Urmston) (Lab)
Does my hon. Friend agree that although the Government are reticent about placing this clause on the statute book, surely the fact that they are Government targets means the money will be found anyway?
Olivia Blake
Absolutely, and I will come to that point. This issue is so significant: it is important that we find the funding for these sorts of interventions because almost 9,000 neighbourhoods in England and Wales have very low incomes but higher than average energy costs because of poor insulation. That requires Government action, and I fully support Labour’s plans, which I believe would cost £12 billion a year—I might be wrong about that.
Olivia Blake
Sorry, £6 billion—I have doubled my ambition. That is a large amount of money, but it would be very welcome in meeting the challenges we face.
I am not alone in my concerns about delivery in this space. In January, the Environmental Audit Committee rightly said that we need a national war mobilisation to improve energy efficiency and reduce carbon. The public are crying out for action to address fuel poverty and household emissions: 80% of respondents to National Energy Action’s polling supported funding retrofits for those on low incomes and, according to the New Economics Foundation, 64% of Conservative voters and 65% of people in the north support a national retrofitting taskforce.
Without the clause, the Bill will be another missed opportunity to tackle the cost of living crisis, to bring forward the emergency energy efficiency measures we need, and to start a national 10-year mission for home insulation. Delivery is important, and without an action plan I am not clear how those millions of homes, and the millions of people living in them, will benefit from better energy efficiency. We need to get on top of our carbon emissions and we need to ensure that housing is not forgotten, given its vast contribution to emissions.
It would be a mistake for the Government to remove the clause. All it is asking for is a warmer homes and a business action plan to set out how His Majesty’s Government intend to deliver energy efficiency. It is important to keep that clear ask in the Bill. I will be deeply regretful if the Government do not support the clause, because it will be another missed opportunity.
Andrew Western
It is a pleasure to serve under your chairship, Ms Nokes. At the risk of repetition, I too rise to defend clause 204. It is interesting that, in my first Bill Committee, we appear to be having something of a groundhog day moment. When we had a similar discussion about low-carbon heating last week, the Minister stood up and gave us various assurances that these things would be done, while resisting with all his might any attempts to compel the Government to do that in law.
It is incredibly challenging when the Minister says that superb progress is being made on these issues and that we have gone up to 40% over the past 13 years. In fact, on current projections we have something in the region of 200 years to go to upgrade the energy efficiency of the UK’s draughty housing stock. National Energy Action says that progress on energy efficiency is too slow, and the UK Business Council for Sustainable Development has calculated that the pace of the Government’s recently announced scheme would take almost 200 years to reach homes in need of upgrade. It is clear why the Opposition are so keen to see the targets in the Bill; clause 204 is therefore so important.
I warmly welcomed the addition of the clause in the other place because although the Minister talks about the energy White Paper, the net-zero strategy, the heat and building strategy that was published alongside it, and the future homes standard, none of those things actually compel the Government to act. That is the problem. The Government can miss their targets time and again because there is nothing that forces them to take the action needed. Warm words will not provide warm homes—it is that simple. This will not get us where we need to go unless it is on the statute book. We know that because we are already missing the targets.
Bim Afolami (Hitchin and Harpenden) (Con)
I respect the hon. Gentleman greatly. Obviously, it is a matter of political debate whether he accepts the warm words of the Conservative party—that is a legitimate, democratic debate that we should have—but what exactly does he propose would be the remedy for his not trusting the Minister’s word? Ultimately, that is his political point. He is entitled to make that point, and he has made it clearly, but trust cannot be legislated for, so I gently suggest that he accept that some things will always be a matter of political debate. I trust the Minister’s word. The hon. Gentleman does not have to do so, but that is ultimately what we are in politics to do—to argue and debate these things.
Andrew Western
I thank the hon. Gentleman for his intervention, but whereas trust cannot be legislated for, targets can. It would be a very simple remedy to place the targets in the Bill in order to remove any question of trust, and to give the industry and homeowners struggling under the weight of high energy bills certainty that the Government are taking the action required. In fact, I do not see this as a question of trust: it is a practical step. Indeed, if Conservative Members are so satisfied that the Government will take the action needed to meet the targets, why be fearful of their inclusion? If they have no issue with hitting a target, why not place it in the Bill? That is the fundamental point.
By not including the targets they have set, it opens up the argument that the Government do not feel they will meet them. In making that argument, I remind colleagues of the words of the National Infrastructure Commission, which says:
“Government is not on track to deliver its commitments on heat or energy efficiency…A concrete plan”—
which is what the clause would require the Secretary of State to introduce within six months of the Bill becoming an Act—
“for reducing energy demand is required, with a particular focus on driving action in homes and facilitating the investment needed.”
Katherine Fletcher
I share the hon. Gentleman’s zeal and passion for insulating the UK’s homes, but he has referred again and again to a concrete plan and investment, and I cannot believe that either of those things come with a price tag of zero. Given that it is important to be fiscally responsible, will he outline how he plans to fund the implementation that he wants to write into the Bill?
Andrew Western
The same applies to the Government’s targets. The fact is that we are being asked to take the Minister’s word that the Government will deliver on the targets, so there must already be a plan to do so. There must already be the funding to deliver, so what is the problem with enshrining this in law? That is the point we are advancing. Either the Government are putting the targets forward in a performative way, with no hope, plan or funding to deliver on them, or they are so assured that the targets will be achieved that there is no need for them to be placed in legislation—it is one or the other. Either way, I am sure that Conservative Members would want to satisfy themselves that the funding is in place; otherwise, the targets are a total waste of time anyway.
When we hear from the Minister, I would be grateful to know where the funding will come from to achieve the targets. Indeed, can we stand by the targets in any way, shape or form? That is the central point that I do not understand, because if the Government are going to deliver on this, what is the problem? If they are not going to deliver, all Committee members should be seeking to hold the Government’s feet to the fire.
Alan Brown
It is a pleasure to serve under your chairmanship, Ms Nokes. I was not going to speak, but the more this debate has gone on, the more confused I have got, so I thought I may as well throw some words out there anyway. Obviously, it is the job of the Opposition to hold the Government to account, but I find it bizarre that it now seems to be the job of the Opposition to make the Government stand by their own targets.
I understand that the clause was inserted in the other place. The Government keep telling us that the other place is very important and that we should rely on the expertise in the Lords, which is supposed to be a revising Chamber. That is ironic, because it was the Lords who brought forward the Bill in the first place. If we have to trust their ability and that it is a revising Chamber, it would seem logical to agree with the revisions that the Lords make. Otherwise, it undermines the point of having the Lords in the first place—which takes us to the position of the SNP: we would abolish it—but the Government tell us that it is an important place. We have heard only this week about how many people are scrambling to get into the Lords and are disappointed not to get in. Then we talk about trust and not being about to legislate for trust. Ironically, Nadine Dorries seemed to be saying yesterday that there is a real lack of trust in this Government.
The Chair
Order. I gently suggest that we need to be debating this clause, not the aspirations of some former Members.
Alan Brown
I know; I was just linking to where the clause came from and wanted to put these matters out there.
I do support the clause, although the future homes standard is effectively only for England. I have already raised my concerns that the Government are not moving fast enough, because they are still at the consultation stage. Subsection 1(d) is really important. The Government should publish an action plan showing how they are going to bring forward the future homes standard. That will give certainty to developers. They need to plan ahead for the technical requirements that they need to apply to new housing developments. It is important that a look-ahead is given to developers as soon as possible.
In terms of all the other targets, given that some of them go beyond the life of this Government anyway, I find it hard to understand why the Government are so reticent to accept the targets for energy efficiency installs. We can argue about whether Labour did more installs than are currently happening in terms of the number of energy efficiency measures, but the most important thing is the upgrading to EPC band C, to which the clause refers.
The Government can talk about the progress they have made in getting properties to EPC band C, but it is still only hovering around the 50% bracket, and that is after 12 years in government. If they are going to hit the target by 2035, there is no doubt that much more structured delivery plans will have to be put in place. Clearly, the properties that we can tackle today are the ones that are most easy to upgrade. It is going to get harder and harder the further into the programme we go. It is important that the Government are held to account on their targets and that they come forward and say how they are going to meet those targets.
Finally, on ironies, I agree with what the Labour party has been saying on energy efficiency, but this has come just after it has done a U-turn on the green new deal and the green investment it promised us all. I will leave it there, but there are a lot of contradictions on both sides, I would say.
Andrew Bowie
It is a pleasure to respond to the debate. There is some confusion at the minute. Indeed, I was slightly confused at the beginning of the debate, given that the hon. Member for Southampton, Test seemed at one stage to be whipping on behalf of the Government and giving advice to Conservative Members— I urge all colleagues on this side not to listen to his words. If I am not mistaken, he was suggesting that the clause we are against was tabled by the Government in the other place; Baroness Hayman is a Labour peer and Lord Foster of Bath is a Liberal Democrat peer.
Dr Whitehead
For clarity, I did not say that it was introduced by the Government, nor would I say that, because it certainly was not. The point I was trying to make was that it is now a part of the Bill, not that it was introduced by the Government in the other place.
Andrew Bowie
I am glad that is clarified for the Committee. For further clarification, we are seeking to revise the Bill back to its original state as drafted and remove an amendment that was made by Labour and Liberal Democrat Members of the House of Lords. I believe that is a relatively regular occurrence for the House of Commons. There should be no confusion on that.
Again, as they were when we were talking about smart meters, the Opposition are such a glass half-empty kind of party. We have made huge progress in the energy efficiency of UK homes. I understand why the Opposition do not want to speak about this: when they left office only 14% of homes had an EPC grading of course; now, after 13 years of Conservative Government, the proportion stands at 47%, and we are driving forward to get it over 50% soon. As for the suggestion that we do not have a plan to move forward, the Government do have a plan. We have set out a heat and buildings strategy and we have announced further measures in the net zero growth plan, which was announced just recently.
Alan Brown
I thank the Minister for giving way again. In this clause that the Government are trying to take out, there is reference to upgrading homes—it is a condition that the Government must abide by—
“where practical, cost effective and affordable”.
Can he provide a definition of what is practical, cost-effective and affordable? I could not get that out of the previous Secretary of State for Business, Energy and Industrial Strategy.
Andrew Bowie
What is practical and affordable will obviously be determined by individual circumstances and the market conditions at the time. Let me also say that I would have welcomed any acknowledgement from the Scottish National party, who are in government in Scotland, that we are working together across these islands to improve insulation and that we have made great progress as an island nation in getting towards 50% of all homes being rated EPC level C or above.
As I was just going on to conclude, we will take no lectures from the Labour party on the costings of projects, given that just last week it had to announce a staggering U-turn on its £28 billion investment in green technology and jobs, and it is yet to come up with any answer about how it will fund the £100 billion of pledges that it has announced thus far.
In terms of costings, a plan, moving this country forward, delivering on insulation and delivering on this entire green strategy, I have much faith in the Government’s position and in what we are seeking to do here today. That is why I advise all my colleagues to vote with the Government this afternoon.
Question put, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 206 to 208 stand part.
New clause 41—Energy performance regulations relating to existing premises—
“(1) Within six months of the date on which this Act is passed the Secretary of State must make regulations—
(a) amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2), all tenancies have an energy performance certificate (EPC) of at least Band C by 31 December 2028; and
(b) amending the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 (S.I. 2019/595) to raise “the cost cap” to £10,000.
(2) Exemptions to subsection (1) apply where—
(a) the occupier of any premises whose permission is needed to carry out works refuses to give such permission;
(b) it is not technically feasible to improve the energy performance of the premises to the level of EPC Band C; and
(c) another exemption specified in the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 has been registered in the PRS Exemptions Register.
(3) Within six months of the date on which this Act is passed the Secretary of State must make regulations—
(a) amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to enable Local Authorities to give notice to landlords that they wish to inspect a property, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time;
(b) to expand the scope of the current PRS Exemptions Register and redesign it as a property compliance and exemptions database;
(c) to require a post-improvement EPC to be undertaken to demonstrate compliance;
(d) to require a valid EPC be in place at all times while a property is let; and
(e) to raise the maximum total of financial penalties to be imposed by a Local Authority on a landlord of a domestic PRS property in relation to the same breach and for the same property to £30,000 per property and per breach of the PRS Regulations.
(4) The Secretary of State may make regulations to—
(a) enable tenants in the private rented sector to request that energy performance improvements are carried out where a property is in breach of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015; and
(b) make provision for a compensation mechanism where a tenant is paying higher energy bills as a result of a property not meeting the required standard.”
This new clause requires the Secretary of State to strengthen minimum energy efficiency standards in the private rented sector, expands the compliance regime available to local authorities, and gives the Secretary of State the power to create a compensation mechanism for tenants adversely affected by non-compliance. These measures are derived from the government’s preferred policy option in the 2020 “Improving the energy performance of privately rented homes” consultation.
New clause 42—Review of the “Improving Energy Performance Certificates: action plan”—
“(1) Within 12 months of the date on which this Act is passed, the Secretary of State must conduct a review of the “Improving Energy Performance Certificates: action plan” that sets out how new technologies can improve the energy usage and efficiency of premises.
(2) Such a review must include analysis of the energy efficiency benefits of energy optimisation technologies and bi-directional charging from vehicles to premises.
(3) Where any energy efficiency benefits are identified by this review, the Secretary of State must make provision under section 207(1)(b) for recommendations to be made about the improvement of the energy efficiency and usage of new and existing premises.”
This new clause would oblige the Secretary of State to update its review of the EPC rating system; for this review to consider bi-directional charging; and for the Secretary of State to then use the existing power under section 207 to promote these improvements.
Andrew Bowie
Clause 205 will provide the Secretary of State with the power to make changes to the existing Energy Performance of Buildings (England and Wales) Regulations 2012 to ensure that they are fit for purpose and contribute effectively to improving the energy efficiency of premises. Following the UK’s withdrawal from the European Union, it is necessary to create new primary powers to permit changes to be made to the 2012 regulations, as that power was lost with the repeal of the European Communities Act 1972.
Clause 206 will enable the Secretary of State to make changes to the Energy Performance of Buildings (England and Wales) Regulations in relation to new premises. That includes new premises in the process of being constructed or changed, as well as new premises whose construction or adaption is planned but has yet to be started. The changes will ensure that the anticipated energy usage and energy efficiency of new premises are taken account of.
Clause 207 enables us to ensure that we have an effective enforcement regime underpinning the energy performance of premises policy by amending existing requirements. We will review the current enforcement regime to ensure that there are sufficient enforcement options in place, with a view to improving compliance with the energy performance of premises framework. The existing regime includes civil penalties, and the clause enables us to amend those penalties or provide for new civil penalties by enforcement authorities up to a maximum of £15,000.
Finally, clause 208 provides that the regulations made under part 9 may amend, repeal or revoke provisions made in primary legislation and that this must be done through the affirmative resolution procedure. It also provides that the affirmative resolution procedure will be used if new criminal offences or civil penalties are created. This will ensure that there is parliamentary oversight of the uses of the power. I commend the clauses to the Committee.
Dr Whitehead
Clause 205 is the beginning of the part of the Bill on the energy performance of properties. I must admit that I thought for a moment there was going to be a spectacular U-turn on the previous clause, but I was sadly disappointed when the Minister decided which way he was really going to vote. I fear the same result in respect of this part of the Bill.
Let me speak briefly to our new clauses 41 and 42, which would considerably strengthen the Bill’s provisions on the energy performance of premises. They relate specifically to energy performance regulations for existing premises. Rather like clause 204, which is now not in the Bill but contained previous Government aspirations and claims in respect of outcomes, new clause 41 relates to things the Government have already said about energy performance certificates for properties in the private rented sector, about what should happen in respect of the improvement of properties in that sector to bring them up to an appropriate band, and about the amount specified in legislation that private landlords should spend on getting their properties up to that level before they are exempted from having to make further improvements.
The really important bit in new clause 41 would require the Secretary of State to make regulations
“amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2)”—
which contains exemptions—
“all tenancies have an energy performance certificate (EPC) of at least Band C by 31 December 2028”.
The new clause would also require the Secretary of State to make regulations
“amending the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019”—
which Members will recall introduced a £3,500 cap on the cost to landlords of achieving band E—to raise to £10,000 the amount that should be invested before landlords are exempt.
Those are reasonably ambitious outcomes for the private rented sector, but they were completely presaged by the Government’s previous proposals, which we supported at the time. Specifically, in September 2020 they consulted on improving the energy performance of privately rented homes in England and Wales. The consultation had proposed outcomes at its heart, but—well I never—there has not yet been a Government response. Only three years have gone by. We hope that there may be a response one day fairly soon, so that progress can be made.
The proposed outcome of the consultation—the favoured option at the time—was exactly as set out in subsection (1) of new clause 41: raising the energy performance standard of private rented properties to band C, a phased trajectory to get there by 2028, and a £10,000 average per-property spend under a £10,000 cap. Everything in the new clause is already there in what the Government said they would do in respect of private rented sector energy efficiency. The only difference is that the Government have not actually done anything about it.
I recently looked up the reaction to the proposals, and a number of commentators and advisers are saying, “Well, landlords, you perhaps ought to get yourselves steeled up to the idea that your properties, to be lettable in future years, will have to be band C, and that you may have to spend up to £10,000 to make your properties lettable at that point.” By the way, that seems a relatively small amount to have to spend, bearing in mind that this is essentially a question whether a property is of merchantable quality. In any other area of commerce, if it were not of merchantable quality, it would not be sold. These measures, if implemented, would ensure that properties were merchantable for letting purposes as far as efficiency standards are concerned, and landlords would be required to spend that relatively small amount before they were exempted and to use every endeavour to get their properties up to that point.
Mark Jenkinson
In my constituency of Workington, I have some wonderful conservation areas with lovely old stone-built houses. A Labour council will not allow the replacement of single-glazed windows with uPVC double glazing, for example, which we know works well for energy efficiency. Why does the hon. Gentleman think that they would not be of merchantable quality?
Dr Whitehead
If the hon. Member cares to go back to the consultation in 2020, he will see that there are certain exemptions, depending on things such as conservation areas, from getting properties up to the standard that we are discussing provided that other things are in place. I have no particular insight into the workings of the hon. Member’s local authority, but it may be that something like that is at the heart of those concerns.
The point is that in general, we would certainly support—and we did at the time—what is set out in the consultation and the Government’s declaration of policy intent. One area where energy efficiency needs to move forward quite rapidly is the private rented sector; after all, that is the housing sector with the worst energy efficiency record. It is just not good enough to stand by the idea that properties in band E, which is a very low energy efficiency band, should be at that level any longer—certainly not in the 2020s, when we are trying to get all the properties that we can up to a standard fit for 2050.
Alec Shelbrooke
Further to my point of order this morning about declarations of interest, I have spoken to the Commons Registrar who has informed that because I personally make no financial gain from property that my wife owns it does not have to be in the register; however, I have to declare an interest at this moment that my family has a substantial property portfolio. The comments that I am about to make, however, are based on the concerns of landlords, estate agents and letting agents in my constituency.
One of the problems is if we start to over-legislate at this time. The hon. Member for Southampton, Test pointed out that, importantly, the Government are still consulting on the report. We are in danger of focusing purely on the one area of energy efficiency in the private rented sector, and in effect making landlords do things that the owner of a private property does not have to do, with the cost being passed on to tenants. Subsection (3)(a) of new clause 41 would
“enable Local Authorities to give notice to landlords that they wish to inspect a property, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time”.
In other words, that would enable constant inspections and attempts to move forward with insulation.
We have said throughout that we have to take the public with us on this agenda. In some areas, we move too quickly to legislate on something that the Government are consulting on and that has not been properly thought through. Several times, my hon. Friends have intervened to ask where the money is coming from to do such works. At the moment, as I look at the Bill and the £10,000 cap, it is coming from the tenant. At a time when there is a political argument on both sides of the House about how people can get on the housing ladder, increasing their rents even further because the landlord has to do something that people in the private sector do not have to do will not help that cause.
There is no doubt that energy efficiency will reduce the amount of fuel that has to be used to heat a home. That is a scientific fact. We hear that it could save £1,000 a year, but that assumes that everything stays level and that we do not have to put another levy on electricity bills. I remind colleagues that when nuclear power came along, it was said that it would be so cheap to produce that we would not be able to meter it. That turned out to be far from the truth.
Alec Shelbrooke
There you go, praise from the other side.
One of the points made by the hon. Member for Southampton, Test was about getting in and retrofitting now, and not having to do it again in 2050. New clause 42(1) states:
“Within 12 months of the date on which this Act is passed, the Secretary of State must conduct a review of the “Improving Energy Performance Certificates: action plan” that sets out how new technologies can improve the energy usage and efficiency of premises.”
I have no doubt of the intent with which that was written, but it can be interpreted very differently. It could mean that as time goes forward, the regulations will change and those with band C EPCs might now be told to come to a level that was not required at this stage of retrofitting.
Jo Gideon (Stoke-on-Trent Central) (Con)
On a point of order, Ms Nokes. I want to seek a little clarification after my right hon. Friend the Member for Elmet and Rothwell declared his interest. I am not planning to speak on the new clause, but before we vote should I make members of the Committee aware of my entry in the Register of Members’ Financial Interests as an owner of a rental property?
The Chair
I think that via that point of order you have made Members aware of your interests. As Mr Shelbrooke indicated, he sought advice from the registrar of interests and I always find it best to be cautious and over-declare rather than under-declare.
Andrew Bowie
I thank the hon. Member for Southampton, Test and my right hon. Friend the Member for Elmet and Rothwell for their comments on the new clauses. In answer to the question of why we have not produced a full response to the consultation, we are committed to raising standards in the sector in line with our ambition, set out in the clean growth strategy, and we will publish a summary of responses to the consultation on improving standards in the private rental sector this year.
Andrew Bowie
Yes, this year.
We are continuing to refine the policy design to ensure that the costs and circumstances relating to energy efficiency improvements are fair and proportionate for landlords and tenants, as my right hon. Friend the Member for Elmet and Rothwell pointed out. The economic headwinds that have been buffeting us, and the changing circumstances in the private rented sector in particular, have made it difficult at the minute, but as I said, we will be publishing our response—a summary of responses, anyway—this year.
New clause 41 seeks to require the Secretary of State to make regulations in relation to energy performance in existing rented premises. His Majesty’s Government agree on the need to improve the energy efficiency of buildings to lower energy bills and deliver carbon savings to meet our net zero and fuel poverty targets. Indeed, this is reflected in the Government consultation on proposals to raise the minimum energy efficiency standard for privately rented homes. Under the Energy Act 2011, the Secretary of State already has powers to amend the private rented sector regulations in order to raise the minimum energy efficiency standards and set the dates by which landlords must comply with the new regulations. The new clause would not allow us to reflect the valuable feedback that the Government received from the consultations in the final policy design, which is essential to ensure that the final policy design is fair and proportionate for landlords and tenants. As I have said, the Government have committed to publishing the summary of responses by the end of this year.
Let me turn to new clause 42. In September 2020, we published the energy performance certificate action plan, in order to ensure that consumers can trust energy performance certificates and to make sure that certificates are accurate and reliable. Certain actions are expected to require regulatory change under the new powers to be implemented. The energy performance certificate is designed to rate the energy performance of a building, as considered as an asset that passes from one occupant to another during sale or rental.
As those occupants may or may not possess energy optimisation technologies or an electric vehicle with bi-directional charging capability, it is not currently considered appropriate to assume a benefit from this in the calculated energy performance rating. Including this nascent technology, which relies on consumer behaviours and equipment not integral to the premises, would increase the complexity of the EPC scheme. Bi-directional charging is a promising technology, but it is not yet viable for use in the mass market.
Question put and agreed to.
Clause 205 accordingly ordered to stand part of the Bill.
Clauses 206 to 208 ordered to stand part of the Bill.
Clause 209
Energy savings opportunity schemes
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
We now turn to part 10 of the Bill, which deals with the energy savings opportunity scheme, which I will refer to as ESOS.
Clause 209 provides a power relating to ESOS. ESOS mandates energy audits of large undertakings at least once every four years, which cover their buildings, transport and industrial processes. The audits result in cost-effective recommendations for improving energy efficiency. The power would replace the repealed power in the European Communities Act 1972, under which the UK established ESOS in 2014, and without which ESOS is a frozen scheme and cannot be updated.
ESOS is important to the UK’s plans to meet net zero targets and reduce energy costs for businesses. The existing scheme’s net benefit is estimated at £1.6 billion. The power covers four core options, as set out in the July 2022 ESOS consultation response: to standardise ESOS reports, improve the quality of audits, add a net zero element to audits, and require public disclosure of information from ESOS reports. It also covers two potential longer-term options to mandate action and extend ESOS to medium-sized enterprises, which are for future consultation. The power will enable the amendment of ESOS, or the establishment of such a scheme, and sets out the general provisions to make regulations.
Clause 210 sets out the application of ESOS, including in relation to geographical application and determining responsibility for energy consumption for the purposes of ESOS. It allows regulations to set the description of undertakings that fall within scope of ESOS, and to provide for two or more participants to be treated as a single participant. It would allow ESOS to extend to a far wider range of undertakings, subject, of course, to future consultation. I therefore commend clause 209 to the Committee.
Dr Whitehead
I do not have anything to say on these clauses, other than to note that we are now into the energy savings opportunity scheme, and that the Minister is indeed right that schemes would have been frozen under EU regulations. However, I am not yet sure whether what would have been the case under the EU regulations is reflected accurately in the things coming forward. I hope that it is. The scheme looks okay to me, but I would like an indication from the Minister that, in effectively updating the scheme for the purposes of this legislation, nothing has been lost from what previously was there.
Andrew Bowie
I am happy to give that guarantee. Indeed, one of the benefits of our now not being in the European Union is that we can devise and implement schemes that are fit for businesses and, indeed, homeowners—people within the United Kingdom—depending on the circumstances that we are facing at the time.
Question put and agreed to.
Clause 209 accordingly ordered to stand part of the Bill.
Clause 210 ordered to stand part of the Bill.
Clause 211
Requirement for assessment of energy consumption
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 211 makes provision for regulations to set out when, how and by whom an ESOS assessment should be carried out, and other requirements. It introduces a new power for future details from ESOS reports to be published to increase the transparency of the scheme and promote the uptake of energy efficiency measures.
Clause 212 enables regulations to set out functions and requirements relating to ESOS assessors, including who may be an assessor, the maintenance of assessor registers, and requirements on designated bodies that maintain assessor registers. New powers are provided to the Secretary of State or the scheme administrator to ensure the standards of assessors. The powers will allow intervention where there is evidence that an assessor or designated body is not carrying out its responsibilities under ESOS regulations appropriately, to improve the overall quality of ESOS reports.
Clause 213 includes a power to introduce new requirements for ESOS participants relating to the production and publication of an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. The requirements aim to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures.
Clause 214 introduces a power to impose new requirements on ESOS participants to achieve energy savings or greenhouse gas emissions reductions. It sets out two approaches: ESOS regulations may either require participants to take specific actions, or may set out other requirements, such as the public reporting of actions, that aim to encourage participants to take those actions. Regulations would be able to specify that the requirements should refer to a cost-benefit analysis. As stated in the Government response to the ESOS consultation, the former approach would be subject to further consultation before any decision was taken regarding its introduction. Regulations making such provision would, under clause 218, also be subject to the affirmative parliamentary procedure.
Dr Whitehead
I have nothing to add to what the Minister said. I am happy for the clauses to stand part of the Bill.
Question put and agreed to.
Clause 211 accordingly ordered to stand part of the Bill.
Clauses 212 to 214 ordered to stand part of the Bill.
Clause 215
Scheme administration
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 215 provides powers for the effective administration of ESOS. It enables regulations to make provision about the appointment of scheme administrators in any of the four nations of the UK, whose functions may relate to administration and compliance monitoring and/or the enforcement of scheme requirements. It also enables regulations to require businesses to have regard to the scheme administrator’s guidance or pay fees to cover the costs of the scheme’s administration.
Dr Whitehead
Clause 215 is about administrators and the administration of schemes, and those administrators will have at their elbow action plans determined by previous clauses. It is good to see in the context of this afternoon’s discussions that a part of the Bill has action plans as a requirement and that those action plans will be positively administered. Having a plan seems to be a bit of a sine qua non for administrators; we do not seem to have that in other parts of the legislation. The Opposition have been assiduous in trying to put that idea forward, but it is nice to see that that line has been breached at least as far as these clauses are concerned.
Andrew Bowie
I am very happy that the hon. Gentleman is very happy.
Question put and agreed to.
Clause 215 accordingly ordered to stand part of the Bill.
Clauses 216 and 217 ordered to stand part of the Bill.
Clause 218
ESOS regulations: procedure etc
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
This speech is very short. Clause 218 requires the Secretary of State, before making regulations, to consult those likely to be affected, including the respective devolved Administrations where provisions relate to devolved matters. It also describes where the affirmative procedure would be required—for example, if extending ESOS to smaller businesses, mandating action by ESOS participants or creating offences.
Question put and agreed to.
Clause 218 accordingly ordered to stand part of the Bill.
Clause 219
Directions to scheme administrators
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
This is another short one. Clause 219 provides the Secretary of State with a power to give directions to a scheme administrator, with which it must comply—for example, when views differ over the interpretation of legislation or when the Secretary of State wishes to order a scheme administrator to remove an individual from its designated register of persons who may be appointed as a lead assessor. Clause 220 enables the Secretary of State to provide or arrange for financial assistance to scheme administrators and ESOS participants.
Dr Whitehead
I will just mention in passing that there is an interesting progression in clause 219, relating to directions. Subsection (1) says:
“The Secretary of State may give directions to a scheme administrator.”
So far, so good. Subsection (2) says:
“The power to give directions under this section includes a power to vary or revoke the directions.”
From that, it appears that the Secretary of State has the power to revoke their own directions—
Dr Whitehead
Indeed, but presumably if the Secretary of State changed his mind, he would not start with subsection (1) in the first place, so it is a bit of a strange formulation. I think that had the Opposition moved that as an amendment, the Minister would have said it was superfluous and unnecessary. I do not know why that particular formulation has been put in but we know that subsection (3) says:
“A scheme administrator must comply with any direction given to it under this section”—
however confusing—so it is probably all right then. But I must admit that subsection (2) looks a bit odd.
Andrew Bowie
I understand the hon. Member’s question and the direct answer is yes, the Secretary of State can revoke his own direction. I think it is important to set that out in the Bill and, indeed, there is precedent for it in comparable provisions in section 51 of the Climate Change Act 2008, passed by the then Labour Government.
Question put and agreed to.
Clause 219 accordingly ordered to stand part of the Bill.
Clause 220 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Energy Bill [ Lords ] (Tenth sitting)
Thursday 15th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 15 June 2023 - (15 Jun 2023)
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Chair
Before we begin, although officially Members have to go through me to take their jackets off, I am happy to say that everyone can have it off today—you all have my permission to remove your jackets. Hansard colleagues would be grateful if Members would email speaking notes to hansardnotes@parliament.uk. As usual, please switch electronic devices to silent. Tea and coffee are not permitted, but there is ample water.
Clause 221
Interpretation of Part 10
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
It is a pleasure to serve yet again under your chairmanship, Dr Huq. The clause—the final clause in part 10—simply sets out the interpretation of terms used in the clauses on the energy savings opportunity scheme, which we discussed at length on Tuesday. It also explains where provisions fall within devolved competence for the purposes of this part of the Bill.
Dr Alan Whitehead (Southampton, Test) (Lab)
Welcome to the Chair again, Dr Huq; it is a pleasure to serve under your chairmanship. The clause concerns just the interpretation of previous clauses—I am sure that they are great interpretations and will go down in history as such—and I have no comments on it.
Question put and agreed to.
Clause 221 accordingly ordered to stand part of the Bill.
Clause 222
General objective
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause marks the start of part 11, which concerns core fuel sector resilience. By “core fuels” we mean the essential liquid and gaseous fuels used for transport and other purposes, whether derived from crude oil or renewable transport fuels.
Ensuring resilience and security of supply for such fuels has become even more critical given the change that we are experiencing in the energy sector globally. Although renewable technologies are making inroads—electric cars, for example, are of growing importance—core fuels still account for more than 95% of the energy used for transport, and over 1.5 million households use heating oil or liquefied petroleum gas for heating. The Government are determined to reduce our dependence on fossil fuels, but that will take time, and it will be a challenging time for the industry.
Analysis by His Majesty’s Government has shown that there are already single points of failure in the fuel system that are critical to regional fuel supply, and those risks require better management. Recent events, such as covid-19, the tanker driver shortages of 2021 and protest activities at oil terminals, have demonstrated the level of risk to fuel supplies. It is therefore a responsible approach for the Government to take powers to ensure that fuel supplies remain secure.
Existing powers are available to Ministers under the Energy Act 1976; however, those are essentially reactive and may be used only when a disruption to fuel supplies is an actual or threatened emergency. The purpose of these measures is to enable us to mitigate risks before they develop into actual disruptions to supply.
Risk management is at the heart of these measures. Not all risks can be eliminated, but a resilient system is more likely to withstand shocks and to recover from them faster. The Government seek to strengthen the resilience of the sector, now and through the net zero transition, and to proactively minimise and address risks that could cause disruption to the supply of fuel.
Clause 223 provides clarification on the scope of the powers and who they can be applied to. The intention is to cover all the critical operators in the supply chain for core fuels, including refiners, infrastructure operators, suppliers, hauliers and wholesalers. The clause sets out which products are considered core fuels, including conventional transport fuels from oil—such as petrol, diesel and jet—heating oil, liquefied petroleum gas and renewable transport fuels.
Dr Whitehead
We have reached an important part of the Bill, concerning core fuel sector resilience. As the Minister stated, we need to ensure that our core fuel supplies are not cut or interrupted by external circumstances, that we have resilience in our supplies, and that we can be assured at all times that petroleum and so on is getting to and from refineries, and to where it is supposed to go. The Minister has reflected already on past disruption to fuel supplies, which hon. Members will recall. It is understandable that we wish to be assured that supplies are secure.
The Minister also stated that we have powers already to ensure that, where disruption takes place, action can be taken to secure resilience. However, these measures on the principle of core fuel resilience go further than that. As the Minister says, this is about trying to anticipate potential disruption and problems as far as core fuel sector resilience is concerned, and then providing the Government with powers to respond proactively, rather than reactively, to the anticipated issues.
I suggest that one needs to be very careful in how one drafts something for that purpose. I assume that what we do not want, although perhaps the Government do, is to get into the situation in the film “Minority Report”, quite a while ago, in which the lead actor, who happens to be Tom Cruise—not that I regularly watch Tom Cruise films—
Dr Whitehead
Oh, all right. We can have a debate about whether Tom Cruise makes good films or not, but I think the general consensus would be no. The point about that film is that he was, as I recall, a detective who had to go round anticipating crimes before they were committed. Indeed, he did not just anticipate crimes—I think my hon. Friend the Member for Bristol East is looking this up on her iPad—
Kerry McCarthy (Bristol East) (Lab)
I have no idea what you are talking about. I am not sure I have ever seen it.
Dr Whitehead
In that film, people were profiled in case they might commit crimes in later life, and they were arrested well before they could commit a crime, or because their profile suggested that they might do so in the future. That is the problem that we may come across with these clauses.
As we will unpack when we come to later clauses, the way the Bill is drafted puts the onus on suppliers and the owners of undertakings that relate to possible disruptions to do “anything”—that is the word in the Bill —to secure core sector resilience. As we will see, if the people in those sectors fail or fall short of doing “anything”, there are penalties: they can be imprisoned, and they can be fined at the discretion of the Secretary of State.
I am interested to hear what the Minister has to say about that, but it seems to me that that gets rather close to the “Minority Report” line about anticipating offences and, as it were, taking people out before they have committed an offence. Furthermore, it puts an enormous onus on the people carrying out those activities to do things that perhaps ought to be for the Government to undertake and enforce, as the Minister said earlier, at the time that a disruption takes place. It could be said that these clauses are about anticipatory activity. The Government quite properly have powers under previous environmental legislation to deal with disruption.
Clause 222 sets out the general objective for core fuel sector resilience and states that the Secretary of State’s functions must be exercised with a view to
“ensuring that economic activity in the United Kingdom is not adversely affected by disruptions to core fuel sector activities, and…reducing the risk of emergencies affecting fuel supplies.”
That is a very wide brief.
Andrew Bowie
I do not want to stray into Captain Mainwaring and Lance Corporal Jones territory, but I think we have been delving into the realms of fantasy. Just for the record, I should state that Tom Cruise is a fine actor and director. The “Top Gun” films, the “Mission: Impossible” series, “Jerry Maguire” and “Minority Report” are all excellent films that I enjoy watching, and Tom Cruise does a very good job acting in them.
The hon. Gentleman is right to mention the existing powers, but those are reactive; we are seeking to be proactive in order to mitigate the risk to the supply of fuel. Some of us—I was still at school—remember the fuel crisis of 1999 under the last Labour Government. Of course, we would not like to see anything like that happen again. There have been disruptions more recently, and we need to take action to mitigate them.
The power in part 11 allows the Government to regulate the sector, but the intention is to have an effective power to preserve fuel supply for end users. A narrower power would risk missing the next unexpected event, and we would end up with an extensive list of possible risks and actions, which we do not want. The hon. Gentleman is right to say that, in most circumstances, the sector acts voluntarily. However, we must remember that such companies are commercial entities and will always act in their interest. Therefore, it is the Government’s role to ensure that there is a protection in place nationally to support the supply of fuel and ensure that this essential service continues for the British people.
Question put and agreed to.
Clause 222 accordingly ordered to stand part of the Bill.
Clause 223 ordered to stand part of the Bill.
Clause 224
Directions to particular core fuel sector participants
Dr Whitehead
I beg to move amendment 116, in clause 224, page 191, line 17, at end insert—
“(9) The Secretary of State may not issue directions to core fuel sector participants that are in contravention of the Trade Union and Labour Relations (Consolidation) Act 1992.”
This amendment sets in legislation the need for the Secretary of State to act in accordance with the Trade Union and Labour Relations (Consolidation) Act 1992 when dealing with core fuel sector participants.
Dr Whitehead
The amendment is, I hope, germane to the general picture that I have painted of the purport of part 11, which places an onus on companies and those engaged in core fuel sector activity to undertake activity—quite often anticipatory activity—that will ensure that the Government’s aims for core fuel sector resilience are achieved.
We saw in clause 223 the range of activities that are envisaged as being covered by part 11: storing oil, handling oil, the carriage of oil or renewable transport fuel by sea or inland water, transporting oil by road or rail, conveying oil or fuel by pipes, processing or producing oil or renewable transport fuel, and so on. That covers a huge range of industrial concerns, companies and undertakings, and all those companies and undertakings will effectively be bound by clause 224. That means that those companies and undertakings can have directions given to them to do various things, on a substantial anticipatory basis, that are necessary for core fuel sector resilience.
Clause 224(4) states:
“If the Secretary of State considers that there is a significant risk of disruption to, or a failure of, continuity of supply of core fuels, the Secretary of State may direct a person to whom this section applies to do anything in relation to the person’s relevant activities or assets which the Secretary of State considers necessary or expedient for the purpose of…reducing the risk, or…reducing the potential adverse impact of the disruption or failure.”
That is not a very closely specified list of things that the participants in core fuel sector resilience—those people who are doing all those activities—may be directed to do. The Secretary of State can direct those companies to do “anything”.
The amendment seeks to clarify one particular area of what “anything” might mean. The clause could be construed as saying that, in doing “anything”, the Secretary of State could assume—again, on an anticipatory basis as far as core fuel sector resilience is concerned—that the companies concerned may or should start to infringe the rights of their employees in relation to employees’ activities in those companies. That is a pretty wide-ranging power. It suggests that, if it is thought that there might be disruption, the onus is on the companies to take actions that might infringe other established provisions in our legal system in order to carry out what the Secretary of State directs them to do in relation to resilience.
From the structure of the clause, it certainly looks as though the Secretary of State might assume—again, at arm’s length—that those companies could, for example, take actions in relation to their employees not because the employees had done something, but because they might do something in the future that affects core fuel sector resilience and therefore means that the companies would be in breach of the Secretary of State’s directions. Of course, the things that might be done include the company’s employees exercising their trade union rights. As we set out in our amendment, those rights are established by the Trade Union and Labour Relations (Consolidation) Act 1992, which governs and regulates the sort of actions that are reasonable for employees to undertake in respect of their trade union and workplace rights. We do not think they should be thrown away on the basis of an anticipatory direction requiring companies to do things in relation to the Secretary of State’s concerns about fuel sector resilience.
I can see the pretty good labour relations with those engaged in fuel sector resilience, which exist in most circumstances in the sector, turning into very bad relations if there is a sort of undefined onus on the companies, at the direction of the Secretary of State, to do something— anything—about something that may or may not happen. Even though there are rules and regulations governing the companies’ relations with their employees, the temptation—in fact, the rational response—will be for them to say to the trade union representatives, “We are going to make sure you cannot exercise your rights in our firm because we are worried that we might fall under this direction in the future.” If an employer were to do that, even though nothing had happened but something might happen in the future, that would be a guaranteed way to break down labour relations, and might quite possibly precipitate the sort of crisis that the Minister is seeking to deal with on an anticipatory basis.
It is therefore conceivable that the very existence of these arrangements could precipitate crises of fuel sector resilience rather than prevent them. I think all hon. Members would agree that we would not be very happy to have that on the statute book, so we want to add a clear understanding that the Secretary of State’s directions should not imply or direct that the companies should act in contravention of the 1992 Act. That is an attempt to clear up a little this series of very vague and far-reaching powers and arrangements.
The amendment would not, of course, impede the force of the Secretary of State’s directions to ensure that the companies involved in core fuel sector resilience are doing everything they can to ensure resilience, but it would framework the circumstances under which they and the Secretary of State act so that the anticipatory arrangements are within reasonable bounds. I am sure the Minister will see the force of the issue: we may conceivably make anticipatory arrangements into real arrangements if we are not careful about how we go about it. I therefore think that the amendment is a protection not just for those who are employed in core fuel sector resilience areas, but for their employers and for the Secretary of State, such that what the Secretary of State is anticipatorily doing has some clear boundaries as far as what that activity may mean.
Olivia Blake
It is a pleasure to serve under your chairship, Dr Huq. I should say that I am a member of the GMB union.
I rise to support the amendment, which is very reasonable and is an attempt to help the Minister. I am sure he will stand up and say that the Secretary of State would never knowingly try to give directions in contradiction to the measure that we have tabled, but the point of the amendment is to get that on the statute book and make it clear to the industry, and those who are employed in it, that that safety net would be there, because “anything” is a very broad word, as outlined by the shadow Minister, my hon. Friend the Member for Southampton, Test.
There have been great relationships within the industry for many years, and as it is such a critical industry when it comes to health and safety, the working rights of those employed in it are critical to maintaining that safety. I hope the Minister will look on the amendment kindly and understand the reasons for it.
Andrew Bowie
The powers in the clause are important to ensure resilience and address disruption in the core fuel sector. I thank the hon. Member for Southampton, Test for his amendment and reassure him, and the hon. Member for Sheffield, Hallam, that the powers are not intended to interfere with any rights to industrial action or any other employee rights. The Government have maintained a good working relationship with the industry over the years and aim to be aware of proposed industrial actions and to work collaboratively, as we have in the past, to understand the impact and potential mitigations for the risks that might arise.
Clause 224 enables directions to be issued for particular purposes only: to improve and maintain resilience, to restore continuity of supply or to reduce the risk or impact of a disruption. In a situation in which a proposed industrial action is assessed to cause a significant risk of disruption, the direction power could be used to ask core fuel sector participants to make contingency plans to mitigate the risk. It is not intended to cut across the rights in the legislation that the hon. Members have highlighted.
I emphasise that the Government will always seek a voluntary solution in the first instance before issuing a direction and, of course, we believe that industry participants will have a chance to make representations before a direction is made and to appeal a direction when issued. I therefore ask that the hon. Member withdraw his amendment.
Kerry McCarthy
Will the Minister clarify what he means by “industry participants”?
Andrew Bowie
Industry participants would be companies, the industry as a whole, trade union bodies and so on. They are absolutely part of the entire process and, of course, if any of them had an issue with the direction being issued, they would have the right to appeal such a decision.
Clause 224 gives the Secretary of State the power to issue directions for the purpose of maintaining or improving core fuel resilience or to recover from or reduce the risk of a disruption to continuity of core fuel supplies. The past few years have demonstrated that the resilience of the core fuel sector needs to improve significantly. We have seen queues at pumps and stock-outs at petrol stations more often than we should. The supply of fuel remains critical to the operation of the country’s economy and essential services.
The individual companies in the supply chain are flexible and manage their own risks. In extreme cases that are out of these companies’ control, it is likely that they can declare force majeure, meaning that because of the extenuating circumstance, they will not be held liable for their failure to perform contractual obligations. It is therefore crucial that the Government have the power to direct key players in the sector to take actions necessary to manage the risk of disruption to fuel supply that could arise.
The clause gives the Secretary of State the power to issue a person carrying on core fuel sector activities, or a facility owner in the core fuel supply sector, with a direction in three different circumstances. The first is to maintain or improve resilience. It is important to note that this power can be used only if the Secretary of State considers that insufficient progress has been made by the proposed recipient to take the steps necessary to address the issue.
A direction can also be issued to restore continuity of supply or to reduce a significant risk of disruption to supplies. Such directions can be issued without waiting for the sector to make progress voluntarily, given the impact that a disruption or significant risk might have on the public. A direction will be issued only if circumstances mean that it is not practicable to make regulations. That could be because of the urgency of the issue or because of the number of cases—if they are not sufficiently numerous to justify making regulations.
A direction can be issued only to persons carrying on core fuel sector activities in the course of a business with capacity in excess of 500,000 tonnes or to a facility owner if the facility has capacity in excess of 20,000 tonnes. That will cover refineries, terminals, pipeline operators and hauliers when a disruption associated with an individual company could have a significant impact on the continuity of supply of core fuels in our United Kingdom. The direction might be to take an action or to stop the recipient doing something that could have an adverse impact on the resilience of the sector. There is a requirement to provide written notice to the recipient and the reason for the direction, so the sector should be reassured that the recipient will be duly informed and will have the opportunity to make representations regarding such a decision.
The power is designed to cover a broad range of scenarios, because the range of conceivable risks is wide and inevitably uncertain. For that reason, we are unable to provide guidance as to the circumstances in which the power will be used. However, I emphasise that His Majesty’s Government intend to work with industry on a voluntary basis whenever possible and that the power can be considered as only a backstop power where a voluntary approach is not effective.
Clause 225 sets out the procedure to be followed before issuing a direction. The recipient of the direction must be given a written notice that sets out the proposed direction, the reason why the direction is being issued and when the direction is intended to come into effect. They will also get an opportunity to make written representations in respect of the proposed direction.
Given that directions will relate to sites covered by regulations for the control of major accident hazards, it is also appropriate that the relevant competent authorities —such as, in England, the Health and Safety Executive and the Environment Agency—are consulted to ensure that the direction does not inadvertently compromise safety. There is also provision to consult other persons whom the Secretary of State deems appropriate. The Secretary of State will consider any representations from the recipients, or those authorities, when deciding whether to issue the direction.
Clause 226 sets out the consequences for failing to comply with a direction. There could be severe impacts to the security of supply if there is non-compliance. It is therefore essential that there are criminal as well as civil sanctions to deter businesses from failing to comply. The offences set out in this clause are criminal offences and they serve as a deterrent measure so that they can provide credibility to the direction power.
The clause sets out both summary and indictable offences for either imprisonment or a fine, or both. The severity of the offence will determine whether it will be a summary conviction or a conviction on indictment. There has always been a history of compliance in the sector. Our hope is that the provisions will be a strong deterrent to future non-compliance and that businesses will realise that it is cheaper and more responsible to comply.
Dr Whitehead
I put what I hoped was a fairly reasoned case for amendment 116. I understand what the Minister has said about the circumstances in which directions would be given and the aim of working on a voluntary and collegiate basis with the industry and ensuring that things proceed, as far as possible, on a voluntary basis. However, the circumstances about which we are talking may tempt the Government to remove themselves from that principle. The Minister may say that is his aim, but I always think that we have to legislate for the worst circumstances, not the best.
It would be a good idea to have the requirement in the amendment in the part of the Bill that talks about directions. I am not particularly satisfied by what the Minister has said about how the clause will work generally and would like a Division on the amendment, because we want it on the record that we think it is important. It is not because we wish to undermine the Bill’s progress in any way, but the amendment relates particularly to what the Minister said about the circumstances under which he thinks directions should or should not be made. We may discuss some of those things in the debates on other clauses as they come up, but at this point I wish to press the amendment to a Division.
Question put, That the amendment be made.
Andrew Bowie
The aim of the clause is similar to that of the power of direction in clause 224, which is to maintain or improve core fuel resilience or to counteract a fuel-supply disruption or its potential adverse impact. The regulation-making power is designed to be used when a larger class or category of operators and owners need to be directed to take certain actions. The clause may also be used to direct action by smaller businesses and operators such as petrol stations.
Before making any regulations under the clause, the competent authorities for health and safety and environmental protection must be consulted. Subsection (8) sets out that regulations made under the clause will be subject to the affirmative procedure because the potential interference to businesses if the powers are used means that it is only reasonable that Parliament has a say on how the powers are exercised. The powers to make regulations can also make non-compliance with the regulations a criminal offence because of the potential impact of any failure to act. I therefore commend to the Committee this great clause of this great Bill.
Dr Whitehead
The clause further underlines what I said about this part as a whole. It relates to the powers of the Secretary of State to make regulations and to the circumstances in which those regulations may be made. As hon. Members will have read, subsection (4) states:
“If the Secretary of State considers that there is a significant risk of disruption to, or a failure of, continuity of supply of core fuels, the Secretary of State may by regulations require persons of a class or description specified in the regulations to do anything in relation to their relevant activities or assets which the Secretary of State considers necessary or expedient for the purpose of…reducing the risk, or…reducing the potential adverse impact of the disruption or failure.”
Once again, we have the word “anything”, which should trouble considerably hon. Members in Committee and, rather more so, the employees and companies involved in core fuel activity.
What discussions and consultations has the Minister had with the industry involved in the resilience of the core fuel sector? What was the response, formally or informally, to the provisions that the Secretary of State will be enabled to put in place under this clause? Did the sector react favourably or unfavourably to the clause? If it reacted unfavourably, was anything done about further discussion with the companies involved—or, by the way, the trade unions at those particular companies—to address such concerns?
If the Minister is proceeding without such a consultation, that rather calls into question what he has said in the past about the good relationship with the industry. Bearing in mind that the Minister and the Secretary of State are asking the industry to do some potentially onerous things—we cannot get more onerous than “anything”—it would be of relevance to the Committee to hear, whether now or in future, what employees and companies think about it. How easy do they think it will be possible to make arrangements that comply with the directions? After all, as we will come to, it is a question not just of their being subject to the directions, but of them actually going to prison if they do not get it entirely right—rather an important point for employers to consider when responding to the clause. If the Minister has useful information to convey to the Committee, that would be helpful to our considerations.
Andrew Bowie
Happily, the Government and the industry have ongoing positive relations, and open dialogue and discussion on multiple issues. The Secretary of State and the relevant Minister in the Department for Energy Security and Net Zero meet the sector regularly. We have conducted extensive discussions with the industry on the issue over several years. Indeed, as far back as 2017 there was a consultation on this matter, which had heavy industry engagement, so I hope that that allays the fears of the hon. Gentleman and sets his mind to rest.
Question put and agreed to.
Clause 227 accordingly ordered to stand part of the Bill.
Clause 228
Power to require information
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 228 introduces a power for the Secretary of State to require information from individuals or companies in the core fuels supply sector. It will enable the Government to have an accurate picture regarding the resilience of the sector.
Currently, the Government rely on the sector to voluntarily provide the information necessary to assess, mitigate and respond to any disruption to the core fuels sector. Although most companies comply with requests, some do so only partially and there is a lack of consistency in the quality of some information collected. There is a risk that that leaves the Government unprepared and unable to assess a situation that might impact security of supply.
Clause 228 will apply to operators with throughput in excess of 1,000 tonnes, which encompasses the majority of key sector players. The type of information requested can vary given the circumstances. It may include information around site infrastructure, operations, supply capacity and volume supplied.
The notice to require information specifies the way that the information must be provided, ensuring that the quality of information provided is consistent. The Secretary of State must notify the proposed recipient of the notice in advance to allow them to make representations, and must consider any such representations before deciding whether to issue such a notice.
Clause 229 places a duty to report a notifiable incident and outlines a clear protocol for businesses to inform the Government, should they identify or suspect a potential risk of disruption. It is expected that businesses should be required to report only a notifiable incident relating to an incident that disrupts or causes failure to—or, indeed, creates a significant risk of the same—the continuity of supply of core fuels.
Guidance is currently being developed, following engagement with industry representatives, to set out the parameters for incident reporting. Examples of the sorts of incidents or risks that might be included are physical and operational issues with infrastructure, industrial action and insolvency. The duty is imposed on core fuel sector players with throughput in excess of 500,000 tonnes, such as refineries, major oil terminals and oil hauliers, but that list can be expanded through regulations.
Clause 229 also permits the Secretary of State to seek further information from the person who has reported the incident. That will aid the Government in identifying supply issues before they develop into emergency situations and in taking appropriate action when necessary. The Secretary of State must notify the proposed recipient of the notice in advance to allow them to make representations and must consider any such representations before deciding whether to issue a notice.
Clause 230 creates an offence where there has been a failure to comply with the requirement to provide information when notice has been given to do so. It also creates an offence when there has been a failure to report incidents and a failure to provide further information about a reported incident on request. The Secretary of State has the right to request information from the sector by written notice for the purpose of ensuring resilience. Failure to comply with those requirements without reasonable excuse means that an offence has been committed. Similarly to clause 226, the offences are criminal offences and are designed to act as a deterrent.
Clause 231 allows the Secretary of State by regulation to require information to be provided at specified intervals. The Government currently conduct periodic reviews of resilience in the system through a voluntary approach. The current reporting scheme does not provide sufficiently detailed information to allow the Government to understand fully the risks and capabilities of the sector, and the voluntary nature of the approach carries the risk that the industry could stop providing the information needed at any time, without notice.
The provision of information at specified intervals—for example, annually—will allow the Government to monitor the supply chain, anticipate pinch points in the system and identify any potential issues. The information provided will then be used by the Government to better monitor resilience and to support decision making in relation to determining whether further action, such as issuing a direction, should be taken. Much like other clauses in this part, there are powers to create criminal offences relating to non-compliance with any regulations.
Clause 232 sets out the circumstances in which the Secretary of State may disclose information provided under clauses 228, 229 or 231 to any Government Department or devolved Administration for the purposes of maintaining sector resilience or restoring a disrupted supply, or, if necessary, for the purpose of a criminal proceeding. The clause does not give the Government the right to contravene the Data Protection Act or certain limits under the Investigatory Powers Act 2016.
Clause 233 sets out that His Majesty’s Revenue and Customs has the power to disclose information to the Secretary of State solely for the purpose of facilitating the Secretary of State’s functions relating to core fuel sector resilience. HMRC currently collects data from core fuels operators on the volume of fuel sold to customers, which provides information on their market share and is important in the assessment of their resilience. The power would allow HMRC to disclose that information when needed for the purpose set out in the clause. That will help to ensure that the Department has a robust and reliable understanding of the state of fuel supply and resilience across the sector and can take appropriate action if needed.
The power is important in ensuring that the Government do not seek the same information from the sector twice, and helps to reduce any administrative burden imposed by His Majesty’s Government. It is also worth noting that protections are in place to prevent the disclosure of information if it breaches provisions under Data Protection Act and certain parts of the Investigatory Powers Act 2016. I commend the clauses to the Committee.
Dr Whitehead
I have no further comments on the clauses; we are happy for them to proceed.
Question put and agreed to.
Clause 228 accordingly ordered to stand part of the Bill.
Clauses 229 to 233 ordered to stand part of the Bill.
Clause 234
Appeal against notice or direction
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause sets out the appeal options available to a person who has been issued with either a notice under clause 224 or, under clauses 228 and 229 respectively, a notice to provide information or a notice to provide further information about a reported incident. I commend the clause to the Committee.
Dr Whitehead
I think I come under the category of “anyone else”, Dr Huq.
I may be wrong, but the clause appears to be about appeals against a notice or direction that relates not just to the immediate clauses we have discussed but in particular to clause 227, on the power to make regulations and, as I have said previously, direct
“persons of a class or description specified in the regulations to do anything in relation to their relevant activities”.
If we set that against clause 234, on the authority to undertake an appeal against a direction, it is noticeable that an
“appeal to the First-tier Tribunal against the direction or notice”
can be made on the ground that the decision is
“based on an error of fact...is wrong in law, or...is unfair or unreasonable”.
Does the Minister consider that the extremely vague wording of the requirement to do “anything” could give rise to a lot of income for lawyers, shall we say? Employers could go along to a tribunal and say, “We were required to do ‘anything’ but do not think that is particularly fair or reasonable under the circumstances, because we could not understand what ‘anything’ constituted.” Employers may be under a direction to do things that they are not clear about and, indeed, that could require them to do something they consider to be directly against the interests of the companies they run and, indeed, the broader question of good relations and so on in respect of energy sector resilience.
Andrew Bowie
I thank the hon. Gentleman for his question. His mention of lawyers of course brought to mind another very good Tom Cruise film: “A Few Good Men”. I believe that members of this Committee, unlike what was said in that film, can handle the truth. That is why I am pleased to say that the Government will ensure that any notice given to a person will be based on discussions with the company in question and give them time to make progress to resolve the issue. Given our preference for a voluntary approach, we do not expect a high number of directions in the first place.
Safeguards such as issuing a draft notification and seeking representations from the recipients before making a decision will ensure that decisions are not disproportionate, which I know the hon. Member for Southampton, Test is worried about, or unfair. For that reason, the number of appeals is expected to be extremely low.
Question put and agreed to.
Clause 234 accordingly ordered to stand part of the Bill.
Clause 235
False statements etc
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 235 creates an offence of knowingly making a materially misleading or false statement when providing information or giving further information about a reported incident. It is important that the information received from the sector under the information powers is as accurate as it can be, given the potential detrimental impact of false information. If a business knowingly provides false or misleading information, that will be considered an offence, which is subject to criminal and/or civil penalties. That also applies to any other statement made to the Secretary of State under this part of the Bill.
Clause 236 sets out the scope of offences that can be made under the regulation powers and how they are punishable. Non-compliance with regulations such as those made under clauses 227 and 231 could seriously impact the Government’s ability to assure the continuity of fuel supply. Therefore, it is of the utmost importance to have the ability to create offences as a deterrent to potential future breaches.
Clause 237 sets out a requirement to seek the consent of the Secretary of State or the Director of Public Prosecutions in England and Wales before proceedings may be brought for offences under this part of the Bill. For Northern Ireland, there is a requirement to seek the consent of the Secretary of State or the Director of Public Prosecutions for Northern Ireland.
Clause 238 sets out that when an offence has been committed by a body corporate or a Scottish partnership with the consent or neglect of an officer or partner, the officer or partner will also be held to have committed an offence and can be prosecuted accordingly. That includes directors and managers, or people acting in that capacity. That will ensure that seniors are encouraging compliance and considering the impact of decisions, as they may be held accountable for non-compliance.
Question put and agreed to.
Clause 235 accordingly ordered to stand part of the Bill.
Clauses 236 to 238 ordered to stand part of the Bill.
Clause 239
Enforcement undertakings
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 18 be the Eighteenth schedule to the Bill.
Andrew Bowie
The clause sets out the civil sanctions available to Government as an alternative to prosecution when the Secretary of State has reasonable grounds to suspect that one of the listed offences has been committed. Civil sanctions are effective in ensuring compliance, allow flexibility and are much more cost-effective for Government, industry and taxpayers.
The Government have had a consistently strong relationship with the sector, as I have said, and we do not expect compliance or support to diminish. Enforcement undertakings have been used successfully as a main form of enforcement by environment agencies and the Health and Safety Executive, so there is precedent. Given the impact of non-compliance, it is important to have these provisions as well as criminal sanctions, so that proportionality and severity can be assessed, and the right sanction applied.
Schedule 18 places an obligation on Government to have a procedure in place for entering into an enforcement undertaking. It encourages transparency on the part of the Government by requiring the procedure to be published so that both parties are clear on what is needed. It includes a process to make changes to the procedure and puts safeguards in place to ensure that consultation has been carried out before the changes are made and published. It allows variation of the terms of the enforcement undertaking provided that both parties agree in writing.
Schedule 18 also states that a compliance certificate must be issued when the Secretary of State is satisfied that there has been compliance with the undertaking, and it sets out the process for that. The Secretary of State may treat a person as having failed to comply with an undertaking and revoke any compliance certificate where inaccurate, incomplete or misleading information has been provided. A person has the power to appeal decisions regarding the refusal or revocation of compliance certificates on the grounds that the decision is based on an error of fact, wrong in law, unfair or unreasonable, or wrong for any other reason.
Dr Whitehead
I am a little puzzled by what the Minister has said previously about the extent to which there has been consultation and discussion with industry and employers in this area. The Committee needs to be clear that he is now advocating Ministers undertaking enforcement of directions that, as we have discussed, apparently have sanctions, certainly for conviction on indictment, of imprisonment for a term not exceeding two years—or 12 months in Scotland and six months in Northern Ireland, given the respective general limits in magistrates courts.
In other words, we are discussing sanctions on employers—one might say that is an interesting turnaround from sanctions on employees—that could lead to their being imprisoned for a time. That appears to be disproportionate to what is suggested as far as enforcement undertakings are concerned, in particular in view of the arrangements that we have already agreed on regarding the circumstances of a direction and the situation that an employer may or may not find him or herself in as far as trying to comply with those directions is concerned.
Certainly, were I an employer or a company engaged in this area, I might well say to the Minister or the Secretary of State: “Yes, we understand that you may be placing on us particular actions in relation to anticipated disruption, but we would be pretty unhappy if failure to comply with a direction, which might not be entirely in our own hands as a company, could result in us as the directors going to prison for two years.” I would not like that to be a consideration were I a director of such a company.
I am therefore a little surprised, because either those companies have perhaps not read the detail of the Bill—although this bit has been around long enough—or the Government simply have not drawn their attention to it, or consulted them, or discussed the circumstances under which such exist. Have the Government just conjured up these important undertakings and the penalties attached to them as a list in the Bill, or was it the result of iterative discussions with the industry as to what is and is not proportionate for the industry?
Andrew Bowie
I do not wish to go over the same ground in too much detail, but a consultation took place in 2017 and an open discussion and debate continues with the industry on this and many other issues. I know the hon. Gentleman speaks with the best of intentions, but he did mention the detail of the Bill, and it is in that detail that there is a choice to enforce either criminal offences or civil sanctions. In many cases, it is in the interests of both parties and the public to use civil penalties to guarantee enforcement, and that would be appropriate. However, there will be cases in which criminal offences are better for enforcement. The Department will consult on guidance and sanctions, which are also subject to parliamentary scrutiny after Royal Assent, so we will have another chance to debate this. The best way to avoid a sanction or, indeed, going to prison is not to break the law.
Dr Whitehead
That’s what Tom Cruise says. [Laughter.]
Question put and agreed to.
Clause 239 accordingly ordered to stand part of the Bill.
Schedule 18 agreed to.
Clause 240
Guidance: criminal and civil sanctions
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
I have to say that I never thought we would be debating Tom Cruise at such length. Clause 240 sets out the Government’s duty to publish guidance on the criminal and civil sanctions associated with the offences listed in this part of the Bill. The purpose of the guidance is to set out the approach to enforcement for offences I set out earlier. The guidance will provide clarity and further information on how offences will be enforced and what actions the Secretary of State may take. The clause sets out the process that the Secretary of State must follow before they can publish guidance around criminal and civil sanctions. That includes consultation requirements and to lay a draft of the proposed guidance before both Houses of Parliament in line with clause 241.
Clause 241 states that the guidance cannot be issued until 40 days after the day on which it is laid in both Houses, or the later of the two days if laid in the Houses on different days. It is certainly not a “Mission: Impossible”.
Question put and agreed to.
Clause 240 accordingly ordered to stand part of the Bill.
Clause 241 ordered to stand part of the Bill.
Clause 242
Financial assistance for resilience and continuity purposes
Andrew Bowie
I beg to move amendment 22, in clause 242, page 203, line 35, leave out from beginning to “financial” in line 1 on page 204 and insert—
“The Secretary of State may, with the consent of the Treasury, provide”.
This amendment ensures consistency with the approach taken in clauses 103 and 134 in relation to powers to provide financial assistance. It does not alter the substantive effect of clause 242(1).
Andrew Bowie
The amendment ensures consistency with the approach taken in clauses 103 and 134 in relation to powers to provide financial assistance. Clause 242 sets out the financial assistance power, which is intended to be used when direct financial intervention is considered the most appropriate way to preserve resilience or secure continuity of core fuel supply. Such financial intervention is to be strictly for the resilience of the core fuel sector and for securing or maintaining the continuity of fuel supply, for which the Government currently do not have explicit powers.
Dr Whitehead
I hear what the Minister says. It is certainly a balanced approach that the power should be used only in exceptional circumstances, and is not a general bail-out or financial handout. I still have some residual concerns about the way the clause was originally worded. As a result of the amendment, it is to be worded marginally differently. The explanatory statement states that the amendment
“does not alter the substantive effect of clause 242(1).”
I am reminded of the following statement by an analytical philosopher whose name escapes me:
“A difference which makes no difference is no difference at all.”
I did not get a clear answer when we talked about clauses 103 and 134. The Minister moved an amendment to clause 103 to take out the words
“out of money provided by Parliament”,
leaving the clause to state that financial assistance may be provided in general. Is there a difference to clause 242 as a result of this similar amendment? If the Government may draw on moneys that have not been provided by Parliament for the purpose of financial assistance, where are they likely to come from, and what controls would Parliament have?
The present wording of clause 242 provides control, inasmuch as if moneys are provided by Parliament, Parliament has the ability to scrutinise and account for them. If removing that element of the clause gives rise to moneys provided not by Parliament but by, say, the Government of Kazakhstan, might that not worry us a little, or is there no need to worry because the Government’s ability to raise money by non-parliamentary means is tempered by other things?
Andrew Bowie
There is absolutely nothing for the hon. Gentleman to worry about. That is what I say in response to his question on parliamentary oversight and ensuring that there is scrutiny of where the money comes from. We are currently in the process of agreeing a protocol with the Energy Security and Net Zero Committee. We propose that the Secretary of State will write to the Chair of the Committee to notify them of instances where the Department has provided financial assistance under the power, so there will be parliamentary scrutiny throughout the process. I am reliably informed that this is a consistent point with respect to Bill drafting.
Amendment 22 agreed to.
Clause 242, as amended, ordered to stand part of the Bill.
Clause 243
Power to amend thresholds
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause contains a power for the Secretary of State to amend or modify the threshold for capacity in excess of which these measures can be applied. Capacity refers to the tonnage of oil that the operator has handled in the previous calendar year. This would not change the person to whom the powers under this part could apply.
The core fuel sector is dynamic, and our net zero goals may change the landscape of the sector in the future. We therefore need to future-proof the legislation to account for potential changes that may occur in the sector such that the thresholds may need to be changed over time. It is important to stress that any regulations made under the power are subject to the affirmative procedure.
Dr Whitehead
I have no particular comments on the clause, although my hon. Friend the Member for Bristol East has reminded me that the philosopher was William James.
The Chair
Fastest finger first—Kerry McCarthy.
Question put and agreed to.
Clause 243 accordingly ordered to stand part of the Bill.
Clause 244
Interpretation of Part 11
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause identifies several key terms that are used throughout part 11, and lets readers know which sections contain the corresponding definitions. It is therefore intended solely as an aid in interpretation.
Dr Whitehead
I have no comments other than that the word “anything” does not appear in the definitions. That is a minor observation.
Question put and agreed to.
Clause 244 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Energy Bill [ Lords ] (Eleventh sitting)
Thursday 15th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 15 June 2023 - (15 Jun 2023)
The Committee divided: - Ayes: 5 / Noes: 7 - Question accordingly negatived.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
I beg to move amendment 135, in clause 245, page 206, line 13, leave out from “wind” to end of line 18 and insert “activity” means—
(a) the planning, construction, operation or decommissioning of offshore wind electricity infrastructure, or
(b) the identification of an area for activity within paragraph (a) (whether or not any particular offshore wind electricity infrastructure is in contemplation).”
This amendment widens the definition in clause 245 to cover the identification of an area for offshore wind development. The amendment also changes the definition to “relevant offshore wind activity”.
The Chair
With this it will be convenient to discuss the following:
Amendment 164, in clause 245, page 206, line 18, at end insert—
“(c) any development listed in Section 66 of the Marine and Coastal Access Act 2009 that is connected to the construction, operation, maintenance or decommissioning of a generating station within paragraph (a).”
This amendment would extend the fast-track consenting process for offshore wind to supporting marine development necessary to support the offshore wind project.
Government amendments 136 and 137.
Clause stand part.
Government amendments 138 to 141.
Clause 246 stand part.
Government amendments 142 to 145.
Clause 247 stand part.
Government amendments 146 to 152.
Amendment 166, in clause 248, page 210, line 7, leave out paragraph (i).
This amendment, together with Amendment 167, would remove the ability to disapply certain environmental protections when making regulations relating to the assessment of the environmental effects etc of relevant offshore wind projects.
Amendment 167, in clause 248, page 210, line 12, leave out subsection (5).
See explanatory statement to Amendment 166.
Amendment 165, in clause 248, page 211, line 38, at end insert—
“(10A) When making regulations under this section the appropriate authority must have regard to the particular importance of furthering the conservation and enhancement of biodiversity.
(10B) The appropriate authority—
(a) may make regulations under this section only if satisfied that the regulations do not reduce the overall level of environmental protection or the level of protection for individual sites and species, and
(b) before making regulations under this section, must publish a statement explaining why it is so satisfied.
(10C) Before making regulations under this section, the appropriate authority must seek advice from persons who are independent of the authority and have relevant expertise.
(10D) A statement published under subsection (10B)(b) must include an explanation relating in particular to protection provided by—
(a) the Marine and Coastal Access Act 2009, the Marine Act (Northern Ireland) 2013 or the Marine (Scotland) Act 2010 (as the case may be),
(b) the Conservation of Habitats and Species Regulations 2017,
(c) the Conservation (Natural Habitats, &c.) Regulations 1994 or the Conservation (Natural Habitats, etc.) Regulations (Northern Ireland) 1995 (as the case may be), and
(d) the Conservation of Offshore Marine Habitats and Species Regulations 2017.”
This amendment would apply certain conditions to the making of regulations relating to the assessment of the environmental effects etc of relevant offshore wind projects.
Government amendment 153.
Clause 248 stand part.
Government amendments 154 and 155.
Clause 249 stand part.
Government amendment 156.
Clause 250 stand part.
Andrew Bowie
What a pleasure it is to serve under your chairmanship yet again, Mr Gray, as we plough on through this immense Bill.
Clause 245 is the first in a series of clauses relating to offshore wind infrastructure projects that will provide new approaches to delivering compensatory measures for environmental impacts and speed up and simplify the consenting process for offshore wind projects. They will do all that while continuing to protect and enhance our marine environment. The clause sets out some key definitions for the purposes of the subsequent new clauses relating to offshore wind infrastructure projects.
I will now briefly set out the Government amendments tabled last week. Government amendments 136 and 137 define “offshore wind electricity infrastructure” to ensure the offshore wind clauses capture all infrastructure in the UK marine area used or intended for use in connection with an offshore wind farm.
Government amendments 135 and 138 to 156 widen the definition of “relevant offshore wind activity” in clause 245 to cover the identification of an area for offshore wind development. That ensures all the clauses relating to offshore wind infrastructure projects apply to offshore wind spatial plans, as well as to individual projects. The amendments also change the definition to “relevant offshore wind activity”.
Clause 246 will allow strategic compensatory measures to be used to fulfil duties under the habitats regulations, the Marine and Coastal Access Act 2009 and the Scottish and Northern Irish equivalents. That should speed up decision making on offshore wind farm development consents while protecting and enhancing our marine environment. For some offshore wind projects, all feasible options to avoid, reduce or mitigate adverse impacts on protected habitats and species will be exhausted. Where that happens, the public authority must satisfy itself that sufficient compensatory measures for these impacts are secured before granting development consent.
The devolved Governments are responsible for consenting to some offshore wind projects in their areas. These provisions ensure that the appropriate public authority can consider applying strategic compensatory measures to offshore wind projects.
Clause 246 will enable public authorities to use strategic compensatory measures that have already been delivered or will be delivered in the future to fulfil their compensation obligations. As strategic compensatory measures could be delivered away from the site affected by the development, the Government are committed to working with devolved Administrations to agree how to manage such measures with cross-border implications.
Clause 247 enables the establishment, operation and management of one or more marine recovery funds. It allows the Secretary of State to delegate functions connected with the marine recovery fund, including to a public authority under a devolved Administration. It is our intention to delegate the functions necessary for devolved Governments to operate their own funds as appropriate. That will mean their marine recovery fund may deliver compensatory measures for the projects they consent. It will be an optional route for offshore wind developers or plan promoters to discharge requirements on them to compensate for damage to a marine protected site.
The Department for Environment, Food and Rural Affairs is leading work with the offshore wind industry and other stakeholders to develop a library of ecologically robust and commercially feasible strategic compensation measures. The marine recovery fund will deliver only measures that have been approved through this process. That will help to reduce time spent considering compensatory measures during the consenting process. It provides a mechanism to deliver approved compensatory measures strategically, using financial contributions from one or more developers or plan promoters.
Clause 248 will help speed up the consenting process for offshore wind projects. It will allow the habitats regulations assessment and marine conservation zone assessment processes to be adapted and streamlined. These changes will apply to offshore wind development in the UK marine area only. The clause will enable the modification of existing, and the creation of new, legislation for the assessment of the environmental effects on protected sites caused by the development of offshore wind. We intend to make regulations that ensure that environmental protection of protected sites is addressed earlier in the pre-application planning process. That should speed up the consenting process by providing greater certainty and reducing statutory nature conservation body resource spent on examination of well-understood mitigations.
The powers also allow for the development of guidance to outline how assessments of the effects on protected sites should be undertaken. We also intend to make regulations that provide clarity on compensatory measures, which should make it easier for developers and regulators to offset damage to protected sites, and to secure such solutions at an earlier stage.
Clause 248 will also allow the Government to consider enabling developers to provide broader compensatory measures, rather than so-called like-for-like measures, that improve wider marine ecosystems but are not targeted at specific impacted habitats, species or protected areas. I must emphasise, however, that a broader approach should be considered only where like-for-like measures are not the most effective compensation. We intend for consent decisions to remain subject to advice from statutory nature conservation bodies.
Clause 249 will help to maintain consistency in environmental assessment processes across the United Kingdom marine protected areas network. To balance that with our offshore wind ambition, we recognise the importance of engaging relevant parties on those important issues. Clause 249 will therefore ensure that the Government and the devolved Administrations work closely with each other, as well as with statutory nature conservation bodies and marine regulatory bodies, on any changes to the process, and consult on issues relevant to their waters. In addition to clause 245, clause 250 sets out some key definitions for the clauses relating to offshore wind infrastructure in this chapter.
With that, Mr Gray, I beg to move that clause 245 and Government amendment 135 stand part of the Bill.
The Chair
That is not quite actually what the Minister should be moving. The Minister is moving amendment 135, proposed to clause 245, as on the amendment paper; the question is that the amendment be made. The Minister does not move clause stand part. I move stand part; the Minister doesn’t.
Dr Alan Whitehead (Southampton, Test) (Lab)
As the Minister has said, we are making progress with this enormous Bill, part of which is the enormous clause 245 and everything that goes with it. Hon. Members will see that Mr Gray has undertaken a difficult task in accommodating these clauses, which cover various factors, and a considerable number of amendments in a single group for debate. I am afraid that that means that a considerable amount of unpacking is necessary, so I hope that hon. Members will forgive me for spending a little time doing so.
To put the Government and Opposition amendments in context, I will reflect briefly on how part 12 seeks to better incorporate in planning arrangements a combination of circumstances relating to offshore wind electricity generation. The reason for that is to ensure that those planning arrangements proceed much more efficiently, including by reducing the time spent getting consent for offshore wind developments. It also proposes bringing a number of other things into the zone—I will give one or two examples in a moment—in order to make the offshore wind planning process much more holistic, as opposed to current approach of wind farm by wind farm, and device by device. It is about making sure that the process can be carried out much more efficiently by speeding it up and redefining it. We must also try to ensure—and we will come to this in a moment—that we take a balanced approach towards speeding up the process, by considering environmental and conservation issues both offshore and in the North sea.
Various clauses in this group deal with different aspects of what we are trying do with offshore wind. Hon. Members will see that both the Bill and the Government amendments suggest doing so via particular routes. The purport of the Government amendments, as far as I understand them, is mainly to ensure that issues wider than just wind farms are included in the whole planning discussion.
Government amendment 136 states that “offshore wind electricity infrastructure” means
“a generating station, in the UK marine area, that generates electricity…or infrastructure, in the UK marine area, used or intended for use in connection with—
(i) an offshore wind generating station, or
(ii) the conveyance of electricity generated by an offshore wind generating station.”
That includes not just the generating stations themselves, but the cables, wires and other arrangements going to and from the stations, including to the point where they are landed onshore.
That is particularly important, given that it is inevitable—indeed, this should have been the case a long time ago—that offshore generation will be undertaken not by point-to-point arrangements with cables to individual wind farms, but by cabling systems that will, for instance, connect wind farms with nodal points to collect their power at sea and then convey that power via one common cable, perhaps to a particular landing station, as opposed to our current point-to-point arrangements.
The development of a grid highway in the North sea—or, indeed, in the Celtic sea—will be integral to the future operation of those wind farm arrangements. It is, therefore, quite proper that that should be considered in the overall planning arrangements. Government amendment 136 allows for that and also very helpfully states in its explanatory statement that it also covers bootstraps. I am sure that everybody knows what a bootstrap is. In a sense it has nothing to do with offshore wind. It is actually an interconnector cable that is anchored at one point on the shore—on land in the UK—and conveys a high-voltage current, via the seabed, to another land point, particularly to get around constraints of onshore cabling congestion.
Katherine Fletcher (South Ribble) (Con)
While I understand the argument that the hon. Gentleman is trying to prosecute, surely we should not let the perfect be the enemy of the good. We are talking about how to sensibly protect the environment while establishing a broader regime for offshore wind, which has huge benefits for the environment. Can he understand that what he proposes might tip the balance towards making the perfect the enemy of the good?
Dr Whitehead
The hon. Member makes a valid point. Certainly, we do not want to effectively veto the development of offshore wind by putting restrictions on it place by place, scheme by scheme, in such a way that those schemes cannot go ahead. However, the North sea and the Celtic sea, for example, are very large places. They have a great many sites that can be used for offshore wind development in a perfectly good and environmentally conscientious way, which allows for enhanced development to take place without trashing the marine environment. The issue is not whether we make the best the enemy of the good, but how we pursue the good in tandem with environmental considerations, while not stopping the progress of that enhanced development.
Katherine Fletcher
I am grateful to the hon. Gentleman for giving way again, and I will make this my last intervention. He has just described offshore wind as trashing the marine environment. I really do not think that we can leave that on the record. In fact, we could highlight the good about offshore wind development. One of the most destructive marine practices is bottom trawling, which is made much more difficult with wind turbines in place. Once installed, wind turbines actually create nursery environments for the marine life that I was so fortunate to study at university.
Dr Whitehead
The hon. Member would be absolutely right again, had I said that offshore wind was trashing the environment. I think that when we get the record back we will see that I said, “so that we can proceed without trashing the environment.”
Dr Whitehead
Okay. What I was trying to convey—perhaps I did not do so in quite the pellucid way I might have—was what we want to achieve with offshore wind development. As I have said, the Opposition are committed, along with the Government, to a huge increase in offshore wind, which we think can be achieved, most importantly, while taking proper note of the environmental considerations that surround those sites. As the hon. Member for South Ribble says, in the right places and under the right circumstances offshore wind can be, in the end, a substantial enhancement of the underwater habitat and environment.
Kerry McCarthy (Bristol East) (Lab)
I think my hon. Friend made it perfectly clear that some places are appropriate for offshore wind and some are not because of the nature of the marine environment. Does he share my concerns about existing protections? A lot of marine protected areas are described as little more than “paper parks” because they are not achieving what they are meant to. We need to enhance the protections for those designated areas. Just as in some places it is appropriate to fish and in others not, we ought to respect the fact that in some areas, marine protection has to be the No. 1 priority.
Dr Whitehead
My hon. Friend is quite right. She will no doubt be thinking back to the Marine and Coastal Access Act 2009, which started to develop exactly the concept that she sets out—that there are right and wrong places for development. There are places that we should seriously ensure are protected as much as possible—marine conservation zones—and it would be really quite a sin to put development on those. There are also places where there are known marine traffic routes, and siting an offshore wind farm right in the middle of a major offshore traffic route would not be a good idea either. There are other areas where the communications required for offshore wind farms could themselves be subject to environmental considerations, and those need to be taken into account too.
After the 2009 Act was passed, a number of marine conservation areas were supposed to be set up. Many of them have not been, and those that were have not had the level of policing and enforcement that they should have had.
Kerry McCarthy
As Labour left government, we had plans for an ecologically coherent network of, I think, 113 marine conservation zones. Does my hon. Friend share my disappointment that we are now 13 years on and still far from achieving that? It is important that we do not go backwards on the issues that we are discussing today. Obviously, we need to go forwards, but going backwards would be even worse than remaining in the same place.
Dr Whitehead
My hon. Friend is right again, and she recalls the exact number of conservation zones, which had escaped my memory. We might say that if we had those marine conservation zones in place now, we would be much clearer today about exactly what we will be doing as far as planning in the North sea and Celtic sea is concerned.
Lyme Bay fairly near me, which should be a marine conservation zone—I am not sure that it is—has cold-water coral features, and it would be quite lethal to those formations were we to develop offshore activities there. That is why that zone should be protected. Other areas further down—
The Chair
Order. I am reluctant to interrupt the hon. Gentleman because he is a great expert on these matters and I greatly enjoy his expositions. However, marine conservation zones do not come into this part of the Bill. If he could tether his remarks to the question of offshore wind, they might be more within scope.
Dr Whitehead
Yes. I think, Mr Gray, you are drawing an analogy between floating offshore wind and tethered offshore wind and saying that I should restrict my remarks to tethered offshore wind rather than free-floating.
Dr Whitehead
Indeed. I will endeavour to tether my remarks to the offshore wind in the North sea that we are thinking about.
What I was trying to get clear is not that Labour Members want to restrict unnecessarily or negatively the development of offshore wind—we want it to go ahead as quickly as possible and on as many sites as possible in the North sea—but that we want it go ahead on the basis of a proper regime that ensures that we equate environmental protection with the development that goes ahead. We are not at all sure that the compensation principle, which appears to be applied here substantially, is the best way to do that.
Amendment 164 very much goes along with what the Government have now put in their own amendment, so amendment 164 is probably pretty redundant. It seeks to bring in a more holistic picture of what it is to develop offshore activities and would, according to our explanatory statement,
“extend the fast-track consenting process for offshore wind to supporting marine development necessary to support the offshore wind project.”
The Minister might want to comment, but I think that is pretty much covered by the Government’s amendments, so I am happy about that.
Amendments 165 to 167 get rather more to the heart of what I have been talking about. Clause 248, which concerns the assessment of environmental effects, allows the Minister by regulation, among other things, to switch off a number of environmental protections—I will not read them all out because it would take a very long time—that are already in place and replace them with the compensation arrangement. We do not think it is right that those protections should be switched off, and with amendments 166 and 167 we seek to switch off the switching off. Amendment 166 would leave out subsection (4)(i), which refers to
“any relevant Habitats Directive rights,”
and amendment 167 would switch off subsection (5), which lists the provisions set out in subsection (4)(i)(i). As I said, it is a long list of sections of Acts and regulations that very much underpin marine environmental protection.
Having done that, we want to replace those provisions with a positive alternative, set out in amendment 165. As I said, we want the appropriate authority to
“have regard to the particular importance”—
I emphasise “have regard”—
“of furthering the conservation and enhancement of biodiversity.”
The amendment also states that the appropriate authority
“may make regulations under this section only if satisfied that the regulations do not reduce the overall level of environmental protection or the level of protection for individual sites and species, and…before making regulations under this section, must publish a statement explaining why it is so satisfied.”
The amendment would also require the appropriate authority to
“seek advice from persons who are independent of the authority and have relevant expertise,”
and to
“include an explanation relating in particular to protection provided by”
measures such as the Marine and Coastal Access Act, the Conservation of Habitats and Species Regulations 2017 and the Conservation (Natural Habitats, &c.) Regulations 1994. The positive alternative we have put forward is that the Secretary of State should have regard to all those things.
