All 32 contributions to the Energy Act 2023

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Wed 6th Jul 2022
Energy Bill [HL]
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1st reading & 1st reading
Tue 19th Jul 2022
Energy Bill [HL]
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2nd reading & 2nd reading
Mon 5th Sep 2022
Energy Bill [HL]
Lords Chamber

Committee stage & Committee stage & Committee stage & Committee stage & Committee stage
Wed 7th Sep 2022
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Energy Bill [HL]
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Report stage: Part 1
Tue 28th Mar 2023
Energy Bill [HL]
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Report stage: Part 2
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Tue 6th Jun 2023
Energy Bill [ Lords ] (Fifth sitting)
Public Bill Committees

Committee stage: 5th sitting & Committee stage: 5th sitting
Thu 8th Jun 2023
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Energy Bill [HL]
Lords Chamber

Consideration of Commons amendments
Wed 18th Oct 2023
Energy Bill [Lords]
Commons Chamber

Consideration of Lords messageConsideration of Lords Message
Tue 24th Oct 2023
Energy Bill [HL]
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Consideration of Commons amendments
Thu 26th Oct 2023
Royal Assent
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Energy Bill [HL]

1st reading
Wednesday 6th July 2022

(1 year, 7 months ago)

Lords Chamber
Read Full debate Energy Act 2023 Read Hansard Text
First Reading
15:53
A Bill 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.
The Bill was introduced by Baroness Bloomfield of Hinton Waldrist (on behalf of Lord Callanan), read a first time and ordered to be printed.

Energy Bill [HL]

2nd reading
Tuesday 19th July 2022

(1 year, 7 months ago)

Lords Chamber
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Second Reading
15:31
Moved by
Lord Callanan Portrait Lord Callanan
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That the Bill be now read a second time.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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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.

15:45
Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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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.

15:57
Lord Bruce of Bennachie Portrait Lord Bruce of Bennachie (LD)
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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.

16:08
Baroness Hayman Portrait Baroness Hayman (CB)
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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.

16:19
Lord Howell of Guildford Portrait Lord Howell of Guildford (Con)
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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.

16:32
Lord Whitty Portrait Lord Whitty (Lab)
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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.

16:45
Baroness Sheehan Portrait Baroness Sheehan (LD)
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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?

17:00
Lord Bishop of Carlisle Portrait The Lord Bishop of Carlisle
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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.

17:05
Lord Moylan Portrait Lord Moylan (Con)
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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 Portrait Baroness Sheehan (LD)
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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 Portrait Lord Moylan (Con)
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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.

17:16
Viscount Hanworth Portrait Viscount Hanworth (Lab)
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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.

17:25
Lord Ravensdale Portrait Lord Ravensdale (CB)
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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.

17:32
Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (GP)
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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.

17:46
Baroness McIntosh of Pickering Portrait Baroness McIntosh of Pickering (Con)
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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.

17:55
Lord Haworth Portrait Lord Haworth (Lab)
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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.

18:02
Baroness Boycott Portrait Baroness Boycott (CB)
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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.

18:09
Baroness Jones of Moulsecoomb Portrait Baroness Jones of Moulsecoomb (GP)
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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 Portrait Baroness Jones of Moulsecoomb (GP)
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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.

None Portrait Noble Lords
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Yes he is!

Baroness Jones of Moulsecoomb Portrait Baroness Jones of Moulsecoomb (GP)
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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.

18:19
Lord Teverson Portrait Lord Teverson (LD)
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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.

18:33
Lord Lennie Portrait Lord Lennie (Lab)
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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.

18:41
Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Baroness Sheehan (LD)
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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 Portrait Lord Callanan (Con)
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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.

Bill read a second time.
Committee (1st Day)
15:21
Amendment 1
Moved by
1: Before Clause 1, insert the following new Clause—
“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 Portrait Lord Lennie (Lab)
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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.

15:30
Lord Moylan Portrait Lord Moylan (Con)
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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 Portrait Baroness McIntosh of Pickering (Con)
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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.