As underlined by the brief exchange between myself and the hon. Member for South Ribble, I mean not that the environmental regulations have a veto on progress, but that the Secretary of State should have regard to them and should make regulations that are compatible with them as far as possible. If they are not compatible, the Secretary of State needs to provide a good explanation as to why, and the circumstances under which that projected development has gone ahead. The development arrangements should work with provisions such as the Marine and Coastal Access Act, rather than against them. That is a much more sensible way to proceed, with a combination of proper and rapid planning consideration and proper environmental protection.
As the hon. Member for South Ribble said, the ultimate outcome should be one where we have a settled marine environment, which is beneficial overall. That includes, for example, the additional assistance that fish conservation may receive from wind farms being in particular places, allowing species to flourish and expand out of the range of fishing vessels, under the shelter of the turbines and so on. The possibility of producing a beneficial outcome overall for marine environments as a result of our trying to develop these new sources of low-carbon power need not be an oppositional activity. It is not a zero sum game; we can have the two together. We think our amendments set out the right way of doing that.
I look forward to the Minister defending the alternative way, as set out in the clauses. The extent of what he has to say will determine whether we decide to divide on any of the amendments. It is important that we get this right together. Ideally, the Minister would come at least some way towards encompassing our alternative method, rather than that which is presently set out in the clauses.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Gray. You must be delighted to have the Thursday afternoon shift this week. I agree with the Government amendments on the expansion of definitions and capturing other infrastructure required to facilitate service offshore wind generation, especially given the scale of the build-out still required and the renewable energy offshore wind targets that we want to see.
I agree with the principles of strategic compensation for adverse environmental effects in clause 246. Such considerations have been a stumbling block for Berwick Bank offshore wind farm, for example, so having regulations that provide clarity on environmental considerations and possible compensation for other projects is certainly welcome. The key test will be whether sufficient clarity is provided and workable. If we want to deploy renewable energy at a much quicker rate to achieve cheaper bills and eliminate reliance on fossil fuels, we need to be able to look at the environmental impacts in the round and come to sensible, balanced solutions. That means creating environmental equivalence or improvements elsewhere by implementing solutions away from sites if it is deemed that they cannot mitigate the environmental impacts of the site of infrastructure construction.
I have one word of caution; I may not be quite as concerned as the shadow Minister, the hon. Member for Southampton, Test, but we need to ensure that these regulations and processes do not become an avenue or vehicle for developers to choose a much easier, cheaper financial solution for them, rather than looking at all avenues to mitigate the environmental impacts at the construction sites. It is critical that robust analysis is undertaken by the relevant regulatory bodies. I realise that subsection (4) is not intended to ensure that everything is looked at and worked through to the nth degree, but we need to ensure that that analysis is not overlooked in the dash for renewable energy and that no shortcuts are taken that allow developers to choose an easy financial solution.
I turn to clause 247. I am sure the Minister is aware that the Scottish Government have concerns that the clause gives the Secretary of State the powers to operate a marine recovery fund in Scottish waters without the consent of Scottish Ministers. Indeed, the Secretary of State will have the powers to completely bypass the Scottish Government and appoint another person or authority, and that is replicated for other devolved Administrations. I understand that the Minister has had ongoing discussions with Gillian Martin MSP—the Energy Minister at the Scottish Government—and other officials on these matters, but as far as I know nothing has been agreed yet. That is why I tabled amendments 176 to 180 to outline my thoughts and put down a marker. Clearly, my amendments were not selected for debate and cannot be voted on, given when they were submitted, but they put down a marker. There is still a window in which the Minister can come to some sort of agreement with the Scottish Government on amendments. It would be good if he could provide the Committee an update on how close we are to a solution. Some form of amendment is still required to subsection (8) in that regard.
There may be issues with clause 247(4), which gives the Secretary of State broad regulation-making powers that could be used in a highly prescriptive manner to direct Scottish Ministers as to how they determine that a compensation condition has been discharged. Again, it should not have been too controversial to agree a way forward. That should be done with the consent of Scottish Ministers before implementation.
I hope that the Minister will acknowledge the collegiate working with the Scottish Government and officials. Nobody is trying to being awkward or territorial for the sake of it, nor are they trying to introduce arbitrary red lines. That is why we are giving the Government a bit more time, rather than pushing votes and extending the debate on this; we are trying to find a collegiate way forward. Again, I hope the Minister can give some insight about a solution with regards to subsection (4).
Finally, in relation to devolution, clause 247(9) allows the Secretary of State to cancel functions that Scottish Ministers have consented to under that clause, which seems anomalous. Again, I am looking for some sort of compromise to protect devolved functions in that regard.
Clause 248 does not provide sufficient certainty that Scottish Ministers will retain consenting functions in the Scottish offshore region or waters beyond 12 nautical miles. I understand that the Scottish and UK Governments have discussed this, but what is the timescale for a possible agreement? I believe that the Scottish Government have suggested draft amendments, so what is the UK Government’s view on them?
Subsections (7) and (8) of clause 248 are too broad. They could alter executively devolved powers and fundamentally shift existing arrangements for the consenting and licensing of offshore wind projects in the Scottish offshore region. Does the Minister appreciate those concerns, and does he have a plan to resolve the situation?
Olivia Blake (Sheffield, Hallam) (Lab)
It is a pleasure to serve under your chairship again, Mr Gray.
I declare an interest, given that we are now talking about renewables: my husband is a company secretary of an organisation called Sheffield Renewables, which is a community benefit society that funds, develops, owns and operates renewable energy systems in Sheffield. Although I hope that Sheffield will not become the coastline—if we do everything right so that vast swathes of east Yorkshire, including Selby, are not under water—I thought that it would be prudent for me to declare that interest at this stage.
As a former shadow Minister for nature, this part of the Bill strikes a chord with me. There are things to welcome in the clauses, but I share some of the concerns that have been outlined by my hon. Friend the Member for Southampton, Test. In fact, I agree with the words of an Environment Audit Committee report in relation to the development of offshore wind: we should
“be extremely sensitive to biodiversity considerations given the obvious risks of disrupting important habitats”.
That is important because the Bill represents an attempt to tackle not only the carbon crisis, but the nature crisis. What is bad for one is bad for the other, so it is important that we bear biodiversity in mind with every step we take through the Bill, not least because nature is a massive carbon sink. The UK already faces massive nature depletion—we have has some of the worst nature depletion in Europe—so it is right that we debate how the Bill takes such considerations into account.
I fear that clause 248 provides wide powers to ignore habitat regulations, marine Acts and general duties around assessment, which is problematic. There is also something of a misalignment between some of the wording in the Bill and that in the Environment Act 2021. When that Act seeks to alter habitat regulations, there are a lot of caveats, and it might be worth the Minister considering whether it would be right to have those caveats in the Bill, given that both measures represent Government policy and strategy.
I hope that the Bill does not conflict with 13 by 2030, which we have had a conversation about, and the protection of marine areas. I also hope that we will discuss protections. I particularly support our amendments 166 and 167, because it is important to have that switch-off or death switch, I suppose—I am trying to think of a way of phrasing it. We need to keep those protections in place where we can. If we allow ourselves to be deluded into thinking that the impact on the environment off-sea will not affect us, we are really missing the point. It would have been nice if there had been a reference to blue carbon in the Bill. Obviously, that has not materialised—I understand why, because the Bill is predominantly to do with energy—but we are missing measures in that space as well.
It is incredibly important that the Minister considers amendment 165, particularly as it outlines some of my concerns about the Bill’s alignment with the Environment Act. It is quite clear that the Bill could do more to ensure that environmental protections exist and that we are not cutting our nose off to spite our face with some of our activity.
Andrew Bowie
I thank the hon. Members for Southampton, Test, for Kilmarnock and Loudoun, and for Sheffield, Hallam for their comments.
The hon. Member for Kilmarnock and Loudoun made some pertinent points, and I understand his concerns around consult and consent throughout the Bill, especially in regard to consent for licences for offshore wind, but I would just say that negotiations are ongoing. There has been very good discussion and work between UK and Scottish Government officials. That is all part of the wider legislative consent motion negotiations, which are ongoing, so I cannot go into the specifics of each case that he mentioned. There are ongoing discussions about these specific clauses with the Scottish Government. By the time of Report and Third Reading, we will hopefully—well, certainly—have more to say about how those discussions have proceeded.
I turn to the comments made by the hon. Members for Southampton, Test and for Sheffield, Hallam—we are seeing so much of each other that perhaps we are becoming hon. Friends. I understand the concerns around whether marine protected areas will be substantial enough to protect the areas of sea that we are discussing. Now that we have established the MPA network and it is substantially complete, DEFRA is working very quickly— as we speak—to implement management measures to deliver protections in the marine environment.
We heard a question of whether we are just watering down the environmental assessment process and if we will cause further damage. Absolutely not—I give my guarantee. The Government are committed to the environmental protection of the marine environment, and developers and the relevant public authorities will continue to be required to undertake environmental assessments ahead of consent being given. That will ensure that developments are located where there are low environmental sensitivities and where impacts can be avoided, reduced or mitigated; or, where that is not possible, that suitable compensatory measures are identified early in the processes. I hope that that addresses some of hon. Members’ concerns.
I thank the hon. Member for Southampton, Test for tabling amendment 164, because it is important. We recognise the importance of extending the fast-track consenting process to offshore wind, as he recognised. We have proposed a substantial amendment with the Bill’s offshore wind environmental improvement package. The Government will support accelerated offshore wind deployment and reduce consenting time while protecting the marine environment, all of which the hon. Member was calling for. His amendment is therefore sadly redundant, as he said, so I hope that he will find it within himself not to press it.
I turn to amendment 165. The Government are committed to ensuring high standards of environmental protection and the offshore wind environmental improvement package seeks to ensure that the acceleration of offshore wind can be delivered in a way that continues to protect the environment and to meet our ambitious net zero targets. Through the offshore wind environmental improvement package, we intend to enable the environmental protection of protected areas to be addressed sufficiently early in the pre-application planning process to inform adequate and ecologically robust mitigation and compensatory measures. That in turn should improve the quality of the information coming into the examination stage of an application. The package will enable the Government to improve environmental assessments for offshore wind projects to ensure that we have a consenting system that works for our marine environment.
The new powers to amend environmental assessments will enable us to consider moving away from the EU’s case law and interpretation of these measures, and to tailor the approach to the United Kingdom’s circumstances, while maintaining important environmental protections. Development consent decisions will also remain subject to advice from DEFRA’s statutory nature conservation bodies.
The amendment would impose a requirement on the appropriate authority to seek independent advice before making regulations under clause 248, but clause 249 already requires the appropriate authority, before making such regulations, to consult statutory nature conservation bodies and such other persons as they consider appropriate.
Andrew Bowie
Clause 251 enables the Secretary of State to make regulations for the purpose of setting our arrangements for emergency planning and response to marine oil pollution incidents. Currently, the emergency oil pollution planning and response regime applies to offshore oil and gas activities as well as harbours and onshore handling facilities. In recognising the energy transition and progress towards net zero, the clause will enable a pollution planning and response regime for emerging offshore technologies such as offshore carbon dioxide storage, combustible gas storage, and hydrogen production and storage.
Similar to offshore oil and gas activities, emerging technologies such as offshore hydrogen production and storage will require infrastructure such as subsea pipelines, surface installation and wells. Infrastructure of that kind may act as a pathway to causing oil pollution in the marine environment during its installation, operation or indeed decommissioning stage. Persons responsible for such infrastructure will be required to have an emergency plan in place.
In recognising the importance of ensuring that such a plan remains valid and effective, provisions may be made in relation to the implementation, maintenance and review of such a plan. Reporting requirements of any marine oil pollution incident may also be set out under the clause. Such regulations may provide for the circumstances in which a report must be prepared, and by whom and to whom such a report must be submitted. The content and format of such a report may also be set out in regulations.
To ensure compliance with emergency marine oil pollution planning and response requirements, the clause makes provision for allowing the inspection of infrastructure to take place. An example of the types of provision such regulations can make is provided in the clause. Regulations may make provision for the meaning of any terms or expressions used, for how functions can be conferred on any person, for the charging of fees in relation to matters set out in regulations, for the management of information, for criminal offences and civil sanctions, and for the purpose of securing compliance with the requirements set out in regulations. Criminal offences may not be punishable with imprisonment, nor shall any civil penalty exceed the sum of £50,000. Regulations that contain aspects in relation to the creation of new criminal offences or revisions to existing criminal offences, the imposition of civil penalties or the setting of a civil penalty amount shall be subject to the affirmative procedure.
Clause 252 enables the Secretary of State to make regulations for the purpose of ensuring consideration of implications for sites designated for protected habitats and species when making decisions in relation to offshore oil and gas activities. Such activities include emerging technology types, such as hydrogen production and storage. As with the existing regime, regulations may be made to make provision for obtaining consent from the Secretary of State prior to undertaking a geophysical survey in relation to the activities mentioned.
Furthermore, the regime will be enhanced by an ability to attach conditions to consents, to ensure that the potential impact of such activities is minimised. For activities that are linked to specific licences issued by the North Sea Transition Authority—the NSTA—for reserved matters, or to a licence issued by Scottish Ministers for devolved matters, regulations may provide that the activity cannot be granted a specified licence without a habitats assessment being undertaken by either the Secretary of State or a Scottish Minister.
Subsection (4) contains a power to enable regulations that provide for directions to be given. Where it becomes apparent that an offshore activity has or may have an adverse effect on a relevant site, the power will enable the Secretary of State to give directions to the consent holder to take mitigating steps. That also applies where the deterioration or disturbance of habitats or species within an offshore site could be significant in relation to the conservation objectives of the relevant site. The consent holder will have to comply with any direction issued.
This delegated power may be used only when the Secretary of State considers that it contributes to the protection of relevant sites, to ensure continued high standards of environmental protection. The meaning of the term “relevant site” is to be set out in regulations, but it is intended to be framed in a way that encapsulates sites designated under other UK regulations for protected habitats and species. Further examples of how the powers in the clause may be exercised are provided for in the clause.
Regulations may make provision for the meaning of any terms or expressions used, for how functions can be conferred on any person, for the revocation of survey consents, for the charging of fees in relation to matters set out in regulations, for the management of information, for criminal offences and civil sanctions, and for the purpose of securing compliance with the requirements set out in regulations. As with clause 251, criminal offences committed under clause 252 may not be punishable with imprisonment or a fine exceeding the statutory maximum, nor shall any civil penalty exceed the sum of £50,000.
In recognising the nature of the provisions included in the clause, regulations shall be subject to the affirmative procedure. I beg to move that clause 251 stand part of the Bill.
The Chair
Technically, the Minister does not actually move clause stand part. I move clause stand part; the Minister merely speaks to the debate. However, I am being a bit picky, just for the sake of it. Does the shadow Minister wish to take part?
Dr Whitehead
Yes, Mr Gray, I intend to take part—briefly, the Committee will be relieved to hear. As the Minister has mentioned, the clause concerns the development of new forms of activity in the North sea that might be seen as analogous to those involving oil and gas, but are actually not. However, the activities might share quite a lot of infrastructure and other things, so it is appropriate that the arrangements for responding to such circumstances are analogous to the arrangements for oil and gas.
This part of the Bill is very different from the last one, in that it tries to ensure that developments go ahead in a safe and reasonable way, that we have plans in place should there be problems, and that those plans are based substantially on the plans that are in place already for oil and gas. That is my understanding of the clause, and I hope the Minister can confirm that. Other than that, I do not have anything much to say about clause 251, which seems sensible for the future.
It is noted that in clause 252, on the effects on habitats of offshore oil or gas activities—new things such as carbon capture and storage—no one is switching anything off in that area, which is also something that the Opposition support.
Question put and agreed to.
Clause 251 accordingly ordered to stand part of the Bill.
Clause 252 ordered to stand part of the Bill.
Clause 253
Charges in connection with abandonment of offshore installations
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The clause amends existing powers to allow for the making of a charging scheme in respect of decommissioning functions, under part 4 of the Petroleum Act 1998, to charge for regulating decommissioning of offshore oil and gas. The decommissioning of offshore oil and gas installations and pipelines on the United Kingdom continental shelf, or UKCS, is regulated through the 1998 Act, and the responsibility for ensuring that the requirements of that Act are complied with rests with my Department.
Owners of oil and gas installations and pipelines are required to decommission their offshore infrastructure at the end of a field’s economic life. The current powers allow us to charge for regulating offshore oil and gas decommissioning activity at only two fixed points in the regulatory process. The existing charging framework is no longer fit for purpose. Currently, the Government are unable to recover the full costs of undertaking the regulatory functions from industry, leaving the taxpayer liable for the shortfall. Furthermore, the current regime is too inflexible and will be unable to recover the full costs of decommissioning the offshore carbon storage infrastructure of the project.
Clause 253 will amend the 1998 Act to allow for the establishment of a new charging regime for activity related to the regulatory functions for the decommissioning of offshore oil and gas installations. The clause will also make amendments to future-proof the cost recovery mechanism in line with the “polluter pays” principle of environmental law, as already established. Maximising our cost recovery will enable us to ensure a sufficiently resourced regulator. That will ensure that we do not cause the industry to delay decommissioning projects, which would adversely affect the industry’s contributions to reducing emissions and achieving their net zero ambitions.
Further details of the new charging regime, including how it works and what rates will be charged, will be set out in the scheme itself, which will be established administratively and then published. The charging scheme is intended to be in line with other charging schemes operating for complex regulatory functions within my Department and elsewhere across the Government.
Dr Whitehead
I have a question on clause 253, which makes provision for decommissioning where, clearly, the decommissioning of new forms of offshore installation cannot be undertaken. When the well is exhausted—obviously there is not a well to exhaust under these circumstances—the decommissioning has to be under other circumstances. An example would be when the carbon capture and storage site has been agreed to be full, and is capped off.
On traditional oil and gas decommissioning, there are provisions for sanctions on companies that have responsibility for decommissioning but do not actually carry out the decommissioning. Does that carry across to the new forms of offshore activity? Or should there be legislation to ensure that when someone is up for decommissioning, they really do it and do not abdicate their responsibility? That is not just a question of charging; it is a question of responsibility for the future.
Andrew Bowie
In answer to the hon. Gentleman’s important question, it is the intention, through this regulation and the existing regulations, that those who are responsible follow through with their commitments to decommission—the “polluter pays” principle has been well established. Nothing in this regulation would stand in the way of that. Nor, we hope, would it put barriers in the way of that. What the regulation seeks to achieve is a new updated charging regime to enable the decommissioning to take place in such a way and in such a fashion that it does not leave the taxpayer liable for any shortfall from the operator who is liable for the decommissioning of an asset in the North sea.
Question put and agreed to.
Clause 253 ordered to stand part of the Bill.
Clause 254
Model clauses of petroleum licence
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 19 be the Nineteenth schedule to the Bill.
Clause 255 stand part.
Andrew Bowie
Currently, the North Sea Transition Authority can only retrospectively challenge a change in control of a petroleum production licence. Clause 254 will allow the NSTA to consider a proposed change of control of a petroleum production licensee before it takes place, to ensure that the governance, technical and financial capability of a licensee in possession of a such a licence remains appropriate.
Companies that wish to drill and extract petroleum must do so under a petroleum production licence granted by the NSTA to the licensee under the Petroleum Act 1998. Prior to issuing these licences, the NSTA satisfies itself that the prospective licensee company and any parent company are fit to hold the licence and will meet their obligations.
At times during the life of a licence it may be the case that the ownership and control of a licensee should pass to a new parent company or person. An undesirable change of control could undermine investor confidence in the commercial environment, making the United Kingdom continental shelf a less attractive place for investment. The NSTA is currently able to take remedial action to a change of control of a licence holder only after such a change has occurred. This is seen by both the NSTA and industry as being inefficient and of limited effectiveness in preventing harms, both to wider industry and the Government.
Clause 254 sets out the amendments that schedule 19 will make to the model clauses in the Petroleum Licensing (Production) (Seaward Areas) Regulations 2008 and the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014. The changes will introduce new before-the-event powers for the NSTA regarding the change of control of a licensee in possession of current and future seaward or landward petroleum production licences. The clause also sets out how provisions inserted into a petroleum production licence by schedule 19 may be altered or deleted.
Schedule 19 amends existing legislation to replace the current after-the-event powers in relation to a change of control of petroleum production licensees with powers intended to apply before a change of control has taken place. The schedule has a similar effect to that which schedule 6 has in relation to carbon storage licensees.
The schedule will introduce a requirement for licensees to apply in writing to the NSTA for consent to a change of control at least three months before the planned date of the change. Following receipt of an application, the NSTA may give unconditional or conditional consent, or refuse consent to the proposal. Conditions imposed may be financial and/or relate to the timing of the change of control and/or relate to the performance of activities permitted by the licence.
In the case of conditional consent or refusal, the NSTA must give the licensee the opportunity to make representations and must consider those representations. The NSTA must decide an application within three months of receiving it, unless it writes to interested parties to notify them of a delay in its decision making. The NSTA’s decision on an application and any conditions must be given in writing.
The schedule also introduces amendments in respect of the NSTA’s powers of revocation and partial revocation of a licence, intended to replace the existing after-the-event powers with before-the-event powers. The NSTA will be able to revoke a licence if its prior consent has not been obtained for a change of control. The NSTA will therefore be able to regulate the suitability of petroleum production licensees in a more robust and timely manner. This will reduce risk and boost confidence in a sector that will play a key part in helping the UK to achieve its net zero goals.
Clause 255 introduces information-gathering powers in relation to a change or potential change of control of a petroleum production licensee in the same way that clause 101 does for carbon storage licensees. Currently, the NSTA does not have information-gathering powers to assist it in considering a change of control in respect of a petroleum production licensee. In some instances, the NSTA is therefore limited in conducting proper due diligence to determine whether a change of control of a licensee is undesirable.
Clause 255 will allow the NSTA to request that a relevant company or person provide it with any information it may require in exercising its functions in relation to a change or potential change of control of a licensee. The information will help the NSTA to consider the financial and technical capability, operational and commercial plans, and governance and fitness of the licensee in relation to its proposed controlling entity. This will provide the NSTA with the necessary information to appropriately consider an application for consent, or when considering whether to revoke a licence where a change of control has occurred without consent.
Information that would be protected from disclosure or production in legal proceedings on grounds of legal professional privilege or, in Scotland, confidentiality of communications is not included under clause 255.
Dr Whitehead
I do not have much to say about the detail of the clauses, inasmuch as they appear to be sensible measures, but I gently point out to the Minister that when he presented the clauses he referred repeatedly to the NSTA as the authority, but of course the NSTA does not exist other than as a trading name. Indeed, clause 254 specifically mentions the Oil and Gas Authority, which is of course the real name of the organisation, as opposed to its trading name. We will come to that later in our deliberations, but I highlight to the Minister that issue or problem, which may be germane to his thoughts when we get to that discussion. Other than that, I have no issue with the substance of the clauses.
Andrew Bowie
We have already debated this matter in Committee and I am sure that we will come back to it in greater detail. Of course, when I refer to the North Sea Transition Authority I am, legally speaking, referring to the Oil and Gas Authority.
Question put and agreed to.
Clause 254 accordingly ordered to stand part of the Bill.
Schedule 19 agreed to.
Clause 255 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Energy Bill [ Lords ] (Twelfth sitting)
Tuesday 20th June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 20 June 2023 - (20 Jun 2023)
The Committee divided: - Ayes: 6 / Noes: 8 - Question accordingly negatived.
The Chair
Before we begin, I remind colleagues that Hansard would be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Once again, I am happy to unilaterally give my permission for the removal of jackets, because it is hot in here. Please switch electronic devices to silent. Tea and coffee are not permitted, but there is a lot of water around—fizzy as well as still.
Clause 256
Application to the territorial sea of requirement for nuclear site licence
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendments 120 and 121.
Clauses 257 to 259 stand part.
Government amendments 124 to 126.
Government amendment 132.
Government amendments 127 to 129.
That schedule 20 be the Twentieth schedule to the Bill.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
It is a genuine pleasure to serve under your chairmanship, Dr Huq, and to be back here for day seven of this Bill Committee.
A geological disposal facility, or GDF, is a highly engineered facility capable of isolating and containing radioactive waste within multiple protective barriers deep underground, so that no harmful quantities of radioactivity ever reach the surface environment. It is vital to the successful decommissioning of the UK’s civil nuclear legacy and to our new-build nuclear programme, which will support the UK Government’s net zero ambitions and energy security strategy.
Clause 256 makes it clear that certain nuclear sites—including a GDF, once prescribed in regulations—located wholly or partly in or under the sea, and within the boundaries of the UK’s territorial sea, require a licence and are regulated by the Office for Nuclear Regulation. I want to make it clear that no part of a GDF will be in the sea itself, nor will radioactive waste be dumped in the sea—that is banned by international conventions, including the London convention and protocol. The process to find a site for a GDF is under way, so it is vital that we have a clear legal framework to ensure that such a site will be licensed and subject to oversight by the Office for Nuclear Regulation.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Given the Government’s plan for a quarter of electricity to be generated by nuclear by 2045, how much additional nuclear waste does the Minister predict? How much additional nuclear waste will be stored at the new geological disposal site, and what is the estimated cost of the new facility?
Andrew Bowie
The costings of any geological disposal facility will be presented to Parliament for scrutiny, but the process is under way to find a site that will be large enough to cope with any increase in waste from our civil nuclear fleet. The hon. Gentleman might be interested to learn that Finland has just opened, and is beginning to utilise, a new GDF. That is the model that we in the UK would like to follow.
Mark Jenkinson (Workington) (Con)
I hope the Minister is going to propose that the Committee visit the facility in Finland. Does he agree that it is unhelpful that our detractors cannot seem to distinguish between legacy waste from a number of programmes and waste from new nuclear establishments, for which we have well-established protocols?
Andrew Bowie
Absolutely—I could not agree more with my hon. Friend. I would be delighted to propose a trip to Finland for all Committee members, but it is not within my gift to organise such a trip. If anybody who is able to host us is listening, I would be keen to engage on that.
I agree with my hon. Friend’s comments regarding new nuclear waste. The excellent work being done in Sellafield—I know that is not in his constituency, but it is certainly in his part of the country—is an example to the world of how we regulate and dispose safely of nuclear waste that has been created. When we talk about a GDF, we are talking about new nuclear waste, which will come about as part of the exciting, new, world-leading and revolutionary investment in a civil nuclear fleet that the United Kingdom is engaged in right now. The north-west of England will be at the very heart of that.
Alan Brown
Will the Minister explain the process for looking for a new geological disposal site? Will consultants do it? Will it be desktop-based to start with, and then involve intrusive site investigations? Will people bid to have a site? How will the process work?
Andrew Bowie
That is a good question. In fact, I was just coming to the process. The GDF siting process is a consent-based approach that requires a willing community to be a partner in the project’s development. The siting process is already under way. Four areas have entered the process: three areas in Cumberland—in Copeland and Allerdale—and one in East Lindsey in Lincolnshire.
Government amendment 120 removes superfluous wording in new section 3A of the Nuclear Installations Act 1965. A licensed disposal site, as defined for the purposes of the new section, is not a nuclear installation within the meaning given by section 26(1) of the Act, so does not need to be mentioned explicitly in subsection (3). The amendment therefore removes it from the clause to correct this error. Amendment 121 is consequential on amendment 120 and removes the unnecessary definition of a licensed disposal site from new section 3A of the Nuclear Installations Act 1965.
The UK’s nuclear decommissioning programme is accelerating as older nuclear sites approach the end of their life cycle. As the first major nuclear sites will reach their final stages of decommissioning in the 2030s, it is essential that our nuclear legal framework is fit for purpose, while continuing to ensure an absolute focus on safety and security as the key priority. The Nuclear Installations Act 1965, which provides such a framework for nuclear safety and nuclear third-party liability, was written before serious consideration was given to decommissioning.
Clause 257 will amend the procedures for exiting nuclear third-party liability. Currently, the 1965 Act has the effect of requiring nuclear sites to remain subject to nuclear third-party liability for longer than is required by internationally agreed standards. The clause implements an alternative route based on internationally agreed recommendations and will apply to nuclear installations in the process of being decommissioned. It adopts a simpler and equally safe route out of the NTPL regime for non-nuclear parts of the nuclear site, such as laboratories, workshops, offices, car parks and land.
Clause 257 changes procedures for ending nuclear licences and regulation by the Office for Nuclear Regulation. It will require the licensee to apply to the ONR to end the licence and will require the ONR to consult the Health and Safety Executive before accepting an application. The ONR will accept an application when it considers that all nuclear safety matters have been resolved. Once the licence has ended, the ONR’s regulation of the site will cease. HSE will pick up responsibility for regulating the health and safety of work activities, while the relevant environmental agency will continue to regulate environmental matters for years or even decades after the end of the nuclear licence.
The clause has the effect of removing a barrier to the on-site disposal of suitable low or very low-level radioactive waste and avoiding the unnecessary excavation and transport of this material. Demolition work results in the creation of large amounts of rubble and waste, a small percentage of which may be lightly contaminated with radioactivity. Excavating that material can create radioactive dust, which is a hazard for workers. Transporting waste to disposal facilities can have noise and traffic impacts for local residents.
The existing environmental legislation, which the clause does not modify, was developed with land remediation in mind. It allows the operator to apply to the relevant environmental agency for a permit to dispose of suitable low or very low-level radioactive waste on site. Applications are subject to robust analysis, and an environmental permit would be granted only if disposing of the waste on site would be a safer and more sustainable option than excavating it and transporting it to disposal facilities elsewhere.
Finally, the clause will allow operators to apply to the ONR to exclude those disposal facilities for nuclear waste that do not require a nuclear licence from the nuclear licensed site boundary. To be clear, the clause does not constitute a relaxation in the standards for public protection. It aligns with UK radiological protection law, international standards and UK Health Security Agency guidance.
Clause 258 will bring an international agreement on nuclear third-party liability into UK law. Its aim is to lower the financial and regulatory burden on low-risk radioactive waste disposal facilities. Sites that meet the criteria will be exempted from the requirement to make provision for third-party claims. Injuries or damages will instead be covered by ordinary civil law, which is robust, proportionate and established. The clause allows the Secretary of State to set out by regulation the conditions that must be met to be excluded from nuclear third-party liability under the OECD Nuclear Energy Agency’s criteria.
The clause includes limits for radioactivity concentration that disposal facilities must meet. Only facilities with sufficiently low concentrations of radioactivity and negligible nuclear risk will be exempted from the requirement to hold nuclear third-party liability. The measures will help to ensure that the UK has sufficient disposal facilities for low and very low-level waste as the decommissioning of the UK’s legacy facilities accelerates and new nuclear projects are developed.
Clause 259 gives effect to schedule 20, which amends the Nuclear Installations Act 1965 to enable UK accession to a second international nuclear third-party liability treaty called the convention on supplementary compensation for nuclear damage. Nuclear third-party liability regimes aim to ensure that victims of a nuclear incident have access to adequate compensation. They also support investor and supply chain confidence by channelling liability to the nuclear operator and placing limits on their liability. The UK already has a robust nuclear third-party liability regime, being party to the Paris and Brussels agreements. The schedule 20 amendments to the 1965 Act that enable UK accession to the CSC will enhance the existing UK regime. Accession to the CSC enhances several of the benefits of our current nuclear third-party liability regime.
Government amendments 124, 125, 126, 127, 128, 129 and 132 make minor and consequential changes to schedule 20 to ensure the accurate implementation of the CSC. They will ensure that, following accession to the CSC, the UK does not inadvertently close off routes to compensation for nuclear damage. That applies to countries and victims that are currently able to claim under our existing nuclear third-party liability regime. To establish that, they seek to remove unnecessary consequential amendments as a result of the further amendments tabled. The changes also ensure that victims from a non-nuclear CSC state can claim under the appropriate conventions.
Dr Alan Whitehead (Southampton, Test) (Lab)
It is a pleasure to serve under your chairmanship again, Dr Huq. It is also a pleasure to hear the Minister rattle through the Government amendments at really high speed. As he identified, this part of the Bill is about civil nuclear sites. Among other things, it is about the repository that we do not have at the moment—in other words, we have not yet found a repository. It would be helpful if the Minister were able to tell us where we are in that search. Does he think the clauses take that process further forward? Or do they impede or lengthen that search?
I am sure the Minister recalls that, some while ago, his party indicated that no new nuclear development would be signed off and authorised until a repository had been located and established. Now, of course, two civil nuclear sites are under active development. Hinkley C is under active development—the reactor core is in place and connected works are under way. I visited the site a little while ago and it really is in a very advanced state, so we can anticipate that nuclear power will come on stream in, I guess, about 2026. I have been guessing that it will come on stream every year since 2017, but we hope that will happen.
Advance discussions and some initial site works have been done for Sizewell C. The reactor that is going in is essentially the twin of the Hinkley C reactor, and a lot of the site works are being replicated to speed up that process a bit. I have not visited Sizewell C yet because—rather like in the story I told a while ago about the underground cable—there is not a great to deal to see at the minute, but we can anticipate that we will have four new nuclear reactors onstream by the early 2030s. All that is taking place alongside a process for a nuclear repository—a final solution for the issue of long-term nuclear waste.
Alan Brown
Does the hon. Gentleman agree that there is a real paradox here? Allegedly the site rate for Hinkley Point C already has built into it the decommissioning costs for the storage of nuclear waste at the end? We are told that the estimates for Sizewell C will include all the costs of decommissioning and disposal up front, but how can EDF properly allow for those costs when it does not even have the new geological disposal facility that it needs to access?
Dr Whitehead
The hon. Member makes a good point. I would think that it is very difficult under the present circumstances. I was about to talk about that briefly. On both those sites the question arises, as he alluded to, of what we do with the nuclear waste from their operation, and what plans are in place for their eventual decommissioning at the end of their lifetime. Having served on various Bill Committees with me, the hon. Member will recall that in a recent nuclear Bill the question was raised of ensuring that a reasonably accurate built-in planning arrangement for decommissioning would be in the programmes that are agreed for nuclear power plants. The plans both for decommissioning and for what happens to nuclear waste as we go along are rather important to get right, given that there is no geological repository either under way, unlike the new nuclear power stations, or finally identified.
We could say that the provisions apply to something that is not really there. It may be there in a little while, or it may not be there for quite a while. Meanwhile, the two nuclear power stations are getting under way and being build. We know that quite a lot of the nuclear waste that has arisen from activities around Sellafield is stored in ponds, which are open to the surface and are safe to the extent that the nuclear waste is firmly stored underwater and there is no risk of it spilling out, except if someone planted a bomb in the pond. The pond would then disperse its contents, but obviously a geological facility is proofed against that occurring. The question is about what sort of planning the new nuclear power stations are likely to undertake for the storage of nuclear waste during their operation, and for its storage and disposal when they are eventually decommissioned.
Mark Jenkinson
May I suggest that the hon. Gentleman arranges a visit to Sizewell B to see exactly how we store new nuclear waste from relatively new facilities? Sizewell B was also under an obligation to deal with the cost of its waste in advance.
Dr Whitehead
I appreciate that Sizewell B is already storing nuclear waste, and I understand that it is doing so quite effectively, although I have not actually been to see it. Obviously, Sizewell B is the newest nuclear power station in the fleet, even though it is not that new. The storage of newer nuclear waste is pretty good and, as the hon. Member rightly points out, the amount of nuclear waste is much lower than in, say, the old Magnox reactors. The issue of the storage of nuclear waste is largely about legacy waste, not new waste, but that is not to say that a fair amount of both high-level and low-level nuclear waste will not arise in the operation of new power stations—Sizewell C and Hinkley C—and, as is clear in the amendments that the Bill makes to nuclear legislation, there is still an obligation, upon full decommissioning, to ensure that there is no hazard whatever on the site from any radiation. That is quite a high bar. I am sure that is something we would all support.
Do the planners and organisers of new power stations—Hinkley C and Sizewell C—plan for on-site storage over the next period and for forms of disposal upon decommissioning that are not geological disposal sites, as a contingency in the event that we still do not have a geological disposal site when those plants are up and running? Or do they rely on the idea that there might be a geological site coming along, although we do not quite know when? We think it might be in the not-too-distant future, but we have not quite got there yet.
As the hon. Member for Kilmarnock and Loudoun correctly points out, that creates quite a difficulty in planning contingency, when building a nuclear power station in the first instance, for decommissioning and the safe storage and disposal of waste nuclear material. I am not sure how that has been resolved in the protocols that have been agreed with the power stations that are under way at the moment, and nor am I exactly up to date with where we are on the geological disposal site. I think I am up to date to the extent that we have not actually found one yet and that, although we have offered favourable terms to several communities to host a nuclear geological disposal site, we have yet to receive support to get it under way.
It would help us to judge the clauses a little better to get a brief rundown of where we are in that process and what plans the Government have either to accelerate it or to determine it in the end, so that as we develop our new nuclear programme we can be reasonably certain that the protocols in place for disposal and decommissioning will be reliable in future. I would be grateful if the Minister would let the Committee know that information.
I have a query and concern of a rather different order about schedule 20. As the Minister said, schedule 20 is about accession to the convention on supplementary compensation for nuclear damage. That international convention, which eventually came into force in 2015, having been agreed, I think, in 1997, sets out the supplementary compensation for nuclear damage on an international tariff basis, so that there is consistency in how compensation is dealt with in the event of accidents or other problems at civil nuclear installations in different parts of the world. So far, so good—it is a good convention and it is important that we are part of it. Indeed, the schedule ensures that we are fully a part of that convention.
There is a bit of a puzzle here. The Government have inserted into the Nuclear Installations Act some proposed new subsections about
“further non-CSC-only claims to compensation”
and have denominated all those claims, and how the provisions about them work, in euros. That is in the Bill. Proposed new subsection (3BA), for example, states that
“the appropriate authority may be required to satisfy them up to the equivalent in sterling of 1,500 million euros”.
Proposed new subsection (3BB) states:
“To the extent that further non-CSC-only claims for compensation are CSC claims, the appropriate authority may be required to satisfy them up to the equivalent in sterling of the aggregate of 700 million euros”.
Proposed new subsection (3BC) states:
“To the extent that further non-CSC-only claims for compensation are both special relevant claims and CSC claims, the appropriate authority may be required to satisfy them up to the equivalent in sterling of the aggregate of 1,500 million euros”.
I do not know whether this is the secret explanation for why the then Secretary of State for Business, Energy and Industrial Strategy, the right hon. Member for North East Somerset (Sir Jacob Rees-Mogg), withdrew the Bill during its passage through the Lords—because he thought that this was a plot to move against Brexit—but it is a bit odd that compensation is denominated in euros, when of course the rate is variable and we would be in a position to vary claims according to the relationship of sterling to euros. In any event, this is an international convention. Perhaps there is a simple explanation, which I hope the Minister has in front of him, but we are signed up to an international convention, not a European convention.
It may be—I do not know—that these measures are a hangover from our membership of Euratom, which we of course de-acceded from at the time of Brexit. It be that if we were a party to Euratom, Euratom would take the place of national membership of the convention and therefore everything would be denominated in euros, but of course we are not now a member of Euratom—we are our own actor, as far as various conventions relating to nuclear safety and activity are concerned—yet we are still denominating things in euros.
While I do not wish to amend the Bill so that we do not denominate claims in euros—I am concerned that the Minister’s career may be in jeopardy if he does not do the job of creating instruments that get us out of being in thrall to the EU and euros—I gently point out that it looks a bit odd. Is there an intention at any stage to regularise that procedure?
Andrew Bowie
The hon. Member’s concern for my career is welcome, and I thank him for expressing it in such kind terms. However, I reassure him and every person in this room—and, indeed, anybody else who might be following the proceedings—that the Government are not secretly taking us into the eurozone through accession to the CSC. It is not an EU treaty. The reason that the sums involved are denominated in euros is simply that the moneys referred to in the treaties that we are currently signed up to—the Paris convention and the Brussels supplementary convention—are expressed in euros. This is just a continuation of the same process. The CSC is an international convention, and we are therefore using the same denominations as in those other conventions. I am sure the hon. Member will be relieved to hear that there is no secret plot. The CSC, of course, is under the International Atomic Energy Agency.
Dr Whitehead
So the Minister can state that all signatory countries to the CSC denominate their compensation in euros, just the same as we do.
Andrew Bowie
I would think that those that are signatories to the Paris and Brussels conventions may. I am led to believe very strongly that it is not the case that all signatories denominate in euros, but we do, as a result of our current membership of the Paris and Brussels conventions.
Dr Whitehead
So we do not have to denominate these things in euros, because a number of signatories to the CSC do not, and presumably their membership of the CSC is not in jeopardy as a result. Presumably, we would have the opportunity not to use euro denomination, like those other members, but we nevertheless we do.
Andrew Bowie
I feel that we may be going round in circles. The Paris convention is a base convention. That is why there is carry-over into the new convention that we are acceding to—the CSC—to maintain the denomination in euros. However, I would suggest that those who are seeking compensation do not really care in which denomination their compensation is paid as long as they receive it in the end for any damage that is caused. I think we have spent quite enough time debating the denomination in which people will receive compensation.
Dr Whitehead
I hope that my comments about the fact that we do not yet have a community that has said it will support a geological waste facility does not necessarily mean that there is not support for the facility to be sited in various parts of the country. It is just that, as I understand it, no authority has actually said, “Yes, we’re happy to have this facility in our area and we wish to proceed with it.” I assume that that is a factor in the question I was trying to get at: when can we expect a geological facility to be timetabled, developed and finally established, and to what extent does that timeline cohere in the context of the nuclear power stations that we are presently commissioning and will bring online in the future?
Andrew Bowie
I thank the hon. Gentleman for his question and for clarifying his earlier comments. As I said, we are at the beginning of the process of identifying a geological disposal facility. Surveys are under way. We are working with communities that have already expressed an interest and we will continue to do so as we move forward.
Question put and agreed to.
Clause 256 accordingly ordered to stand part of the Bill.
Clause 257
Decommissioning of nuclear sites etc
Amendments made: 120, in clause 257, page 223, line 15, leave out
“or a licensed disposal site”.
This amendment corrects a minor and technical drafting error in new s.3A of the Nuclear Installations Act 1965: a licensed disposal site (as currently defined for the purposes of the new section) is not a nuclear installation (within the meaning given by s.26(1) of the Act) and so the carve out in subsection (3) is not necessary.
Amendment 121, in clause 257, page 224, leave out lines 5 to 8.—(Andrew Bowie.)
This amendment, consequential on Amendment 120, removes the unnecessary definition of “licensed disposal site” from new section 3A of the Nuclear Installations Act 1965.
Clause 257, as amended, ordered to stand part of the Bill.
Clauses 258 and 259 ordered to stand part of the Bill.
Schedule 20
Accession to Convention on Supplementary Compensation for Nuclear Damage
Amendments made: 124, in schedule 20, page 374, line 9, leave out sub-paragraph (4).
This amendment and the Minister’s other amendments to Schedule 20 make minor and consequential changes to that Schedule to ensure accurate implementation of the CSC.
Amendment 125, in schedule 20, page 375, line 7, leave out
“, (3BA), (3BB), (3BC), (3BD) or (3BE)”
and insert
“or, in a case where the relevant reciprocating territory is also a CSC territory (as defined by section 16AA), (3BB)”.
See the Minister’s explanatory statement for Amendment 124.
Amendment 126, in schedule 20, page 377, line 4, at end insert—
“(c) a country mentioned in section 26(1B)(b),
(d) an overseas territory mentioned in section 26(1B)(c) or (d), or
(e) a relevant reciprocating territory.”
See the Minister’s explanatory statement for Amendment 124.
Amendment 132, in schedule 20, page 378, line 11, at end insert—
“(as amended or supplemented from time to time)”.
This amendment ensures that the definition of “the CSC” in Schedule 20 is to the Convention on Supplementary Compensation for Nuclear Damage as amended or supplemented.
Amendment 127, in schedule 20, page 379, line 13, leave out
“In section 26 of the 1965 Act (interpretation),”
and insert—
“(1) Section 26 of the 1965 Act (interpretation) is amended as follows.
(2)”.
See the Minister’s explanatory statement for Amendment 124.
Amendment 128, in schedule 20, page 379, line 27, at end insert—
“(e) after the definition of ‘overseas territory’ insert—
‘“the Paris Convention” means the Convention on Third Party Liability in the Field of Nuclear Energy of 29 July 1960, as amended by the Additional Protocol of 28 January 1964, by the Protocol of 16 November 1982 and by the Protocol of 12 February 2004;’.”
This amendment sets out a definition of the Paris Convention for the purposes of the amendments to the Nuclear Installations Act 1965 to which Amendment 129 relates.
Amendment 129, in schedule 20, page 379, line 27, at end insert—
“( ) In subsection (1A)(a)—
(a) in the opening words, for ‘a relevant international agreement’ substitute ‘the Paris Convention’;
(b) in sub-paragraph (i)—
(i) for ‘relevant international agreement’ (in each place it appears) substitute ‘Convention’;
(ii) for ‘agreement’ (in the third place it appears) substitute ‘Convention’;
(iii) for ‘agreement’s’ substitute ‘Convention’s’;
(c) in sub-paragraph (ii), for ‘relevant international agreement’ substitute ‘Convention’.”—(Andrew Bowie.)
See the Minister’s explanatory statement for Amendment 124.
The Chair
We now come to the Question that schedule 20, as amended, be the Twentieth schedule to the Bill. [Interruption.] Dr Whitehead, anything else?
Dr Whitehead
Sorry, Dr Huq, I was making a comment from a sedentary position.
The Chair
Chuntering is a bad habit.
Schedule 20, as amended, agreed to.
Clause 260
Provision of additional police services
Dr Whitehead
I beg to move amendment 162, in clause 260, page 230, line 23, at end insert—
“(d) the provision of the additional police services in question is within the competence and in accordance with the usual operational practices of the Civil Nuclear Constabulary”.
The Chair
With this it will be convenient to discuss the following:
Amendment 163, in clause 260, page 230, line 33, after “Secretary of State”, insert “or the Police Authority”.
Clause stand part.
Clauses 261 to 263 stand part.
Dr Whitehead
I remain quite amused that we smuggled a euro or two into our flexibility structure a moment ago. I am sure that that will go down in history.
Clauses 260 to 263 relate to the Civil Nuclear Constabulary. For those who do not know too much about that constabulary, as I must admit that until recently I did not—
Mark Jenkinson
I am sorry for taking up so much of the hon. Gentleman’s time this morning, but on that note, I have a drop-in with the Civil Nuclear Police Federation at 12 o’clock today in room Q in Portcullis House. I encourage all colleagues to attend.
Dr Whitehead
That is a very helpful intervention, because among other things it means that our business will have to be finished by 12 o’clock this morning to facilitate our collective visit to the drop-in to be better informed about the Civil Nuclear Constabulary.
The Civil Nuclear Constabulary was established under the 1965 Act. It has about 1,500 officers nationally; they occupy eight sites in England and three in Scotland. There is a headquarters in Culham, with a chief constable and so on. It is just like a police authority, only not geographically in one place. Its prime responsibility is not guarding nuclear sites—that is for the Ministry of Defence police and the Army, basically—but the security of the sites and all that goes with policing around nuclear sites. I think it has jurisdiction up to 5 km away from nuclear sites. I will be interested to hear more about this, but as I understand it, it is a very specialised force.
All members of the Civil Nuclear Constabulary are routinely armed and are trained to that extent. They undertake virtually no arrests. A couple of years ago, they made a total of 24 arrests; last year I think they made 10, two of which turned out not to be arrestable. In comparison, an ordinary police force of the same size, such as Dorset police, would make about 7,500 arrests in an average year. The profile of the Civil Nuclear Constabulary’s activity and specialities is very different from that of an ordinary police force.
That is not saying very much about the Civil Nuclear Constabulary, other than that it is a specialist force, has jurisdiction relating to nuclear sites and, as far as I understand it, does a very good job at what it is asked to do. The clauses before us are not about the Civil Nuclear Constabulary itself, but about the extent to which its officers might, as it were, be rented out to other police forces. “Rented out” sounds a rather pejorative way of putting it; it is not intended to be, but that is really the only way I can describe it.
The clauses concern the circumstances under which officers can be seconded—I would say rather more than seconded—to other forces, subject to a decision of the Secretary of State. Clause 260(1), which will amend the Energy Act 2004, states:
“The Constabulary may, with the consent of the Secretary of State, provide additional police services to any person”,
which basically means to any other police authority.
Clause 260 also states that the Secretary of State
“must not give consent for the purposes of subsection (1) unless satisfied, on an application made by the Police Authority”,
which I assume means the Civil Nuclear Police Authority, that the application
“is in the interests of national security”
and
“will not prejudice the carrying out of its primary function under section 52(2)”
of the 2004 Act.
The establishment of the Civil Nuclear Police Authority is a little anomalous, by the way. It was originally under the jurisdiction of the Department for Business, Energy and Industrial Strategy and has now effectively been transferred to the jurisdiction of the Department for Energy Security and Net Zero, rather than the Home Office, as is the case with ordinary police forces.
Dr Whitehead
If we go to room Q, we will find out more, but civil nuclear constables are special police. They are recruited and trained in a different way, their responsibilities are different, and the activities they undertake are normally different. That gives rise to questions about whether civil nuclear constables can easily be transferred to other police authorities. I assume that the rental agreement would state whether they should undertake the ordinary activities that constables in comparable authorities undertake. Are they to be rented out on the basis that they will become ordinary police constables in a particular authority, or on the basis that they have special arrangements? They clearly will not have special arrangements concerning arresting people, so I imagine that the arrest rate of a police authority that had recruited police constables from the Civil Nuclear Constabulary for additional services would not go through the roof. Such constables are routinely armed, so there is also a question about whether they would be disarmed for the purpose of undertaking their duties in other police forces.
The answers to such questions do not appear in the clauses before us. There is just an arrangement that police constables can be rented out, that compensation can be paid for them, that the Secretary of State can intervene if he or she thinks there are problems, and that the police authority has to be consulted about renting out and, as it were, de-renting—that is all that the clauses cover.
I do not necessarily imagine that our amendments will be pursued to a great extent, but I would very much like to hear the Minister’s response to what they are trying to do. On the renting out of police, amendment 162 would clarify that
“the provision of the additional police services in question is within the competence and in accordance with the usual operational practices of the Civil Nuclear Constabulary”.
That is, those police who are rented out are not to be turned into ordinary police, and the circumstances of the renting out should be within the competence of the Civil Nuclear Constabulary, so we should not reasonably expect them to turn out to be ordinary policemen in other police authorities.
Also, we want the Civil Nuclear Police Authority to be rather more involved in decisions as to whether to continue renting out, so amendment 163 would add the words “or the Police Authority” after “Secretary of State”. We are trying to tighten up both the concept and the practice of these arrangements, to ensure that there is respect for the fact that the Civil Nuclear Constabulary is a specialist service, with staff who have special skills, qualities and qualifications that may differ from those of police in other forces. Renting-out arrangements should respect that. We should be a little careful to ensure that we do not put a square peg in a round hole through this renting out, even though there may be circumstances where a freer interchange of police between the Civil Nuclear Constabulary and county police forces could take place, and would benefit both sides.
I appreciate that clauses 260 to 263 to some extent supply what was left out from the Energy Act 2004, in which the Civil Nuclear Constabulary was defined, but I am not sure that the clauses do the job completely, and make sure that the strengths and qualities of the Civil Nuclear Constabulary are properly reflected in any renting-out arrangement, and that its constables are not expected to do things for which they are not trained, or in which they do not have experience, if they are seconded to other constabularies.
Andrew Bowie
First, as the Civil Nuclear Constabulary will be in room Q, Portcullis House, at midday today, at a meeting hosted by my hon. Friend the Member for Workington, I pay tribute to all the officers and staff who serve so diligently in that constabulary. I had a very enjoyable and informative meeting with Chief Constable Simon Chesterman and the chairman of the Civil Nuclear Police Authority, Susan Johnson, a couple of weeks ago. The constabulary serves this country and does incredibly important work protecting our civil nuclear fleet. It is incredibly well trained for that.
The hon. Member for Southampton, Test, referred to “ordinary” policing. Yes, Civil Nuclear Constabulary officers are highly trained in armed policing, and in the specialties that they have to be trained in to carry out their job, but they are also trained in what he described as ordinary—unarmed—policing, and are held to stringent College of Policing standards, such as those set out in the authorised professional practice armed policing guidance. That is consistent across the organisation, regardless of which site an officer is deployed to, and that would remain the case if there was any expansion of the constabulary’s services.
The Secretary of State must consult the chief constable before providing consent to the constabulary providing additional services. That ensures that the views of the person who is arguably best placed to assess competence and operational arrangements is taken into consideration. Should the CNC take on additional responsibilities outside the civil nuclear sector—we have been talking about that today—the chief constable will be responsible for ensuring that any additional training requirements are identified and delivered. I hope that addresses the concerns of the hon. Member for Southampton, Test, on that point.
The Civil Nuclear Constabulary is a crucial component of our civil nuclear security system, as the specialist armed police force dedicated to the protection of our most sensitive civil nuclear facilities, and of civil nuclear material in transit. In the evolving national security and energy landscape, we want to ensure that we are making the best use of our resources to protect the UK’s essential services and critical national infrastructure, as well as our wider national security interests.
Dr Whitehead
The Minister addressed the overall subject of the Civil Nuclear Constabulary well, but I do not think that he entirely addressed our questions, which were not about the competency of the constabulary, or its establishment or function. Our questions were about the new provision that the Government are seeking to introduce regarding the extent to which police personnel could perform a wider function, depending on circumstances in the Civil Nuclear Constabulary.
By the way—this may be a reasonable topic for discussion in a drop-in—I would not like the Civil Nuclear Constabulary to be assumed to be an ancillary police force with some special responsibilities. It is clearly a very specialised and highly trained police force with a particular set of duties. By and large, it should have the necessary number of police constables to perform its duties. If over time—this may be something for the Department to consider, since it has special responsibility for the constabulary—the general conclusion is reached that this is a police force to which, to put it a bit unpleasantly, other forces can help themselves when they are in periods of stress, that would not be very good for the future of the constabulary.
There is another alternative. As the Minister mentioned, the police authority has to carry out three-year reviews. If during those reviews it is thought that substantial numbers of the police force had been rented out over the review period, there may be a temptation for a future Secretary of State—not present Ministers; I am sure they have a very close eye on what the Civil Nuclear Constabulary is doing and how it carries out its role—to say, “The Civil Nuclear Constabulary does not need all these people. Let’s reduce its size. Let’s cut it down to a smaller number, because that will do for its operations—we can see that it is renting out quite a lot of its force for other purposes.” That would be a retrograde step.
The Minister prayed in aid, as a reason not to pass the amendment, proposed new section 55A(4)(c) of the Energy Act 2004, in which the Secretary of State must judge that
“it is reasonable in all the circumstances for the Constabulary to provide those services.”
That is a bit of a problematic, I would have thought; how do we judge what is
“reasonable in all the circumstances”?
For that to apply, the officers must be “surplus to requirements”, but most reasonable judgments would be, “Well, they are not surplus to requirements. They are a key part of the Civil Nuclear Constabulary and they are doing a good job.” I would therefore expect that there would be a fairly high bar as to what was
“reasonable in all the circumstances”,
but that is not defined. Our amendment attempts to define that effectively, by saying that the release of these officers would be
“within the competence and in accordance with the usual operational activities of the Civil Nuclear Constabulary.”
We do not want to press the amendments to a vote, but I would like the Minister to give some assurance on the record that the
“reasonable in all the circumstances”
judgment would, in practice, be a full and close partner to the definition we attempted to apply to the leasing arrangement through amendment 162. Unless that is stated on the record, we will worry about the temptation to play fast and loose with the Civil Nuclear Constabulary when there are pressures elsewhere.
Andrew Bowie
To clarify, the expansion of the CNC will not in any way affect the CNC’s core mission. We are absolutely not playing fast and loose with the Civil Nuclear Constabulary. The CNC’s priority and core function will remain the protection of civil nuclear sites and material, in line with the UK’s international obligations. Before granting consent for the CNC to take on additional services, the Secretary of State must be satisfied that the CNC’s core nuclear supervision will not be prejudiced in any way. This legislation includes an ongoing statutory duty for the CNC’s chief constable to ensure that that remains the case. I hope the hon. Member will withdraw his amendment on that basis.
Dr Whitehead
I thank the Minister for that intervention. Following the assurances he has given on that basis, among others, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 260 to 263 ordered to stand part of the Bill.
Clause 264
Civil nuclear industry: amendment of relevant nuclear pension schemes
Kerry McCarthy (Bristol East) (Lab)
I beg to move amendment 103, in clause 264, page 234, line 31, at end insert
“, or on benefits in deferment or pensions in payment;”
This amendment means that the Secretary of State may not put a cap on revaluation of benefits in deferment or pensions in payment.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Clauses 265 to 269 stand part.
Kerry McCarthy
It is a pleasure to see you in the Chair, Dr Huq. These clauses relate to nuclear pension schemes, and the amendment would provide certainty that Nuclear Decommissioning Authority pensions would not be capped. There is some ambiguity in the drafting of the Bill, and the door has been left open for the introduction of regulations to cap pension increases when that is not part of what has been agreed in the past among Government, unions and nuclear workers.
I say the door has been left open for such regulations because subsection (3) (c ) of the clause specifies that only increases for revaluation—that is, active deferred members—cannot be capped. It does not mention pensions in payment. The wording is
“not involving imposing a cap on any revaluation or revaluation rate”.
The amendment would mean that the Secretary of State could not put a cap on revaluation of benefits in deferment or pensions in payment, as well as the other schemes I have mentioned.
The provision as it stands is contrary to the heads of terms agreement between BEIS and the NDA, which explicitly states that pension increases will be in line with inflation, as measured by the consumer prices index, with no reference to any cap. It is also important to note that, although members of recognised trade unions in the NDA group voted in favour of the reforms that these measures facilitate, I am told that there was by no means an overwhelming endorsement. Many voted in such a way because they feared the Government would impose even worse reforms, which had been threatened, if they did not agree to what is now on the table. They felt that that was the best deal they could get, but they feel that the promises made to them have been broken and they are not happy. Given that, it is even more important that we ensure that the Bill reflects the compromise agreement that was reached.
It is also wrong to say that these reforms would bring pension provision across the NDA group into line with wider public sector pensions, which I think is what the Minister in the Lords said. Those pension schemes underwent much more radical reform long before Lord Hutton’s review of public sector pensions, and they have been closed to new entrants for many years. Lord Hutton recommended that public sector pension accrual remain on a defined-benefit basis, but pension provision across the NDA group is mostly on a defined-contribution basis. I have been approached by representatives of trade unions who are eager to meet the Minister to ensure that reforms are fully consistent with Lord Hutton’s review. I do not know whether the Minister can offer today to meet those representatives, so I can take that back to them.
An amendment is necessary to remove any doubt about the status of nuclear workers’ pensions. I am sure we all agree that the effectiveness of the Civil Nuclear Constabulary is essential to maintain the UK’s nuclear security, and that the work of everyone at the NDA is really important, as we have already heard this morning. Those people are integral to keeping the public safe, and that should be recognised when legislation is being determined.
I hope the Minister accepts that the amendment has been tabled in a constructive spirit. It is designed to remove any uncertainty, and I hope he will accept it.
Andrew Bowie
I am searching in vain for a second Minister to take some of this Bill. Unfortunately, they do not seem to be available. I thank the hon. Member for Bristol East for moving her amendment and allowing us to debate an important issue, especially for employees of the Nuclear Decommissioning Authority. I recently had a constructive meeting with trade unions representing workers from the NDA and was happy to discuss the issues they are concerned about in depth and specifically the one we are debating today.
The Nuclear Decommissioning Authority agreed with unions as part of negotiations that the consumer price index should be used for revaluations and that it should not be capped. Both the reference to the CPI and that revaluations should not be capped are referenced in the clause. As the clause sets out, revaluations include pensionable earnings, benefits in deferment and pensions in payment. Pensionable earnings relate to the pension payments contributed by employee and employer while they are working. Benefits in deferment are those benefits that have been built up by an employee who has left the pension scheme but has not yet accessed it. Pensions in payment relate to those receiving their pension.
The Government are content, therefore, that the legislation as drafted does not exclude benefits in deferment and pension in payment from the non-capping of the revaluation of earning by CPI. It is therefore in line with the agreed scheme. However, I am happy to put on record that in the new scheme, both benefits in deferment and pensions in payment will be uprated by CPI and will not be capped. While I appreciate the hon. Member for Bristol East raising the issue and the importance of ensuring that those with benefits in deferment and pensions in payment do not have their revaluations capped, I do not think the amendment is necessary.
Kerry McCarthy
Can the Minister confirm that when he discussed this with the trade union representatives, they were happy to accept his assurances that that is what the Bill says? Certainly, they have not communicated that to us. As far as I am concerned, they still believe that getting our amendment into the Bill is still important.
Andrew Bowie
That specific element was not discussed or brought up in the meeting, but I am happy to meet trade unions again to continue the discussion on the matter.
Kerry McCarthy
If there is some ambiguity, is there a reason why he feels that putting a clarification in the Bill to spell it out and give those reassurances would not be acceptable? The amendment does not seek to change his position as I understand it; it just seeks to make sure that that is clear.
Andrew Bowie
I understand why some Members, including the hon. Lady and trade unions, would find that helpful. We do not believe it is necessary because I have stressed today on the record—it will be in Hansard—that it is the Government’s position that those benefits in deferment and pensions in payment do not have revaluations capped and that they will be uprated by CPI. We do not think it is necessary because that is already the Government’s position. It is on the record and I am happy to stand by that.
Turning to clause 264, the 2011 report by Lord Hutton of Furness started the Government on the road to the reform of public sector pensions. While the Public Service Pensions Act 2013 made a large number of reforms, it did not cover all public sector bodies, including those within the NDA group. The NDA is the statutory body responsible for the decommissioning and safe handling of the UK’s nuclear legacy, with 17 sites across the United Kingdom, including Sellafield. Even though the NDA was created in 2005 via the Energy Act 2004, many of its sites have been operating since the middle of the 20th century. That lengthy history has led to a complicated set of pension arrangements, which include two pension schemes that, while closed to new entrants since 2008, provide for final salary pensions and are in scope for reform. They are the combined nuclear pension plan and the site licence company section of the Magnox Electric Group of the electricity supply pension scheme.
In 2017, the Government and the NDA engaged with trade unions to agree a reformed pension scheme that was tailored to the characteristics of the affected NDA employees. That resulted in a proposed bespoke career average revalued earnings scheme which, following statutory consultation with affected NDA employees and a ballot of union members, was formally accepted by the trade unions. Subsequently, a formal Government consultation was launched in 2018, with the Government publishing a response in December of that year confirming the proposed change.
The reformed scheme still offers excellent benefits to its members. Notably—and unusually compared with other reformed schemes—it still includes provision for members to retire at their current retirement age. For nearly everybody, that will be 60 years old. However, the complicated nature of the pension schemes, in the context of the statutory framework that applies to pension benefits across the NDA estate, means that specific legislation is needed to implement the new scheme.
Clause 264 provides the Secretary of State with the power to make secondary legislation designating a person who will be required to amend the provisions of a nuclear pension scheme. That is necessary, as at the current time the scheme rules limit the NDA’s ability to make changes to pension scheme arrangements. Clause 264 uses the phrase “relevant nuclear pension scheme” to describe the types of schemes that a designated person could be required to amend by virtue of that amendment. Clause 265 explains what is meant by that phrase. Clause 265 also clarifies the UK Atomic Energy Authority pension schemes and pension schemes that benefit persons specified in the Public Service Pensions Act 2013 are not relevant pension schemes.
Clause 266 relates to the provision of information. In order to implement the proposed pension reforms, the NDA—and, in the case of the MEG-ESPS, Magnox Limited—will need information from others. Clause 266 gives a person who has been required to amend a relevant nuclear pension scheme the power to require persons holding any information they might reasonably require to provide that information. That could include the number of members in a pension scheme, and the salaries and ages of those members.
Data protection legislation may still prevent the information from being shared. The clause specifies, however, that in making that assessment, the requirement to disclose imposed by the clause must be taken into account. The clause also provides that disclosure does not constitute a breach of confidence or breach of any other restriction on the disclosure of information.
Clause 267 sets out definitions relevant to the clauses about amendments of relevant nuclear pension schemes. Clause 268 relates to the protection that is in place that would currently block any change of pension. Although the reformed pension to be provided to affected NDA workers is still excellent, it has always been clear that the reforms to public sector pensions would result in lower levels of benefits to members than is currently the case. Although that is the acknowledged effect of Government policy in this area, it does bring it into conflict with existing legislation. Both schedule 8 of the Energy Act 2004 and regulations made under schedules 14 and 15 of the Electricity Act 1989 effectively mean that any change to NDA pensions must be “no less favourable”.
Clause 268 effectively expands a power made under an earlier clause, providing the ability for regulations made by the Secretary of State to amend or disapply schedule 8 of the Energy Act 2004 and regulations made under schedules 14 and 15 of the Electricity Act 1989. Given that this is not a hybrid Bill, we believe it is more appropriate for those powers to be exercised via regulation rather than primary legislation.
Clause 269 relates to the procedure for the regulations under this chapter. The Government believe it is right and proper for regulations under this chapter to be subject to the affirmative procedure. We also believe that these regulations should not be subject to the hybrid instrument procedure. There has been considerable consultation with those affected, and the policy is in line with pension reform across the public sector.
Kerry McCarthy
I welcome the Minister’s assurances and his offer to meet the unions to discuss this point. I have spent a lot time looking at the wording. Although I agree that it could be interpreted in the way the Minister says, that is arguable. I still feel it would be best to have clarity in the Bill and, therefore, would like to press the amendment to a vote.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss the following:
Clauses 271 to 273 stand part.
Government new clause 52—Principal objectives of Secretary of State and GEMA.
Andrew Bowie
I will start with the good news and first speak to clause 271 and Government new clause 52. The Government have maintained the view that Ofgem’s principal objective makes its role in achieving the net zero target clear. However, we have carefully considered the effect of clause 271 with Ofgem and sought legal advice to ensure that the Lords amendments would not impact the hierarchy and intended effect of Ofgem’s duties. We are therefore content to clarify Ofgem’s duties by making specific reference to the net zero target in the Climate Change Act 2008.
The Government new clause is equivalent in substance to clause 271, but includes some minor drafting changes to ensure that the duty works in practice. First, it clarifies the authority’s role in supporting, rather than enabling, the Government to meet their net zero target. Secondly, it clarifies the net zero targets and carbon budgets specific to sections 1 and 4 of the 2008 Act. The new clause does not change the intention of clause 271. I thank my right hon. Friend the Member for Kingswood (Chris Skidmore) for the recommendation in his report entitled “Mission Zero”, Baroness Hayman in the other place and the energy industry for working constructively with the Government to bring forward this significant change.
I now turn to clause 270, which was also added to the Bill in the Lords on Report. The clause would prohibit the opening of new coalmines and extensions to existing coalmining in Great Britain. After carefully considering this addition, I tabled my intention to oppose the clause standing part of the Bill on 17 May. The Government are committed to ensuring that unabated coal has no part to play in future power generation, which is why we are phasing it out of our electricity production by 2024. Coal’s share of our electricity generation has already declined significantly in recent years—from almost 40% in 2012 to around 2% in 2021.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Does my hon. Friend the Minister agree with me that although, as he rightly says, electricity production by coal has been as little as 1% and huge amounts of work can be done to reduce that carbon dioxide output, it is vital, with electricity generation, to maintain a baseload? As we saw recently when a gas turbine power station was turned off and we were relying on wind power, the baseload could not be maintained and the system tripped out for a large area of the country. Does the Minister agree with me that the objectives are fine, but physics and reality come in at some point?
Andrew Bowie
I could not agree any more wholeheartedly with or put it any better than my right hon. Friend. For energy security reasons, it is vital that we maintain all options that are open to us. That does not in any way impede, get in the way of or stand contrary to our overarching net zero ambition.
Alan Brown
On that point, as the Minister agrees with his colleague, is the Minister saying that he needs to keep coal generation as an option, on the table, beyond the planned phase-out date? Because that is what I just heard.
Andrew Bowie
No, the planned phase-out date of October 2024 is extant and something that we are working towards. However, it is important that we ensure that, as part of our electricity baseload, we have access to the relevant energy sources so that we ensure this country’s energy security. Given the situation with energy security in central Europe and, indeed, worldwide, that should be understood by everyone.
Alan Brown
If the Government allow the licensing of a new coalmine, how will that help energy security? The Minister has just committed to phasing out the use of unabated coal by October 2024, so, by the time a new coalmine is operational, it certainly will not add any energy security.
Andrew Bowie
The hon. Gentleman heard my answer to that very point. I do not think I need to labour it much more.
Dr Whitehead
Is the Minister saying that we should have access to those supplies in order to back the system up? And by the way, I do not think that tripping out, which came up a little while ago, was just about coal.
Dr Whitehead
It was a gas turbine that tripped out. It was not about coal, as far as I understand.
Is the Minister saying that we should have access to those supplies until, but not after, 2024? We will not have anywhere to burn them after 2024 because the intention is to have phased out coal by then. What exactly is the Minister saying? By the way, coal is unlikely to be burned in a UK power establishment in the future, if such establishments survive.
Andrew Bowie
This is the Energy Bill, so I understand why the focus has been on energy and energy security. However, coal is not just required for energy purposes, and that is another reason why we will vote against the clause.
Mark Jenkinson
I have a constituency interest in a new coalmine in a neighbouring constituency in west Cumbria. Its planning condition is to produce metallurgical coal, which is used in steel plants. The Minister was recently in Sweden, as I was just a couple of months ago. We hear a lot about HYBRIT—hydrogen breakthrough ironmaking technology—which is a green steel project. I was relieved to hear that HYBRIT requires coking coal, even in electric arc furnaces with direct reduced iron, and that it will continue to be used for some time. Does the Minister agree that we should not close off avenues for UK-sourced coking coal?
Andrew Bowie
I entirely agree with my hon. Friend. His expertise in the area, his experience in Sweden and his constituency interest have proved invaluable in ensuring that everybody is fully aware of the situation, the technology and, indeed, the science behind all of this.
Even when we phase out coal power stations, domestic demand for coal will continue in industries such as steel, cement and heritage railways, and that demand can be met by domestic resources on existing lines of deployment. A full prohibition of coal extraction, regardless of the circumstances or where that coal is going to be used—be that in steel, cement or a heritage railway—is likely to prevent extensions to existing operational mining, even where an extension would enable site restoration or deliver public safety benefits; cut across heritage mining rights in the Forest of Dean, which are important to its tourism offer; and, importantly, prevent domestic coal extraction projects from progressing that are seeking to supply industries that are still reliant on coal.
Andrew Western (Stretford and Urmston) (Lab)
The Minister has set out a series of perceived advantages. On the flipside, the proposed new coalmine at Whitehaven would emit 9 million tonnes of carbon dioxide each year, so does he agree that that would have serious implications for our net zero ambitions?
Andrew Bowie
I very much question the figures that the hon. Gentleman has just put to the Committee. I stress that it is really important that we ensure that the industries in the United Kingdom that rely on coal are able to rely on a domestic source for that coal—British coal—and not on imports from overseas, which will actually increase carbon emissions.
The Chair
Order. May I just point out that some of these interventions are getting a little bit lengthy? We have a whole debate—one other Member has already indicated that she wants to speak—so colleagues can make speeches if they wish.
Alan Brown
I will be brief, Dr Huq. On the Minister’s point, is it not the case that up to 85% of the coke that will be exported to the EU is coming out of coal in Cumbria? Does he agree with the figures of Lord Deben, the chair of the Committee on Climate Change, which state that the new Cumbrian coal mine will emit about 400,000 tonnes of CO2 a year, equivalent to 200,000 cars being added to the road?
Andrew Bowie
Now I am getting confused, because I have some figures coming from over there and other figures coming from over there. It is important that we ensure that industries that rely on a source of coal are able to rely on domestic sources of coal. This clause, proposed by the Labour party, would prevent that from happening, harm future investment, harm jobs and harm our progress.
Katherine Fletcher (South Ribble) (Con)
This is one of the most jaw-dropping moments I have ever had in my parliamentary career. The Scottish National party and the Labour party are arguing against domestic jobs, our proud coalmining heritage and energy security for this country. Is that not flabbergasting?
Andrew Bowie
I am actually close to speechless. Labour likes to describe itself as the party of the workers. Well, it is anti-workers, anti-jobs and anti-investment in British industry.
Andrew Bowie
That is demonstrated by the clause, and that is why I believe that now is not the right time to make the changes suggested by the Labour party. We will oppose the clause.
Finally, I will address clauses 272 and 273 on community energy, which I also oppose. I recognise that several Members spoke in support of these clauses on Second Reading. However, the Government continue to believe that this is a commercial matter that should be left to suppliers, and further work is needed before considering whether primary legislation is needed.
In evidence submitted to the Committee and published on 13 June, Energy UK set out its in-principle support, much like the Government, for community energy, and recognised the role that it will play in our energy system. However, it asks that
“these measures be removed to give the Government, the regulator, and the industry time to fully consider the best approach to integrating community energy effectively, protecting consumers and preventing additional costs being added to all consumers’ energy bills on behalf of a currently small portion of the population.”
Kerry McCarthy
Does the Minister accept that the wording inserted in the Bill by the Lords reflects the exact same wording of a private Member’s Bill—I think it is the Local Electricity Bill—that more than 120 Conservative MPs previously pledged to support? I checked to see whether any members of the Committee supported that Bill, and apparently the hon. Members for Hyndburn and for West Aberdeenshire and Kincardine were among those 120 MPs. I think the rest of the Committee gets off the hook on that. Would the Minister like to explain why he has changed his mind?
Andrew Bowie
The hon. Lady is hearing me explain at great length why the position of the Government is what it is.
Clause 272 seeks a minimum export guarantee scheme. Community energy projects can already access power purchase agreements, which are arrangements for the continuous purchase of power over a given period with market-reflective prices. For example, Younity, a joint venture between Octopus and Midcounties Co-operative, already purchases electricity from more than 200 community groups of all sizes. It has PPAs of varying contract lengths, from six months to five years. Renewable Exchange has also enabled more than 100 community projects to sell electricity via PPAs since 2018.
When we introduced the smart export guarantee, we consciously moved from a consumer-funded subsidy model to a competitive market-based system with cost-reflective pricing. That was in line with the vision to meet our net zero commitments at the lowest net cost to UK taxpayers, consumers and businesses. Introducing a fixed price would be a step backwards, as it requires all energy consumers to pay more than the market price for electricity to subside local communities that benefit from community energy projects. An electricity export guarantee indexed to the wholesale price is inconsistent with the Government’s aim to decouple renewable generation from a wholesale price linked to the marginal cost, usually fossil fuel generation or gas. A static export price could also dampen price signals needed in the system, for example, in the use of intraday batteries.
History suggests that such a support scheme would have only a minimal impact on deployment. For example, deployment of community energy projects over the final five years of the much more generous feed-in tariff subsidy scheme was still very low. These projects are also typically more expensive than larger utility-scale renewable projects, with small solar and onshore wind projects between 50% and 70% more expensive. The proposal would be mandatory for suppliers with more than 150,000 consumers, and would therefore introduce a huge new administrative burden. Suppliers would face the additional one-off costs of putting in place process and IT infrastructure, as well as ongoing costs of managing the scheme, which would be passed on to consumers in higher bills. It is likely that it will disproportionately impact smaller suppliers, sitting just above the 150,000 customer threshold.
Similarly, on clause 273 it is the Government’s view that a local tariff is unlikely to result in a better price for consumers. Suppliers would incur potentially significant costs in setting up and delivering the scheme. They would also have to recoup the additional costs, which we anticipate would be via the service fee and would therefore be recoverable only from local consumers. A small-scale low-carbon generator is also unlikely to guarantee a supply of electricity to local consumers at all times. Suppliers would have to buy additional wholesale energy to cover all local consumer demand, while continuing to charge for all other supply costs incurred. The local tariff would also need to reflect the export price paid to the generator. Presumably that is intended to ensure that local consumers benefit from cheaper export prices, but it would create an unintended outcome whereby higher export prices benefit the generator and increase the tariff price.
I hope that I have explained at length why I, as the Member for West Aberdeenshire and Kincardine, am espousing this position. I reassure the Committee that I am working with my officials to explore what other credible options are available to support the community energy sector. Indeed, work continues as we speak. We are taking these issues seriously, but for the reasons that I have provided I will oppose the clauses.
Alan Brown
The Minister says that he is working with his officials, but assuming that the Government majority on the Committee will reject clauses 272 and 273, what opportunity is there for mechanisms to be introduced to support local energy?
Andrew Bowie
As much as I know that we are all aghast at the thought of the Committee finishing and the Bill going back to the House, that will not be the end of our journey together. We will gather again on Report and Third Reading, so there will be ample opportunity for the hon. Gentleman to speak on the Bill at that stage, and for any changes that might be required to it.
The Chair
There is a drop-in session in room Q in Portcullis House at noon, but it is entirely voluntary.
Ordered, That the debate be now adjourned.—(Joy Morrissey.)
Energy Bill [ Lords ] (Fourteenth sitting)
Thursday 22nd June 2023
(1 year, 5 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 22 June 2023 - (22 Jun 2023)
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 4 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Chair
I remind the Committee that with this we are considering:
Clauses 271 to 273 stand part.
New clause 52—Principal objectives of Secretary of State and GEMA—
“(1) Section 4AA of the Gas Act 1986 (principal objective and general duties of Secretary of State and GEMA) is amended as set out in subsections (2) and (3).
(2) In subsection (1A)(a), for ‘the reduction of gas-supply emissions of targeted greenhouse gases’ substitute ‘the Secretary of State’s compliance with the duties in sections 1 and 4(1)(b) of the Climate Change Act 2008 (net zero target for 2050 and five-year carbon budgets)’.
(3) In subsection (5B), omit the definitions of ‘emissions’, ‘gas-supply emissions’ and ‘targeted greenhouse gases’.
(4) Section 3A of the Electricity Act 1989 (principal objective and general duties of Secretary of State and GEMA) is amended as set out in subsections (5) and (6).
(5) In subsection (1A)(a), for ‘the reduction of electricity-supply emissions of targeted greenhouse gases’ substitute ‘the Secretary of State’s compliance with the duties in sections 1 and 4(1)(b) of the Climate Change Act 2008 (net zero target for 2050 and five-year carbon budgets)’.
(6) In subsection (5B), omit the definitions of ‘emissions’, ‘electricity-supply emissions’ and ‘targeted greenhouse gases’.”
This new clause is intended to replace clause 271. The intention is for it to appear at the start of Part 6. It is equivalent in substance to clause 271 but includes some drafting changes and consequential amendments.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Gray. I want to make quite a few comments on the clauses, but I hope we are more than halfway through the debate, given how long we spent on it on Tuesday. You were not here then, Mr Gray, but the Labour Front Benchers shared their contributions, which is a luxury that I do not have as the only SNP Front Bencher. I warn the Committee to buckle up for what is now going to be an Alan monologue for a wee while, so be prepared!
First, I want to make some comments about Tuesday’s discussion of the merits of clause 270, which was inserted by the Lords. I am sorry that the hon. Member for South Ribble is not in her place; I would rather be saying this with her directly opposite—
Alec Shelbrooke (Elmet and Rothwell) (Con)
Will the hon. Gentleman give way?
Alan Brown
Shortly; I will make the point first. On Labour and the SNP being against opening coal mines, the hon. Member for South Ribble said:
“This is one of the most jaw-dropping moments I have ever had in my parliamentary career. The Scottish National party and the Labour party are arguing against domestic jobs, our proud coalmining heritage and energy security for this country. Is that not flabbergasting?”––[Official Report, Energy Public Bill Committee, 20 June 2023; c. 356.]
That was a week in which the former Prime Minister resigned and was proven by the Privileges Committee—with a Tory majority—to be a serial liar, and in which Parliament voted to effectively sanction what would have been a 90-day suspension. I find that a bit more jaw-dropping than ourselves and Labour opposing new coal mines.
Alec Shelbrooke
To help the hon. Gentleman, I merely say that my hon. Friend the Member for South Ribble is unfortunately detained in the Chamber because a huge bomb factory was found in her constituency this morning and she needs to raise that on the Floor of the House. I know that my hon. Friend will be here later.
Alan Brown
I thank the right hon. Gentleman for that clarification. I was not casting any aspersions about the hon. Member not being here; I was just saying that it was unfortunate when I am addressing her comments. I note how important that issue in her constituency is and hope it gets resolved.
On coalmining heritage—I do not think I need to point this out, but I will anyway, as an obvious history lesson—the coalmines were shut down as a result of Maggie Thatcher putting her anti-union ideology ahead of the coalmining industry. At that time she was more than happy to import coal from the likes of Poland and bring it in from overseas while shutting the coalmines here. That is a fact.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
indicated dissent.
Mark Jenkinson (Workington) (Con)
Does the hon. Member agree with the former Labour leader of one of the Aberdeen councils, Barney Crockett, that Labour’s energy policy will wreak more harm on industrial communities than anything that Margaret Thatcher ever did?
The Chair
Order. Before we allow ourselves to get into what might be an amusing, if controversial, area, I remind the Committee that we are dealing specifically with clause 270, which prohibits new coalmines in the six months after the Bill is passed. Perhaps we could restrict ourselves to that, rather than getting into more exciting rabbit holes.
Alan Brown
Excitement is sometimes quite tempting, Mr Gray, but I will try my best. I am trying to draw together the history of the coalmines and the issue of whether we should go forward with more. On the intervention, it is not usually for me to agree with Barney Crockett, but Labour’s energy policy is certainly all over the place.
We are debating opening new coalmines, but the reality is that there are now not too many people, even of working age, who have actually worked in coalmines—that is how long ago they were shut down—so there is not even a skillset out there that would be able to operate much of the mines. I realise that technology has moved on—the proposed mine at Whitehaven will use modern technology—but skilled labour will still be hard to get and the Government’s immigration policies will prohibit skilled miners coming from elsewhere.
Labour and the SNP are against coalmines, but we need to look at the wider context and consider the comments of the right hon. Member for Kingswood (Chris Skidmore), who was commissioned by the Tory Government to undertake a net zero review. His report was supported and commended by Members on both sides of the House, who agreed with its recommendations. Before the decision on the Whitehaven mine, he said:
“Opening a new coal mine in the UK would send the wrong signal across the world. We are international leaders when it comes to tackling climate change. To act differently, having pledged the ending of coal, would be to surrender that leadership.”
After the decision to grant planning permission for the coalmine, the right hon. Gentleman stated that if the recommendations in his report, such as on net zero tests, were part of the process, the coalmine would have been refused. He added:
“I obviously personally believe the coal mine decision is a mistake.”
A senior Tory parliamentarian is saying the same things as us. He is against the opening of new coalmines, and by default therefore supports clause 270. On international leadership, he effectively said that by opening new coalmines, the UK can no longer claim to be world leading on climate change.
I understand the importance of the jobs that go along with coalmines. My constituency needs new jobs, but we cannot use the phrase “local jobs” to justify bad decisions. Prioritising jobs above everything else leads to a race to the bottom. We could create jobs by chopping down all the trees in the UK and burning them, but that is a ludicrous proposition, so we cannot use new jobs as a justification.
If we want to talk about jaw-dropping comments, I was surprised to find that the hon. Member for South Ribble was a Parliamentary Private Secretary to the COP26 President, the right hon. Member for Reading West (Sir Alok Sharma), so it is worth while to look at what he said about the proposals for opening new coalmines. He said:
“Over the past three years the UK has sought to persuade other nations to consign coal to history, because we are fighting to limit global warming to 1.5C and coal is the most polluting energy source…A decision to open a new coalmine would send completely the wrong message and be an own goal. This proposed new mine will have no impact on reducing energy bills or ensuring our energy security.”
Our comments were deemed jaw-dropping, but I assume that those of the COP26 President, who led the worldwide negotiations on emissions reduction, and those of the chair of the net zero review should not be regarded as jaw-dropping and should be respected.
Alec Shelbrooke
The hon. Gentleman said the proposals will not improve our energy security, but will he comment on what will happen to the steel industry if we are not able to produce the electricity needed to move to arc furnaces in the timeframe outlined by the clause? As I said at the end of the previous sitting, we keep identifying areas that will be powered by electricity, but we do not seem to have the ability to catch up with that. On energy security, will he comment on what will happen if we are unable to generate the electricity that the steel industry needs?
Alan Brown
I am happy to comment on energy security, but I remind the right hon. Gentleman that those were not my words but the words of the former COP26 President. He said that the proposed new mine will not deliver energy security. I am sure that, like me, the right hon. Gentleman respects the President of COP26 and believes that he did a good job.
This argument about supplying coke and coal to the steel industry has already been debunked: 85% of the coal from the new coalmine will go abroad, so it will not provide energy security by supporting the steel industry in the UK. That is a bogus argument.
Mark Jenkinson
The hon. Gentleman says that that point has been debunked, but I actually debunked the debunking in the previous sitting. I am sure he heard those comments. On the issue of 85% being for export, that all depends on whether we want a UK steel industry and whether we want to grow it. Does he agree that we should be growing the UK steel industry and using 100% of that coal here?
Alan Brown
I want to debunk the hon. Gentleman’s debunking of the debunking. Let me come to the comments of the chair of the Climate Change Committee, Lord Deben, who the last time I checked is a Tory and was a Tory Minister.
The Chair
Order. This has become a bit chatty. I think perhaps we should restore a bit of order.
Alan Brown
This is an important point. The chair of the Climate Change Committee condemned the opening of the new coalmine and said that opening it would mean the UK emitting 400,000 tonnes of additional carbon dioxide into the atmosphere. He also pointed out that 85% of the coal will be exported because it is high in sulphur and therefore not suitable for the UK steel industry. A former chief executive of British Steel, Ron Deelen, said:
“This is a completely unnecessary step for the British steel industry”.
Alec Shelbrooke
The hon. Gentleman is being exceptionally generous with his time. He said that exporting 85% of the coal does not add to our energy security, but does he accept that if we have energy at home and do not have to import it, that is energy security by definition?
Alan Brown
I agree, which is why I want to see more renewables deployed. That is why I keep arguing for pumped-storage hydro, but the Government have fought that. It would give us storage and additional security and resilience. Obviously, I want the UK to become a net exporter of energy overall—that is the ideal place to get to—but renewables and storage are the answer.
Plenty of other senior Tory voices are saying that we should not open coalmines, so I do not see why the SNP and Labour should not be on the side of science and of such otherwise-respected senior Tory parliamentarians. It is also ludicrous that we are still effectively banning onshore wind in England but the Government will not accept a ban on opening up new coalmines and burning fossil fuels. When we talk about trying to lead the world on energy change, that is rank hypocrisy.
I realise the reality is that the transition will use some carbon fossil fuels. We need to understand that. That is why I believe in a just transition and have tabled a new clause that asks the UK Government to follow the lead of the Scottish Government by setting up a just transition commission. I have also tabled a new clause about net zero impact assessments. That in itself should underline Government policy and make the decision-making process transparent, so that we fully understand the impacts of policy decisions on net zero.
The Minister said it was important we ensure that industries that rely on coal can rely on domestic sources of coal, but that is a vacuous comment, because any coal mined in the UK goes on the open market and to whoever pays the most money for it. Having a new UK coalmine does not mean that that coalmine will automatically supply UK-based steel makers.
Bim Afolami (Hitchin and Harpenden) (Con)
Would the hon. Gentleman accept that any new piece of energy infrastructure or production from the North sea, or indeed on the land in the UK, can be subject to whatever licence terms the licence issuer, which is the Government, decides? Would he therefore accept that, if the licences have specific restrictions, what he says may not necessarily be true?
Alan Brown
I cannot disagree with that premise—that could happen—but it is interesting that an ardent free marketeer is advocating for special conditions to be put on licences such that oil, gas or coal could be sold only in the UK. I think the hon. Gentleman knows as well as I do that international companies would be loth to accept a licence on that premise. We would be better off nationalising the industry than putting conditions such as those on licences, but in theory the hon. Gentleman is right: we could make that a condition of the licence.
To return to Tuesday’s debate, for me it seemed that there were mixed messages about the possible burning of coal for electricity generation. The right hon. Member for Elmet and Rothwell stated:
“I believe that we cannot just disregard the opening of coalmines, because this is about where we generate all this electricity from. If we cannot generate that electricity, we need back-up plans, including these mines.”––[Official Report, Energy Public Bill Committee, 20 June 2023; c. 376.]
Could the right hon. Member tell me how many new coal mines he envisages opening for the burning of electricity?
Alec Shelbrooke
I do not know, but what I do know is physics. The physics says that we have to maintain a baseload. If we are unable to maintain that baseload, other options may have to be looked at, as Germany has done.
Alan Brown
The whole point is that coal is not being used to support baseload. Even if we believe in the concept of electricity baseload, it is not coal that is doing that. Coal is being used as a back up to the back up for when peak demand is hit, so that argument is wrong. Coal is not used for baseload.
The hon. Member for Workington stated:
“We are far too parochial on the subject of net zero and emissions.”
He seemed to be saying that if we do not do it, somebody else will, which is not showing international leadership. He went on to say:
“if we can export to Germany or somewhere else where people make large quantities of steel using coking coal, that is a reduction in total global emissions that we should champion.”––[Official Report, Energy Public Bill Committee, 20 June 2023; c. 373.]
The hon. Member has still not explained how the UK shipping coal to Germany is going to reduce global emissions—I still do not see how that follows—but I do share his concern that a lot of emission reductions have come from that offshoring manufacturing and industry. That is something we have to stop, so I fully agree with him on that, but opening a coalmine to export coal to Germany is not the way to re-shore industry.
Mark Jenkinson
The hon. Member is being incredibly generous with his time. On the point on how shipping coal from the UK to Germany lowers emissions, if that happens instead of coal being shipped from the US, Russia or somewhere further afield, then the shipping emissions are greatly reduced. As my right hon. Friend the Member for Elmet and Rothwell points out, it is also much cleaner coal to start with.
Alan Brown
I understand the point that Government Members are trying to make but, at the end of the day, if we are shipping coal to Germany, we are still increasing UK shipping emissions. We are increasing emissions from the UK to about 400,000 tonnes of CO2. In the global context, there is no saying whether those coal emissions are getting displaced if the coal is going to Germany, so we cannot guarantee a reduction in global emissions. We would be putting more coal on the market, which is coal somebody else will snap up elsewhere. The likelihood is that we would actually increase emissions.
I should have said in my opening remarks that I represent a former coalmining area, so I recognise the devastation caused by pit closures. My area recovered some jobs through open-cast coalmining, but even that industry collapsed a few years ago, leaving us with devastating blights on the landscape and huge craters that needed filling. Unfortunately, again, there was no help from the UK Government when we needed it. I understand the legacy of coalmining and I want support for these areas, but opening new coalmines is not the way to do it.
We cannot turn back the clock. What we need to do is create jobs for the future. We need green-based jobs in coalmining areas such as mine, using geothermal energy and making use of the closed mines. Let us make them an asset for the future, providing clean energy and reducing energy bills at a local level.
The Committee will be pleased that I am bringing my monologue to an end. I hope that my comments are going to convince the Government and Conservative Committee members that there is no need for new coalmines going forward. I would be delighted to hear the Minister, in his summing up, say that he is not going to move against clause 270, but is going to retain it and listen to those of us who want it.
Clause 271 is to be replaced by new clause 52. I welcome the Government’s change on that and their making reaching net zero a statutory duty of Ofgem. Will the Minister tell us whether new clause 52 and Ofgem’s new statutory duties will make it much easier for Ofgem to allow anticipatory investment? That has been one of the issues, so we want to make sure that it can do that and do that forward plan-ahead, rather than building more constraints into the grid while upgrading it at the same time.
Turning to clauses 272 and 273, it seems like for ages Energy Ministers have stated their support for the principle of the Local Electricity Bill—community electricity generation and the sale of electricity locally—but they have always said that the Bill was not the right solution to facilitate that. The original drafters and MPs who have tried to bring forward private Members’ Bills have changed the Bill to try to address the concerns of Ministers, but that still was not enough.
The cross-party group of peers who drafted clauses 272 and 273 to mimic the effect of the Local Electricity Bill again tried to address the Government’s concerns. I fail to understand why the Government are still against the two clauses. It is worth pointing out that 323 MPs overall, including 128 Tory MPs—let alone myriad local authorities, environmental groups and individuals—have supported the Bill. The feet-dragging makes no sense. I commend the hon. Member for Bristol East for pointing out that the Minister himself was a signatory to the Local Electricity Bill. I wonder what about a ministerial car made him change his mind about supporting it.
Alan Brown
Not of one down here!
Community energy schemes have seen almost no growth for six years, despite renewables clearly being cheaper than ever. Of course, that is tied in with the removal of feed-in tariffs, which were very successful in delivering the likes of small-scale hydro across the highlands, for example.
The Government are pressing ahead with voting to remove clauses 272 and 273. What are their proposals for facilitating community energy generation and providing the certainty of price that groups and companies need to be able to move forward? The Minister must be aware that the smart energy guarantee does not deliver at present and, as I say, there has been no growth in community energy schemes in six years.
At the moment, community energy schemes account for just 0.5% of the UK’s electricity. According to the Environmental Audit Committee, that could increase twentyfold in 10 years, so something like 10% of energy by community generation could be achieved in 10 years if the right conditions are put in place. Even if that is overstated and the reality is only 5%, that would still represent a huge shift in generation and would provide local grids with stability and resilience. That would be much better value than the new £35 billion Sizewell C nuclear station.
If we consider nuclear, price certainty is not a new concept. It underpins the contract for difference auction rates, and it is what is provided for Hinkley Point C. A great example of the potential scope for community energy generation is a study being undertaken in my constituency by the Newmilns Regeneration Association, which is investigating the installation of solar panels on the brownfield site of the former Vesuvius factory. The aim is to sell electricity to local industry, reducing its bills and helping it to be sustainable, and for Newmilns to be a net zero town going forward. The national regulatory authorities believe that the Local Electricity Bill, or the alternative in the form of clauses 272 and 273, needs to be in place to facilitate trading of the electricity that would be generated. That is why I fully support the clauses’ retention in the Bill.
Clause 272 would provide guaranteed income for electricity for small-scale renewable energy generators, and clause 273 would enable community schemes registered under the clause 272 guarantee to sell the electricity they generate locally. The Committee Clerks circulated additional written evidence today, in which professors from the University of Manchester say there should be no fear about clauses 272 and 273, because they will not unduly affect the prices that suppliers have to pay for electricity; at worst, the effect will be marginal. They also recommend that the Government retain the clauses. I really hope that they do.
Andrew Western (Stretford and Urmston) (Lab)
It is a pleasure to serve under your chairmanship again, Mr Gray. After a fairly lively start to the morning, I want to focus predominantly on the matter about which we are all largely in agreement: the addition of new clause 52 to replace clause 271.
I will briefly address clauses 270, 272 and 273, which we have debated at length. I do not wish to add anything particularly new; I will just reiterate colleagues’ comments about the clauses’ importance. The Minister and the hon. Member for Hyndburn previously supported clause 270, so I am bewildered by their shift, given that, as we have heard, building a new coalmine will not make a material difference to the British people’s energy prices, yet it certainly grates against our broader net zero ambitions.
It is a real shame that the Government intend to strike clauses 272 and 273 from the Bill, not least because all we seek is surety for smaller generators that their investment is worthwhile. The other day, my hon. Friend the Member for Southampton, Test gave the example of a hydro turbine that costs in excess of £1 million. It is incredibly difficult for a small-scale producer to make that investment without a guarantee, which the clauses would provide, that it will see a return in the form of a guaranteed purchase by energy suppliers. None the less, although we have not heard in detail why the Government are opposed to the clauses, we are where we are.
As I said, I want to focus most of my comments on new clause 52. I am a little surprised that the Government feel the need to rework clause 271, but we should none the less take the concession for what it is. New clause 52 is incredibly welcome, as it will legally require Ofgem to ensure that its decisions assist the Government’s drive to deliver net zero by 2050. Reaching net zero is, of course, one of the most urgent and challenging tasks that we face as a nation, and it is right that we pull every lever at our disposal to achieve it. I am pleased that the Government have conceded that the new clause is a necessary step, given that they previously stated that Ofgem’s existing decarbonisation objective was sufficient. That objective was set in 2010, it is limited to targeting greenhouse gases only, and it has no specific timescale attached to it.
The move to update Ofgem’s duties so that it has a statutory requirement to support the UK in reaching our net zero emissions targets has huge backing from every part of the energy industry, as well as from consumer campaigners and climate activists. It was recommended by the Skidmore review and by the Climate Change Committee earlier this year. Crucially, it has the support of Ofgem itself. Ofgem’s CEO, Jonathan Brearley, said that the net zero duty is
“the best option, not only from a climate perspective, but to ensure a secure, low-cost energy future.”
Ofgem’s support is most welcome, and the new duty makes its responsibility for ending our reliance on fossil fuels crystal clear. Making net zero one of its core duties will empower Ofgem to deliver the long-term investment in our electricity network and grid that the National Infrastructure Commission has said is critical to achieving the large-scale shift to renewable energy and low-carbon transport and heating that we need. Indeed, there seems to be a broad consensus in the industry that the lack of a clear duty that specifically refers to our net zero targets is a key reason for the historical underinvestment in the grid. This overdue duty can play a key role in reversing that trend and putting an end to a situation in which the absence of investment in the grid has made it very difficult for new renewable infrastructure to be connected to it.
Placing this duty on a national regulator that was created to serve consumers is, in effect, a statutory recognition that the needs of consumers and the planet are very much aligned. The long-term investment that will help us to achieve net zero will also mean sustainable, cheaper forms of energy for consumers and an end to the volatility in the market that has caused such misery to millions of households across the country in recent years. I therefore fully support new clause 52, and I pay tribute to everybody, across parties, who was involved in bringing it to this stage.
Andrew Bowie
It is a pleasure to see you back in the Chair and to serve under your chairmanship, Mr Gray.
Andrew Bowie
Well, I hope it will remain a pleasure—I am sure it will. Here we are on day eight, sitting 15 of the Committee. There has been a comprehensive debate on the clauses, and I thank all Members on both sides and from all three parties represented for their full contributions. I will respond to some of the points that were made.
The hon. Member for Stretford and Urmston just referred to the Ofgem net zero duty. I am delighted that the Committee has welcomed the Government’s commitment on the duty and our new clause, and I pay tribute again to Members across the House and in the other place for their constructive dialogue on the issue. I confirm to the hon. Member for Kilmarnock and Loudoun that the measure will allow for anticipatory investment. I have engaged with industry and others, and they are confident that that is the case and welcome this step.
Community energy projects can have real benefits for the communities in which they are based, which is why so many Members supported the private Member’s Bill on the issue. However, the Government and I do not believe that every consumer should have to bear the cost of such projects. That does not seem a fair way to fund them.
Kerry McCarthy (Bristol East) (Lab)
Will the Minister explain why he does not think that consumers should bear the cost of community energy projects but does think that they should bear the cost of new hydrogen, through the hydrogen levy? That seems rather inconsistent.
Andrew Bowie
As the hon. Lady knows, we are listening and acting on the concerns raised by many in this place and the other place, including on Second Reading in the Commons, when issues regarding the hydrogen levy were raised. I am sure that we will have much more to say on that when the Bill comes back to the Floor of the House.
I am also not convinced that the Lords amendments tackle the real issues faced by community energy groups: high start-up costs and lack of expertise. I have had positive engagement with Members on that. The Government are therefore considering other options that could tackle such issues in a fairer and more proportionate way ahead of Report stage. I hope that members of the Committee and those who are following our proceedings with interest are reassured by those comments.
The hon. Member for Kilmarnock and Loudoun spoke at length, as did other Members—I hope to cover most contributions in my response—about coal. The hon. Gentleman specifically mentioned exporting coal to Germany. It is rather ironic that the only reason that Germany is importing coal is its nonsensical position on nuclear and new nuclear power—a position that is shared by the Scottish Government in Edinburgh. The hon. Gentleman might want to take that away and consider it.
The hon. Gentleman also mentioned that he disagreed with the comment by my hon. Friend the Member for South Ribble that the debate in Committee the other day was one of the “most jaw-dropping” moments of her political career, given the events of the week. I concur with the hon. Gentleman that that was a bit surprising, given that this was the week that a former leader of Aberdeen Labour claimed that Labour’s energy policies were the “final straw”—this is a Labour councillor saying this—and that
“Margaret Thatcher never delivered a more brutal put down of an industry than that delivered by Keir Starmer in Edinburgh.”
In the same week, a Green Minister in the Scottish Parliament faced a vote of no confidence, the Whip was withdrawn from a former SNP Minister, and a person of interest in an ongoing police investigation professed their innocence but could not do the same for another person of interest, to whom she is married. The last week was quite an exciting week for politics—I agree.
Our reliance on coal is rapidly diminishing, but there is still a need for it in industries such as steel and cement, so now is not the right time to make these licensing changes. I thank colleagues, including my hon. Friend the Member for South Ribble, for highlighting the role that these industries play in our constituencies, where they provide jobs and contribute to the economy.
Alan Brown
On coalmines, what does the Minister think about the suggestion from the hon. Member for Hitchin and Harpenden that any new licences could be supplied on the condition that the coal be sold only on the domestic market?
Andrew Bowie
I would not like to shut down any of the ideas put forward by my hon. Friend the Member for Hitchin and Harpenden; the Government will consider all suggestions for the future licensing of coalmines. I do not want to go down a rabbit hole and make commitments on matters for which I may not be responsible in future.
I found the comments by my right hon. Friend the Member for Elmet and Rothwell fascinating, as I do all his comments. I was particularly interested in his intervention on the hon. Member for Southampton, Test regarding the situation in Germany, which I also referenced.
A number of Opposition Members mentioned the coalmine in Cumbria. The decision by the Secretary of State for Levelling Up, Housing and Communities followed a comprehensive planning inquiry, which heard from 40 witnesses, and considered matters including the demand for coking coal and its suitability, climate change, and impact on the local economy. The full reasons for the Secretary of State’s decision are set out in a published letter, which should be read in its entirety, but he concluded that
“there is currently a UK and European market for the coal,”
and that
“it is highly likely that a global demand would remain”.
Alongside that, the UK is working to support the decarbonisation of steel and other industries that still rely on coke and coal through our £315 million industrial energy transformation fund, which helps businesses with high energy use to cut their energy bills and carbon emissions by investing in energy efficiency and low-carbon technologies.
For those reasons, I do not agree with the hon. Members for Bristol East, for Southampton, Test, and for Sheffield, Hallam. A complete ban is not appropriate, and risks our having to meet future demand for the industries that I mentioned from our own resources. The hon. Member for Sheffield, Hallam—I am sorry that she is not here today—mentioned the Government’s commitment to COP26. As I said in my opening remarks, coal’s share of our electricity supply has already declined significantly in recent years; it has gone from providing almost 40% of our electricity in 2012 to less than 2% in 2021. I do not agree with professions from Opposition Members that we are surrendering our lead on climate issues to the Biden Administration in the USA. It is not for me to question the decisions of that Administration, or to say whether they are for good or ill, but they have just approved a drilling licence in the Arctic circle, so I suggest that our lead on these issues remains extant.
Alan Brown
Remember, we are talking about comments from not just Opposition Members; comments about us losing our international lead were made by the right hon. Member for Kingswood, who did a net zero review; the COP26 President, the right hon. Member for Reading West; and the chair of the Climate Change Committee. That is three senior Tories who are saying that the UK is losing its international lead.
Andrew Bowie
I recognise that. I speak with my right hon. and hon. Friends on thisissue and others, and I understand the concerns, including those of Committee members. However,I reassure all right hon. and hon. Members that phasing out unabated coal power generation within timeframes that keep 1.5°C within reach remains a key UK Government priority, and the Government are leading on that. That builds on our COP26 energy transition legacy, which included securing agreement to accelerate efforts
“towards the phasedown of unabated coal power”
in the Glasgow climate pact, our co-leadership of the Powering Past Coal Alliance, and launching an international just transition declaration at the Glasgow summit. I would be very surprised if we did not return to some of these issues on Report, but I hope that the Committee will carefully consider my remarks.
Alan Brown
I had not expected to be given that privilege, Mr Gray. I remain unconvinced by the Minister’s arguments, and I refer him again to the fact that comments about the UK losing its international leadership have come from senior members of his party. He really should reflect on that, instead of arguing that opening new coalmines is the way forward.
Question put, That the clause stand part of the Bill.
Dr Alan Whitehead (Southampton, Test) (Lab)
On a point of order, Mr Gray. May I ask for clarification of the voting process on clause 271 and Government new clause 52? As I am sure all Committee members are aware, new clause 52 will effectively replace clause 271, with the consent of each side. However, although we will be voting on clause 271 stand part today, we will not be voting on new clause 52 until the end of the Committee’s business. We could therefore conceivably end up with clause 271 being dropped but not replaced by new clause 52. Is it within procedure to retain clause 271 but assume that new clause 52 will replace it in due course, or are there other ways of doing it?
The Chair
The hon. Gentleman makes an interesting point, but he is of course not correct.
The Chair
Well, I am answering the question in that case. The answer is that I will put the Question on clause 271 now and, depending on what the majority decides, it will either remain in the Bill or be removed. At the end of consideration, we will come to new clause 52. If there is a majority for it, it will be added to the Bill. If there is not, it will not. The two are not conditional on each other; they are entirely separate.
Clause 271
GEMA general duties relating to climate change
Question put, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 20.
That schedule 7 be the Seventh schedule to the Bill.
Clause 133 stand part.
That schedule 8 be the Seventh schedule to the Bill.
Clauses 134 and 135 stand part.
Government amendment 19.
Andrew Bowie
I now return to part 4 of the Bill, which relates to the independent system operator and planner, or ISOP.
Clause 132 introduces schedule 7. The purpose of the schedule is to empower the Secretary of State to make transfer schemes to create the ISOP and give it the capacity to carry out its functions. As discussed already, the ISOP will be founded on the existing capabilities and functions of National Grid Electricity System Operator and, where appropriate, National Grid Gas. That will require several transactions between Government, National Grid plc and other relevant parties, because the property that the ISOP requires is not currently owned by a single entity. The transfers could include matters such as personnel, IT systems, physical assets, methodologies, models, data, and other resources and inputs used by the existing entities in performing their functions.
Schedule 7 sets out a set of principles, procedures and expectations in relation to the transfer scheme that will help provide clarity to affected parties. For example, it outlines that the Government are required to consult the transferor or transferors when the transfer scheme power is expected to be used. Not all the detail of the scheme can be determined in advance, so the Bill also includes a small number of time-limited powers to make regulations, which include regulations to provide further details to all parties, including third parties, on procedures for agreeing and paying compensation.
Government amendment 19 makes a minor procedural amendment to clause 275, to include the Treasury in the list of persons that can make regulations under the Bill. Amendment 20 clarifies that, because regulations under paragraph 9 of schedule 7 deal with financial matters, they can only be annulled in the House of Commons.
Clause 133 introduces schedule 8, which relates to pensions. As part of the transfer of functions, some employees will transfer into the ISOP. The purpose of the schedule is to allow the Secretary of State to separate the pension arrangements of the ISOP and to provide scope for various forms of reorganisation that may be appropriate in the light of the transfer. That includes making provision for the responsibility for the affected employees’ qualifying pension schemes and protecting the value of their benefits during the transfer. In exercising powers, the Secretary of State must ensure that the arrangements made for each employee’s pension provision is, in all material respects, at least as good immediately after any transfer-related changes are made as they were before that point.
Clause 134 grants the Secretary of State the power to provide financial assistance to the ISOP—that is, to draw on the financial resources available to Government in the kind of circumstances when the existing electricity system operator and gas system operator would have relied on the financial strength of their corporate group to raise capital sums. The Secretary of State will have the power to set conditions on the financial assistance provided, which may include conditions about repayment with or without interests or other return. In the highly unlikely situation that the ISOP faces financial difficulty, the power would also allow the Secretary of State to step in and avoid any disruption to the electricity and gas sectors.
Finally, clause 135 removes the barriers, in section 7 of the Electricity Act 1989 and section 7B of the Gas Act 1986, to payments raised in one sector being used to benefit consumers in the other. It also introduces a provision, in each Act, to expand licence holders’ statutory duties and require them to have regard to the interests of consumers of the other energy sector where directed by their licence. The removal of such barriers is fundamental, because it will enable the ISOP to co-ordinate and ensure strategic planning across the energy sector more effectively.
Dr Whitehead
We come to a part of the Bill that we should have discussed a couple of weeks ago: clauses 132 to 139. When we discussed the rest of the business relating to the ISOP, these debates were moved by the Government towards the end of the consideration of later clauses in the Bill. At the time, I thought that was because there was some blockbusting new clause that the Government were thinking of introducing, which was not quite down the slipway at that point. I thought it would appear when we considered the clauses today.
I was disappointed to see that nothing has appeared. There are two Government amendments that were there previously, and nothing in the way of new clauses. I assume the reason for discussing the provisions now—although the Minister may have an interesting explanation up his sleeve—may well be because Ofgem has just produced a consultation—[Interruption.] No, the Minister is shaking his head. In any event, had the Minister consulted with Ofgem about whether it was going to produce a consultation on transfers and various other things, then he would have found that they have produced a consultation, “Funding the transition to a Future System Operator”, which was published today. The Minister will understand that not a great deal of time has elapsed since the publication of that consultation.
That consultation is very relevant to the provisions we are discussing. If the Minister did think the consultation would be published in time, it would have been helpful of him to bring that to the Committee’s attention. Apparently, however, there are different reasons for discussing these provisions later in the Committee cycle than planned.
A headline in Utility Week said the full costs of the transition to a future system operator could come to about £392 million. I read that headline but I am too mean to go behind the paywall of Utility Week to read the rest of the article. I sought out the Ofgem consultation instead and got the full picture. The consultation indicates that this level of cost for the transition is accurate. In clauses 132 to 139, provision is given for the bringing together of the various agencies’ present responsibilities for what would be the new independent system operator. That extends beyond just taking the National Grid ESO away from National Grid and putting it into ISOP. It involves other agencies—the Minister is absolutely right.
In this instance, however, the prime issue of the transition is of course the ESO itself. At the moment and for a long time, the ESO has had a relationship with National Grid involving separation by Chinese walls. It was, in effect, owned by National Grid and so was part of the National Grid family of companies, but over the recent period, since the ESO was set up, its operation has been separated from that of National Grid. Previously, we have discussed the extent to which the Chinese walls were strong enough for what ESO was doing in relationship to what National Grid might be doing—for example, potential conflict on interconnectors, with National Grid owning at least part of an interconnector while ESO was planning for interconnectors overall.
The fact that the separation will take place and that the business of the ESO will be transferred fully into the ISOP is important. That will complete the process of setting up the ISOP properly, so that it can operate fully independently from day one—in Committee, we have expressed strong interest in ensuring that. However, with the Ofgem consultation, the issue of compensation for those transfers arises to some extent. According to the consultation, part of the transfer arrangements relates to transferring personnel across and part to what assets and so on will be transferred. What is not entirely clear in the consultation is also alluded to in the provisions in the group, in particular schedule 7.
Paragraph 8 of schedule 7, headed “Compensation”, appears to start talking about compensation in general terms for, as it were, the loss to National Grid of its ownership of the ESO, as well as of the various things relating to the transfer of assets and individuals. Compensation would be couched in two parts: literally, which desks and pot plants are going over to the ISOP, with personnel and various other things, and what the compensation for that is, presumably; and compensation for the fact that the ESO was part of the National Grid corporate family and no longer will be.
I am not clear whether the provision on compensation encompasses that consideration. If so, what might that consideration be? Do the Government have a figure in mind for compensating National Grid for its losing ESO to the ISOP? Is that facilitated through these clauses or a separate arrangement to be arrived at? In other words, do the clauses deal just with compensation relating to bodies, pot plants and desks, or with compensation more widely?
Dr Whitehead
Good.
As I was saying, this is potentially important, because the clauses in this part of the Bill relate to the Secretary of State’s ability to provide the ISOP with finance. Will the ISOP undertake the job of providing the compensation due under the clause—presumably it would be provided with money by the Government to do that—or will the Government deal with that separately before the ISOP is set up?
There is also an important point about compensation for the loss of the ESO to the ISOP. It would seem inappropriate for the ISOP to pay compensation to National Grid, given its removal from National Grid in the first place. I therefore assume that other mechanisms will be in place to provide that compensation. If that compensation is paid, there are provisions in the Bill allowing for such payments to be recovered by companies involved in the process in the course of their activities. [Interruption.] I will pause for a moment while the Minister consults his Whip.
Dr Whitehead
This is something I specifically want the Minister to say something about. It is important that we get it right.
Assuming that compensation is given for the loss of the ESO and the companies concerned can recover that, do the Government intend for the ISOP to have a part in the mechanism whereby costs are recovered through standing charges on bills? As the Minister knows, standing charges are substantially made up of a combination of charges for TNUoS and DUoS—transmission network use of system and distribution use of system—and a balancing charge, and, as he and other hon. Members will know, standing charges are increasing substantially as a proportion of our electricity bills. They are now about 25% of our energy bills.
It looks as if the compensation, if it can be recovered by somebody—I assume it could be recovered one way or another by National Grid in its network charges, or by the ISOP in what it eventually contributes to the standing charge—will eventually work its way into the standing charge, and hence on to customers’ bills. That makes it important to understand what the Government have in mind about what compensation should be paid to National Grid for the loss of ESO and its transfer to the ISOP.
It may be that there has been a nice agreement that no one will pay anyone compensation, and National Grid will just hand over ESO to the ISOP. I suspect that is not the case, but I have not seen anywhere—and it is not explicit in the consultation—what the level of compensation might be, who will pay it, how it might be transferred to bills and standing charges, if necessary, and how the process overall might work. It would be helpful if the Minister could give us an understanding of all that. It would certainly enable us to better judge schedule 7, as it relates to the process of how those transfers take place and what their consequences are.
Andrew Bowie
On the question of why we have returned to these clauses, I am sorry that I was unable to turn up today with a blockbuster moment for the Committee. I know they were all expecting it and waiting with bated breath. Unfortunately, it is a simple matter of procedure. We temporarily skipped over the remaining clauses in part 4 to ensure that the necessary Ways and Means motion could be agreed by the House. I am pleased to confirm that the resolution was obtained on Tuesday, allowing us—I was expecting a “Hear, hear!”—to continue with clauses 132 to 139.
The Ways and Means resolution was necessary as a result of provisions that confer power on the Treasury to make regulations setting out the way taxes have effect in connection with a transfer of assets from one body to another. It was impossible to proceed with debate on the clauses until the motion was passed by the House. That has now been done, so we can proceed.
On the consultation that was published this morning, I cannot mandate when Ofgem publishes its consultations, so unfortunately that was not a consideration. However, we note that the Ofgem consultation launched today, and I will of course consider it in detail. I am happy to provide hon. Members with more detail in writing should they wish.
The hon. Member for Southampton, Test spoke about transfers. The Bill provides multiple steps for agreement on the value of compensation: first, simple agreement between parties—in this case the Secretary of State, National Grid and the owners of National Gas—secondly, in a situation of non-agreement, the joint appointment of an independent valuer to assess the value of the assets to be transferred; or, thirdly, as a fall-back option, the appointment of an independent valuer by the Secretary of State on behalf of both parties. The framework of considerations to be made by the independent valuer will be set out in regulations to be made under the Bill.
The entire process is an ongoing commercial transaction, so the Government are limited in the extent of the information they can provide at this point, although I recognise the importance of the hon. Gentleman’s questions. I will respond specifically to his point about the standing charge and his worry that that could have an effect on bills. We do not expect costs to rise at all as a result of the establishment of the ISOP. The ISOP will be funded by Government, and its ongoing operations will continue to be supported by funding from the network balancing charges at a level determined through a price-control mechanism, much like the current gas and electricity system operators are. However, we expect the ISOP to enable a long-term reduction in costs compared with the status quo.
Dr Whitehead
I think the Minister just said that he expects compensation to be included in network charges, which means that in the end it will go on standing charges for customers. There will be an effect on customers’ bills.
Andrew Bowie
I reiterate that we are not expecting any increase in customers’ bills as a result of the creation of the ISOP. There will be no increase. We expect the ISOP to enable a long-term reduction in costs, so its creation will have the opposite effect on customers’ bills. Future network decisions will be built on the expert and impartial advice of the truly whole-system body that many in the industry and outside it have been calling for for some time.
Dr Whitehead
I appreciate that the Minister cannot tell me—presumably because of an ongoing discussion relating to commercial companies—what the compensation for National Grid is likely to be. However, I assume that, in stating that he cannot tell me, he has confirmed that that will be part of the transfer arrangements. I was trying to distinguish between the compensation for pot plants and desks, and compensation for the loss of the ESO by National Grid.
That leads us to an unsatisfactory position in which we do not know how much the compensation will be. Presumably, we have to take it on trust that the Government will be fairly rigorous about ensuring that the compensation is proportionate to the actual loss, but I am not sure how it will be determined. Sorry, Mr Gray, this is a long intervention.
The Chair
No, it is a speech. The Minister finished, and therefore the hon. Member is making a speech.
Dr Whitehead
Good, I can go on forever then. I was trying to make my remarks as brief as possible in order to accommodate the Minister’s previous comments, so I will just round them off.
We do not know the detail of the procedure for determining compensation, we do not know even what ballpark figure the Government have in mind for compensation to National Grid for the loss of the ESO, we do not know what strategies the Government might adopt in their negotiations on what the compensation might consist of, and we do not know whether there is any process of arbitration if National Grid, for example, thinks that the compensation it receives is not the right amount, or what mechanisms—perhaps under the Bill—would enable the final amount to be determined to the satisfaction of all sides.
We do know that some compensation may find its way on to network charges, one way or another. Therefore, it is important for the economy and the effectiveness of network charges that we at least have a ballpark figure for the sort of compensation that might be considered. If the Government are minded to provide huge amounts of money in compensation to National Grid, that might have an inflationary effect on network charges; if they have a more robust view of what the compensation should look like, that would have a lesser effect on charges. Either way, as I think the Minister will agree, we are in a position of some fog.
As the Bill makes progress we legislate for all this to happen, we still do not have a clear handle on what those procedures will look like or the money that might be involved. I do not know whether the Minister will respond to this speech, but I think that he should be able at least to write to us about the procedure and the arrangements. Ideally, that would include further and better particulars on the range of compensation, while not giving away anything commercially sensitive. Alternatively, he could take His Majesty’s loyal Opposition into a position of trust and get around a table with us to talk these things through, so that, between us, we are clear about how they might proceed.
Andrew Bowie
Let me briefly answer those points. As I have set out, this is an ongoing commercial discussion between parties. The Bill provides multiple steps for agreement on the value of compensation, which has yet to be determined, and I do not think that it would be good governance to insert a ballpark figure into the Bill. I cannot underline enough that the creation of the ESO will not have any adverse effect on consumers’ bills. In fact, as a result of it, we will see bills reduce in time. I am happy to write to the hon. Gentleman with more information.
Question put and agreed to.
Clause 132 accordingly ordered to stand part of the Bill.
Schedule 7
Independent System Operator and Planner: transfers
Amendment made: 20, in schedule 7, page 282, line 7, at end insert—
“(3A) A statutory instrument containing regulations under this paragraph is subject to annulment in pursuance of a resolution of the House of Commons.”—(Andrew Bowie.)
This amendment provides for a statutory instrument containing regulations made by the Treasury under paragraph 9 of Schedule 7 to be subject to annulment in pursuance of a resolution of the House of Commons.
Schedule 7, as amended, agreed to.
Clause 133 ordered to stand part of the Bill.
Schedule 8 agreed to.
Clauses 134 and 135 ordered to stand part of the Bill.
Clause 136
Principal objective and general duties of Secretary of State and GEMA under Part 4
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 137 stand part.
That schedule 9 be the Ninth schedule to the Bill.
Clause 138 stand part.
Government amendment 18.
Clause 139 stand part.
Andrew Bowie
Clause 136 ensures that when carrying out various functions in relation to the ISOP under the Bill, the Secretary of State and Ofgem must have regard to their principal objective and general duties as defined in the Electricity Act 1989 and the Gas Act 1986. The principal objective of the Secretary of State and Ofgem can be characterised as protecting the interests of existing and future electricity and gas consumers. General duties include promoting effective competition in the energy sector, having regard to security of supply and securing a healthy energy market.
It is relatively common to extend the application of those principles where a new Act gives new, freestanding functions to the Secretary of State or Ofgem. The clause states that the Secretary of State must have regard to the principal objective and general duties when carrying out new functions relating to designation under clause 120 or when making an order that an existing transmission licence becomes the ISOP’s electricity system operator licence.
Clause 137 introduces schedule 9, which contains necessary consequential amendments to the Gas Act and Electricity Act to enable the ISOP and its licensable activities to be integrated into the existing framework of the energy system regulated by Ofgem.
Clause 138 contains provisions on the interpretation of terms used in part 4 of the Bill. I draw hon. Members’ attention in particular to subsection (3), which is intended to make it clear that whenever part 4 includes a proposition about the ISOP’s functions, that is to be understood as applying to any and all of the ISOP’s functions, whether provided by the Bill, by other legislation, or as functions ancillary to them.
Clause 139 concerns the limited regulation-making powers in part 4. Government amendment 18 is consequential on Government amendment 20, which we have already discussed. It ensures that regulations made by the Treasury under schedule 7(9) are not subject to the negative procedure. As these are financial regulations, the intention is for them to be laid before the House of Commons only and approved by the House of Commons alone.
Dr Whitehead
These measures are essentially consequential on those we have already discussed. I have no particular comment to make on them other than to say hooray; I am happy to let them go through undiscussed.
Question put and agreed to.
Clause 136 accordingly ordered to stand part of the Bill.
Clause 137 ordered to stand part of the Bill.
Schedule 9 agreed to.
Clause 138 ordered to stand part of the Bill.
Clause 139
Regulations under Part 4
Amendment made: 18, in clause 139, page 122, line 32, at end insert—
“(2) Subsection (1) does not apply to regulations under paragraph 9 of Schedule 7.”
This amendment excludes regulations made by the Treasury under paragraph 9 of Schedule 7 from the provision about negative procedure in Parliament made by clause 139. This is consequential on Amendment 20.—(Andrew Bowie.)
Clause 139, as amended, agreed to.
New Clause 8
Key definitions
“(1) This section applies for the purposes of this Chapter.
(2) ‘Carbon storage licence’ means a licence granted, or having effect as if granted, by the OGA under section 18(1) of the Energy Act 2008 (and references to a ‘licensee’ are to a person who holds such a licence).
(3) ‘Exploration operator’, in relation to a carbon storage licence, means a person who is responsible for organising or supervising—
(a) the carrying on of exploration, within the area within which activities are authorised under the licence, with a view to, or in connection with, the carrying on of activities within section 17(2)(a) or (b) of the Energy Act 2008, or
(b) the establishment or maintenance in a controlled place (as defined in section 17 of the Energy Act 2008) of an installation for the purposes of such exploration.
(4) ‘Carbon storage information’ means information acquired or created by or on behalf of a licensee in the course of carrying out activities under the licensee’s carbon storage licence.
(5) ‘Carbon storage samples’ means samples of substances acquired by or on behalf of a licensee in the course of carrying out activities under the licensee’s carbon storage licence.
(6) ‘Sanctionable requirement’ means a requirement imposed on a person by or under a provision of this Chapter which, by virtue of the provision, is sanctionable in accordance with this Chapter.—(Andrew Bowie.)
NC8 to NC28 and NS1 and NS2 make provision about carbon storage information and samples, and the powers of the OGA, corresponding to the provision made by Chapters 3, 5 and 6 of Part 2 of the Energy Act 2016 in respect of offshore petroleum. They are intended to form new Chapter 4A in Part 2. This new clause defines key terms for the purposes of the intended new Chapter.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
Government new clause 9—Retention of information and samples.
Government new clause 10—Preparation and agreement of information and samples plans.
Government new clause 11—Information and samples plans: supplementary.
Government new clause 12—Information and samples coordinators.
Government new clause 13—Power of OGA to require information and samples.
Government new clause 14—Prohibition on disclosure of information or samples by OGA.
Government new clause 15—Power of Secretary of State to require information and samples.
Government new clause 16—Power of OGA to give sanction notices.
Government new clause 17—Enforcement notices.
Government new clause 18—Financial penalty notices.
Government new clause 19—Revocation notices.
Government new clause 20—Operator removal notices.
Government new clause 21—Duty of OGA to give sanction warning notices.
Government new clause 22—Publication of details of sanctions.
Government new clause 23—Subsequent sanction notices.
Government new clause 24—Withdrawal of sanction notices.
Government new clause 25—Sanctions: information powers.
Government new clause 26—Appeals in connection with Chapter.
Government new clause 27—Procedure for enforcement decisions.
Government new clause 28—Interpretation of Chapter.
Government new schedule 1—Permitted disclosures of material obtained by OGA.
Government new schedule 2—Carbon storage information and samples: appeals.
Andrew Bowie
New clause 8 provides the key definitions for the purposes of this new chapter, enabling the effective understanding of all carbon storage information and samples provisions. The powers provided by this chapter specifically support the Oil and Gas Authority, the business name of which is the North Sea Transition Authority, in its role as a regulator of carbon storage.
New clause 9 provides the Secretary of State with the power to make regulations on the retention of information and samples acquired by carbon storage licensees acting under the authority of the NSTA. The provisions will align carbon storage information requirements with existing petroleum licensing provisions, as established in the Energy Act 2016.
The specific type of information and samples that licensees will be required to retain will be set out in regulations. That will be alongside the form and manner in which they are to be retained, the period of retention and the events that trigger the commencement of such requirements. The various exploration, appraisal and monitoring activities that will be carried out on and under the seabed by carbon storage licence holders will yield important information, supporting the NSTA to carry out its regulatory functions.
New clauses 10 and 11 establish requirements for the preparation and agreement of information and samples plans. These are agreements between the NSTA and a carbon storage licence holder that set out what should happen to carbon storage information and samples held by the licence holder before the occurrence of certain carbon storage licence events. Provisions involving information and samples plans were introduced for petroleum licences in the Energy Act 2016. We therefore expect them to provide the same benefits for carbon storage licence events.
New clause 12 establishes provisions for the designation of information and samples co-ordinators, which will monitor compliance with obligations imposed under the new chapter, uphold the requirements of any information and samples plans, and help to protect against the risks of data loss during a licence event. Information and samples co-ordinators are expected to prove a valuable aid in respect of data reporting compliance. That is evident in the instrumental role they currently play in relation to petroleum licensees under the Energy Act 2016.
New clause 13 establishes powers for the NSTA to obtain information and samples collected through carbon storage activities to support its regulatory functions. This includes information and samples held by persons in accordance with regulations made under new clauses 9 and 10.
New clause 14 prohibits the NSTA from disclosing any information and samples it holds in accordance with the powers in this chapter, subject to the provisions of new schedule 1 and the power of the Secretary of State to obtain information from the NSTA in new clause 15. This will provide carbon storage licensees with the reassurance that any information and samples provided to the NSTA in support of their regulatory functions will not be allowed to be disclosed, except in specified circumstances.
New schedule 1 sets out the circumstances in which, to whom, and for what purposes the NSTA can disclose information. This includes providing for disclosure in accordance with regulations made by the Secretary of State that may permit protected material to be published, or made available to the public, after a specified period. The public disclosure of this information after a suitable period of confidentiality will support effective regulation by the NSTA.
New clause 15 provides powers to the Secretary of State to require information and samples held by, or on behalf of, the NSTA. It will align powers for carbon storage information and samples with the equivalent powers established for petroleum information and samples under the Energy Act 2016. This power will be used to enable the Secretary of State to carry out statutory functions, to monitor the performance of the NSTA, or to provide information for the purposes of parliamentary proceedings. Carbon storage licences return to the Government once storage sites have been closed for a designated period, and the Government are liable for any potential future leakage.
I turn now to new clauses 16 to 25. New clause 16 provides the NSTA with powers to issue sanction notices to persons who fail to comply with the requirements imposed on them under this chapter of the Bill. Such sanction notices can be in the form of an enforcement, a financial penalty, a revocation or operator removal notices. New clauses 17 to 20 make the necessary provisions for each of those types of notice. Importantly, new clause 21 places a requirement on the NSTA to issue a sanction warning notice ahead of any sanction notice that it proposes to issue under the powers established in new clause 16.
New clause 22 establishes that the NSTA may publish details of any sanction notices issued under new clause 16, including details of any sanction notice that is cancelled or withdrawn. New clause 22 also provides that the NSTA may not publish information that it considers to be commercially sensitive, not in the public interest or otherwise inappropriate to publish. New clause 23 places a restriction on the NSTA issuing more than one sanction notice in respect of the same contravention. New clause 24 provides the NSTA with the power to withdraw any sanction notices issued. Finally, new clause 25 enables the NSTA to require specified documents or information to support an investigation into whether a sanction notice ought to be provided under new clause 16.
New clause 26 introduces new schedule 2 to the Bill. Alongside new schedule 22, new clause 26 provides for an appeal to be made to the first-tier tribunal against any decision made by the NSTA. This is in relation to the NSTA exercising its new power to require carbon storage information samples. As I am sure Committee members will agree, the right of appeal for licence holders is a necessary and important part of conferring new regulatory powers on the NSTA.
New clause 27 will require the NSTA to determine and publish the procedure it proposes to follow in its decision making when issuing a sanction notice under new clause 16, which ensures public transparency in how the NSTA will enforce the sanctionable requirements and provides clarity for licence holders in respect of the NSTA’s procedures.
Finally, new clause 28 provides definitions to aid the interpretation of the provisions relating to carbon storage information samples detailed in this chapter. The definitions cross-reference the relevant existing legislation where appropriate.
Dr Whitehead
This group consists primarily of new clauses that the Government introduced. A substantial number of new clauses relate to the very sensible business of securing samples and various other things that can be of use in the regulation of the process and quality control, and in various other things relating to carbon capture and storage activity. So far, so good. These are certainly sensible clauses that establish arrangements for disputes and various other things, such as sanctions for when samples are not properly provided and so on—all good stuff.
However, there is an important point about the collection and retention of samples, as set out in the factsheet, which was subsequently published, that the Minister kindly provided me with when he said he intended to produce these new clauses. By the way, the factsheet refers to the NSTA, but the legislation refers to the OGA—again, maybe that is something we can discuss later. The Government say:
“We are legislating to provide the NSTA with appropriate powers to require carbon storage licensees to retain and report information and samples gathered as part of activities associated with the geological storage of carbon dioxide, and to enable the NSTA to publicly disclose this information after a suitable confidentiality period.”
I understand and appreciate the need for a suitable confidentiality period, but it is really important that the samples and data collections are available publicly for the greater benefit of the sector as a whole, in terms of its future development of carbon capture and storage. Government new clause 14 has a fairly fierce title: “Prohibition on disclosure of information or samples by OGA”. It effectively prohibits disclosure except under slightly unclear circumstances set out in new schedule 1, which states that the material may nevertheless be published and put into the public domain, but there is no real definition of how that may be done.
Andrew Bowie
As ever, I do not have all the information the hon. Gentleman is asking for at my fingertips, but I am happy to write to him with more detail on exactly how we will proceed.
On information samples being stored, and how they are publicly disclosed, as in the petroleum industry, the reporting of information to the North Sea Transition Authority will allow it to be securely stored in the NSTA controlled online data systems, such as the national data repository, or as open data in the NSTA data centre, which are both accessible via any internet browser.
Information in the national data repository becomes publicly accessible, online, upon disclosure. All information in the NSTA open data centre is disclosed information and is publicly accessible online. Reported samples are held by the British Geological Survey on behalf of NSTA. Disclosed geological samples are physically accessible by the public at the British Geological Survey geological sample storage facility in Nottinghamshire.
The hon. Gentleman asks why we are not fully changing the name of the OGA to the NSTA. We understand that the name change is important. We are considering legislative options for amending the statutory name of the Oil and Gas Authority. However, as was outlined in the other place, if we legislatively changed the OGA’s name to the NSTA, we would need to address all the instances in which the OGA is mentioned in primary and secondary legislation, and any partial name change could undermine or change the North Sea Transition Authority’s statutory functions, powers and objectives. I promise that I will write to the hon. Gentleman will more information on the other points he raised.
Question put and agreed to.
New clause 8 accordingly read a Second time, and added to the Bill.
New Clause 9
Retention of information and samples
“(1) Regulations made by the Secretary of State may require—
(a) specified licensees to retain specified carbon storage information;
(b) specified licensees to retain specified carbon storage samples.
(2) ‘Specified’ means specified, or of a description specified, in regulations under this section.
(3) Regulations under this section may include provision about—
(a) the form or manner in which information or samples are to be retained;
(b) the period for which information or samples are to be retained;
(c) the event that triggers the commencement of that period.
(4) Regulations under this section may provide for requirements imposed by the regulations to continue following a termination of rights under the licensee’s carbon storage licence (whether by transfer, surrender, expiry or revocation and whether in relation to all or only part of the licence).
(5) Regulations under this section may not impose requirements which have effect in relation to particular carbon storage information or particular carbon storage samples at any time when an information and samples plan dealing with the information or samples has effect.
(6) Requirements imposed by regulations under this section are sanctionable in accordance with this Chapter.
(7) Before making regulations under this section, the Secretary of State must consult each licensing authority that may under section 18(1) of the Energy Act 2008 grant a licence in respect of the carrying on, in a place to which the regulations would apply, of activities within section 17(2) of that Act.
(8) Regulations under this section are subject to the negative procedure.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), enables the Secretary of State to make regulations about the retention of information acquired or created, or samples acquired, by or on behalf of the holder of a carbon storage licence.
Brought up, read the First and Second time, and added to the Bill.
New Clause 10
Preparation and agreement of information and samples plans
“(1) The responsible person must prepare an information and samples plan in connection with any of the following (each ‘a licence event’)—
(a) where a licensee is a company, a change in control of the company within the meaning of paragraph 6 of Schedule 1 to the Carbon Dioxide (Licensing etc.) Regulations 2010 (S.I. 2010/2221) (inserted by Schedule 6 to this Act);
(b) a change in the identity of—
(i) the exploration operator under a carbon storage licence, or
(ii) where a storage permit has been granted under a carbon storage licence, the operator in relation to the storage permit (within the meaning of regulation 1(3) of the Carbon Dioxide (Licensing etc.) Regulations 2010);
(c) a transfer of rights under a carbon storage licence, whether in relation to all or part of the area in respect of which the licence was granted;
(d) a surrender of rights under a carbon storage licence in relation to all of the area in respect of which the licence was granted, or in relation to so much of that area in respect of which the licence continues to have effect;
(e) the expiry of a carbon storage licence;
(f) the termination of a carbon storage licence;
(g) the revocation of a storage permit.
(2) ‘Responsible person’, in relation to a licence event, means the person who is or was, or the persons who are or were, the licensee in respect of the relevant licence immediately before the licence event.
(3) ‘Relevant licence’, in relation to a licence event, means the carbon storage licence in respect of which the licence event occurs.
(4) ‘Information and samples plan’, in relation to a licence event, means a plan dealing with what is to happen, following the event, to—
(a) carbon storage information held by the responsible person before the event, and
(b) carbon storage samples held by that person before the event.
(5) The responsible person must agree the information and samples plan with the OGA—
(a) in the case of a licence event mentioned in subsection (1)(a), (b), (c), (d) or (e), before the licence event takes place, or
(b) in the case of a licence event mentioned in subsection (1)(f) or (g), within a reasonable period after the termination of the carbon storage licence or revocation of the storage permit.
(6) An information and samples plan has effect once it is agreed with the OGA.
(7) If an information and samples plan is not agreed with the OGA as mentioned in subsection (5)(a) or (b), the OGA—
(a) may itself prepare an information and samples plan in connection with the licence event, and
(b) may require the responsible person to provide it with such information as the OGA may require to enable it to do so.
(8) The OGA must inform the responsible person of the terms of any information and samples plan it prepares in connection with a licence event.
(9) Where the OGA—
(a) prepares an information and samples plan in connection with a licence event, and
(b) informs the responsible person of the terms of the plan,
the plan has effect as if it had been prepared by the responsible person and agreed with the OGA.
(10) Where an information and samples plan has effect in connection with a licence event, the responsible person must comply with the plan.
(11) The requirements imposed by subsection (5) and (10), or under subsection (7)(b), are sanctionable in accordance with this Chapter.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the preparation and agreement of plans dealing with what is to happen to carbon storage information and samples following certain events.
Brought up, read the First and Second time, and added to the Bill.
New Clause 11
Information and samples plans: supplementary
“(1) Where an information and samples plan has effect in relation to a licence event, the OGA and the responsible person may agree changes to the plan.
(2) Once changes are agreed, the plan has effect subject to those changes.
(3) Where—
(a) two or more persons are the responsible person in relation to a licence event, and
(b) those persons include a company that has, since the licence event, been dissolved,
the reference to the responsible person in subsection (1) does not include that company.
(4) An information and samples plan, in relation to a licence event, may provide as appropriate for—
(a) the retention, by the responsible person, of any carbon storage information or carbon storage samples held by or on behalf of that person before the licence event,
(b) the transfer of any such information or samples to a new licensee, or
(c) appropriate storage of such information or samples.
(5) Where an information and samples plan makes provision under subsection (4) for a person, other than the responsible person, to hold information or samples in accordance with the plan—
(a) the plan may, with the consent of that other person, impose requirements on that person in connection with the information and samples, and
(b) any such requirements are sanctionable in accordance with this Chapter.
(6) An information and samples plan prepared by the OGA under section (Preparation and agreement of information and samples plans) may not include provision under subsection (4)(b) for the transfer of information or samples to another person without the consent of the responsible person.
(7) An information and samples plan may provide for the storage of information or samples as mentioned in subsection (4)(c) to be the responsibility of the OGA.
(8) Where a transfer of rights under a carbon storage licence relates to only part of the area in relation to which the licence was granted, the information and samples plan prepared in connection with the transfer is to relate to all carbon storage information and carbon storage samples held by the responsible person before the licence event, and not only information and samples in respect of that part of the area.
(9) In this section, ‘licence event’ and ‘responsible person’ have the same meaning as in section (Preparation and agreement of information and samples plans).”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision supplementing the provision about information and samples plans made by NC10.
Brought up, read the First and Second time, and added to the Bill.
New Clause 12
Information and samples coordinators
“(1) A person within subsection (2) (a ‘relevant person’) must—
(a) appoint an individual to act as an information and samples coordinator, and
(b) notify the OGA of that individual’s name and contact details.
(2) The following persons are within this subsection—
(a) a licensee, and
(b) an exploration operator under a carbon storage licence.
(3) The information and samples coordinator is to be responsible for monitoring the relevant person’s compliance with its obligations under this Chapter.
(4) A relevant person must comply with subsection (1) within a reasonable period after—
(a) the date on which this section comes into force, if the person is a relevant person on that date, or
(b) becoming a relevant person, in any other case.
(5) The relevant person must notify the OGA of any change in the identity or contact details of the information and samples coordinator within a reasonable period of the change taking place.
(6) The requirements imposed by this section are sanctionable in accordance with this Chapter.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision requiring licensees and exploration operators to appoint an individual (an information and samples coordinator) to be responsible for monitoring their compliance with obligations imposed by or under the intended new Chapter.
Brought up, read the First and Second time, and added to the Bill.
New Clause 13
Power of OGA to require information and samples
“(1) The OGA may by notice in writing, for the purpose of carrying out any of its functions under Chapter 3 of Part 1 of the Energy Act 2008 (storage of carbon dioxide), require—
(a) a licensee to provide it with any carbon storage information, or a portion of any carbon storage sample, held by or on behalf of the licensee;
(b) a person who holds information or samples in accordance with an information and samples plan to provide it with any such information or a portion of any such sample.
(2) The notice must specify—
(a) the form or manner in which the information or the portion of a sample must be provided;
(b) the time at which, or period within which, the information or the portion of a sample must be provided.
(3) Information requested under subsection (1) may not include items subject to legal privilege.
(4) Requirements imposed by a notice under this section are sanctionable in accordance with this Chapter.
(5) Where a person provides information or a portion of a sample to the OGA in accordance with a notice under this section, any requirements imposed on the person in respect of that information or sample by regulations under section (Retention of information and samples) are unaffected.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the power of the OGA to require licensees and certain other persons to provide it with any carbon storage information or samples they hold (or that are held on their behalf).
Brought up, read the First and Second time, and added to the Bill.
New Clause 14
Prohibition on disclosure of information or samples by OGA
“(1) Protected material must not be disclosed—
(a) by the OGA, or
(b) by a subsequent holder,
except in accordance with section (Power of Secretary of State to require information and samples) or Schedule (Permitted disclosures of material obtained by OGA).
(2) In this section and in Schedule (Permitted disclosures of material obtained by OGA)—
‘protected material’ means information or samples which have been obtained by the OGA under section (Power of OGA to require information and samples) or (Sanctions: information powers);
‘subsequent holder’, in relation to protected material, means a person holding protected material who has received it directly or indirectly from the OGA by virtue of a disclosure, or disclosures, in accordance with Schedule (Permitted disclosures of material obtained by OGA).
(3) References to disclosing protected material include references to making the protected material available to other persons (where the protected material includes samples).”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision prohibiting the disclosure by the OGA of information and samples obtained under NC13 except in accordance with NS1 or with a requirement imposed by the Secretary of State under NC15.
Brought up, read the First and Second time, and added to the Bill.
New Clause 15
Power of Secretary of State to require information and samples
“(1) The Secretary of State may require the OGA to provide the Secretary of State with such information or samples held by or on behalf of the OGA as the Secretary of State may require for the purpose of—
(a) carrying out any function conferred by or under any Act,
(b) monitoring the OGA’s performance of its functions, or
(c) any Parliamentary proceedings.
(2) The Secretary of State may use information or samples acquired under subsection (1) (‘acquired material’) only for the purpose for which it is provided.
(3) Acquired material must not be disclosed—
(a) by the Secretary of State, or
(b) by a subsequent holder,
except in accordance with this section.
(4) For the purposes of subsection (3)(b), ‘subsequent holder’, in relation to acquired material, means a person who receives acquired material directly or indirectly from the Secretary of State by virtue of a disclosure, or disclosures, in accordance with this section.
(5) Subsection (3) does not prohibit the Secretary of State from disclosing acquired material so far as necessary for the purpose for which it was provided.
(6) Subsection (3) does not prohibit a disclosure of acquired material if—
(a) the disclosure is required by virtue of an obligation imposed by or under any Act, or
(b) the OGA consents to the disclosure and, where the acquired material in question was provided to the OGA by or on behalf of another person, confirms that that person also consents to the disclosure.
(7) References in this section to disclosing acquired material include references to making the acquired material available to other persons (where the acquired material includes samples).”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision, corresponding to the provision made by section 11 of the Energy Act 2016, about the power of the Secretary of State to require the provision of carbon storage information or samples held by or on behalf of the OGA.
Brought up, read the First and Second time, and added to the Bill.
New Clause 16
Power of OGA to give sanction notices
“(1) If the OGA considers that a person has failed to comply with a sanctionable requirement imposed on the person, it may give the person a sanction notice in respect of that failure.
(2) If the OGA considers that there has a been a failure to comply with a sanctionable requirement imposed jointly on two or more persons, it may give a sanction notice in respect of that failure—
(a) to one only of those persons (subject to section (Revocation notices)(2)),
(b) jointly to two or more of them, or
(c) jointly to all of them,
but it may not give separate sanction notices to each of them in respect of the failure.
(3) In this Chapter ‘sanction notice’ means—
(a) an enforcement notice (see section (Enforcement notices)),
(b) a financial penalty notice (see section (Financial penalty notices)),
(c) a revocation notice (see section (Revocation notices)), or
(d) an operator removal notice (see section (Operator removal notices)).
(4) Sanction notices, other than enforcement notices, may be given in respect of a failure to comply with a sanctionable requirement even if, at the time the notice is given, the failure to comply has already been remedied.
(5) Where the OGA gives a sanction notice to a person in respect of a particular failure to comply with a sanctionable requirement—
(a) it may, at the same time, give another type of sanction notice to the person in respect of that failure to comply;
(b) it may give subsequent sanction notices in respect of that failure only in accordance with section (Subsequent sanction notices) (subsequent sanction notices).
(6) The OGA’s power to give sanction notices under this section is subject to section (Duty of OGA to give sanction warning notices) (duty of OGA to give sanction warning notices).
(7) Where the OGA gives a sanction notice to a licensee in respect of a failure to comply with a sanctionable requirement—
(a) the matter is to be dealt with in accordance with this Chapter, and
(b) any requirement under the licensee’s carbon storage licence to deal with the matter in a certain way (including by arbitration) does not apply in respect of that failure to comply.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the power of the OGA to give sanction notices to persons who have failed to comply with requirements imposed on them by or under the intended new Chapter.
Brought up, read the First and Second time, and added to the Bill.
New Clause 17
Enforcement notices
“(1) An enforcement notice is a notice which—
(a) specifies the sanctionable requirement in question,
(b) gives details of the failure to comply with the requirement, and
(c) informs the person or persons to whom the notice is given that the person or persons must comply with—
(i) the sanctionable requirement, and
(ii) any directions included in the notice as mentioned in subsection (2),
before the end of the period specified in the notice.
(2) The notice may include directions as to the measures to be taken for the purposes of compliance with the sanctionable requirement.
(3) Requirements imposed by directions included in an enforcement notice as mentioned in subsection (2) are sanctionable in accordance with this Chapter.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about enforcement notices (notices requiring a person to take measures for the purposes of complying with a requirement imposed by or under the new Chapter), which may be given by the OGA under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 18
Financial penalty notices
“(1) A financial penalty notice is a notice which—
(a) specifies the sanctionable requirement in question,
(b) gives details of the failure to comply with the requirement, and
(c) informs the person or persons to whom the notice is given that the person or persons must—
(i) comply with the sanctionable requirement before the end of a period specified in the notice, where it is appropriate to require such compliance and the failure to comply with the requirement has not already been remedied at the time the notice is given, and
(ii) pay the OGA a financial penalty of the amount specified in the notice before the end of a period specified in the notice.
(2) The period specified under subsection (1)(c)(ii) must not end earlier than the end of the period of 28 days beginning with the day on which the financial penalty notice is given.
(3) The financial penalty payable under a financial penalty notice in respect of a failure to comply with a sanctionable requirement (whether payable by one person, or jointly by two or more persons) must not exceed £1 million.
(4) If a financial penalty notice is given jointly to two or more persons, those persons are jointly and severally liable to pay the financial penalty under it.
(5) A financial penalty payable under a financial penalty notice is to be recoverable as a civil debt if it is not paid before the end of the period specified under subsection (1)(c)(ii).
(6) The OGA must—
(a) issue guidance as to the matters to which it will have regard when determining the amount of the financial penalty to be imposed by a financial penalty notice, and
(b) have regard to the guidance when determining the amount of the penalty in any particular case.
(7) The OGA may from time to time review guidance issued under subsection (6)(a) and, if it considers appropriate, revise it.
(8) Before issuing or revising guidance under this section, the OGA must consult such persons as it considers appropriate.
(9) The OGA must—
(a) lay any guidance issued under this section, and any revision of it, before each House of Parliament;
(b) publish any guidance issued under this section, and any revision of it, in such manner as the OGA considers appropriate.
(10) The Secretary of State may by regulations subject to the affirmative procedure amend subsection (3) to change the amount specified to an amount not exceeding £5 million.
(11) Money received by the OGA under a financial penalty notice must be paid into the Consolidated Fund.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about financial penalty notices (notices requiring a person to pay a financial penalty for failure to comply with a requirement imposed by or under the intended new Chapter), which may be given by the OGA under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 19
Revocation notices
“(1) A revocation notice may be given only in respect of a failure to comply with a sanctionable requirement imposed on a licensee in that capacity.
(2) Where two or more persons are the licensee in respect of a carbon storage licence, the revocation notice must be given jointly to all of those persons.
(3) A revocation notice is a notice which—
(a) specifies the sanctionable requirement in question,
(b) gives details of the failure to comply with the requirement,
(c) informs the person or persons to whom the notice is given that—
(i) where no storage permit has been granted under the carbon storage licence, the licence is to be terminated, or
(ii) where a storage permit has been granted under the carbon storage licence, the permit is to be revoked,
on the date specified in the notice (‘the revocation date’).
(4) The revocation date must not be earlier than the end of the period of 28 days beginning with the day on which the revocation notice is given.
(5) A revocation notice may not be given in circumstances where the carbon storage licence to be terminated, or the storage permit to be revoked, in accordance with the notice is one which, on the date the notice is given, the OGA would not have the power to grant.
(6) Where a carbon storage licence is terminated in accordance with a revocation notice—
(a) the rights granted to the licensee by the licence cease on the revocation date;
(b) the revocation does not affect any obligation or liability imposed on or incurred by the licensee under the terms and conditions of the licence;
(c) the terms and conditions of the licence apply as if the licence had been terminated in accordance with those terms and conditions, subject to section (Power of OGA to give sanction notices)(7)(b).
(7) Where a storage permit is revoked in accordance with a revocation notice—
(a) the authorisation granted by the storage permit ceases on the revocation date;
(b) the revocation does not affect any obligation or liability imposed or incurred under the terms and conditions of the storage permit;
(c) the terms and conditions of the carbon storage licence apply as if the storage permit had been revoked in accordance with those terms and conditions, subject to section (Power of OGA to give sanction notices)(7)(b).” —(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about revocation notices (notices terminating a carbon storage licence, or a storage permit, where a licensee has failed to comply with a requirement imposed by or under the intended new Chapter), which may be given by the OGA under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 20
Operator removal notices
“(1) An operator removal notice may be given only in respect of a failure to comply with a sanctionable requirement imposed on an exploration operator under a carbon storage licence in that capacity.
(2) An operator removal notice is a notice which—
(a) specifies the sanctionable requirement,
(b) gives details of the failure to comply with the requirement, and
(c) informs the exploration operator to whom it is given that, with effect from a date specified in the notice (‘the removal date’), the licensee under whose carbon storage licence the exploration operator operates (‘the relevant licensee’) is to be required to remove the exploration operator (see subsection (4)).
(3) The OGA must—
(a) give a copy of the operator removal notice to the relevant licensee, and
(b) require the relevant licensee to remove the exploration operator with effect from the removal date.
(4) Where a licensee is required to remove an exploration operator from a specified date, the licensee must ensure that, with effect from that date, the exploration operator does not exercise any function of organising or supervising any of the activities referred to in paragraphs (a) and (b) of section (Key definitions)(3).
(5) The removal date must not be earlier than the end of the period of 28 days beginning with the day on which the operator removal notice is given.
(6) An operator removal notice may not be given in circumstances where the carbon storage licence under which the exploration operator operates is one which, on the date the notice is given, the OGA would not have the power to grant.
(7) A requirement imposed on a licensee under subsection (3)(b) is sanctionable in accordance with this Chapter.” —(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about operator removal notices (notices requiring a licensee to remove an exploration operator who has failed to comply with a requirement imposed by or under the intended new Chapter), which may be given by the OGA under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 21
Duty of OGA to give sanction warning notices
“(1) This section applies where the OGA proposes to give a sanction notice in respect of a failure to comply with a sanctionable requirement.
(2) The OGA must give a sanction warning notice in respect of the sanctionable requirement to—
(a) the person or persons to whom it proposes to give a sanction notice, and
(b) where it proposes to give an operator removal notice, the relevant licensee (see section (Operator removal notices)(2)(c)).
(3) A sanction warning notice, in respect of a sanctionable requirement, is a notice which—
(a) specifies the sanctionable requirement,
(b) informs the person or persons to whom it is given that the OGA proposes to give a sanction notice in respect of a failure to comply with the requirement,
(c) gives details of the failure to comply with the sanctionable requirement, and
(d) informs the person or persons to whom it is given that the person or persons may, within the period specified in the notice (‘the representations period’), make representations to the OGA in relation to the matters dealt with in the notice.
(4) The representations period must be such period as the OGA considers appropriate in the circumstances.
(5) Subsections (6) and (7) apply where the OGA gives a sanction warning notice to a person or persons in respect of a sanctionable requirement.
(6) The OGA must not give a sanction notice to the person or persons in respect of a failure to comply with the requirement until after the end of the representations period specified in the sanction warning notice.
(7) Having regard to representations made during the representations period specified in the sanction warning notice, the OGA may decide—
(a) to give the person or persons a sanction notice in respect of the failure to comply with the requirement detailed in the sanction warning notice under subsection (3)(c),
(b) to give the person or persons a sanction notice in respect of a failure to comply with the requirement which differs from the failure detailed in the sanction warning notice under subsection (3)(c), or
(c) not to give the person or persons a sanction notice in respect of a failure to comply with the requirement.” —(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the duty of the OGA to give a sanction warning notice where it proposes to give a sanction notice under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 22
Publication of details of sanctions
“(1) The OGA may publish details of any sanction notice given in accordance with this Chapter.
(2) But the OGA may not publish anything that, in its opinion—
(a) is commercially sensitive,
(b) is not in the public interest to publish, or
(c) is otherwise not appropriate for publication.
(3) If, after details of a sanction notice are published by the OGA, the sanction notice is—
(a) cancelled on appeal, or
(b) withdrawn under section (Withdrawal of sanction notices),
the OGA must publish details of the cancellation or withdrawal.” —(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the publication by the OGA of details of sanctions notices given under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 23
Subsequent sanction notices
“(1) This section applies where the OGA gives a sanction notice in respect of a particular failure to comply with a sanctionable requirement (whether the notice is given alone or at the same time as another type of sanction notice).
(2) If the sanction notice given is a revocation notice or an operator removal notice, no further sanction notices may be given in respect of the failure to comply.
(3) If the sanction notice given is a financial penalty notice which does not require compliance with the sanctionable requirement, no further sanction notices may be given in respect of the failure to comply.
(4) Subsection (5) applies if the sanction notice given is—
(a) an enforcement notice, or
(b) a financial penalty notice which requires compliance with the sanctionable requirement.
(5) No further sanction notices may be given in respect of the failure to comply before the end of the period specified under section (Enforcement notices)(1)(c) or (Financial penalty notices)(1)(c)(i), as the case may be (period for compliance with sanctionable requirement).”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision restricting the power of the OGA under NC16 to give more than one sanction notice in respect of the same failure.
Brought up, read the First and Second time, and added to the Bill.
New Clause 24
Withdrawal of sanction notices
“(1) The OGA may, at any time after giving a sanction notice, withdraw the sanction notice.
(2) If a sanction notice is withdrawn by the OGA—
(a) the notice ceases to have effect, and
(b) the OGA must notify the following persons of the withdrawal of the notice—
(i) the person or persons to whom the notice was given;
(ii) in the case of an operator removal notice, the licensee under whose carbon storage licence the exploration operator operates.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the withdrawal of sanction notices given by the OGA under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 25
Sanctions: information powers
“(1) This section applies for the purposes of an investigation which—
(a) concerns whether a person has failed to comply with a sanctionable requirement, and
(b) is carried out by the OGA for the purpose of enabling it to decide whether to give the person a sanction notice, or on what terms a sanction notice should be given to the person.
(2) The OGA may by notice in writing, for the purposes of that investigation, require the person to provide specified documents or other information.
(3) ‘Specified’ means specified, or of a description specified, in a notice under this section.
(4) A requirement under subsection (2) applies only to the extent—
(a) that the documents requested are documents in the person’s possession or control, or
(b) that the information requested is information in the person’s possession or control.
(5) A requirement imposed by a notice under subsection (2) is sanctionable in accordance with this Chapter.
(6) The documents or information requested—
(a) may include documents or information held in any form (including in electronic form);
(b) may include documents or information that may be regarded as commercially sensitive;
(c) may not include items that are subject to legal privilege.
(7) The notice must specify—
(a) to whom the information is to be provided;
(b) where it is to be provided;
(c) when it is to be provided;
(d) the form and manner in which it is to be provided.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the power of the OGA to require the provision of information for the purposes of an investigation carried out to enable it to decide whether to give a person a sanction notice under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 26
Appeals in connection with Chapter
“In Schedule (Carbon storage information and samples: appeals)—
(a) Part 1 contains provision about appeals against decisions by the OGA relating to the preparation of an information and samples plan and appeals against the giving of a notice under section (Power of OGA to require information and samples), and
(b) Part 2 contains provision about appeals against the imposition of sanction notices and appeals against the giving of a notice under section (Sanctions: information powers).”—(Andrew Bowie.)
This new clause introduces NS2, which contains provision about appeals in connection with the new Chapter intended to be formed by NC8 to NC28 (see the explanatory statement for NC8).
Brought up, read the First and Second time, and added to the Bill.
New Clause 27
Procedure for enforcement decisions
“(1) The OGA—
(a) must determine the procedure that it proposes to follow in relation to enforcement decisions, and
(b) must issue a statement of its proposals.
(2) The procedure mentioned in subsection (1)(a) must be designed to secure, among other things, that an enforcement decision is taken—
(a) by a person falling within subsection (3), or
(b) by two or more persons, each of whom falls within subsection (3).
(3) A person falls within this subsection if the person was not directly involved in establishing the evidence on which the enforcement decision is based.
(4) The statement mentioned in subsection (1)(b) must be published in whatever way appears to the OGA to be best calculated to bring the statement to the attention of the public.
(5) When the OGA takes an enforcement decision, the OGA must follow its stated procedure.
(6) If the OGA changes its procedure in a material way, it must publish a revised statement.
(7) A failure of the OGA in a particular case to follow its procedure as set out in the latest published statement does not affect the validity of an enforcement decision taken in that case.
(8) But subsection (7) does not prevent the Tribunal from taking into account any such failure in considering an appeal under paragraph 4 or 5 of Schedule (Carbon storage information and samples: appeals) in relation to a sanction notice.
(9) In this section, ‘enforcement decision’ means—
(a) a decision to give a sanction notice in respect of a failure to comply with a sanctionable requirement, or
(b) a decision as to the details of the sanction to be imposed by the notice.”—(Andrew Bowie.)
This new clause, which is intended to form part of new Chapter 4A in Part 2 (see the explanatory statement for NC8), makes provision about the procedure for the taking of decisions by the OGA in relation to the giving of sanction notices under NC16.
Brought up, read the First and Second time, and added to the Bill.
New Clause 28
Interpretation of Chapter
“In this Chapter—
‘information and samples plan’ has the meaning given in section (Preparation and agreement of information and samples plans);
‘items subject to legal privilege’ —
(a) in England and Wales, has the same meaning as in the Police and Criminal Evidence Act 1984 (see section 10 of that Act);
(b) in Scotland, has the meaning given by section 412 of the Proceeds of Crime Act 2002;
(c) in Northern Ireland, has the same meaning as in the Police and Criminal Evidence (Northern Ireland) Order 1989 (S.I. 1989/1341 (NI 12));
‘OGA’ means the Oil and Gas Authority;
‘protected material’ has the meaning given in section (Prohibition on disclosure of information or samples obtained by OGA);
‘sanction notice’ has the meaning given in section (Power of OGA to give sanction notices);
‘storage permit’ has the same meaning as in the Storage of Carbon Dioxide (Licensing etc) Regulations 2010 (S.I. 2010/2221) (see regulation 1(3) of those Regulations);
‘subsequent holder’ has the meaning given in section (Prohibition on disclosure of information or samples obtained by OGA);
‘Tribunal’ means the First-tier tribunal.”—(Andrew Bowie.)
This new clause makes provision about the interpretation of the new Chapter intended to be formed by NC8 to NC28 (including NS1 and NS2): see the explanatory statement for NC8.
Brought up, read the First and Second time, and added to the Bill.
New Clause 29
Designation of hydrogen transport counterparty
“(1) The Secretary of State may by notice given to a person designate the person to be a counterparty for hydrogen transport revenue support contracts.
(2) A ‘hydrogen transport revenue support contract’ is a contract to which a hydrogen transport counterparty is a party and which was entered into by a hydrogen transport counterparty in pursuance of a direction given to it under section (Direction to offer to contract with eligible hydrogen transport provider)(1).
(3) A person designated under subsection (1) is referred to in this Chapter as a ‘hydrogen transport counterparty’.
(4) A designation may be made only with the consent of the person designated (except where that person is the Secretary of State).
(5) The Secretary of State may exercise the power of designation so that more than one designation has effect under subsection (1), but only if the Secretary of State considers it necessary for the purposes of ensuring that—
(a) liabilities under a hydrogen transport revenue support contract are met,
(b) arrangements entered into for purposes connected to a hydrogen transport revenue support contract continue to operate, or
(c) directions given to a hydrogen transport counterparty continue to have effect.
(6) As soon as reasonably practicable after a designation ceases to have effect, the Secretary of State must make one or more transfer schemes under section 82 to ensure the transfer of all rights and liabilities under any hydrogen transport revenue support contract to which the person who has ceased to be a hydrogen transport counterparty was a party.
(7) In this Chapter ‘hydrogen transport provider’ means a person who carries on (or is to carry on) in the United Kingdom activities of transporting hydrogen.
(8) In subsection (7) the reference to carrying on activities in the United Kingdom includes carrying on activities in, above or below—
(a) the territorial sea adjacent to the United Kingdom;
(b) waters in a Renewable Energy Zone (within the meaning of Chapter 2 of Part 2 of the Energy Act 2004);
(c) waters in a Gas Importation and Storage Zone (within the meaning given by section 1 of the Energy Act 2008).
(9) In subsection (7) ‘transporting hydrogen’ includes transporting a compound, of which hydrogen is an element, which revenue support regulations specify as a qualifying compound for the purposes of this section.”—(Andrew Bowie.)
This new clause and NC30, NC31 and NC32 (which are intended to be inserted after clause 60) enable the Secretary of State to designate a counterparty and direct it to offer to contract with hydrogen transport providers or (as the case may be) with hydrogen storage providers.
Brought up, read the First and Second time, and added to the Bill.
New Clause 30
Direction to offer to contract with eligible hydrogen transport provider
“(1) The Secretary of State may, in accordance with any provision made by revenue support regulations, direct a hydrogen transport counterparty to offer to contract with an eligible hydrogen transport provider specified in the direction, on terms specified in the direction.
(2) Revenue support regulations may make further provision about a direction under this section and in particular about—
(a) the circumstances in which a direction may or must be given;
(b) the terms that may or must be specified in a direction.
(3) Provision falling within subsection (2) may include provision for calculations or determinations to be made under the regulations, including by such persons, in accordance with such procedure and by reference to such matters and to the opinion of such persons, as may be specified in the regulations.
(4) Revenue support regulations must make provision for determining the meaning of ‘eligible’ in relation to a hydrogen transport provider.”—(Andrew Bowie.)
See the explanatory statement for NC29.
Brought up, read the First and Second time, and added to the Bill.
New Clause 31
Designation of hydrogen storage counterparty
“(1) The Secretary of State may by notice given to a person designate the person to be a counterparty for hydrogen storage revenue support contracts.
(2) A ‘hydrogen storage revenue support contract’ is a contract to which a hydrogen storage counterparty is a party and which was entered into by a hydrogen storage counterparty in pursuance of a direction given to it under section (Direction to offer to contract with eligible hydrogen storage provider)(1).
(3) A person designated under subsection (1) is referred to in this Chapter as a ‘hydrogen storage counterparty’.
(4) A designation may be made only with the consent of the person designated (except where that person is the Secretary of State).
(5) The Secretary of State may exercise the power of designation so that more than one designation has effect under subsection (1), but only if the Secretary of State considers it necessary for the purposes of ensuring that—
(a) liabilities under a hydrogen storage revenue support contract are met,
(b) arrangements entered into for purposes connected to a hydrogen storage revenue support contract continue to operate, or
(c) directions given to a hydrogen storage counterparty continue to have effect.
(6) As soon as reasonably practicable after a designation ceases to have effect, the Secretary of State must make one or more transfer schemes under section 82 to ensure the transfer of all rights and liabilities under any hydrogen storage revenue support contract to which the person who has ceased to be a hydrogen storage counterparty was a party.
(7) In this Chapter ‘hydrogen storage provider’ means a person who carries on (or is to carry on) in the United Kingdom activities of storing hydrogen.
(8) In subsection (7) the reference to carrying on activities in the United Kingdom includes carrying on activities in, above or below—
(a) the territorial sea adjacent to the United Kingdom;
(b) waters in a Renewable Energy Zone (within the meaning of Chapter 2 of Part 2 of the Energy Act 2004);
(c) waters in a Gas Importation and Storage Zone (within the meaning given by section 1 of the Energy Act 2008).
(9) In subsection (7) ‘storing hydrogen’ includes storing a compound, of which hydrogen is an element, which revenue support regulations specify as a qualifying compound for the purposes of this section.’—(Andrew Bowie.)
See the explanatory statement for NC29.
Brought up, read the First and Second time, and added to the Bill.
New Clause 32
Direction to offer to contract with eligible hydrogen storage provider
“(1) The Secretary of State may, in accordance with any provision made by revenue support regulations, direct a hydrogen storage counterparty to offer to contract with an eligible hydrogen storage provider specified in the direction, on terms specified in the direction.
(2) Revenue support regulations may make further provision about a direction under this section and in particular about—
(a) the circumstances in which a direction may or must be given;
(b) the terms that may or must be specified in a direction.
(3) Provision falling within subsection (2) may include provision for calculations or determinations to be made under the regulations, including by such persons, in accordance with such procedure and by reference to such matters and to the opinion of such persons, as may be specified in the regulations.
(4) Revenue support regulations must make provision for determining the meaning of ‘eligible’ in relation to a hydrogen storage provider.”—(Andrew Bowie.)
See the explanatory statement for NC29.
Brought up, read the First and Second time, and added to the Bill.
New Clause 52
Principal objectives of Secretary of State and GEMA
“(1) Section 4AA of the Gas Act 1986 (principal objective and general duties of Secretary of State and GEMA) is amended as set out in subsections (2) and (3).
(2) In subsection (1A)(a), for ‘the reduction of gas-supply emissions of targeted greenhouse gases’ substitute ‘the Secretary of State’s compliance with the duties in sections 1 and 4(1)(b) of the Climate Change Act 2008 (net zero target for 2050 and five-year carbon budgets)’.
(3) In subsection (5B), omit the definitions of ‘emissions’, ‘gas-supply emissions’ and ‘targeted greenhouse gases’.
(4) Section 3A of the Electricity Act 1989 (principal objective and general duties of Secretary of State and GEMA) is amended as set out in subsections (5) and (6).
(5) In subsection (1A)(a), for ‘the reduction of electricity-supply emissions of targeted greenhouse gases’ substitute ‘the Secretary of State’s compliance with the duties in sections 1 and 4(1)(b) of the Climate Change Act 2008 (net zero target for 2050 and five-year carbon budgets)’.
(6) In subsection (5B), omit the definitions of ‘emissions’, ‘electricity-supply emissions’ and ‘targeted greenhouse gases’.”—(Andrew Bowie.)
This new clause is intended to replace clause 271. The intention is for it to appear at the start of Part 6. It is equivalent in substance to clause 271 but includes some drafting changes and consequential amendments.
Brought up, read the First and Second time, and added to the Bill.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Energy Bill [ Lords ] (Sixteenth sitting)
Tuesday 27th June 2023
(1 year, 4 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 June 2023 - (27 Jun 2023)
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Chair
Before we begin, I remind Members that Hansard colleagues would be grateful if any speaking notes could be emailed to hansardnotes@parliament.uk. Please put electronic devices on silent, and tea and coffee are not allowed during sittings. The only refreshment permitted is water, which is available in the room. I might review my view on whether gentlemen can remove their jackets if it warms up later in the day.
New Clause 1
Smart meter roll-out for prepayment customers
“(1) The Secretary of State must ensure that all legacy prepayment meters are replaced with smart meters, unless the customer objects in writing, before the end of 2025.
(2) The Secretary of State must by regulations provide for an end to the practice of self-disconnections, such regulations to come into force within six months of the date on which this Act is passed.
(3) Regulations under subsection (2) may provide for, but are not limited to—
(a) the introduction of a social tariff for prepayment customers,
(b) the introduction of mechanisms to apply credit automatically if a prepayment customer runs out of credit, and
(c) the introduction of a mechanism to transfer a prepayment customer to credit mode automatically if they run out of credit.” —(Alan Brown.)
Alan Brown (Kilmarnock and Loudoun) (SNP)
I beg to move, That the clause be read a Second time.
Alan Brown
It is a pleasure to serve under your chairmanship, Ms Nokes.
We are now in the final week of this Bill Committee, and Members will have spotted that a lot of Government new clauses and amendments have been tabled and accepted. In the spirt of fairness, the Government should also accept some of our new clauses and amendments; hopefully that is what is going to happen. Rather than getting into a debate, if the Minister wants to intervene and tell me which new clauses the Government will accept in the spirit of fairness, I would be happy to give way.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
I would not like to put you off.
Alan Brown
Okay, so we go back to my monologue justifying why the Government should accept some of our new clauses, including new clauses 1 and 2.
Clearly, we should be grateful that energy prices are starting to fall, but the reality is that the cap on energy bills for an average household was set at £1,138 in April 2021. This month, Ofgem has set the cap at more than £2,000, so energy bills are still nearly double what they were two years ago. The reality is that many people are struggling badly with their energy bills, even though prices are falling, and those struggling the most are those with prepayment meters. People with prepayment meters can access credit of only £5 or £10. If they reach that credit limit, the lights go out—it is as simple as that. They cannot turn on the gas or electricity, and it is a real difficulty for people. It also means that if people cannot get out of the house for whatever reason—if they are ill or have just had a newborn kid—and have reached the threshold, they lose access to their energy by virtue of not being able to top up their meters.