15:45
I am also very concerned—and I am not sure that this was pointed out in the policy paper—that the current price cap does not cover oil, solid fuels, and LPG. These are particularly important to those of us living in deeply rural areas, where we are off the gas grid and have no access to alternative fuel supplies. Many of those living in the countryside are old people, pensioners, or people living on fixed incomes, in some of the most poorly insulated housing not just in this country but, dare I say, in the whole of Europe, if not the world.
I have family in Demark and went to visit, among other places, the little summerhouse that we used to play in during our summer holidays on the fjord. Theirs is an all-year-round house built 20 or 30 years ago, with triple glazing and a modern state-of-the-art heating pump that fires up all their fuel costs except for their hot water. It is small, it is inobtrusive and it does not make a noise. Why this country always seems to be 20 or 30 years behind many others in terms of technology I simply do not know.
Amendment 6 is intended as a probing amendment. The energy security strategy policy paper and the Queen’s Speech originally referred to an energy security Bill, so I accept that this Bill has gone broader than that, but I hope that my noble friend the Minister will give a commitment today that energy security will remain paramount and underlie all the terms and priorities of the Bill.
The introduction to the policy paper from the current Prime Minister—that is probably the last time that I will be able to say that—says:
“We need a power supply that’s made in Britain, for Britain—and that’s what this plan is all about.”
No man, and no country, is an island. In energy policy, we are heavily dependent on interconnectors bringing energy from Norway and France, if not from other countries too, bringing in LPG in tankers. I accept that a global crisis underlies this, Putin’s invasion of Ukraine, with all the background that is in the policy paper. However, I hope that we will work closely with Europe and other countries to ensure that we do not go it completely alone in trying to work our way through this energy crisis.
There are other points that I hope this amendment can encapsulate but which I do not see in the Bill. I hope that my noble friend can put my mind at rest in this regard. First, there is a lack of focus on tidal energy. Scotland has focused very heavily and very effectively on tidal energy, as have other countries. Why are we possibly turning down the potential for tidal energy? Secondly, as my noble friend will be aware, I am a great fan of energy for waste. I am not saying that it is not there, but I do not see in the policy paper or in the Bill opportunities to have more energy from waste. At the moment in North Yorkshire, bizarrely, we are exporting a lot of our household waste to Holland, where it is burned and forms an energy source for local households. This seems a bizarre and very expensive way of getting rid of our household waste, so effectively, through energy from waste, we will be resolving two issues: how to dispose of our waste which we can no longer send to landfill because it is full and creating a strand of energy.
I make a plea to my noble friend that the energy created in this way, such as that at the energy waste plant in Allerton Park in North Yorkshire, should go to the local community. That will bring communities on side. It gets rid of one of their waste outlets—household waste—and creates a source of energy that I should like to see them being able to use.
I will mention onshore and offshore wind. It is not often stated that both these forms of energy are entirely dependent on pylons and overhead energy transmission to feed them into the national grid. My understanding is that this amounts to 30% of energy being lost in transmission, which seems hugely wasteful. If we have an energy crisis, how is it that we are creating this new energy source with either onshore or offshore wind farms and not undergrounding it—we certainly are not in the north of England—while losing 30% of our electricity through overhead line transmission?
A further plea, which I hope will be close to the heart of the noble Lord, Lord Teverson, is that we should ensure that, when we have a dash for further offshore wind farms, there will be an independent review of the damage that current and future wind farms on the scale envisaged will have on marine life. We have not yet established that, but it is deeply disturbing and could lead to loss of marine life, as well as sea mammals and birds.
To conclude, in speaking to Amendment 6, I support a great deal of what is in the Bill, but I feel that it is silent on many points and should go further in securing our energy supply, which I understood was its original focus. I hope my noble friend will put my mind at rest in this regard.
Baroness Bloomfield of Hinton Waldrist Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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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 Portrait Lord Ravensdale (CB)
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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 Portrait Lord West of Spithead (Lab)
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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.

16:00
Lord Howell of Guildford Portrait Lord Howell of Guildford (Con)
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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 Portrait Viscount Trenchard (Con)
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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?

16:15
Could the Minister also confirm that the Government recognise that the only way to achieve energy security without watering down our net-zero commitments is to accelerate significantly programmes for the development of both SMRs and AMRs, which have been and still are considered—illogically—different technology sectors? The acceptance of Amendment 5 or a similar amendment would make it more likely that the necessary strategic policy changes could be made.
I am also inclined to support Amendment 6, in the name of my noble friend Lady McIntosh, to establish one “principal objective”: energy security. On Amendment 231, eloquently spoken to by my noble friend Lord Moylan, it is interesting to seek to distinguish and separate carbon and non-carbon sources of electricity and the pricing mechanisms of those two subsectors. I would like to know what the Minister thinks about that and the other amendments in this group.
Baroness Worthington Portrait Baroness Worthington (CB)
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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 Portrait Lord Teverson (LD)
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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 Portrait Baroness Jones of Moulsecoomb (GP)
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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.