It is unfair that people with prepayment meters pay higher standing charges. Frankly, it is an outrage that people who pay in advance for their energy are paying a premium to access it, whereas people like us in this room, who pay by direct debit, have access to credit and cheaper tariffs. As I say, the reality is that if someone is on a prepayment meter, they are going to struggle to pay their bills, they will pay more and they will face the difficulties associated with a lack of credit.
As End Fuel Poverty states:
“Imposition of a pre-payment meter is disconnection by the back door. When you can’t top up the meter everything clicks off”.
Forcing people to have prepayment meters means that those who are already struggling are put on to a system whereby they will be forced to ration, automatically disconnected when the credit limit is reached and more likely—this is the rub—to have a cold, damp home, with the long-term health implications that that brings, as well as the short-term heating and eating dilemmas.
It is estimated that 19% of housing stock across the UK is damp. The proportion rises to nearly a third, or 31%, for those on prepayment meters. In other words, if someone is on a prepayment meter, they are 65% more likely than the average person to live in a damp house. Some 51% of prepayment customers have health conditions or disabilities, so in many ways the existing system is punishing those who are more likely to require more energy in the first place. That, in a nutshell, is why a social tariff is needed for those with prepayment meters.
Research by Utilita indicated previously that as many as 14% of the 4.5 million households with prepayment meters did not choose to be on such tariffs, and what has been happening during the cost of living crisis is outrageous. For example, an investigation for the i paper revealed that since the end of lockdown energy firms have secured almost 500,000 court warrants to forcibly install meters in the homes of customers who are in debt. Freedom of information requests showed that in the first six months of last year there were 180,000 applications for such warrants.
We then had the bombshell coverage of an undercover reporter working for bailiffs, which exposed the cruelty of some bailiffs for what it was: revelling in the forced installation of prepayment meters, no matter the vulnerabilities of the customers. The officers of that debt company were working on behalf of British Gas, which of course said that it was shocked and that it did not advocate such a policy.
The rub is that some utility companies are using debt collection agencies routinely as part of their process to collect money that they believe they are owed. That set-up relieves utility companies of the burden of debt collection. More importantly, it stops them providing debt advocacy and interacting with customers, which is what is required. Meanwhile, the debt collection companies add their own fees just for reissuing bills to customers.
All that is why we tabled new clauses 1 and 2. Voluntary codes for prepayment meters will never be enough. It is quite clear that we will never know how many people were forced on to prepayment meters against their will, especially when smart meters can be switched remotely to prepayment mode without people even realising initially.
New clause 1 sets out the need for legacy prepayment meters to be switched to smart meters as long as consent is given. This is an enabling aspect, as smart meters will make it easier to implement the provisions of new clause 1(3), which will end the practice of so-called self-disconnection. The provisions include the consideration of a social tariff, and, most importantly, mechanisms to allow customers to access credit and not be cut off immediately as they would be with a £5 or £10 credit limit.
New clause 2 restricts the forcible use of prepayment meters. It does not prevent informed consent and agreement for people to move to prepayment mode, because some customers like it as a way of managing their debt, but what is important is consent and an understanding of what prepayment means. The provisions also give access to impartial debt counselling services before the switch to prepayment mode is needed. Subsection (2)(c) places a duty on the Secretary of State to assess and define customer vulnerabilities, because the current definition is too narrow and does not cover some people who should be classed as vulnerable. Lastly, subsection (3) confirms that switching smart meters to prepayment mode is considered the same as a legacy prepayment meter.
Too many people have been forced on to prepayment meters. We cannot allow that to continue and we cannot allow the door to reopen for energy companies. No matter what they say here and now when there is an immediate storm and a backlash, we need to protect people for good going forward, which is what new clauses 1 and 2 will do.
According to recent Government figures, £120 million-worth of the vouchers issued for customers in prepayment mode were still unclaimed at the start of June. There are only four days left until the deadline on 30 June, so I hope the Minister will update us on the outstanding balance of unclaimed prepayment meter credit vouchers. Having nearly 20% of vouchers unclaimed at the start of the month is indicative of a failed policy that does not support the most vulnerable in our society. Again, that is why we need new clauses 1 and 2 to protect those who sometimes cannot protect themselves.
Kerry McCarthy (Bristol East) (Lab)
As always, it is a pleasure to see you in the Chair, Ms Nokes.
I rise primarily to speak in support of new clause 38, but it has quite a lot of overlap with new clause 2. Our new clause 38, on the restriction of the use of prepayment meters, says:
“The Secretary of State may by regulations restrict the installation of new prepayment meters for domestic energy use.”
It makes provision to ensure that consumers have full and informed consent on the installation of a prepayment meter, and that vulnerable customers are not put on to prepayment meters. We heard from the hon. Member for Kilmarnock and Loudoun some of the reasons why we have shared concerns about that. Some of my points will be very familiar to the Minister if he followed the debate earlier this year, when it reached crisis point.
Citizens Advice estimates that the number of people moved on to prepayment meters reached 600,000 in 2022, up from 380,000 in 2021. We know that that comes at a cost to them. There is a poverty premium on some of the most vulnerable, and on people on the lowest incomes, because of the shift to prepayment meters, and their use should be restricted as a result. Those with prepayment meters are more likely to be in fuel poverty and facing significant debts already. We find ourselves in a situation in which those requiring the most support are being forced to pay the most and are given the least help.
Citizens Advice revealed at the start of the year, at the height of the energy crisis, that someone was being cut off from their energy supply every 10 seconds, with millions unable to afford to top up their prepayment meters. We also know that so-called voluntary self-disconnection was a thing. People simply could not afford it, so they would not necessarily feature in the numbers. Labour’s call for a moratorium on the forced installation of prepayment meters was dismissed until the March Budget. The Secretary of State told the House on a number of occasions that he was talking to Ofgem and that plans were in motion, but during that period we were still hearing horrific stories about forced entry to people’s houses, warrants being issued and energy companies continuing to go down that path.
Our view was very much that it was the Government and the energy regulator’s responsibility to ensure that people were not left at home in the cold and the dark, yet we had to press incredibly hard before anything was achieved. Over the winter, more than 130,000 households that included a disabled person or someone with a long-term health condition were being disconnected from their energy supply at least once a week because they could not afford to top up. The same report also said that
“63% of PPM users who had disconnected in the last year said it had a negative impact on their mental health. This rises to 79% of disabled and people with long-term health conditions.”
Really good work was done by organisations such as Citizens Advice, but it also took tireless investigations from UK newspapers to expose the scale of the crisis. An investigation by the i in December showed that magistrates were batch processing hundreds of warrants in the space of a few minutes to allow the forced installation of prepayment meters, with one court in the north of England approving 496 warrants in just three minutes. At some point, we were given reassurances that people’s circumstances and vulnerabilities were being taken into account before the warrants were issued, but if nearly 500 are issued in three minutes, clearly they are not taking any information into account; it is very much a rubber-stamping exercise.
An undercover report by The Times in February highlighted how British Gas was employing debt collectors to break into people’s homes. Among them were customers described in the staff notes as a woman in her 50s with “severe mental health bipolar”, a woman who
“suffers with mobility problems and is partially sighted”,
and a mother whose
“daughter is disabled and has a hoist and electric wheelchair”.
We heard in debates at the time that many MPs had their own stories of constituents who were affected by the forced installation of prepayment meters; hopefully we will hear from some today to back up what we are calling for.
It was therefore a relief when action was taken in April, and a code of practice was introduced by Ofgem, but we have to wonder why the scheme is voluntary rather than compulsory. Just yesterday, the Committee on Fuel Poverty, in its annual report, expressed disappointment with Ofgem’s code of practice, stating that it is
“disappointingly limited in ambition”.
We have to wonder what the Government’s role is in that. I argue that Ofgem has proven incapable of dealing with the situation and it is up to the Government to step up and take control. That is what we seek to achieve with the new clauses.
The code’s voluntary nature still leaves too much power and judgment in the hands of energy suppliers, and the vulnerable and the voiceless should not be exposed to the dangers that prepayment meters pose, so I call on the Minister to give us some assurance that he accepts that it is the Government’s responsibility to act in this case—we cannot continue to leave it to voluntary codes of practice—and to support new clause 38.
Andrew Bowie
It is an absolute pleasure to serve under your chairmanship again, Ms Noakes, for sitting 16 in the final week before we conclude our proceedings in Committee. I thank Members for tabling their new clauses.
New clause 1 places a duty on the Secretary of State to ensure that all legacy prepayment meters are replaced with smart meters before the end of 2025. The Government have been clear that our aim is for as many households as possible to benefit from smart metering, including those that prepay for energy, which is why we have set minimum installation targets for suppliers until the end of 2025. To ensure effective scrutiny and transparency, large suppliers are also required to publish their performance against their targets, broken down by credit and prepayment mode. That ensures that they have strong incentives to deliver.
Although we agree with the hon. Member for Kilmarnock and Loudoun that smart prepayment is highly superior to legacy prepayment meters, it is also true that those customers who would benefit the most from prepayment meters can be among the hardest audiences to reach and the most vulnerable in our society. It is therefore critical that we tread carefully and do not place unrealistic targets in statute that may cause unintended consequences.
As drafted, the new clause could result in the prioritisation of the replacement of traditional prepayment meters. That may inadvertently deprioritise smart meter installation for credit consumers, many of whom are in vulnerable circumstances. Data from Ofgem indicates that around 70% of those with disabilities pay by direct debit and may therefore benefit from the automated readings that smart meters deliver.
Let me turn to the requirement to end self-disconnections within six months of the Bill becoming law. It is critical that the market delivers a fair deal for consumers, with an energy market that is resilient and investable over the long term. Ofgem’s recently published code of practice on prepayment is clear that when self-disconnection occurs, suppliers must make multiple attempts to contact the customer to understand the reasons for self-disconnection and offer appropriate support, including additional support credit. If frequent or prolonged periods of self-disconnection are identified, energy suppliers should assess whether a prepayment meter remains a safe and practicable option for that consumer.
As announced in the 2022 autumn statement, His Majesty’s Government have committed to work with consumer groups and industry to consider the best approach to consumer protection from April 2024, as part of a wider retail market reform. In addition, as announced at the spring Budget, we are keeping the energy price guarantee at £2,500 for an additional three months from April to June. That means we have covered nearly half a typical household’s energy bill through the energy price guarantee and energy bill support schemes since October, with a typical family saving £1,500. That is in addition to the expanded warm home discount scheme, which has been extended until 2026 and provides £475 million in support per year in 2020 prices.
New clauses 2 and 38 would allow the Secretary of State to restrict the use of prepayment meters, especially in relation to vulnerable consumers or where consumers are not aware that they are being moved to a prepayment mode. It is of course critical that our most vulnerable energy users are protected. The findings in The Times regarding British Gas customers were shocking and completely unacceptable. The Government acted quickly to tackle that issue of inappropriate prepayment meter use, and the Secretary of State wrote to energy suppliers insisting that they revise their practices and improve their action to support vulnerable households.
Following that intervention, all domestic energy suppliers agreed to pause the forced installation of prepayment meters and the remote switching of smart meters to prepayment mode. Ofgem rules are clear that suppliers can install a prepayment meter to recover a debt only as a last resort. They also require energy suppliers to offer a prepayment service only when it is safe to do so, with clear obligations on energy suppliers regarding support for customers in payment difficulty. The Secretary of State has called for more robust Ofgem enforcement on those issues, and Ofgem has responded by announcing a further review of supplier practices relating to prepayment meter customers.
Kerry McCarthy
The Minister may be about to come to this point, but I am wondering how it is going—does he know how many warrants are now being issued by the courts? Is he aware of statistics on how many prepayment meters are now being installed or on the type of customers who are being put on them?
Andrew Bowie
I do not have the exact numbers at my fingertips, but I am happy to write to the hon. Lady with that information. I can tell her that the senior presiding judge has ordered magistrates courts to immediately stop authorising warrants for energy firms to forcibly install prepayment meters while the process by which suppliers bring forward such applications is being reviewed.
Dr Alan Whitehead (Southampton, Test) (Lab)
In his reply to my hon. Friend the Member for Bristol East, will the Minister expand briefly on his understanding of the meaning of the word “pause” in relation to the forcible installation of prepayment meters by energy companies? As far as I am aware, there is no time set for that, nor is it subject to any other actions that the Government may take. Is it the Minister’s understanding that the pause is strictly time-limited and that practices may start again at the end of it?
Andrew Bowie
The pause will be until Ofgem has finalised the review of supplier practice in relation to prepayment meter customers. That is what we expect, anyway, because in addition to what I have said this morning, the Secretary of State has told Ofgem to toughen up on energy suppliers and to investigate customers’ experiences of how their supplier is performing. Following that, Ofgem established a new customer reporting system for households to pass on their experiences of how they are being treated. We are approaching this across the board. We believe, however, that any ban on the forced installation of prepayment meters would risk a build-up of customer debt. Unpaid debts increase costs for all energy consumers and could pose a risk to supplier stability.
To address issues around the forced installation of prepayment meters, Ofgem has recently published a new code of practice, as I mentioned. The code has been agreed with energy suppliers to improve protections for customers being moved involuntarily to a prepayment meter. It ensures better protections for vulnerable households, increased scrutiny of supplier practices, and redress measures where prepayment meters were wrongly installed. It includes provisions to prevent involuntary installations for all high-risk customers, including those dependent on powered medical equipment, people over 85, and households with residents with severe health issues. It also includes a requirement for suppliers to reassess whether prepayment remains the most suitable and preferred payment method for a customer once they have repaid debts. Suppliers must agree to any request from a prepayment customer who is clear of debt to move off a prepayment meter.
The rules to which suppliers must adhere regarding the installation of prepayment meters are set out in the licence conditions set by Ofgem as the independent regulator. Ofgem will undertake a formal statutory consultation process to modify suppliers’ licence conditions in line with the code ahead of this winter. This will allow Ofgem to use its full enforcement powers to enforce compliance with the code, ensuring that consumers are protected and that the poor practices that we have seen will not happen again.
It is vital that, as the independent regulator, Ofgem continues to set the rules to which energy suppliers must adhere in licence conditions. New clauses 2 and 38 would risk taking that power away from Ofgem. Allowing the Government to set rules outside the licence conditions would threaten Ofgem’s independence and its ability to regulate suppliers effectively.
The Government have always been clear that action is needed to crack down on the practice of forcing people, especially the most vulnerable, on to prepayment meters. We will continue to work closely with Ofgem and industry to see that the code leads to positive changes for vulnerable consumers. I hope that hon. Members are reassured by my explanation and that they might feel able to withdraw their new clauses.
Alan Brown
Despite what the Minister says, I am not fully convinced by those arguments. With the leave of the Committee, I will not press new clause 1 to a vote, but it is important to understand that new clause 2 would not even mean an outright ban on the installation of prepayment meters; it would just put protections in place so that people are not forced on to prepayment meters. It would also address debt build-up by ensuring that people are given access to debt counselling, for example. New clause 2 is about working with customers and providing additional protections, so I would certainly like to press it to a vote.
On new clause 1, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Restriction of the use of prepayment meters
“(1) The Secretary of State may by regulations restrict the installation of new prepayment meters for domestic energy use.
(2) Regulations under subsection (1) may set conditions for energy suppliers in relation to the installation of new prepayment meters, including—
(a) ensuring consumers have given full and informed consent to the installation of a prepayment meter after having been offered access to a recognised debt counselling agency;
(b) ensuring vulnerable consumers are not required to use prepayment meters;
(c) publishing a non-exhaustive list of circumstances in which a consumer is considered vulnerable, including financially vulnerable; and
(d) ensuring consumers have a clear, timetabled route back to standard meters once specified conditions are met.
(3) In this section ‘installation of new prepayment meters’ includes switching existing energy meters to a prepayment mode.”—(Alan Brown.)
This new clause would allow the Secretary of State to restrict the use of prepayment meters, especially in relation to vulnerable consumers or where consumers are not aware they are being moved over to a prepayment mode.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Alan Brown
I beg to move, That the clause be read a Second time.
This fairly simple clause seeks for the Government to include in all future legislative impact assessments a net zero compatibility test. Achieving net zero is vital to save to planet. The Government have legally binding targets to hit net zero by 2050, and this Committee has agreed to Government amendments that give Ofgem a statutory duty to consider net zero. If the regulator is obliged to consider net zero, and if the Government have legal targets to achieve net zero, surely it makes sense to legislate for the Government to undertake a net zero compatibility assessment, so as to ensure that policies will not have an adverse impact on the legally binding target to achieve net zero. That would result in transparency on whether policies are adversely or positively impacting on the route to net zero. Such transparency would also be of assistance with costs, especially given the net zero cynics among Government Members. Importantly, Energy UK, the trade body that represents energy companies, also says that it supports a net zero compatibility test.
Given what I have outlined, I do not see why the Government would not accept the new clause. If the Government can carry out impact assessments of the effect of legislation on small businesses, why not carry one out on the wider, legally binding target to hit net zero? I hope that the Minister will accept the new clause.
Andrew Bowie
I thank the hon. Members for Kilmarnock and Loudoun and for Argyll and Bute (Brendan O’Hara) for tabling their new clause. The Government agree with the intention behind it, but we believe that it is unnecessary. We are already taking a cross-Government and systematic approach to embedding net zero and climate into Government policies and decision-making processes.
The creation by the Prime Minister of the new Department for Energy Security and Net Zero, which I am proud to serve, means that there is an entire Department dedicated to delivering on our climate ambitions. The Department’s focus, alongside energy security, is driving overall delivery of net zero and maximising the economic opportunity that the transition presents. The new Department’s officials work with counterparts across Government to co-ordinate action, working particularly closely with the Cabinet Office and the Treasury to ensure that net zero is prioritised in Government policy and decision making, and that it aligns with our wider priorities.
We are also working with industry and stakeholders, which has led to the creation of the net zero council, the green jobs delivery group, the jet zero council and the local net zero forum. We also work closely with our devolved Administration colleagues. We have also gone further by creating the Domestic and Economic Affairs (Energy, Climate and Net Zero) Committee, which brings together senior Ministers from across Government to ensure a co-ordinated approach to delivering net zero across government. Additionally, we have provided Green Book supplementary guidance on the valuation of energy use and greenhouse gas emissions for appraisal. That guidance helps officials when undertaking options appraisal for policies, programmes and projects; building business cases; and when conducting impact assessments. I hope that provides the hon. Member with the reassurance that he needs to withdraw his new clause.
Alan Brown
The Minister smiled when he said he hoped that that would satisfy me. There is no surprise that it does not. He outlined the creation of the new Department for Energy Security and Net Zero, and the important thing is that the net zero compatibility test would apply to all legislation that the Government introduce from every Department, so it would make every Department start to consider the net zero implications of its policies. That is what is critical about this new clause. I do not wish to withdraw the motion.
Question put and negatived.
New Clause 6
Just Transition Commission
“(1) Within six months of the date on which this Act is passed the Secretary of State must by regulations establish a body to be known as the ‘Just Transition Commission’.
(2) Regulations under subsection (1) must provide for the purposes of the Just Transition Commission to include—
(a) the provision of scrutiny and advice on the ongoing development of just transition plans;
(b) the provision of advice on appropriate approaches to monitoring and evaluation; and
(c) consultation with such persons as the Secretary of State shall consider appropriate in relation to the delivery and likely impact of just transition planning.
(3) The Just Transition Commission must produce and lay before Parliament an annual report of its work.”—(Alan Brown.)
Brought up, and read the First time.
Alan Brown
I beg to move, That the clause be read a Second time.
I shall potentially continue my losing streak here. This new clause is about setting up a just transition commission. The Committee may be aware that the Scottish Government set up a just transition commission a couple of years ago, which is effectively world leading. It brings together independent academics, and representatives from trade unions and right across industry. It advises the Scottish Government on policy implications and what is needed as we move forward to a just transition to ensure that workers are not left behind and do not lose their jobs, to be effectively left on the scrapheap.
This important body came together and has brought transparency to the Scottish Government, and I want to see that replicated at Westminster. It would be good for the Government as a way to work across the sector and the industry, with trade unions and academics to provide expertise. I look forward to hearing the Minister’s thoughts on that, explaining why they are probably not going to do this in the short term. I will be happy to be proved wrong on that.
Kerry McCarthy
We certainly need more focus, and to hear more from the Government about ensuring that this is a just transition. We know that we cannot reach net zero without the skilled workforce to deliver it, and without decisive action to ensure that no community is left behind. It is illustrative to look at what Joe Biden is doing with the Inflation Reduction Act in the United States, where a lot of focus is on energy-intensive states such as Texas to ensure that, as they move away from fossil fuel exploration, the jobs are still there. We all know what happened, as we debated earlier in this Committee, when the coalmines were closed with the lack of a strategy to ensure good, decent jobs for people left behind. We saw whole communities abandoned and, in some parts of the country, turned into basic commuter villages, rather than having a home-grown industry.
It has rightly been said that net zero is the economic opportunity of the century, but it represents a potential threat to those who, at the moment, rely on traditional industries. That is not because oil and gas extraction will immediately cease, or because coal-fired blast furnaces will suddenly be switched off. It is because our reliance on the old way of doing things will gradually decline and, as a result, the skills required will evolve.
Workers in those industries need to know that there is a plan. As I said, we cannot allow the mistakes of the 1980s to be repeated. We need a forward-looking industrial strategy, to make it clear that the transition to net zero is an opportunity to reinvigorate our industrial heartlands and coastal communities and to make it clear that that means a higher quality of work, better regulation of employment practices and greater diversity in the sector. This is quite a complex task. Some of it will be industry-led, but we know, particularly when we get further down the supply chain to those clusters of jobs that will be based around the traditional industries, that those smaller companies will need support to diversify as well.
Alan Brown
The hon. Lady will be aware that procurement rules and contracts for difference auctions, for example, are reserved to Westminster, so the Scottish Government do not have control of that. There is a whole supply chain aspect that is not developed, and that is partly because of these procurement rules—the fact that the cheapest price takes all. We want that amended at some time.
Kerry McCarthy
I was about to move on to that, because it is important. On the Government’s lack of action on developing a strategy, I have been trying to ask questions about the Green Jobs Delivery Group, such as when we will actually see some delivery and outcomes and how that will feed through into a skills strategy and an industrial strategy, but I have been getting very little by way of response.
Friends of the Earth Scotland has called on both the UK Government and the Scottish Government to ensure greater worker representation in their transition planning through existing bodies such as the UK’s Green Jobs Delivery Group and the Just Transition Commission in Scotland. It says that at the moment there is little support provided for high-carbon workers to find alternative jobs, to facilitate retraining where necessary, or to lighten the financial burden of training currently borne by the workers.
Last month, the Climate Change Committee briefed that the
“Government has policy levers at its disposal to support workers during the transition”
but warned that
“clearer plans are needed to harness the potential of the transition and to manage its risks.”
Work has been done. As I said, my concern is about focusing on setting up a commission rather than just calling on the Government to actually come forward with a clear strategy, a clear road map, particularly on the skills front, and to link that up. I do not know whether the Minister will accept my analysis of the situation, but it seems very fragmented. It is left, in large part, to big companies in the supply chain to try to ensure that the workers of the future are there as they transition. There is not a strategy for the smaller companies in the supply chain unless the big companies are leading that.
Alan Brown
I understand what the hon. Lady is saying about wanting the Government to get on with it sooner, but does she not agree that commissioning a body of experts will provide better advice, enabling the Government to develop their strategy better?
Kerry McCarthy
As I said, the Government have had their green jobs taskforce, and now they have the delivery group. They are also doing things on the nature side. I would argue that they should have had all the information and expert advice; it is all available out there.
What we need are more incremental steps. Rather than setting up a body, we need something concrete from the Minister on what the Government are doing, for example, to ensure that further education colleges are tying up with the potential needs of businesses in their areas. Some incredibly good further education colleges are working on that—going into schools, working with businesses and encouraging young people to look at those careers—but as I said it is piecemeal and depends on the quality of the college, and the relationship with other agencies in the local area. I sympathise with focusing on a just transition, but I have concerns about whether setting up another body is the way to do it.
Andrew Bowie
I thank the hon. Members for Kilmarnock and Loudoun and for Bristol East for their contributions. The Government agree with the intention behind the new clause; however, we already view transition as a consideration embedded across all Government policy actions. We are committed to managing the transition to net zero in such a manner that the positive opportunities are maximised for the economy and the population, while protecting individuals, communities and the economy.
Given that the majority of the low carbon economy lies outside London and the south-east of England, Government action to deliver our net zero commitment and build a low carbon economy will help to level up the UK and spur on the transition. That is demonstrated through the North sea transition deal agreement in March 2021, through which the UK became the first G7 country to agree a landmark deal to support the oil and gas industry’s transition to clean, green energy, while supporting 40,000 jobs in industrial heartlands across the UK.
Since delivering a net zero workforce transition needs joint action by Government, industry, and the education sector, the Government have established the green jobs delivery group. The group is headed up by Ministers and business leaders to act as the central forum for driving forward action on green jobs and skills, and has committed to publishing a net zero and nature workforce action plan in 2024, which will consider the workforce transition. We will continue to join up across the devolved Governments, who have already made excellent progress, with the Welsh Government having launched their net zero skills plan in March 2023, and the Scottish Government and Skills Development Scotland having launched their climate emergency skills action plan 2020-2025 in 2020.
Alan Brown
On working with the devolved Governments, does the Minister recognise that it is time for the UK Government to match fund the £500 million just transition fund that the Scottish Government have put in place?
Andrew Bowie
I thank the hon. Member for his intervention, and point him to the remarks that I just made regarding the huge investment that we are already making in the transition, the fact that we were the first G7 nation to sign a transition deal, and the £100 billion of private sector investment by 2030 that we hope to see, and that we are driving into British industries, supporting 480,000 green jobs by the end of the decade. We are looking to meet that target, unlike the Scottish Government’s green jobs target, which of course they have not met—alongside failing in four years out of five to meet their climate change targets, as was announced just last week. Since delivering a net zero workforce transition needs joint action by Government and industry, as I have said, we are continuing in that regard.
With respect to the scrutiny advised in the new clause, the Government already report progress on delivering our net zero ambitions through multiple channels—through parliamentary Select Committees, the Public Accounts Committee, independent bodies such as the National Audit Office, and—under the Climate Change Act 2008—the Climate Change Committee. I should point out that the hon. Member’s colleague and friend, the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil), has recently taken up the chairmanship of the Energy Security and Net Zero Committee, and will, I am sure, ably hold my Department to account. I hope that that provides the hon. Member for Kilmarnock and Loudoun with the reassurances that he needs to withdraw the motion.
Olivia Blake (Sheffield, Hallam) (Lab)
It is a pleasure to serve under your chairmanship, Ms Nokes. I have asked a few written questions in this space and I agree wholeheartedly with my hon. Friend the Member for Bristol East that the just transition should have already started for many workers. A survey two years ago found that workers were looking to move from the fossil fuel industry to renewables but that they were being put off by training fees. I have asked repeatedly about that.
I asked the Department whether it knew what the average cost of retraining would be for oil and gas workers but was told that it does not know or does not hold that data. However, I have heard at first hand from oil and gas workers who want to move into renewables that they face training costs of many thousands of pounds and that the quality of such training is questionable in some places. Government inaction risks leaving those workers behind when they want to be part of the transition and already have transferrable skills in those industries. I also recently asked a question about the Department’s discussions with the offshore wind industry on recognising an energy skills passport to help oil and gas workers, but was told in response that no such discussions have taken place.
I thank the Minister for his kind words about a transition. However, when will we see action for oil and gas workers? When will the inaction turn into action and delivery so we can get on with developing the green skills we need in this country to deliver net zero and compete in a global market?
Andrew Bowie
I thank the hon. Member for Sheffield, Hallam for the tone of her words. The Government believe that the best way to secure jobs for oil and gas workers is to continue to give them support and, indeed, to support investment into the North sea, which not only provides secure employment for them now and into the future but provides for our energy security needs, which is something the Labour party might take note of moving forward.
As a representative of a constituency in the north-east of Scotland, I am fully aware of the pressures that workers in the North sea oil and gas industry face and the desires of many of them to transition to new green jobs. We see that in the city of Aberdeen, which is transitioning from being the oil and gas capital of Europe to the energy capital of Europe. That is why we have set up our green jobs delivery group and why we are identifying recommendations and actions for central and local government, industry and business, and the devolved Administrations.
We are also exploring how we can support local areas to deliver a successful transition, and the Department for Work and Pensions is expanding sector-based work academy programmes to help those who are out of work develop the skills they need to re-enter the job market. The programme runs in England and Scotland and is developed by jobcentres in partnership with employers and training providers. The Government take that incredibly seriously and I have a particular interest in the matter.
I thank the hon. Lady for her comments, but we are clear that it is very important to support people who are reskilling and upskilling from traditional oil and gas jobs into new green jobs, while also investing in our oil and gas industry to ensure that investment continues to support the traditional jobs that will be needed for some time yet.
Alan Brown
The Minister puts forward arguments that suggest the Government are doing a lot in terms of green jobs. The Government are doing some things, but not enough. That is the reality.
To go back to my intervention on the hon. Member for Bristol East, the CfD rules should have been changed years ago to incentivise supply chain development and create those homegrown jobs. Perhaps a just transition commission would have provided advice on how that procurement could have been taken forward. I want to revisit that. The Government should think and should speak to people engaged in the just transition commission. In the meantime, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 33
Purposes
“(1) The principal purpose of this Act is to increase the resilience and reliability of energy systems across the UK, support the delivery of the UK’s climate change commitments and reform the UK’s energy system while minimising costs to consumers and protecting them from unfair pricing.
(2) In performing functions under this Act, the relevant persons and bodies shall have regard to—
(a) the principal purpose set out in subsection (1);
(b) the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets) and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change;
(c) the desirability of reducing costs to consumers and alleviating fuel poverty; and
(d) the desirability of securing a diverse and viable long- term energy supply.
(3) In this section ‘the relevant persons and bodies’ means—
(a) the Secretary of State;
(b) any public authority.”—(Dr Whitehead.)
This new clause and NC34, NC35 and NC36 are intended as a suite of purpose and strategy clauses for this Bill.
Brought up, and read the First time.
Dr Whitehead
I beg to move, That the clause be read a Second time.
We come now to something that has run as a bit of a leitmotif through our discussions in Committee, which is the position of the North Sea Transition Authority—I was going to say the “so-called” North Sea Transition Authority, but I accept that it is the North Sea Transition Authority. However, as we have pointed out in previous debates, the name came about by means I am not entirely clear about, as opposed to being set in legislation.
In a previous debate, we discussed the circumstances under which somebody might go about their daily business calling themselves a particular appellation but find out that there were legal consequences to using a name that was not actually theirs, even though for daily purposes that name was reasonably accepted. That is the key point as far as the North Sea Transition Authority is concerned, because legally the North Sea Transition Authority is actually the Oil and Gas Authority. It is not just legally the Oil and Gas Authority; it is an authority that was effectively set up by the Energy Act 2016.
If we turn to the pages of the 2016 Act, we see a number of functions that the OGA must undertake. It is not the case that the OGA did not exist at all in any form prior to the 2016 Act’s passing into law; it was originally incorporated under the Companies Act 2006 as the Oil and Gas Authority Limited. The 2016 Act made a particular point of taking that limited company and transforming it by legislation. It states:
“The company originally incorporated under the Companies Act 2006 as the Oil and Gas Authority Limited is renamed as the Oil and Gas Authority.”
There it is in the legislation. The 2016 Act then made a number of transfers of functions from the OGA: the transfer of property rights, staff and so on. It is fairly clear from that that the Government at the time of the passage of the 2016 Act had a very real intention as to the function, activity and so on of the Oil and Gas Authority: they set it all out in the legislation. They were clear and specific on that. They were also clear and specific on what the OGA should be doing.
It was not just guidance on what the OGA should be doing; it was set out in the legislation under section 8, “Matters to which the OGA must have regard”. It needed to
“minimise public expenditure relating to, or arising from, relevant activities.”
It was concerned with the
“need for the United Kingdom to have a secure supply of energy.”
It had a function entitled “Storage of carbon dioxide”, and the OGA needed to
“work collaboratively with the government”.
By the way, regarding a debate we will come to later, the OGA also had at least an implied function with respect to the maximum economic extraction of oil and gas from the North sea. It was clear that the OGA had a number of things it should do, and that it was able to collect samples and regulate the oil and gas industry in the North sea, all within the overall umbrella of maximising economic recovery of that oil and gas in the North sea and elsewhere.
The OGA had a clear set of legal requirements and a clear set of duties and responsibilities, but the Government’s decision—I do not know whose decision it was, and it would be helpful if the Minister clarified that for me—that, henceforth, the OGA should be called the North Sea Transition Authority was, as far as I can see, conceived and carried out on no legal basis whatever. It was simply a device, which I guess aligned with the North sea transition deal, which was originally entitled the North sea oil and gas deal, whose title was, during discussions on the deal, so I understand, changed. That was when the Government had an industrial strategy, and this was put forward as a strategy for oil and gas in the North sea, although it also included elements of what we might say was a transition.
The North sea oil and gas companies undertook to change their position on flaring, for example, and undertook to do various things about the electrification of the North sea oil rigs and various other things. However, notably in the North sea transition document, there was no mention of, nor any agreement on, the management of production in the North sea, or indeed management of exploration or any other activities that were going on. This was a limited document that might be described as a North sea transition document, and an even more limited change to the name of the North sea OGA, which was renamed the North Sea Transition Authority. I presume that the name change arose from the basement of the Department for Business, Energy and Industrial Strategy as a nod in the direction of that particular document, but that is all.
The North Sea Transition Authority has done some mighty work in respect of its new function. It has changed its notepaper, I think—it has got that bit sorted out—but nothing else has happened as far as the authority is concerned. As the Minister saw just recently, and as I have periodically pointed out as the Committee has progressed, when the guidance notes and the notes published by the Department on various aspects of the Bill appear, we see that the North Sea Transition Authority is doing various things related to various aspects of the Bill. However, when we go into the clauses in the Bill, we see that it is not the North Sea Transition Authority that is doing those things, but the Oil and Gas Authority, because that remains the legal arrangement.
Andrew Bowie
I thank the hon. Member for tabling his new clause and for his attempts at my reformation. To be clear, the new clause would change the name of the Oil and Gas Authority and introduce an express obligation for it to ensure the transition to net zero in carrying out its functions.
In March 2022, the Oil and Gas Authority changed its trading name to the North Sea Transition Authority, or NSTA. The change, supported by the Government and the Opposition, reflects the expanded role the NSTA plays in our transition to a net zero economy.
Under the new clause, the name change would occur only in the Energy Act 2016. However, as the hon. Gentleman admitted, the Oil and Gas Authority is mentioned in a large amount of primary and secondary legislation, which would also require amendment. Any partial change of name could undermine or change the NSTA’s statutory functions, powers and objectives. However, the Government recognise the importance of the change and, as we speak, we are considering legislative options to amend the authority’s statutory name to the NSTA in all places where it occurs.
Dr Whitehead
Indeed there is a feeling welling up in me that we are not able to proceed with the new clause, given that the Minister said—and I agree—that such a change cannot be made easily with a quick stroke of a pen, and that a number of other things need to be considered alongside that. I am pleased that he indicated that, as we speak, there are serious people with towels round their heads working through the implications and looking at how we can best do it. That was the intention of the new clause, but perhaps I was rather optimistic in thinking that the name change could be written in easily. I appreciate that it cannot.
I also appreciate that the transition authority has the green light from Government to start undertaking things relating to transition. It is beginning to pursue that, and that is all good, but I say gently to the Minister that at some stage we will need to push this together. If the gentlemen with wet towels round their heads—
Dr Whitehead
And ladies, indeed. If they can undertake their work in a reasonable fashion, I hope we will have a solution that is good for all of us, as far as the transition is concerned. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 44
Maximum economic recovery in the North Sea
“(1) The Petroleum Act 1998 is amended as follows.
(2) Omit sections 9A to 9I.”—(Dr Whitehead.)
This new clause removes reference to Maximum Economic Recovery in the North Sea as placed into the Petroleum Act 1998 by section 41 of the Infrastructure Act 2015.
Brought up, and read the First time.
Dr Whitehead
I beg to move, That the clause be read a Second time.
New clause 44 concerns a similar legislative requirement—this time, not in the Energy Act 2016, but in the Infrastructure Act 2015. The 2015 Act—I know that hon. Members will have it at their bedsides at all times—contains what can only be described as a performative piece of legislation. Section 41 makes an extensive amendment to the Petroleum Act 1998, which worked perfectly well in supporting the development and activity of the North sea basin, to introduce a principal objective of
“maximising the economic recovery of UK petroleum”—
interestingly, that is not defined in the legislation—through
“development, construction, deployment and use of equipment,”
collaboration among various persons, and so on.
Section 41 also states that the Secretary of State
“must produce one or more strategies for enabling the principal objective to be met.”
There is a requirement on the Secretary of State,
“As soon as practicable after the end of each reporting period,”
to
“consider the extent to which, during that period, these persons have followed section 9C by acting in accordance with the current strategy or strategies,”
and to
“produce a report on the results of the consideration of that question.”
The section goes on to state what the report must contain, and to provide that the Secretary of State
“must publish, and lay before each House of Parliament, a copy of each report produced under this section.”
I have one initial question for the Minister: where are the reports? I have looked quite hard in the Library and various other places to find copies of the reports that the Secretary of State was supposed to produce in each reporting period, and to identify what considerations he or she made in terms of licence holders and operators under petroleum licences and so on. It is probably a case of me being a little remiss, but I cannot find those reports on the maximisation of the economic recovery of UK petroleum, several of which should have been produced by now, since they are supposed to be produced at the end of each two-year reporting period.
Far be it from me to suggest that the Secretary of State is in breach of his requirements under the 2015 Act. I am sure the Minister can put me right about whether the Secretary of State is in breach and either point me to the reports or, perhaps, suggest that they might be forthcoming. I hope the Minister has received inspiration that may enable him to address that point.
Even at the time, section 41 of the 2015 Act appeared to be rather strange in definitional terms. What would lead the Secretary of State to consider that the economic recovery of UK petroleum has been maximised? Is it the extraction of every last drop of petroleum and gas from the North sea—and, if so, over what timescale? It is unclear. Presumably, if economic circumstances change and make further North sea extraction economical, the Secretary of State and industry should start busily extracting everything that is economically extractable, even though in the future it may not be regarded as such.
Section 41 is a bit of a nonsense, and of course it is a much bigger nonsense now than it was, because the Government have solemnly agreed to our net zero targets and amended the Climate Change Act 2008. Indeed, the amendment of those targets was agreed after the 2015 Act was passed. We now have targets for our country’s future emissions, as well as legislation that essentially says that we are required to do the opposite of those targets through oil and gas extraction in the North sea.
As I am sure the Minister is aware, one important calculation in reaching net zero—indeed, the Government have introduced a net zero calculator—is whether at least some extraction of oil and gas from the North sea contradicts the net zero target. We have had a number of assessments, including from the Climate Change Committee and various other bodies, that maximising the economic extraction of oil and gas from the North sea would undoubtably bust our targets, and that we must be clear that at least some of it probably needs to be left there. If we sucked the North sea and other places dry of their oil and gas resources, depending on how we accounted for it, that would pretty much inevitably bust our ability to reach our targets. The objective to maximise economic recovery sits in stark contradiction to our overall emissions targets.
Olivia Blake
It has been an interesting discussion. “Maximum economic recovery” might sound like three benign words, but they could be a toxic combination. If we are not careful, they could be rephrased as “maximum economic crisis”. The climate catastrophe that will unfold if we do not cap global warming at 1.5°, and maintain that on average over 20 years, will be incredibly tough for any Government and for everyone internationally. Some reports suggest that if we wait 10 years, it will not take 1% of GDP to tackle the climate emergency; that will jump staggeringly. About 8% of GDP expenditure will have to go on resilience alone, and dealing with the consequences of the climate catastrophe. The cost of changing to a green energy system in that same decade would double as well. It is really important that we understand what that means.
I say “toxic combination”, but there is also the very real and significant risk of stranded assets. The financial sector, the insurance industry and pension funds are all very aware of the issue, and we see that in how they are changing the way that they invest in projects, and the divestment policies of many of the institutions in this space. Nature published an article in 2022 stating that 60% of oil and gas and 90% of known coal should remain in the ground if we are to get to 1.5°C, but the issue of stranded assets is a reality. We cannot have our cake and eat it; we cannot inhale our cake quicker and hope for the best. Every drop of oil and gas and every lump of coal that we burn contributes to the Anthropocene we are seeing. We have decisions that we can take, and we know that those decisions have an impact.
Stranded assets are really important in this debate. A report in 2022 suggested that the oil, gas and fossil fuel industry had £1.4 trillion of stranded assets. That means that there will be a cliff edge for jobs. There will be assets that people can no longer use or get value from. It will mean that we have barrels of oil, gas and coal that we cannot use, because—a very senior scientist makes this argument in the report—the world will have moved on. We hope that the world will move on as a result of the Bill; if we do not scale up net zero measures, UK households could be spending £500 a year on foreign gas, rather than saving £1,500-odd through a move to renewables and energy efficiency policies, and retrofitting.
This is an incredibly important point. We cannot just hope that things will get better, and squeezing every last drop out of the North sea is not compatible with our aim of 1.5°. We cannot set a date for getting to net zero, but then produce as much carbon and other greenhouse emissions as we like and hope for the best. There must be carbon budgeting, as we all know. We have had all this conversation about a just transition, yet we are giving massive tax breaks. For example, if Rosebank goes ahead, it will receive a tax break of £3.75 billion for something that may soon become a stranded asset.
Katherine Fletcher (South Ribble) (Con)
I am grateful to the hon. Lady, and I will be brief. Will she share the definition of a stranded asset? Some oil and gas extraction areas have enormous potential for carbon capture and storage; it will be a matter of pushing stuff down a pipe, rather than pulling stuff out of it. Has any of that been taken into account in her slightly apocalyptic analysis of what we can do in the North sea and other areas?
Olivia Blake
It is apocalyptic because going above 1.5°C will be catastrophic.
Olivia Blake
I absolutely agree that it needs to be a transition; that is exactly my point. In the scenario we are discussing,
“Fossil fuel resources that cannot be burned and fossil fuel infrastructure (e.g. pipelines, power plants) that is no longer used may end up as a liability before the end of its anticipated economic lifetime.”
The assets are not being valued at their value over their lifetime; it is that simple. Say we give a value to an asset for its lifetime—25, 50, 100 years or whatever. Its lifetime will fall short of that period, and there will be catastrophic consequences for the financial and economic world; things will go into freefall. This is about economic risk, not just what we have, where. It is that fundamental. That understanding is missing from a lot of this debate, but financial services, pension funds and the insurance industry are all saying that they are very aware of the issue.
Katherine Fletcher
The hon. Lady has just read quite a detailed definition of a stranded asset, which included fossil fuel reserves remaining under the ocean, if I heard her correctly.
Olivia Blake
We would have to leave them there, but figures for them would be baked into the economic analysis and the business planning for those sites. That is why there is a financial risk; financial plans will come into play that will be unrealistic and unmeetable. That is why the assets will become stranded assets; it had been planned that they would produce a profit over a period, but we will not get to that time because of the situation.
Katherine Fletcher
If I understand the hon. Lady correctly, she is worrying about a figure of £1.5 billion in stranded assets, which includes fossil fuels that are left under the ground. That does not take into account the fact that the assets could be repurchased for an energy transition. Would she agree that there is perhaps more analysis to do?
Olivia Blake
To be clear, it is not £1.3 billion; it is £1.4 trillion, and that is why this is significant. I am not the only one worried about this—so are financial institutions around the globe. This massive financial risk could spin us into financial crisis if we are not careful. This is not just a climate catastrophe; it is an economic situation that we need to monitor, and we need to ensure that we do not have a cliff edge that lands us in a spiral that we cannot get out of. That is why a transition is so important, and why we need development of industry in the North sea, but cannot rely on our valuations of assets at the moment.
We need to take into consideration changes in the use of oil and gas, so that we can reach 1.5°C. We cannot deal with those two issues in isolation. As much as that would please everyone at the moment and allow them to make a quick buck, it is economically illiterate to think that we can continue as we are. That is a big problem. There are huge opportunities for Government, and I welcome a lot of the things in the Bill that will help to unlock them.
At household level, the move to renewables would significantly benefit people. Renewables are three times cheaper than oil and gas-related heating and electricity. A record number of households are suffering from energy insecurity. It is important that we look at the issue in the round. We cannot just say, “We need this” or “We need that,” and expect it to add up. If the financial sector gets scared, and much suggests that it is, it will look to invest in other places. If insurance companies say, “We are not going to insure these facilities because there is such an economic risk to us,” we are in trouble. If pension funds flee from the sector, we are in trouble. Our financial sector is incredibly important in this area, and those in it are saying loud and clear, “Governments are behind us, and we need them to catch up.” This tiny phrase, “Maximum economic recovery”, and what it asks for, could lead to the cliff edge that we have all been saying that we do not want. That is why this is so important.
Andrew Bowie
I thank the hon. Members for Southampton, Test, and for Sheffield, Hallam, for their impassioned contributions to the debate. There has been talk of apocalypse and catastrophe, and there has been some idea that the country is not taking the issue seriously. The hon. Member for Sheffield, Hallam suggested that we were just setting a date and hoping for the best. Nothing could be further from the truth. We have decarbonised faster than any other G7 nation. Off the coast of this country are the first, second, third and fourth-largest offshore wind farms in the world. We created an entire Department to focus on the challenges of net zero, and we are passing this Bill, which will enable us to unlock so much of what we need to do to move this country forward even more quickly.
There was talk of economic illiteracy, but it is economic illiteracy not to support our outstanding British offshore oil and gas industry as it continues to produce the oil and gas that is required to keep the lights on in this country as we transition to a net zero future. It is the safest, most responsible offshore oil and gas sector in the world. Indeed, by 2035 we will have the first net zero offshore oil and gas sector, and the North sea will be the first basin in the world to be a net zero basin. I urge colleagues to stop talking down this Great British success story and start talking it up, as it contributes so much to our energy security and net zero ambitions.
Olivia Blake
I think the Minister completely missed the point of what I was saying. I am in no way doing down the industry. I am saying that there are financial risks linked to our climate risks, and they must be brought into this debate. That is fundamental, and future Governments will not thank us if we do not discuss and address that now.
Andrew Bowie
I could not agree more that there are financial risks. That is probably why, just this morning, so many businesses expressed their worry at Labour’s Just Stop Oil plans, which were outlined a couple of weeks ago and which the former Labour leader of Aberdeen City Council described as even worse for an industry than the actions of Margaret Thatcher in the 1980s. That is from a member of the Labour party who resigned due to Labour’s policies on oil and gas.
Dr Whitehead
I would be grateful if the Minister withdrew that comment about Labour’s “Just Stop Oil plans”. There are no Labour Just Stop Oil plans. Indeed, Labour has condemned the activities of Just Stop Oil protesters, because Labour does not wish just to stop oil. We specifically said this morning that we do not wish to do that, and that we see a substantial role for the North sea oil and gas industry out to 2050. We would support that future, so I hope the Minister will not resort to these easy gibes and will address the issue rather more seriously today. That would be helpful.
Andrew Bowie
I should probably turn to the new clause, but I welcome the welcome and support that the hon. Gentleman—and now, it seems, the Labour party—will give to our offshore oil and gas industry. He should probably inform the members and founders of Just Stop Oil who have donated so much money to his party.
The objective of maximising economic recovery in the North sea forms the basis of the North Sea Transition Authority’s regulatory functions, and removing them could significantly undermine its ability to operate as intended. It would also lead to a significant lack of clarity about the authority’s regulatory role. Maximising the economic recovery of oil and gas need not be in conflict with the transition to net zero, and the North Sea Transition Authority is already doing a great deal of work to support an orderly transition that delivers on our climate commitments and supports workers.
In December 2020, in accordance with section 9A of the Petroleum Act 1998, the North Sea Transition Authority published a revised strategy, titled “The OGA Strategy”.
Andrew Bowie
It is rather ironic, given what we have just been discussing. Through the revised strategy’s central obligation, the North Sea Transition Authority must
“secure that the maximum value of economically recoverable petroleum is recovered from the strata beneath relevant UK waters; and, in doing so, take appropriate steps to assist the Secretary of State in meeting the net zero target”.
The strategy therefore already provides a basis for the North Sea Transition Authority’s ongoing work to help drive the energy transition.
Under the revised strategy, the North Sea Transition Authority has also introduced new expectations for how North sea oil and gas assets will be managed in the least polluting way, and it will consider the full societal carbon cost when taking decisions. The North Sea Transition Authority will continue to work with Government, industry and other regulators to help accelerate the move to net zero while meeting the UK’s energy demands and need for energy security.
Section 9D of the Petroleum Act 1998, on reports by the Secretary of State, was repealed by paragraph 10 of schedule 1 to the Energy Act 2016, which means the repeal happened before any reports needed to be produced.
I pay tribute to our offshore oil and gas industry, particularly Offshore Energies UK and its “Vision 2035” plan, which means the North sea will become the world’s first net-zero basin. With these explanations, I hope the hon. Gentleman feels able to withdraw his new clause.
Dr Whitehead
I thank the Minister for clarifying the position on reports, because I must admit that I had not read that paragraph of the 2016 Act. It rather underscores my point that this is a performative piece of legislation. There were requirements to report, but the Government presumably realised that they were even sillier than the original imposition on the 1998 Act and decided, one year later, that reports would not be necessary. It could have been a bit embarrassing if the reports came out, so they decided that the reports were not necessary. I thank him for that clarification, but he is rather speaking to my point instead of his.
I am very disappointed that the Minister has sought to characterise our debate as one side of the Committee being against oil and gas and the other side being in favour; he thereby swerves the important point raised by my hon. Friend the Member for Sheffield, Hallam. On the overall position that maximum economic extraction could lead us—
Energy Bill [ Lords ] (Eighteenth sitting)
Thursday 29th June 2023
(1 year, 4 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 29 June 2023 - (29 Jun 2023)
The Committee divided: - Ayes: 6 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 8 - Question accordingly negatived.
The Chair
Before we begin, I remind Members that Hansard colleagues would be grateful if you could email your speaking notes to hansardnotes@parliament.uk. Please switch your electronic devices to silent. Tea and coffee are not allowed during sittings. The only refreshment permitted in the Committee is the water that is available in the room.
New Clause 86
Investment protection agreements and climate change targets
“Within six months of the day on which this Act is passed, the Secretary of State must—
(a) initiate procedures for the United Kingdom to withdraw from the Energy Charter Treaty;
(b) lay before Parliament a report setting out—
(i) the list of investment protection agreements to which the UK is a party which offer protections to the energy sector, and
(ii) an assessment of the risks they pose to the Secretary of State fulfilling duties in this Act with regard to the achievement of targets set by the Climate Change Act 2008.”—(Olivia Blake.)
Brought up, and read the First time.
Olivia Blake (Sheffield, Hallam) (Lab)
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairship, Mr Sharma. It is the first time, I think, that we have been in the room together for this Bill. New clause 86 requests that the UK Government commence withdrawal from the outdated investment provisions of the energy charter treaty, which risk undermining our Climate Change Act 2008 targets, internationally agreed emissions reductions and duties in this Bill in respect of the impact of energy production on habitats, species and the climate.
As many Committee members are aware, the energy charter treaty is an investment agreement between 50 countries for the energy sector. The investor-state dispute settlement mechanism in the treaty allows foreign companies to sue Governments outside the national legal system in somewhat secretive tribunals. The amounts at stake can be in the billions, and the ECT has already generated at least 135 claims, making it the world’s most litigated ISDS agreement. In the most recent Intergovernmental Panel on Climate Change report, UN climate scientists warned of the risk that ISDS agreements are
“able to be used by fossil-fuel companies to block national legislation aimed at phasing out the use of their assets”.
The report even name-checked the energy charter treaty, yet the UK continues to be party to it.
The treat is not just a potential risk. There have already been several high-profile cases of fossil fuel companies suing Governments through the treaty. For example, German energy giant RWE is suing the Netherlands for €1.4 billion over its coal phase-out. The UK oil company Rockhopper won a case this summer against Italy over a ban on offshore oil drilling. It won more than £210 million—more than six times what it had spent on the project. UK fracking firm Ascent Resources launched legal action against Slovenia over requirements for an environmental impact assessment, which is quite a benign ask of any project. It has also launched legal action over Slovenia’s subsequent ban on fracking, introduced by its Parliament, and that case is still pending.
The energy charter treaty poses a huge threat to climate action. As states take the necessary steps to phase out or phase down fossil fuels, more and more fossil fuel giants will turn to such mechanisms to sue Governments. It has been estimated that if the UK Government follow the International Energy Agency’s recommended pathway and cancel oil and gas projects that are in the pipeline, they could face claims of up to £9.4 billion from the ECT alone.
Globally, there is a risk of up to $111.5 billion in claims, but that is clearly not the only risk. The most recent IPCC report warns that there is a risk of regulatory chill from investment agreements, and again it particularly highlights the ECT. The fear of being sued is causing Governments to delay or decide against taking the necessary action on climate. Last year, two countries acknowledged that that is already happening.
Countries across Europe are seeing the risks for what they are and are already taking action. Towards the end of 2022, there was a cascade of announcements from countries planning to exit the ECT. Germany, France, the Netherlands, Spain, Poland, Slovenia, Luxembourg and Denmark all said that they are leaving, and Italy has already left. The European Parliament has voted for a co-ordinated withdrawal of all EU countries, and the European Commission is now recommending that as well, because reform of the treaty has not worked and will not work. Current proposals for modernising the treaty are weak and do not have the support of many countries. They will mean that existing fossil fuel projects will remain protected for at least 10 years, and that some gas projects will be protected until 2040. Projects that have just been given new or extended licences, such as the Cambo oilfield, will be protected and all existing projects can still continue.
Reform has ultimately been a failure, and exiting the treaty is now the only option. Germany, France, the Netherlands, Spain and Slovenia have all referred to the incompatibility of the ECT with the Paris climate agreement and climate goals, and the EU Council recently decided that it will not support reform. If countries exiting the ECT do so in co-ordination, as seems to be happening, they could agree between each other not to apply the 20-year sunset clause, as has been suggested by several countries that are leaving.
In June, the Energy Minister at the time, the right hon. Member for Chelsea and Fulham (Greg Hands), said:
“The UK cannot support an outdated treaty which holds back investment in clean energy and puts British taxpayers at increased risk from costly legal challenges.”
That was stated in a press release on 24 June 2022. Back then, the Government wanted to put their trust in the reform proposals to fix the problem, but we have since seen country after country doing its own assessment and concluding that reform is not possible or has failed.
If the UK does not step up and become part of the vanguard for exiting the ECT, it could be left behind in an obsolete and collapsing treaty, bearing all the risks while others move on. Put simply, while we are still members of the ECT we will not be able to achieve the aims of the Bill and meet our net zero obligations without facing huge costs from the agreement. A co-ordinated withdrawal is the most effective way to protect taxpayers’ money, the planet and our future from this damaging treaty, and I urge the Minister to have a rethink.
I will not push this probing new clause to a vote, but I hope that it will allow the Minister the opportunity to set out the Government’s position on this very important issue. It is right that it is considered in this debate, but I accept that I probably will not get the support of Government Members in a vote.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
It is a pleasure to serve under your chairmanship, Mr Sharma, on the last morning that we gather together in this room to debate the Bill. I thank the hon. Member for Sheffield, Hallam for tabling her important new clause, which relates to an issue that I addressed in a Westminster Hall debate not that long ago.
The UK is committed to addressing the urgent need for climate action at home and abroad through our ambitious net zero targets and international commitments. The new clause would initiate procedures for the United Kingdom to withdraw from the energy charter treaty. His Majesty’s Government completely recognise that the treaty needs to be updated to reflect the current energy landscape, which is why we worked hard for two years at negotiating to modernise it; hence, the comments to which the hon. Lady referred—by the former Energy Minister, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands)—were absolutely correct.
We wanted to bring the treaty into line with modern energy priorities, international treaty practice and international commitments on climate change. Unfortunately, the European Union and its member states were unable to endorse the adoption of modernisation at the energy charter conference. Yes, the European Parliament has voted to update the treaty, and the European Commission is advising that member states or the organisation withdraw, but the EU Council was unable to reach an agreement on modernisation, which is why we are where we are today.
Since the energy charter conference, we have engaged with stakeholders across business, civil society and Parliament, and we are carefully monitoring the positions of the other contracting parties—including the countries to which the hon. Lady referred—and the EU, in relation to the adoption of modernisation. In a context that continues to develop near weekly, we are carefully assessing how to take forward our priorities in relation to the treaty, but we cannot accept the new clause, which would require the UK to initiate procedures to withdraw. As I said, we will carefully consider where we stand.
The new clause would also require the Government to lay before Parliament a report detailing UK investment treaties covering the energy sector and the risks that they pose to the Secretary of State fulfilling their duties under the Climate Change Act. The UK has investment agreements with around 90 trading partners, and the agreements are the responsibility of the Department for Business and Trade. The Government’s right to regulate in the public interest, including in areas such as the environment and labour standards, is recognised in international law, and the Government are clear that when negotiating trade and investment agreements we will continue to protect our right to regulate.
I hope that that provides the hon. Member for Sheffield, Hallam with the reassurance she needs, and I humbly ask that she consider withdrawing her new clause.
Olivia Blake
I thank the Minister for his response. He will not be surprised that I am not satisfied with it, but I will not press the new clause to a vote. There are many risks in this area. Other countries have already taken the lead, and we are being left behind, which exposes us to a higher level of risk. I hope that the Minister will not only continue to consider the modernisation of the ECT but consider withdrawing from it. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 87
Government support for community energy
“(1) Within three months of the passage of this Act, the Secretary of State must publish and lay before Parliament a report setting out the financial, policy and other support that the Secretary of State plans to make available to widen the ownership of low carbon and renewable energy schemes and increase the number of such schemes owned, or part owned, by community organisations.
(2) The report must set out—
(a) all policies, programmes or other initiatives with which the Secretary of State plans to support the development and construction of new low carbon community energy schemes;
(b) the level of financial support which will be made available for—
(i) the Rural Community Energy Fund,
(ii) the Urban Renewable Energy Fund, and
(iii) any other fund or support package designed to support the development of new low carbon community energy schemes;
(c) all policies, programmes or other initiatives the Secretary of State intends will increase community ownership of local low carbon energy schemes through shared ownership schemes;
(d) the steps the Secretary of State is taking to develop new market rules to make it easier for low carbon community energy schemes to sell the energy they generate;
(e) the number and the capacity of the new community energy schemes the Secretary of State expects to be constructed as a result of the measures set out in the report.
(3) Not less than twelve months after the publication of the report, and not later than the end of each subsequent period of twelve months, ending five years after the publication of the report, the Secretary of State must lay before Parliament and publish an assessment of the progress made by the policies, programmes and other initiatives set out in the report.
(4) The assessment must set out—
(a) the total amount of financial support provided by the policies in the report;
(b) the number and capacity of low carbon community energy schemes —
(i) completed, and
(ii) in development;
(c) the number and capacity of new shared ownership schemes;
(d) any changes the Secretary of State proposes to make to the policies, programmes and other initiatives included in the original report.”—(Olivia Blake.)
This new clause is intended to replace clauses 272 and 273, if those clauses are removed as indicated by Government Amendments 15 and 16. It would require the Government to report annually for 5 years on the support it is providing to Community Energy schemes and the number and capacity of such schemes that are delivered.
Brought up, and read the First time.
Olivia Blake
I beg to move, That the clause be read a Second time.
I redeclare my interest: my husband is a company secretary of an organisation called Sheffield Renewables, which is a community benefit society that funds, develops, owns and operates renewable energy systems in Sheffield.
It might seem strange that I tabled new clause 87, given that the Lords passed Labour’s much stronger new clause on community energy. I am extremely disappointed that the Government voted to strike out any attempt to use the Bill to further support community energy schemes. Although the Minister made some comments about wanting to support community energy, the Bill is somewhat lacking in that regard. New clause 87 gives the Government an opportunity to support some elements of community energy schemes.
A Bill that talks about energy security but fails to help many community groups across the UK that are raring to provide clean, green energy seems to have failed from the outset. Many community groups are being offered funding, but they are unable to take up the opportunities because they are unsure and there is uncertainty in this space. I spoke last week about the huge and growing public support for community energy projects and the failure of Government policy to respond to it. I hope that my new clause, which I admit does not go nearly far enough, will focus minds on this important issue.
The new clause is quite straightforward: it gives the Minister three months to report on what support will be provided for community energy for the next five years. I chose that timescale because Ministers often assure us that the Government’s review of electricity market arrangements, or REMA, will improve community energy’s access to markets and thus improve its viability. I am therefore asking for reports on the stop-gap measures that are needed before those arrangements come in and for an extension to the period to deal with any delays.
I have to be honest: I am almost embarrassed by the new clause. With sky-high energy bills and the climate crisis, we should be acting, not reporting, but perhaps reports will stimulate a bit of growth in action on the Minister’s part. The new clause also does not propose new policies to support community energy. I stress that that is not because such policies are not needed. Were we to have a Labour Government, there would be something much more robust in the Bill on this policy area, like clauses 272 and 273, which the Opposition defended last week but the Government were successful in stripping from the Bill.
The new clause asks the Minister to report on how he will refinance and restart the urban and rural community energy funds, which closed when the initial money allocated was used up. In its former shape, his Department supported those schemes at the time, so there is no reason why, if the Minister wants to see more community energy, he could not relaunch them now, or look into doing so. The new clause leaves scope for other initiatives to be included in the report, whether new funds, new policies or a new approach to allowing community groups to buy into and benefit from larger commercial schemes in their area. It would require assessments of progress and updates to be done annually for five years after the report is published, to check that we are on track.
As I say, we should be doing so much more with the Bill in this space, but I would love to hear the Minister’s response to the new clause and to the idea that the Government should, at the very least, restart the support schemes that they have let lapse and report on progress until REMA is completed.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Sharma. I want to say a few words in support of new clause 87. As the hon. Member for Sheffield, Hallam outlined, it is not even that onerous, as it is about reporting going forward, although I always find that clauses that require reporting still have the Government running a mile, because they do not like to commit to it.
Government Members voted to remove from the Bill clauses 272 and 273, which were in favour of community energy schemes and putting in place arrangements to procure them. The argument from the Minister was:
“Introducing a fixed price would be a step backwards, as it requires all energy consumers to pay more than the market price for electricity to subsidise local communities that benefit from community energy projects.”––[Official Report, Energy Public Bill Committee, 20 June 2023; c. 357.]
I do not think it is too onerous to ask all billpayers to help to subsidise a few community schemes. Will the Minister write to the Committee to outline what additional costs the Government think would go on to all billpayers’ bills if there was a fixed price guarantee for local energy schemes? It is really important that we understand what the Government think the extra costs would be for billpayers.
The Government happily tell us that the regulated asset base model in the Nuclear Energy (Financing) Act 2022 will add £10 to every single bill in the UK. If that is the case and it is okay for nuclear, why do they not look at what the costs and benefits overall for local community energy schemes would be? That is my main point.
Will the Minister also write to the Committee to outline the amount of community energy that has been deployed each year in the last decade? That will allow us to understand the trends and how easy it is for community energy schemes to access the grid and the system and whether there are any blockers.
Finally, perhaps the Minister does not need to write to us on this, but will he spell out what he thinks the flaws are now in the original Local Electricity Bill that he did not see at the time, when he signed up as a supporter and sponsor of the Bill? What are the defects, since he is now against such a concept?
Andrew Bowie
I thank hon. Members for their contributions, and especially the hon. Member for Sheffield, Hallam for tabling new clause 87, which seeks to create a new community energy strategy, to be followed up with annual reports to Parliament on progress for the sector. The Committee discussed community energy in great detail last week—and a very enjoyable debate it was too. I reassure the Committee that the Government are, as we speak, looking closely at this matter. I urge all Members to watch this space.
Nevertheless, I remind Members that the Government’s general approach to community energy is already laid out in the net zero strategy and the net zero growth plan. As such, we do not see any added value in mandating a dedicated community energy strategy or annual report in the manner set out in the new clause. Instead, we believe it is more beneficial to the community energy sector for the Government to continue our approach to help local authorities and community energy groups to work together to develop funding for projects across the net zero agenda, with funding from existing sources such as UK growth funding schemes.
For example, the UK shared prosperity fund provides £2.6 billion in funding for investment in places, including for community infrastructure projects. Ofgem supports community energy projects and welcomes applications to the industry voluntary redress scheme. Through our local net zero hubs, we are supporting local authorities and community energy groups to work together, including by funding a pilot programme that supports local authorities to develop community-led energy groups and projects.
The Government have also reintroduced the community energy contact group to strengthen our engagement with the sector. I have already outlined our arguments as to why the new clause would not be fair, so I am afraid that I cannot commit to writing to the Committee, as the hon. Member for Kilmarnock and Loudoun asks me to. In relation to why my own personal position may be now what it is, I have always been, and remain, committed to supporting community-led energy groups across the country. That is why we are working to implement schemes to support those projects across the entire UK. We will continue to do so, and I will be their biggest champion.
Alan Brown
It was positive to hear the Minister say, “Watch this space” because the Government are reviewing things. However, I reiterate my request that he writes to the Committee to outline what he thinks the costs will be. That must be a Government concern if they are considering how to provide further support to community energy schemes. That is a serious request—I am not trying to be awkward. Also, how much community energy is being deployed each year?
Andrew Bowie
I would be delighted to engage in further discussion with the hon. Gentleman and other interested hon. Members. I will commit to ongoing engagement, but we do not believe that the new clause provides any added value.
Dr Alan Whitehead (Southampton, Test) (Lab)
The Minister said, “Watch this space”. It would be very helpful if he were to give us an outline of what the content of the space might actually look like.
Andrew Bowie
Far be it from me to spoil the enjoyment for hon. Members! I said this when we debated it last week, and I say it again: we continue to work on this. We continue to look at what more the Government can do to support community energy projects across the United Kingdom, and I will commit to provide an update on the next steps ahead of Report. I hope that is suitable for hon. Members. I do not believe that this new clause would add any value, so I encourage—indeed, I humbly beg—the hon. Member for Sheffield, Hallam to withdraw her new clause.
Olivia Blake
Beg the Minister might, but I will be pushing this new clause to a vote. The comments made by the SNP spokesperson, the hon. Member for Kilmarnock and Loudoun, and the Opposition spokesperson, my hon. Friend the Member for Southampton, Test, show why we are not completely confident that information from the Minister will be forthcoming, but I welcome his comments and his statement that he is currently looking at this and that there will be something ahead of Report. However, I truly feel that this new clause is the bare minimum requirement in this space, so we will push it to a vote.
Question put, That the clause be read a Second time.
Dr Whitehead
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under you, Mr Sharma, and I hope we will complete this Committee stage under your chairmanship today. New clause 88 involves a little bit of Energy Bill archaeology. I will explain what I mean by holding up a copy of the Energy Bill as it first appeared. Archaeology is necessary because it first appeared on 6 July 2022—we have been working on the Bill for that long.
Among the 270-odd clauses in the original Bill, clause 161 sought to extend the domestic gas and electricity tariff cap. Under the Domestic Gas and Electricity (Tariff Cap) Act 2018, the tariff cap has a defined life, and the original Bill would have amended the arrangements. The Act also introduced a carefully calibrated procedure to determine how long a cap should last. Ofgem is required to produce an annual report on the tariff cap and, if during that time market conditions have become more straightforward, it can recommend its removal. The report goes to a Minister, who then decides what will happen. This approach started in 2020. If Ofgem reports that market conditions have not returned to normal, the same procedure is carried out again the following year.
That process was time-limited to 2023. Quite clearly, market conditions have not returned to normal, so it is important to extend the mechanism. Essentially, that was what clause 161 in the original Bill did: it extended the arrangements to 2024 and 2025. Again, that was time-limited, with a sunset of 2025. As I recall, that important provision assured the industry and various others that the cap was being actively looked at. That gave a little bit of certainty to the industry, and its reaction was informed by the understanding that a reasonably objective test would carried out for the continuation or otherwise of the price cap.
I will roll forward rapidly to the end of September 2022 and the propitious day on which the right hon. Member for North East Somerset (Sir Jacob Rees-Mogg) became the Secretary of State for Business, Energy and Industrial Strategy. He lost no time in seeking to vandalise this provision by opportunistically inserting a stand-alone schedule to the Energy Prices Act 2022—which it had become necessary to pass—which addressed the enormous rise in prices, what Government intervention might look like and how it could be regulated.
Katherine Fletcher (South Ribble) (Con)
I appreciate that the hon. Gentleman is trying to bring some colour to his remarks, but does he agree that alluding to acts of physical violence in something so important is not a brilliant plan?
Dr Whitehead
I would agree if that were not my metaphorical way. Of course I do not believe that the former Secretary of State for Business, Energy and Industrial Strategy is going to take the Minister into a cupboard and do him over; it is a metaphor that I hoped might convey some of the possible lingering influence of the right hon. Member for North East Somerset on our present considerations. I am sure that the Minister will want to put that lingering influence out of his mind when considering what to do today.
After all the work that has been done on getting this clause back into the Bill, I confidently expect the Minister to greet it with acclamation. He does not have to do any work on it now, because it is ready to go. He can proceed with a Bill he can be proud of through its remaining stages in this House.
Andrew Bowie
For the record, let me make it absolutely clear that I have only the greatest respect for my right hon. Friend the Member for North East Somerset and that he has never expressed any desire to take me into a cupboard and, metaphorically or not, do me over. We enjoy a very good relationship. Although we disagree on some points of principle, we are broadly in agreement on the general direction of travel that is needed for the betterment of this country. I put on record my thanks for his service in supporting the Government in the various offices in which he served.
I also thank the hon. Member for Southampton, Test for tabling new clause 88. I note that it reflects the clauses that were in this Bill when it was first published in July last year, as he has pointed out. However, I am sure that it will not have escaped his notice that a great deal has happened to energy prices since then. Last September, the Government announced a massive package of support for consumers. As part of the work to deliver that package, the Domestic Gas and Electricity (Tariff Cap) Act 2018 was modified by the Energy Prices Act 2022, which received Royal Assent on 25 October.
Those modifications were made so that the tariff cap could function both as a cap to ensure that prices are efficient and as the reference price for the subsidy payments to households under the energy price guarantee. Although energy prices have now fallen below the level at which energy price guarantee payments are being made, it will remain in force until the end of March 2024 to protect households from price spikes. To ensure that the support rates under the energy price guarantee could be set and delivered effectively and quickly, the Energy Prices Act removed the requirement on Ofgem to carry out a review and to produce a report and recommendation to inform annual decisions by the Secretary of State on whether to extend the cap. As a result, there is now no automatic end date for the cap and the Secretary of State will give notice of when the tariff cap will end, but that does not change the fact that the tariff cap was always intended to be a temporary measure. It remains so, for now; as stated in the Government’s energy security plan, we intend to consult later this summer on the future of the price cap. In the light of my remarks, I hope that the hon. Member for Southampton, Test will feel that he can withdraw the new clause.
Dr Whitehead
I thank the Minister for his remarks. Water has indeed flowed under the bridge since the original intentions of the Bill were set out, but I think he has rather missed the point that I was trying to make. We are not saying that there should not be a price cap or that there should be no protection against price spikes and so on, which is what the price cap does at the moment. Nor are we saying that the market has returned to normal. What we are saying is that there was a perfectly good procedure in place, which could work perfectly well under the present circumstances, to give confidence to industry and various others that the price cap would be considered fairly carefully during its progress. That has been replaced by an occult process whereby the Secretary of State just has an idea or does not have an idea.
The whole framework of proper discussion, proper argument, proper reporting and proper consideration has been knocked away. The Minister says that there will be consultation on the future of the price cap at some stage, but I think he will agree that that is not a proper substitute for the clear arrangements that were originally in place under the 2018 Act and that were supposed to be in place under the Bill.
That is the point that we are trying to make: not that under the present circumstances the price cap has somewhat changed its function in terms of being a back-up to other measures that are in place for pricing, but that the long-term issue of the price cap itself was previously under careful consideration and now is not. That is the fundamental difference between the legislation as it was and the legislation as it is now, on a half-baked, un-thought-out basis, in the medium term.
I am both encouraged and disappointed by what the Minister has had to say. We want it on the record that we would like the proper procedures for price cap management to be reinstated. We have produced a method that can and will work, which I think hon. Members will agree is probably superior to a half-promise that something might happen at some stage, with some consideration being given to consultation. On that basis, we would like to press new clause 88 to a vote, so that at the very least we can place it on the record that we think it important and that we are disappointed that the Government do not appear to have taken our argument on board.
Question put, That the clause be read a Second time.
Dr Whitehead
I beg to move, That the clause be read a Second time.
The Committee will be delighted to know that I do not intend to detain it for any length of time on the new clause, which follows on from our earlier debate about the setting up of the independent system operator.
We think something is missing from the otherwise pretty comprehensive and good arrangement for the setting up, organisation and running of the independent system operator, which we completely support; although we would like to see the independent system operator playing more of a system architect role than is presently envisaged, in general we are absolutely for setting up the ISOP in the way that has been described. What ought to follow is at least a consideration of whether the arrangements between the ISOP and the distributed network operators, on which we tabled some amendments at the time, are sufficiently robust to enable a system operator function to operate at all levels of grid delivery. As I said a little while ago, there are decreasing distinctions between the lower-level grid operated by the DNOs and the high-level grid, which is the function of the National Grid ESO at the moment.
The possibility arises that it will be possible—more than possible—to establish regional independent system operators to perform, in conjunction with the ISOP, the same sort of function that is presently envisaged for the ISOP itself. That would be a slightly different function, inasmuch as the regional system operators could be responsible for what is increasingly likely to happen with regional balancing, ancillary services and other such things that are part of the emerging structure of the grid as a whole, as we move from a centralised to a much more decentralised grid arrangement.
RISOs, as I call them, would be able to play a substantial role in that. All new clause 88 suggests is that the Secretary of State produce a report on the advisability of establishing regional independent system operators. I called them RISOs a moment ago, but RISOs are actually duplicating machines favoured by those with left-wing tendencies producing leaflets; these would be RISOPs, which could be established to provide that important link arrangement between the high-level grid and the low-level grid for the future.
That is all, really, as far as the new clause is concerned. It does not require anything earth-moving to take place in the immediate future—just consideration of this arrangement. It may well be that just by raising the matter I will have put the thought in the Secretary of State’s mind that maybe we should consider going in that direction; it is certainly a direction the Opposition would consider going in if our roles on these Benches were reversed. My purpose in tabling new clause 89 was to raise the issue and see what the Minister has to say about it; I certainly do not intend to press it to a vote.
Andrew Bowie
For the record, may I point out that it is not just leaflet publishers of left-wing tendencies who are au fait with risograph printers? I have spent many hours standing by a RISO producing leaflets for those of centre-right tendencies.
I may be wrong but, according to my notes, this is the last new clause or amendment the hon. Member for Southampton, Test will speak to, so I thank him and the shadow team for the very collegiate way in which they have proceeded through Committee stage. I look forward to engaging with the hon. Gentleman again on Report and Third Reading, and indeed in the interim, when I am sure we will be corresponding. I thank all hon. Members for their contributions thus far.
New clause 89 speaks to the creation of a new set of bodies to deliver regional system operation and planning, and in many ways repeats the intentions of amendment 97, which the hon. Member for Southampton, Test tabled. As with that amendment, the new clause creates powers relating to the operation of distribution systems.
Ofgem has recently consulted on the future of local energy institutions and governance, with a focus on the creation of regional system planners specifically. That consultation closed on 10 May, and I suggest that this new clause prejudges the outcome of that work.
Alongside Ofgem, the Government will carefully consider the proposals we are consulting on. If we then proposed legislative or licence changes that affected the relationship between the ISOP and distribution networks, any additional functions accruing to the ISOP would be covered by the wording in clause 119(2)(b) and clause 134(3)(a). That is because those clauses allow for other functions to be conferred on the ISOP under, or by virtue of, legislation other than part 4.
I hope that puts the mind of the hon. Member for Southampton, Test at ease and that he feels able to withdraw his new clause.
Dr Whitehead
I have no further comments to make, other than to thank the Minister for his comments. There are indeed consultations under way through Ofgem, and I look forward to seeing what those have to say. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 90
Objections by planning authorities to applications for consent under section 36 or 37 of the Electricity Act 1989
“(1) Schedule 8 to the Electricity Act 1989 is amended as follows.
(2) Omit paragraph 2.
(3) In the cross-heading before paragraph 3, omit ‘by other persons’.
(4) In paragraph 3, omit sub-sub-paragraph (2)(a).”—(Alan Brown.)
This new clause would remove the ability of a local planning authority automatically to cause a public inquiry to be held by objecting to an application to the Secretary of State for consent under section 36 or 37 of the Electricity Act 1989, instead leaving Ministers to decide whether a public inquiry should be held.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss new clause 91—Variations of consents under section 37 of the Electricity Act 1989—
“(1) The Electricity Act 1989 is amended as follows.
(2) After section 37, insert—
‘37A Variation of consents under section 37
(1) The person for the time being entitled to the benefit of a section 37 consent may make an application to the Secretary of State for the consent to be varied.
(2) Regulations made by the Secretary of State may make provision about the variation of a section 37 consent, including in particular provision about—
(a) the making and withdrawal of applications;
(b) fees;
(c) publicity and consultation requirements;
(d) rights to make representations;
(e) public inquiries;
(f) consideration of applications.
(3) Regulations under subsection (2) may provide for any statutory provision applicable to the grant of a section 37 consent to apply with specified modifications to the variation of a section 37 consent.
(4) On an application for a section 37 consent to be varied, the appropriate authority may make such variations to the consent as appear to the authority to be appropriate, having regard (in particular) to—
(a) the applicant's reasons for seeking the variation;
(b) the variations proposed;
(c) any objections made to the proposed variations, the views of consultees and the outcome of any public inquiry.
(5) Regulations may make provision treating, for prescribed purposes, a section 37 consent varied under this section as granted in its varied form when the original consent was granted (rather than when the variation was made).
(7) In this section—
“section 37 consent” means a consent granted under section 37 (consent required for overhead lines), whenever granted;
“statutory provision” means a provision of or made under an Act, whenever passed or made; and for this purpose “Act” includes an Act of the Scottish Parliament and an Act of the Assembly.’”
This new clause would introduce into the Electricity Act 1989 provision for applications to vary consents under section 37 (consent required for overhead power lines), which currently, unlike consents under section 36 (construction, extension or operation of generating station), require a new application to be made for consent.
Alan Brown
The Committee must have been delighted that I managed to table two new clauses right at the deadline. Hopefully I will not detain the Committee too long.
These two new clauses derive from liaison and discussions that I had with Scottish and Southern Electricity Networks, which is responsible for the transmission system in the north of Scotland. Its work and infrastructure are clearly going to be integral to having a system that gets renewable energy from the north of Scotland to elsewhere in Great Britain and, in the case of surplus energy, to Ireland and Europe for export. The Minister is obviously well aware of that, given that it relates to his constituency, but hopefully he is also aware of the need to have a streamlined process that facilitates the deployment of critical grid infrastructure and has thought about the issues that the new clauses cover.
Taking offshore wind in the round, there is a target of 50 GW of deployment by 2030, although it has to be said that that was set largely on a whim by Boris Johnson, who raised the target from 30 GW, to 40 GW and then suddenly to 50 GW. Now, I am all for that ambition and that target, and if we achieve the deployment of 50 GW of offshore wind energy by 2030, that would be fantastic, but we need the policies and support in place to make that happen. Right now, even the Government’s own offshore wind champion, Tim Pick, says we are not going to hit that 50 GW target. So is the offshore wind champion still a champion who knows his stuff, or will the Minister explain why Tim Pick is wrong and why that 50 GW target will be achieved by 2030?
Tim Pick said that there is more likely to be 40 GW of deployment by 2030, which arguably would still be a significant achievement, but it would represent only 80% of the current target. The reality is that we have 14 GW of offshore wind deployed at the moment, so if we are to hit 50 GW by 2030, we need 5 GW of new offshore wind to come onstream every year until 2030.
Andrew Bowie
I thank the hon. Gentleman for his contributions on the new clauses. I have said in Committee, on the Floor of the House and elsewhere that this is the biggest challenge we face—connectivity and improving capacity in the grid—if we are to reach our targets, not just on our net zero commitments but in becoming more energy secure and delivering cheaper bills for the British people.
I recognise that the speed of electricity consenting in Scotland is critical to those aims and to the whole UK economy, as I have just suggested. It is important to enable rapid deployment of renewable energy generation and of the transmission lines needed to transport it to consumers across the country. With that goal in mind, we are aware that areas of the Scottish planning system need to be reviewed—specifically the ones that the hon. Member for Kilmarnock and Loudoun just mentioned—and we are committed to speeding up planning decisions across the UK wherever possible.
I am sure, however, that we are all in agreement—I know the hon. Gentleman is—that the issues are incredibly complex and multifaceted, and that any potential changes need to be carefully considered to ensure they are the right ones for consumers and the network. For example, as the Electricity Act 1989 applies to projects in England and Wales less than 132 kV and 2 km, and to all transmission projects in Scotland, we need to be certain that any amendments to the Bill would not have unintended consequences elsewhere. Moreover, we would not want to remove an automatic inquiry trigger without understanding what could replace that process.
The Government share the concerns of the hon. Member for Kilmarnock and Loudoun and we want to find a solution. I have had constructive discussion with the Energy Minister in the Scottish Government and within my Department on how to resolve this issue moving forward, but I am interested to meet the hon. Gentleman and anyone else he might suggest so that we can work together on a solution to this complicated issue. I therefore do not feel that we can accept his new clauses, and I would be grateful if he did not press them to a vote.
Alan Brown
I was shocked when the Minister said that he could not accept the new clauses—I did not see that coming! I am having to think on my feet, because I am completely thrown. Column 1 Column 2 A Minister of the Crown Section (Power of OGA to require information and samples) or (Sanctions: information powers) His Majesty’s Revenue and Customs Section (Power of OGA to require information and samples) or (Sanctions: information powers) The Competition and Markets Authority Section (Power of OGA to require information and samples) or (Sanctions: information powers) The Scottish Ministers Section (Power of OGA to require information and samples) The Welsh Ministers Section (Power of OGA to require information and samples) A Northern Ireland Department Section (Power of OGA to require information and samples) The Office for Budget Responsibility Section (Power of OGA to require information and samples) An enforcing authority Section (Power of OGA to require information and samples) or (Sanctions: information powers) The Statistics Board Section (Power of OGA to require information and samples) or (Sanctions: information powers) The GEMA Section (Power of OGA to require information and samples) or (Sanctions: information powers) The Crown Estate Section (Power of OGA to require information and samples) A manager of the Crown Estate in Scotland Section (Power of OGA to require information and samples)
To make a serious point, I appreciate the Minister’s offer of a meeting, and I would like to take that up. I suggest that we have someone from the industry there as well. I am happy to work with the Minister to see how we can resolve the matter. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Schedule 1
Permitted disclosures of material obtained by OGA
“Disclosure by OGA to specified persons
1 (1) Section (Prohibition on disclosure) does not prohibit a disclosure of protected material by the OGA which—
(a) is made to a person mentioned in column 1 of the table below,
(b) is made for the purpose of facilitating the carrying out of that person’s functions, and
(c) is a disclosure of protected material obtained by the OGA under a provision mentioned in the corresponding entry of column 2 of the table.
(2) In the table—
‘enforcing authority’ has the same meaning as in Part 1 of the Health and Safety at Work etc Act 1974 (see section 18(7)(a) of that Act);
‘manager of the Crown Estate in Scotland’ means a person who for the time being is discharging functions in relation to the management of any property, rights or interests to which section 90B(5) of the Scotland Act 1998 applies;
‘Minister of the Crown’ has the same meaning as in the Ministers of the Crown Act 1975.
(3) Section (Prohibition on disclosure) does not prohibit a disclosure of protected material by the OGA which—
(a) is a disclosure of protected material obtained by it under section (Power of OGA to require information and samples),
(b) is made to the Natural Environment Research Council, or any other similar body carrying on geological activities, and
(c) is made for the purpose of enabling the body to prepare and publish reports and surveys of a general nature using information derived from the protected material.
(4) A person to whom protected material is disclosed by virtue of sub-paragraph (1) or (3) may use the protected material only for the purpose mentioned in sub-paragraph (1)(b) or (3)(c) (as the case may be).
(5) Section (Prohibition on disclosure) does not prohibit a person mentioned in sub-paragraph (4) from disclosing the protected material so far as necessary for the purpose mentioned in that sub-paragraph.
(6) The Secretary of State may by regulations amend the table in sub-paragraph (1)—
(a) to remove a person from column 1,
(b) to add to column 1 a person to whom sub-paragraph (7) applies, or
(c) to add, remove or change entries in column 2.