16:30
I am sympathetic to the early amendments. Amendment 5 is a bit of a right-wing, net-zero-wrecking amendment, so I definitely would not support it. Amendment 6 from the noble Baroness, Lady McIntosh, is also a bit of a wrecking amendment in terms of the climate goals, so I definitely would not support that. Interestingly, Amendment 231 in the name of the noble Lord, Lord Moylan, would be a very good idea because, as the noble Lord, Lord Teverson, just said, it is ridiculous that people who have installed solar power, for example, and have renewable sources for their own electricity end up paying the top rate like everybody else. Those people have cheaper electricity. We should split the renewable electricity market from the fossil fuel-based electricity market—it is absurd that they have been bundled together—because renewable is so cheap and abundant. I would therefore probably support that sort of amendment if it came up later.
I am sceptical about whether this Bill will even get through. It could easily be overturned—it might not even get past this week, of course—but we must seize the opportunity to fix a broken system. We are living through a market failure. It will destroy the lives of millions of people, push more people into poverty and make life harder. If the Government cannot get a grip of the issue, they will deserve to be out of power for a generation.
Baroness Hayman Portrait Baroness Hayman (CB)
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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.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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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.

16:45
Lord Moylan Portrait Lord Moylan (Con)
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My Lords, did I hear my noble friend say 2023? Did I hear that correctly?

Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Baroness Worthington (CB)
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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 Portrait Lord Callanan (Con)
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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 Portrait Lord Lennie (Lab)
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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.

Amendment 1 withdrawn.
Amendments 2 to 7 not moved.
Clause 1: Principal objectives and general duties of Secretary of State and economic regulator
Amendment 8
Moved by
8: Clause 1, page 2, line 2, leave out second “may” and insert “are or are likely to”
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 Portrait Lord Foulkes of Cumnock (Lab Co-op)
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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 Portrait Baroness Worthington (CB)
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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 Portrait Baroness Bennett of Manor Castle (GP)
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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.

17:00
The noble Baroness, Lady Worthington, referred to the construction industry. Are we specific about that when looking at mineral carbonation? There is already at least one company that makes the reasonable claim—perhaps still to be fully attested—to be a carbon capture and storage producer of cement blocks, using a process of mineral carbonation that combines waste slag from the steel industry with carbon from industrial plants. We need to leave these possibilities open and ensure that they are encouraged, to make sure that a company that develops such a plan does not then run into a block of legislation that stops it being able to deliver because it would then be left in a difficult commercial situation.
Lord Teverson Portrait Lord Teverson (LD)
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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 Portrait Lord Hutton of Furness (Lab)
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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 Portrait Lord Lennie (Lab)
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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 Portrait Lord Callanan (Con)
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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.

17:15
On Amendment 13, which would require that the economic regulator should be duty bound to assist the Secretary of State’s compliance with his or her duties under the Climate Change Act, I reiterate the point in relation to the language of “have regard to” in the drafting of regulatory duties in a complex sector with varying objectives that can sometimes conflict. It is important to make sure that the regulator’s duties strike the right balance between setting out all the relevant issues and considerations and allowing the necessary discretion for the regulator to balance those considerations—and of course to have sufficient authority and independence in that decision-making process. For example, in a circumstance where net-zero objectives are perhaps in tension with consumer protections, the amendment could inadvertently reduce the regulator’s ability and discretion to balance such tension. The drafting of the regulatory duties will ensure that achieving emissions reduction targets is considered by both the regulator and the Secretary of State in their decision-making and that this is balanced appropriately against other regulatory considerations. I hope that I have been able to offer sufficient reassurance to both noble Lords.
I move on to the noble Baronesses, Lady Worthington and Lady Bennett of Manor Castle, and their remarks on Amendments 14, 15, 16 and 19, which are concerned with expanding definitions in the Bill to encompass non-geological forms of storage of carbon dioxide, including usage. The definition of “carbon capture entity” in Clause 63 could include a broad range of carbon-capture applications, including projects where the utilisation of carbon dioxide results in the storage of carbon dioxide with a view to its permanent containment. If the project meets the other conditions in the definition, decisions about which carbon-capture entities are eligible for support are therefore to be made on a case-by-case basis.
Carbon capture and usage technologies typically involve the capture of carbon dioxide and its subsequent use as an alternative to directly captured carbon dioxide that is stored permanently underground. As has been said, CCU has a variety of potential applications across industrial sectors in the UK, including fertiliser production, cement, lime and food and drink. However, not all those applications result in the permanent abatement of carbon dioxide. Carbon capture and usage resulting in the permanent abatement of carbon dioxide presents only a relatively small abatement potential when compared with carbon capture, which is disposed of by way of geological storage. Therefore, we are prioritising support for the deployment of carbon capture and storage in the UK in order to incentivise large-scale abatement of carbon dioxide and the establishment of transport and storage infrastructure essential for net zero.
We anticipate that those who may wish to off-take carbon dioxide from the network for the purposes of carbon capture and usage are likely to have alternative options available, such as off-taking directly from an emitter. Therefore, it is considered that economic regulation is not currently needed for networks transporting carbon dioxide for non-geological storage or for usage purposes. I hope therefore that I have offered sufficient reassurance to noble Lords on that matter and that they will not press their amendments.
Baroness Worthington Portrait Baroness Worthington (CB)
- Hansard - - - Excerpts

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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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 Portrait Lord Foulkes of Cumnock (Lab Co-op)
- Hansard - - - Excerpts

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.