(7) This sub-paragraph applies to—
(a) persons holding office under the Crown;
(b) persons in the service or employment of the Crown;
(c) persons acting on behalf of the Crown;
(d) government departments;
(e) publicly owned companies as defined in section 6 of the Freedom of Information Act 2000.
(8) Regulations under sub-paragraph (6) are subject to the affirmative procedure.
Disclosure required for returns and reports prepared by OGA
2 (1) Section (Prohibition on disclosure) does not prohibit the OGA from using protected material obtained by the OGA under section (Power of OGA to require information and samples) for the purpose of—
(a) preparing such returns and reports as may be required under obligations imposed by or under any Act;
(b) preparing and publishing reports and surveys of a general nature using information derived from the protected material.
(2) Section (Prohibition on disclosure) does not prohibit the OGA from disclosing protected material so far as necessary for those purposes.
Disclosure in exercise of certain OGA powers
3 (3) Section (Prohibition on disclosure) does not prohibit a disclosure of protected material if it is made in the exercise of the OGA’s powers under section (Publication of details of sanctions) (publication of details of sanctions).
Disclosure after specified period
4 (1) Section (Prohibition on disclosure) does not prohibit protected material obtained by the OGA under section (Power of OGA to require information and samples) from being—
(a) published, or
(b) made available to the public (where the protected material includes samples),
by the OGA or a subsequent holder at such time as may be specified in regulations made by the Secretary of State.
(2) Regulations under sub-paragraph (1) may include provision permitting protected material to be published, or made available to the public, immediately after it is provided to a person.
(3) Before making regulations under sub-paragraph (1), the Secretary of State must consult such persons as the Secretary of State considers appropriate.
(4) Sub-paragraph (3) does not apply if the Secretary of State is satisfied that consultation is unnecessary having regard to consultation carried out by the OGA in relation to what time should be specified in regulations under sub-paragraph (1).
(5) Regulations under sub-paragraph (1) are subject to the affirmative procedure.
(6) In determining the time to be specified in respect of protected material in regulations under sub-paragraph (1), the Secretary of State must have regard to the following factors—
(a) whether the specified time will allow owners of protected material a reasonable period of time to satisfy the main purpose for which they acquired or created the material;
(b) any potential benefits to the [carbon storage] industry of protected material being published or made available at the specified time;
(c) any potential risk that the specified time may discourage persons from acquiring or creating carbon storage information or carbon storage samples;
(d) any other factors the Secretary of State considers relevant.
(7) In balancing the factors mentioned in sub-paragraph (6)(a) to (d), the Secretary of State must take into account the principal objectives of the Secretary of State set out in section 1(1).
(8) For the purposes of sub-paragraph (6)(a), the owner of protected material is the person by whom, or on whose behalf, the protected material was provided to the OGA under section (Power of OGA to require information and samples).
Disclosure with appropriate consent
5 (1) Section (Prohibition on disclosure) does not prohibit a disclosure of protected material if it is made with the appropriate consent.
(2) For this purpose a disclosure is made with the appropriate consent if—
(a) in the case of disclosure by the OGA, the original owner consents to the disclosure;
(b) in the case of disclosure by a subsequent holder—
(i) the OGA consents to the disclosure, and
(ii) where the protected material in question was provided to the OGA under section (Power of OGA to require information and samples), the OGA confirms that the original owner of the material also consents to the disclosure.
(3) For the purposes of sub-paragraph (2), the original owner of protected material provided to the OGA is the person by whom, or on whose behalf, the protected material was so provided.
Disclosure required by legislation
6 Section (Prohibition on disclosure) does not prohibit a disclosure of protected material required by virtue of an obligation imposed by or under this or any other Act.
Disclosure for purpose of proceedings
7 (1) Section (Prohibition on disclosure) does not prohibit a disclosure of protected material by the OGA for the purposes of, or in connection with—
(a) civil proceedings, or
(b) arbitration proceedings.
(2) Section (Prohibition on disclosure) does not prohibit a disclosure of protected material by the OGA for the purposes of, or in connection with—
(a) the investigation or prosecution of criminal offences, or
(b) the prevention of criminal activity.”—(Andrew Bowie.)
This new schedule contains provision about permitted disclosures of material obtained by the OGA for the purposes of NC14.
Brought up, and read the First and Second time, and added to the Bill.
New Schedule 2
Carbon storage information and samples: appeals
“Part 1
Appeals against decisions relating to information and samples
Appeals in relation to information and samples plans
1 (1) A person affected by any decision of the OGA to which effect is given by the preparation of an information and samples plan may appeal against it to the Tribunal—
(a) on the ground that the decision was not within the powers of the OGA, or
(b) on the ground that the plan is unreasonable.
(2) On an appeal under this paragraph the Tribunal may—
(a) affirm, vary or quash the decision under appeal,
(b) remit the decision under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate, or
(c) substitute its own decision for the decision under appeal.
Appeals against notices requiring provision of information or samples
(1) A person affected by any decision of the OGA to which effect is given by the giving of a notice requiring the provision of information or samples under section (Power of OGA to require information and samples) may appeal against it to the Tribunal—
(a) on the ground that the decision was not within the powers of the OGA, or
(b) on the ground that the length of time given to comply with the notice is unreasonable.
(2) On an appeal under this paragraph the Tribunal may—
(a) affirm, vary or quash the decision under appeal,
(b) remit the decision under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate, or
(c) substitute its own decision for the decision under appeal.
Part 2
Appeals relating to enforcement of sanctionable requirements
Appeals in relation to sanction notices
(1) Where a sanction notice is given under section (Power of OGA to give sanction notices) in respect of a failure to comply with a sanctionable requirement, an appeal may be made—
(a) under paragraph 4 (on the ground that there was no such failure to comply);
(b) under paragraph 5 (against the sanction imposed by the notice).
(2) Where an appeal is made in relation to a sanction notice, the notice ceases to have effect until a decision is made by the Tribunal to confirm, vary or cancel the notice.
(3) Where, on an appeal made in relation to a sanction notice—
(a) the Tribunal makes a decision to confirm or vary the notice, and
(b) an appeal is or may be made in relation to that decision,
the Tribunal, or the Upper Tribunal, may further suspend the effect of the notice pending a decision which disposes of proceedings on such an appeal.
Appeals against finding of failure to comply
4 (1) An appeal may be made to the Tribunal by the person, or by any of the persons, to whom a sanction notice is given in respect of a failure to comply with a sanctionable requirement, on the grounds that the person, or persons, did not fail to comply with the requirement.
(2) On an appeal under this paragraph, the Tribunal may confirm or cancel the sanction notice.
(3) Where sanction notices are given on more than one occasion in respect of the same failure to comply with a sanctionable requirement—
(a) an appeal under this paragraph may be made only in relation to the sanction notice, or any of the sanction notices, given on the first of those occasions, and
(b) appeals in relation to sanction notices given on subsequent occasions in respect of that failure to comply may be made only under paragraph 5.
Appeals against sanction imposed
(1) Where a sanction notice is given in respect of a failure to comply with a sanctionable requirement, a person mentioned in sub-paragraph (2) may appeal to the Tribunal against any of the decisions of the OGA mentioned in sub-paragraph (3) (as to the sanction imposed by the notice) on the grounds mentioned in sub-paragraph (4).
(2) The persons who may appeal are—
(a) the person, or any of the persons, to whom the notice was given, and
(b) in the case of an operator removal notice under section (Operator removal notices), the licensee under whose carbon storage licence the exploration operator operates.
(3) The decisions against which an appeal may be made are—
(a) where an enforcement notice has been given, the decision as to—
(i) the measures that are required to be taken for the purposes of compliance with the sanctionable requirement, or
(ii) the period for compliance with the sanctionable requirement;
(b) where a financial penalty notice has been given, the decision—
(i) to impose a financial penalty, or
(ii) as to the amount of the financial penalty imposed;
(c) where a revocation notice has been given, the decision to revoke the storage permit;
(d) where an operator removal notice has been given, the decision to require the removal of the exploration operator.
(4) The grounds on which an appeal may be made are that the decision of the OGA—
(a) was unreasonable, or
(b) was not within the powers of the OGA.
(5) On an appeal under this paragraph against a decision made in relation to an enforcement notice, the Tribunal may—
(a) confirm or quash the decision, in the case of a decision mentioned in sub-paragraph (3)(a)(i) (remedial action), or
(b) confirm or vary the decision, in the case of a decision mentioned in sub-paragraph (3)(a)(ii) (period for compliance),
and confirm, vary or cancel the enforcement notice accordingly.
(6) On an appeal under this paragraph against a decision made in relation to a financial penalty notice, the Tribunal may—
(a) confirm or quash the decision, in the case of a decision mentioned in sub-paragraph (3)(b)(i) (imposition of penalty), or
(b) confirm or vary the decision, in the case of a decision mentioned in sub-paragraph (3)(b)(ii) (amount of penalty),
and confirm, vary or cancel the financial penalty notice accordingly.
(7) The Tribunal must have regard to any guidance issued by the OGA under section (Financial penalty notices) (6)(a) when deciding whether to confirm or vary a decision as to the amount of a financial penalty under sub-paragraph (6)(b).
(8) On an appeal under this paragraph against a decision to revoke a storage permit or to require the removal of an exploration operator the Tribunal may—
(a) confirm the decision,
(b) vary the decision by changing the revocation date or the removal date, as the case may be, or
(c) quash the decision,
and confirm, vary or cancel the sanction notice in question accordingly.
(9) Where a decision is quashed under sub-paragraph (5)(a), (6)(a) or (8), the Tribunal may remit the decision to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate.
Appeals against information requirements
(1) A person to whom a notice is given under section (Sanctions: information powers) may appeal against it to the Tribunal on the grounds that—
(a) the giving of the notice is not within the powers of the OGA, or
(b) the length of time given to comply with the notice is unreasonable.
(2) On an appeal under this paragraph the Tribunal may—
(a) confirm, vary or cancel the notice, or
(b) remit the matter under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate.”—(Andrew Bowie.)
This new schedule contains provision about appeals in connection with the new Chapter intended to be formed by NC8 to NC28 (see the explanatory statement for NC8).
Brought up, read the First and Second time, and added to the Bill.
Clause 274
Power to make consequential provision
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 114, in clause 275, page 242, line 31, at end insert—
“(10A) The Secretary of State may not make regulations under this Act which would affect any matter within the competence of the Scottish Parliament unless the Secretary of State has first—
(a) consulted the Scottish Ministers on a draft of the regulations; and
(b) obtained the consent of the Scottish Parliament to the regulations.”
Clauses 275 to 277 stand part.
Government amendments 171, 172, 123, 133, 131 and 175.
Clause 278 stand part.
Government amendment 17.
Clause 279 stand part.
Andrew Bowie
I have just a 3,000-word speech—[Laughter.]
Government amendment 171 is consequential on the previously debated new clauses associated with providing powers to the Secretary of State to design and allocate a RAB as part of the hydrogen transport business model. It sets out that these new clauses come into force two months after Royal Assent.
Government amendment 172 is consequential on the previously debated Government new clause 72, associated with providing powers to the Secretary of State to modify the Gas Act 1986 in relation to hydrogen. It sets out that Government new clause 72 comes into force two months after Royal Assent.
Government amendments 123 and 133 are consequential and necessary to ensure that the previously debated Government new cause 52, on the Ofgem net zero duty, and new clauses 53 and 54, on energy-intensive industries, come into force two months after Royal Assent.
Government amendment 131, alongside Government new clause 55, which we have already discussed, will provide the Secretary of State with the power to make changes to the Nuclear Installations Act 1965 regarding the convention on supplementary compensation for nuclear damage and other relevant legislation, if required in the future. That would be by means of an order made through the affirmative procedure. This power will come into force two months after Royal Assent.
Government amendment 175 means that the new clauses relating to Great British Nuclear come into force two months after Royal Assent. Government amendment 17 removes the privilege amendment added to the Bill by the Lords. That is standard procedure.
Clauses 274 to 279 are general tidying-up provisions at the end of the Bill. Clause 274 provides the Secretary of State with a regulation-making power to make consequential amendments that arise from the Bill.
Clause 275 provides that regulations made under the Bill are to be made by statutory instrument. Clause 276 provides information on how terms that are used throughout the Bill should be interpreted in the Bill. Separate interpretation provisions are found in other parts of the Bill where those terms appear only in those parts.
Clause 277 sets out the territorial extent of provisions in the Bill. Clause 278 sets out when the provisions in the Bill come into force. Finally, clause 279 confirms the short title by which the Bill may be cited.
Dr Whitehead
I also have a 3,000-word speech, but I will not give it today. The Government amendments and clauses are wholly unexceptional, and are essential for the speed of the Bill. I have nothing further to add to what the Minister said.
Alan Brown
I will be brief. Amendment 114 is about getting the consent of Scottish Ministers before the passing of regulations. I could have tabled it to any number of previous clauses, but this is the most appropriate clause for it to relate to, because it relates to the regulations made under the whole Bill.
There has been talk of collegiate working—the two Governments working together—and the Minister said that he wants to find a different process, but there remain concerns that unless there is a firmed-up process, there is a risk that, somewhere down the line, policies and regulations will be proposed against the consent of Scottish Ministers.
The Scottish Government support the Bill; we are working together in these policy areas. It is not about trying to give the Scottish Government some sort of veto but about working together and ensuring that processes are in place that allow for not just consultation but taking the advice and wishes of the Scottish Government on board.
I know that the word “consent” always makes the Westminster Government very nervous, because they think it gives too much power to the Scottish Parliament, but it is not about that. It is not about political fights; it is about working together and ensuring that the wishes of the Scottish Government in respect of energy matters and considerations are taken on board.
Andrew Bowie
I thank the hon. Member for Kilmarnock and Loudoun for amendment 114. I highlight the fact that the UK Government have worked closely and constructively with the devolved Governments during the preparation and passage of the Bill. As I have said already, I recently met the Scottish Minister for Energy and the Environment, Gillian Martin, to discuss the topic of this amendment. As I mentioned, the negotiations on the legislative consent motion are still ongoing, and I would not want to prejudge any of those discussions.
The Bill has been carefully designed to respect the devolution settlements. We have already included consultation requirements with the devolved Governments in areas where the Bill provides powers to make regulations in devolved areas, and we have offered to enhance them. Those requirements provide Scottish Ministers with appropriate opportunities to contribute to the development of regulations. Indeed, British Government officials regularly engage with their Scottish Government counterparts and share information on any upcoming UK Government secondary legislation that legislates on devolved matters in Scotland. We will, of course, continue to do so.
Amendment 114 would require consent from the Scottish Parliament for each regulation. I and the Government believe that imposing a blanket consent procedure and a lengthy process on future secondary legislation is unnecessary, creates additional administrative burdens and risks the making of future legislation. I hope that, with those comments, the hon. Gentleman will find it within himself to withdraw his amendment.
Alan Brown
I do not think it would be an unnecessary legislative burden, to be honest. If it is some simple process, consent will be equally simple to achieve, so I do not think it would unduly delay things or overcomplicate them. I will not press amendment 114, but I reserve the right to table it on Report, because I really want to ensure that things are resolved to the satisfaction of each side.
Question put and agreed to.
Clause 274 accordingly ordered to stand part of the Bill.
Clause 275
Regulations
Amendment made: 19, in clause 275, page 241, line 35, after “State” insert “, the Treasury”.—(Andrew Bowie.)
This amendment provides for regulations made by the Treasury to be made by statutory instrument. This will affect regulations under paragraph 9 of Schedule 7.
Clause 275, as amended, ordered to stand part of the Bill.
Clauses 276 ordered to stand part of the Bill.
Clause 277
Extent
Amendments made: 168, in clause 277, page 243, line 6, at end insert
“, except section (Power to modify Gas Act 1986 in relation to hydrogen)”.
This amendment is consequential on Amendment 170.
Amendment 169, in clause 277, page 243, line 16, at end insert—
“(aa) sections (Key definitions for Part), (Designation), (Designation: procedure), (Revocation of designation), (Grant, extension or restriction of gas transporter licence by Secretary of State), (Applications for grant etc of gas transporter licence), (Modification of gas transporter licence by Secretary of State), (Scope of modification powers under section (Modification of gas transporter licence by Secretary of State)), (Procedure etc relating to modifications under section (Modification of gas transporter licence by Secretary of State)), (Information and advice), (Conditions of gas transporter licences for conveyance of hydrogen), (Secretary of State directions to the GEMA) and (Repeal of Part);”.
This amendment provides for the new clauses that are intended to form a new Part inserted after Part 2 to extend to England and Wales and Scotland.
Amendment 170, in clause 277, page 243, line 17, at end insert—
“(ba) section (Power to modify Gas Act 1986 in relation to hydrogen);”.
This amendment provides for NC72 to extend to England and Wales and Scotland.
Amendment 174, in clause 277, page 243, line 22, at end insert—
“(h) sections (Great British Nuclear), (Crown status), (Great British Nuclear’s objects), (Financial assistance), (Secretary of State directions and guidance), (Annual report), (Annual accounts), (Transfer schemes), (Transfer schemes: compensation), (Transfer schemes: taxation), (Transfer schemes: provision of information or assistance), (Reimbursement and compensation in connection with designation) and (Pension arrangements in connection with Great British Nuclear);”.—(Andrew Bowie.)
This amendment means that the new clauses relating to Great British Nuclear extend to England and Wales and Scotland.
Clause 277, as amended, ordered to stand part of the Bill.
Clause 278
Commencement
Amendments made: 171, in clause 278, page 244, line 7, at end insert—
“(ba) sections (Key definitions for Part), (Designation), (Designation: procedure), (Revocation of designation), (Grant, extension or restriction of gas transporter licence by Secretary of State), (Applications for grant etc of gas transporter licence), (Modification of gas transporter licence by Secretary of State), (Scope of modification powers under section (Modification of gas transporter licence by Secretary of State)), (Procedure etc relating to modifications under section (Modification of gas transporter licence by Secretary of State)), (Information and advice), (Conditions of gas transporter licences for conveyance of hydrogen), (Secretary of State directions to the GEMA) and (Repeal of Part);”.
This amendment provides for the new clauses that are intended to form a new Part, to be inserted after Part 2, to come into force two months after Royal Assent.
Amendment 172, in clause 278, page 244, line 9, at end insert—
“(ea) section (Power to modify Gas Act 1986 in relation to hydrogen);”.
This amendment provides for NC72 to come into force two months after Royal Assent.
Amendment 123, in clause 278, page 244, line 10, at end insert—
“(ea) section (Principal objectives of Secretary of State and GEMA);”.
This amendment provides for NC52 to come into force two months after Royal Assent.
Amendment 133, in clause 278, page 244, line 12, at end insert—
“(ga) sections (Electricity support payments for energy-intensive industries) and (Levy to fund electricity support payments);”.
This amendment provides for NC53 and NC54 to come into force two months after Royal Assent.
Amendment 131, in clause 278, page 244, line 16, at end insert—
“(l) section (Convention on Supplementary Compensation for Nuclear Damage: implementation power).”.
This amendment provides for NC55 to come into force 2 months after Royal Assent.
Amendment 175, in clause 278, page 244, line 16, at end insert—
“(l) sections (Great British Nuclear), (Crown status), (Great British Nuclear’s objects), (Financial assistance), (Secretary of State directions and guidance), (Annual report), (Annual accounts), (Transfer schemes), (Transfer schemes: compensation), (Transfer schemes: taxation), (Transfer schemes: provision of information or assistance), (Reimbursement and compensation in connection with designation) and (Pension arrangements in connection with Great British Nuclear);”.—(Andrew Bowie.)
This amendment means that the new clauses relating to Great British Nuclear come into force 2 months after Royal Assent.
Clause 278, as amended, ordered to stand part of the Bill.
Clause 279
Short title
Amendment made: 17, in clause 279, page 244, line 29, leave out subsection (2).—(Andrew Bowie.)
This amendment removes the privilege amendment inserted by the Lords.
Clause 279, as amended, ordered to stand part of the Bill.
Title
Andrew Bowie
I beg to move amendment 11, in title, line 3, leave out “industrial”.
This amendment is consequential on Amendment 10.
Andrew Bowie
The amendments simply make changes to the Bill’s long title to reflect amendments made in Committee. The amendments reflect the introduction of measures on greenhouse gas removals, hydrogen transport and storage, and energy-intensive industries, and ensure that they are reflected in the Bill’s long title.
Amendment 11 agreed to.
Amendments made: 173, in title, line 4, after “production” insert “and transportation”.
This amendment makes a change to the long title to reflect NC59, NC60, NC61, NC62, NC63, NC64, NC65, NC66, NC67, NC68, NC70 and NC71 (which are intended to form a new Part to be inserted after Part 2).
Amendment 134, in title, line 7, after “codes;” insert—
“about financial support for persons carrying on energy-intensive activities;”.—(Andrew Bowie.)
This amendment is consequential on NC53 and NC54. It reflects those new clauses in the Bill’s long title.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Andrew Bowie
Thank you, Mr Sharma, for your excellent chairing of the Committee this morning, and thank you to Mr Gray, Dr Huq and Ms Nokes for their equally excellent chairmanship over the course of the Committee.
I pay special tribute to the Clerks and to my officials for their tireless work on what is quite a hefty piece of legislation. I also thank Members on both sides of the Committee for the constructive, thoughtful and insightful debate on this landmark Bill. I have already thanked the shadow Minister, the hon. Member for Southampton, Test, for his overall support, and for our way of working in Committee, which has been collegiate and good mannered—well, not good mannered. [Interruption.] Bad mannered! [Laughter.] Although we have not agreed on every detail, I thank him for his knowledgeable contributions.
The Energy Bill will provide a clear, more affordable and more secure energy system. It will liberate private investment, including in technologies, reform our energy system so that it is fit for purpose, and ensure its safety, security and resilience. I look forward to working with everyone present to take the Bill through Report stage and on to Royal Assent.
Dr Whitehead
I associate myself with the Minister’s remarks concerning your excellent chairing, Mr Sharma, and that of your colleagues the hon. Member for North Wiltshire (James Gray), my hon. Friend the Member for Ealing Central and Acton (Dr Huq) and my constituency neighbour the right hon. Member for Romsey and Southampton North (Caroline Nokes). I hope that you can convey to them the thanks of all Committee members for their excellent work in bringing the Committee to its conclusion.
I also thank, beyond the normal level of thanks, the Committee Clerks, who have been of tremendous assistance to me in bringing forward the sinews for debate by way of the amendments and new clauses, all in perfect order and debated accordingly. In my relatively long experience of taking Bills through the House, their work has been way beyond the call of duty, for which I am very grateful to them.
I believe the Minister is the record holder of fastest House of Commons runner in the London marathon ever.
Dr Whitehead
I think it was ever, but perhaps we should have a rerun. It is rather appropriate that we have got through this marathon Bill in good order and in good time. The Minister is very substantially responsible, not least with his speed-reading skills, for managing us through that lengthy process, and I thank him for that. I also thank him for his good humour, collegiality and careful consideration of the points that we have put forward.
We of course do not agree with everything that has come out of the Committee, and we will pursue some of those things during the Bill’s later stages, but I hope that I can say on behalf of the whole Committee that, overall, we have between us delivered a Bill that fundamentally we pretty much agree on through to its next stages in relatively good order. That is not always the case in this place, and it is something we can all be quite proud of. That is the end of my thanks. I hope that everyone will be happy with having the afternoon off, now that we can move forward to Report stage.
Alan Brown
Thank you, Mr Sharma. I echo the thanks to you as Chair, and to the other three Chairs. Special thanks go to the Clerks, particularly those in the Public Bill Office. It is amazing how what I think is a simple, two-line email request becomes a full page of amendments. I thank them particularly for helping me to get new clauses 90 and 91 sorted on Monday. That diligence is appreciated, although apparently not by all Government Members.
I thank the Doorkeepers. It is a remarkable skill to have the patience to sit here in these Committees and listen to the often dry debate. I find that listening to politicians is quite tedious at times—[Hon. Members: “No!”] Okay, but it is a special skill, so thanks to the Doorkeepers.
The Bill has been welcomed on a cross-party basis. As the shadow Minister said, from our perspective there are still some outstanding issues, which hopefully we can iron out on Report. Let us get going.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Energy Bill [Lords]
Tuesday 5th September 2023
(1 year, 2 months ago)
Commons ChamberRead Full debate Energy Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 5 September 2023 - (5 Sep 2023)
18:00 - The House divided: - Ayes: 192 / Noes: 316 - Question accordingly negatived.
18:14 - The House having divided: - Ayes: 235 / Noes: 306 - Question accordingly negatived.
18:28 - The House divided: - Ayes: 188 / Noes: 310 - Question accordingly negatived.
18:41 - The House divided: - Ayes: 223 / Noes: 310 - Question accordingly negatived.
18:54 - The House divided: - Ayes: 189 / Noes: 305 - Question accordingly negatived.
19:10 - The House divided: - Ayes: 280 / Noes: 19 - Question accordingly agreed to.
Madam Deputy Speaker (Dame Rosie Winterton)
I will call the Minister in a second to move the new clause, but I take this opportunity to remind colleagues that many Members have put down to speak in this debate, and it will last until 7 o’clock, including Third Reading. There is quite a lot of pressure, and I hope colleagues will bear that in mind when putting together their speeches.
New Clause 52
Revenue certainty scheme for sustainable aviation fuel producers: consultation and report
“(1) The Secretary of State must carry out a public consultation on the options for designing and implementing a sustainable aviation fuel revenue certainty scheme.
(2) A “sustainable aviation fuel revenue certainty scheme” is a scheme whose purpose is to give producers of sustainable aviation fuel greater certainty than they otherwise would have about the revenue that they will earn from sustainable aviation fuel that they produce.
(3) The Secretary of State must open the consultation within the period of 6 months beginning with the day on which this Act is passed.
(4) The Secretary of State must bring the consultation to the attention of, in particular, such of each of the following as the Secretary of State considers appropriate—
(a) producers of sustainable aviation fuel;
(b) suppliers of sustainable aviation fuel;
(c) airlines.
(5) The Secretary of State must, within the period of 18 months beginning with the day on which this Act is passed, lay before Parliament a report on progress made towards the development of a sustainable aviation fuel revenue certainty scheme.
(6) In this section, “sustainable aviation fuel” means aviation turbine fuel whose use (as compared with the use of other aviation turbine fuel) will, in the opinion of the Secretary of State, contribute to a reduction in emissions of greenhouse gases; and for this purpose—
“aviation turbine fuel” has the meaning given by article 3(1B) of the Renewable Transport Fuel Obligations Order 2007 (S.I. 2007/3072);
“greenhouse gas” has the meaning given by section 92(1) of the Climate Change Act 2008.”—(Andrew Bowie.)
This new clause, intended to be inserted after clause 156, requires the government to consult on options for setting up a revenue certainty scheme for sustainable aviation fuel producers, and to publish a report about progress towards developing such a scheme.
Brought up, and read the First time.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
Government new clause 63—Renewable liquid heating fuel obligations.
Government new clause 64—Regulations under section 92(1): procedure with devolved authorities.
Government new clause 65—Regulations made by Secretary of State: consultation with devolved authorities.
Government new clause 66—Regulations under section 292 and 293: procedure with devolved authorities.
New clause 1—Community benefits relating to onshore wind farms—
“(1) Within six months of the date on which this Act is passed, the Secretary of State must prepare and lay before Parliament a report setting out proposals for ensuring that local communities benefit from onshore wind farms.
(2) The report under subsection (1) must set out, but is not limited to, proposals for—
(a) 5% of the gross revenue of new wind farm, solar, hydro and other renewable developments generating over 1MW to be paid into community benefit funds;
(b) widening the distance of communities around new renewable developments which receive shares of community benefit funds, with the aim of limiting the wealth disparity amongst rural communities; and
(c) ensuring that communities surrounding wind farms have a statutory right to benefit from local renewable energy development.”
New clause 2—Prohibition of new coal mines—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must by regulations prohibit the opening of new coal mines and the licensing of new coal mines by the Coal Authority or its successors.
(2) Regulations under this section are subject to the affirmative procedure.”
New clause 3—Prohibition of energy production from coal—
“(1) The Secretary of State must by regulations provide for the UK to cease energy production from coal from 1 January 2025.
(2) Regulations under this section may amend primary legislation (including this Act).”
New clause 4—Flaring and venting—
“(1) The Energy Act 1976 is amended as follows.
(2) In section 12, after subsection (5), insert—
“(6) The Secretary of State may not grant consent under this section after 1 January 2025; and any consent granted under this section ceases to have effect from 1 January 2025.
(7) Paragraph (3)(a) of this section ceases to have effect from 1 January 2025.”
(3) In section 12A, after subsection (5), insert—
“(6) The OGA may not grant consent under this section after 1 January 2025; and any consent granted under this section ceases to have effect from 1 January 2025.””
This new clause is intended to ban flaring and venting of natural gas after 1 January 2025.
New clause 5—Date of cessation of issuing of oil and gas exploration and production licences—
“(1) Within three months of the day on which this Act is passed, the Secretary of State must establish an independent body to advise on the date after which no new licences for oil and gas exploration and production should be issued.
(2) The body must make its recommendation to the Secretary of State not later than three months after the day on which it is established.
(3) Not less than three months after the date on which the Secretary of State receives the body’s recommendation, the Secretary of State must present to Parliament legislative proposals to give effect to the recommendation.”
New clause 6—Net zero power supply—
“(1) It is the duty of the Secretary of State to ensure that the aggregate amount of net emissions of carbon dioxide and net emissions of each of the other targeted greenhouse gases associated with the supply of power in the UK in 2035 is zero.
(2) The Secretary of State must by regulations provide for the means of calculation of net emissions of carbon dioxide and of each of the other targeted greenhouse gases for the purposes of subsection (1).
(3) The means of calculation provided for in regulations under subsection (2) must be consistent with the means of calculation of the net UK carbon account for the purposes of section 1 of the Climate Change Act 2008.
(4) For the purposes of this section a “targeted greenhouse gas” has the same meaning as given in section 24 of the Climate Change Act 2008.”
This new clause is intended to provide for the UK’s power supply to be net zero by 2035.
New clause 7—Energy Charter Treaty—
“Within six months of the day on which this Act is passed, the Secretary of State must initiate procedures for the United Kingdom to withdraw from the Energy Charter Treaty.”
New clause 8—Community and Smaller-scale Electricity Export Guarantee Scheme—
“(1) Within six months of the passing of this Act, the Secretary of State must by regulations require licensed energy suppliers with more than 150,000 customers (“eligible licensed suppliers”) to purchase electricity exports from sites including those operated by community groups, that generate low carbon electricity with a capacity below 5MW.
(2) Fossil fuelled local power plants with a capacity of less than 5MW are not eligible for participation in the Community and Smaller-scale Electricity Export Guarantee Scheme, with the exception of a local combined heat and power plant that generates electricity ancillary to its purpose of providing heat for local heat networks.
(3) “Fossil fuel” has the meaning given in section 104(4).
(4) Licensed energy suppliers with fewer than 150,000 customers may also purchase electricity exports from the sites defined above provided that they do so on the terms set out by the regulations.
(5) The regulations must require that eligible licensed suppliers—
(a) offer to those sites a minimum export price set annually by the Gas and Electricity Markets Authority (“GEMA”),
(b) offer to those sites a minimum contract period of five years, and
(c) allow the exporting site to end the contract after no more than one year.
(6) Within six months of the passing of this Act, GEMA must—
(a) set an annual minimum export price for those sites that has regard to current wholesale energy prices and inflation in energy prices and the wider economy,
(b) introduce a registration system for exporting sites meeting the requirements set out in subsection (1) and wanting to access these export purchases,
(c) define specifications for the smart export meters required by such sites,
(d) define “low carbon electricity” in such a way that it includes renewable generation technology and may include other technology with extremely low carbon dioxide emissions,
(e) define requirements for an exporting site generating low carbon electricity with a capacity of less than 5MW to be registered as a Community or Smaller-scale Energy site, and maintain a register of such sites.
(7) To access the export purchase agreements defined in this section exporters must—
(a) register their site with GEMA,
(b) install a smart export meter that meets specifications defined by GEMA, and
(c) notify GEMA if their ownership structure meets the definition of a Community or Smaller-scale Energy site.
(8) All licensed suppliers providing such purchase agreements must report annually to GEMA—
(a) the number and capacity of Community or Smaller-scale Energy sites that have been offered contracts to purchase electricity and the number of these that agreed those contracts,
(b) the total amount of electricity purchased under these agreements, and
(c) the price paid for that electricity.
(9) OFGEM must make and publish a report annually on the operation of the export purchase agreements, setting out—
(a) the number of Community or Smaller-scale Energy sites contracted with licensed energy suppliers under this section and the total amount of electricity purchased,
(b) the licensed suppliers contracting with Community or Smaller-scale Energy sites and the amount of electricity each has purchased,
(c) an assessment of how the mechanism is performing and the contribution it is making to delivering secure and low carbon electricity supplies, and
(d) recommendations on how the mechanism could be improved.
(10) Regulations under this section are subject to the affirmative procedure.”
New clause 9—Community and Smaller-scale Electricity Supplier Services Scheme—
“(1) Within six months of the passing of this Act, the Secretary of State must by regulations require licensed energy suppliers with more than 150,000 customers (“eligible licensed suppliers”) to offer a Community and Smaller-scale Electricity Supplier Service agreement to any registered Community or Smaller-scale Energy site under section (Community and Smaller-scale Electricity Export Guarantee Scheme) for the purposes of allowing that site to sell electricity to local consumers.
(2) The Community and Smaller-scale Electricity Supplier Service agreement will require licensed suppliers to make a community or smaller-scale energy tariff available to consumers local to the exporting site that has regard to the export price paid or that would be paid to that site under section (Community and Smaller-scale Electricity Export Guarantee Scheme).
(3) The eligible licensed supplier may limit the total number of consumers the community or smaller-scale energy tariff is available to such that the total annual energy sold under the tariff is broadly equivalent to the total annual energy generated by the site.
(4) The eligible licensed supplier will be the registrant for the meters of any local consumer purchasing energy under the community or smaller-scale energy tariff.
(5) The eligible licensed supplier may charge a reasonable fee for the provision of services under this section provided that it has regard to distribution, licensing and regulatory costs and any guidance provided by GEMA.
(6) The eligible licensed supplier must return any money raised through the sale of energy under a tariff set up under this section to the Community or Smaller-scale Energy site, save for the fee allowed under subsection (5).
(7) Eligible licensed suppliers must report annually to GEMA on—
(a) the number and capacity of community energy groups or smaller-scale sites offered Community and Smaller-scale Electricity Supplier Service agreements and the number who have contracted to use them,
(b) the total amount of electricity purchased under these agreements, and
(c) the tariffs for each agreement.
(8) GEMA must—
(a) produce guidance on the level of community or smaller-scale energy tariffs and on the reasonable charges that eligible suppliers may charge for Community and Smaller-scale Electricity Supplier Service Agreements,
(b) make and publish a report annually on the operation of the export purchase agreements, setting out—
(i) the number of community energy projects or smaller-scale sites contracted with licensed energy suppliers under this section and the total amount of electricity purchased,
(ii) the licensed suppliers contracting with community energy groups or smaller-scale sites and the amount of electricity each has purchased,
(iii) an assessment of how the mechanism is performing and the contribution it is making to delivering secure and low carbon electricity supplies, and
(iv) recommendations for how Community and Smaller-scale Electricity Supplier Service agreements could be improved.
(9) Regulations under this section are subject to the affirmative procedure.”
New clause 11—Enhancing rewards for solar panels—
“Within six months of the day on which this Act is passed, the Secretary of State must prepare and lay before Parliament a report on enhancing the reward under the Smart Export Guarantee for customers who install solar panels.”
This new clause seeks to enhance the reward under the Smart Export Guarantee for energy customers who install solar panels.
New clause 12—Prohibition on flaring and venting and enhanced measures to reduce fugitive methane emissions—
“(1) The Secretary of State must by regulations—
(a) prohibit the practice of flaring and venting by oil and gas installations other than in an emergency within the jurisdiction of the United Kingdom,
(b) require monthly leak detection and repair inspections to reduce fugitive methane emissions,
(c) require a measurement, reporting and verification process to quantify methane emissions, and
(d) require the upgrade of all equipment to alternative zero- or low-emission and low-maintenance equipment, such as electric, mechanical, or compressed air equipment.
(2) In this section—
“flaring” means the burning of methane gas and other hydrocarbons produced during oil and gas extraction;
“venting” means the release of methane gas and other hydrocarbons directly into the atmosphere, without combustion.
(3) Regulations under this section must be made so as to come into force by 31 December 2025.”
This new clause would prohibit “flaring” and “venting”.
New clause 13—Introduction of a social tariff for vulnerable energy customers—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must prepare and lay before Parliament a plan to bring forward a social tariff for vulnerable energy customers.
(2) The plan under subsection (1) must set out ways in which the social tariff for energy would satisfy the following conditions—
(a) it is additional to the Warm Home Discount and Default tariff price Cap,
(b) it is mandatory for all licensed electricity and gas suppliers,
(c) it is targeted at households that are in or at risk of fuel poverty,
(d) it is set at a level that is below the market price, and
(e) it automatically enrols eligible households onto the tariff.”
This new clause will require the Secretary of State to bring forward a plan to introduce a social tariff for energy.
New clause 14—Smart meter roll-out for prepayment customers—
“(1) The Secretary of State must ensure that all legacy prepayment meters are replaced with smart meters before the end of 2025.
(2) Within three months of the day on which this Act is passed, the Secretary of State must prepare a plan to end self-disconnections by the end of 2026.
(3) Such a plan may include but is not limited to—
(a) the introduction of a social tariff for prepayment customers,
(b) the introduction of mechanisms to apply credit automatically if a prepayment customer runs out of credit,
(c) the introduction of a mechanism to transfer a prepayment customer to credit mode automatically if they run out of credit.”
This new clause places duties on the Secretary of State to ensure prepayment metered customers are prioritised in the smart meter rollout, and to create a plan to stop self-disconnections before the end of 2026.
New clause 15—Restriction of the use of prepayment meters—
“(1) Within 90 days of the day on which this Act is passed the Secretary of State must make regulations prohibiting energy suppliers from authorising or undertaking the installation of new prepayment meters for domestic energy use unless the condition in subsection (2) is met.
(2) The condition is that the energy supplier has received an explicit request from the consumer for the installation of a prepayment meter.
(3) In this section “installation of new prepayment meters” includes switching existing energy meters to a prepayment mode.
(4) The Secretary of State may make subsequent regulations that amend or repeal regulations made under this section.
(5) Regulations under this section are subject to the affirmative procedure.”
This new clause would require the Secretary of State to prohibit the installation of new prepayment meters unless consumers explicitly request them.
New clause 16—National Warmer Homes and Businesses Action Plan—
“(1) The Secretary of State must, before the end of the period of 6 months beginning with the day on which this Act is passed, publish an action plan entitled the Warmer Homes and Businesses Action Plan, to set out proposals for delivery of—
(a) a low-carbon heat target, of 100% of installations of relevant heating appliances and connections to relevant heat networks by 2035,
(b) an Energy Performance Certificate at band C by 2035 in all UK homes where practical, cost effective and affordable, and
(c) an Energy Performance Certificate at band B by 2028 in all non-domestic properties, and
(d) the Future Homes Standard for all new builds in England by 2025.
(2) The Secretary of State must, in developing the Warmer Homes and Businesses Action Plan, consult the Climate Change Committee and its sub-committee on adaptation.”
This new clause imposes a duty on the Secretary of State to bring forward a plan with time-bound proposals for low carbon heat, energy efficient homes and non-domestic properties and higher standards on new homes.
New clause 17—Plan for vulnerable consumers—
“(1) Within three months of the day on which this Act is passed, the Secretary of State must prepare and lay before Parliament a plan addressing the needs of vulnerable consumers and consumers from low-income households in relation to the cost of energy.
(2) The plan under subsection (1) may include, but is not limited to—
(a) the extension of the energy price cap on heating oil,
(b) the extension of the warm homes discount,
(c) the increase of winter fuel payments,
(d) preventing electricity suppliers from recovering the costs of paying a revenue collection counterparty under the Nuclear Energy (Financing) Act 2022 from customers claiming Universal Credit or other legacy benefits,
(e) requirements for energy suppliers to offer social energy tariffs to households experiencing fuel poverty, and
(f) any other measures the Secretary of State believes are appropriate.”
This new clause would require the Secretary of State to develop a plan to protect vulnerable customers from the rising cost of energy.
New clause 18—Energy performance regulations relating to existing premises—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must make regulations—
(a) to amend the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2), all tenancies have an Energy Performance Certificate (EPC) of at least Band C by 31 December 2028; and
(b) to amend the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 (S.I. 2019/595) to raise the cost cap to £10,000.
(2) Regulations under subsection (1) must provide for exemptions to apply where—
(a) the occupier of any premises whose permission is needed to carry out works refuses to give such permission;
(b) it is not technically feasible to improve the energy performance of the premises to the level of EPC Band C; or
(c) another exemption specified in the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 has been registered in the Private Rented Sector (PRS) Exemptions Register.
(3) Within six months of the passage of this Act the Secretary of State must make regulations—
(a) to amend the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 to enable local authorities to give notice to landlords that they wish to inspect a property in relation to those Regulations, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time;
(b) to expand the scope of the current PRS Exemptions Register and redesign it as a database covering properties’ compliance with or exemptions from EPCs;
(c) to require a post-improvement EPC to be undertaken to demonstrate compliance;
(d) to require a valid EPC be in place at all times while a property is let; and
(e) to raise the maximum total of financial penalties to be imposed by a local authority on a landlord of a domestic private rented sector property in relation to the same breach and for the same property to £30,000 per property and per breach of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.
(4) The Secretary of State may make regulations—
(a) to enable tenants in the private rented sector to request that energy performance improvements are carried out where a property is in breach of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015; and
(b) to make provision for a compensation mechanism where a tenant is paying higher energy bills as a result of a property not meeting the required standard.
(5) Regulations under this section are subject to the affirmative procedure.”
This new clause seeks to improve the energy efficiency of private rental properties for tenants and gives powers to local authorities to conduct assessments of the energy efficiency of private rental properties and increase financial penalties for breaches of energy efficiency standards.
New clause 19—Decarbonisation of capacity market—
“Within six months of the day on which this Act is passed the Secretary of State must introduce measures to reduce the carbon intensity of power supplied by the capacity market by prioritising—
(a) demand side management,
(b) the supply of renewable energy, and
(c) electricity storage and other non-carbon-based energy storage systems.”
This new clause is a probing amendment to explore the potential of decarbonising the capacity market.
New clause 20—Onshore wind and solar power—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must prepare and lay before Parliament a plan to significantly increase the proportion of the energy supply generated by onshore wind power in the United Kingdom.
(2) The plan under subsection (1) must set out measures which may include but are not limited to—
(a) revising national planning guidance on onshore wind and solar to increase the number of onshore wind and solar installations,
(b) improving infrastructure to ensure access to grid connections for existing onshore wind and solar installations, and
(c) increasing access to grants or subsidies to encourage new onshore wind and solar installations.
(3) The Secretary of State must report annually to Parliament to provide an update on the progress in increasing onshore wind and solar power.”
This new clause would require the Secretary of State to prepare a plan to significantly increase the proportion of the UK energy supply generated by onshore wind and solar power.
New clause 21—Value added tax on energy-saving materials—
“In Schedule 8, Part II, Group 23, note 1 of the Value Added Tax Act 1994 (meaning of “energy-saving materials”), at the end insert—
“(1) batteries used solely for the purpose of storing electricity generated by solar panels.””
This new clause includes batteries used solely to store energy generated by solar panels in the list of energy saving materials subject to a zero VAT rate.
New clause 22—Increasing grid capacity—
“Within three months of the day on which this Act is passed, the Secretary of State must prepare and lay before Parliament a plan to—
(a) reduce access costs and time frames for grid connections,
(b) reform the energy network to permit local energy grids, and
(c) accelerate the development of an offshore wind energy grid in the North Sea.”
This new clause seeks to require the Secretary of State to produce a plan to increase grid capacity.
New clause 23—Impact of insulation in homes on energy bills—
“The Secretary of State must, within six months of the day on which this Act is passed, prepare and lay before Parliament a report setting out—
(a) an assessment of the average cost of energy bills if homes were properly insulated, and
(b) the impact of improving all homes to the highest possible Energy Performance Contract rating on energy bills and greenhouse gas emissions.”
This new clause requires the Secretary of State to carry out an assessment of the average cost of energy bills if homes were insulated (a) properly and (b) to the highest possible Energy Performance Contract rating.
New clause 24—Government support for community energy—
“(1) Within three months of the passage of this Act, the Secretary of State must publish and lay before Parliament a report setting out the financial, policy and other support that the Secretary of State plans to make available to widen the ownership of low carbon and renewable energy schemes and increase the number of such schemes owned, or part owned, by community organisations.
(2) The report must set out—
(a) all policies, programmes or other initiatives with which the Secretary of State plans to support the development and construction of new low carbon community energy schemes;
(b) the level of financial support which will be made available for—
(i) the Rural Community Energy Fund,
(ii) the Urban Renewable Energy Fund, and
(iii) any other fund or support package designed to support the development of new low carbon community energy schemes;
(c) all policies, programmes or other initiatives the Secretary of State intends will increase community ownership of local low carbon energy schemes through shared ownership schemes;
(d) the steps the Secretary of State is taking to develop new market rules to make it easier for low carbon community energy schemes to sell the energy they generate;
(e) the number and the capacity of the new community energy schemes the Secretary of State expects to be constructed as a result of the measures set out in the report.
(3) Not less than twelve months after the publication of the report, and not later than the end of each subsequent period of twelve months, ending five years after the publication of the report, the Secretary of State must lay before Parliament and publish an assessment of the progress made by the policies, programmes and other initiatives set out in the report.
(4) The assessment must set out—
(a) the total amount of financial support provided by the policies in the report;
(b) the number and capacity of low carbon community energy schemes —
(i) completed, and
(ii) in development;
(c) the number and capacity of new shared ownership schemes;
(d) any changes the Secretary of State proposes to make to the policies, programmes and other initiatives included in the original report.”
This new clause would require the Government to report annually for 5 years on the support it is providing to Community Energy schemes and the number and capacity of such schemes that are delivered.
New clause 25—Investment protection agreements and climate change targets—
“Within six months of the day on which this Act is passed, the Secretary of State must—
(a) initiate procedures for the United Kingdom to withdraw from the Energy Charter Treaty;
(b) lay before Parliament a report setting out—
(i) the list of investment protection agreements to which the UK is a party which offer protections to the energy sector, and
(ii) an assessment of the risks they pose to the Secretary of State fulfilling duties in this Act with regard to the achievement of targets set by the Climate Change Act 2008.”
New clause 26—Prohibition on setting domestic energy prices according to region—
“Within six months of the day on which this Act is passed, the Secretary of State must by regulations prohibit energy companies from setting prices for domestic energy supply according to geographical region.”
This new clause would require the Government to bring forward legislation to end the regional pricing of domestic energy bills.
New clause 27—Report on extending price cap for off grid fuels—
“Within three months of the day on which this Act is passed, the Secretary of State must publish and lay before Parliament a report setting out the consequences of extending the price cap for off grid fuels.”
This new clause would require the Secretary of State to publish a report on extending the price cap for off grid fuels.
New clause 28—Prohibition on hydraulic fracturing—
“(1) Associated hydraulic fracturing is prohibited.
(2) “Associated hydraulic fracturing” has the meaning given by section 4B of the Petroleum Act 1998.
(3) The Secretary of State may by regulations make consequential provision in connection with this section.”
This new clause would introduce a permanent ban on fracking.
New clause 29—Prohibition of new oil and gas field developments and issuing of exploration and production licences—
“Within six months of the day on which this Act is passed, the Secretary of State must by regulations prohibit—
(a) the approval of new oil and gas field developments, and
(b) the release of new oil and gas exploration and production licences.”
This new clause would prohibit the approval of new oil and gas field developments and the issuing of new oil and gas exploration and production licenses.
New clause 30—Duty to phase down UK petroleum—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must make regulations to amend section 9A of the Petroleum Act 1998.
(2) Regulations under subsection (1) must—
(a) remove the “principal objective” of maximising the economic recovery of UK petroleum;
(b) define a new “principal objective”.
(3) The new “principal objective” referred to in paragraph (2)(b) must provide for—
(a) delivery of a managed and orderly phase down of UK petroleum;
(b) advancement of the UK’s climate change commitments, including—
(i) the target for 2050 set out in section 1 of the Climate Change Act 2008, and
(ii) the commitment given by the Government of the United Kingdom in the Glasgow Climate Pact to pursue policies to limit global warming to 1.5 degrees Celsius;
(c) facilitation of a just transition for oil and gas workers and communities.
(4) Before making regulations under subsection (1) the Secretary of State must hold a public consultation which must include consultation with—
(a) the devolved administrations,
(b) relevant trade union and worker representatives,
(c) oil and gas workers and communities,
(d) relevant representatives from academia,
(e) relevant climate and environmental organisations and representatives,
(f) relevant industry representatives of petroleum and renewable energy businesses supporting the transition away from fossil fuels, and
(g) offshore energy training bodies.
(5) Relevant climate and environmental organisations and representatives under subsection (4(e)) must include the Climate Change Committee.”
This new clause would amend the Petroleum Act 1998 to remove the principal objective of maximising the economic recovery of UK petroleum and replace it with a new principal objective to deliver a managed and orderly phase down of UK petroleum, advance the UK’s climate targets, and support a just transition for oil and gas workers.
New clause 31—Requiring installation of solar panels on all new homes—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must by regulations require—
(a) the installation of solar panels on the roofs of all new homes; and
(b) that new housing developments are planned in order to maximise solar gain.
(2) Regulations under subsection (1) may provide for exemptions in cases where the installation of solar panels on the roof of a new home is not appropriate.”
This new clause would mandate the installation of solar panels on the roofs of all new homes and require new housing developments to be planned in order to maximise solar gain.
New clause 32—Capacity market—
“(1) The Secretary of State must exercise the power in section 27 of the Energy Act 2013 to ensure that the capacity adequacy procured through the capacity market has a rising share of zero carbon flexible and dispatchable power that is consistent with achieving a zero carbon power system by 2035.
(2) The Secretary of State must ensure that all new multi-year capacity market contracts awarded to unabated fossil fuel capacity market units should have a contract end date no later than 31 December 2034.
(3) In exercising functions under this section, the Secretary of State must have regard to the desirability of maintaining security of supply.
(4) Draft regulations under subsection (1) must be laid before Parliament within six months of the day on which this Act is passed.”
This new clause probes the potential of decarbonising the capacity market.
New clause 33—Energy Demand Reduction Delivery Plan—
“(1) The Secretary of State must, within 12 months of the day on which this Act is passed, prepare and publish an Energy Demand Reduction Delivery Plan.
(2) In preparing the Energy Demand Reduction Delivery Plan under subsection (1), the Secretary of State must consult the Climate Change Committee.
(3) The Energy Demand Reduction Delivery Plan under subsection (1) must include but is not limited to—
(a) a quantitative assessment on the role of energy demand reduction in meeting the United Kingdom's carbon budgets and the 2050 net zero target;
(b) energy demand reduction targets for—
(i) aviation
(ii) surface transport,
(iii) shipping,
(iv) manufacturing and construction,
(v) buildings, and
(vi) agriculture,
in line with the UK’s carbon budgets and the 2050 net zero target; and
(4) an assessment of the role in achieving those targets of—
(a) energy efficiency improvements and technologies, and
(b) avoiding unnecessary energy use through infrastructure and behaviour change
(5) The Climate Change Committee must evaluate, monitor and report annually on the implementation of the Energy Demand Reduction Delivery Plan.”
This new clause would introduce a requirement to produce an Energy Demand Reduction Delivery Plan quantifying sectoral energy demand reduction targets and assessing how these can be achieved, and to review progress towards achieving them.
New clause 34—Production of sustainable aviation fuel—
“(1) The Secretary of State may by regulations introduce a price stability mechanism to incentivise the production of sustainable aviation fuel in the United Kingdom.
(2) A draft of regulations made under subsection (1) must be laid before Parliament within twelve months of the passage of this Act.
(3) A Minister must make a motion in each House of Parliament to approve the regulations laid before Parliament under subsection (2) within fifteen sitting days of the date on which they were laid.
(4) If both Houses of Parliament approve the regulations, they must be made in the form in which they were laid before Parliament.
(5) If either House of Parliament does not approve the regulations, the Secretary of State must lay a revised draft of the regulations before Parliament, and subsections (3) to (5) of this section apply to those regulations as they do to regulations laid under subsection (2).
(6) For the purposes of this section—
“price stability mechanism” is a mechanism under which a producer may enter into a private law contract with a Government-backed counterparty for the purposes of receiving a guaranteed price for a product or service;
“sitting day” is—
(a) in the case of the House of Commons, a day on which the House of Commons sits;
(b) in the case of the House of Lords, a day on which the House of Lords sits.”
New clause 35—Energy decarbonisation for homes: local authority funding—
“(1) The Secretary of State must, within six months of the date on which this Act is passed, carry out and publish an assessment of the benefits of providing long-term predictable funding to local authorities for the purpose of energy decarbonisation for homes in their local authority area.
(2) The assessment under subsection (1) must include an assessment of the likely impact of decarbonisation funding on—
(a) energy demand,
(b) fuel poverty, and
(c) installations of low-carbon heating systems.”
New clause 36—Introduction of a National Energy Guarantee—
“(1) Within six months of the date on which this Act is passed, the Secretary of State must prepare and lay before Parliament a plan to replace the existing energy price guarantee with a National Energy Guarantee in the form of a rising block tariff including a free or low-cost energy allowance to cover essential needs.
(2) When preparing the plan under subsection (1) the Secretary of State must consult independent bodies working on fuel poverty before determining the pricing of the allowance and the threshold above which the higher tariff should apply.
(3) Once the plan under subsection (1) has been laid before Parliament, the Secretary of State may by notice in writing require the regulator to introduce a rising block tariff, provided it satisfies the following conditions—
(a) that an allocation of energy set at no less than 50% of a defined minimum essential level is provided free of charge to all households;
(b) that the tariff incentivises energy-saving measures, particularly among higher income households;
(c) that households not connected to a mains gas supply will be given an increased electricity allowance, such that they are not disadvantaged;
(d) that the tariff is accompanied by additional allowances for disabled people and others who require high levels of energy usage to fulfil their essential needs; and
(e) that the tariff does not undermine the ability of energy suppliers to offer innovative tariffs through higher energy bands.”
This new clause would introduce a National Energy Guarantee in the form of a rising block tariff: an allowance for low-cost energy to cover essential needs, with a premium tariff to incentivise energy saving measures in households with high energy use, and additional allowances for those with unavoidably high energy needs.
New clause 37—Industrial lithium-ion battery storage facilities—
“(1) Within 12 months of the date on which this Act is passed, the Secretary of State must make regulations about the building of industrial lithium-ion battery storage facilities.
(2) Regulations under subsection (1) must include—
(a) a requirement for a relevant environmental permit to be issued by the Environment Agency, and
(b) a requirement for the relevant fire authority to be a statutory consultee in all planning applications for such facilities.”
This new clause would require the Secretary of State to make regulations for the building of industrial lithium-ion storage facilities which must include requiring an Environmental Permit from the Environment Agency and for the Fire Authority to be a statutory consultee in planning applications.
New clause 39—Duties of the Gas and Electricity Markets Authority in respect of off-grid fuels—
“(1) Within three months of the passage of this Act, the Secretary of State must by regulation extend the duties of the Gas and Electricity Markets Authority to the distribution and supply of fuels utilised for off-grid home heating.
(2) Regulations under subsection (1) must provide for GEMA to apply a cap on the price of fuel supplied for off-grid home heating proportionate to the cap applied in respect of on-grid homes.”
This new clause seeks to extend the duty of Ofgem to regulate off-grid fuels utilised for off-grid home heating and to ensure that a cap is applied for off-grid home fuels that is proportionate to the cap applied for on-grid homes.
New clause 40—Renewable liquid fuels for low-carbon heating—
“Within six months of the passage of this Act, the Secretary of State must by regulation introduce a Renewable Liquid Heating Fuel Obligation, setting annual obligations on fuel suppliers to ensure the supply of recognised low-carbon renewable liquid fuels for domestic and commercial heating.”
This new clause would require the Government to introduce a Renewable Liquid Heating Fuel Obligation for home and commercial building heating purposes, which would create a scheme that mirrors the Renewable Transport Fuel Obligations Order 2007. This would offer the option to off-gas-grid properties to switch to renewable liquid fuels.
New clause 41—Duty to ensure the lowest possible cost of energy to businesses and households—
“In exercising any function under or in connection with this Act, it is the duty of the Secretary of State to ensure the lowest possible cost of energy to businesses and households.”
This new clause is designed to be placed as Clause 1 of the Bill and would give the Secretary of State the duty to exercise functions under the Act which will result from the Bill in a way which would ensure the lowest possible costs of energy to businesses and households.
New clause 42—Restriction on energy company obligations—
“(1) In section 33BC of the Gas Act 1986 (promotion of reductions in carbon emissions: gas transporters and gas suppliers), after subsection (1) insert—
“(1ZA)) An order under subsection (1) may not impose an obligation on a gas transporter or gas supplier with fewer than 1,000 employees.”
(2) In section 33BD of the Gas Act 1986 (promotion of reductions in home-heating costs: gas transporters and gas suppliers), after subsection (1) insert—
“(1A)) An order under subsection (1) may not impose an obligation on a gas transporter or gas supplier with fewer than 1,000 employees.”
(3) In section 41A of the Electricity Act 1989 (promotion of reductions in carbon emissions: electricity distributors and electricity suppliers), after subsection (1) insert—
“(1ZA)) An order under subsection (1) may not impose an obligation on an electricity distributor or electricity supplier with fewer than 1,000 employees.”
(4) In section 41B of the Electricity Act 1989 (promotion of reductions in home-heating costs: electricity distributors and electricity suppliers), after subsection (1) insert—
“(1A)) An order under subsection (1) may not impose an obligation on an electricity distributor or electricity supplier with fewer than 1,000 employees.””
This new clause would restrict the Energy Company Obligation, which places an obligation on energy suppliers to install energy efficiency and heating measures, to large companies (those with over 1000 employees).
New clause 43—Planning applications for onshore wind energy developments—
“(1) Within three months of the date on which the Act is passed, the Secretary of State must—
(a) remove from the National Planning Policy Framework the restrictions placed by footnote 54 on the circumstances in which proposed wind energy developments involving one or more turbines should be considered acceptable, and
(b) publish guidance for wind developers on how they can engage communities, demonstrate local consent to local planning authorities, and provide financial benefits to local residents.
(2) Section 78 of the Town and Country Planning Act 1990 is amended by the insertion, after subsection (3), of the following new subsection—
“(3A) An appeal under this section may not be brought or continued against the refusal of an application for planning permission if the development is for the purposes of installing new onshore wind sites not previously used for generating wind energy.””
This new clause aims to remove the current planning restriction that a single objection to an onshore wind development is sufficient to block the development, to ensure that local communities willing to take onshore wind developments will receive some community benefit, and to provide that local decisions made on onshore wind cannot be overturned on appeal.
New clause 44—Independent review of the generation of bioenergy with carbon capture and storage—
“(1) The Secretary of State must commission an independent review of the generation of bioenergy with carbon capture and storage (BECCS).
(2) The review must report on the potential impact of BECCS on—
(a) household energy bills,
(b) lifecycle carbon emissions in the generation of energy,
(c) biodiversity,
(d) land use, and
(e) any other matter the Secretary of State considers appropriate.
(3) The Secretary of State must lay before Parliament—
(a) the report of the review, and
(b) the Government’s response to the review.
(4) No subsidy may be given for BECCS until the report of the review and the Government’s response have been laid before Parliament in accordance with subsection (3).
(5) Subsection (4) does not apply if an agreement for the giving of subsidy was concluded before the passage of this Act.
(6) For the purposes of this section—
“bioenergy” means energy from biomass;
“biomass” has the meaning given by paragraph 3 of the Renewables Obligation Order 2015 (SI 2015/1947);
“subsidy” has the meaning given by section 2 of the Subsidy Control Act 2022.”
This new clause would prohibit new government subsidies for generating bioenergy with carbon capture and storage (BECCS) until the Secretary of State commissions and publishes an independent review of BECCS to establish its impact on household energy bills, lifecycle carbon emissions, biodiversity and land use, and the Government’s response.
New clause 45—Modelling of the UK’s energy needs—
“(1) The Secretary of State must commission—
(a) a report on the most energy efficient, most economic and least carbon-intensive means to fulfil the UK’s current energy needs, and
(b) a report on comprehensive future energy modelling for the UK on the most energy efficient, most economic and least carbon-intensive means to meet the UK’s future energy needs.
(2) The Secretary of State must lay before Parliament the reports required under subsection (1) within six months of the day on which this section comes into force.”
This new clause would require the Secretary of State to commission and publish reports on the most energy efficient, most economic and least carbon-intensive means of satisfying the UK’s energy needs.
New clause 46—Review of Contract for Difference strike prices—
“(1) Within three months of the passage of this Act, the Secretary of State must undertake a review of Contract for Difference strike prices, and make a report to Parliament on the review.
(2) The review must—
(a) include an assessment of the viability of existing projects that have already been allocated,
(b) include an assessment of the UK-based supply chain for each project awarded Contracts for Difference, and
(c) re-evaluate the parameters for—
(i) the allocation for round five of Contracts for Difference funding, and
(ii) future allocation rounds.”
This new clause requires the Secretary of State to assess the viability of projects that have been awarded Contracts for Difference, and to undertake a review of the existing parameters for Contracts for Difference allocation.
New clause 47—Nationally significant infrastructure projects and forced labour—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must by regulations provide that existing and new applicants for nationally significant infrastructure projects (within the meaning given by sections 14 and 15 of the Planning Act 2008) of over 50mw must demonstrate that their goods were not manufactured in, or produced with materials using forced labour.
(2) Regulations under subsection (1) must require all existing and new NSIP energy applicants to submit a report to the Planning Inspectorate to demonstrate clear and convincing evidence that the goods, or materials in the goods, were not mined, produced, or manufactured wholly or in part by forced labour.
(3) Within six months of the day on which this Act is passed the Foreign, Commonwealth and Development Office must create and publish a guide on interpreting reports for the Planning Inspectorate to consult when determining whether goods, or materials in the goods, were mined, produced, or manufactured wholly or in part by forced labour.
(4) Regulations under subsection (1) must provide that any nationally significant infrastructure project of over 50mw unable to demonstrate beyond reasonable doubt that its goods, or materials in the goods, were not mined, produced, or manufactured wholly or in part by forced labour must be recommended for rejection by the Planning Inspectorate upon the submission of the Inspection to the Secretary of State for Energy Security and Net Zero.
(5) Regulations under subsection (1) must provide for any company found to be circumnavigating the requirements of the regulations through third parties, subcontractors or third countries to be permanently barred from operating in the United Kingdom.”
This new clause will require the developers of new NSIP energy projects to demonstrate that their projects do not use, benefit from, or contribute to the forced labour.
New clause 48—Development of solar energy plants on agricultural land—
“(1) The Secretary of State must by regulations prevent the development of solar energy projects on sites of over 500 acres where over 20% of the land is Best and Most Versatile agricultural land.
(2) For the purposes of this section “Best and Most Versatile agricultural land” means land classed as grade 1, grade 2 or subgrade 3a under the agricultural land classification published by Natural England.
(3) Regulations under subsection (1) must—
(a) include provision for the prevention of the development of solar energy projects for which permission has already been sought, but not granted, and
(b) apply both to applications determined by local planning authorities and to those determined by the Planning Inspectorate.
(4) Regulations under subsection (1) may amend primary legislation.
(5) Within six months of the day on which this Act is passed, the Secretary of State must publish plans and incentives for the development of solar energy on rooftops, commercial and residential sites, and brownfield sites composed of ungraded land.”
This new clause would end the development of large-scale solar plants on BMV land and require the Secretary of State to publish plans to incentivise the building of solar on rooftops and brownfield sites.
New clause 49—Electricity Storage Capacity—
“(1) Within six months of the day on which this Act is passed the Secretary of State must lay before Parliament a strategy for an increase in the provision of electricity storage facilities to enhance the resilience and flexibility of electricity supply and ensure fair pricing for electricity users.
(2) The strategy referred to in subsection (1) must cover all forms of electricity storage, including—
(a) battery,
(b) hydrogen,
(c) ammonia,
(d) adiabatic compressed air energy storage systems, and
(e) hydroelectric storage.
(3) The strategy referred to in subsection (1) must address considerations relating to—
(a) licensing,
(b) planning,
(c) regulation,
(d) subsidy, and
(e) taxation.
(4) The strategy referred to in subsection (1) must set out—
(a) proposed pricing mechanisms for stored electricity, and
(b) provisions ensuring consumers pay a fair price for electricity.”
This new clause seeks to ensure the UK Government sets out a report to Parliament that demonstrates how it plans to meet the increased storage capacity that will be required with a future electricity network that is heavily reliant on renewable sources.
New clause 50—Renewable Liquid Heating Fuel Obligation—
“(1) Within twelve months of the date of Royal Assent to this Act, the Secretary of State must carry out a consultation on a renewable liquid heating fuel obligation.
(2) For the purposes of subsection (1) a renewable liquid heating fuel obligation means requiring fuel suppliers to meet annual targets to ensure the supply of recognised low-carbon renewable liquid fuels for domestic and commercial heating.
(3) For the purposes of the consultation under subsection (1) the Secretary of State must consult such persons as the Secretary of State considers appropriate.
(4) Within three months of the conclusion of the consultation under subsection (1) the Secretary of State must lay before Parliament a report of the consultation.
(5) Following publication of the report under subsection (4) the Secretary of State may by regulations set out a scheme requiring fuel suppliers to meet annual targets to ensure the supply of recognised low-carbon renewable liquid fuels for domestic and commercial heating.
(6) Regulations under subsection (5) may provide for—
(a) a scheme for the imposition of low-carbon renewable liquid fuel obligations on fuel suppliers;
(b) the appointment of an Administrator to run the scheme;
(c) matters in relation to the functions of the Administrator;
(d) the method by which amounts of low-carbon renewable liquid fuel are to be counted or determined for the purposes of provision made by or under the regulations;
(e) the Administrator to issue certificates to suppliers setting out the amounts of low-carbon renewable liquid fuel supplied, the time period in which they were supplied and other relevant facts;
(f) a supplier which does not wholly discharge its low-carbon renewable liquid fuel obligation for a given period to pay the Administrator a specified sum within a specified period, and further provision for connected purposes;
(g) the imposition of civil penalties, and objections to and appeals against civil penalties;
(h) the disclosure of relevant information by relevant persons; and
(i) such other provision as the Secretary of State considers appropriate.”
This new clause would require the Secretary of State to consult on a scheme for renewable liquid heating fuel obligations for home and commercial building heating purposes, and to publish a report on the consultation. The new clause would further allow the Secretary of State make regulations to set up a scheme for renewable liquid heating fuel obligations for home and commercial building heating purposes.
New clause 51—Tidal Range power—
(1) Within three months of the day on which this Act is passed, the Secretary of State must establish a Tidal Range Assessment Grant for the purposes of funding an independent evidence-led review of the potential contribution to be made by tidal range energy generation to the future energy generating capacity of the United Kingdom.
(2) The review under subsection (1) must include—
(a) pre-feasibility assessments of proposed tidal range projects and their potential both individually and together to contribute to the future energy generating capacity of the United Kingdom;
(b) whole life-cycle analysis and financial modelling to identify the optimum framework for the financing of tidal range projects as ultra-long lifecycle infrastructure assets, including an assessment of the potential merits of a Regulated Asset Base funding model for tidal range projects;
(c) a whole energy market analysis to establish and quantify the potential contribution of tidal range power to the decarbonisation of the United Kingdom’s energy system with particular reference to the value of predictable, flexible energy generation near centres of increasing demand and the potential of operational tidal range projects to bypass major grid barrier issues and enable a stable, operable, and secure decarbonised energy grid;
(d) an assessment of the current and planned innovations in sectors related to the development of operational tidal range projects, including in the broader supply chain, digital twins, power handling and distribution, and energy storage, and how these can be used to drive a reduction in cost and maximise the contribution of materials and components produced in the United Kingdom to tidal range projects;
(e) environmental baseline research and monitoring programmes of the proposed locations of selected tidal range projects for the purposes of establishing an enhanced understanding of the possible impacts on biodiversity and local ecosystems of operational tidal range projects; and
(f) whole-system analysis to evaluate other potential benefits of operational tidal range projects, such as coastal and flooding protection, the stimulation of related industries, and contributions to local economies.”
New clause 53—Community and Smaller-scale Electricity Supplier Services Scheme—
“(1) Within six months of the passage of this Act, the Secretary of State must by regulations require licensed energy suppliers with more than 150,000 customers (“eligible licensed suppliers”) to offer a Community and Smaller-scale Electricity Supplier Service agreement to any Community or Smaller-scale Energy site registered under section [Community and Smaller-scale Electricity Export Guarantee Scheme (No. 2)] for the purposes of allowing that site to sell electricity to local consumers.
(2) A Community and Smaller-scale Electricity Supplier Service agreement is an agreement which requires licensed suppliers to make a community or smaller-scale energy tariff available to consumers local to the exporting site that has regard to the export price paid or that would be paid to that site under section [Community and Smaller-scale Electricity Export Guarantee Scheme (No. 2)].
(3) The eligible licensed supplier may limit the total number of consumers the community or smaller-scale energy tariff is available to such that the total annual energy under the tariff is broadly equivalent to the total annual energy generated by the site.
(4) The eligible licensed supplier is the registrant for the meters of any local consumer purchasing energy under the community or smaller-scale energy tariff.
(5) The eligible licensed supplier may charge a reasonable fee for the provision of services under this section provided that it has regard to distribution, licensing and regulatory costs and any guidance provided by GEMA.
(6) The eligible licensed supplier must return any money raised through the sale of energy under a tariff set up under this section to the Community or Smaller-scale Energy site, save for the fee allowed under subsection (5).
(7) Eligible licensed suppliers must report annually to GEMA on—
(a) the number and capacity of community energy groups or smaller-scale sites offered Community and Smaller-scale Electricity Supplier Service agreements and the number who have contracted to use them,
(b) the total amount of electricity purchased under these agreements, and
(c) the tariffs for each agreement.
(8) GEMA must—
(a) produce guidance on the level of community or smaller-scale energy tariffs and on the reasonable charges that eligible suppliers may charge for Community and Smaller-scale Electricity Supplier Service agreements,
(b) make and publish a report annually on the operation of the export purchase agreements, setting out—
(i) the number of community energy projects or smaller-scale sites contracted with licensed energy suppliers under this section and the total amount of electricity purchased,
(ii) the licensed suppliers contracting with community energy groups or smaller-scale sites and the amount of electricity each has purchased,
(iii) an assessment of how the mechanism is performing and the contribution it is making to delivering secure and low carbon electricity supplies, and
(iv) recommendations for how Community and Smaller-scale Electricity Supplier Service agreements could be improved.
(9) Regulations under this section are subject to the affirmative procedure.”
New clause 56—Delinking of renewable and gas prices in the retail market—
“(1) Within six months of the passage of this Act the Secretary of State must publish a plan to ensure the delinking of gas and renewable and low carbon energy prices as they appear in the retail market.
(2) The plan may take into account—
(a) the establishment of a “green pool” for the direct sale of renewable and low carbon power into the retail market;
(b) the incorporation of low carbon and renewable power plants not possessing a Contract for Difference into Contract for Difference arrangements suitable for inclusion in a green power pool after it is established.”
This new clause requires the Secretary of State to produce a plan to end the linkage between renewable and low carbon energy and gas prices at retail level which results in most renewable power being priced in the retail market as if it were gas.
New clause 57—Onshore wind—
“(1) The Secretary of State must by regulations ensure that onshore wind installations are treated for the purpose of planning and development as local infrastructure and will be permitted or otherwise as if they were.
(2) Regulations under subsection (1) may amend any primary legislation passed before the passage of this Act.”
This new clause ensures that onshore wind development proposals in England and Wales are permitted to proceed on the same basis as other local infrastructure projects.
New clause 58—Community and Smaller-scale Electricity Export Guarantee Scheme (No. 2)—
“(1) Within six months of the passage of this Act, the Secretary of State must by regulations require licensed energy suppliers with more than 150,000 customers (“eligible licensed suppliers”) to purchase electricity exports from sites, including those operated by community groups, which generate low carbon electricity with a capacity below 5MW.
(2) The requirement imposed by regulations under subsection (1) is to be known as the Community and Smaller-scale Electricity Export Guarantee Scheme.
(3) Fossil fuelled local power plants with a capacity of less than 5MW are not eligible for participation in the Community and Smaller-scale Electricity Export Guarantee Scheme, with the exception of a local combined heat and power plant that generates electricity ancillary to its purpose of providing heat for local heat networks.
(4) “Fossil fuel” has the meaning given in section 104(4).
(5) Licensed energy suppliers with fewer than 150,000 customers may also purchase electricity exports from the sites specified in subsection (1) provided that they do so on the terms set out by the regulations.
(6) The regulations must require that eligible licensed suppliers—
(a) offer to the sites specified in subsection (1) a minimum export price set annually by the Gas and Electricity Markets Authority (“GEMA”),
(b) offer to those sites a minimum contract period of five years, and
(c) allow the exporting site to end the contract after no more than one year.
(7) Within six months of the passage of this Act, GEMA must—
(a) set an annual minimum export price for those sites that has regard to current wholesale energy prices and inflation in energy prices and the wider economy,
(b) introduce a registration system for exporting sites meeting the requirements set out in subsection (1) and wanting to access these export purchases,
(c) define specifications for the smart export meters required by such sites,
(d) define “low carbon electricity” in such a way that it includes renewable generation technology and may include other technology with extremely low carbon dioxide emissions,
(e) define requirements for an exporting site generating low carbon electricity with a capacity of less than 5MW to be registered as a Community or Smaller-scale Energy site, and maintain a register of such sites.
(8) Regulations under subsection (1) must provide that to access export purchase agreements exporters must—
(a) register their site with GEMA,
(b) install a smart export meter that meets specifications defined by GEMA, and
(c) notify GEMA if they are a community group.
(9) All licensed suppliers providing purchase agreements for sites specified in subsection (1) must report annually to GEMA—
(a) the number and capacity of Community or Smaller-scale Energy sites that have been offered contracts to purchase electricity and the number of such sites which agreed those contracts,
(b) the total amount of electricity purchased under those agreements, and
(c) the price paid for that electricity.
(10) OFGEM must make and publish a report annually on the operation of the export purchase agreements, setting out—
(a) the number of Community or Smaller scale Energy sites contracted with licensed energy suppliers under this section and the total amount of electricity purchased,
(b) the licensed suppliers contracting with Community or Smaller-scale Energy sites and the amount of electricity each has purchased,
(c) an assessment of how the mechanism is performing and the contribution it is making to delivering secure and low carbon electricity supplies, and
(d) recommendations on how the mechanism could be improved.
(11) Regulations under this section are subject to the affirmative procedure.”
New clause 59—Decarbonised electricity supply by 2030—
“(1) It is the duty of the Secretary of State to ensure that the supply of electricity in the UK is decarbonised by 2030.
(2) The Secretary of State must, within six months of the passage of this Act, produce and publish a plan which will set out how the duty in subsection (1) is to be achieved.”
This new clause is intended to provide for the UK’s electricity supply to be decarbonised by 2030.
New clause 60—Planning consent for new electricity pylons—
“(1) Within six months of the passage of this Act, the Secretary of State must by regulations provide for a fast-track planning process for electricity pylons along motorways and rail lines.
(2) Regulations under this section may amend primary legislation.”
New clause 61—National Warmer Homes and Businesses Action Plan (No. 2)—
“(1) The Secretary of State must, before the end of the period of 6 months beginning with the day on which this Act is passed, publish an action plan entitled the Warmer Homes and Businesses Action Plan, to set out proposals for delivery of—
(a) an Energy Performance Certificate at band C by 2035 in all UK homes where practical, cost effective and affordable, and
(b) an Energy Performance Certificate at band B by 2030 in all privately rented non-domestic properties, and
(c) the Future Homes Standard for all new builds in England by 2025.
(2) The Secretary of State must, in developing the Warmer Homes and Businesses Action Plan, consult the Climate Change Committee and its sub-committee on adaptation.”
New clause 62—Energy performance regulations relating to existing premises (No. 2)—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must make regulations—
(a) amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2), all tenancies have an Energy Performance Certificate (EPC) of at least Band C by 31 December 2028; and
(b) amending the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 (S.I. 2019/595) to raise the cost cap to £10,000.
(2) Regulations under subsection (1) must provide for exemptions to apply where—
(a) the occupier of any premises whose permission is needed to carry out works refuses to give such permission;
(b) it is not technically feasible to improve the energy performance of the premises to the level of EPC Band C; or
(c) another exemption specified in the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 has been registered in the Private Rented Sector (PRS) Exemptions Register.
(3) Within six months of the passage of this Act the Secretary of State must make regulations—
(a) amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 to enable local authorities to give notice to landlords that they wish to inspect a property in relation to those Regulations, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time;
(b) expanding the scope of the current PRS Exemptions Register and redesigning it as a database covering properties’ compliance with or exemptions from EPCs;
(c) requiring a post-improvement EPC to be undertaken to demonstrate compliance;
(d) requiring a valid EPC to be in place at all times while a property is let; and
(e) raising the maximum total of financial penalties to be imposed by a local authority on a landlord of a domestic private rented sector property in relation to the same breach and for the same property to £30,000 per property and per breach of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.
(4) Regulations under this section are subject to the affirmative procedure.”
New clause 67—Local supply rights—
“(1) Within six months of the day on which this Act is passed, the Secretary of State must publish a report on and consult on the introduction of local supply rights for community energy schemes, which would enable these schemes to sell their power to local customers.
(2) The report must set out—
(a) the potential benefits of community energy,
(b) the estimated additional costs to consumer bills that would be incurred in order for community energy schemes to account for 10% of energy generation by 2033, and
(c) an estimate of typical cost/benefit ratios for local communities and consumers.”
This new clause seeks to require the Government to publish a consultation on the introduction of local supply rights for community energy schemes within 6 months of the Act being passed.
New clause 68—Reports on the functioning of the energy price support framework—
“Within six months of the day on which this Act is passed, the Secretary of State must prepare and lay before Parliament reports assessing—
(a) the potential benefits of a social tariff would have on levels of fuel poverty across the UK,
(b) the adequacy of the current system for individuals who have higher energy needs due to a medical condition, and
(c) the potential benefits of a strategy that rewards households who use less energy by guaranteeing them a lower price through a tiered electricity plan.”
This new clause will require the Secretary of State to report on the functioning of the current framework as it relates to certain groups.
Government amendment 180.
Amendment 3, in clause 2, page 3, line 30, at end insert
“issued by the economic regulator or other competent authority”.
This amendment allows persons with a CO2 storage licence from the North Sea Transition Authority to operate a geological storage site for CO2 disposal, as per current legislation in the Energy Act 2010.
Amendment 4, page 3, line 34, leave out “a service” and insert
“a monopoly service to multiple users”.
This amendment would exclude from the requirement to have an economic licence, all forms of transportation where competitive markets are more likely to develop than monopolies e.g. shipping, rail or road. It would also enable investment in private spur connections to the regulated CO2 network.
Government amendments 131, 198, 181, 132, 199 to 209, 144 to 147, 139 and 140.
Amendment 175, in clause 65, page 58, line 13, leave out
“in the opinion of the Secretary of State”.
This amendment would remove the role of the Secretary of State in determining who qualifies as a “low carbon hydrogen producer.”
Government amendments 141 and 142.
Amendment 9, page 60, line 22, leave out clause 69.
This amendment, together with Amendments 10 to 12, would leave out the clauses of the Bill which provide for a hydrogen levy.
Amendment 10, page 61, line 1, leave out clause 70.
See explanatory statement to Amendment 9.
Amendment 170, in clause 70, page 61, line 2, leave out
“relevant market participants (see subsection (8))” and insert “the Secretary of State”.
This amendment, together with Amendments 171 to174, is intended to provide that the Secretary of State, rather than relevant market participants, should fund the hydrogen levy administrator.
Amendment 171, page 61, line 19, leave out “relevant market participants” and insert “the Secretary of State”.
See explanatory statement to Amendment 170.
Amendment 172, page 61, line 34, leave out “relevant market participants” and insert “the Secretary of State”.
See explanatory statement to Amendment 170.
Amendment 173, page 61, line 37, leave out subsection (5).
See explanatory statement to Amendment 170.
Government amendment 148.
Amendment 174, page 62, line 9, leave out subsection (9).
See explanatory statement to Amendment 170.
Amendment 11, page 62, line 12, leave out clause 71.
See explanatory statement to Amendment 9.
Amendment 12, page 63, line 11, leave out clause 72.
See explanatory statement to Amendment 9.
Amendment 13, in clause 73, page 64, line 22, leave out paragraph (a).
This amendment is consequential on Amendments 9 to 12.
Amendment 14, page 64, line 26, leave out “each paragraph of”.
This amendment is consequential on Amendments 9 to 12.
Amendment 15, page 64, line 27, leave out “under that paragraph”.
This amendment is consequential on Amendments 9 to 12.
Government amendment 121.
Amendment 16, page 65, line 6, leave out paragraph (a).
This amendment is consequential on Amendments 9 to 12.
Amendment 17, page 65, line 10, leave out
“a hydrogen production revenue support contract or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 18, page 65, line 15, leave out
“a hydrogen production allocation body or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 19, in clause 74, page 65, line 22, leave out paragraph (a).
This amendment is consequential on Amendments 9 to 12.
Amendment 20, page 65, line 31, leave out
“hydrogen production revenue support contract or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 21, in clause 75, page 65, line 35, leave out subsection (1).
This amendment is consequential on Amendments 9 to 12.
Amendment 6, page 66, line 2, after “that” insert “eligible”.
This amendment clarifies that the low carbon hydrogen producer must be eligible to receive support, which other amendments ensure means that they are compliant with the Low Carbon Hydrogen Standard.
Amendment 22, page 66, line 10, leave out “(1) or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 23, in clause 76, page 66, line 23, leave out paragraph (a).
This amendment is consequential on Amendments 9 to 12.
Amendment 24, page 66, line 30, leave out
“hydrogen production revenue support contracts or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 25, page 66, line 33, leave out
“hydrogen production revenue support contracts or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 26, page 67, line 10, leave out
“hydrogen production revenue support contracts or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 27, page 67, line 15, leave out “for producing hydrogen or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 28, page 67, line 17, leave out
“(whether in respect of hydrogen production or capture of carbon dioxide)”.
This amendment is consequential on Amendments 9 to 12.
Government amendment 143.
Amendment 29, in clause 77, page 67, line 40, leave out subsection (1).
This amendment is consequential on Amendments 9 to 12.
Amendment 30, page 68, line 19, leave out “hydrogen production counterparty or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 31, page 68, line 24, leave out paragraph (c) and insert—
“(c) how the eligible carbon capture entity to whom the offer is made may enter into a carbon capture revenue support contract as a result of the offer;”.
This amendment is consequential on Amendments 9 to 12.
Amendment 32, page 68, line 28, leave out
“eligible low carbon hydrogen producer or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 33, in clause 78, page 68, line 36, leave out
“an eligible low carbon hydrogen producer, or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 34, page 68, line 39, leave out
“hydrogen production counterparty or (as the case requires)”.
This amendment is consequential on Amendments 9 to 12.
Amendment 35, page 69, line 1, leave out “hydrogen production counterparty or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 36, page 69, line 16, leave out “hydrogen production counterparty or”.
This amendment is consequential on Amendments 9 to 12.
Amendment 37, page 69, line 35, leave out clause 80.
This amendment is consequential on Amendments 9 to 12.
Amendment 38, in clause 81, page 70, line 33, leave out
“hydrogen transport counterparty, hydrogen storage counterparty, hydrogen production counterparty”.
This amendment is consequential on Amendments 9 to 12.
Amendment 39, in clause 82, page 71, line 1, leave out paragraph (a).
This amendment is consequential on Amendments 9 to 12.
Amendment 40, in clause 83, page 71, line 32, leave out sub-paragraph (i).
This amendment is consequential on Amendments 9 to 12.
Amendment 41, page 71, line 40, leave out paragraph (e).
This amendment is consequential on Amendments 9 to 12.
Government amendment 149.
Amendment 42, page 72, line 9, leave out
“hydrogen production revenue support contract or”.
This amendment is consequential on Amendments 9 to 12.
Government amendments 150 to 152.
Amendment 43, in clause 84, page 73, line 7, leave out subsections (3) and (4).
This amendment is consequential on Amendments 9 to 12.
Government amendments 210 to 213.
Amendment 44, in clause 86, page 74, line 9, leave out paragraphs (b) and (c).
This amendment is consequential on Amendments 9 to 12.