Amendment 8 withdrawn.
Amendments 9 to 16 not moved.
Clause 1 agreed.
Clause 2: Prohibition on unlicensed activities
Amendment 17
Moved by
17: Clause 2, page 3, line 30, leave out “a licence” and insert “an economic licence issued pursuant to subsection (2) or a licence issued by another competent authority”
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 Portrait Lord Foulkes of Cumnock (Lab Co-op)
- Hansard - - - Excerpts

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.

17:30
Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (GP)
- Hansard - - - Excerpts

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 Portrait Baroness Blake of Leeds (Lab)
- Hansard - - - Excerpts

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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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.

17:45
The economic regulation and licensing framework for carbon dioxide transport and storage provided for in the Bill is intended to work alongside existing licence requirements in the Energy Act 2008. The economic regulation funding model allows a network operator, under the terms and conditions of a licence, to charge network users for delivering and operating the network—and the right to an “allowed revenue” that reflects its efficient costs and a reasonable return on the capital investment involved. In our view, this economic regulation model is appropriate for carbon dioxide transport and storage, given the natural monopoly characteristics of the infrastructure and assets. We recognise that, in the future, the market may evolve such that it may become appropriate for different licence types to be granted, with different conditions attached to those necessary first licences.
Amendment 18, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, seeks to enable other forms of storage to be part of carbon dioxide transport and storage networks. Economic regulation is not currently considered appropriate for networks established to transport carbon dioxide for usage purposes, as we discussed in relation to similar amendments in the previous debate.
Amendment 20, also tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, aims to include provision for shipping, as well as any other method of non-pipeline transportation, within the scope of the economic licensing framework for the transport and storage of carbon dioxide. Subsection 2(3)(b) provides scope for alternative means of transportation to be included within the economic licencing framework, if that is appropriate in the future, by way of regulations. So the Government recognise the importance of non-pipeline methods of transporting carbon dioxide for storage to achieving decarbonisation across sectors of the economy.
However, although pipelines for the transportation of carbon dioxide and carbon dioxide geological storage sites currently have certain monopolistic characteristics, non-pipeline forms of transportation obviously do not share these attributes. Therefore, it is currently not considered necessary to economically regulate non-pipeline methods of carbon dioxide transportation, but we will of course keep this matter closely under review.
Amendments 21 and 22, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, seek to make it clear that a licence can be granted to cover either carbon dioxide transportation or storage, or both. In our view, the flexibility to license these activities both together and separately is important, and I reassure both noble Lords that this is already the intent and allowed for in the drafting. The first licences are expected to cover the full carbon dioxide transport and storage network. However, in future it may become desirable to separately license constituent parts of a network.
Clause 7 provides for the granting of licences in relation to activities described in Clause 2, and as drafted it allows for licences to be granted in respect of either one or both types of activity. Additionally, there is a power in Clause 8 to enable different licence types to be specified, should that become desirable in the future.
I now move to address Amendments 23, 27 and 35, also from the noble Lord, Lord Lennie, and the noble Baroness, Lady Bennett. These amendments seek to place a responsibility on the Secretary of State to ensure that individuals obtaining a carbon dioxide transport and storage licence are “fit and proper”. These amendments place responsibility on the process of licence application, licence transfer and the special administrative regime. I support the aim of the noble Lord and noble Baroness to ensure the upmost standards for those wishing to engage in the transport and storage of carbon dioxide that will be needed to help us meet our net-zero target.
Of course, the granting of a licence pursuant to the Bill does not supersede or displace existing requirements for persons wishing to carry out activities relating to the storage of carbon dioxide to obtain the necessary storage permit. Such a permit may be granted where the relevant authority considers the applicant to be “technically competent” and “financially sound”, as set out in Regulation 7 of the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010.
Clause 9(6) of the Bill provides powers for the Secretary of State to specify in regulations any considerations that should be taken into account before granting a licence, such as a successful application for a storage permit—which would also be required—or compliance with other preconditions that could constitute a fit and proper persons test. The safety of CCUS is underpinned by a strong regulatory framework that is in place precisely to mitigate any risks, with BEIS of course being guided by the relevant expert bodies in this matter. The department is currently developing licence terms that require the ultimate controller of the licensee to provide the necessary undertakings that it is a fit and proper person and anticipates testing this in advance of awarding any licence.
I thank the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, for their Amendment 24 to Clause 9, which seeks to amend the parliamentary procedure applying to regulations made under this clause from negative to affirmative. Regulations which may be made under Clause 9 would be very much procedural in their nature, and it is the Government’s firm view that the negative procedure is in this case entirely appropriate. Regulations could include conditions that future licence applications may be required to meet. For example, regulations could be produced to stipulate particular considerations for the economic regulator to take into account when it grants licences. However, decisions by the economic regulator and the Secretary of State under this part would, in any event, be bound by the principal objectives and general duties in Clause 1, which we discussed earlier.
Finally, I turn to Amendment 26 from the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, which seeks to clarify that the economic regulator may exercise discretion in whether to revoke a licence. Clause 17 is intended to ensure that persons with a material interest in the revocation of a carbon dioxide transport and storage licence are notified ahead of a licence being terminated. This facilitates, for example, a statutory transfer scheme being affected.
I hope I have been able to provide the necessary assurances to noble Lords and noble Baronesses. I thank them for helping us to test the robustness of the Government’s carbon dioxide transport and storage licensing frameworks and I hope that they will not press their amendments.
Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (GP)
- Hansard - - - Excerpts