Amendment 45, page 74, line 22, leave out paragraphs (b) and (c).
This amendment is consequential on Amendments 9 to 12.
Amendment 46, age 74, line 28, leave out “a hydrogen levy administrator”.
This amendment is consequential on Amendments 9 to 12.
Amendment 47, in clause 88, page 77, line 2, leave out paragraph (b).
This amendment is consequential on Amendments 9 to 12.
Government amendments 153 to 162.
Amendment 48, page 78, line 37, leave out clause 90.
This amendment is consequential on Amendments 9 to 12.
Government amendment 163.
Amendment 49, in clause 91, page 79, line 36, leave out paragraph (b).
This amendment is consequential on Amendments 9 to 12.
Government amendments 164, 70, 165, 122 to 124 and 214 to 216.
Amendment 7, in clause 128, page 115, line 6, after “transportation” insert
“by pipeline, ship or other means,”.
Carbon dioxide transport by ship is almost certain to be a part of the Scottish Cluster and subsequent phases of other CCUS clusters and this amendment makes explicit that transportation by ship or other means would be included in the financial assistance available under clause 103.
Government amendments 125 to 129, 71, 72, 133 and 134.
Amendment 8, in clause 142, page 127, line 2, leave out from “heat” to the end of line 18 and insert “from a renewable source.”
This amendment would enable the Secretary of State to make provision for the establishment of a low-carbon heat scheme which encouraged the use of heating appliances that generate heat from a renewable source but which might previously have burnt a fossil fuel.
Government amendments 217 and 218.
Amendment 50, in clause 152, page 133, line 30, at end insert
“, except that that power is not exercisable without a warrant issued by a justice of the peace.”
This amendment would require a warrant for the exercise of the power to enter premises in a hydrogen grid conversion trial.
Amendment 130, page 136, line 3, leave out clause 155.
This amendment would remove clause 155 and therefore ensure that fusion energy facilities are still required to secure a nuclear site licence.
Amendment 1, in clause 159, page 137, line 31, at end insert—
“(1A) The person designated under subsection (1) must be a public body with no other roles or interests in the energy sector.”
This amendment ensures that the ISOP is a public body, not an individual or a private company, and has no conflicting interests.
Amendment 51, in clause 160, page 138, line 9, at beginning insert—
“(A1) The ISOP must carry out its functions in the way that it considers is best calculated to ensure the lowest possible cost of energy to businesses and households.”
This amendment, together with Amendment 52, would introduce a new primary objective for the Independent System Operator and Planner (ISOP), to which the existing objectives for the ISOP in the Bill would become secondary.
Amendment 52, page 138, line 9, at beginning insert “Subject to subsection (A1),”.
See explanatory statement to Amendment 51.
Government amendments 73 to 76.
Amendment 2, in clause 162, page 140, line 5, leave out subsection (1) and insert—
“(1) The ISOP must have regard to the strategic priorities set out in the current strategy and policy statement but will otherwise carry out its functions independently of the Secretary of the State.”
This amendment ensures that the Independent System Operator and Planner (ISOP) is independent.
Government amendments 166 and 77 to 79.
Amendment 53, page 178, line 25, leave out clause 212.
This amendment would remove the clause granting the Secretary of State an extension of time for the extension of powers relating to smart meters.
Government amendments 103 and 219 to 224.
Amendment 54, in clause 227, page 188, line 31, leave out paragraph (c).
This amendment would ensure that it was not possible to impose a penalty on a person for not complying with a request for information relating to a heat network zone.
Amendment 55, in clause 228, page 189, line 9, leave out subsections (2) to (10) and insert—
“(2) Regulations made by virtue of subsection (1) may not impose a requirement on any person.”
This amendment would prevent regulations about heat networks within heat network zones from imposing mandatory requirements.
Amendment 56, page 192, line 30, leave out clause 230.
This amendment would leave out the clause which provides for the enforcement of heat network zone requirements.
Amendment 57, page 193, line 12, leave out clause 231.
This amendment would leave out the clause which provides for penalties to be imposed by regulations about heat network zones.
Amendment 58, page 196, line 3, leave out clause 235.
This amendment, together with Amendments 59 to 63, would remove Chapter 2 of Part 9 of the Bill, on energy smart appliances.
Amendment 59, page 197, line 13, leave out clause 236.
See explanatory statement to Amendment 58.
Amendment 60, page 198, line 4, leave out clause 237.
See explanatory statement to Amendment 58.
Amendment 61, page 199, line 39, leave out clause 238.
See explanatory statement to Amendment 58.
Amendment 62, page 200, line 22, leave out clause 239.
See explanatory statement to Amendment 58.
Amendment 63, page 201, line 14, leave out clause 240.
See explanatory statement to Amendment 58.
Amendment 64, page 205, line 14, leave out clause 246.
This amendment, together with Amendments 65 to 67, would leave out Part 10 of the Bill, on the energy performance of premises.
Government amendments 182 to 184.
Amendment 65, page 206, line 29, leave out clause 247.
See explanatory statement to Amendment 64.
Amendment 66, page 207, line 1, leave out clause 248.
See explanatory statement to Amendment 64. This amendment would remove a clause which would enable the creation of criminal offences by regulations.
Government amendment 185.
Amendment 67, page 208, line 6, leave out clause 249.
See explanatory statement to Amendment 64. This amendment would remove a clause which would enable the amendment, repeal or revocation of primary legislation by regulations.
Government amendments 186 to 193.
Amendment 68, page 214, line 1, leave out clause 255.
This amendment would leave out the clause which provides for requirements to be imposed by energy savings opportunity scheme regulations.
Amendment 69, page 216, line 16, leave out clause 257.
This amendment would leave out the clause which provides for the enforcement of energy savings opportunity scheme regulations and the creation of connected penalties and offences.
Government amendments 225 to 229, 80, 81, 230 to 238, 82, 194, 239, 195, 240, 241, 83, 242, 84 to 94, 243, 176, 177, 196, 178, 244, 104 to 110, 169, 179, 111 to 120, 95 to 100, 197, 101, 135 to 138, 167, 168 and 102.
Andrew Bowie
I am delighted to rise today to bring before the House our landmark Energy Bill for its consideration. This world-leading, historic Bill—a Conservative Bill—will deliver for this country cleaner, cheaper and more secure energy. It will level up this country, while contributing to levelling down bills for the British people. It will unleash new technology, liberate private investment in clean technologies, modernise and future-proof our energy network, and deliver for this country and for future generations.
The United Kingdom already has a great story to tell on reducing our carbon emissions. We have reduced our emissions faster than any other G7 nation. We were the first European nation to legislate for net zero. We have the first oil and gas basin dedicated to going net zero and the first, second, third and fourth-largest offshore wind farms in the world operating and generating power off the coast of Great Britain right now. We have eliminated our reliance on coal. We have grown to more than 40% of energy being generated by renewables. We have announced further investment in carbon capture, usage and storage, and we are pressing ahead with Great British Nuclear, which I launched two months ago with an exciting programme for small modular reactors. We are on track to deliver 24 GW of nuclear power on the grid by 2025.
Ian Paisley (North Antrim) (DUP)
Can the Minister confirm that at the weekend, agreements were made that have removed Northern Ireland from benefiting from the renewable liquid fuel agreements? Is that the case, and if so, why?
Andrew Bowie
If the hon. Gentleman will have patience, I will come to the renewable liquid heating fuel amendments later in my speech, where I am happy to direct any questions to which he is seeking answers.
We have done all the things I have mentioned while growing our economy. We have cut our emissions by 40% while growing our economy by 60%. It is an inherently Conservative value—a value close to the hearts of all on the Government Benches—to pass on what we inherit in a better state to the next generation. That includes the state of our environment and our climate. There is also no more Conservative value than to ensure the security of our nation and its people, and that includes our energy supply.
John Redwood (Wokingham) (Con)
On that very point—security—what provision is being made for days when there is no wind, given that we will see the closure of most of our nuclear power stations this decade and will have little else to rely on, other than fossil fuel? How are we going to get through?
Andrew Bowie
My right hon. Friend knows that I am a great champion of supporting our oil and gas industry, which continues to supply a large amount of our energy baseload and will do for a significant amount of time to come. As he also knows, we are investing a lot of time and money into ensuring that we deliver the next generation of nuclear power plants, including small modular reactors, so that we have the energy baseload that this country needs so that, as he rightly suggests, when the wind does not blow and the sun does not shine, people can still be assured that the lights will come on. The Conservative principles that I have spoken about are at the very heart of the Bill, which I am pleased to bring before the House today.
It is true that some time has passed since the Bill was introduced in July last year. The Opposition spokesperson, the hon. Member for Southampton, Test (Dr Whitehead), was but a boy when this Bill was introduced last year. A huge amount of constructive dialogue and dedicated work has taken place during that time. I thank all the Secretaries of State at the Department for Business, Energy and Industrial Strategy and the Department for Energy Security and Net Zero, the Ministers and the Prime Ministers who have been involved since the Bill was introduced.
Since the Bill came to this House from the other place, I have met and engaged with colleagues from all sides of House. We debated the Bill in a lively Second Reading and spent 72 long hours in Committee, so I start by thanking everyone across the House, especially the shadow ministerial team, the former Scottish National party energy spokesman, the hon. Member for Kilmarnock and Loudoun (Alan Brown), and all on the Government side, for their constructive engagement in ensuring that we got the Bill to these final stages in a state that, I hope, will be broadly welcomed by most, if not all, Members.
Richard Graham
The Minister referred to base energy load, which is crucial in respect of nuclear energy, but is also relevant to marine energy, which, as he knows, we have huge potential for around our coast, particularly in Scotland. Will he confirm that that will play an important part in the next contracts for difference round and in his thinking?
Andrew Bowie
I am delighted to confirm that that will play an important part. Indeed, we have ringfenced £10 million to support marine energy in the country. We believe it has a huge role to play in delivering our energy baseload. Indeed, the innovations being made in that technology are incredibly exciting and will play a huge part in our energy baseload moving forward.
Jamie Stone
The Minister is incredibly well-mannered. The irony is that we generate an enormous amount of power from onshore wind in the highlands, yet we face the highest levels of fuel poverty. New clause 1, tabled in my name, talks about increasing the community benefit in some way and widening the number of communities who could benefit. I am aware that the hon. Member for Rutland and Melton (Alicia Kearns) has tabled a similar amendment, and I would like to voice my support and that of the Liberal Democrats for it.
Andrew Bowie
I thank the hon. Gentleman for his constructive intervention. The Government recently launched a consultation on community benefits, because we do understand that those communities being asked to host pieces of critical national infrastructure should be recompensed for that, and that the community benefits that the individuals, communities and groups in those areas receive should be enough to recompense them for what they are doing in the national interest.
Matt Hancock (West Suffolk) (Ind)
On infrastructure of national scale, in order to keep people on side, is it not also vital that such projects are in the right place—unlike the Sunnica development near my constituency—so that those of us who care about the agenda can support it wholeheartedly and ensure that the Conservative values that the Minister talks about are rightly behind the green energy revolution?
Andrew Bowie
Absolutely. It is incumbent on all involved, from the transmission operators to the developers, National Grid, the electricity system operator and indeed the Department and those across Government, to ensure that where such pieces of critical national infrastructure are being built, developed and planned, plans are proceeded with and laid in a way that is conducive to local sentiment and local support and will provide for that local community for many years to come.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (Ind)
Will the Minister give way?
Angus Brendan MacNeil
I am grateful to the very polite Minister, as was said by the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone). I am sure the Minister is aware that heat pumps will produce about 2.5 times the energy of the electricity put into them, or four times for ground source heat pumps—they are multipliers of the power put into them. The Government have a plan for 600,000 to be installed by 2028. Will we see those? How many will we see next year? Does he have intervening targets for that? At the moment, they are at only a 10th of where the target would have them.
Secondly, a point asked in my constituency is about the new £10 million community energy fund, which relates only to England, despite energy being reserved. Will he enlighten Euan Scott, my constituent, please?
Madam Deputy Speaker (Dame Rosie Winterton)
Order. There is so much pressure on time, so it is really important that interventions are short.
Andrew Bowie
On the hon. Member’s first point, absolutely, we remain committed to delivering, developing and rolling out heat pumps across the country, and we remain committed to the targets we have set out. On the community energy fund, there is already an equivalent Scottish community energy fund up and running and delivering for communities across Scotland. That is a competency of the Scottish Government at Holyrood. I would be delighted to direct any questions that he or his constituent have on that to the Scottish Government in Edinburgh. [Interruption.] He makes the case from a sedentary position that energy is reserved. Yes, but the Scottish Government have their own community energy fund. We will base a lot of what we are doing on that fund as it is rolled out in Scotland.
With your leave, Madam Deputy Speaker, I will take some time to explain the not insubstantial number of Government amendments to the House. I turn first to Government amendment 148 and the subsequent consequential amendments. I think it is fair to say that considerable concern was raised about the initial proposals for a hydrogen levy. The Government have carefully considered those concerns. I particularly thank my hon. Friend the Member for South Thanet (Craig Mackinlay) for his amendments on the issue, and indeed the right hon. Member for Doncaster North (Edward Miliband) for his amendments relating to those clauses. It is right that we take these considerations seriously and, where appropriate, seek to make changes.
Alec Shelbrooke
May I take the opportunity to thank my hon. Friend for reflecting on what I said in Committee and for the commitments given to me by the Government to bring about an amendment to the Bill? I thank him for listening to Back Benchers’ concerns in Committee.
Andrew Bowie
I was very pleased to take that intervention. I thank my right hon. Friend for it. If he is patient, I will explain to the rest of the House—I think Committee members are aware—what we seek to do with the hydrogen levy as it stands.
The Government’s amendments will remove provisions that enabled the levy to be imposed on energy suppliers in Great Britain, ensuring that within Great Britain the levy can be placed only on gas shippers. In the case of Northern Ireland, the amendments seek to ensure that only gas supply licence holders who engage with gas shipping can be subject to that levy. That reflects the different approach to the licensing of gas shipping across Great Britain and Northern Ireland.
The revised provisions will provide a fairer approach to funding hydrogen, placing the charge higher up the supply chain, with the potential for costs to be spread to the sectors expected to benefit most from early hydrogen development, not the wider British public. I remind the House that the Bill will also enable the option of funding hydrogen through the Exchequer. By providing two robust and reliable options for hydrogen funding, we will help bolster industry confidence in the viability of the UK hydrogen economy and boost private investment, with the potential to unlock significant energy security and economic benefits. The hydrogen sector could support over 12,000 jobs and generate up to £11 billion in private investment by 2030.
I must be clear, and the House should understand, that the Bill will not actually introduce a levy on gas shippers. Instead, it will enable the Government to introduce the levy through secondary legislation.
Craig Mackinlay (South Thanet) (Con)
It is very welcome that the levy will not be applied on households as a direct cost they will see in their bills, but it is something of a sleight of hand just to push it further up the supply chain, because it will be an energy-related cost somewhere in the supply chain that will feed down to every business and household in another way through an additional charge they will face, much like VAT. I welcome it as far as I can, but I would rather see it removed in its entirety.
Andrew Bowie
I thank my hon. Friend for his contribution. As we have spoken about before, I understand his position on the levy. It is our belief that in ensuring that the levy is placed higher up the chain, the sectors that will benefit most from the early development of hydrogen will bear the brunt of the cost, not the wider British public. That is the aim and intention of what we seek to achieve.
As I was saying, the Bill will not introduce the levy on to shippers; instead, it will enable the Government to introduce the levy through secondary legislation. I am sure we will continue to have this debate in the months and years ahead.
I turn to Government new clause 63, amendment 8 and new clauses 40 and 50 on renewable liquid heating fuel. I thank my right hon. Friend the Member for Camborne and Redruth (George Eustice) for his work and amendments relating to renewable liquid fuels for low-carbon heating. His constructive work with the Government has been incredibly helpful and positive. I also pay tribute to my hon. Friend the Member for Bury St Edmunds (Jo Churchill), who has been championing the use of renewable liquid fuels for low-carbon heating for many years.
As the recent biomass strategy made clear, such fuels will have a critical role to play in decarbonising our economy. We recognise that they have the potential to play an important role in decarbonising heat, especially as not all off-grid properties will be suitable for electrification. We will explore the potential of these fuels for heat by issuing a consultation within 12 months. We want to take the powers now to support the use of these fuels in heat in the future, should they be needed. That is why we tabled Government new clause 63, taking powers to impose obligations on heating fuel suppliers to increase the supply of renewable liquid heating fuels.
Nickie Aiken (Cities of London and Westminster) (Con)
In my constituency we have a particular issue with commercial and domestic use, because residents are often in the same building as commercial properties. It would be helpful for the Minister to look at the definition of heat network systems, so that Ofgem can understand what systems qualify as heat networks in domestic properties, which are a real issue in my constituency.
Andrew Bowie
The measures in the Bill will provide the Government with powers to implement heat network zoning in England. Those include powers to develop a nationwide methodology for identifying and designating areas as heat network zones, and to establish a new zoning co-ordinator role—which we generally expect will be filled by local government, though my hon. Friend is free to apply—with responsibility for designating areas as heat network zones and enforcing requirements in them. They also include powers requiring heat networks developed in zones to meet a low-carbon requirement, and to ensure that certain buildings and heat sources connect to a heat network in a zone within a specific timeframe. The relevant Minister in the Department and I will be happy to meet my hon. Friend to discuss how that will be relevant to her urban constituency as we move forward and seek to implement these proposals.
Richard Fuller (North East Bedfordshire) (Con)
I join the Minister in thanking my right hon. Friend the Member for Camborne and Redruth (George Eustice) for leading on the measures included in new clause 63. On the renewable liquid heating fuel obligation, the Minister said that he would do a consultation within the next 12 months. Many of my constituents who are off-grid also want secondary legislation to come through in the next 12 months. Can he assure the House that that is his intention?
Andrew Bowie
I can confirm that we will move to a consultation in the next few months. Indeed, we will use the powers to support the use of those fuels in heat in future, should they be needed. Again, as we move through the consultation period, other Ministers in the Department and I would be delighted to meet my hon. Friend and all Members concerned. I understand that this issue affects many constituencies across the country and, rightly, interests many right hon. and hon. Members. As we move forward with the consultation and towards implementing the powers, we will be delighted to meet Members.
David Duguid (Banff and Buchan) (Con)
I welcome Government new clauses 52 and 63, which are of particular value to those living in certain parts of the country, such as north-east Scotland, as the Minister is very much aware. Will he join me in reinforcing and emphasising the benefit of developments in sustainable aviation fuel and renewable liquid heating fuel respectively, particularly in Aberdeenshire?
Andrew Bowie
Yes, I am very pleased to welcome developments in renewable liquid heating fuel. The consultation, which will be UK-wide, will benefit those living in rural constituencies such as Banff and Buchan, and those across north-east Scotland and rural Britain. I welcome the support for the sustainable aviation fuel amendment, to which I will refer shortly.
Angus Brendan MacNeil
To back up the point made by the hon. Member for Banff and Buchan (David Duguid), standard consultation and the legislation being in place in 12 months do not show the necessary urgency. That is the point that unites many people. The Minister, with his Thompson gun approach to spitting things out, got that one out very quickly, but we need it done an awful lot more quickly than starting within 12 months. This Government will probably be gone in 12 months.
Andrew Bowie
I am determined to work very hard to ensure that this Government will not be gone in 12 months. However, we are taking the powers now to ensure support for the use of these fuels in heat in future, if needed. I should make clear that we are starting the consultation within the next 12 months, not in 12 months. It will be within the next year.
Ian Paisley
There is a vast rural housing network in Northern Ireland of so many households, and there is overreliance on heating oil. What is the arrangement for using renewable liquid fuels in Northern Ireland?
Andrew Bowie
Once again, I thank the hon. Gentleman for his question. I was just about to answer his original question: I can confirm that officials from the Department for Energy Security and Net Zero in London have been in discussion with Northern Ireland officials, who are broadly content with the Government’s approach on this issue. However, conversations will continue with Northern Ireland officials on what we can do to support renewable liquid heating fuels in Northern Ireland. Once again, as on the other issues I have specified, I would be delighted to meet the hon. Gentleman and colleagues from across Northern Ireland to discuss how this Government can ensure that the support delivered in Great Britain can be replicated in Northern Ireland.
I turn back to my comments on renewable liquid heating fuels. With regard to amendment 8, the powers in clause 142 relate only to the planned clean heat market mechanism, for which the Government’s focus is on supporting the development of the market for electric heat pumps. We do not believe that expanding the power set out here is necessary to allow for boilers burning renewable liquid fuels to be installed or used. In the light of those steps, I hope my right hon. Friend the Member for Camborne and Redruth is reassured by the Government’s action and will feel able not to press the amendment.
I turn to Government new clauses 52 and 169 and new clause 35 on sustainable aviation fuel. I thank my right hon. Friend the Member for Epsom and Ewell (Chris Grayling) for his constructive engagement with me and colleagues at the Department for Transport. This Government are committed to ensuring that the UK sustainable aviation fuel programme is one of the most comprehensive in the world. That is why in the Bill we are committing to publish a consultation on the options for designing and implementing a revenue certainty scheme within six months of it being passed.
We will also update Parliament within 18 months on the development of a sustainable aviation fuel revenue certainty scheme. As the Secretary of State for Transport, my right hon. Friend the Member for Forest of Dean (Mr Harper), set out in a written ministerial statement yesterday, that builds on our commitment to deliver a revenue certainty scheme for domestic sustainable aviation fuel production by the end of 2026. The intention is that the scheme will be industry-funded. Alongside that, we have published a plan for delivering the scheme, which contains a timeline of key milestones such as a public consultation on options, an associated Government response, design phases, and delivery and legislative steps.
Chris Grayling (Epsom and Ewell) (Con)
I thank my hon. Friend for his constructive approach on this issue. Could I seek one more assurance? When the consultation is finished, will the Government review the likelihood of securing the investment we want? If there is still doubt, will he ensure that discussion takes place about whether the Government should play a part in that, potentially at a future fiscal event?
Andrew Bowie
I can give my right hon. Friend that assurance and go further. That commitment, alongside our £165 million advanced fuels fund and the world-leading SAF mandate, will help to provide strong market signals and incentives to drive the demand and supply of SAF from sustainable sources. Future funding decisions on SAF will be considered as part of the next spending review.
I would like to turn briefly to community energy. I thank my hon. Friend the Member for Wantage (David Johnston) for his continued engagement on the Bill, particularly his championing of community energy, alongside many others in this House. The Government recognise that community energy projects can have real benefits for the communities in which they are based, and are keen to ensure that they deliver value for money for consumers. That is why we have launched a new £10 million community energy fund, which expands on the success of the previous rural community energy fund, to enable both rural and urban communities across England to access grant funding to develop local renewable energy projects for investment.
Sally-Ann Hart (Hastings and Rye) (Con)
It is fantastic that the Government have announced the new fund to help community energy schemes get off the ground. That is a very welcome step. Could my hon. Friend outline what steps he will take to remove the barriers that prevent community energy schemes from accessing local markets?
Andrew Bowie
I can indeed. I am delighted to tell my hon. Friend that alongside our proposed fund, we are committing to publishing an annual report to Parliament and to consulting on the barriers the sector faces when developing projects.
I am also very pleased to announce that His Majesty’s Government have reached an agreement with the Scottish Government to amend the Bill to secure their support for a legislative consent motion in the Scottish Parliament. The comprehensive set of amendments agreed with the Administration in Edinburgh will strengthen the Bill’s consultation provisions and require the Secretary of State to seek the consent of devolved Ministers before exercising powers under clauses 2, 3 and 293.
I would also like to take this opportunity to confirm to the House and to the Scottish Government that by virtue of clause 218(2)(a)(ii), the regulatory cost the GEMA can recover from gas and electricity licence holders from across Great Britain includes any costs it occurs performing the Scottish licensing function. The Government are disappointed that the Welsh Government have decided not to support the legislative consent motion for the Bill in the Senedd. However, as a sign of good faith the Government will extend the amendments agreed with the Scottish Government to apply in Wales and Northern Ireland where appropriate.
A number of Government amendments for consideration on Report relate to commencement. They ensure that clauses, such as those relating to the smart meter roll-out and low carbon heat schemes, will come into force as soon as the Bill gains Royal Assent. The remaining Government amendments are technical in nature and, as such, I do not propose to discuss any of them in great detail—I am sure Madam Deputy Speaker is delighted.
Christine Jardine (Edinburgh West) (LD)
I thank the Minister for giving way, but I notice that I cannot see any mention in the amendments of standing charges. I know that is a very difficult thing, but in my constituency there is a great deal of concern about the fact that there is no uniformity in the United Kingdom on standing charges. My constituents can pay around £100 a year more than people elsewhere in the country. Do the Government have any intention to address that issue, along with issues such as domestic insulation?
Andrew Bowie
I thank the hon. Lady very much for her intervention and her question. I am engaging with Ofgem on that very issue and am looking to convene a meeting in Edinburgh with all the significant players involved in energy transmission and production in Scotland at the earliest available opportunity, so we can discuss the issues regarding standing charges and other issues that affect Scottish bill payers. I would be very delighted to engage with her as we move towards that meeting taking place.
Angus Brendan MacNeil
The Minister may have heard on “The World at One” on Radio 4 last week the head of OVO Energy talking about the movement for the cost of transmission from the unit price to the standing charge price, which has ramped up standing charges and is very concerning to many people because that disproportionately impacts poorer bill payers. Will he look at that issue and discuss it with Ofgem at his meeting?
Andrew Bowie
Yes, I can confirm that I will raise that issue with Ofgem at my next meeting, and at the next available opportunity I have to meet the Chairman of the Energy Security and Net Zero Committee, I will certainly have an answer for him on that question.
Anna McMorrin (Cardiff North) (Lab)
In 2013, the then coalition Government cut all the energy efficiency programmes, plunging millions of people into debt. What plans does he have to ensure there is an insulation programme to provide desperately needed energy efficiency right across homes and households?
Andrew Bowie
This is the biggest piece of energy legislation ever passed by the British Parliament. We are driving forward with schemes to help insulate houses, drive down bills, and deliver cleaner and more secure energy, and all we can get from the Opposition is criticism. We have ramped up our renewable energy production to over 40%. We have eliminated coal. We are developing new nuclear, which the Opposition failed to do over 13 years in government. Rather than carping from the sidelines, it would be useful if Opposition Back Benchers got on board, supported the Bill and supported our great British companies developing the technology to take this country forward, creating the new jobs, ensuring security of supply and driving towards net zero, which means we will leave this country and the planet in a better place for the next generation, instead of trying to score political points at the expense of this Government who are seeking to deliver for the British people. As such, I am immensely proud of the Bill. It was strong before and it is even stronger now. It is, as I have just said, the single biggest piece of energy legislation ever to be brought before the House.
Andrew Bowie
I am afraid I will not give way.
The Bill is a revolution in community energy: restarting our nuclear sector; regulating for fusion; developing carbon capture, usage and storage; supporting the technology of the future; liberating private finance; developing our own oil and gas reserves; building an energy network of the future to secure our energy supply; securing our energy base so we are powering Britain from Britain; growing our economy; investing to ensure lower bills; and driving towards a cleaner future. That is what the Bill achieves. It was brought here and delivered today by the Conservative Government, moving the country forward into a brighter, more secure and cleaner future. Therefore, Mr Deputy Speaker, with great pleasure, I commend the new clauses and amendments to the House.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
Order. As Members can see, there is great interest in this debate. I am therefore pondering exactly what the time limit will be. Members will be informed just before Dave Doogan speaks, I believe. [Interruption.] It will not apply to the Labour Front Bencher; the hon. Gentleman can be relieved.
Dr Alan Whitehead (Southampton, Test) (Lab)
The Minister is quite right: the Bill has been with us for rather a long time. I am personally delighted that it is before us this afternoon, but we need to remember that Second Reading was over a year ago, in July 2022, in another place. The Bill has survived four Secretaries of State and two Departments in its passage through the House, so it certainly should be an improved Bill by now. I am concerned, however, that the long passage of the Bill to the statute book has had a real effect on investors and various other people seeking to invest in the low-carbon economy. We should not forget that.
What is this Bill about? As the Minister has said, it is essentially about the decarbonisation of the energy system and making that system fit for net zero. It is, overwhelmingly, a Bill that enables that decarbonisation to take place, and it has been described in a number of instances as a “green plumbing” Bill, which I think is not a bad description. It provides the necessary mechanisms and the details of how we will reach our targets in a variety of areas, as the Minister said: on hydrogen, on carbon capture and storage, on licensing, on the introduction of an independent system operator—which is very important to good construction—on low-carbon heat schemes, on district heating, on energy-saving appliances, and on fusion power. It also makes a number of regulation changes in relation to civil nuclear decommissioning and oil and gas management. It is, moreover, a Bill that the Opposition have welcomed, both for its extent and for its “green plumbing” activities. We were supportive of its measures in Committee, while also tabling amendments that we thought would strengthen its approach. Indeed, the Government have inserted some of them in the Bill, with very slight changes, and we welcome that as well.
However, in my view the Bill is incomplete and unsatisfactory, given its ambition as a green decarbonisation Bill, in that it fails to complete the three tests, or tasks, that are necessary to provide the clarity and consistency that would ensure that the policy will deliver what is claimed. Those tests are these. First, what are the targets for a policy, and how firm are they? Secondly, what are the technical means whereby the proposed targets can be actioned? Thirdly, what is the plan, both financially and procedurally, to make the targets real and not just hot-air aspirations? It is essential to the process of energy decarbonisation for all three of those tests to be in the Bill as we proceed against very tight timescales and immense challenges of implementation.
In some instances, the Bill has succeeded in that regard. The Government’s targets were set out in a number of documents on clean energy, such as the energy security strategy and the 2020 Energy White Paper. Indeed, in a number of instances, the targets contained in those documents have been substantially added to in the Bill. For example, the target of 10 GW of low-carbon hydrogen production by 2030 has been underpinned by the clauses relating to such matters as hydrogen levy management procedures. I applaud the Government’s change of heart on the hydrogen levy. Although a number of Committee members knowingly voted the wrong way, with the honourable exception of the right hon. Member for Elmet and Rothwell (Alec Shelbrooke), the Government have put that right now. We would have liked to see them go a little further with a clear statement that the money would come from the Consolidated Fund, but we will live with the change that they have undertaken to make. I think we can count that as both a win for our pressure on the Bill and a win for the Bill itself.
Caroline Lucas
I agree that those three tests for decarbonisation make a lot of sense, but does the hon. Gentleman agree that as well as targets for some of the good stuff, we need to see the Government stop doing the bad stuff? In this case, the bad stuff is more and more new licences for oil and gas in the North sea. Would Labour support my amendment, which would see an end to the MER rule on maximising the economic recovery of petroleum and replace it with a just transition to a greener economy? As long as we have a statutory duty to maximise the economic recovery of oil and gas, it does not matter how many targets we have on renewables, because we will not meet the targets that we need to meet.
Dr Whitehead
I do not think it would be appropriate for me to indicate exactly which amendments from various Members we might or might not support, and it would take a great deal of time for me to do so, but the hon. Member will recall that we tabled an amendment on maximum economic recovery in Committee. I think she can take from that that, broadly speaking, we support the principle of “stop doing the bad things and start doing the good things”. Whether the detail of her new clause fits exactly with that picture is another matter, but I hope she can take some encouragement from that.
Sammy Wilson (East Antrim) (DUP)
Does the hon. Gentleman accept that, while the Government may have set out the high-level ambitions and targets, they have failed to highlight the cost of this Bill to ordinary constituents? I think, for example, of the cost of bringing properties up to certain energy efficiency levels, the size of the hydrogen levy and who will pay it when it is introduced, the cost of sustainable aviation fuel to the aviation industry and the cost of flying—I could go on. That has not been spelled out, because there is a dishonesty here, and the burden will fall on ordinary people.
Dr Whitehead
It is not for me to defend how the Government have managed their arrangements as far as the costs of these measures are concerned, but I would say more generally that we have to cast this Bill in terms of how much it would cost us as consumers and others if we did not do these things over the next period. We need to consider the cost to people’s bills, people’s lives and people’s welfare if we simply stood aside and ignored doing the things that are necessary for decarbonisation. I can honestly say that in the longer term the overall cost of doing these things would be far more on the saving side for customers and the general public than the issues that are before us at the moment.
The Government have done a number of things in this Bill. I mentioned the measures on hydrogen, which I welcome in terms of meeting hon. Members’ concerns. We are also pleased to see that the Government have tabled amendments on other issues of concern to Members such as sustainable aviation fuel, and new clause 34 on liquid fuel.
Chris Grayling
I am keen to see a process start now that leads to our securing the investment we need to ensure that sustainable aviation fuel is available for our industry, and given the timeframe I am keen to see both parties making a commitment to that in their manifestos. Can the hon. Gentleman give me an assurance that the Opposition also support this move towards developing a sustainable aviation fuel industry in this country?
Dr Whitehead
I understand the right hon. Gentleman’s concerns about what the shortly-to-appear Labour Government will be doing on these matters, although I hope that he will not go about spreading defeatism on his own side. As a future Labour Government, we are very concerned about the need to develop sustainable aviation fuel in a cost-effective and timely manner. We understand that this is a substantial element of the transition that will be undertaken in aviation, but we have to be careful that we do not procure all the resources that might go to other things for use in making sustainable aviation fuel, because there are many other things that can be done with those fuels. We need a balance between the various possible candidates for what would go into sustainable aviation fuel for the future.
I am pleased that the Government have also made a concession on liquid fuel heating obligations. In other areas, despite having ample opportunity and time to put additional material in the Bill—indeed, the Government have put substantial amounts of additional material in the Bill with our support—they have not taken the opportunity to place in legislation the three tests that I mentioned, which is why our amendments concentrate on those emissions.
Angus Brendan MacNeil
The hon. Gentleman mentions boilers, and a number of organisations, including Green Alliance, Action for Warm Homes, Power for People and Energy UK, have produced briefs that point to how infrequently such Bills come around. There are great changes in energy technology and in world events, but they are not mirrored in Parliament. Both sides of the House should commit to not cramming everything into one energy Bill every decade. Given how things are changing in this sphere, Parliament should address it far more frequently than every decade.
Dr Whitehead
If the hon. Gentleman contains himself, he will see that we have tabled an amendment on low-carbon energy in homes. I agree that we cannot put everything in a Bill but, because of the urgency of the commitment we are making with this Bill, it is important that we get as much clarity as possible on what we are doing in the Bill now, so we know where we are going and the ways we are doing so.
Having discussed those other amendments, I will now draw attention to Labour’s amendments. I hope the House will understand why we have drafted them in this way and how that relates to the tests I mentioned. On our new clause 53, the Government say they support community and local energy. Indeed, as the Minister said, the Government have put a modest amount of funding into supporting community energy but, as the hon. Member for Hastings and Rye (Sally-Ann Hart), who is not in her place now, said, we still do not have an understanding of how community energy can actually work. We think community energy will be an important part of the decarbonisation process. It is not one of the large, shiny things upon which money will be lavished in large amounts but, in aggregate, it will have a huge impact on decarbonising energy in this country.
The Government still have not introduced arrangements that will enable local power producers to trade locally and get the proper value of their trade, which is vital to the success and certainty of these projects. Labour wants to support local energy projects practically, particularly through the “valley of death” period where the pockets of community energy are usually shallower than needed for all the planning permissions to run their course. With support from Great British Energy and local authorities, we propose that £400 million a year will eventually support the important role of community and local energy in decarbonising power.
John Redwood
If this electrical revolution is to take off, many more people will need to buy electric cars and heat pumps. Does the hon. Gentleman have any advice for the Government on how those items can be made more popular and more affordable?
Dr Whitehead
The Government and I have been in considerable discussion about precisely that point. We need to make sure we change the model of ownership of those devices. We perhaps need to have a longer debate about that on another occasion.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
My hon. Friend is making an important point about new clause 53, which stands in his name and those of his Front-Bench colleagues. Is not it the case at the moment that the grids—the national grid and the local distribution networks—do not have a duty to positively engage with small-scale and community electricity suppliers to encourage them on to the grid and instead just put them at the bottom of a list that is first come, first served? The new clause will start to change that approach, which is supportive and nurturing in its essence.
Dr Whitehead
My hon. Friend is absolutely right. The campaign that he may be referring to was signed up to by the Minister when he was not a Minister; he may have some other views on that these days, but the new clause is not too far from the original document that he signed a while ago. I am going to have to make some rapid progress, so I am sorry to say that I will not be able to take any further interventions. However, I will try to get through the measures we are proposing as quickly as possible, in order to allow other Members who are bursting to get into the debate the time to do that.
Our new clause 56 deals with delinking renewables and gas prices. A mechanism should be in place to ensure that the dividend from renewable power costs and prices can come through to customers. However, as we have seen in the recent power crisis, that is not the case at the moment. Gas prices surged to nine times the price of renewable power at some stages during the energy crisis and are still substantially more expensive than those of renewables, but they rule the roost as far as energy prices for the retail market are concerned, through marginal cost pricing. We think that needs to change through delinking the process and we wish to put an amendment in that would ensure that that happened, so that the benefit of renewable power can come to customers in the way that the whole House would intend to happen.
New clause 57 deals with onshore wind. Three minutes before the Bill came to the Floor of the House, a written statement on onshore wind was made by the Minister. I have had a chance to read it quickly and it seems to me as though it still treats onshore wind as a special case and not as an ordinary case of a local infrastructure project, which should receive no better and no worse consideration than any other such project. Onshore wind is essential to the decarbonisation of our energy system, but we have just let it collapse over a considerable period by, in effect, banning it. The Government are taking grandmother’s footsteps back from the ban, but this is still not good enough.
Sir John Hayes (South Holland and The Deepings) (Con)
I was one of the architects of what the hon. Gentleman described as a ban. He will understand that, when onshore wind was no longer permitted across the UK, this catalysed the offshore industry and we became a world leader in offshore wind precisely because developers then chose to go offshore. Offshore wind has many advantages, not least its scale, the size of the turbines and the single point of connection to the grid. Onshore wind has none of those virtues.
Dr Whitehead
That is remarkably like saying I am encouraging you to use your second car because I shot the tyres out of your first car. The right hon. Member makes a quite ridiculous statement.
First, onshore wind is the cheapest form of power available. Secondly, it can be available for community and local energy, in the way described earlier. Thirdly, through CfDs, it can systemically provide a cheaper power environment for the population as a whole. It is a disgrace that only two turbines have been commissioned in this country since February 2022. It is a golden opportunity for decarbonisation that we are missing completely.
Anna McMorrin
My hon. Friend is being very generous. Does he agree that the failure to roll out onshore wind is costing families £182 a year because of lack of investment?
Dr Whitehead
Lack of investment does indeed have a direct impact. If we go back and look at what could have been the case and look at what is the case now, there is a direct link between energy prices now and the lack of development of onshore wind. Our amendment, which we hope to push to a vote, would make the way that onshore wind was treated simple and straightforward: it should be treated no differently from any other local infrastructure project. There should be the same protections, safeguards and concerns for people who have that local infrastructure coming their way. It should not be a special case, over and above other projects, which I think will produce an explosion of investment in onshore wind in future.
Dr Whitehead
No. I have to make progress.
New clause 61—
“National Warmer Homes and Businesses Action Plan (No. 2)”—
addresses another area in which the Government have set out their aspirations. The Minister has said that the Government are making progress on their aspirations to retrofit homes, as set out in their national energy plans and the White Paper, “Powering our net zero future”. Those aspirations include having all homes at an EPC band C standard by 2035 and all private rented properties at band B by 2030. However, nowhere are there any plans about how we are actually going to do that or how homes that are among the worst insulated in Europe can be lifted to the levels needed by 2035. The Government are stuck with aspirations but no plan.
Our new clause puts a plan in place. It puts those aspirations into legislation and requires a Government plan to bring them about, which would be another enormous win for decarbonisation. People’s energy bills will fall, fuel poverty will be tackled and gas supply in retrofitted properties will reduce by perhaps 25%. It would be a win all round.
The Government have no plan. Labour has a substantial plan, which has already been put forward, including a 10-year programme to uprate and retrofit 19 million homes, costing £6 billion per annum by the second part of the next Labour Government, with a local authority and community base getting it done. That will transform the present, pretty paltry progress that has been made. Admittedly, there has been good progress in some areas, including the energy company obligation, the local authority delivery scheme, the home upgrade grant and other schemes, but who can forget the spectacular failure of the Government’s green homes grant a little while ago? Our new clause will transform the way that works and we want it to be added to the Bill.
New clause 62 is closely associated with new clause 61, but addresses the private rented sector.
New clause 59 is very important. We want to see the decarbonisation of our energy, power and electricity systems by 2030. The Government’s ambition at the moment is mostly to decarbonise the power system by 2035, but, again, they have no plan as to how that will actually happen. They have given no indication as to what steps they will take to achieve this, and they are certainly beginning to fail in the implementation of carbon budgets. Bringing forward the decarbonisation of the power system would greatly enhance that and allow us to meet our targets. Labour wants to see the complete decarbonisation of the system by 2030. That does involve massive uplifts in the rate of progress—for example, in offshore wind by five, in solar by three, and in onshore by two—and, indeed, the development of other renewables. In that regard, I recommend that hon. Members have a look at new clause 51.
Dr Whitehead
No, I will not give way again.
My hon. Friend the Member for Birkenhead (Mick Whitley) has a particularly interesting new clause on tidal range. With the right effort and the right investment, a huge acceleration of build-out can be achieved. Indeed, we have set out our plans on how to do that over the next period. What we need is for that ambition and those plans to be in legislation and in the Bill now.
The Minister did not give any indication in his contribution of whether the Government will move towards any of these amendments, but we hope to press some of them to a vote this afternoon. However, I have to say that we do so within the general setting that we are supportive of the Bill. We want it to succeed, but we want it to succeed with our bits added on, not least because this is the Bill that we will inherit when we are in government shortly. We will then have to do all the work that the Government have set out in the Bill.
Finally, let me say to those hon. Members who are thinking of voting against our amendments that they contain the Government’s own ambitions. What we are trying to do is to put the Government’s own ambition into legislation and provide ways by which it can be achieved. If hon. Members decide to vote against these changes this afternoon, they will, at least in some measure, be voting against their own Government. I hope that they will have sufficient sense to make sure that they do not do so as far as this Bill is concerned.
Mr Deputy Speaker (Mr Nigel Evans)
Order. As Members can see, there are many people who wish to take part in this debate. I know that Alok Sharma will show self-restraint, but we will be imposing a time limit to ensure that we get in as many people as we can. The debate is very time limited. The multiple votes will come at 6 o’clock, so I ask people to show restraint even on the time limit that I impose.
Sir Alok Sharma (Reading West) (Con)
Thank you, Mr Deputy Speaker.
I do support the overall aim of the Bill, but, in the interests of brevity, I will limit my comments to new clause 43 on onshore wind. I thank all colleagues who have co-signed this new clause, which of course builds on the excellent work that my right hon. Friend the Member for Middlesbrough South and East Cleveland (Sir Simon Clarke) led last year when trying to put in place a more permissive planning regime for onshore wind.
Onshore wind is one of the cheapest sources of energy available. It is also one of the quickest to deploy. Getting more home-grown clean energy deployed is about enhancing our energy security, our climate security and our national security, all of which are totally interlinked. It is also ultimately about bringing down bills. That is why onshore wind needs to be a meaningful part of a diversified energy mix.
We currently have 14 GW of installed onshore wind capacity across the UK with the ability to power around 12 million homes. However, as we all know, due to planning rule changes, since 2015 we have had a de facto ban on onshore wind. Just one objection is able to defeat a planning application. Frankly, that is not a sensible way for a planning process to operate. As a result, in England planning permissions have been granted for just 15 wind turbines over the past five years. It is also worth pointing out that, had onshore wind annual build-out rates stayed at the average pre-ban level, an extra 1.7 GW would have been added by last winter. That is the equivalent of powering 1.5 million homes for the entire winter, and it would have avoided between 2% and 3% of the UK’s annual net gas imports being burned in our power stations.
John Redwood
Does my right hon. Friend accept, on the cost argument, that we also need to build a new gas turbine station as back-up for when the wind does not blow?
Sir Alok Sharma
We do need a diversified energy system, and I think the Minister set out all the work that is going on on nuclear, for example. However, as we drive forward for greater energy security, we need to change the planning rules to allow more onshore wind. The objectives of new clause 43 are to ensure a more permissive planning regime. The new clause seeks to lift the current planning restriction that in effect means that a single objection can block a development. It also seeks to ensure that local communities willing to take onshore wind developments will receive direct community benefits.
The Government have today responded to new clause 43 by bringing forward a written ministerial statement on onshore wind. I thank the Government for the constructive dialogue we have had over the past days on this issue. I acknowledge that that written ministerial statement, and indeed the accompanying changes to the national planning policy framework, move things forward and will help to deliver a more permissive planning regime for onshore wind.
The de facto ban is lifted. The statement clarifies that the policy intent is not to allow very limited objections or even a single objection to ban a planning application, and it is explicit that local communities willing to host onshore wind farms should directly benefit, including potentially through energy discounts. That is positive, but we do need to see the Government’s formal response to their consultation on this issue to understand the detail of the precise mechanism by which the benefits regime will work.
I also welcome the fact that local plans will not be the only route to delivering more onshore wind, with more agile and targeted routes available. Of course it is now a requirement for local planning authorities to support community-led initiatives for renewable and low-carbon energy. Vitally, those policy changes are effective today.
Angus Brendan MacNeil
The right hon. Gentleman talks about bill payers, but for the previous wind that was built under renewables obligation certificates, there were big profits because the prices were denominated in gas. Under the CfDs, money is not going to the bill payers, but to the Government—it was creamed off the top. The mechanism has to change; I applaud what he is trying to say and do, but there is a missing link on how the bill payer will see a benefit, as they should.
Sir Alok Sharma
The hon. Gentleman will know that onshore wind has been back as part of the CfD process in the last couple of years. I am very happy at a future date to have a detailed discussion on that but, in the interest of time, I will move on.
I understand that some people would like the planning regime for onshore wind to be even more permissive and for onshore wind to be treated like any other infrastructure. I get that, but we also have to recognise that it has been a contentious issue in the past, and it is important that we take communities with us on this journey. That is why the community benefits mechanism will be so vital. Frankly, people respond better to a carrot than to a stick.
Dame Maria Miller (Basingstoke) (Con)
My right hon. Friend talks about the importance of taking people with us. More wind power will need more energy storage so that we can smooth out for the times when the wind is not blowing. Does he agree that the sort of lithium ion battery storage plants that are proliferating in our country are in need of proper permitting? My new clause 37, which I have been discussing with my hon. Friend the Minister, will help to bring in that sort of permitting and ensure that lithium ion battery storage facilities are sited in the right places.
Sir Alok Sharma
I certainly agree with my right hon. Friend that we need more battery storage. That is being rolled out and I am pleased that she has had a discussion with the Minister.
In conclusion, I welcome the written ministerial statement because it moves us forward. It is for that reason that we will not seek to press new clause 43 to a Division.
Dave Doogan (Angus) (SNP)
I start by paying tribute to my predecessor in this role, my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), whose work on energy, particularly on access to clean and affordable energy, was exceptional. I base my ambitions in this role on his record. I also note the Minister’s kind remarks about my hon. Friend and thank him for them.
I want to highlight the abject abandonment of community-owned energy projects in this Bill. It is patently obvious that any just transition to net zero is simply not possible if local communities cannot sell the energy they produce to local customers. Local energy trading provides manifold improvements, including lower prices, protections against price shocks, enhanced energy security, network redundancy and a return on investment back to communities.
The UK Government kicking this can down the road is a hammer blow to efforts to achieve a just transition, and they are doing so without even trying to disguise the fact. Worse still, they have instead provided a paltry £10 million over two years—the Minister left out the “over two years” bit—to fund feasibility studies in England. That is not seedcorn funding; it is chicken feed served up with extra disdain for Scotland and Wales, as the UK Government have steadfastly refused to apply Barnett consequential to this admittedly pitiful sum.
Fundamentally, this sop to Tory Back Benchers does not—as one of the Minister’s Back Benchers said—remove the barriers preventing community energy schemes from selling their power locally. The Local Electricity Bill would have done that, as would amendments made to the Energy Bill had they not been removed by Ministers in Committee in July. Why is this Tory Government so loth to put power in the hands of the people?
Turning to nuclear, English MPs maintain an enduring obsession with nuclear. Their total failure to concede or even rationally acknowledge the catastrophic decommissioning and clean-up costs of that energy source is, by any measure, incredible. As they drag Scotland and Wales along with them for the ride, it is almost as if those English MPs, and indeed the Government, can foresee a time in the not-too-distant future when they will need to buy Scotland’s energy rather than just taking it, as they have got used to doing over recent decades. Nuclear is their insurance policy against Scotland’s independent future.
New nuclear is a millstone around the neck of our net zero future, consuming disproportionate costs per megawatt-hour. If we contrast nuclear with offshore wind, we see that although construction costs for nuclear continue to spiral out of control, and SMR nuclear continues not to get off the ground, the cost of offshore wind has fallen by 80% in a decade. New offshore wind projects coming online within the next two years will be paid about £45 per MWh, which is half the wholesale power price of £90 per MWh forecast until at least the end of the decade, and 60% less than the £115 per MWh of electricity from Hinkley C nuclear power plant.
Tories and Labour Members alike will cry, “This is all about baseload for when the wind does not blow”—I am surprised they have not done so already. Of course, that is correct; we do need baseload, but it does not have to be nuclear. If successive Westminster Governments had invested nearly as much rhetoric and taxpayers’ money creating a renewable energy mix as they have done for nuclear, we would be in a very different place. It would be a place where tidal flow and barrage schemes complement widespread impoundment, pump storage and run-of-river hydro schemes, together with green hydrogen production, battery storage, solar on every appropriate elevation of a domestic or commercial property, and timely delivery of carbon capture, usage and storage.
Angus Brendan MacNeil
The hon. Gentleman makes a point that must be recognised and understood for the future. Before Hinkley Point was commissioned, the question was of providing 6 GW of nuclear baseload rather than just 6 GW of baseload, and of seeing whether there could be a mix of green energy, as he argues, or if it would have to be nuclear energy. By prescribing the way the Government have in the past while sticking to 2012 index-linked CfD prices, nuclear is a way to make and print money very quickly.
Dave Doogan
My hon. Friend is correct. Over and above the self-evident environmental consequences of nuclear, the way in which this and successive Westminster Governments have fiscally mismanaged the pursuit of nuclear leaves nothing to the imagination.
To continue my remarks, we do not live in that place. We live here in broke, broken Britain. The Bill fails the people on energy once again because it is bereft of strategy and completely loses control of costs. If we want to evidence such calamitous incompetence, we need look no further than auction round 5, or, more specifically, the strike price therein. That price threatens to kill off construction-ready projects from that auction round. At the very best, it will mean even less of the additional supply chain value landing in domestic companies and local workers’ bank accounts, further deepening the cost of living crisis. Penny wise, pound foolish.
Contrast that with the strategic ambition of the Scottish Government, who are investing in communities by maximising the economic, supply chain and employment opportunities of onshore and offshore wind, with up to £1.4 billion of developer supply chain commitments on average across Scotland. I have seen the extraordinary investment and opportunity at Montrose port in my Angus constituency with Seagreen, but we need sustained investment to win those crucial multiplier effects and make the just transition a systemic reality for our communities.
David Duguid
I welcome the hon. Member to his new role and pay tribute to his predecessor, the hon. Member for Kilmarnock and Loudoun (Alan Brown).
The hon. Member gave a whole list of reasons why there would be an absence of baseload in Scotland, but I think I may have missed the point where he suggested how that baseload would be supplemented in the absence of nuclear. Could he clarify that? Does it include a new gas-fired power station in Peterhead with carbon capture, usage and storage?
Dave Doogan
The hon. Gentleman is entirely correct: he did miss me highlighting what would replace that baseload, and I refer him to Hansard after today’s debate.
The challenges of inflation and interest rates have altered the parameters to such an extent that this Government’s pretence that it is business as usual is breathtaking. Have they not seen what happened in the recent auction round in Spain or, conversely, what happened in Ireland when the Irish Government intervened to protect investment in renewables and reaped the benefit and reward for their economy?
If projects do slip from allocation round 5 as a result of an unrealistic strike price, where do Ministers think the supply chain capacity, the skilled workers and the specialist vessels will go? They will not wait around here, waiting for the Department to get its sums right—they will be off to the US and the EU to access commercially cogent incentive packages such as those found in the Inflation Reduction Act or the EU’s Net-Zero Industry Act. The stakes could not be higher for both net zero commitments and UK energy prices.
I am proud that the SNP has worked to protect people from the worst effects of the Westminster cost of living crisis with our amendments to the Bill, with steps that would protect the next phase of contracts for difference projects within AR5, properly provide for a comprehensive and complementary mix of energy storage solutions, advance local supply rights and work towards supporting our most vulnerable with the development of a social tariff, especially for those with higher energy use caused by medical conditions. I am pleased that the SNP’s new clause 39 will be put to a vote this evening, and I urge all Members to support that provision, which, while modest in scope, would have profoundly positive effects on many in our rural constituencies who live off the grid and have to heat their homes through liquid fuel.
Mr Deputy Speaker (Mr Nigel Evans)
Order. Before the hon. Gentleman makes his intervention, I inform the House that there will be a four-minute time limit on Back Benchers introduced from the start.
Angus Brendan MacNeil
The hon. Gentleman mentioned a small issue that makes a big difference. The energy bills support scheme, which was very harsh, ended far too soon and has caused an awful lot of problems. This has been covered by Radio 4, and people have written letters about it—I have a letter here from Stourport, in the constituency of the hon. Member for Wyre Forest (Mark Garnier), who is a member of my Energy Security and Net Zero Committee. People the length and breadth of the UK are feeling the harshness of the Government’s penny-pinching and tight deadlines, and those who live in caravan parks or on boats are being especially hammered by this. This Government should listen and make a difference. One of the big things affecting people watching this debate today is that they are not getting that £400 for the last year.
Dave Doogan
I agree entirely, and I echo the calls from my Scottish National party Westminster leader, my hon. Friend the Member for Aberdeen South (Stephen Flynn), who wants to see the £400 support package reintroduced. The idea that the pressure on household budgets from energy prices has somehow gone away is for the birds.
Energy security is not some abstract area of Government policy, nor is the purchase of energy a discretionary one for homes and businesses in our constituencies. Failing to legislate and plan strategically in this area, as Westminster has done in perpetuity, is the very reason people are facing the choice between heating and eating. It is the same reason that businesses across these islands have closed their doors due to energy costs. The exorbitant cost of energy in the UK is a function of supply-side constraint, and this Government have compounded that through incompetence, inaction, lack of ambition, penny-wise, pound-foolish misadventure and their obsession with nuclear.
Just imagine how much more perilous the situation for energy consumers in England would be if they never had Scotland’s energy powerhouse to shore up this Government’s incompetence and spaffing money on nuclear left, right and centre. This Bill was an opportunity to make up lost ground and catch up with functioning unions—the United States and the European Union—but as usual, the dysfunctional United Kingdom gets it wrong again, and it is ordinary taxpayers and bill payers who will pick up the pieces and pay the cost. There is one reason why households in energy-rich Scotland are facing fuel poverty and haemorrhaging household budgets on energy costs, and it is sitting in this Chamber: the UK Government.
Mr Deputy Speaker (Mr Nigel Evans)
I remind Members of the four-minute limit.
Alicia Kearns (Rutland and Melton) (Con)
A core pillar of this Bill is the delivery of a safe, secure and resilient UK energy system, but no energy system can be safe and secure when it risks undermining our food security and contravenes our values by using forced labour throughout its supply chains. We live in a contested world, and there is no doubt that energy security is one of the greatest challenges of our time, but we can have no security when our energy system is riddled with forced labour from a hostile state. The use of forced labour—specifically, Uyghur forced labour—in supply chains not only contradicts our ethical and moral values, but undermines our fight for human rights across the globe. We cannot go green on Uyghur blood-red labour.
Beyond the morals, there are serious commercial and security risks. British and international manufacturers that do not use slave labour—that abide by our modern slavery laws—are being priced out and undercut by Chinese suppliers that do not care. That contravenes all notions of fair market competition and punishes those who play by the rules, supporting only the communist People’s Republic of China state-backed enterprises. We are unnecessarily undermining our security when we do not tackle this problem.
Turning to the two new clauses that I tabled, I will not move new clause 48, but I will make the point that it is about moving to a rooftop-first strategy. We must make sure that we stop targeting the best and most versatile land. At my last count, 77 solar plants are currently proposed in Lincolnshire and bordering counties, totalling 38,000 acres of good arable land. That is wrong, but as I say, I will not move the new clause.
Mr David Davis (Haltemprice and Howden) (Con)
My hon. Friend is entirely right in her argument, but this is not just about the overall number of sites. Individual projects take up over 3,500 acres in my constituency, industrialising a piece of beautiful English countryside and destroying the lives of five villages. In fact, if anything, my hon. Friend’s clause does not go far enough.
Alicia Kearns
I thank my right hon. Friend, who as always makes very valid points. In my own constituency, one village will be 95% encircled by solar that will be 13 feet high, in one of the areas that produces the greatest food in our country.
Siobhan Baillie (Stroud) (Con)
These solar farms make absolutely no sense to people when we are in a food security crisis, but also, tenant farmers are being ousted. The landowners often live miles and miles away and could not give two hoots about the land they are selling off, and it does not work. We need a really strong steer from Government, which we were promised in our prime ministerial leadership campaigns last year.
Alicia Kearns
My hon. Friend is absolutely right: farmers want to conserve and to grow the food of this nation. They do not want to turn to solar, which landowners are often doing.
Sir John Hayes
Further to the intervention made by my hon. Friend the Member for Stroud (Siobhan Baillie), meanwhile, solar on buildings is absent. One drives around the country and sees huge warehouses, commercial buildings and office blocks with not a solar panel to be seen. Those panels are going on to land that should be growing food to produce the food security that this country needs. Food security and energy security combined means national resilience.
Alicia Kearns
I absolutely agree. That is why I still urge the Government to bring forward a strategy on rooftop solar—they can do so.
Turning to new clause 47, the UK has tough modern slavery laws. It is evident that we want to do something about that issue, but we cannot outsource the protection of human rights. There are developers who utilise forced labour in their supply chains—who not only violate our ethical and moral values but, as I say, pose a commercial risk. We cannot be reliant on Uyghur slave labour. Alan Crawford and Laura Murphy recently released landmark reports into the use of Uyghur forced labour in solar supply chains. They have made very clear that across the UK, there is just too much. Some 40% of all solar that is built in the UK is affected, and 45% of all polysilicon and solar panels around the world come from Xinjiang—they are made with slave labour. It is shocking to see that five pages of the recent report from Sheffield Hallam were dedicated to just one supplier, Canadian Solar, which is planning to build in this country and is a serial applicant. These same companies are tariff dodging repeatedly and trying to hide the reality of what they are doing.
My new clause 47 is very straightforward: it seeks to increase transparency. When a Minister makes a decision on a proposal of this magnitude, they should have full sight of whether there is forced slave labour within the application. Currently, a Minister making a decision on a nationally significant infrastructure project has no idea if the vast majority of the product to be put on British soil will be made with slave labour. I hope this will deter these companies and force them to finally choose to produce polysilicon without slave labour. There is no onus on the Government, there is no cost implication for them and I am not forcing their; I am asking for transparency, not least given that the US and the EU have both brought forward enormous Bills that deal with forced Uyghur labour in their countries or their areas of influence.
We have done nothing, and the reality is that we never walk the walk, but just talk the talk when it comes to the Uyghur. I cannot think of one piece of legislation that this Government have brought forward since my election that deals with Uyghur slave labour, yet we go to Beijing and then claim that we have raised it, based on no reality. Unfortunately, I have heard absolutely nothing today to reassure me that we genuinely want to deal with this, and that we recognise that it is not just in solar but across the energy footprint and is not just in China but in other places where components are made with slave labour. Therefore, at the moment I am minded to press the new clause to make sure that we finally deal with the reality of what we are facing and get some transparency within the system for our Ministers.
Sammy Wilson
The hon. Member will have our full support if she does press the new clause. We should add another argument, which is that the countries that use forced labour, especially China, have a commercial advantage, and we are going to find ourselves dependent upon them for energy sources in the future.
Alicia Kearns
I could not agree more with the right hon. Gentleman. That is the exactly the point I would make.
The new clause speaks for itself: this is about transparency and finally dealing with the forced labour being imposed on our countryside. The path we choose today will define not just define our values but the legacy that we leave for future generations and for our children. I hope the House will make the right choice.
Mick Whitley (Birkenhead) (Lab)
I rise to speak in support of new clause 51, tabled in my name, concerning tidal range power. In 1966, the world’s first ever tidal power station became operational on the Rance river in Brittany. More than 50 years later, the station is less than halfway through its predicted lifespan of 120 years, and is continuing to generate an annual output of approximately 600 GWh of clean energy. Since then, the station has been surpassed in scale and generating capacity by the Sihwa Lake tidal power station in South Korea. The proven success of these schemes over many decades demonstrates the enormous potential of tidal range generation as a renewable, indigenous source of net zero energy. When confronted by the existential challenge of climate collapse and the necessity of decarbonising our energy system, as well as the need to guarantee our energy security in an increasingly volatile global energy market, I believe we now need to be looking with new urgency at the role that tidal range generation has to play in the United Kingdom’s future energy mix.
The UK, more than any other country in the world, is uniquely positioned to harness the power of our tides. We have the second highest tidal range in the world, and half of all of Europe’s tidal energy capacity is found in Britain. Already well developed plans for tidal range projects across the west coast promise to mobilise and deliver 10 GW of net zero energy, with the potential for 10 GW of additional capacity. In Merseyside alone, the much anticipated Mersey tidal power project could generate enough energy to power 1 million homes, yet we have consistently failed to harness the awesome power of our tides.
While there has been some welcome progress in the development of smaller tidal stream technologies in recent years, leading to tidal stream’s inclusion in the fourth allocation of the contracts for difference scheme, the possibilities of large-scale tidal range generation have been largely ignored by the Government since the decision in 2018 by the then Business Secretary to deny funding for the Swansea tidal lagoon. There was only passing mention of tidal in last year’s energy security strategy, and tidal range is not covered by this Bill. It has been excluded entirely from the national policy statements on energy infrastructure projects. I am assured that this situation will be rectified when the revised NPS for energy, EN-1, is published later this year.
The aim of my amendment is simple: it seeks to establish funding for an independent and evidence-led study into the opportunities and risks of tidal range generation as the vital first step towards establishing investor and Government confidence in this technology. This study is a central task of the British Hydropower Association, which represents the interests of the UK hydropower community. The study would consider the role of tidal range generation in the UK’s future energy mix and the role that tidal range, as a predictable and reliable energy source, has to play in meeting our energy needs at times when seasonal factors and weather systems interrupt supply from solar and wind.
George Eustice (Camborne and Redruth) (Con)
I support Government new clause 63 and welcome their bringing it forward. I had tabled amendment 8 and new clauses 40 and 50, each of which in different ways sought to give the Government the powers they needed to extend the existing renewable transport fuel obligation so that it might cover domestic heating fuels for off-grid properties. Government new clause 63 achieves that, creating the same power by replicating section 124 of the Energy Act 2004, and therefore I will not press my amendment or new clauses to a Division. I thank the Minister for the work he has put in on this; we have discussed it many times and I know he has worked hard to get a cross-Government consensus.
I also welcome the Minister’s commitment to a consultation. Some Members have questioned the timing of it, but we all have to be realistic about how long these things can take and the fact that a consultation needs to be done properly, and we should therefore accept in good faith the undertaking he has given at the Dispatch Box today. So I support that.
I want to address a point raised earlier by the hon. Member for North Antrim (Ian Paisley) and reassure him that I did not hang him out to dry. I am very conscious of the fact that Northern Ireland has 400,000 homes that are off the gas grid, and when discussing the Government new clause proposal last week, I highlighted the fact that Northern Ireland was a special case. The Minister has given an undertaking that conversations are continuing with officials in Northern Ireland, and I hope we can find a resolution to that issue.
My final point is not really a matter for today’s Bill: the associated issue of the proposed ban on replacement boilers for off-grid homes currently proposed for 2026. I know that the Government will be looking at that—it is a consequential consideration following an amendment they have put forward today—and I look forward to hearing what Ministers will have to say about it in due course.
Nadia Whittome (Nottingham East) (Lab)
I rise to speak in support of new clause 35. My amendment is about funding for decarbonising homes and I hope Members across the House will agree that it is badly needed. Our homes are among the least energy-efficient in Europe and heating them accounts for 14% of all UK carbon emissions. If we do not retrofit around 29 million existing homes in the UK we will not be able to reach net zero by 2050. This is a mammoth task, so we must act now.
However, decarbonising housing is not just about tackling the climate crisis: millions of people are living in freezing homes that are expensive to heat, left at the mercy of the volatile gas market. Poor-quality housing is costing people their health and even their lives. Retrofitting homes would reduce bills, make homes safer and improve people’s quality of life. It would also create new jobs in every part of the country, helping build the green economy we so desperately need.
The Climate Change Committee has found that people accept the need to make changes to their homes, but they need well-designed policies to help them to act. The biggest barrier for many will be the up-front cost. The Government have funding to retrofit the homes of people on low incomes, and that is available through the social housing decarbonisation fund and the sustainable warmth fund, but the amount on offer just is not enough, particularly given the rising labour and material costs. In fact, last year, the number of Government-funded energy efficiency measures installed in UK homes dropped by half, year on year. It is now a shocking 97% below 2012 levels.
If the Government had not cut energy efficiency support in 2013, just imagine how many more people might have spent last winter in a comfortable home and how many fewer families would have had to choose between heating and eating. Short-sighted Tory cuts have cost us a decade in a fight we cannot afford to lose. We need long-term consistent funding and a clear road map of how the decarbonisation of housing will be achieved. Local authorities are uniquely placed to understand the needs of their area and to target schemes where they can provide the most benefits. In Nottingham, against the odds, more than 4,000 homes have been retrofitted by the city council in the past decade. Just imagine what more could be achieved by councils across the country with long-term predictable funding for decarbonising homes. The amendment is calling for the Government to undertake an assessment of the benefits of providing this funding to local authorities. I hope the House will invest in our future by supporting new clause 35.
Craig Mackinlay
I suppose that the volume of my amendments probably speaks for itself, but I have a great interest in this Bill. I am aware of the limitation of time this afternoon, so I will keep my observations to the two areas that I think are fundamentally important.
I absolutely despise this Bill. I have been in this House for eight years, and I have rarely seen a Bill of such nature. It is 426 pages, and it has attracted 146 pages of amendments. That means it has a lot of interest, but I want to discuss two of the amendments that I have tabled.
First, amendment 50 relates to clause 152(4) and the hydrogen grid conversion trials. The clause seeks to amend the Gas Act 1986, and I am particularly concerned by subsection (4), which increases the rights and powers available to unknown new inspectors. It includes the
“power to enter premises in the trial location for the purpose of inspecting anything on the premises, or carrying out any tests on the premises, in preparation for or otherwise in connection with the trial.”
My amendment, which I tabled with others, would interpose at least a magistrate—a justice of the peace—in that proposal before we start entering people’s premises. We accept that in other energy matters. For example, to have a meter changed, it has to go through a magistrates court. I know that well, as I used to sit as one.
Clause 248 causes me the most gross concern. It is the reason that I hope an amendment can be accepted, although I know it was not selected by Mr Speaker. The clause is titled “Sanctions”, and I suppose it does what it says on the tin. Subsection (4) states: “Energy performance regulations”—which are unknown and may be put into place in this House in the future by statutory instrument—
“may provide for the imposition of civil penalties by enforcement authorities”
for a penalty of up to £15,000 for not complying with those regulations. Were that not bad enough, all in this House should sit up and take notice of subsection (3) —I know it is a big Bill. It states that energy performance regulations, which are as yet unknown, but are available to be put on the statute book in the future by statutory instrument,
“may provide for the creation of criminal offences”
in relation to various cases, with imprisonment for a term of up to 12 months.
I do not know about other Members in the House, but I rather like “The Shawshank Redemption”. It is a great film. I can imagine the old lags in the future having a chat about why they are in prison. One might say, “I’ve done benefit fraud—£50,000-worth—and I got six months.” Another might say, “I had dangerous driving causing an injury—8 months.” The businessman talking to them will say, “I had a very good business with 20 people working for me in a factory. They have all been put out of work. My business has closed and my family are on the street.” The others will say, “What on earth did you do, sir?” and he will say, “I infringed an energy performance certificate, and I got 12 months.”
Sammy Wilson
Does the hon. Member agree that that could be for something as simple as renting out premises without having shown the EPC for them? It is a ridiculous situation.
Craig Mackinlay
My right hon. Friend has it exactly right. Hence I feel that when we in this place are creating criminal penalties that could put our fellow citizens in prison for 12 months for an unknown offence of the future relating to net zero, we have a duty to discuss them properly. This must be the first time we are potentially criminalising people in this country for not adhering to the new code of net zero. We should not be doing it lightly. We should be doing it carefully and with consideration. It should not be done by statutory instrument.
John Redwood
I thank my hon. Friend for highlighting this issue to all in the House. I hope that the Government will take urgent action to get rid of it, because it is completely unacceptable. It also shows how little time we have to discuss fundamental issues.
Craig Mackinlay
My right hon. Friend has put his finger exactly on the pulse. This is a substantial Bill. I say to the Minister that I hope the Government will strip out criminal penalties for not adhering to unknown net zero certification, EPCs and all the rest of it in the future for something as simple as not complying with some of these net zero regulations. This is really serious. I hope that when the Bill returns to the other end of the Palace, consideration can be given to strip out such proposals.
I could have gone on at huge length this afternoon. I tabled many amendments because these are overweening powers trying to push and nudge us and to ban things. All I can imagine is that the Chinese embassy will be looking at the Bill with great enthusiasm, as it will drive even more of our high-energy businesses offshore. China will be pleased that it will be able to sell us more solar panels and wind turbines based on its steel, produced on the back of very cheap coal power. That is what we are doing here: driving our high-energy businesses offshore. This is not a recipe for energy security; this is a recipe for energy disaster.
I could talk at length about what is wrong with the net zero proposals banning cars, banning oil boilers, banning this and banning that. That is not what we do as Conservatives. We actually allow freedoms. We allow the market to decide. The Bill goes in the wrong direction.
Caroline Lucas
There are some elements of the Bill to commend, not least the net zero duty on Ofgem, but overall it fails to deliver the scale of ambition we need or to set out a vision of an energy system free not just from Putin’s influence but from expensive and polluting oil and gas in their entirety. My amendments would address that failing.
New clause 29 would prohibit the approval of new oil and gas field developments and the issuing of new oil and gas exploration and production licences. I am sure that the Minister will seek to paint the new clause as somehow incredibly radical and the policy of Just Stop Oil, pretending that it would recklessly turn off the taps tomorrow. He will no doubt trot out the same tired lines about a quarter of the UK’s energy continuing to come from oil and gas in 2050. In reality, the new clause is far from radical. It would simply do what the science tells us is necessary if we are to secure a liveable future for ourselves and our children and rule out any new oil and gas licences. In doing so, it would follow the advice of experts including the Climate Change Committee, which in its latest report was clear:
“Expansion of fossil fuel production is not in line with Net Zero.”
It acknowledges that while the UK will continue to need some oil and gas until the target is met,
“this does not in itself justify the development of…North Sea fields.”
Yet rather than heeding that warning, just one month later we had the former Secretary of State vowing to max out the North sea’s remaining oil and gas reserves. The Government re-announced 100 new licences and it was not ruling out the prospect of Rosebank.
However hard they try to obfuscate and evade, Ministers cannot deny the fact that, without additional abatement, the projected CO2 emissions from existing fossil fuel infrastructure would already exceed the remaining carbon budget for a safe climate. Any oil and gas extracted from the North sea belongs not to us but to multinational companies, which will sell it to the highest bidder on the global market. The majority of fossil fuel projects in the pipeline are for oil, not gas, and will do nothing to boost energy security, given we currently export 80% of the oil that we extract.
Chris Skidmore (Kingswood) (Con)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
The rest of the world has woken up to the reality that the energy transition is here to stay. Investment in fossil fuels is reducing at such a rate that, while 10 years ago capital investment in oil was six times that of solar power, this year for the first time solar received more investment than oil. Last year, UK renewable power generated more electricity than fossil fuels. The cost of those technologies fell faster than ever predicted, with electricity production from renewables nine times cheaper than from gas.
Markets and investors across the world recognise that net zero is the future. Today we can only help or hinder that future, but we cannot stop it. The energy transition is an economic reality that, as legislators, we can either speed up, ensuring that the UK benefits from the economic opportunities and investments that can be ours if we so choose, or we can slow it down. To do so—to delay and hinder the transition—would merely cause the UK catastrophic economic self-harm. Investments will go elsewhere. Companies will locate elsewhere. Jobs will be created not here, but elsewhere.
As legislators, this is the choice we face: net zero and our economic future, or not zero with increasing costs and a loss of growth that will never come this way again. For that reason, I support the Bill, which seeks to maintain progress in the energy transition. However, we can and should go further. Yes, we must expand our use of renewable and clean energy, but the reality is that the UK should commit to phasing out fossil fuels. We do not need new oil and gas fields, which will only become stranded assets far sooner than we think. We do not need new oil and gas exploration licences for fossil fuels that are not ours to keep—as the hon. Member for Brighton, Pavilion (Caroline Lucas) made clear—but are sold on international markets and are rapidly losing market share and demand.
The truth is that, if we are truly serious about tackling climate change and delivering a green industrial revolution in the UK, focusing our finite investments, workforce and time on the energy transition, there is no place for new oil and gas fields or new coalmines. None of my amendments can be considered radical. Legislating to prevent the opening of new companies simply maintains a commitment that the UK sought to make to the rest of the world at COP26. Legislation to remove coal-fired electricity production from the grid simply puts into law a commitment that the Government have made to the ending of coal-fired generation by the end of 2024. Legislating to leave the energy charter treaty, which penalises nations for not maintaining investments in fossil fuels, simply ensures the UK follows the rest of Europe in doing so. Legislating to ban gas flaring and venting by 2025, which is responsible for methane emissions that are 54 times more powerful than carbon dioxide, simply brings forward a commitment from 2030, and is something that Norway has had in place since 1971. And legislating to establish an independent body to advise on when to end new oil and gas licensing in the UK seeks to depoliticise an issue on which we need to find a responsible consensus that can be supported cross-party, for it is too important to seek to divide and play politics with.
Tonight, in that spirit of cross-party collaboration and knowing that this is too important to get wrong or to fall short, I too am willing to back any amendments that I believe will deliver the energy transition more effectively. I hope all Members across this House will consider doing the same.
Clive Lewis (Norwich South) (Lab)
I would like to speak briefly to new clause 36, tabled in my name. New clause 36 asks—no, implores—this House to consider a national energy guarantee, which is also known as a rising block tariff combined with a social tariff. It is a system of energy pricing that shows that social and environmental goals can be advanced together. It really does embody a green new deal in action.
There are some in this House who claim that tackling the cost of living crisis and the climate crisis is a zero-sum game; that we can only do one or the other. The amendment blows a hole right through that falsehood. The reality of the current system in use by the Government is that too many people—millions of them and growing—are falling into fuel poverty. It is a system that simply is not fit for purpose. Let us be clear. Higher energy prices are not a blip. They are here to stay. Research from Cornwall Insight shows that energy prices will remain
“significantly above the five year pre-2021 historic average”
until at least the end of the decade. Even though Ofgem’s price cap will come down in October, the average bill will still be nearly double what it was in 2021, before prices soared. Millions of households will pay more this winter, given the Government’s energy assistance schemes have ended for most.
Up and down the UK, energy debt is soaring. Citizens Advice reports that nearly 8 million people borrowed to pay their bills in the first six months of this year. A quarter of people say that their energy bill is the cost they are most worried about. In my own city of Norwich, the rate of reporting fuel debts has increased by a staggering 300%. Yet by subsidising the unit price, the Government’s energy price guarantee disproportionately benefited well-off households and did nothing to incentivise energy demand reduction and decarbonisation.
The national energy guarantee will ensure that everyone can afford the essential energy they need, while cutting carbon. Here is how it works. Everyone gets a free energy allowance that covers 50% of essential needs. Households with higher needs, such as those with children or disabled residents, would get a larger allowance. The next 50% of energy used is charged at a reduced rate, matched to 2021 prices. Beyond that, a carbon-busting premium tariff kicks in. The result is that around 80% of us will have lower bills, while wealthier high-energy users will pay more but can reduce their bills by installing energy-saving measures such as insulation.
In one fell swoop, we will have protected essential energy needs, reduced bills and incentivised a ramping up of decarbonisation of our housing sector—crucial if we are to meet our net zero commitments. I urge and implore the House to support new clause 36.
David Duguid
In the interests of time, I will limit my remarks to carbon capture and storage, and the impact of offshore wind on other commercial activities at sea, specifically fishing. If I have time at the end, I will talk about hydrogen and maybe even the future of oil and gas.
I welcome the announcement on 31 July by the Prime Minister in my constituency confirming the Acorn CCS and hydrogen project; that will mean that four CCUS clusters will be operational by the end of the decade. The Scottish cluster is particularly crucial for my constituency of Banff and Buchan, as well as the whole of Scotland, not just for the estimated 21,000 jobs the project is predicted to support but to enable the construction of a new CCS power station at Peterhead. That power station will replace the existing one, which is currently the only dispatchable thermal power station north of Leeds. It will be critical is providing stable baseload in support of intermittent renewable sources of energy, and will do so in a way that is 95% emission-free.
Again in the interests of time, I am not going to speak about every single amendment that I tabled, but I hope the Minister will bear with me and perhaps respond to the following questions. In respect of clause 2, which deals with licensable activities and their prohibition, can he clarify whether, or why, an economic licence would be required specifically over and above the geological storage licence that would be granted under the existing regulatory regime, namely the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010? Will private operators be able to develop merchant models in competitive transport and/or storage markets in the longer term?
As the Minister will know, the UK has about a third of Europe’s entire offshore carbon dioxide storage potential undersea, roughly equal to that of all the other EU states combined. Only Norway has slightly more than the UK in the North sea. This enormous potential to offer CO2 storage services to European and other countries presents an opportunity for the UK to become a global leader in CCUS, and accelerate the global efforts to prevent CO2 emissions. How will cross-border transport and geological storage of carbon dioxide be enabled to develop in time, without having to rely on the granting of exemptions to allow private networks to develop? Can the Minister also confirm that it will be possible to facilitate transportation by ship, and any other means of transport other than pipeline, through regulation, and that that is covered adequately by clause 128(1)(a)? I see him nodding.
Finally, may I raise the subject of offshore wind? The fishing industry understands that energy security matters, and that offshore wind has an important part to play in the overall energy mix, but food security matters too. The Minister will be aware of studies which have shown that up to half our seas could be lost to fishing owing to other activities, including offshore wind. Academic studies carried out by Heriot-Watt University, among others, have shown the impact that electromagnetic fields from subsea cables have had on the migration, growth and development—including abnormalities—of crabs and lobsters. The Energy Bill already makes provision for the principle of a levy to address the environmental impact of these new wind farms, which is absolutely right and proper, so what consideration—including engagement with devolved Administrations, as required—has been given, or could be given, to the businesses, industries and coastal communities that will inevitably be impacted by offshore wind operations?
Last month, the think-tank Onward published a compelling paper arguing for statutory payments, from developers, to be made to communities where—if and when—onshore wind was developed. If that principle is fair, payments for actual loss of earnings to other marine business from offshore developments are even more compelling as a principle. I am aware of the various voluntary codes and guidance that are available, but they have so far proved to be insufficient. If the Minister is unable to respond to that last question today, will he agree to meet me, and representatives from the fishing industry, to discuss how best to embed a fair and equitable principle in Government action, that would come at no cost to His Majesty’s Treasury?
Wera Hobhouse (Bath) (LD)
The UK has a responsibility to deliver an effective net zero strategy. This Energy Bill provided a chance to ensure that the Government’s own climate commitments could be met. Some parts of the Bill are welcome, but as it stands, it presents us with many missed opportunities. The Liberal Democrats fully support the establishment of the independent systems operator, and I am pleased that the Government have finally listened and given Ofgem a net zero duty. However, I am disappointed that the Government removed sensible amendments in Committee, such as the amendment to ban new coalmines, and I strongly support new clause 2.
Let me now focus on the Liberal Democrats’ new clauses 11, 12, 15, 24 and 28. The aim of new clause 28 is to ban fracking permanently. Fracked fuel is a fossil fuel; it hardens our reliance on expensive gas, and it flies in the face of our net zero commitments. The Government’s own experts have said that the seismic activity caused by hydraulic fracking is not safe. It is incomprehensible that the Government ever considered lifting the ban, and it caused huge anxiety among communities across the country. That must never happen again.
Last year, Shell forcibly installed prepayment meters in more than 4,000 homes, while making £32 billion in profits. Those on prepayment meters typically spent about £130 a year more than direct debit customers. Why are so many vulnerable people forced into this? The Government must support my new clause 15 to prohibit the installation of new prepayment meters unless consumers explicitly request them.
Solar is one of the cheapest forms of energy, and again it is incomprehensible that this Government do not give it the support that it deserves. The Climate Change Committee says that UK solar power deployment is significantly behind the Government’s target of 70 GW by 2035. The smart export guarantee should incentivise households to invest in solar panels by allowing them to sell the excess electricity produced back to the grid. However, under the current system it will take householders decades to break even and this will not incentivise solar investment. Our Liberal Democrat new clause 11 aims to enhance the reward under the smart export guarantee.
Richard Drax (South Dorset) (Con)
In the short time I have, may I introduce a slight note of caution? I was impressed by the almost Tiggerish performance by the Minister—he is very persuasive on this Bill—but what concerns me is what is guiding Government policy and, dare I say it, the policy of many in this House. The Climate Change Act 2008, and the further legislation in 2019 when our Government increased the cut in carbon emissions to 100% by 2050, introduced targets that in my humble opinion were not really thought through. The practical consequences have not been thought through, and they are becoming more and more evident today as we discuss these difficult issues.
Do not let me mislead people in the House. I, like everyone here, want to break away from fossil fuel and have cleaner air. The green revolution is coming, as my right hon. Friend the Member for Kingswood (Chris Skidmore) said, but we have to be careful not to bring it in so quickly that it is not available, it is not affordable and, when the sun does not shine and the wind does not blow, it does not work. Strategically, we are an island nation and we have to keep the lights on. Our duty as MPs is to say to our constituents, “I can guarantee that when you go to your light switch or to make a cup of tea or cook a meal, the power will be there to do all that, and to drive your car from A to B.”
At the moment there is a great drive for electric cars, but they are expensive and the plug-in points and investment are nowhere near ready for that revolution. There are also many questions about where the batteries and the resources for them will come from. We have already heard from my hon. Friend the Member for Rutland and Melton (Alicia Kearns) about the slave labour that applies to many parts of the battery industry.
We are now on our fourth carbon budget—I do not know whether people know that—running from 2023 to 2027, and the Government are being guided by that. The Climate Change Committee advises on the carbon budget, and the Government can be legally challenged once it is in place. The budget is set for five years, so the question now is: what about our democracy? In my humble opinion, we are debating these crucial issues for probably the first time. It was pushed through in 2008 and 2018, and we are now facing the consequences of those decisions. If we have to fall back on the courts to decide on the policies we make in this place, we can recall the anxiety and grief that that caused on the Brexit issue. In my view, that is completely unacceptable.
There are three consequences: in 18 months’ time, no new house will be fitted with a gas boiler; in seven years’ time, petrol cars will be illegal; and in 12 years’ time, people will not be able to replace their boiler like for like.
Ian Paisley
Is it not the case that, after car batteries expire, most of them end up in landfill? This is another significant problem we need to take stock of when these issues are considered.
Richard Drax
It is. I have read many articles, not least by Mr Bean who, as we know, is a car expert. He wrote a very good article in The Guardian about why we are not quite ready for battery cars. If my wife or daughter is travelling from A to B, I want her to get there safely, as she can in a petrol or diesel car, without having to wait in a petrol section for some minutes to recharge her car, which then takes half an hour or so.
Our actions have consequences, and I urge the Government to think this through very carefully. We cannot impoverish our country to meet what I would call, in some cases, an almost cultish policy to turn this country into something we cannot afford. When we can afford it, and when it works, that is when we should adopt all these policies. I urge caution as the Government go forward.
Olivia Blake (Sheffield, Hallam) (Lab)
I declare an interest, as my husband is the company secretary of Sheffield Renewables, a community benefit society that funds, develops, owns and operates renewable energy systems in Sheffield.
I rise to speak in support of a number of amendments that would be vital additions to the Bill. It was a pleasure to sit on the Public Bill Committee to debate, at great length, many of the issues that have been raised today. I still feel the Bill is missing its intended purpose, as the Government put it, to
“deliver a cleaner, more affordable and more secure energy system for the long term.”