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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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 Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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 Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

That would be very useful.

Lord Foulkes of Cumnock Portrait Lord Foulkes of Cumnock (Lab Co-op)
- Hansard - - - Excerpts

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.

Amendment 17 withdrawn.
Amendments 18 to 20 not moved.
Clause 2 agreed.
Clauses 3 to 6 agreed.
Clause 7: Power to grant licences
Amendment 21 not moved.
Clause 7 agreed.
Clause 8: Power to create licence types
Amendment 22 not moved.
Clause 8 agreed.
Clause 9: Procedure for licence applications
Amendments 23 and 24 not moved.
Clause 9 agreed.
Clause 10 agreed.
Clause 11: Conditions of licences: general
Amendment 25
Moved by
25: Clause 11, page 12, line 39, leave out “and legacy”
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 72, line 25.
Amendment 25 agreed.
Clause 11, as amended, agreed.
Clauses 12 to 16 agreed.
Schedule 1 agreed.
18:00
Clause 17: Termination of licence
Amendment 26 not moved.
Clause 17 agreed.
Clause 18: Transfer of licences
Amendment 27 not moved.
Clause 18 agreed.
Clauses 19 to 21 agreed.
Schedule 2 agreed.
Clauses 22 to 25 agreed.
Clause 26: Provision of information to or by the economic regulator
Amendment 28
Moved by
28: Clause 26, page 25, line 34, leave out “Environmental” and insert “Environment”
Member's explanatory statement
This amendment is to correct a misspelling of SEPA’s name.
Lord Foulkes of Cumnock Portrait Lord Foulkes of Cumnock (Lab Co-op)
- Hansard - - - Excerpts

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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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 Portrait Lord Foulkes of Cumnock (Lab Co-op)
- Hansard - - - Excerpts

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.

Amendment 28 agreed.
Amendment 29 not moved.
Clause 26, as amended, agreed.
Clause 27: Power of Secretary of State to require information
Amendment 30 not moved.
Clause 27 agreed.
Clause 28 agreed.
Clause 29: Power to require information for purposes of monitoring
Amendment 31 not moved.
Clause 29 agreed.
Clause 30: Duty to carry out impact assessment
Amendment 32 not moved.
Clause 30 agreed.
Clause 31 agreed.
Clause 32: Enforcement of obligations of licence holders
Amendment 33
Moved by
33: Clause 32, page 30, line 25, leave out from beginning to “provision” and insert “Schedule (Enforcement of obligations of licence holders) makes”
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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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.

18:15
Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

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 Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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.