We are in a climate and nature emergency, and we are now seeing its effects. We are also facing the worst cost of living crisis in decades. Although I am pleased the Minister has listened to Members on both sides of the House on the hydrogen levy, there is still a lot more to do.
The Bill could have been our opportunity to tackle these issues head on, transitioning away from climate-wrecking fossil fuels while making energy affordable for everyone. Sadly, in its current form, it fails on those fronts. First and foremost, the Bill will fail to make energy more affordable for my constituents. National Energy Action has warned that 6.3 million households could be trapped in fuel poverty this winter, and by 2024 some households will face spending up to a quarter of their income on energy bills.
We need to overhaul our broken energy pricing system, not have more tinkering around the edges. I am proud to support new clause 36, tabled by my hon. Friend the Member for Norwich South (Clive Lewis), which would introduce a national energy guarantee. This idea needs to be considered, as we need to make sure that the burden of the transition does not fall on those who are least able to meet it.
Secondly and shockingly, the Bill fails to deliver any energy efficiency measures. There is nothing about how we will achieve the targets that have been set. The latest CCC report is clear that the Government need to rapidly scale up and accelerate energy efficiency to stand any hope of meeting legally binding decarbonisation targets. Obviously, the greenest energy is energy that is not used, and the more we can do to reduce the need for energy in poor-quality housing the better.
New clauses 33 and 35 aim to correct the current position by making it a legal requirement for the Government to produce an energy demand reduction plan and providing local authorities with funding for the decarbonisation of homes. I thank the hon. Member for Brighton, Pavilion (Caroline Lucas) and my hon. Friend the Member for Nottingham East (Nadia Whittome) for tabling those new clauses, and I urge the Government to support them.
Finally, the Bill fails to decarbonise at speed and scale. Again, the latest CCC report could not be clearer:
“Expansion of fossil fuel production is not in line with Net Zero”.
New clauses 2 and 29 would prohibit coalmines and new oil and gas respectively. New clause 30 would phase down UK petroleum, and new clause 59 would decarbonise electricity supply by 2030. They could and should have been central pillars of the Bill. They are about how we can transform our energy system and meet Labour’s ambitious plans to be a green energy superpower by 2030. However, the Government have removed many new clauses that were won in the Lords—for example, the one on banning new coalmines—and Ministers are refusing to support any such measures today. Instead, they waited until MPs went home over the summer to give the green light to hundreds of new North sea oil and gas licences, without proper scrutiny, in a damning indictment of this Government’s record on climate action. Those are not the only amendments that would help to raise the ambition in this Bill that the Government have removed.
Finally, I wish to mention the importance of new clause 7. The treaty that has been outlined is holding us back and we need to be on the front foot with this. I hope that Ministers will reconsider whether or not we should be part of this treaty in the future.
Dame Andrea Leadsom (South Northamptonshire) (Con)
This is a great Bill and I congratulate the Government as it takes us a huge step forward. Back in 2015, when I believe the hon. Member for Southampton, Test (Dr Whitehead) was the shadow Energy Minister, I was Energy Minister and we announced we were taking coal off the system by 2025. I recall that at that time the whole world was up in arms, saying, “Oh no, the lights will go out. This will never happen.” Yet by 2020 coal was almost off the system and today there is hardly ever any use of coal. That demonstrates what can happen when a Government set a direction of travel, put the funding behind it and let businesses and investors get on with it. It is a huge accolade for a Conservative Government, who then stand aside and let private investment come in. It is time that we committed ourselves to building new nuclear baseload, as that is vital. We can be proud of our achievements on offshore wind and the commitment now to carbon capture, usage and storage—that has been too long in coming but I am pleased to see it.
Time is tight, but I wish to refer to my new clause 60, which calls for a specific problem to be tackled in a specific way. We all have major concerns in our constituencies, where communities do not wish to see huge electricity pylons, great big wind turbines and great big industrial sites related to energy in their area. Yet we know that we need new onshore wind, lots of solar and lots of electricity pylons. My new clause proposes to make it much easier to build the 600 km of new electricity cabling and pylons that we need by 2030 to meet our power decarbonisation targets alongside major road and rail routes. As things stand, communities understandably object to these huge pieces of kit going through their areas, and then these things get delayed and delayed. In the past eight or so years, we have built only about 30 km of new pylons but we need about 600 km by 2030. We need to get our skates on. The Government can help by making it much easier for planning—
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I completely agree with the point the right hon. Lady is making. Does she agree that Governments across the UK—transmission infrastructure is a matter where the Welsh Government have competence—should be looking at cable ploughing technology as a way forward? It enables “undergrounding” at a far cheaper cost and in a far more environmental way than traditional undergrounding.
Dame Andrea Leadsom
I have a lot of sympathy with what the hon. Gentleman says, but he will know that over their lifetime it costs over five times as much to put cables underground as overground. While I agree that burying them is better in sensitive areas, that will not offer the faster and cheaper solution that overground cables, alongside major roads and rail tracks, would offer.
Tonia Antoniazzi (Gower) (Lab)
We all want to cut emissions and tackle climate change, but people continue to suffer from the cost of living crisis. It is important that the cost of transitioning to lower carbon alternatives is not left to individuals to shoulder on their own.
The Government propose phasing out the use of high-carbon fossil fuel heating from the gas grid by banning the installation of new gas-fuelled boilers from 2026, and they advocate the alternative of heat pumps. While heat pumps have an important role to play in the decarbonisation of home heating, a heat pump only approach risks unfairly burdening off-grid rural homeowners with expensive installation costs. My constituents are rightly concerned at the prospect of being made to install very costly alternative heating systems that are not fit for purpose.
Some 11 million people live in rural areas across the UK, with 15% in off-grid homes. The cost of installing a low-carbon heat pump is around four times more expensive than a replacement boiler. What is more, while a heat pump can technically be installed in all homes across the UK, and it should be in new build housing, in certain property types, such as those in rural and coastal communities like Gower, they will not run efficiently and risk increasing energy bills to unnecessarily high levels for homeowners, above those they currently pay. In some cases, that could increase the overall cost of installation to £25,000, according to the Government’s own calculator.
I welcome the fact that the Government are consulting on increasing the grants available for heat pumps in certain homes, as announced last week. However, for some, those increased grants will not go far enough in making the cost of heat pump installation workable. My constituents in Gower, many of whom are off-grid homeowners, want to play their part in reducing emissions. In fact, the majority of people who came to my summer surgeries, while concerned about the cost, wanted to do their bit to reduce carbon emissions.
As has been said in the Chamber today, renewable liquid fuels, such as renewable diesel made from hydrotreated vegetable oil, offer a cheaper alternative. They can reduce net carbon dioxide greenhouse gas emissions from source to end user by up to 90%. At a small cost, existing off-grid boilers can be modified to run renewable liquid fuels, such as HVO, saving the homeowner the extortionate cost of a heat pump replacement.
However, renewable liquid fuels are more expensive than their high-carbon competitor, kerosene. In order to aid swift uptake, the Energy Bill must enable the use of renewable liquid fuels, as well as introducing measures to explore reducing their cost and making them more accessible, such as a renewable liquid heating fuel obligation, mirroring what already exists in transport and aviation. That would help my constituents transition to lower-carbon alternatives and incentivise faster and wider transition, more broadly, among off-grid households. There is some consensus across the House on those measures. An effective transition to cleaner energy must ensure that rural off-grid communities, such as mine in Gower, are not left with an expensive cost burden as we transition to net zero.
To conclude, in light of the consultation on renewable liquid fuels, the Government must review their oil boiler ban. The Minister must ensure that the consultation is expedited so that all our off-grid constituents can benefit before he leaves Government.
John Redwood
The wish to carry through a great electrical revolution will require a lot of good will from the British people. My worry about this legislation is that it may antagonise them by being unduly restrictive, particularly with the threat of civil and even criminal penalties on some of their conduct. We need to persuade people that the green products will be cheaper, better, more acceptable and make a more general contribution, and not try to bamboozle them. I hope that there will be an opportunity to vote on the amendments tabled by my hon. Friend the Member for South Thanet (Craig Mackinlay) to get rid of the threat of criminal and civil penalties over the issue of a proper transition.
For things to take off, the products—the heat pumps and the electric cars—will have to be much more popular. More people will have to believe in their specifications and adequacy, and they will have to be more affordable. I, for example, would be very happy to have a heat pump to heat my rather small London flat, but I am told that there is not one available because I am not allowed to adorn the outside of the block of flats with any of the things that a person would need to make a heat pump system work. There must be practical solutions to these problems. We cannot force the pace by legislation; the markets and the investment have to catch up.
My second worry about this legislation is that energy policy has to achieve three things at the same time. Yes, we have to take considerable environmental issues into account, but we also need affordable energy and we need available energy. In recent years, all main parties have put so much emphasis in their policy making on the environmental that we are missing the obvious, which is that we are no longer guaranteeing security of supply. We cannot guarantee security of supply if we are mainly relying on wind farms. We cannot rely on solar on a dark winter evening when people want to cook their meal and turn the heating up, because there is no solar. We have to look at the relative costs. The unit cost of energy generated by a wind farm that is already built is very cheap on one costing system, but if we have a gas turbine system that is non-operational for most of the time, only kicking in occasionally when the wind does not blow, that is part of the cost of the delivery of the wind power and it is a far more expensive way of running gas turbines than if we use them all the time.
Craig Mackinlay
My right hon. Friend is making an excellent point about the extra energy provision that we need to make renewables work. Has he considered the true environmental cost of the batteries, the digging up of cobalt by children in the Democratic Republic of Congo, the smelting and all the rest of it? That is the real cost of relying on renewables, and we hear very little about the real cost of the batteries.
John Redwood
I am greatly in favour of doing proper, whole-life carbon accounting, taking into account all the CO2 generated by making the green product—its lifetime use, on which it may be better, and its disposal, on which it may be worse. It is certainly the case that if we acquire an electric vehicle that has generated a lot of CO2 in its production and then we do not drive it very much, we will have not a CO2 gain but a CO2 loss, so there must be realistic carbon accounting. We also should not fall nationally for the fallacy that is built into the international system. For example, we could say that we have brought our CO2 down because we are importing things, but that actually generates a lot more CO2 than had we done it for ourselves.
This is the essence of the argument about our own gas. If we get more of our own gas down a pipe, it produces a fraction of the CO2 for the total process than if we import liquefied natural gas having had to use a lot of energy compressing and liquefying the gas, a lot of energy switching it back, and a lot of energy on long-distance sea transport. Therefore, we must be realistic in the CO2 accounting.
Finally, I do not think that the Bill is giving us much guidance. For example, if the electrical revolution does take off, because the really popular products arrive and people find them affordable, how will they get the power delivered to their homes? We are already told that many wind farms cannot be started or cannot be connected to the grid any time soon. There needs to be a massive expansion of green capacity and a big digging-up of roads and re-cabling of Britain. If my constituents are all to adopt an electric car and a heat pump, we need a massive expansion both of electricity generation and of grid capacity. I do not see that happening at the moment. There need to be market reactions and proper investment plans, and this legislation is not helping.
I fear that this Bill adds to the costs. It adds targets that could turn out to be unrealistic and that could be self-defeating, because quite often the actions taken to abate CO2 end up generating more CO2 at the world level and mean that we have exported an awful lot of crucial business that we would be better off doing here.
Mr Deputy Speaker (Mr Nigel Evans)
We are going to a three-minute limit immediately. The wind-ups will start at 5.50 pm and then there will be multiple votes from 6 pm onwards. I am afraid some people may not get in.
Ian Paisley
Thank you for calling me in this debate, Mr Deputy Speaker. It has not been all jolly hockey sticks, despite the fact that this Bill has taken up quite a considerable amount of the House’s time over the last number of years and Sessions.
Northern Ireland has more than 60%, maybe approaching 70%, of its houses heated by solid fuel. As a representative of a constituency with a vast rural section that relies on coal and heating oil, I cannot put my name to something that will say to my constituents, “I don’t know what this is going to cost you, but this decision will actually inflict a higher cost on you when there is a suitable and available product there that you can use to heat your home or to drive your car.” That presses heavily on me, and it has pressed heavily, I notice, on some other Members across the House, because there are significant cost implications in going down the proposed route.
Northern Ireland is not behind in making change. It is actually front and centre in the hydrogen revolution. It has been making hydrogen products and will be part of the hydrogen hub and the most significant hydrogen manufacturer in the entire island of Ireland. I listened carefully to the points made from the Government Front Bench about the hydro levy, and it will be interesting to see how that follows through.
I was delighted by the comments made by the right hon. Member for Camborne and Redruth (George Eustice). I know he was not trying to hang anyone out to dry today, but it was important that we got from the Minister a clear indication of what is happening, not just in Northern Ireland, with regard to liquid renewables. It is important that the Government must support a variety of heating technologies to give the UK the best chance of hitting the 2050 carbon reduction target, if that is what they wish to do. They must reflect the diverse types of houses that people live in across the entirety of the United Kingdom and do something that is fundamentally fair to people. We cannot inflict this massive cost on people when we have an overreliance on solid fuels, especially in a country such as mine.
We heard some comments from the right hon. Member for Wokingham (John Redwood) on the issue of battery disposal. It concerns me considerably that whenever a battery car has finished its life cycle, the battery largely ends up in landfill. What benefit is that, when there are other technologies out there being explored, utilised and developed that could give us a much better and more user-friendly experience?
A ban on new replacement fossil fuel appliances in homes from 2026 will put a substantial cost on people. I also agree thoroughly with the points made about the disruption to many people and about heat pumps. This Bill needs to have even more thought given to it.
Sir Jacob Rees-Mogg (North East Somerset) (Con)
In my point of order earlier I said that this was a 328-page Bill. That was what it was when it came from the House of Lords; it is now a 427-page Bill, which we are expected to debate in detail in three hours, on a day when we had two relatively lightweight statements. That really seems to me not the proper way to have scrutiny in this House. It does not allow this House to do its proper job of looking at the detail of legislation—it is as if we had abdicated it entirely to their lordships.
I have supported my hon. Friend the Member for South Thanet (Craig Mackinlay) in a number of amendments, every single one of which has basically the same aim: to ameliorate the burden this Bill will place on all our constituents. Throughout the Bill, we are creating cost, regulation, penalties and obligations. New clause 42 is there to say that the lowest possible cost should be at the forefront of the mind of the Government in everything that they do, irrespective of how the energy is generated. If that means fossil fuels, let it be fossil fuels. As my right hon. Friend the Member for Wokingham (John Redwood) said, we need to keep people with us, and we risk losing them if we put undue burdens on them.
Alex Cunningham (Stockton North) (Lab)
The issue of flaring and venting emissions highlighted in new clause 12 is an extremely important one. Any unplanned hydrocarbon releases must be done safely. I know the tremendous concerns of the trade unions, including the National Union of Rail, Maritime and Transport Workers, and of the 49,000 offshore workers, about the Bill’s failure to address safety-critical maintenance work on oil and gas installations. I very much agree with the sentiments in the new clause and welcome the fact that flaring and venting emissions have been reduced, but according to industry body Offshore Energies UK, the average safety-critical maintenance backlog on UK offshore oil and gas installations increased by 50% during the pandemic. I hope that the Minister will reflect on that and perhaps meet the unions.
Turning to new clause 22, I see tremendous merit in and need for timely and cost-effective connections to the grid, and for an acceleration of the development of an offshore wind energy grid, both of which are critical for Teesside and the Teesworks site. Given the promise of many more jobs in the industry, connectivity to the electricity grid for the Teesworks site could not be more important. I would be obliged if the Minister updated me on power supplies, which I understand do not currently exist for the site, and on how he will use the new legislation to ensure that Teesside gets the power it needs.
The Government say that the purpose of new clause 52 is to give greater certainty to producers of sustainable aviation fuel. That is undoubtedly necessary, but I take issue with the long lead time. The new clause specifies that
“The Secretary of State must open the consultation within the period of 6 months”
and report to Parliament on progress
“within the period of 18 months”.
The industry needs certainty now. I know from talks that I have had with industrialists that the Government’s dilly-dallying is already impacting on investment decisions, and not in a positive way.
New clause 34 calls for a price stability mechanism to support the development of a UK sustainable aviation fuel industry. That is what those in the industry want, and they want it now. Alfanar is developing a £1.5 billion waste-to-sustainable aviation fuel facility on Teesside—the largest in the world and the most advanced in Europe. It also plans two more SAF plants in the UK, but—and this is a big but—it needs certainty from the UK Government that they are serious about the industry and will take the brakes off and get on with creating a business environment that will instil confidence.
I very much welcome new clause 56. It beggars belief that the existing linking of renewable and gas prices in the retail market has delivered billions’ worth of extra cash to energy companies while our hard-pressed constituents pick up the bill. I hope that Ministers will accept that that is unfair on consumers, and that the new clause will help them to correct that. I would have loved to have talked at length about carbon capture and storage, but suffice it to say that the Government should take on board the amendments tabled by others.
Chris Grayling
I have pushed my new clause 34 to a point where the Government have responded in a sensible way and started what I hope and believe will be a process. It was not for no reason that around 70 Members of Parliament signed that new clause; it was because of a recognition that this transition is going to happen in one of our most important industries, and it is going to happen around the world.
The migration to sustainable aviation fuel is vital as the world decarbonises, not only because it is an essential first step towards decarbonisation, but in the long term—not for short-haul flights, which I think will be powered by hydrogen; by the 2030s, we will start to see short-haul hydrogen planes in operation. However, there is no technological approach yet that will take us to Australia or North America using anything other than sustainable aviation fuel, so it is a vital industry for the future of this country.
There are investors out there waiting to invest in developing plants here, but they need the confidence to know that there is a Government committed to creating a framework that will enable that investment to take place and be sustained. One of the reasons I intervened on the Opposition spokesman, the hon. Member for Southampton, Test (Dr Whitehead), is that over the next 12 months, as we prepare for a general election, investors are looking for confidence on both sides of the House. It is not about a lack of confidence in our ability to win the next general election; it is about delivering confidence to investors right now.
That is why it is important that both the Government and the Labour party are committed to the development of sustainable aviation fuel in the United Kingdom. We want investors to be taking decisions about the deployment of their capital in this country now, preparing to invest and preparing for the end of the process that the Government have started through their new clauses, so that by 2026 they are ready to build plants, develop sustainable aviation fuel and provide an important part of the future of the aviation industry in this country.
I am grateful to the Minister for what he has done and the assurances he has given today, but I say to him and his colleagues in Government that I and others will be holding their feet to the fire in the next 12 months, to ensure that the consultation starts as quickly as possible and that the response to it comes as quickly as possible. By the time we get to the general election, I want there to be a clear route map forward for the development of SAF in this country that has given investors confidence, so that they know as we go into the election campaign that both sides will take this forward and that we have an industry that will be vital to the future of aviation in Britain, which is a crucial industry for all of us.
Alec Shelbrooke
It has been a pleasure to speak on the Bill on Second Reading and in Committee, but I agree with my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg) that it is a great pity we cannot have a long debate on Report or Third Reading, to expand on issues further.
One of the issues that I wanted to expand on is about some of the alternatives. We keep talking about electric vehicles moving down, but hydrogen combustion vehicles offer a real opportunity to move forward. We also talk about net zero, but this has now moved to zero-emission vehicles. That rules out hydrogen combustion, so again, we are going down a rabbit hole of just having electric vehicles, but an electric vehicle is not a zero-emission vehicle. If it was, the underground would have the cleanest air in London, and it does not, because there are a lot of particulates around it.
My hon. Friend the Member for Rutland and Melton (Alicia Kearns) makes it clear through new clause 47 that we have to look at the sources, and new clause 37 relates to where batteries go. We keep talking about the rare earth metals that are needed. Indeed, the hon. Member for Angus (Dave Doogan) talked about being able to maintain baseload by using various aspects of energy storage. We keep coming back to the need for rare earth metals and materials to enable that, and they come from areas of the world that we do not have an influence over. In the past 18 months, there has been a huge debate about the fact that we cannot be reliant on Russian energy, and yet few Members in today’s debate have recognised the fact that we are wholeheartedly moving towards becoming reliant on China to supply our energy needs.
This is a huge Bill. It is a fundamental Bill that we have brought forward as we look to the future, but it is far too big, with far too many aspects to it. It has become a bit of a hodgepodge, saying, “We want electric vehicles. We want electric heating in homes. We want to have arc blast furnaces rather than coal furnaces, so we will ban new coalmines.” I promise this House that if we move to just arc furnaces, we will destroy steel manufacturing in this country, because we do not have the ability now to produce the electricity that is needed. We are not going to switch off the lights in people’s homes before we switch off an arc furnace, and once it has been switched off, we cannot switch it back on.
That is the big mismatch in the Bill, which is why I regret that we will not have a Third Reading debate to discuss these issues on a slightly wider basis. The rush to renewables is happening quicker than the timeline for making sure we have enough turbines, as my right hon. Friend the Member for Wokingham (John Redwood) pointed out. My hon. Friend the Member for South Dorset (Richard Drax) made very important points as well. Although the aims are there, and I think we all want to follow those aims—not being reliant on foreign energy is highly important—at the moment there does not appear to be a connection between these things as they come online. As such, although the aims of the Bill are good, we have to make sure that we implement them over a consistent timeframe so that we take the public with us.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
The beautiful food-producing farmland in my constituency is a particular target for industrial-scale solar farms, often backed by prospectors who have no personal connection to our area. This raises huge concerns among my constituents about the scale of the projects and the lack of thorough consultation. With the imperative of food security on our minds, we must explore alternatives to covering vast expanses of our productive land with solar panels.
Many people do not appreciate the scale of the issue, so to illustrate the magnitude of this challenge, I will highlight one proposal for a solar farm in my constituency. It aims to engulf a staggering 587 hectares of land, just under half of which is grade 1 to grade 3A farmland—the very best and most versatile agricultural land, the best land for food production. In fact, almost 10,000 acres of my constituency are currently open to planning for solar farms. Those farms will dwarf villages such as Witham St Hughs, Thorpe on the Hill, Bassingham and Holdingham, and will almost encircle villages such as Scopwick, Digby and Ashby de la Launde.
I do not stand against solar panels in principle; I have previously spoken about the unexplored potential of utilising industrial roof spaces for them. However, I do not believe that covering our farmland in solar panels is the right thing to do, and I vehemently object to the lack of food security it could produce. I therefore support new clause 48, tabled by my hon. Friend the Member for Rutland and Melton (Alicia Kearns), which seeks to solve this injustice and put an end to these large-scale projects. Furthermore, I appreciate that that clause also encourages future developments on brownfield sites, which are far better suited to such endeavours. Let us work together to protect our precious farmland, maintain our food security, heed the concerns of our constituents, and chart a more sustainable path for our energy future.
I was also shocked to hear that more than 90% of solar panels may be made by, or have elements that come from, slave labour. As we discuss the slavery of the past, let us do all we can to prevent the slavery of the here and now. I therefore also support new clause 47, which should be pushed to a Division later.
Lincolnshire as a whole produces a vast amount of this country’s food, yet 22,500 acres—1.3% of its land area—are currently open to applications for solar panels. As such, I ask the Minister to answer two questions in his summing up. First, what will we eat when our best and most versatile farmland is covered by solar panels? Secondly, what is his assessment of the impact on the environment of growing energy from solar panels instead of food, then importing food from elsewhere?
Peter Aldous (Waveney) (Con)
The Bill has an important role to play in ensuring that we meet our 2050 net zero targets, enhancing our energy security and creating new jobs, particularly in coastal communities such as the constituency I represent. In driving forward the measures in the Bill, I urge the Government to have in mind the following parameters.
First, we need to pursue a strategic approach to the provision of infrastructure while maximising the leveraging-in of the enormous amount of much-needed private sector investment that will be required. Secondly, the Bill’s framework needs to be sufficiently flexible to allow all regions of the UK to play their full role in the transition. It has been estimated that by 2035, East Anglia’s renewable and low-carbon energy supply portfolio could power the equivalent of 90% of the UK’s homes. In our area, we need a recognition of the role we will play.
Finally, the Government need to rural-proof their policies, as articulated by my right hon. Friend the Member for Camborne and Redruth (George Eustice) and the hon. Member for Gower (Tonia Antoniazzi).
Community energy has an important contribution to make in boosting clean energy generation and in offering people the opportunity to benefit from agreeing to host new energy infrastructure. Therefore, the announcement of the new £10 million community energy fund is to be welcomed. However, it is important that the Government monitor very closely the fund’s impact and whether it is successful in unblocking more community-owned projects. If it is not, they need to bring forward further measures, such as the amendments that were proposed in the other place.
Duncan Baker (North Norfolk) (Con)
I rise to support the principle of the Government lifting the ban on new onshore wind farms. I have every sympathy with new clause 43, but I want to bring some context as to why and mention the fact that public support on this topic has completely and utterly changed 180° in the last 10 or 15 years.
In 2009, which feels like a long time ago now, I was first elected as a local councillor and, in the very village I grew up in, one of the most controversial and contentious planning applications I have ever seen was put in front of us. It was for a 66-metre—you’ve guessed it—wind turbine; it was not a very big one, but it was to be built on the Cromer glacial ridge in North Norfolk. The backlash against that proposal was enormous, with 1,500—1,500—objections, genuine protests and councillors elected on the back of the stop the turbine campaign. The applicant went through three planning appeals, two High Court hearings and an application to the Court of Appeal. Finally, the planning inspector granted permission in February 2020, after over a decade of fighting. That turbine went up just a few months ago.
I am telling hon. Members this because the Mack family that went through that process for over a decade must have spent tens and tens of thousands of pounds, but now it has been built, public perception has changed and the complaints against it have been absolutely negligible. What that says, above all, is that people have now changed the general consensus on onshore wind. It has totally changed and, as parliamentarians, we should reflect public opinion. When the mood changes, we should change with it sometimes. People get it now: people get that that one turbine will power 700 homes in the local area. Of course, new applications must be designed to be sympathetic to the surrounding landscape, but people recognise that we need our own energy security, sustainable, clean and green forms of energy to decarbonise and an energy mix that will give us security as well.
Things have clearly changed, and I think this is a very sensible, pragmatic and low-cost way of the Government moving to give us more clean and green energy. That one single application I mentioned shows how public sentiment has changed, which is why I support the Bill today.
Several hon. Members rose—
Mr Deputy Speaker (Sir Roger Gale)
Order. This will have to be the final two minutes from the Back Benches. I call Jerome Mayhew.
Jerome Mayhew (Broadland) (Con)
Thank you, Mr Deputy Speaker. I am just going to talk about one new clause, new clause 29, which I oppose. It seeks to prevent further licences of North sea oil and gas. The reason I oppose it is that we have a plan for the decarbonisation of our economy and it is policed, if I can put it that way, by the Committee on Climate Change. In the path to net zero by 2050, we recognise that we have a continuing need for oil and gas at least until 2035, when more than 50% of our energy needs will still come from fossil fuels, and actually up to 2050 included, because it is net zero, not absolute zero. We have to have oil and gas, so let’s get it from the most efficient and environmentally friendly source. The most environmentally friendly source is Norway, but that is not an unlimited resource; the CO2 equivalent per barrel of oil there is about 7 kg. The additional oil and gas we use comes not from Norway but from Qatar; it is liquid natural gas and the CO2 equivalent per barrel there is 79 kg, whereas the figure for the North sea is 21 kg—a quarter the level of environmental damage per kilogram of CO2 equivalent. The consequence of closing down the North sea prematurely would be to increase emissions and make our carbon footprint worse. It would be the triumph of virtue signalling over the practicalities of decarbonisation.
Jerome Mayhew
I will not; I am sorry, but I only have one and a half minutes.
It is logical on environmental grounds, therefore, to support new licences in oil and gas. But there are other arguments. There is the balance of payments—we used to talk about the balance of payments. In 2022, our trade in goods deficit was £63.9 billion. I would rather have our imports of oil and gas coming from the UK and not being imports at all, supporting our balance of payments.
There is the tax income. The Office for Budget Responsibility says that in 2023-24 we are going to get £10.4 billion of tax revenue from North sea oil. That pays for a lot of public goods. We should be supporting that, and we should be supporting business profitability and jobs, because that supports our communities. It also gives time for the phasing of what is described as the just transition to renewable jobs. There is an irony in that the proponents of new clause 30, led by the hon. Member for Brighton, Pavilion (Caroline Lucas), talk about just transitions, but it is this longer process away from North sea oil and gas, managing decline, that provides the space for a truly just transition to new renewables employment in this country. I do not support new clause 29 as a result.
Several hon. Members rose—
Mr Deputy Speaker (Sir Roger Gale)
I apologise to those Members who have not been called; a note will be made and a count taken. I call the Minister, Andrew Bowie.
Andrew Bowie
I am delighted to rise. I must apologise in advance of my closing remarks: given the time available, I will not be able to address every single point, question, statement and amendment raised today. [Interruption.] That is the first time I have ever been told to speed up my speaking style. However, I will commit to write to every Member who has raised a question, and certainly questions that are pertinent to how we implement some of the regulations that we are presenting here today and which will be subject to discussion in the Lords next week.
On new clause 47, presented by my hon. Friend the Member for Rutland and Melton (Alicia Kearns), we keep all sanctions under review and she knows that we cannot comment on any potential future designations. We have a global rights sanctions regime, which allows us to take action when the necessary legislative criteria are met and we assess sanctions are appropriate. I can confirm to her that we take an interest in the concerns she set out and will continue to act. We have introduced new guidance on the risks of doing business in Xinjiang, enhanced export controls and announced the introduction of financial penalties under the Modern Slavery Act 2015.
Alicia Kearns
I know the Minister has historically been very strong on this point. I am interested in the fact that the Government have raised that point about sanctions and the possibility of sanctions, because we have not heard that before. Both the US and EU have sanctioned those who use slave labour within their supply chains. If the Government—I hope they are saying this today; I know they cannot comment on sanctions designations—are saying that they will bring forward sanctions against companies that are completely complicit in slave labour—we have the evidence both from the US and our own work—that will be incredibly positive because it would send a strong deterrent message across the industry that we will not accept slave labour in our supply chains.
Andrew Bowie
I thank my hon. Friend for her comments and constructive engagement over the past couple of days and months. As I said, I commit to working with her and other interested parties on this matter as we continue to do what we can to combat the existence of slave labour in that market.
The energy efficiency amendments were raised a number of times. I want to be absolutely clear: we are simply seeking to replace the power to amend the energy performance of premises regime, which was lost as we departed the EU. Brexit gives us the power to do that. I can categorically guarantee before the House that we are not creating new offences. In any case, any new offences on anything—as is always the case—would have to be subject to debate, scrutiny and vote in this place, which Brexit has allowed us to do.
My hon. Friend the Member for South Thanet (Craig Mackinlay) raised the issue of a warrant for exercising power of entry with his amendment 50. I assure him that clause 152 modifies the Gas Act 1986 by building on existing provisions concerning the powers of entry. As such, the existing rules on powers of entry will continue to apply, whereby gas transporters must obtain a warrant from the magistrates court before use. I hope that satisfies my hon. Friend.
I thank my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom) for her amendment today. I pay tribute to her for her outstanding work, her support for this Bill during her time as Secretary of State in the Department for Business, Energy and Industrial Strategy and her continued work when she was chair of the departmental Back-Bench committee. I am delighted to be able to confirm that we will continue to work towards what her amendment seeks to do, and I am happy to continue to work with her in pursuance of that, alongside the industry and the Department.
It would be remiss of me not to mention and thank my right hon. Friends the Members for Reading West (Sir Alok Sharma) and for Middlesbrough South and East Cleveland (Sir Simon Clarke) for their close work with the Government over recent weeks. Onshore wind is an important part of our energy mix, and the Government have always maintained that it should be built where there is local support, ensuring that the voices of local communities are heard. In December last year, the Government consulted on changes to national planning policy for onshore wind in England. Through that consultation, the Government have heard the strength of feeling and the range of views on this topic. We continue to believe that decisions on onshore wind are best made by local representatives who know their areas. Nevertheless, the feedback was clear that we need to strike the right balance, and that is why the Secretary of State for Levelling Up, Housing and Communities published a written ministerial statement, as was described earlier, and we look forward to working with colleagues to implement that as we move forward.
I would also be remiss not to mention my right hon. Friend the Member for Basingstoke (Dame Maria Miller) and her comments today and constructive engagement over the past few months. Lithium-ion battery storage systems are a concern for many in this House. The Government acknowledge the concerns surrounding the potential safety and environmental impact of battery energy storage at grid scale. It is a priority for this Government to ensure the existence of an appropriate, robust and future-proofed regulatory framework that protects people and the environment. That is why I am pleased to confirm today that we have sought to provide further clarity through both the planning system and environmental permitting regulations.
The Government have recently updated planning practice guidance, which encourages battery storage developers to engage with local fire and rescue and local planning authorities to refer to the guidance published by the National Fire Chiefs Council. The Government intend to consult on including battery storage systems in the environmental permitting regulations at the earliest opportunity.
The main mechanisms for controlling emissions to air, land and water from industrial installations is through complying with an industrial installations permit. These permits set out mandatory conditions that operators must comply with to protect the health of local communities and the local environment. Installations are then inspected at a frequency according to their level of risk, and regulators have enforcement powers available to them if operators are not complying with their permit conditions. I hope that my right hon. Friend and other hon. and right hon. Members for whom this is an issue of great concern are reassured by those commitments today.
I thank all hon. and right hon. Members for their engagement in this debate, especially my hon. Friend the Member for Banff and Buchan (David Duguid), who is a real champion of the UK’s thriving CCUS industry. I thank him for his comments today. The licences issued by different authorities are designed to serve different purposes. The new requirement for an economic licence recognises the monopolistic nature of carbon dioxide pipelines and storage and is designed to protect users of the networks from anti-competitive behaviours, including monopolistic pricing. This is complementary, rather than duplicative of the existing carbon storage licensing framework. I can reassure my hon. Friend that the provision in clause 128(1)(a) is sufficiently broad to cover all methods of CO2 transportation.
Finally, my hon. Friend spoke about offshore wind. As part of the development consent process, applicants are required to consult with stakeholders, including devolved Administrations where relevant, and consider the impacts of their development on other sea users. However, I am also happy to confirm that I will meet him at any time, as well as representatives of the fishing industry, for whom this is a big issue.
I thank Members across the House for their considered contributions. For the reasons that I have set out, I respectfully ask them not to press their amendments to any votes.
Question put and agreed to.
New clause 52 accordingly read a Second time, and added to the Bill.
Mr Deputy Speaker (Sir Roger Gale)
Order. I am advised that the bells at No. 1 Parliament Street are not working. I shall extend the Division time by two minutes.
Energy Bill [HL]
Tuesday 12th September 2023
(1 year, 2 months ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 168-I Marshalled list for Consideration of Commons Amendments - (11 Sep 2023)
16:55 - Division on the Amendment to the Motion. - Ayes: 191 / Noes: 216 - Amendment to the Motion disagreed.
17:12 - Division on the Amendment to the Motion. - Ayes: 186 / Noes: 214 - Amendment to Motion on Amendment 272 disagreed.
17:25 - Division on the Amendment to the Motion - Ayes: 208 / Noes: 205 - Amendment to the Motion on Amendment 274 agreed.
Lord Callanan
That the House do agree with the Commons in their Amendment 1.
“(aa) the interim targets, as defined in section 2 of that Act;”
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, with the leave of the House, as well as moving that this House do agree with the Commons in their amendment, I will also speak to the other Commons amendments. I am pleased to bring the Energy Bill back to this House, following on from the many hours of debate that we had during its parliamentary stages in this place. The Bill is essential to the transformation of our energy system and will leverage private investment in clean technologies. It will reform our energy system so that it is fit for the future, and it contains essential provisions for ensuring the safety, security and resilience of the UK’s energy system.
The Government have listened carefully to the points raised, both in this House and in the other place, and we tabled various amendments in the other place to address many of these issues. The amendments have been gathered into three groups. First, there are the amendments making changes to the Bill in response to concerns raised across the House and where we have overturned lost votes. Secondly, there are amendments where we have introduced new government policy. Thirdly, there are amendments addressing minor and technical amendments made to the Bill. I wrote to noble Lords about this in advance of the debate, and I am grateful for the positive engagement that I have received from across the House.
I will speak first to the amendments in the first group, tabled following constructive engagement with both Houses. First, on the amendment on Ofgem’s duties, no doubt the noble Baroness, Lady Hayman, will be pleased about this—and I am grateful to her for her amendments on Report that sought to include the Government’s net-zero targets within Ofgem’s duties. The Government have now tabled a revised version of the noble Baroness’s amendment to ensure that it would not impact the hierarchy and intended effect of Ofgem’s duties, but very much in the spirit of the original amendment. The revised provision amends Ofgem’s existing duty to consider a reduction in greenhouse gases by making specific reference to the net-zero targets and carbon budgets in the Climate Change Act 2008. This reaffirms the Government’s commitment and mandate in achieving our net-zero targets and ensures that Ofgem’s role in net zero is clear.
I turn to the amendments to the hydrogen levy provisions. The Government have included these provisions following consideration of the concerns raised by colleagues in both Houses, particularly the Labour Front Bench. Following careful analysis of the implications, these amendments are similar in intent to an amendment made on Report in this House, but they help to ensure that the provisions work in a way that is practical. Specifically, they remove provisions that enable the levy to be imposed on energy suppliers in Great Britain, ensuring that within Great Britain the levy could be placed only on gas shippers. In the case of Northern Ireland, the amendments are intended to ensure that only gas supply licence holders who engage in gas shipping activities can be subject to the levy. This reflects the different approach to the licensing of gas shipping across Great Britain and Northern Ireland. The revised legislation provides a fairer approach to funding hydrogen, placing the charge higher up the supply chain, with the potential for costs to be spread to sectors expected to benefit most from early hydrogen deployment.
Finally, I remind the House that the Bill will not impose a levy on gas shippers. Instead, it will enable government to introduce such a levy through secondary legislation. Any decision to do so would take into account all relevant considerations, including the affordability of energy bills. The Government will hold a public consultation as usual, before laying regulations introducing the levy.
I turn to amendments on renewable liquid heating fuel. As the recent biomass strategy made clear, such fuels will have a critical role to play in decarbonising our economy. We recognise that these fuels have the potential to play an important role in decarbonising heat in those off-grid properties that are not suited to electric heating. I thank the noble Lord, Lord Berkeley, for his amendment and comments on Report on this issue. I am pleased to confirm that we will explore the potential of these fuels for heat by issuing a consultation within 12 months, and we are taking powers in the Bill to support the use of these fuels in heat in future. This amendment would provide government with the powers to introduce, again by regulation, measures that would impose obligations on heating fuel suppliers to supply specified amounts of renewable liquid heating fuel within specified periods. The Government also commit to consult specifically with the Scottish Government when consulting on the role of renewable liquid fuels in heating buildings off the gas grid and the implementation of a renewable liquid heating fuel obligation. The Government will look to legislate when parliamentary time allows to give statutory force to this consultation requirement.
Amendments 165 and 165A on sustainable aviation fuel commit the Government to publishing a consultation on the options for designing and implementing a revenue certainty scheme for sustainable aviation fuel within six months of the Bill being passed. The Government are also introducing a sustainable aviation fuel mandate from 2025 that will do the heavy lifting to close the cost gap between jet kerosene and sustainable aviation fuel by providing price support in the form of tradable certificates. These policies, along with the £165 million advanced fuels fund, will help to deliver our ambition of having at least five commercial-scale sustainable aviation fuel plants under construction in the UK by 2025.
I turn to community energy. The Government recognise that such projects can have real benefits for the communities in which they are based, and we are keen to ensure that they deliver value for money for consumers. That is why earlier this summer we launched a new £10 million community energy fund, which expands on the success of the previous rural community energy fund to enable both rural and urban communities across England to access grant funding to develop local renewable energy projects for investment. Alongside the proposed fund, we are committing to publishing an annual report and to consulting on the barriers the sector faces when developing projects.
Baroness Bennett of Manor Castle (GP)
My Lords, I will speak to Amendment 165A in my name and briefly comment on Amendment 272A in the name of the noble Lord, Lord Teverson, and Amendment 274A in the name of the noble Baroness, Lady Boycott, both of which have the strongest possible Green support.
It is 2023 and we are in a climate emergency. We cannot consider new coal. I am afraid the Minister’s brandishing of heritage railways does not hack it; it is a tiny usage, much as I have no objection to heritage railways. For steel and cement, other nations are moving very quickly away from using coal while we are stuck in the starting gate. On the community energy amendment from the noble Baroness, Lady Boycott, I had the great pleasure formally to move it on Report and we saw hugely strong support not just in your Lordships’ House but all around the country. Tomorrow we will debate the Levelling-up and Regeneration Bill. This is a way to allow communities to take control of their energy supplies and provide the framework to set free huge opportunities up and down the land. It is a no-brainer and I urge your Lordships’ House to vote for both amendments.
Moving chiefly to my Amendment 165A, it is worth revisiting the history of the Bill. Those with a very long memory might think back to 19 July 2022, when it had its Second Reading in your Lordships’ House. That was three Prime Ministers back and I really cannot count how many energy policies we have had from the Government since then. We might be in traditional ping-pong now, but the Government’s positions on so many of the issues in the Energy Bill have bounced back and forward so fast within the Government that it is enough to make any observer dizzy.
One of the last-minute additions was this clause on so-called sustainable aviation fuel. If noble Lords look back to the other place, they will see that the level of debate that occurred around this very significant amendment was really very scant. That is why I have tabled this amendment now, to provide a real opportunity for your Lordships’ House to at least explore the issues and bring out some of the Government’s thinking. I hope we will also hear significant explanations from the other Front Benches on what their thinking is on so-called sustainable aviation fuel. It is often linked with and spoken about as though it is in the same stable as renewable energy, but the fact is, of course, that almost no flights now are powered by sustainable fuel because of supply and cost. Sustainable fuel can be three times as expensive and even for United, the largest consumer of sustainable fuels in the US, last year it comprised less than 1% of its total fuel consumption.
The fact is that so-called sustainable aviation fuels are not a “get out of the limits of this finite planet free card” for the aviation sector. The idea that aviation can keep expanding, or that it should—I shall be coming back to this tomorrow in an amendment to the levelling-up Bill—is, I would say, for the birds: although of course the birds cannot afford the inevitable environmental damage that burning stuff, whatever the stuff is, inflicts.
I can go through some statistics on this. Bain & Company in June published a report assessing the most likely pathways to net zero by 2050 for the aviation sector. The headline was that it can eliminate 70% of emissions from aircraft operations without using electric or hydrogen at scale. Just 5% of emissions reductions come from hydrogen and electric planes in the Bain & Company scenario; the rest is engine efficiency, aircraft efficiency, optimising routes and scaling up so-called sustainable aviation fuels. A 70% reduction is significant, but the Science Based Targets initiative net-zero standard requires a 90% reduction in CO2 across all scopes by 2050 at the very latest. This report suggests that so-called sustainable aviation fuel can meet a maximum of 60% of global jet fuel demand in 2050 in the best-case scenario.
I think it is worth reflecting very briefly, looking to debates in the other place, that we saw both Labour and Tory MPs going further than this amendment does and calling for government subsidies for the sector. We have to set this in the context of the fact that tax exemptions last year saw the Treasury lose £4.7 billion from the aviation sector: that is calculated by Transport & Environment. That could pay for—gosh—more than 40 new hospitals: does that sound familiar? Or it could cover the cost 10 times over of additional medical staff. It is the equivalent of 1% of the income taxes collected by the Government last year. That is the context.
To come to the detail, my amendment simply addresses subsection (6). It seeks to bring in some systems thinking: an approach that does not look simply at the climate emergency because, as huge and pressing as that is, we are actually in a state where we have exceeded so many other planetary boundaries and we face so many other crises and threats that it is absolutely critical that the Government think in a systemic kind of way. If your Lordships want to think about where things went horribly wrong when we did not do that, Dieselgate is the obvious example. That was a case of corruption and fraud, but behind it was the problem of looking simply at the carbon emissions from diesel and not considering all the other environmental effects.
The current government amendment says that the Secretary of State should look at the contribution to the reduction in greenhouse gases. My amendment keeps that but adds the impact on the food system. Your Lordships’ House often debates the fact that food security is a huge and pressing issue of our age, and if we take land out of use for growing food and turn it to growing stock for aviation fuels, we are creating a potentially huge problem for ourselves.
Proposed new subsection (6)(c) says,
“not negatively impact human, animal or plant health”.
That perhaps comes back to the diesel reference, if we think particularly about human health. Burning stuff produces pollutants—that is just practical reality. However, we must also think about plant health. We often talk about using agricultural waste for these sustainable aviation fuels. That agricultural waste could be going back into the soil to contribute to soil and plant health, bringing us to a situation where we are not depleting our soils and then topping them up with artificial fertilisers, particularly nitrogen produced by the incredibly energy-intensive Haber-Bosch process. This is a systems-thinking, joined-up approach.
Finally, my amendment says,
“not negatively impact the availability of feedstocks for other industrial processes”.
The Minister referred to steel and cement, but all kinds of different, innovative steps are being taken to use all kinds of different materials to replace current fossil fuel production. We need to think about where what we call waste could best go.
I am aware of the desire to move this debate on, so I will not speak much longer, but I have just two final reflections. First, we hear a great deal of talk about waste cooking oil in terms of so-called sustainable fuels. Well, I am afraid that your local chippy is not going to take your private jet flight very far at all—let us be realistic about that. Secondly, my mother’s favourite movie was “The Sound of Music”, in which there is a song that goes:
“Nothing comes from nothing,
Nothing ever could”.
All energy use—all fuel—has environmental and social costs associated with its production and use. We have to think in that systemic, holistic way when we think about how we fuel our sustainable future.
Baroness Blake of Leeds (Lab)
My Lords, I will speak to Amendment 187A in my name. The purpose of moving this amendment is straightforward: we have an opportunity to put in place an enforceable plan of action that will deliver the often-mentioned aspirations to deliver energy-efficient homes and properties. I was sure that the Minister would repeat the line that this is unnecessary—and so he did. But I am afraid that the facts tell a different story. The new clause would enable a plan to be in place, working to clear targets to reduce gas supply in homes by 25% and a 10-year programme to retrofit 19 million homes, costed at £6 billion, with local authority and a community base to deliver.
The facts are these. Since 2010, progress to reduce emissions has stalled. The UK is still heavily reliant on fossil fuels for home heating and industry, and has the least energy-efficient housing stock in Europe, according to the IMF. Limited progress on energy-efficiency measures has been made worse by poor public information campaigns and the lack of a long-term plan with clear targets, clear technical explanations and little evidence of a financial and structural plan to go alongside. I do not wish to repeat all the comments that have been made throughout the debates on this Bill. However, we have to acknowledge a lack of grip, of urgency, and of serious explanation of the benefits of determined action.
In terms of tackling emissions and meeting legally binding decarbonisation targets, reducing the need for heat must be a top priority. Benefits include: a reduction in the cost of heating homes—therefore, a very positive help to those suffering from the cost of living crisis; a huge benefit to the health of the population by achieving affordable warmth, potentially saving the NHS £500 million a year; and a major contribution to energy security by reducing our dependence on fossil fuels.
These come on top of the potential of delivering economic benefits, providing skilled jobs and high-wage opportunities. Retrofitting poorly performing homes alone could support 190,000 jobs across all regions. Given the strength of opinion on energy efficiency in so many analyses of progress, I am minded to test the opinion of the House.
Lord Teverson (LD)
My Lords, first, I congratulate the Minister—he knows that I like to praise his work—particularly on the change in the Ofgem amendment, in that our major regulator will now have a net-zero objective. To me, that is absolutely stark staringly obvious, and the fact that there has been government resistance to it while the Bill has been in this House I find strange, so that is a real move forward. The other thing that is to me stark staringly stupid is that we are talking about opening a coal mine in 2023. That makes no sense at all, and I will go through the reasons why.
It is not just we on these Benches or the Opposition who have that view. Let me quote from the Commons at Report. The then Energy Minister, Chris Skidmore—highly respected in this area and highly respected by the Government, in that he wrote their independent net zero review—said:
“Legislating to prevent the opening of new coal mines simply maintains the commitment that the UK sought to make to the rest of the world at COP26”—[Official Report, Commons, 5/9/23; col. 303.]
That was Chris Skidmore, former Energy Minister, valued by the Government for his net zero review, and by all of us for that great piece of work.
At COP 26 in Glasgow a couple of years ago, which we chaired very successfully under Sir Alok Sharma, we nailed our colours to the mast and led a coalition of countries—I think the government press release says 190—and celebrated the fact that we would phase out coal. What motivates me most to put Amendment 272A forward again is that our international reputation is being shredded by the fact that we are moving ahead on this basis. Let us not pretend that it is not noticed internationally, because it is. Even the White House, under John Kerry, the climate envoy, has remarked on this piece of government policy planning and Michael Gove’s proposal to open the coal mine. So, our international reputation for climate leadership, which all of us on all sides of this House have been particularly proud of over the years, is being literally trashed by this decision.
That has other effects as well. During a Private Notice Question yesterday, we debated the fact that we had no investor take for offshore wind on the CfD pitch when it concluded last week. That shows that we need rock-solid commitment to net zero in order to attract investment into this country. To me, our saying internationally that we are starting to open coal mines absolutely goes against what we are saying to bring in investment. It questions UK government policy, which is competing with the Inflation Reduction Act in the United States and a green deal industrial plan in the EU. We are trying to get a slice of that global investment, yet our environmental and climate focus is wobbling. That is absolutely wrong.
This amendment would apply to any sort of coal mine, but the Minister mentioned the Cumbrian coal mine, which is what that decision is all about. Let us be clear about that proposition and the company West Cumbria Mining. As the noble Baroness, Lady Bennett, has said already, that industry is moving—indeed, must move—competitively towards a much greener stance; for the UK steel industry to remain competitive, it must do so as well. As I understand it, scientists have questions about West Cumbrian coal, including whether its sulphur content is even sufficient for the steel industry. However, the main facts are these: first, the steel industry generally is not that interested in that coal; and, secondly, the company itself says that some four-fifths of the coal will not be used by the UK steel industry, which means that it needs to be exported. Once coal is exported, we have no control over how that substance is used.
That brings me to transport. The argument is that it is better to provide our own coking coal than to import it. However, if we export 80% of this coal, that will put transport costs up because we will have the cost of transporting it to other, international markets.
The one argument that I do have sympathy with concerns jobs. We all know that the region of Cumbria is hugely challenged in terms of levelling up, jobs and income. However, it is completely obvious to me that, as the noble Baroness, Lady Blake, just talked about with regard to Labour’s amendment, we have the ability to provide green jobs and proper energy efficiency. It is clear to me that this coal mine will not be there for a particularly long time, so those jobs will be transient.
I will leave it at that but let me come back to the United Kingdom’s international reputation and our important share in global investment in the green sector. I quote the Government’s own website, which said this after COP 26:
“The end of coal—the single biggest contributor to climate change—is in sight thanks to the UK securing a 190-strong coalition of countries and organisations at COP26”.
That was a proud moment for not just Alok Sharma but the Government. It is being trashed.
Baroness Boycott (CB)
My Lords, I rise to speak to Amendment 274B in my name. I draw attention to my interests in the register.
I will speak briefly about community energy but let me just say that I absolutely support the amendments in the names of the noble Baroness, Lady Blake, and the noble Lord, Lord Teverson. I also very much support the noble Lord’s words, especially about what this measure is going to do to Britain’s reputation, and his reminding us of where this country was just a couple of short years ago as the leaders of COP, playing a proud role on the world stage; that seems to be in tatters right now.
Community energy is wildly popular in the country—it is extremely popular with all sorts of people. I find it puzzling why the Government are not bending over backwards to make this easier and simpler for people. I do not want to get into the arguments about onshore wind, but surely one way to mitigate communities’ concerns about renewable energy is to give people a stake in it so that it is about not just a bit of money but owning something. My sister has lived on a small island in Denmark for 60 years. The people there are completely energy independent. It was the first place I knew of that had wind farms everywhere. Everyone knows how much electricity is coming in and what it is doing. They have ownership and share prices—that is just the way it has been done, and it is kind of brilliant. Why can we not say, “The local energy we produce off that hill heats my towel rail all year round”? They can report, “I co-own it”, “It has paid to put solar panels on the roof of the community hall”, or “It has paid for energy efficiency advice and deals for the other homes in our village”.
In fairness to the Government, they have acknowledged this, but we seem to have spent an incredible amount of time hand-wringing about the difficulties rather than finding the easy, appropriate ways of supporting it. All that the sector wants is a deal comparable with all the other renewable energy that we have in this country, via a guaranteed minimum price. This gives communities the certainty that they need to raise the funds to go ahead. This is true across so much of the alternative energy sector.
I supported the establishment of the £10 million community energy fund but, quite honestly, that is not very much. If you look in the Evening Standard, you find that you can buy a flat for £10 million within about 100 yards of here. It is not going to go far enough. We need real reform, so the commitment made by Andrew Bowie in the other place
“to consulting on the barriers the sector faces when developing projects”—[Official Report, Commons, 5/9/23; col. 281.]
was particularly welcome.
That is why I have come up with this compromise amendment, which I hope that the Minister feels able to accept. It would give the industry a boost to know that there was something coming down the tracks on an agreed timeframe. A problem that we have seen before is consultations which do not receive a response—or do but with serious delays. That is all that I am trying to avoid with this amendment in lieu, which sets a generous timescale of 18 months for a consultation and a further six months for bringing forward proposals to remove the barriers to community energy schemes. This times nicely with the end of the two-year community energy fund and would avoid a potential cliff edge.
I believe that the Minister will appreciate the need for clarity for the sector and the need to reassure over 300 MPs, including 147 Conservative MPs, who backed the original Local Electricity Bill, which recognised the barriers to community energy and proposed remedies. I therefore ask him to give this house more clarity on timescales, or I may be required to test the opinion of the House.
Baroness Meacher (CB)
My Lords, I rise extremely briefly to support very strongly the amendments of the noble Baroness, Lady Blake, the noble Lord, Lord Teverson, and my noble friend Lady Boycott. Regarding the amendment tabled by my noble friend Lady Boycott, it is crazy that we have barriers inhibiting the development of renewable energy by community energy schemes. This amendment is a very modest proposal to ensure that those barriers are removed within a reasonable timeframe. I hope that all sides of the House can support these three amendments, but I have particularly spoken to that tabled by the noble friend Lady Boycott.
Baroness Hayman (CB)
My Lords, I declare my interests as set out in the register and record my gratitude to the Minister for the Ofgem amendment. In much more elegant language, the noble Lord, Lord Teverson, said that it was a no-brainer. It absolutely is, and Amendment 187A is equally a no-brainer. However, before I say why, I add my support to those amendments tabled by the noble Lord, Lord Teverson, and the noble Baroness, Lady Boycott. Particularly in the latter we have a compromise which would really boost a sector of the energy industry that is of great benefit.
In terms of benefits, no one—including the Government —fundamentally challenges the benefits of improving the energy efficiency of Britain’s old, cold, leaky housing stock. They recognise the benefits for individuals and families in terms of health and reduced bills, but it goes beyond that. There are benefits for the UK because improving energy efficiency reduces demand, helps towards our net-zero target and improves our energy security. It is also potentially of benefit to the taxpayer in reducing the huge expense that the Government take on board when energy prices spike. We have seen how much the Government have spent on heating homes and that money going out of the window because of the state of the housing stock. There are also benefits in stimulating the retrofitting industry, which is a national industry. It goes across all parts of the country and helps with the training and then the providing of secure and sustainable jobs.
We have debated this—I will not say ad nauseam, but certainly at length—not only on this Bill but on the Social Housing (Regulation) Bill and the Levelling-up and Regeneration Bill, because of the issues that I was talking about, such as employment and the fact that the poorest people suffer most from the worst homes, in terms of energy efficiency and their health.
Lord Lucas (Con)
My Lords, I very much support the amendment from the noble Baroness, Lady Boycott, as I did in Committee. The reduction that she has achieved in her ambitions sits very well with what the Government have said are their ambitions. I would like to see my noble friend supporting this and saying that it is an opportunity. Giving us a tight, but not too tight, timescale to make this happen is a good way to demonstrate that.
Lord Lennie (Lab)
My Lords, I will make a few comments. First, I thank the noble Baroness, Lady Boycott, the noble Lord, Lord Teverson, and my noble friend Lady Blake for their amendments and will make our position on them clear. Secondly, I thank the noble Lord, Lord Callanan, for the welcome changes that he made to the Bill in the other place on the housing levy and on renewable liquid fuels.
We generally welcome the passage of the Bill. It has been a long time in gestation—15 months or more—with hundreds of changes and more today. We welcome all those too, although they probably could have been made earlier.
I turn to the three amendments. First, on coal, the new new Labour Party is no longer in favour of coal. We absolutely support what the noble Lord, Lord Teverson, said about the coal industry, and it is time to put this in legislation. It is not enough to say that we are no longer committed to coal; we need to legislate for it and so we will be supporting this amendment.
On my noble friend Lady Blake’s amendment on energy efficiency, I will restate the facts. First, the UK has the least energy-efficient homes in Europe. Domestic energy-efficiency measures have fallen 95% since 2012 and are 20 times lower than they were when Labour was last in power. The Resolution Foundation estimates that 9 million households are paying an extra £170 a year as a result of these failings.
The Minister said that the amendment is unnecessary, because it is partly in the net zero strategy and the Powering Up Britain publication, but this is legislation, and it should state what the Government propose to achieve and by what timescale. Therefore, we support the amendment.
On community energy, the noble Baroness, Lady Boycott, set out very clearly her proposal to commit the Government to finding out what the barriers inhibiting the development of community energy are, and to bring forward a plan to overcome them. That is a very modest amendment from where we were the last time around, and I can see no reason whatever for the Government not to support it. We will support those three amendments should the Members wish to test the opinion of the House.
Lord Callanan (Con)
My Lords, I thank all noble Lords who have contributed to the debate. I will start on the last issue raised by the noble Baronesses, Lady Boycott and Lady Meacher, and others: that of community energy.
The Government launched the £10 million fund this summer, and it is larger than its predecessors. From what I have seen so far, it has been welcomed across the community energy sector. It will fund projects such as Congleton Hydro, which received £73,500 in funding from the former rural community energy fund—this fund will do a similar job. Thanks to that funding, it is producing affordable, clean and secure electricity from a local weir, enough to power the equivalent of 60 homes. Not only is the project reducing emissions in the area but its success has led to the creation of an annual £5,000 fund for local community projects.
Amendments 274A and 274B aim to commit us to a consultation on the barriers preventing the development of community energy schemes. The amendments set out with whom we should consult, and commit government to bringing forward proposals to remove identified barriers to community energy. But as I referred to earlier, the Government have already committed to consult on the barriers that the sector faces when developing projects. As part of this process, we will of course involve the community energy sector in designing the consultation, through the Community Energy Contact Group. We continue to believe that it is more appropriate to allow the small-scale export market to develop with minimum intervention than to introduce a support scheme that specifies minimum prices or contract lengths for generators.
I know that the House is keen on supporting community energy, and we are the same, but it has to be done in a cost-effective manner, because the cost is borne by every other bill payer. It might be advantageous to certain islands or rural community villages, but if there is a cost in excess of the system, it is borne by every other bill payer in the country. The amendments would place an additional obligation on government to bring forward proposals to remove these barriers within a specified timeframe.
In Committee in the other place, Energy UK submitted evidence recognising the role of community energy but cautioning:
“The additional context of developing roles for future energy system operation, reform of competition in delivery of network infrastructure, and wider reforms of electricity markets including energy retail”
mean that the consideration of community energy needs to take into account this much wider context, rather than considering community energy “in isolation”, and that we need
“to give the Government, the regulator, and the industry time to fully consider”
all those issues. We must be careful not to disadvantage the majority of the population to benefit a very small minority.
We obviously cannot be sure what the consultation will conclude until we have carried it out, so in our view it is not appropriate to make a commitment to do something the outcome of which, and what barriers or proposals will come forward, we do not know at this stage. But I reassure the House that the Government will continue to work closely with the sector and the wider industry on the best way forward.
I now move on to the somewhat contentious issue of coal. Amendment 272A, on prohibiting coal extraction, was raised by a number of noble Lords, including the noble Lords, Lord Teverson and Lord Lennie, and of course the noble Baroness, Lady Bennett. I was particularly interested to hear the comments of the noble Lord, Lord Lennie, because of course we both come from the north-east of England, and there are still sitting Labour MPs in the north-east, whom the noble Lord, Lord Lennie, knows well, campaigning in favour of opening new coal mines. It is interesting that the Labour position seems to be developing from that.
A full prohibition on coal extraction is likely to prevent extensions in existing operational mining—even where that extension could enable site restoration or deliver public safety benefits. It would cut across heritage mining rights in, for instance, the Forest of Dean, which is important to its tourism offer, and perhaps also in Beamish, another area that we know well. Importantly, it would prevent domestic coal extraction projects from progressing that seek to supply industries that are still reliant on coal, such as steel manufacturing. Again, the Labour Party loses no opportunity to lecture us on the importance of the steel industry. That industry is going through a transformation, but many parts of it still require access to coal, so I hope the Labour Party has cleared its position with the steel unions, which I suspect would not support an amendment such as this—I will leave that little domestic argument to different Labour members.
The phasing out of future coal-powered generation, which we do agree with, is a more proportionate response to moving away from coal use than a complete prohibition on coal extraction. Such a ban would deny the prospect of access to domestic coal reserves for future generations, regardless of the circumstances, regardless of the use it could be put to and regardless of the fact that it could perhaps play a role with CCUS in the future.
The Secretary of State for DLUHC’s decision on the mine followed a comprehensive planning inquiry that heard from over 40 different witnesses and considered matters including the demand for coking coal and its suitability. It went into all the issues that the noble Lord, Lord Teverson, recommended, the climate change impact and, crucially, the impact on that particular local economy. While the full reasons for the Secretary of State’s decision are set out in his published letter—which should perhaps be read in its entirety—he concluded that
“there is currently a UK and European market for the coal … it is highly likely that a global demand would remain”.
While coking coal may be required for steel production for quite some time—I assume the Labour Party is not proposing that we should close the steel industry down overnight; if so, that would be a fairly radical policy change from all that it has said before—to support the decarbonisation of that industry through its transition period, as well as other industries that still rely on coking coal, we have already put in place the £315 million industrial energy transformation fund. We think that is a better way to help industry move away from coal in the future, rather than just banning their fuel source, because you would be banning British coal—you would not be banning coal; you would just import those same supplies produced by miners in other parts of the world. This helps business, in our view, with their high energy use, to cut their energy bills and reduce their carbon emissions through investing in energy efficiency and low-carbon technologies—that is a more constructive way to proceed.
On sustainable aviation fuel, again the noble Baroness, Lady Bennett, got excited and condemned us for something that we are not doing. Sustainable aviation fuel is the most developed technology pathway for aviation decarbonisation and will play a key role along with the other technologies as outlined in the jet zero strategy. Many experts view sustainable aviation fuel as the only alternative to kerosene for long-haul flights up until 2050. If the noble Baroness does not want that, she should have the courage of her convictions and say to people that what the Greens really want to do is to ban flying completely, to prevent people going on business or on their holidays. If that is her agenda, she should say so, rather than try to put amendments forward to prevent us developing those sustainable fuels that we could use in the future to decarbonise the sector.
We recognise that there is uncertainty around feedstock availability and we will continue to work closely with colleagues across government to ensure that the most up-to-date evidence and modelling are reflected throughout the policy design of the SAF mandate and the revenue certainty mechanism. We have already confirmed that the sustainable aviation fuel mandate will not support crop-based biofuels and that SAF must meet strict sustainability criteria. These measures will prevent negative environmental consequences, such as the loss of biodiversity, deforestation and the clearance of land with high-carbon stock that could be associated with the cultivation of raw materials that may be used in certain SAF production.
On energy efficiency and energy statements, of course I understand noble Lords’ desire to go further. I am passionately committed to the cause of energy efficiency, but I do not recognise some of the characterisation put forward in this House. We are making good progress in this country. In 2010, some 14% of UK homes were at EPC band C or above. Now it almost 50%. We have a particularly difficult problem because we have the oldest housing stock in Europe, but we are making progress on this matter. We could go further and faster, and we are endeavouring to do so, but we do have a good record in this country. I want to put that on the record before I talk about the specific issues.
Lord Callanan
That the House do agree with the Commons in their Amendment 2.
Lord Callanan (Con)
My Lords, with the leave of the House, I will speak also to the other amendments in this group. The Government introduced amendments on Report in the Commons to commence further provisions of the Bill on Royal Assent. These amendments will ensure that key secondary legislation can progress at the pace required for the department’s policy objectives to be met.
The remaining government amendments are technical and minor in nature. They relate to existing policies already in the Bill. I wrote to noble Lords about these amendments, setting out what they do and our intentions behind them. Therefore, the House will forgive me if I do not speak to every amendment in detail; I will instead recap the key amendments we sought to make in the other place.
In general, the amendments have been made to improve the clarity, precision and consistency of the Bill. In Part 1, we have amended the definition of a carbon capture entity to include direct air capture projects, with the intention of supporting such projects that bolster our greenhouse gas removals efforts, as set out in the net zero strategy.
In Part 2, we have tabled amendments to the definitions of hydrogen production revenue support contract and carbon capture revenue support contract so that, while contracts can be offered only to eligible low-carbon hydrogen producers and eligible carbon capture entities, after the point of contract signature it is for the contracts to set the parameters of the ongoing support that they provide. This will help ensure that projects and their investors are clear on the terms of their support. That should inspire confidence in this new regime.
We have amended Part 5, on the independent system operator and planner, to limit the breadth of its efficiency and economy objective and clarify the definitions of ISOP functions in the Bill. These changes leave the ISOP with a mission that is more clearly defined but also flexible enough to accommodate wider developments in energy regulation. They should also help to reduce the risk of the ISOP being distracted from its core purposes and potentially incurring unnecessary costs to customers.
Part 12 on the offshore wind environmental improvement package has been amended to make clear that the clauses apply to all infrastructure in the UK marine area used or intended for use in connection with an offshore wind farm and in connection with the conveyance of electricity generated by such wind farms. Further amendments have been made on the energy performance of premises, petroleum production licensing, the disposal of radioactive waste and compensation for nuclear damage, as well as other minor drafting and clarificatory amendments. I hope noble Lords will agree that they are necessary amendments that improve the Bill. I beg to move.
Lord Callanan
Moved by
That the House do agree with the Commons in their Amendments 3 to 16.
“(7A) But regulations made by virtue of subsection (7)(a) may not make provision amending (or repealing or revoking) any provision of—
(a) an Act of the Scottish Parliament, or an instrument made under such an Act, unless the Scottish Ministers have consented to the making of that provision;
(b) a Measure or Act of Senedd Cymru, or an instrument made under such a Measure or Act, unless the Welsh Ministers have consented to the making of that provision;
(c) Northern Ireland legislation, or an instrument made under Northern Ireland legislation, unless the Department for the Economy in Northern Ireland has consented to the making of that provision.”
(b) consider any representations which are duly made and not withdrawn.”
“(2A) Before making regulations under this section containing provision within devolved competence, the Secretary of State must give notice to each relevant devolved authority—
(a) stating that the Secretary of State proposes to make regulations under this section, and
(b) specifying the period (of not less than 28 days from the date on which the notice is given) within which representations may be made with respect to the provision within the relevant devolved competence, and must consider any representations duly made and not withdrawn.
(2B) For the purposes of this section “relevant devolved authority” means—
(a) the Scottish Ministers, if the regulations contain provision within Scottish devolved competence;
(b) the Welsh Ministers, if the regulations contain provision within Welsh devolved competence;
(c) the Department for the Economy in Northern Ireland, if the regulations contain provision within Northern Ireland devolved competence;
and “the relevant devolved competence”, in relation to a relevant devolved authority, is to be construed accordingly.
(2C) For the purposes of this section, provision—
(a) is within Scottish devolved competence if it would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament;
(b) is within Welsh devolved competence if it would be within the legislative competence of Senedd Cymru if it were contained in an Act of the Senedd (ignoring any requirement for the consent of a Minister of the Crown imposed under Schedule 7B to the Government of Wales Act 2006);
(c) is within Northern Ireland devolved competence if it—
(i) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and
(ii) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998;
and references to provision being within devolved competence are to provision that is within Scottish, Welsh or Northern Ireland devolved competence.”
(b) specify a period of not less than 28 days within which representations or objections with respect to the proposed regulations may be made,
and the Secretary of State must consider any representations or objections which are duly made and not withdrawn.”
(b) sending a copy of the notice to—
(i) the Scottish Ministers, if an activity that would be authorised by the proposed licence is within Scottish devolved competence;
(ii) the Welsh Ministers, if an activity that would be authorised by the licence is within Welsh devolved competence;
(iii) the Department for the Economy in Northern Ireland, if an activity that would be authorised by the licence is within Northern Ireland devolved competence.
(5A) Section 17(4) (activities authorised by a licence: devolved competence) applies for the purposes of subsection (5)(b) of this section as it applies for the purposes of section 17.”
“(10) For the purposes of this section “appropriate devolved authority”, in relation to regulations, means—
(a) the Scottish Ministers, if the regulations contain provision within Scottish devolved competence;
(b) the Welsh Ministers, if the regulations contain provision within Welsh devolved competence;
(c) the Department for the Economy in Northern Ireland, if the regulations contain provision within Northern Ireland devolved competence.
(10A) For the purposes of this section, provision—
(a) is within Scottish devolved competence if it would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament;
(b) is within Welsh devolved competence if it would be within the legislative competence of Senedd Cymru if it were contained in an Act of the Senedd (ignoring any requirement for the consent of a Minister of the Crown imposed under Schedule 7B to the Government of Wales Act 2006);
(c) is within Northern Ireland devolved competence if it—
(i) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and
(ii) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.”
“(a) stating that the Secretary of State proposes to make regulations under this section, and
(b) specifying the period (of not less than 28 days from the date on which the notice is given) within which representations must be made with respect to the proposed provisions,
and must consider any representations duly made and not withdrawn.”
(iii) the appropriate devolved authorities (if any).”
“(12) For the purposes of this section the “appropriate devolved authorities” are—
(a) the Welsh Ministers, if provision making the modifications proposed in the notice under subsection (2) would be within the legislative competence of Senedd Cymru if it were contained in an Act of the Senedd (ignoring any requirement for the consent of a Minister of the Crown imposed under Schedule 7B to the Government of Wales Act 2006);
(b) the Scottish Ministers, if provision making the modifications proposed in that notice would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament;
(c) the Department for the Economy in Northern Ireland, if provision making the modifications proposed in that notice—
(i) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and
(ii) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.”
the Scottish Ministers, if an activity authorised by the licence is within Scottish devolved competence,
the Welsh Ministers, if an activity authorised by the licence is within Welsh devolved competence,
the Department for the Economy in Northern Ireland, if an activity authorised by the licence is within Northern Ireland devolved competence,
(iv) the Oil and Gas Authority, and
(v) such other persons as the economic regulator considers are likely to be affected by the decision, and”
“(1A) Section 17(4) (activities authorised by a licence: devolved competence) applies for the purposes of subsection (1)(b) of this section as it applies for the purposes of section 17.”
“(5A) The economic regulator must send a copy of any notice given by it under subsection (4) to—
(a) the Welsh Ministers,
(b) the Scottish Ministers, and
(c) the Department for the Economy in Northern Ireland.”
Lord Callanan
That the House do agree with the Commons in their Amendment 17.
“carbon dioxide transport and storage revenue support contract” has the meaning given by section 59(2);”
Lord Callanan (Con)
My Lords, with the leave of the House I will speak also to the other amendments in this group, which concern new policy that was introduced in the other place. I turn first to the amendments on hydrogen transport and storage infrastructure. These amendments will enable business models to be brought forward to provide investors with the long-term revenue certainty that they will need to establish and scale up the deployment of hydrogen transport and storage infrastructure. I am sure this will be of interest to the noble Lord, Lord Whitty, and the noble Baroness, Lady Bennett, who spoke about this earlier in the Bill’s passage.
The development of this infrastructure represents the critical next step in the growth of the hydrogen economy to support the Government’s ambition to have up to 10 gigawatts of low-carbon hydrogen production capacity by 2030. The business models are intended to help overcome the key barriers to investment in this infrastructure, such as high capital costs, lengthy development lead times and uncertain financial investment returns in what is a very nascent market.
Next, on carbon capture storage information and samples, the amendments support the role of the North Sea Transition Authority—NSTA—as the regulator of carbon dioxide storage in the UK continental shelf. They achieve this by ensuring that it has the relevant powers to access and share information and samples collected through relevant carbon-storage activities. This reflects similar powers already held by the NSTA for the petroleum industry and will enhance knowledge sharing across the carbon capture, usage and storage industry. It will support innovation for the effective utilisation of the UK’s geological storage potential and help encourage private investment in the UK’s growing green economy.
The Government have also tabled amendments relating to Great British Nuclear. These amendments will enable GBN to support government in rebuilding our civil nuclear industry and facilitating the delivery of nuclear projects to achieve our net-zero ambitions. GBN will play a critical role in strengthening the UK’s energy security. By legislating for GBN, we are working to undo decades of underinvestment and inspire trust in the UK civil nuclear industry, restoring the global leadership that the UK used to have in civil nuclear power.
I move on to discuss the amendments to provide relief on network charging for energy-intensive industries. High industrial electricity prices are one of the key barriers that inhibit the most carbon-intensive sectors from adopting greener technology. The measures deliver on a fundamental element of the British industry supercharger set out in February. These amendments will give the Government the powers to deliver a scheme that will provide relief on electricity network charges for Britain’s strategic energy-intensive industries. It will bring electricity prices for these UK businesses in line with some of their global competitors, thereby helping to preserve thousands of jobs and investment and enabling greater electrification of industrial processes, removing one of the major barriers to decarbonisation. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to speak to Amendments 259A to 271A inclusive; your Lordships will be pleased to know that I do not intend to speak to each one individually. For technical reasons these had to be split up but, essentially, this is a chance for your Lordships’ House to reconsider again the whole Great British Nuclear introduction that the Minister just outlined.
This debate follows on in many ways from that secured for last Thursday by the noble Lord, Lord Howell of Guildford, about nuclear power. I will not revisit all the many issues raised there, although I note that the noble Lord, Lord Howell, expressed rightful and strong scepticism about the progress of both Hinkley Point C and Sizewell C, on cost and other factors. There is also the continuing cost of the clean-up of dinosaur technology from the last century of £260 billion, and issues of waste that we have still not tackled.
I said that I will not go through these amendments one by one, but I do want to speak to Amendment 262A, which disagrees with the financial assistance. In our discussion yesterday on the failure of the offshore wind contract for difference bidding process, the Minister said my suggestion that we should look at a higher strike price for offshore wind was not thinking about the bill payer. I do not know how many Members of your Lordships’ House have looked closely at the detail of government Amendment 262, but it is utterly an open slather:
“The Secretary of State may provide financial assistance … to facilitate the design, construction, commissioning and operation of nuclear energy generation”.
Proposed new subsection (2) says that this assistance
“may be provided … by way of grant, loan, guarantee or indemnity … the acquisition of shares … the acquisition of … assets … a contract, or … by incurring expenditure for the benefit of the person assisted”.
Proposed new subsection (3) says that the assistance may be considered “without interest”—it goes on and on. I will not go through the whole lot, but basically this allows the Secretary of State the open slather to do whatever they like to fund nuclear—and one thing we know about nuclear energy generation is that it costs, and the cost just keeps going up.
I am afraid there is currently a great deal of speculation. Many people accept that, essentially, Hinkley Point C and Sizewell C are ongoing disasters. We have this wonderful new idea of small-scale nuclear plants scattered all over the countryside, as a noble Lord suggested in last Thursday’s debate. Really, my Lords, how realistic is this? We are talking about something that simply does not scale down.
I am aware of the desire of your Lordships’ House to move on to votes, but I want to quote one person who perhaps has a different perspective from mine. Markus Krebber, the chief executive of RWE, suggests that investors should not and will not back nuclear plants. This comes back to the issue of finance. If there will not be private money coming in, we are talking about massive sums of government money. He told the Australian Financial Review:
“I would have a big question mark whether building new ones is really a good strategy, because if you look at the cost overruns and the delays, I think purely a renewables-based energy system including the necessary storage is probably in most of the regions already today cheaper than new nuclear”.
I think that is unarguable.
I will briefly address the issue of Sizewell C. We are talking as Japanese fishermen around the Fukushima nuclear plant suffer massive economic loss as a result of the dumping of wastewater into the sea there. In Suffolk we will see the local economy facing massive loss if Sizewell C goes ahead. Studies by the Suffolk Coast destination management organisation show that visitors would stay away, losing the tourism industry up to £40 million a year and an estimated 400 jobs.
If we look at the environmental impacts of the proposed Sizewell C, we can see that it is opposed by both the RSPB and the Suffolk Wildlife Trust. The site is surrounded by protected wildlife habitats. When it comes to water, the Planning Inspectorate was unable to recommend that Sizewell C be granted planning consent due to the lack of an identified long-term supply of potable water. There is a huge problem with access to the site. It will require a 60-metre cut-off wall so that it can be dewatered and existing soil can be swapped out for more suitable material and huge, as yet undesigned, sea defences. Looking at the state of our climate now, we are seeing significant runaway with very serious potential risks in the impact on our sea levels. I note that Cefas said that
“it is generally only possible to predict detailed changes to the coastline over the next 10 years”.
I have focused a little on Sizewell C and the deep uncertainties and concern because of the point about money. Under the government amendment, we are letting a Government go ahead and do whatever they like and spend whatever they like on a project that is so deeply problematic.
Lord Kerr of Kinlochard (CB)
The Minister waxed lyrical about the scheme to provide subsidies for energy-intensive industries. We were deeply moved by his enthusiasm. He was silent on the clause that follows. He was talking about Clause 177, but Clause 178 sets out how the subsidies are to be paid for—by levies on all electricity users. I do not want this moment to pass without making the old-fashioned comment that I think it is best that subsidies are paid for out of taxation, rather than by levies.
Subsidies are a political decision by the Government; they are absolutely entitled to make those political decisions. But all electricity users are, at the moment, suffering from the political decision to instruct Ofgem to prioritise competition, which has led to the collapse of more than 30 supply companies. The costs of these collapses are being borne by us all in the levies on our electricity bills. You can debate whether it is honest or dishonest for political decisions to be paid for in a concealed fashion of this kind, but what is certain is that it is regressive. I am therefore slightly less enthusiastic about the combination of Amendments 177 and 178 than the Minister was about Amendment 177.
Lord Lennie (Lab)
All I would like to say is that, in response to the comments by the noble Baroness, Lady Bennett, we are interested in keeping the lights on and we are interested in nuclear being part of the mix of fuels that will keep the electricity going, particularly now that coal will no longer be part of the electricity production in this country.
Lord Callanan (Con)
I thank all noble Lords for their contributions. I will first deal directly with the points by the noble Lord, Lord Kerr. What should I say about this? He is, of course, prescient in his observations, but this has been a long-standing policy—effectively of the Treasury, which is unwilling to fund many of these policies from general taxation. Therefore, a lot of previous subsidies, such as the warm home discount, are levied on energy bills. That has been a long-standing policy through a number of Governments and different Treasuries. I wish the noble Lord luck in his campaign to change the mind of His Majesty’s Treasury on these matters.
Moving on to the other issues, let me deal first with the points made by the noble Baroness, Lady Bennett. The problem for the Greens on this is that any sensible energy system in the UK—this is recognised also by the Opposition and we are grateful for their support—needs nuclear power, because it is a source of carbon-free electricity. Of course, many Greens, the more progressive Greens who have looked at our energy system properly, also support the use of nuclear power. I would point the noble Baroness to a very interesting website that I was looking at, called Greens for Nuclear Energy. This is a statement from a series of members of the Green Party who take a sensible and progressive view about this. Looking at the needs of the energy supply system and the need for decarbonisation, they have come to the same conclusion as many other sensible experts: that there is a need for nuclear power in this country.
The website says:
“Greens For Nuclear Energy seek to influence the Green movement’s key organisations and institutions”
in favour of nuclear energy because
“We need every available low carbon power source to combat catastrophic climate change”.
They therefore believe that
“the increasingly urgent need to deal decisively with our emerging climate crisis makes continued opposition to nuclear energy irrational for environmentalists and reduces our chances of averting a climate catastrophe.”
Perhaps the noble Baroness would want to go away and look at some of the more sensible members of her own party.
The invasion of Ukraine and the subsequent rise in global energy prices have demonstrated the paramount importance of accelerating our homegrown power and strengthening our national energy security. This is in addition to the significant contribution, as I have just said, that nuclear would make to achieving our net-zero objectives because it is very low carbon. Nuclear technology generates zero direct carbon or other greenhouse gas emissions and has one of the lowest life cycle emission rates among generating technologies. The Committee on Climate Change, the International Energy Agency and the UN Economic Commission for Europe—alongside some sensible Green members—have all highlighted the role that new nuclear electricity generating capacity, in partnership with renewables, can play as part of our diverse energy mix while helping us to achieve net zero.
Great British Nuclear will de-risk new nuclear developments by, among other things, co-funding selected technologies through their development. This will provide greater certainty for investors to develop projects over the long term required to deliver new nuclear generation capacity on to the electricity grid. We intend to fund Great British Nuclear’s initial operating costs via grant in aid. It will be subject to standard NDPB reporting and accountability requirements, which will be set out in Great British Nuclear’s framework document.
The terms of investment in development projects will be bespoke and negotiated on an individual basis. The key goal will be to deliver on the Government’s commitment to increase nuclear energy capacity in Britain, while of course ensuring, as always, value for money for the taxpayer and the bill payer. We are legislating to ensure that Great British Nuclear has the long-term operational mandate needed to carry out the role that government intend for it. The amendments set out the framework within which Great British Nuclear shall operate in facilitating the deployment of nuclear reactors in Britain.
I spoke earlier about the comments of the noble Lord, Lord Kerr. The EII support levy, like the other measures in the British Industry Supercharger, would simply constitute a rebalancing of existing electricity costs away from EIIs and on to other energy users, who have traditionally received more protection from higher energy prices than some in industry.
At the end of these debates, I am grateful to all noble Lords who have contributed. In particular, I thank my colleague in the other place, Andrew Bowie, for guiding the Bill through the House of Commons. I also thank the department’s Bill team and all the other policy and legal officials across various government departments who have been involved in this huge and landmark piece of legislation. They who have worked tirelessly to deliver it. I particularly thank the House authorities, parliamentary staff, clerks and doorkeepers, and all noble Lords who have contributed to the evolution of this landmark Bill.
Lord Callanan
That the House do agree with the Commons in their Amendments 188 to 258.
(a) in relation to England and Wales, the Secretary of State;
(b) in relation to Scotland, the Scottish Ministers;
(c) in relation to Northern Ireland, the Department;”
““the Department” means the Department of Finance in Northern Ireland;”
“(1A) Regulations under this Part containing provision within subsection (2) (with or without other provision)—
(a) if made by the Secretary of State, are subject to the affirmative procedure (see section 276);
(b) if made by the Scottish Ministers, are subject to the affirmative procedure (see section 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10));
(c) if made by the Department, may not be made unless a draft of the regulations has been laid before and approved by a resolution of the Northern Ireland Assembly.”
“(2A) Any other regulations under this Part—
(a) if made by the Secretary of State, are subject to the negative procedure (see section 276);
(b) if made by the Scottish Ministers, are subject to the negative procedure (see section 28 of the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10));
(c) if made by the Department, are subject to negative resolution within the meaning given by section 41(6) of the Interpretation Act (Northern Ireland) 1954 (c. 33 (N.I.)).”
“(4) A power of the Department to make regulations under this Part is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).”
“(5) In this section “primary legislation” means—
(a) an Act of Parliament,
(b) an Act of the Scottish Parliament,
(c) an Act or Measure of Senedd Cymru, or
(d) Northern Ireland legislation.”
“(2A) Before making ESOS regulations that contain provision within devolved competence, the Secretary of State must give notice—
(a) stating that the Secretary of State proposes to make ESOS regulations,
(b) setting out or describing the provisions of the regulations that contain provision within devolved competence, and
(c) specifying the period (of not less than 28 days from the date on which the notice is given) within which representations may be made with respect to those provisions,
and must consider any representations duly made and not withdrawn.
(2B) A notice under subsection (2A) must be given to each relevant devolved authority, that is to say—
(a) the Scottish Ministers, so far as the regulations contain provision within Scottish devolved competence;
(b) the Welsh Ministers, so far as the regulations contain provision within Welsh devolved competence;
(c) the Department for the Economy in Northern Ireland, so far as the regulations contain provision within Northern Ireland devolved competence.
(2C) The Secretary of State need not wait until the end of the period specified under subsection (2A)(c) before making ESOS regulations if, before the end of that period, each relevant devolved authority to which the notice was given has confirmed that it has made any representations it intends to make with respect to the provisions referred to in subsection (2A)(b).