Amendment 33 agreed.
Amendment 34
Moved by
34: Clause 32, page 30, line 28, leave out subsections (2) and (3)
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 30, line 25.
Amendment 34 agreed.
Clause 32, as amended, agreed.
Clauses 33 to 42 agreed.
Clause 43: Objective of a transport and storage administration
Amendment 35 not moved.
Clause 43 agreed.
Clauses 44 to 52 agreed.
Amendment 36
Moved by
36: Before Schedule 3, insert the following new Schedule—
“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.
Amendment 36 agreed.
Schedule 3: Transfer schemes
Schedule 3 agreed.
Clause 53: Cooperation of storage licensing authority with economic regulator
Amendment 37 not moved.
Clause 53 agreed.
Clauses 54 to 56 agreed.
Schedule 4: Amendments related to Part 1
Schedule 4 agreed.
Clause 57: Revenue support contracts
Amendment 38
Moved by
38: Clause 57, page 51, line 34, at end insert—
“(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 Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

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 Portrait Baroness Blake of Leeds (Lab)
- Hansard - - - Excerpts

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 Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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.

18:30
I am pleased that the noble Lord recognises the importance of ensuring that all the different strands of the Government’s net-zero agenda are joined up. I can assure him that this is the case and that the impacts of any regulations made under Clause 109 will be clearly set out. The Government do not believe that this amendment is necessary for the success of the hydrogen village trial and therefore, again, I hope he will feel able not to move it.
Amendments 143, 145 and 148 all relate to the independent system operator and planner, now referred to as ISOP. The Bill is intended to extend the strategy and policy statement to provide guidance to ISOP in a similar manner to how it can provide it to Ofgem. It ensures that the Government can effectively communicate to ISOP and Ofgem their strategic priorities and policy outcomes. These clauses therefore reflect the wording that applies in the strategy and policy statement to Ofgem as set out in the Energy Act 2013.
On Amendment 143, it would in our view be misguided to add to ISOP’s responsibilities demonstrating its alignment with every policy outcome in the statement, particularly if the same duty does not necessarily apply to Ofgem. On Amendment 145, this is a government document and in our view it is for the Government alone to draft it and ensure that it is aligned with our policy priorities. The Government will use the statement, once it has been designated, as a tool to provide strategic focus to ISOP and to ensure that it is aligned with the strategic priorities of the Government’s energy policy. There are no statutory obligations on the Government to set out assumptions or design methodology in the statement. Therefore, it would not be appropriate or necessary for ISOP to be obliged to opine on their appropriateness. However, ISOP will always have liberty to provide its views on the contents of the statement if it wishes or if we choose to ask it to.
I thank the noble Lord for his Amendment 148, which seeks to provide ISOP with the duty to make recommendations on updating the strategy and policy statement. As I have said, the strategy and policy statement is a government document which reflects the Government’s own policy priorities. If ISOP deems it particularly important, it will always have the right to provide recommendations at its own discretion, but we do not think it appropriate to place a statutory duty on it. We think that is unnecessary and, in this case, inappropriate. It is therefore neither necessary nor suitable for ISOP to have a duty to provide its opinion on the content or timing of the next iteration of the strategy and policy statement.
It is also worth pointing out that Ofgem will have no such corresponding duty, and it would not be appropriate to impose a duty only on ISOP and not Ofgem, as the strategy and policy statement is meant to operate in the same way, effectively, for both of them. I welcome the noble Lord’s contributions, which have allowed us to have a discussion on this issue, but I hope that, in this case, he feels able not to move his amendments.
Amendment 160 seeks to ensure that policy processes are aligned with the purpose set out in Amendment 6. In my view, it is unnecessary for two reasons. First, there are already provisions in the clause that do not just have regard to the outcomes the noble Lord is seeking but are in fact designed with those outcomes in mind. The buy-out mechanism has been designed to aid the removal of obligation thresholds under the energy company obligation scheme, which aims to address current market distortions in the retail energy market. This measure will lead to more energy suppliers becoming obligated, therefore spreading the cost of ECO among a greater number of domestic consumers. Secondly, the amendment would not have a practical effect. The ECO scheme was developed to meet various fuel poverty commitments and targets set out in the fuel poverty strategy for England. Again, I do not think that duplicating the existing obligations in this Bill serves any substantive purpose.
Therefore, given the reassurances I have been able to provide, I hope the noble Lord will feel able not to press his amendments.
Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

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.

Amendment 38 withdrawn.
House resumed.
18:36
Sitting suspended.
Committee (2nd Day)
Relevant document: 4th Report from the Constitution Committee
16:29
Clause 57: Revenue support contracts
Amendment 39
Moved by
39: Clause 57, page 51, line 39, at end insert—
“(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 Portrait Lord Lennie (Lab)
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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 Portrait Baroness Liddell of Coatdyke (Lab)
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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 Portrait Lord Howell of Guildford (Con)
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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 Portrait Viscount Hanworth (Lab)
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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 Portrait Baroness Jones of Moulsecoomb (GP)
- Hansard - - - Excerpts

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.

16:45
Lord Teverson Portrait Lord Teverson (LD)
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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 Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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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 Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

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.

Amendment 39 withdrawn.
Amendment 40
Moved by
40: Clause 57, page 52, line 11, leave out “function on any” and insert “relevant function on any relevant”
Member’s explanatory statement
This amendment is to ensure powers are appropriately delegated.
Baroness Liddell of Coatdyke Portrait Baroness Liddell of Coatdyke (Lab)
- Hansard - - - Excerpts

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 Portrait Baroness Blake of Leeds (Lab)
- Hansard - - - Excerpts

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 Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

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.

17:00
Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
- Hansard - - - Excerpts

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 Portrait Baroness Liddell of Coatdyke (Lab)
- Hansard - - - Excerpts

Given that explanation, I am prepared to withdraw the amendment.

Amendment 40 withdrawn.
Lord Geddes Portrait The Deputy Chairman of Committees (Lord Geddes) (Con)
- Hansard - - - Excerpts

We come to Amendment 41. Lord Callanan?

Lord Callanan Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

Moved formally. No! I will speak to it.

Lord Callanan Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

You just can’t get the Whips to support you properly nowadays, can you?

Lord Callanan Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

I am only joking. My noble friend is brilliant at the job.

Amendment 41

Moved by
41: Clause 57, page 52, line 21, at end insert “or (Enforcement).”
Member's explanatory statement
This amendment provides for regulations under new clause (Enforcement) to be subject to the affirmative procedure.
Lord Callanan Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

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 Portrait Lord Lennie (Lab)
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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 Portrait Lord Callanan (Con)
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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.

Amendment 41 agreed.
Clause 57, as amended, agreed.
Clauses 58 to 60 agreed.
Clause 61: Designation of hydrogen production counterparty
Amendment 42 not moved.
Amendment 43
Moved by
43: Clause 61, page 55, line 5, leave out from “of” to end and insert ““low carbon hydrogen production”, including (without limitation) compliance with the Low Carbon Hydrogen Standard”
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 Portrait Baroness Liddell of Coatdyke (Lab)
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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 Portrait Baroness Bennett of Manor Castle (GP)
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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 Portrait Baroness Worthington (CB)
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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.

17:15
So we should be under no illusion but that hydrogen in home heating is a last resort. The most obvious thing to do is to use electricity. It is the cleanest and most flexible vector. Heat pumps are by far and away more efficient. I think it has already been mentioned in this debate that it can take up to six times as much electricity to produce the same usable heat from hydrogen as a simple heat pump. This is fundamental to ensuring that we send the right signals in our energy policy. We must seek the most cost-effective and secure system. Let us not get distracted by the lobbyists and vested interests, who will tell us that their particular solution is the right one when it is so clearly not the case. Nineteen independent studies have shown us that electricity is far better for use for heating in the home than using hydrogen.
Turning to my amendment, if we are to use this highly questionable route forward for heating, let us ensure that we introduce very stringent standards. I have been speaking to the Green Hydrogen Organisation, which is a new trade association in Europe concerned with representing green hydrogen companies. It says that the best standard is 1 kilogram of CO2 equivalent for 1 kilogram of hydrogen, and that is what we should be adopting. We should seek to be as ambitious as possible, driving investment into only the cleanest forms and not being distracted by what would be a very expensive and inefficient, very costly and potentially dangerous solution which is just not needed at this time.
Lord Oates Portrait Lord Oates (LD)
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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 Portrait Baroness Blake of Leeds (Lab)
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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 Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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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 Portrait Baroness Bennett of Manor Castle (GP)
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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 Portrait Baroness Bloomfield of Hinton Waldrist (Con)
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I need to take that question back to the department and then write to the noble Baroness.

Baroness Liddell of Coatdyke Portrait Baroness Liddell of Coatdyke (Lab)
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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.

Amendment 43 withdrawn.
Amendments 44 to 47 not moved.
Clause 61 agreed.
Clause 62: Direction to offer to contract
Amendment 48 not moved.
Clause 62 agreed.
Clause 63: Designation of carbon capture counterparty
Amendment 49 not moved.
Clause 63 agreed.
Clause 64 agreed.
Amendment 50
Moved by
50: After Clause 64, insert the following new Clause—
“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 Portrait Lord Oates (LD)
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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.