(2D) The Secretary of State must, if requested to do so by a relevant devolved authority, give the authority a statement setting out whether and how representations made by the authority with respect to the provisions referred to in subsection (2A)(b) have been taken into account in the regulations.
(2E) References in subsection (2A) to provision within devolved competence are to provision that is within Scottish, Welsh or Northern Ireland devolved competence.
(2F) Where the Secretary of State makes ESOS regulations that have effect in relation to the compliance period beginning on 6 December 2019 (see regulation 4 of the Energy Savings Opportunity Schemes Regulations 2014 (S.I. 2014/1643))—
(a) subsections (2A) to (2E) do not apply, and
(b) before making the regulations, the Secretary of State must consult—
(i) the Scottish Ministers, so far as the regulations contain provision within Scottish devolved competence,
(ii) the Welsh Ministers, so far as the regulations contain provision within Welsh devolved competence, and
(iii) the Department for the Economy in Northern Ireland, so far as the regulations contain provision within Northern Ireland devolved competence,
and subsection (2) applies to consultation under paragraph (b) as it applies to consultation under subsection (1).”
“(d) the acquisition of shares or any other interest in, or securities of, a body corporate;”
(a) the planning, construction, operation or decommissioning of offshore wind electricity infrastructure, or
(b) the identification of an area for activity within paragraph (a) (whether or not any particular offshore wind electricity infrastructure is in contemplation).”
“(2) In subsection (1), “offshore wind electricity infrastructure” means—
(a) a generating station, in the UK marine area, that generates electricity from wind (an “offshore wind generating station”), or
(b) infrastructure, in the UK marine area, used or intended for use in connection with—
(i) an offshore wind generating station, or
(ii) the conveyance of electricity generated by an offshore wind generating station.”
“(3) For the purposes of the reference in subsection (2)(b)(ii) to infrastructure used or intended for use in connection with the conveyance of electricity generated by an offshore wind generating station, it does not matter whether the infrastructure is also used or intended for use in connection with the conveyance of electricity generated from other sources.”
“(5A) “Relevant person”, for the purposes of a determination made by virtue of subsection (4)(a), means the person who imposed the compensation condition.”
“(8A) Regulations made by virtue of subsection (7)(c) must provide that the delegation of a function—
(a) to a Scottish public authority requires the consent of the Scottish Ministers;
(b) to a Welsh public authority requires the consent of the Welsh Ministers;
(c) to a Northern Ireland public authority requires the consent of DAERA.”
“(9A) Before making regulations under this section, the Secretary of State must consult—
(a) the Scottish Ministers, so far as the regulations relate to relevant offshore wind activities in Scotland,
(b) the Welsh Ministers, so far as the regulations relate to relevant offshore wind activities in Wales,
(c) DAERA, so far as the regulations relate to relevant offshore wind activities in Northern Ireland, and
(d) such other persons as the Secretary of State considers appropriate.”
“(6A) Regulations made under this section by the Secretary of State—
(a) may not provide for a function that is exercisable by a Scottish public authority, a Welsh public authority or a Northern Ireland public authority to cease to be exercisable by that authority, and
(b) to the extent that a function is exercisable by or on behalf of a Scottish public authority, a Welsh public authority or a Northern Ireland public authority, may not provide for the function also to be exercisable to that extent by another person,
but may (subject to paragraphs (a) and (b)) modify such a function.”
“(7A) But regulations made by the Secretary of State by virtue of subsection (7)(a) may not enable directions to be given—
(a) to a Scottish public authority by a person other than the Scottish Ministers;
(b) to a Welsh public authority by a person other than the Welsh Ministers.”
“(3) References in this Chapter—
(a) to a Scottish public authority are to the Scottish Ministers or any other public authority whose functions are exercisable only or mainly in or as regards Scotland;
(b) to a Welsh public authority are to the Welsh Ministers or any other public authority whose functions are exercisable only or mainly in or as regards Wales;
(c) to a Northern Ireland public authority are to a Northern Ireland department or any other public authority whose functions are exercisable only or mainly in or as regards Northern Ireland.”
“Regulations under section 251 and 252: procedure with devolved authorities
Regulations under section 251
(1) Before making regulations under section 251 that contain provision within devolved competence, the Secretary of State must give notice to each relevant devolved authority—
(a) stating that the Secretary of State proposes to make regulations under that section,
(b) setting out or describing the provision that is within the relevant devolved competence, and
(c) specifying the period (of not less than 28 days from the date on which the notice is given) within which representations may be made with respect to that provision,
and must consider any representations duly made and not withdrawn.
(2) The Secretary of State need not wait until the end of the period specified under subsection (2)(c) before making regulations if, before the end of that period, each relevant devolved authority to which the notice was given has confirmed that it has made any representations it intends to make with respect to the provision referred to in subsection (2)(b).
(3) The Secretary of State must, if requested to do so by a relevant devolved authority, give the authority a statement setting out whether and how representations made by the authority with respect to the provision referred to in subsection (2)(b) have been taken into account in the regulations.
(4) In subsections (1) to (3), “relevant devolved authority”, in relation to regulations, means—
(a) the Scottish Ministers, if the regulations contain provision within Scottish devolved competence;
(b) the Welsh Ministers, if the regulations contain provision within Welsh devolved competence;
(c) the Department of Agriculture, Environment and Rural Affairs in Northern Ireland, if the regulations contain provision within Northern Ireland devolved competence;
and “the relevant devolved competence”, in relation to a relevant devolved authority, is to be construed accordingly.
Regulations under section 252
(5) The Secretary of State may not make regulations under section 252 containing provision within Scottish devolved competence unless the Scottish Ministers have consented to that provision.
(6) The Secretary of State may not make regulations under section 252 containing provision within Welsh devolved competence unless the Welsh Ministers have consented to that provision.
Devolved competence
(7) For the purposes of this section, provision—
(a) is within Scottish devolved competence if it would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament;
(b) is within Welsh devolved competence if it would be within the legislative competence of Senedd Cymru if it were contained in an Act of the Senedd (ignoring any requirement for the consent of a Minister of the Crown imposed under Schedule 7B to the Government of Wales Act 2006);
(c) is within Northern Ireland devolved competence if it—
(i) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and
(ii) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998;
and references to provision being within devolved competence are to provision that is within Scottish, Welsh or Northern Ireland devolved competence.”
“(za) the Petroleum (Production) (Landward Areas) Regulations 1995 (S.I.
1995/1436),
(zb) the Petroleum (Current Model Clauses) Order 1999 (S.I. 1999/160),
(zc) the Petroleum Licensing (Exploration and Production) (Seaward and Landward Areas) Regulations 2004 (S.I. 2004/352),”
“(2) Where a licence granted (or having effect as if granted) by the Oil and Gas Authority under the Petroleum (Production) Act 1934 or the Petroleum Act 1998—
(a) incorporates model clauses amended by a paragraph of Schedule 19 (whether or not any provision of those model clauses is modified or excluded), and
(b) is in force immediately before that paragraph comes into force,
the licence has effect with the amendments provided for by that paragraph.”
““licensed disposal site” means a site that would be, or would at any time have been, a relevant disposal site but for section 7B(5)(a) (nuclear site licence granted in respect of site);”
“Convention on Supplementary Compensation for Nuclear Damage: implementation power
(1) The Secretary of State may by regulations make such provision as the Secretary of State considers appropriate—
(a) to implement the CSC, or
(b) otherwise for the purposes of dealing with any other matter arising out of, or related to, the CSC.
(2) The provision that may be made by virtue of subsection (1) includes provision that is authorised by the CSC to be made in relation to a particular matter.
(3) Regulations under this section may amend—
(a) Schedule 20,
(b) the Nuclear Installations Act 1965, or
(c) any other enactment having effect in relation to a matter to which the CSC relates.
(4) In this section, “the CSC” means the Convention on Supplementary Compensation for Nuclear Damage (as amended or supplemented from time to time).
(5) Regulations under this section are subject to the affirmative procedure.”
Lord Callanan
That the House do agree with the Commons in their Amendment 259.
“Great British Nuclear
(1) The Secretary of State may by notice designate a company as Great British Nuclear.
(2) A company may be designated under this section only if—
(a) it is limited by shares, and
(b) it is wholly-owned by the Crown.
(3) A notice under subsection (1)—
(a) must specify the time from which the designation has effect, and
(b) must be published by the Secretary of State as soon as reasonably practicable after the notice is given.
(4) The designation of a company terminates—
(a) if it ceases to be wholly-owned by the Crown, or
(b) if the Secretary of State revokes its designation by notice.
(5) A notice under subsection (4)(b)—
(a) must specify the time from which the revocation has effect, and
(b) must be published by the Secretary of State as soon as reasonably practicable after the notice is given.
(6) For the purposes of this section a company is wholly-owned by the Crown if each share in the company is held by—
(a) a Minister of the Crown,
(b) the Nuclear Decommissioning Authority established by section 1 of the Energy Act 2004,
(c) the United Kingdom Atomic Energy Authority established by section 1 of the Atomic Energy Authority Act 1954,
(d) a company which is wholly-owned by the Crown, or
(e) a nominee of a person falling within any of paragraphs (a) to (d).
(7) A company designated as Great British Nuclear under this section is exempt from the requirement in section 59 of the Companies Act 2006 (requirement as to use of “limited” in company name).
(8) In this section—
“company” means a company registered under the Companies Act 2006;
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act).”
Lord Callanan
That the House do agree with the Commons in their Amendment 260.
“Crown status
(1) Great British Nuclear is not to be regarded as a servant or agent of the Crown or as enjoying any status, immunity or privilege of the Crown.
(2) Great British Nuclear’s property is not to be regarded as property of, or property held on behalf of, the Crown.”
Lord Callanan
That the House do agree with the Commons in their Amendment 261.
“Great British Nuclear’s objects
Great British Nuclear’s objects are to facilitate the design, construction, commissioning and operation of nuclear energy generation projects for the purpose of furthering any policies published by His Majesty's government.”
Lord Callanan
That the House do agree with the Commons in their Amendment 262.
“Financial assistance
(1) The Secretary of State may provide financial assistance—
(a) to Great British Nuclear, or
(b) to any other person to facilitate the design, construction, commissioning and operation of nuclear energy generation projects.
(2) Financial assistance under this section may be provided in any form and in particular may be provided—
(a) by way of grant, loan, guarantee or indemnity,
(b) by the acquisition of shares or any other interest in, or securities of, a body corporate,
(c) by the acquisition of any undertaking or of any assets,
(d) pursuant to a contract, or
(e) by incurring expenditure for the benefit of the person assisted.
(3) Financial assistance under this section may be provided subject to such conditions as the Secretary of State considers appropriate, which may include—
(a) conditions about repayment with or without interest or other return, or
(b) conditions with which Great British Nuclear or any recipient of financial assistance under subsection (1)(b) must comply if the financial assistance is used for—
(i) acquiring shares or any other interest in, or securities of, a body corporate, or
(ii) participating in a partnership or joint venture.
(4) The power to provide financial assistance under this section is in addition to (and does not limit or replace) any other power of a Minister of the Crown to provide financial assistance.
(5) In this section—
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act);
“partnership” means—
(a) a partnership within the meaning of the Partnership Act 1890, or
(b) a limited partnership within the meaning of the Limited Partnerships Act 1907.”
Lord Callanan
That the House do agree with the Commons in their Amendment 263.
“Secretary of State directions and guidance
(1) The Secretary of State may from time to time give Great British Nuclear directions or guidance.
(2) Before giving a direction or issuing guidance the Secretary of State must consult Great British Nuclear and such other persons as the Secretary of State considers appropriate.
(3) Directions may be general or particular in character.
(4) Great British Nuclear must—
(a) comply with any directions given to it under this section, and
(b) have regard to any guidance given to it under this section.
(5) The Secretary of State must—
(a) publish and lay before Parliament any directions given to Great British Nuclear under this section, and
(b) publish any guidance given to Great British Nuclear under this section.”
Lord Callanan
That the House do agree with the Commons in their Amendment 264.
“Annual report
(1) Great British Nuclear must, after the end of each reporting year, send a report to the Secretary of State about the activities it has undertaken during that year.
(2) The Secretary of State must lay a copy of the report before Parliament together with any comments that the Secretary of State considers appropriate.
(3) In this section “reporting year”, in relation to Great British Nuclear, means a period of 12 months ending with 31 March (but does not include any period before its designation as Great British Nuclear).”
Lord Callanan
That the House do agree with the Commons in their Amendment 265.
“Annual accounts
(1) Great British Nuclear must send a copy of its accounts and reports for each financial year to the Secretary of State before the end of the period for filing those accounts and reports.
(2) The Secretary of State must lay a copy of any accounts and reports received under subsection (1) before Parliament.
(3) In this section—
“accounts and reports” means, in relation to Great British Nuclear, the annual accounts and reports that Great British Nuclear’s directors must deliver to the registrar under section 441 of the Companies Act 2006;
“financial year”, in relation to Great British Nuclear, means Great British Nuclear’s financial year determined in accordance with section 390 of the Companies Act 2006;
“period for filing”, in relation to accounts and reports for a financial year, has the same meaning as in the Companies Acts (see section 442 of the Companies Act 2006);
“the registrar” has the meaning given by section 1060(3) of the Companies Act 2006.”
Lord Callanan
That the House do agree with the Commons in their Amendment 266.
“Transfer schemes
(1) The Secretary of State may make one or more schemes for the transfer of property, rights and liabilities—
(a) to a GBN body or a proposed GBN body from—
(i) a former GBN body;
(ii) a GBN body;
(iii) a proposed GBN body;
(iv) a Minister of the Crown or Crown body;
(v) a designated BNFL body;
(vi) an NDA body;
(vii) a UKAEA body;
(viii) a nominee of a person falling within any of sub- paragraphs (i) to (vii);
(b) to a former GBN body, a Minister of the Crown or Crown body, a designated BNFL body or a public body from—
(i) a former GBN body;
(ii) a GBN body.
(2) The things that may be transferred under a transfer scheme include—
(a) rights and liabilities relating to a contract of employment;
(b) property, rights and liabilities that could not otherwise be transferred;
(c) property acquired, and rights and liabilities arising, after the making of the scheme;
(d) criminal liabilities.
(3) A transfer scheme may—
(a) create rights, or impose liabilities, in relation to property, rights or liabilities transferred;
(b) make provision about the continuing effect of things done by a transferor in respect of anything transferred;
(c) make provision about the continuation of things (including legal proceedings) in the process of being done by, on behalf of or in relation to a transferor in respect of anything transferred;
(d) make provision for references to a transferor in an instrument or other document in respect of anything transferred to be treated as references to the transferee;
(e) make provision for shared ownership or use of the property;
(f) make provision for apportioning property, rights or liabilities;
(g) require a transferor, an associate of a transferor, or a transferee, to enter into any agreement of any kind, or for a purpose, specified in or determined in accordance with the scheme;
(h) make provision for transferring property, rights and liabilities irrespective of any requirement for consent that would otherwise apply;
(i) make provision for preventing a right of pre-emption, right of reverter, right of forfeiture, right to compensation or other similar right from arising or becoming exercisable as a result of the transfer of property, rights or liabilities;
(j) make provision for dispensing with any formality in relation to the transfer of property, rights or liabilities by the scheme;
(k) make provision for reimbursing any person in respect of expenditure reasonably incurred by the person in connection with the making of a transfer scheme;
(l) make provision that has the same or similar effect to the TUPE regulations;
(m) make other consequential, supplementary, incidental or transitional provision.
(4) A transfer scheme may provide—
(a) for modifications by agreement;
(b) for modifications to have effect from the date when the original scheme came into effect.
(5) A transfer scheme may make provision requiring a transferor to provide such co-operation to a transferee as the transferee may reasonably require in connection with the implementation of the scheme.
(6) The co-operation that may be required by virtue of subsection (5) includes, in particular, co-operation in relation to—
(a) the provision of information;
(b) consultation with representatives of employees transferred by the scheme.
(7) Any requirement imposed on a person by a transfer scheme is enforceable by the Secretary of State in civil proceedings—
(a) for an injunction,
(b) for specific performance of a statutory duty under section 45 of the Court of Session Act 1988, or
(c) for any other appropriate remedy or relief.
(8) Before making a transfer scheme, the Secretary of State must consult—
(a) the transferor (or, if there is more than one transferor, the transferors), and
(b) such other persons as the Secretary of State considers appropriate.
(9) Subsection (8) may be satisfied by consultation before the passing of this Act (as well as by consultation after that time).
(10) The making of a transfer scheme is not a trigger event for the purposes of the National Security and Investment Act 2021.
(11) In this section—
“associate” has the meaning given by section 1152 of the Companies Act 2006; “company” means a company registered under the Companies Act 2006; “Crown body” means any body corporate in which a Minister of the Crown holds, directly or indirectly, any shares or other interest;
“designated BNFL body” means a company designated for the purposes of Schedule 7 to the Energy Act 2004 or any body corporate in which a company designated for those purposes holds, directly or indirectly, any shares or other interest;
“former GBN body” means—
(a) a company formerly designated as Great British Nuclear, or
(b) any body corporate in which a company formerly designated as Great British Nuclear—
(i) holds, directly or indirectly, any shares or other interest, and
(ii) held, directly or indirectly, any shares or other interest, at a time at which it was designated as Great British Nuclear;
“GBN body” means Great British Nuclear or any body corporate in which Great British Nuclear holds, directly or indirectly, any shares or other interest;
“information” includes documents;
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act);
“NDA company” means the Nuclear Decommissioning Authority (established by section 1 of the Energy Act 2004) or any body corporate in which the Nuclear Decommissioning Authority holds, directly or indirectly, any shares or other interest;
“proposed GBN body” means a company that the Secretary of State proposes to designate as Great British Nuclear or any body corporate in which a company proposed to be designated for those purposes holds, directly or indirectly, any shares or other interest;
“public body” means a body established by an enactment (within the meaning of Part 1 of this Act) or any body corporate in which a body established by an enactment holds, directly or indirectly, any shares or other interest;
“the TUPE regulations” means the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246);
“UKAEA body” means the United Kingdom Atomic Energy Authority (established by section 1 of the Atomic Energy Authority Act 1954) or any body corporate in which the United Kingdom Atomic Energy Authority holds, directly or indirectly, any shares or other interest.”
Lord Callanan
That the House do agree with the Commons in their Amendment 267.
“Transfer schemes: compensation
(1) A scheme under section (Transfer schemes) may provide for a transferor or any person who has suffered loss or damage in consequence of the scheme to be entitled to compensation from the Secretary of State or a transferee under the scheme, in accordance with provision made by or under the scheme.
(2) Where a person is entitled to compensation, the amount of compensation is to be the amount—
(a) agreed by the Secretary of State and the person, or
(b) in the absence of such agreement, determined by an independent valuer.
(3) An independent valuer appointed for the purposes of subsection (2) must be appointed—
(a) by the Secretary of State and the person, or
(b) in the absence of such agreement, by the Secretary of State on behalf of both the Secretary of State and the person.
(4) The Secretary of State may by regulations make provision about compensation under this section that corresponds or is similar to any provision about compensation that may be made by the Secretary of State by regulations under paragraph 8(5) of Schedule 7.
(5) Regulations under this section are subject to the negative procedure.”
Lord Callanan
That the House do agree with the Commons in their Amendment 268.
“Transfer schemes: taxation
(1) The Treasury may by regulations make provision varying the way in which a relevant tax has effect in relation to—
(a) anything transferred under a scheme under section (Transfer schemes), or
(b) anything done for the purposes of, or in relation to, a transfer under such a scheme.
(2) The provision that may be made under subsection (1)(a) includes, in particular, provision for—
(a) a tax provision not to apply, or to apply with modifications, in relation to anything transferred;
(b) anything transferred to be treated in a specified way for the purposes of a tax provision;
(c) the Secretary of State to be required or permitted to determine, or to specify the method for determining, anything that needs to be determined for the purposes of any tax provision so far as relating to anything transferred.
(3) The provision that may be made under subsection (1)(b) includes, in particular, provision for—
(a) a tax provision not to apply, or to apply with modifications, in relation to anything done for the purposes of, or in relation to, the transfer;
(b) anything done for the purposes of, or in relation to, the transfer to have or not have a specified consequence or be treated in a specified way;
(c) the Secretary of State to be required or permitted to determine, or to specify the method for determining, anything that needs to be determined for the purposes of any tax provision so far as relating to anything done for the purposes of, or in relation to, the transfer.
(4) In this section—
(a) “relevant tax” means income tax, corporation tax, capital gains tax, stamp duty, stamp duty reserve tax, stamp duty land tax or value added tax;
(b) “tax provision” means any provision—
(i) about a relevant tax, and
(ii) made by an enactment (within the meaning of Part 1 of this Act);
(c) references to the transfer of a property include the grant of the lease.
(5) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.”
Lord Callanan
That the House do agree with the Commons in their Amendment 269.
“Transfer schemes: provision of information or assistance
(1) The Secretary of State may direct a person within subsection (2) to provide the Secretary of State with such specified information or assistance as the Secretary of State may reasonably require in connection with the making of a scheme under section (Transfer schemes).
(2) A person is within this subsection if—
(a) property, rights or liabilities are likely to be transferred from or to the person by such a scheme, or
(b) the person is a body corporate that is likely to be transferred under such a scheme.
(3) Paragraph 12(4), (6), (7) and (8) of Schedule 7 apply to a direction under this section as they apply to a direction under sub-paragraph (1) of that paragraph.
(4) In this section—
“assistance” includes assistance provided in a country or territory other than the United Kingdom;
“information” includes documents;
“specified” means specified in the direction.”
Lord Callanan
That the House do agree with the Commons in their Amendment 270.
“Reimbursement and compensation in connection with designation
The Secretary of State may reimburse a person in respect of expenditure reasonably incurred by the person in preparation for or in connection with the designation of a company under section (Great British Nuclear) (other than any expenditure incurred in connection with the making of a scheme under section (Transfer schemes)).”
Lord Callanan
That the House do agree with the Commons in their Amendment 271.
“Pension arrangements in connection with Great British Nuclear
(1) The Secretary of State may by regulations make provision about pension arrangements in relation to Great British Nuclear that corresponds or is similar to any provision about pension arrangements in relation to the ISOP that may be made by the Secretary of State by regulations under paragraph 2 or 3 of Schedule 8 (see paragraph 4 of that Schedule for restrictions on how the power to make regulations under paragraph 2 or 3 of that Schedule may be exercised).
(2) Before making regulations under subsection (1) that make provision corresponding or similar to the provision that may be made by regulations under paragraph 2(1) of Schedule 8, the Secretary of State must carry out a consultation corresponding to the consultation required by paragraph 2(5) of that Schedule.
(3) Before making regulations under subsection (1) that make provision corresponding or similar to the provision that may be made by regulations under paragraph 3(1) of Schedule 8, the Secretary of State must carry out a consultation corresponding to the consultation required by paragraph 3(4) of that Schedule.
(4) Subsections (2) and (3) may be satisfied by consultation before the passing of this Act (as well as by consultation after that time).
(5) The Secretary of State may direct a person within subsection (6) to provide the Secretary of State with specified pensions information or such specified assistance as the Secretary of State may reasonably require in preparation for or in connection with the exercise of the power conferred on the Secretary of State by subsection (1).
(6) The following persons are within this subsection—
(a) the trustee of a qualifying pension scheme;
(b) any person who exercises functions on behalf of a person within paragraph (a);
(c) any person who is or has been an employer of a qualifying member of a qualifying pension scheme.
(7) Sub-paragraphs (5) to (7) of paragraph 5 of Schedule 8 apply to a direction given under subsection (5) as they apply to a direction given under sub-paragraph (1) of that paragraph.
(8) The exercise of the power conferred on the Secretary of State by subsection (1) is not a trigger event for the purposes of the National Security and Investment Act 2021.
(9) In this section—
“pensions information” means information that—
(a) relates to pensions or other benefits under a qualifying pension scheme, or
(b) relates to the administration of a qualifying pension scheme in respect of pensions or other benefits under the scheme;
“qualifying member”, in relation to a qualifying pension scheme, means a person who is or has been a member (as defined by section 124(1) of the Pensions Act 1995) of the scheme;
“qualifying pension scheme” means a pension scheme that provides for the payment of pensions or other benefits to or in respect of employees or former employees of—
(a) a transferor in relation to a transfer scheme under section (Transfer schemes), or
(b) an associate (as defined by section 1152 of the Companies Act 2006) of such a transferor;
“specified” means specified in the direction.
(10) Regulations under this section are subject to the negative procedure.”
Lord Callanan
That the House do agree with the Commons in their Amendment 272.
Lord Teverson (LD)
My Lords, for the reputation of the UK internationally and for the health of the planet, I wish to test the opinion of the House on this amendment.
Lord Callanan
That the House do agree with the Commons in their Amendment 273.
Lord Callanan
That the House do agree with the Commons in their Amendment 274.
Baroness Boycott
At end insert “and do propose Amendment 274B instead of the words so left out of the Bill—
“Local supply for community energy
(1) Within 18 months of this Act being passed the Secretary of State must consult and report on the barriers preventing the development of community energy schemes.
(2) For the purposes of this section, community energy schemes are defined as low carbon and renewable energy schemes owned, or part-owned, by community organisations.
(3) In carrying out the consultation, the Secretary of State must consult with—
(a) current and prospective community energy generators,
(b) the community energy industry,
(c) the electricity transmission and distribution industries,
(d) licensed energy suppliers, and
(e) any other persons deemed relevant by the Secretary of State.
(4) Within six months of the closure of the consultation conducted under subsection (1), the Secretary of State must respond to the consultation and bring forward proposals to remove the barriers preventing the development of community energy schemes.””
Baroness Boycott (CB)
My Lords, I beg leave to test the opinion of the House on this very simple, good-for-everybody amendment.
Lord Callanan
That the House do agree with the Commons in their Amendments 275 to 338.
“(ca) Chapter 3 of Part 3, except section (Renewable liquid heating fuel obligations);”
“(aa) sections (Key definitions for Part), (Designation), (Designation: procedure), (Revocation of designation), (Grant, extension or restriction of gas transporter licence by Secretary of State), (Applications for grant etc of gas transporter licence), (Modification of gas transporter licence by Secretary of State), (Scope of modification powers under section (Modification of gas transporter licence by Secretary of State)), (Procedure etc relating to modifications under section (Modification of gas transporter licence by Secretary of State)), (Information and advice), (Conditions of gas transporter licences for conveyance of hydrogen), (Secretary of State directions to the GEMA) and (Repeal of Part);”
“(ba) section (Power to modify Gas Act 1986 in relation to hydrogen);”
“(bb) section (Renewable liquid heating fuel obligations);”
“(h) sections (Great British Nuclear), (Crown status), (Great British Nuclear’s objects), (Financial assistance), (Secretary of State directions and guidance), (Annual report), (Annual accounts), (Transfer schemes), (Transfer schemes: compensation), (Transfer schemes: taxation), (Transfer schemes: provision of information or assistance), (Reimbursement and compensation in connection with designation) and (Pension arrangements in connection with Great British Nuclear);”
“(3) Chapter 2 of Part 7 extends to England and Wales only, subject to subsection (5).”
“(za) in Chapter 1 of Part 2—
(i) section 56;
(ii) sections 57 and 58, so far as relating to hydrogen production revenue support contracts and a hydrogen production counterparty;
(iii) sections 61 and 62;
(iv) section 77(1) to (3), so far as relating to a designation under section 61;
(v) section 79, so far as relating to hydrogen production revenue support contracts and a hydrogen production counterparty;
(vi) sections 81 and 84, so far as relating to the exercise of any power that comes into force in accordance with this paragraph;
and in this paragraph “hydrogen production revenue support contract” and “hydrogen production counterparty” have the same meaning as in that Chapter;”
“(za) section 103;”
“(za) Chapter 1 of Part 3;”
“(za) section 115;”
“(za) section 117;”
(i) sections 127 and 128;
(ii) section 132 (including Schedule 7) and section 133 (including Schedule 9);
(iii) section 136(2) and (3), so far as relating to other provisions in force by virtue of this paragraph;
(iv) sections 138 and 139;”
“(za) section 160 (including Schedule 13);”
“(za) section (Revenue certainty scheme for sustainable aviation fuel producers: consultation and report);”
“(za) section (Renewable liquid heating fuel obligations);”
“(aa) section 170;”
“(b) Chapters 1 to 3, sections (Key definitions), (Retention of information and samples), (Preparation and agreement of information and samples plans), (Information and samples plans: supplementary), (Information and samples coordinators), (Powers of OGA to require information and samples), (Prohibition on disclosure of information or samples obtained by OGA), (Power of Secretary of State to require information and samples), (Power of OGA to give sanctions notices), (Enforcement notices) (Financial penalty notices), (Revocation notices), (Operator removal notices), (Duty of OGA to give sanction warning notices), (Publication of details of sanctions), (Subsequent sanctions notices), (Withdrawal of sanction notices), (Sanctions: information powers), (Appeals in connection with Chapter), (Procedure for enforcement decisions) and (Interpretation of Chapter) and Chapter 5 of Part 2, so far as not already in force by virtue of subsection (2);”
“(ba) sections (Key definitions for Part), (Designation), (Designation: procedure), (Revocation of designation), (Grant, extension or restriction of gas transporter licence by Secretary of State), (Applications for grant etc of gas transporter licence), (Modification of gas transporter licence by Secretary of State), (Scope of modification powers under section (Modification of gas transporter licence by Secretary of State)), (Procedure etc relating to modifications under section (Modification of gas transporter licence by Secretary of State)), (Information and advice), (Conditions of gas transporter licences for conveyance of hydrogen), (Secretary of State directions to the GEMA) and (Repeal of Part);”
“(ca) section (Power to modify Gas Act 1986 in relation to hydrogen);”
“(ea) section (Principal objectives of Secretary of State and GEMA);”
“(ga) sections (Electricity support payments for energy-intensive industries) and (Levy to fund electricity support payments);”
“(l) section (Convention on Supplementary Compensation for Nuclear Damage: implementation power).”
“(d) after subsection (10) insert—
“(10A) For the purposes of subsection (5)””
“SCHEDULE
Section (Prohibition on disclosure of information or samples obtained by OGA)
PERMITTED DISCLOSURES OF MATERIAL OBTAINED BY OGA
Disclosure by OGA to specified persons
1 (1) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a disclosure of protected material by the OGA which—
(a) is made to a person mentioned in column 1 of the table below,
(b) is made for the purpose of facilitating the carrying out of that person’s functions, and
(c) is a disclosure of protected material obtained by the OGA under a provision mentioned in the corresponding entry of column 2 of the table.
Column 1 | Column 2 |
A Minister of the Crown | Section (Power of OGA to require information and samples) or (Sanctions: information powers) |
His Majesty’s Revenue and Customs | Section (Power of OGA to require information and samples) or (Sanctions: information powers) |
The Competition and Markets Authority | Section (Power of OGA to require information and samples) or (Sanctions: information powers) |
The Scottish Ministers | Section (Power of OGA to require information and samples) |
The Welsh Ministers | Section (Power of OGA to require information and samples) |
A Northern Ireland Department | Section (Power of OGA to require information and samples) |
The Office for Budget Responsibility | Section (Power of OGA to require information and samples) or (Sanctions: information powers) |
An enforcing authority | Section (Power of OGA to require information and samples) or (Sanctions: information powers) |
The Statistics Board | Section (Power of OGA to require information and samples) or (Sanctions: information powers) |
The GEMA | Section (Power of OGA to require information and samples) or (Sanctions: information powers) |
The Crown Estate | Section (Power of OGA to require information and samples) |
A manager of the Crown Estate in Scotland | Section (Power of OGA to require information and samples) |
“enforcing authority” has the same meaning as in Part 1 of the Health and Safety at Work etc Act 1974 (see section 18(7)(a) of that Act);
“manager of the Crown Estate in Scotland” means a person who for the time being is discharging functions in relation to the management of any property, rights or interests to which section 90B(5) of the Scotland Act 1998 applies;
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975.
(3) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a disclosure of protected material by the OGA which—
(a) is a disclosure of protected material obtained by it under section (Power of OGA to require information and samples),
(b) is made to the Natural Environment Research Council, or any other similar body carrying on geological activities, and
(c) is made for the purpose of enabling the body to prepare and publish reports and surveys of a general nature using information derived from the protected material.
(4) A person to whom protected material is disclosed by virtue of sub-paragraph
(1) or (3) may use the protected material only for the purpose mentioned in sub-paragraph (1)(b) or (3)(c) (as the case may be).
(5) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a person mentioned in sub-paragraph (4) from disclosing the protected material so far as necessary for the purpose mentioned in that sub-paragraph.
(6) The Secretary of State may by regulations amend the table in sub-paragraph (1)—
(a) to remove a person from column 1,
(b) to add to column 1 a person to whom sub-paragraph (7) applies, or
(c) to add, remove or change entries in column 2.
(7) This sub-paragraph applies to—
(a) persons holding office under the Crown;
(b) persons in the service or employment of the Crown;
(c) persons acting on behalf of the Crown;
(d) government departments;
(e) publicly owned companies as defined in section 6 of the Freedom of Information Act 2000.
(8) Regulations under sub-paragraph (6) are subject to the affirmative procedure.
Disclosure required for returns and reports prepared by OGA
2 (1) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit the OGA from using protected material obtained by the OGA under section (Power of OGA to require information and samples) for the purpose of—
(a) preparing such returns and reports as may be required under obligations imposed by or under any Act;
(b) preparing and publishing reports and surveys of a general nature using information derived from the protected material.
(2) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit the OGA from disclosing protected material so far as necessary for those purposes.
Disclosure in exercise of certain OGA powers
3 Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a disclosure of protected material if it is made in the exercise of the OGA’s powers under section (Publication of details of sanctions) (publication of details of sanctions).
Disclosure after specified period
4 (1) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit protected material obtained by the OGA under section (Power of OGA to require information and samples) from being—
(a) published, or
(b) made available to the public (where the protected material includes samples),
by the OGA or a subsequent holder at such time as may be specified in regulations made by the Secretary of State.
(2) Regulations under sub-paragraph (1) may include provision permitting protected material to be published, or made available to the public, immediately after it is provided to a person.
(3) Before making regulations under sub-paragraph (1), the Secretary of State must consult such persons as the Secretary of State considers appropriate.
(4) Sub-paragraph (3) does not apply if the Secretary of State is satisfied that consultation is unnecessary having regard to consultation carried out by the OGA in relation to what time should be specified in regulations under sub-paragraph (1).
(5) Regulations under sub-paragraph (1) are subject to the affirmative procedure.
(6) In determining the time to be specified in respect of protected material in regulations under sub-paragraph (1), the Secretary of State must have regard to the following factors—
(a) whether the specified time will allow owners of protected material a reasonable period of time to satisfy the main purpose for which they acquired or created the material;
(b) any potential benefits to the [carbon storage] industry of protected material being published or made available at the specified time;
(c) any potential risk that the specified time may discourage persons from acquiring or creating carbon storage information or carbon storage samples;
(d) any other factors the Secretary of State considers relevant.
(7) In balancing the factors mentioned in sub-paragraph (6)(a) to (d), the Secretary of State must take into account the principal objectives of the Secretary of State set out in section 1(1).
(8) For the purposes of sub-paragraph (6)(a), the owner of protected material is the person by whom, or on whose behalf, the protected material was provided to the OGA under section (Power of OGA to require information and samples).
Disclosure with appropriate consent
5 (1) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a disclosure of protected material if it is made with the appropriate consent.
(2) For this purpose a disclosure is made with the appropriate consent if—
(a) in the case of disclosure by the OGA, the original owner consents to the disclosure;
(b) in the case of disclosure by a subsequent holder—
(i) the OGA consents to the disclosure, and
(ii) where the protected material in question was provided to the OGA under section (Power of OGA to require information and samples), the OGA confirms that the original owner of the material also consents to the disclosure.
(3) For the purposes of sub-paragraph (2), the original owner of protected material provided to the OGA is the person by whom, or on whose behalf, the protected material was so provided.
Disclosure required by legislation
6 Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a disclosure of protected material required by virtue of an obligation imposed by or under this or any other Act.
Disclosure for purpose of proceedings
7 (1) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a disclosure of protected material by the OGA for the purposes of, or in connection with—
(a) civil proceedings, or
(b) arbitration proceedings.
(2) Section (Prohibition on disclosure of information or samples obtained by OGA) does not prohibit a disclosure of protected material by the OGA for the purposes of, or in connection with—
(a) the investigation or prosecution of criminal offences, or
(b) the prevention of criminal activity.”
“SCHEDULE Section (Appeals)
CARBON STORAGE INFORMATION AND SAMPLES: APPEALS
PART 1
APPEALS AGAINST DECISIONS RELATING TO INFORMATION AND SAMPLES
Appeals in relation to information and samples plans
1 (1) A person affected by any decision of the OGA to which effect is given by the preparation of an information and samples plan may appeal against it to the Tribunal—
(a) on the ground that the decision was not within the powers of the OGA, or
(b) on the ground that the plan is unreasonable.
(2) On an appeal under this paragraph the Tribunal may—
(a) affirm, vary or quash the decision under appeal,
(b) remit the decision under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate, or
(c) substitute its own decision for the decision under appeal.
Appeals against notices requiring provision of information or samples
2 (1) A person affected by any decision of the OGA to which effect is given by the giving of a notice requiring the provision of information or samples under section (Power of OGA to require information and samples) may appeal against it to the Tribunal—
(a) on the ground that the decision was not within the powers of the OGA, or
(b) on the ground that the length of time given to comply with the notice is unreasonable.
(2) On an appeal under this paragraph the Tribunal may—
(a) affirm, vary or quash the decision under appeal,
(b) remit the decision under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate, or
(c) substitute its own decision for the decision under appeal.
PART 2
APPEALS RELATING TO ENFORCEMENT OF SANCTIONABLE REQUIREMENTS
Appeals in relation to sanction notices
3 (1) Where a sanction notice is given under section (Power of OGA to give sanction notices) in respect of a failure to comply with a sanctionable requirement, an appeal may be made—
(a) under paragraph 4 (on the ground that there was no such failure to comply);
(b) under paragraph 5 (against the sanction imposed by the notice).
(2) Where an appeal is made in relation to a sanction notice, the notice ceases to have effect until a decision is made by the Tribunal to confirm, vary or cancel the notice.
(3) Where, on an appeal made in relation to a sanction notice—
(a) the Tribunal makes a decision to confirm or vary the notice, and
(b) an appeal is or may be made in relation to that decision,
the Tribunal, or the Upper Tribunal, may further suspend the effect of the notice pending a decision which disposes of proceedings on such an appeal.
Appeals against finding of failure to comply
4 (1) An appeal may be made to the Tribunal by the person, or by any of the persons, to whom a sanction notice is given in respect of a failure to comply with a sanctionable requirement, on the grounds that the person, or persons, did not fail to comply with the requirement.
(2) On an appeal under this paragraph, the Tribunal may confirm or cancel the sanction notice.
(3) Where sanction notices are given on more than one occasion in respect of the same failure to comply with a sanctionable requirement—
(a) an appeal under this paragraph may be made only in relation to the sanction notice, or any of the sanction notices, given on the first of those occasions, and
(b) appeals in relation to sanction notices given on subsequent occasions in respect of that failure to comply may be made only under paragraph 5.
Appeals against sanction imposed
5 (1) Where a sanction notice is given in respect of a failure to comply with a sanctionable requirement, a person mentioned in sub- paragraph (2) may appeal to the Tribunal against any of the decisions of the OGA mentioned in sub-paragraph (3) (as to the sanction imposed by the notice) on the grounds mentioned in sub-paragraph (4).
(2) The persons who may appeal are—
(a) the person, or any of the persons, to whom the notice was given, and
(b) in the case of an operator removal notice under section (Operator removal notices), the licensee under whose carbon storage licence the exploration operator operates.
(3) The decisions against which an appeal may be made are—
(a) where an enforcement notice has been given, the decision as to—
(i) the measures that are required to be taken for the purposes of compliance with the sanctionable requirement, or
(ii) the period for compliance with the sanctionable requirement;
(b) where a financial penalty notice has been given, the decision—
(i) to impose a financial penalty, or
(ii) as to the amount of the financial penalty imposed;
(c) where a revocation notice has been given, the decision to terminate the carbon storage licence or to revoke the storage permit;
(d) where an operator removal notice has been given, the decision to require the removal of the exploration operator.
(4) The grounds on which an appeal may be made are that the decision of the OGA—
(a) was unreasonable, or
(b) was not within the powers of the OGA.
(5) On an appeal under this paragraph against a decision made in relation to an enforcement notice, the Tribunal may—
(a) confirm or quash the decision, in the case of a decision mentioned in sub-paragraph (3)(a)(i) (remedial action), or
(b) confirm or vary the decision, in the case of a decision mentioned in sub-paragraph (3)(a)(ii) (period for compliance),
and confirm, vary or cancel the enforcement notice accordingly.
(6) On an appeal under this paragraph against a decision made in relation to a financial penalty notice, the Tribunal may—
(a) confirm or quash the decision, in the case of a decision mentioned in sub-paragraph (3)(b)(i) (imposition of penalty), or
(b) confirm or vary the decision, in the case of a decision mentioned in sub-paragraph (3)(b)(ii) (amount of penalty),
and confirm, vary or cancel the financial penalty notice accordingly.
(7) The Tribunal must have regard to any guidance issued by the OGA under section (Financial penalty notices)(6)(a) when deciding whether to confirm or vary a decision as to the amount of a financial penalty under sub-paragraph (6)(b).
(8) On an appeal under this paragraph against a decision to terminate a carbon storage licence, to revoke a storage permit or to require the removal of an exploration operator the Tribunal may—
(a) confirm the decision,
(b) vary the decision by changing the revocation date or the removal date, as the case may be, or
(c) quash the decision,
and confirm, vary or cancel the sanction notice in question accordingly.
(9) Where a decision is quashed under sub-paragraph (5)(a), (6)(a) or (8), the Tribunal may remit the decision to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate.
Appeals against information requirements
6 (1) A person to whom a notice is given under section (Sanctions: information powers) may appeal against it to the Tribunal on the grounds that—
(a) the giving of the notice is not within the powers of the OGA, or
(b) the length of time given to comply with the notice is unreasonable.
(2) On an appeal under this paragraph the Tribunal may—
(a) confirm, vary or cancel the notice, or
(b) remit the matter under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate.”
“(2A) Any requirement imposed on a person by a transfer scheme is enforceable by the Secretary of State in civil proceedings—
(a) for an injunction,
(b) for specific performance of a statutory duty under section 45 of the Court of Session Act 1988, or
(c) for any other appropriate remedy or relief.”
“(3A) A statutory instrument containing regulations under this paragraph is subject to annulment in pursuance of a resolution of the House of Commons.”
“(a) such specified pensions information, or
(b) such specified assistance,
as the Secretary of State may reasonably require in preparation for or in connection with the exercise of a power conferred on the Secretary of State by this Schedule.”
“PART A1
PETROLEUM (PRODUCTION) (LANDWARD AREAS) REGULATIONS 1995
A1 In the Petroleum (Production) (Landward Areas) Regulations 1995 (S.I. 1995/1436), Schedule 3 (model clauses for petroleum exploration and development licences in landward areas) is amended as follows.
A2 After clause 37 insert—
“37A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 37(4).”
A3 (1) Clause 38 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 37A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Petroleum Act 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A4 (1) Clause 38A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 38(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 38(2)(b) occurs which consists of a breach of clause 37A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 38(2)(j) occurs in relation to a change in control of one of those persons (see clause 37A); or
(d) an event mentioned in clause 38(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
PART A2
PETROLEUM (CURRENT MODEL CLAUSES) ORDER 1999
Introduction
A5 The Petroleum (Current Model Clauses) Order 1999 (S.I. 1999/160) is amended in accordance with this Part of this Schedule.
Part 2 of Schedule 2
A6 Part 2 of Schedule 2 (current model clauses for controlled waters or seaward production licences deriving from Schedule 2 to the 1964 Regulations and Schedule 4 to the 1966 Regulations) is amended in accordance with paragraphs A7 to A9.
A7 After clause 38 insert—
“38A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 38(4).”
A8 (1) Clause 39 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 38A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A9 (1) Clause 39A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 39(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 39(2)(b) occurs which consists of a breach of clause 38A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 39(2)(j) occurs in relation to a change in control of one of those persons (see clause 38A); or
(d) an event mentioned in clause 39(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 3
A10 Part 2 of Schedule 3 (current model clauses for landward production licences deriving from Schedule 3 to the 1966 regulations) is amended in accordance with paragraphs A11 to A13.
A11 After clause 36 insert—
“36A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 36(3).”
A12(1) Clause 37 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 36A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A13(1) Clause 37A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 37(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 37(2)(b) occurs which consists of a breach of clause 36A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 37(2)(j) occurs in relation to a change in control of one of those persons (see clause 36A); or
(d) an event mentioned in clause 37(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 4
A14 Part 2 of Schedule 4 (current model clauses for landward production licences deriving from Schedule 4 to the 1976 Regulations or Schedule 4 to the 1982 Regulations) is amended in accordance with paragraphs A15 to A17.
A15 After clause 37 insert—
“37A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 37(3).”
A16(1) Clause 38 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 37A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A17(1) Clause 38A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 38(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 38(2)(b) occurs which consists of a breach of clause 37A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 38(2)(j) occurs in relation to a change in control of one of those persons (see clause 37A); or
(d) an event mentioned in clause 38(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 5
A18 Part 2 of Schedule 5 (current model clauses for seaward production licences deriving from Schedule 5 to the 1976 Regulations) is amended in accordance with paragraphs A19 to A21.
A19 After clause 39 insert—
“39A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 39(4).”
A20(1) Clause 40 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 39A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A21(1) Clause 40A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 40(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 40(2)(b) occurs which consists of a breach of clause 39A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 40(2)(j) occurs in relation to a change in control of one of those persons (see clause 39A); or
(d) an event mentioned in clause 40(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 6
A22 Part 2 of Schedule 6 (current model clauses for seaward production licences deriving from Schedule 5 to the 1982 Regulations) is amended in accordance with paragraphs A23 to A25.
A23 After clause 38 insert—
“38A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 38(4).”
A24(1) Clause 39 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 38A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A25(1) Clause 39A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 39(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 39(2)(b) occurs which consists of a breach of clause 38A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 39(2)(j) occurs in relation to a change in control of one of those persons (see clause 38A); or
(d) an event mentioned in clause 39(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 8
A26 Part 2 of Schedule 8 (current model clauses for landward development licences deriving from Schedule 5 to the 1984 Regulations) is amended in accordance with paragraphs A27 to A29.
A27 After clause 35 insert—
“35A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 35(3).”
A28(1) Clause 36 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 35A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A29(1) Clause 36A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 36(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 36(2)(b) occurs which consists of a breach of clause 35A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 36(2)(j) occurs in relation to a change in control of one of those persons (see clause 35A); or
(d) an event mentioned in clause 36(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 9
A30 Part 2 of Schedule 9 (current model clauses for seaward production licences deriving from Schedule 4 to the 1988 Regulations as they had effect before 16 December 1996) is amended in accordance with paragraphs A31 to A33.
A31 After clause 41 insert—
“41A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 41(4).”
A32(1) Clause 42 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 41A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A33(1) Clause 42A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 42(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 42(2)(b) occurs which consists of a breach of clause 41A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 42(2)(j) occurs in relation to a change in control of one of those persons (see clause 41A); or
(d) an event mentioned in clause 42(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 10
A34 Part 2 of Schedule 10 (current model clauses for seaward production licences deriving from Schedule 4 to the 1988 Regulations as they had effect on and after 16 December 1996) is amended in accordance with paragraphs A35 to A37.
A35 After clause 41 insert—
“41A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 41(4).”
A36(1) Clause 42 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 41A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A37(1) Clause 42A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 42(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 42(2)(b) occurs which consists of a breach of clause 41A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 42(2)(j) occurs in relation to a change in control of one of those persons (see clause 41A); or
(d) an event mentioned in clause 42(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 13
A38 Part 2 of Schedule 13 (current model clauses for landward appraisal licences deriving from Schedule 5 to the 1991 Regulations) is amended in accordance with paragraphs A39 to A41.
A39 After clause 32 insert—
“32A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 32(3).”
A40(1) Clause 33 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (h) insert—
“(i) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 32A);
(j) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Petroleum Act 1998;”;
(b) in the closing words, after “(f)” insert “or (i) or (j)”.
(3) Omit paragraphs (3) to (5).
A41(1) Clause 33A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 33(2)(c), (d), (e) or (f) occurs in relation to one of those persons;
(b) an event mentioned in clause 33(2)(b) occurs which consists of a breach of clause 32A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 33(2)(i) occurs in relation to a change in control of one of those persons (see clause 32A); or
(d) an event mentioned in clause 33(2)(j) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Part 2 of Schedule 14
A42 Part 2 of Schedule 14 (current model clauses for landward development licences deriving from Schedule 6 to the 1991 Regulations) is amended in accordance with paragraphs A43 to A45.
A43 After clause 34 insert—
“34A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 34(3).”
A44(1) Clause 35 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 34A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act of 1998;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A45(1) Clause 35A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 35(2)(c), (d), (e) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 35(2)(b) occurs which consists of a breach of clause 34A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 35(2)(j) occurs in relation to a change in control of one of those persons (see clause 34A); or
(d) an event mentioned in clause 35(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
PART A3
PETROLEUM LICENSING (EXPLORATION AND PRODUCTION) (SEAWARD AND LANDWARD AREAS) REGULATIONS 2004
Introduction
A46 The Petroleum Licensing (Exploration and Production) (Seaward and Landward Areas) Regulations 2004 (S.I. 2004/352) are amended in accordance with this Part of this Schedule.
Schedule 2
A47 Schedule 2 (model clauses for production licences relating to frontier areas — no break clause) is amended in accordance with paragraphs A48 to A50.
A48 After clause 37 insert—
“37A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 37(4).”
A49(1) Clause 38 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 37A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A50(1) Clause 38A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 38(2)(c), (d), (e), (ee) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 38(2)(b) occurs which consists of a breach of clause 37A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 38(2)(j) occurs in relation to a change in control of one of those persons (see clause 37A); or
(d) an event mentioned in clause 38(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Schedule 3
A51 Schedule 3 (model clauses for production licences relating to frontier areas — including break clause) is amended in accordance with paragraphs A52 to A54.
A52 After clause 38 insert—
“38A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 38(4).”
A53(1) Clause 39 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 38A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A54(1) Clause 39A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 39(2)(c), (d), (e), (ee) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 39(2)(b) occurs which consists of a breach of clause 38A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 39(2)(j) occurs in relation to a change in control of one of those persons (see clause 38A); or
(d) an event mentioned in clause 39(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Schedule 4
A55 Schedule 4 (model clauses for standard production licences) is amended in accordance with paragraphs A56 to A58.
A56 After clause 36 insert—
“36A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 36(4).”
A57(1) Clause 37 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its consent to a change in control of the Licensee (see clause 36A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A58(1) Clause 37A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 37(2)(c), (d), (e), (ee) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 37(2)(b) occurs which consists of a breach of clause 36A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 37(2)(j) occurs in relation to a change in control of one of those persons (see clause 36A); or
(d) an event mentioned in clause 37(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.
Schedule 6
A59 Schedule 6 (model clauses for petroleum exploration and development licences) is amended in accordance with paragraphs A60 to A62.
A60 After clause 35 insert—
“35A Change in control of Licensee
(1) This clause applies if—
(a) the Licensee is a company, or
(b) where two or more persons are the Licensee, any of those persons is a company,
and references in this clause to a company are to such a company.
(2) A change in control of a company is not permitted without the consent of the Oil and Gas Authority (“the OGA”).
(3) There is a “change in control” of a company if a person takes control of the company, not having previously been a person who controlled the company.
(4) If a change in control of a company is contemplated, the company must apply in writing to the OGA for consent at least three months before the date on which it is proposed that the change would occur (if consent were given).
(5) The OGA may—
(a) consent to the change in control unconditionally,
(b) consent to the change in control subject to conditions, or
(c) refuse consent to the change in control.
(6) If the OGA proposes to grant consent subject to any condition or to refuse consent, the OGA must, before making a final decision—
(a) give the company an opportunity to make representations, and
(b) consider any representations that are made.
(7) The general rule is that the OGA must decide an application within three months of receiving it, but the OGA may delay its decision by notifying the interested parties in writing.
(8) Conditions as mentioned in paragraph (5)(b) may be imposed on the person taking control of the company (as well as on the company), and may include—
(a) conditions relating to the arrangements for the change in control, including the date by which it must occur,
(b) conditions relating to the performance of activities permitted by this licence, and
(c) financial conditions.
(9) The OGA’s decision on the application, and any conditions as mentioned in paragraph (5)(b), must be notified in writing to the interested parties.
(10) In this clause “the interested parties” means—
(a) the company,
(b) the person who (if consent were granted) would take control of the company, and
(c) if the company and another person or persons are the Licensee, that other person or those other persons.
(11) For the purposes of this clause, the question of whether a person has control of a company is to be determined in accordance with the test set out in clause 35(4).”
A61(1) Clause 36 (power of revocation) is amended as follows.
(2) In paragraph (2)—
(a) after sub-paragraph (i) insert—
“(j) if the Licensee is a company, any breach of a condition subject to which the Oil and Gas Authority gave its
consent to a change in control of the Licensee (see clause 35A);
(k) if the Licensee is a company, any failure to provide full and accurate information in response to a notice given by the Oil and Gas Authority to that company under section 5D of the Act;”;
(b) in the closing words, after “(g)” insert “or (j) or (k)”.
(3) Omit paragraphs (3) to (5).
A62(1) Clause 36A (power of partial revocation) is amended as follows.
(2) For paragraph (1) substitute—
“(1) This clause applies in a case where two or more persons are the Licensee and—
(a) an event mentioned in clause 36(2)(c), (d), (e), (ee) or (g) occurs in relation to one of those persons;
(b) an event mentioned in clause 36(2)(b) occurs which consists of a breach of clause 35A(2) or (4) in relation to a change in control of one of those persons;
(c) an event mentioned in clause 36(2)(j) occurs in relation to a change in control of one of those persons (see clause 35A); or
(d) an event mentioned in clause 36(2)(k) occurs which consists of a failure by one of those persons as mentioned in that provision.”
(3) In paragraph (2), for “or (b)” substitute “, (b), (c) or (d)”.”
“(c) a country mentioned in section 26(1B)(b),
(d) an overseas territory mentioned in section 26(1B)(c) or (d), or
(e) a relevant reciprocating territory.”
“(1) Section 26 of the 1965 Act (interpretation) is amended as follows.
(2) +”
“(e) after the definition of “overseas territory” insert—
““the Paris Convention” means the Convention on Third Party Liability in the Field of Nuclear Energy of 29 July 1960, as amended by the Additional Protocol of 28 January 1964, by the Protocol of 16 November 1982 and by the Protocol of 12 February 2004;”.”
“( ) In subsection (1A)(a)—
(a) in the opening words, for “a relevant international agreement” substitute “the Paris Convention”;
(b) in sub-paragraph (i)—
(i) for “relevant international agreement” (in each place it appears) substitute “Convention”;
(ii) for “agreement” (in the third place it appears) substitute “Convention”;
(iii) for “agreement’s” substitute “Convention’s”;
(c) in sub-paragraph (ii), for “relevant international agreement” substitute “Convention”.”
Energy Bill [Lords]
Wednesday 18th October 2023
(1 year, 1 month ago)
Commons ChamberRead Full debate Energy Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Message as at 18 October 2023 - (18 Oct 2023)
00:00 - The House divided: - Ayes: 293 / Noes: 181 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
I beg to move, That this House disagrees with Lords amendment 274B. Lords amendment 274B was added to the Bill during consideration in the Lords of Commons amendments. As was set out, the Government did not agree with the inclusion of the amendment and, after further careful consideration, we remain of the same view today. The amendment commits the Government to a consultation
“on the barriers preventing the development of community energy schemes”
and sets out whom we would consult. It also commits the Government to bringing forward proposals to remove identified barriers to community energy.
However, as a result of working closely with colleagues who have made representations during the passage of the Bill, on 5 September I set out the Government’s commitment to consult on the barriers that the sector faces when developing projects. As a part of that process, we are involving the community energy sector in designing the consultation, through our community energy contact group. The group has already had constructive discussion on this work at its meeting earlier this month. The Government have already made a clear commitment to the consultation—I announced that commitment at the Dispatch Box in September. We therefore think it is unnecessary, and of no additional value, to put the specifics of it in primary legislation.
Sir Jeremy Wright (Kenilworth and Southam) (Con)
I thank my hon. Friend for all the work he has done to put in place not just this consultation but the fund, which will be tremendously useful for these purposes too. Does he accept that there is a sense of urgency here; that there is a need to get on with removing these barriers? If he is not content with the timetable set out in this amendment, will he give the House an indication of what he thinks the right timetable is, so that community energy companies and others can know where they stand and get on with the good work that he and I are both in favour of?
Andrew Bowie
I thank my right hon. and learned Friend for his intervention. Of course, I agree with him that pace is of the utmost importance in supporting community energy groups around the country, which is why the contact group has already met earlier this month and is engaging already on identifying the barriers that the consultation will seek to address and, thus, informing the Government as to what we need to do. That work is ongoing, which is why we do not feel that this amendment is required; we have begun that process already.
There are other issues with the amendment that mean we cannot support its inclusion in the Bill. The amendment would place an additional obligation on the Government to bring forward proposals to remove these barriers within a specific timeframe. As I just said, we cannot be sure what barriers will be raised in the consultation, or what the proper response to those barriers should be, until we have carried it out. We therefore cannot create a legislative obligation to remove barriers within a six-month timeframe when we are not aware of the nature of the barriers and have not yet properly analysed them.
Chris Skidmore (Kingswood) (Con)
I appreciate the Minister’s argument, but that is technically not what the amendment says; there is no requirement for legislative reform, only one to bring forward proposals. It is unfair to mislead the House—
Madam Deputy Speaker (Dame Eleanor Laing)
Order. It is not misleading the House; the Minister might possibly have done so inadvertently, but he would not have been misleading the House.
Chris Skidmore
My apologies to the Minister. I did not mean to make accusations so strongly. The challenge here is that subsection (4) of the new clause set out in the amendment contains no reference to legislation such as the Minister suggested. That is my point.
Andrew Bowie
I thank my right hon. Friend for his intervention. It is the Department’s view and mine that the amendment would result in legislation being required. As I said, we absolutely understand the importance of this, which is why I launched the consultation process as I did. It is why we are engaging so closely with the sector and all interested parties so that we can get this consultation up and running and out as soon as possible, and identify those barriers preventing community energy groups from accessing the market. I know that he has a passion in this area and holds strong convictions on it. I would be happy to continue to work with him, alongside the community energy contact group, as we develop our proposals for the consultation.
I also wish to reassure the House that we will continue to work closely with the sector to support its important work, both through our existing support, including, for example, the £10 million community energy fund, and in carrying out the consultation, to which we have already committed.
Dr Alan Whitehead (Southampton, Test) (Lab)
That was a disappointing and specious defence by the Minister of his intention not to proceed with these proposals from the other place. He knows perfectly well what the barriers to developing community energy are; we have debated them at length during the passage of the Bill. So I am not sure it is going to take a forensic panel of inquiry to find out what those details are before the Government can act on any of these things.
We are on the last lap of the Energy Bill and it is particularly disappointing that we are hearing what we are hearing today about this Lords amendment. The Bill, which has been with us in both Houses for well over a year now, puts into place many of the essential tools that will enable energy to progress towards a low-carbon, net zero future. The Opposition have consistently supported the Bill, while endeavouring during its passage to strengthen it in its low carbon mission. We have tried to place into the Bill further elements to make it the best it can be in pursuit of its low-carbon mission, and there have been some junctures during its passage when the Minister has endeavoured to take on board those suggestions for strengthening it, in some instances by drafting a Government amendment that meets the purport of our amendments. I am grateful to the Minister for those changes to the Bill and for the collegiate way in which the Bill has been debated and decided upon.
However, there are exceptions to that, one of which is in front of us today. As the Minister states, it relates to community and local energy, which I am sure Members will agree is and will be an important part of the future low carbon energy landscape. It has the potential to make a serious contribution to our local carbon arsenal of plant, while being funded and supported by the community in which that plant is situated, making it easier to develop and able to restore the benefits of its operation to the community itself.
Labour has committed to providing strong support for community energy, including the assistance of Great British Energy, the company we propose to set up to support the development of local low carbon plant with community energy schemes. The potential for such schemes to contribute to the overall installation of low carbon systems in the UK is immense, with perhaps 8 GW of install capacity added to the national stock through such local schemes. I remind the House that that is getting on towards the equivalent capacity of three nuclear power stations such as Hinkley Point C.
John Redwood (Wokingham) (Con)
One of the barriers will be the shortage of grid and cable capacity to link into. Is the hon. Gentleman envisaging some kind of privileged access or some solution to the grid shortage?
Dr Whitehead
That is not quite the subject of our debate, but the right hon. Member can see that we envisage an energetic and far-reaching proposal to develop the grid in such a way that those grid shortages are overcome, so that the grid is able to service the low carbon economy in the way we would all want it to do. In the context of what we are discussing, I remind the right hon. Member that this would be about distributed grids at a local level, rather than the national high-level grids. We need to take further action to strengthen and sort out grids at that level.
The Lords clearly continue to feel strongly about this issue; as we can see, they have sent back to us today a modified version of the original amendment, requiring the Government to consult on changes to assist community energy and, importantly, to set a timeline for proposals to be brought forward to remove barriers to the development of community energy.
Of course, there are others in this House who feel strongly about this issue. The proposals that the Lords have now twice tried to have inserted into the Bill are essentially the wording of a group called Power for the People, which suggested wording for a community energy enabling Bill for which it campaigned to secure signed-up support from parliamentarians. It did indeed secure substantial support from parliamentarians who feel strongly on the issue of community energy. Some 325 Members signed up in support, including 130 Conservative Members and, perhaps most remarkably, 22 members of the Government, including six Treasury Ministers, the present Chancellor and the Minister himself, as I often seek to remind him. There is no lack of support in the House for the principles and practice of community energy.
The Lords amendment seeks to acknowledge and further that support by putting forward very reasonable and, one might have thought, pretty non-contentious wording to add to the Bill. It is inexplicable to me that the Government should seek to resist these proposals in the way they have. Yes, they will say, as the Minister has said, that they have set up a community energy fund of £10 million over two years, which is welcome, and they have verbally indicated that, at some stage, there will be a consultation on barriers to supply, but there are no timelines for that and no commitment to move positively forward from it. That is what this amendment seeks to put right.
As I have said, the Minister appears already to be a signed-up supporter of community energy action, and I would fear for his own emotional wellbeing if he were forced today to perform another policy backflip and acquiesce in yet another Government repudiation of themselves in rejecting this latest Lords amendment. Instead, let us end the extended passage of the Bill on a high note, and all around the House agree on both the importance of community energy and the measures we will need to take to ensure it thrives in the future.
Chris Skidmore
I rise in support of the amendment. It is very similar to an amendment that I tabled during the previous stage of the Bill in the Commons. I echo the comments that have been made about the amendment being uncontentious. It calls for additional consultation—if the Government want me to do that, I will do it myself for the community energy groups.
The net zero review held several roundtables with a number of community energy groups across the country. Indeed, they were one of the reasons why pillar 4 in the final report, “Mission Zero: Independent Review of Net Zero”, was
“Net Zero and the Community”.
One of the key findings of the review was that over half of all net zero decisions will need to be taken not by Government or Parliament, but outside this Chamber. We can turbocharge our transition towards net zero if we can empower and support more community energy groups to take the action that needs to be taken.
Indeed, the only single wind turbine that has been built in the United Kingdom in the past year has been delivered through community energy. I am proud that it is in my home city of Bristol. Ambition Lawrence Weston has seen its 4.25 MW turbine built and it will now power 3,500 homes for the community energy project. The £4 million to pay for the project was raised by the group—it did not come cap in hand to Government—and now it will see an economic return of £140,000 a year as a result of the energy that will be sold to the grid. That is just one example of the myriad examples of net zero projects that demonstrate the economic opportunity that net zero can provide.
In Bristol, we also have the Bristol City Leap, which is a result of a £7 million investment from Bristol City Council. There has been £424 million of inward investment from the American company Ameresco Ltd to decarbonise the city’s district heat network. Community energy points the way for demonstrating that net zero is not a cost, despite what some may say, but an opportunity. We must seize that opportunity now, not just to tackle the climate crisis or reach our nationally determined contribution for 2030, because net zero is about 2030 not just about 2050. We cannot keep kicking the can down the road, somehow suggesting we are going to meet our carbon budgets. Meeting them now, today, is absolutely vital to ensure we can meet our climate commitments in future carbon budgets.
Community energy is here and now. We can get on with delivering net zero with the tools and technologies we have, and, above all, with the people we have—individuals and communities across the country. Community Energy England has 220 groups, a third of which would like to build onshore wind turbines, like Ambition Lawrence Weston. They want to get on with it. They are not often being paid to do this; they do it because they recognise what they can return to their communities. As a Conservative who believes in the power of local communities, we as a Government should be supporting local communities to the hilt to deliver on energy action.
When we look at the future of the grid, everything points to the fact that creating flexibilities on the edge of the grid enhances our energy security, allows us to return energy to the grid, frees up energy capacity elsewhere, and frees up our demand on oil and gas elsewhere. This is a no-brainer. I shall support Lords amendment 274B if it is pushed to a vote, although I will not push it to a vote myself. Nevertheless, it is vital that we send a clear message not just that we are committed to the net zero pathway—because it is the right and the economically important thing to do—but that we recognise that, when it comes to net zero, we need a big bang moment. We need to create little platoons of individuals and communities that are going out there writing their own net zero narratives and stories. For that reason, I will be supporting this Lords amendment today.
Dave Doogan (Angus) (SNP)
“Specious”, said His Majesty’s Opposition spokesperson about the arguments against this amendment, to which I would add, having listened to the Minister’s defence of the Government’s position on community energy, that it was also one of the more tendentious arguments that we have heard in this Chamber. I am not convinced that the Minister is absolutely fully signed up to that which he has been put out today to defend. I think he knows the importance of community generation and he is not content with the feet dragging that his Government are forcing him to come here to defend. This is another extremely negative decision by a Government who show no let-up in their disdain for community ambition for disaggregated generation infrastructure, or, in fact, for the climate. If we contrast that ambition with the Tories’ now messianic devotion to the cult of nuclear, we see that next year everyone across these islands will be well shot of them, and nowhere more so will that be clear than in the energy space.
Lords amendment 274B is a perfectly sensible ambition. It is a pragmatic amendment by their lordships. It is balanced and deliverable, works with the grain of local ambition, and is destined to unlock significant value in the green transition. It would unlock local enterprise and it would unlock value-add in the real economy and promote community wellbeing. There is nothing not to recommend about this ambition; it is quite clear that it has positives for the people and for our communities. It is no wonder, then, that this Tory Government will reject it out of hand. They have no interest in empowering the people or powering the green revolution. They would rather throw billions on to our energy bills to pay for nuclear, while they proscribed onshore wind in England up until September this year, leaving Scotland to do all the heavy lifting as usual.
Why will these Tories not follow the SNP Scottish Government’s lead in this priority? The Scottish Government’s community and renewable energy scheme promotes community energy ownership across Scotland. CARES continues to help communities engage, participate in and benefit from the transition to net zero. Since 2010, CARES has offered advice and support to more than 900 organisations and assisted in the delivery of 600 community and locally owned renewable projects throughout Scotland, offering funding in the process of £58 million. Just to clarify, that is just in Scotland, which rather puts in the shade the £10 million on offer from the English Government to English community generation—whenever that happens. CARES accelerates progress towards the Scottish Government’s target of 2 GW of renewable energy to be locally or community owned by 2030. The scheme assists in the delivery of both the Scottish Government’s energy strategy and heat in buildings strategy through the provision of loan finance, grant funding and specialist advice.
In Scotland, we see a Government of the people working with the people for their shared ambitions, but here in Westminster we see only the veneer of an Administration masking the infighting, bitter division and self-interest of that Tory party.
The Scottish Government’s community good practice principles, which have been widely adopted across the renewables industry, promote the provision of community benefits at a national level. They promote the equivalent of £5,000 per installed megawatt per annum, index-linked for the life of the project. Over £22.8 million has been paid out in community benefits to Scottish communities in the 12 months since August 2021. England has a very similar scheme but—and it is a big Tory-shaped but—as these funds are in the greater part principally born of onshore wind development, and the Tories introduced a de facto ban on onshore wind in 2015, English communities have lost out on millions and millions of pounds in community funding thanks to this dysfunctional UK/English Government.
Wera Hobhouse (Bath) (LD)
Let us remind ourselves what Lords amendment 247B is about. Within 18 months of the Act being passed, the Secretary of State would be required to carry out a consultation and publish a report on the barriers preventing the development of community energy schemes. It would also require the Government to respond and bring forward proposals to remove the barriers preventing the development of community energy schemes within six months of the consultation closing. That is the bare minimum that the Government could do. It would at least move the issue forward, and yet the Government still put forward a motion to disagree with it.
The Government say that they have already committed to consult on the barriers to local supply, but we still have not been given a date when that will actually happen. The Lords amendment would stop the Government’s current policy of dither and delay and require them to get on with taking community energy schemes forward.
Ultimately, the Government should not need to consult, because they are already well aware of what barriers face the sector; Community Energy England has told them repeatedly over the last five years. It is really disappointing, because there is even an all-party parliamentary group for community energy. Officials have engaged with the APPG, yet nothing has happened because the Government, despite warm words, are not really committed to community energy.
In 2021, the Environmental Audit Committee published a series of recommendations to encourage community energy. The only recommendation taken forward so far is the community energy fund, and even that does not yet have a launch date. I hope that the Minister will tell me when the launch date will be. When will we see the fund for community energy?
We are in the middle of an energy crisis. Bills have skyrocketed. Access to cheap, clean, home-produced energy has never been more vital. We need to secure our energy supply, protect consumers and reach net zero. As we have always said in the debate about reaching net zero, we need to take people with us. That is not about delaying targets, as the Government have just done, but about encouraging people to walk the difficult journey to net zero. Community energy does exactly that. Why are the Government not supporting it with all their might? Why are the Government not even supporting the Lords amendment? It is the bare minimum.
Community energy has the potential to power 2.2 million homes and save 2.5 million tonnes of carbon dioxide emissions every year. All it needs is a Government who give it the support that it deserves. I have seen at first hand the benefits that community energy can bring. In my Bath constituency, Bath and West Community Energy has installed enough renewables to power 4,500 homes. It has invested the money that it has earned back into my local community, donating nearly £330,000 to support environmental and fuel poverty schemes. That is what community energy can do. What is there not to support? Why are the Government not committed to doing all that they can to ensure that community energy projects can be delivered?
Wera Hobhouse
Unfortunately, the Government are unwilling to see the potential of community energy. Community energy schemes currently generate just 0.5% of the UK’s electricity. That is because—we know all this; we have said it many times—the financial, technical and operational requirements involved in becoming a licensed supplier put initial costs at more than £1 million. That is a massive risk for any new start-up or small scheme. Any community energy projects such as the one in Bath can exist only because it has reached a certain size. That is one of the problems.
The Government are aware of that fact, but voted to remove Lords amendments to rectify it. The Government need to start matching their supportive words about community energy with action. The most effective step that they could take would be to enable local supply and remove the regulatory barriers that prevent community energy schemes from selling their power to local customers. That could include a community right to connect to the grid ahead of commercial projects that deliver little or no social and community benefit. I am sure that I have answered the question that the right hon. Member for Wokingham (John Redwood) was about to ask.
Community energy schemes are ready to provide clean, green energy that helps local communities. They are not asking for a huge amount of public money, just for the Government to stop blocking the system. In this time of energy uncertainty, having a reliable local supplier can only be positive. I fully support Lords amendment 274B to hold the Government’s feet to the fire on community energy. I urge everyone in this House to do the same.
Andrew Bowie
I thank all right hon. and hon. Members for contributing to this afternoon’s debate. I will first respond to some of the comments made by my constituency neighbour, the hon. Member for Angus (Dave Doogan). I know that he does not like it very much, and would like it if it were not the case, but he is absolutely wrong and I have to correct him: this is not the English Government; this is the British Government. We are the Government of the entire United Kingdom—a United Kingdom of which Scotland remains a part and, if the opinion polls are anything to go by, will continue to remain a part of for quite some time.
The hon. Member has an obsession with decrying the nuclear industry as something that the Tories alone are obsessed with. Tell that to the Governments of France, Sweden, Finland, Italy, Poland, the Czech Republic, Slovakia, Canada, the United States of America and more, who are reinvesting and restarting their own civil nuclear industry, as is the Labour Welsh Government, who are very much in favour of further investment in, and development of, nuclear. He raised the lack of funding for community energy projects; £10 million over two years is an incredibly generous offer. That is alongside other UK growth funding such as the UK shared prosperity fund, which community energy groups can access by working in partnership with their local authorities.
The hon. Member for Bath (Wera Hobhouse) asked when the community energy fund will be launched. It will be launched as soon as possible. We are aiming to launch applications to the fund as soon as we physically can.
My opposite number, the hon. Member for Southampton, Test (Dr Whitehead), is right that we have had a productive and constructive relationship when it comes to discussion of the Bill. The 72 hours that we spent together in Committee were beneficial to everybody’s health, I am sure, and to the development of Government policy on this matter. We have come some way from where we were when we started discussing how we would support community energy. He rightly praised the role that the sector has played during the passage of the Bill. The community energy sector has been incredibly receptive to our commitment to a consultation and to the £10 million fund.
John Redwood
I am grateful to the Minister for giving way. Did he notice that the hon. Member for Bath (Wera Hobhouse) would not give way? She was arguing—the typical position of her party—that it knew all the answers before the consultation, yet it still wanted a very long, drawn-out consultation to avoid doing the answers.
Andrew Bowie
My right hon. Friend is absolutely right. I also noticed that—
Andrew Bowie
Two seconds. I will respond to the first intervention before I give way to the hon. Lady. I also noticed that she managed to answer a question that had not even been asked by my right hon. Friend.
Wera Hobhouse
The amendment also says that the Government should respond to the barriers and put forward proposals. That is really what we want to know: what is the response to any consultation? The Government have failed to give any response to that.
Andrew Bowie
We cannot respond to a consultation that has not been launched yet. We are in the process right now of working with the community energy contact group. In fact, it has already met. Work is under way right now to develop the consultation, identify what the barriers to market are, and get out there and support the community energy sector, as the Government are determined to do.
Dave Doogan
The Minister is very kind. He was re-emphasising the importance of the £10 million community energy investment that he is making in England over two years. The Scottish Government have been investing £5.5 million every year for the last 13 years. If he thinks that his investment is outstanding, how would he characterise the Scottish Government’s investment?
Andrew Bowie
I welcome all Governments’ investment in support of community energy projects across the United Kingdom, but this is a sharp change from the last time the hon. Member came to this place, when he was decrying the fact that we were not extending community energy packages across the United Kingdom. I think I had to inform and educate him that there was already a community benefits package in Scotland, operated by the Scottish Government. Yes, there are problems with that scheme, and we will learn from the difficulties that it has faced. That is why I am so sure that the scheme that we are launching—the £10 million to support community energy projects the length and breadth of the country—is the right one, working in tandem with the funds that are already available north of the border for community energy projects in my constituency and, indeed, in his.
The hon. Member for Southampton, Test spoke about previous amendments on community energy. We have been clear that they would not provide the best outcomes for consumers. A right to local supply already exists, and Ofgem has existing flexibility to award supply licences that are restricted to certain geographies. We continue to believe that it is a commercial matter left to suppliers.
Lastly, I turn to my right hon. Friend the Member for Kingswood (Chris Skidmore). Six months may be too soon, frankly, to adequately analyse the outcomes of the consultation. It must fully take into consideration wider interdependencies in the energy system. We will always aim to respond in a timely manner, but I would not want to put a strict timeframe in legislation.
The Government support our route to net zero. The Government are taking action to ensure that we are more energy secure and energy independent, and the Government are supporting community energy projects the length and breadth of the country. For that reason, we should disagree to the Lords amendment before us.
Question put, That this House disagrees with Lords amendment 274B.
Energy Bill [HL]
Tuesday 24th October 2023
(1 year ago)
Lords ChamberRead Full debate Energy Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 176-I Marshalled list for Consideration of a Commons Reason - (23 Oct 2023)
Lord Callanan
That this House do not insist on its Amendment 274B, to which the Commons have disagreed for their Reason 274C.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, Amendment 274B was added to the Energy Bill during the previous consideration of Commons amendments. As the House will be aware, the amendment was debated in the other place last week and the Government Motion to disagree to the amendment was passed with a substantial majority.
I can confirm to the House that our position remains the same. The amendments would commit the Government to a consultation on the barriers preventing the development of community energy schemes. The amendment sets out with whom we would consult and commits the Government to bringing forward proposals to remove identified barriers to community energy within a brief six-month timescale.
I welcome the constructive engagement from across the House, in particular from the noble Baroness, Lady Boycott. I welcome her continued efforts throughout the passage of the Bill to ensure that the interests of the community energy sector are heard in this Chamber, but I reassure the noble Baroness that, on this issue, the Government have already made a clear commitment to the consultation.
As part of this commitment, we have outlined that we will engage in an open and collaborative way with the community energy sector, via the community energy contact group, to design the consultation. In fact, officials are already engaging on exactly that, and earlier this month held a very constructive discussion on the consultation with the group. Given our existing commitment to consult, and our ongoing engagement with the sector, we therefore believe that it is of no additional value to put the specifics in primary legislation.
In addition, there are further issues with the previous amendments that meant that we could not support their inclusion in the Bill. We clearly cannot commit to putting forward proposals to remove barriers that are preventing the development of community energy schemes before we know what barriers are raised in the consultation, or the implications of removing them. It would be remiss of us to agree to put that into primary legislation. Placing this obligation on the Government would be putting the cart before the horse.
However, I reassure the House yet again that the Government will carry out the consultation and continue to work closely with the sector to do so. I also reiterate the Government’s support in principle for community energy; we recognise the role that community groups play in our efforts to eliminate our contribution to climate change. I participated in a great visit to North Kensington Community Energy two weeks ago where I was able to see first-hand some of the important work that the sector does and to meet the contact group.
More widely, government support for the sector is demonstrated through existing support that we have already put in place, such as the £10 million community energy fund. I am pleased to tell the House that we aim to open applications to that fund as soon as we possibly can.
Baroness Boycott (CB)
I thank the Minister very much for his sort of co-operation through the passage of the Bill. It is hugely important. It was introduced about 16 months ago, and I do not wish to delay it any further. But I speak with great regret that the Government find themselves unable to agree to my simple and incredibly uncontroversial amendment, which just seeks to clarify the Government’s commitment to consult on the barriers that community energy schemes face. I am very pleased that the Minister went to visit one that was working, but I assure him that a lot are not.
While I welcome the steps the Government have taken to re-establish the community energy fund—for instance, reporting to Parliament and consulting—it is important to put a timescale on these plans; 18 months is fair and reasonable. Without a timescale there is a risk that this will not happen. It has been demonstrated that this issue has widespread support across both Houses. When we have something that we agree on, we ought to just get on with it and do it. I fear that this small but significant issue will get drowned out in next year’s general election. I would appreciate reassurance from the Minister that this is a needless worry and that the Government are committed.
I would just like to get some clarity on a couple of points. What will be the basis of this annual report to Parliament? Is it simply to report on the progress of projects, or will it address the challenges that we face and the best route to sort them out? My amendment also sought to ensure that, should any consultation find that there are barriers—new barriers, for instance—the Government will commit to taking steps to address these. Being candid, we know that there are barriers, and I appreciate the argument that you should not legislate for the unknown, but I am simply trying to get an assurance that they would plan to lift barriers that we know are there—including ones that we do not know.
To return to the issue of the consultation, we have rehearsed what issues need to be resolved; thanks to the Bill committee in the other place, there are many views on record. I do not believe that much is likely to change in the next year. While I agree that we should follow due process here, it must not be used as a reason for delay. I urge the Minister to open this consultation ASAP, so that we can get this ball rolling.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise very briefly and with great pleasure following the noble Baroness, Lady Boycott, who has done such an enormous amount of work on this issue—I pay tribute to that.
I was the person who started these amendments on their way back in December 2022, after we started work on this Bill last July. A consultation is something but what we really need is action, so I have a simple question for the Minister. As he said, this consultation has already started this month; if the Government see or identify through that consultation some simple, easy-to-remove barriers, will they act on them immediately rather than waiting for the end of the formal process? Surely, if action can be taken then projects, such as the one in Kensington to which the Minister referred, can go forward.
Lord Teverson (LD)
My Lords, I too congratulate the noble Baroness, Lady Boycott, on her persistence in this area. One of the strong messages that came out between Committee and Report in this House was the slow progress, and lack of progress, on community schemes. I very much hope that this consultation will reverse that trend. It seems slightly ironic, though typical, that the objection from the Commons is on there being a timetable, whereas we all know that for anything to happen, you need a timetable to focus.
On these Benches we are now keen to get this Bill on the statute book and that it becomes an Act. It has been delayed a number of times, mainly from the government side, as it has progressed through both Houses. There are a lot of important parts of this Bill that need to happen. I very much hope that the future systems operator will be quickly nominated and can move into action, so that a number of the strategic bottlenecks that we have in our energy sector can be swept away and solved. Again, I thank the noble Baroness for her persistence in this area, and I hope that consultation will move to action very quickly.
Lord Lennie (Lab)
My Lords, I thank the noble Baroness, Lady Boycott, for her persistence on this. I agree with what she is trying to achieve. The Minister came dangerously close to Rumsfeld-speak when he effectively said that we cannot know the unknowables. All that we and the amendment were suggesting was that a report needs to come forward and then we can determine how we need to act, which seems entirely sensible.
I agree with the noble Lord, Lord Teverson: it is time that the Bill got on to the statute book. The Bill has been far too long in digestion. Let us hope we can now eat it all and enjoy its flavour.
Lord Callanan (Con)
I thank all Members who have contributed to this extremely brief debate. To have a brief debate on the back of a Bill that now has 335 clauses, one of the longest Bills that we have passed in this House for many years, is quite ironic but probably appropriate.
On the issue in question, I thank the noble Baroness, Lady Boycott, for her remarks. She spoke about the timing of the consultation. All I can tell her is that we will launch it as soon as we can; I am afraid I cannot put a specific date on it, but I hope it will not be too long away now. Officials need to continue their discussions with the community energy sector about the content of the consultation before we can launch it. I confirm absolutely that officials are working closely with the Community Energy Contact Group—I have met it myself —and we are keen to get on with this as quickly as possible.
Similarly, on the content of the consultation, until we finish those discussions we cannot commit to exactly what the consultation will include. That really would be putting the cart before the horse—unknown unknowns, as the noble Lord, Lord Lennie, referred to. On the commitment to publish an annual report on the community energy sector, which the noble Baroness, Lady Boycott, spoke about, I confirm that, as with the consultation, we will work closely with the sector to design exactly what the report will look like.
The noble Baronesses, Lady Bennett and Lady Boycott, asked me to commit to removing barriers. Until we know what those barriers are, it is impossible for me to give a vague commitment. If removing a barrier is simple and straightforward then of course we would want to do it, but we are talking in generalities without knowing what the specific issues are. Let us have a bit of patience and wait for the outcome of the consultation. The House can be reassured that we are committed to the consultation and keen to see the community energy sector go forward, which is why we have provided the new £10 million fund to aid it to do just that. In the personal discussions I had with the sector, it was extremely keen and enthusiastic to get on with some of the great work that it does.
As this will be the final time that I will be on my feet for this gigantic piece of legislation, I thank the Members from all sides who have contributed during the passage of this, frankly, huge piece of legislation. At every industry forum that I have done for the last six months, I have been asked the obligatory question, “When will the Energy Bill get Royal Assent?”. Whether it be the CCUS sector, the hydrogen sector or the smart meter sector, as well as the community energy sector, every stakeholder group in this area is keen to get this legislation on the statute book. I know the House had some concerns but in general the legislation has support from all sides, and I think everybody accepts that it will do great and noble things for the energy sector.
As well as Members of the House, I thank all the officials who have now spent a number of years working on this. There were several hundred of them so I cannot mention them all by name, but I particularly pick out Jeremy Allen and Jessica Lee, who have led the team fantastically over the last months and years. I am sure they will be lost without their little baby, as the Energy Bill becomes the Energy Act. They have done some great work, including on the Nuclear Energy (Financing) Act and the Energy Prices Act. I hope noble Lords will join me in thanking them for all the good work they have done, in the finest traditions of the Civil Service, in helping us to navigate our way through these important pieces of legislation.
Royal Assent
Thursday 26th October 2023
(1 year ago)
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