17:30
It is clear that long-duration energy storage will be critical to decarbonising the power sector by 2035. I think that is recognised by all who have been involved in this. We currently have long-duration storage capacity of about 26 gigawatt hours, which is principally in the existing four pumped storage plants that we have—two in Wales and two in Scotland—and about two gigawatt hours from long-duration battery storage. We need to increase that capacity significantly.
The Economic Affairs Committee report on energy published this summer quoted the estimates that that capacity needed to rise eightfold to meet those demands. It also called on the Government to
“develop a market model for long-duration energy storage”
as rapidly as possible. The need for speed is underlined by the long lead times for projects such as this. Dinorwig took over 10 years from being given the go-ahead to coming into operation, and Ffestiniog pumped storage station began its planning in the early 1950s and did not come into operation until 1963.
As many noble Lords are aware, we currently have a pumped storage project ready to go at Coire Glas in Scotland. It received planning consent in 2020. That would be capable of providing 30 gigawatt hours of capacity; that is enough to power 3 million homes for 24 hours and would double our current long-duration storage capacity. At present, however, it cannot go ahead because the revenue support models have not been agreed. These projects have big upfront capital costs, although they have very long lifetimes, as we see from the continuing operation of projects from the 1960s and later.
There seems to be a lot of delay from the Government in coming to conclusions. Their own consultation on long-duration energy storage closed in September 2021. They promised a response to that in the first quarter of 2022. They finally responded in July and effectively said that, although the responses to the consultation had been pretty clear—indeed, the responses to the inquiry of the Economic Affairs Committee of this House pointed to the same cap and floor model—they wanted to think about it further. I suppose that we should recognise that this a very thoughtful Government, because they intend to think about it for the rest of this year, through the whole of 2023 and into 2024. That is completely inadequate for the urgency of this task, because there is no way of achieving our target to decarbonise the power sector by 2035 without bringing on a lot of long-duration storage.
I recognise that some potential long-duration storage solutions are innovative technologies, but pumped hydro storage is not: it is old and proven, in terms of both effectiveness and value over the long term. These amendments will not solve things, but we may come back more specifically on Report. What I want to get from the Government is some understanding of whether they feel they can come forward with at least a pathfinder solution, possibly for something like Coire Glas, because that will take a long time to build out. It needs to get going and the people developing it cannot just keep these things mothballed all the time; they need to know the revenue support model. I hope the Government will respond specifically on that issue. I also hope they will think about how to separate their support models for innovative technologies, which may need to be more flexible or different, from those for proven technology that we can get on with now. I beg to move.
Lord Moylan Portrait Lord Moylan (Con)
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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 Portrait Lord Foster of Bath (LD)
- Hansard - - - Excerpts

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%.

17:45
When he queried this with the supplier, he was told that Solar Energy UK had done some research, discussed this with HMRC and been informed that the Government were clear that retrofit or stand-alone batteries will still be subject to VAT at 20%. This does not really make sense. There should not be a fiscal incentive to install a battery at one time but not at another. The law at present penalises those who do not have the money to install solar technologies and a battery at the same time, which is detrimental to what should be the policy objective of maximising our energy self-sufficiency.
The reason for this is that installing a battery improves the self-consumption ratio of a solar system. This refers to the energy generated which is used on site. For a typical home, installing a battery will at least double the amount of electricity generated by a solar system installed on a roof. This maximises the benefit to the home owner as it means they pay less for their energy bills, and maximises the benefit to the country by allowing electricity generated in the day to be used at night—incidentally, easing the pressure on the national grid in the early evening, which is a peak time.
We should not penalise home owners and occupiers looking to protect themselves from the energy price crisis by adding batteries to their existing home solar systems as a stand-alone item to improve the benefits. Nor should we penalise those who could not afford to do both at the same time. My amendment, which removes VAT from stand-alone batteries, will help people cope with the energy crisis, help generate more energy and help us achieve our zero-carbon goal. I beg to move.
Lord Geddes Portrait The Deputy Chairman of Committees (Lord Geddes) (Con)
- Hansard - - - Excerpts

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 Portrait Lord West of Spithead (Lab)
- Hansard - - - Excerpts

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 Callanan Portrait Lord Callanan (Con)
- Hansard - - - Excerpts

It hates to spend money full stop.

Lord West of Spithead Portrait Lord West of Spithead (Lab)
- Hansard - - - Excerpts

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 Portrait Baroness McIntosh of Pickering (Con)
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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 Portrait Baroness Neville-Rolfe (Con)
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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 Portrait Viscount Trenchard (Con)
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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 Portrait Baroness Worthington (CB)
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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.

18:00
Lord Foster of Bath Portrait Lord Foster of Bath (LD)
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To be absolutely clear, it would apply to all batteries that receive their supply from solar panels.

Baroness Worthington Portrait Baroness Worthington (CB)
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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.

Earl of Kinnoull Portrait The Earl of Kinnoull (CB)
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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 Portrait Baroness Bennett of Manor Castle (GP)
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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.