Brexit: Energy Security (European Union Committee Report)
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
The noble Lord has set me a rather large challenge in terms of how much he wants me to respond to in my comments—particularly as he strayed into the Smart Meters Bill, now the Smart Meters Act. I do not think we want to rehearse that. I may have to refer to the Nuclear Safeguards Bill, shortly to become an Act, because I think it will be important for this issue, but I am grateful for his mention that he will be tabling amendments to the price cap Bill—or whatever its proper name is. I look forward to seeing them as soon as possible to make it easier for us to respond to them in good time when we meet in Committee on Monday and Wednesday.
I join other noble Lords in offering my congratulations to the noble Lord, Lord Teverson, on chairing the EU Energy and Environment Sub-Committee and my thanks for producing the report. I am grateful that my right honourable friend was able to respond in good time—although I am not sure that I recognised her response in the remarks made by the noble Baroness, Lady Featherstone, and the noble Lord, Lord Rooker. I thought that she responded in a proper and timely manner.
I should also say that I hope that the noble Lord, Lord Teverson, has received a letter from my right honourable friend sent only today—if he has not, I have a copy—in response to the European Commission’s notices to stakeholders, referred to by the noble Lord, Lord Krebs. The noble Lord, Lord Teverson, nods, so I take it that he has received it. The noble Lord, Lord Krebs, referred to the various questions raised in that capacity. I shall ensure that a copy of the letter is placed in the Library so that the noble Lord can see the more detailed response. I apologise for the fact that it came out only today, but I think it was probably of use to him in his response.
Many points and questions have been put to me, some of which I will be able to respond to. As always, I give an assurance that I will write in due course to noble Lords to deal with other, more detailed points if I feel that I cannot answer them in the time allowed. The noble Lord, Lord Rooker, complained about the brevity of some of my right honourable friend’s responses. He will be the first to understand that it is not always possible in a short debate happening late at night to respond in the detail that he would like to some of the points that he has made.
We believe that the UK has a well-functioning, competitive and resilient energy system and that our energy market is one of the most liquid and developed markets in the world. As we have made clear, we also believe as regards costs that it is right to intervene where necessary. That is why we have brought forward the price cap Bill as a temporary measure.
As noble Lords will be aware, we have also commissioned the independent review of the cost of energy by Professor Dieter Helm. We are currently considering his findings and will be sorting out the next steps after further consultation with stakeholders. I hope that the noble Lord, Lord Davies, will accept that as a response to some of his points about costs and will be prepared to wait for it in due course.
At the heart of our plans for a reliable electricity system in Great Britain is the capacity market. It secures the capacity required to meet peak demand in a range of scenarios, and it will continue to do so after EU exit. To ensure long-term security, we are broadening GB’s power generation base, including through new nuclear generation and offshore wind. Several noble Lords referred to the building of Hinkley, including the noble Viscount, Lord Hanworth. He will also be aware of the announcement that my right honourable friend the Secretary of State made about Wylfa in Anglesey. For some reason, his noble friends did not want me to repeat that Statement in this House, but it is there in Hansard for him to see. I can further add that the latest contracts for difference round secured record renewable energy capacity—I say this to the noble Baroness, Lady Featherstone—at a record low price.
The GB gas market is highly diversified, with a variety of different sources of supply that do not depend on a relationship with the EU. We have domestic production, short-range and flexible gas storage facilities, gas pipelines from Norway, and three liquefied natural gas terminals, as well as gas interconnectors, about which I shall say something a little later, because they were raised by the noble Lord, Lord Grantchester and the noble Baronesses, Lady Featherstone and Lady Sheehan.
Whatever our future relationship with the EU, we remain committed to delivering dependable, secure and low-carbon energy. Our Clean Growth Strategy, published in October—again, the noble Baroness was faintly dismissive of it—set out plans to build further on our successful decarbonisation of the power sector, while looking across the whole of the economy and country, through the 2020s and beyond. The clean growth grand challenge in our industrial strategy sets out to maximise the advantages from the global shift to clean growth for UK industry. The grand challenge will require us to embed clean growth across government’s activities. We remain strongly committed to the Paris climate change agreement, and will satisfy our international obligations and seek to maintain the shared approach enshrined in the agreement. Leaving the EU will not change any of our domestic statutory commitments to reduce our emissions, as laid out in the Climate Change Act 2008; indeed, those targets are more ambitious and challenging than those set by EU regulation.
As set out in the Prime Minister’s Mansion House speech, we are seeking the broadest and deepest possible agreement, covering more sectors and co-operating more fully than any free trade agreement anywhere in the world today, for its future economic partnership with the EU. We have made significant progress on negotiations so far; we have agreed the terms of a time-limited implementation period, and on the wider withdrawal agreement have locked down entire chapters on the financial settlement and citizens’ rights. More recently, as was made clear at Question Time today by my noble friend Lord Callanan, we will produce a White Paper that will set out in detail the UK’s position on a future relationship.
With respect to energy, as was made clear in the evidence given by my honourable friend Richard Harrington, we seek broad co-operation with the EU, ensuring that energy trading continues as efficiently as possible with the EU to underpin our future economic relationship. This includes exploring options for the UK’s continued participation in the EU’s internal energy market, as was mentioned by many noble Lords but particularly by the noble Lords, Lord Teverson, Lord Davies of Stamford and Lord Grantchester. It also includes protecting the single electricity market across the island of Ireland, which was a concern to many noble Lords. The Irish Government and the rest of the EU share the UK Government’s intention to support the stability of energy supply on the whole of the island of Ireland.
The Government are also clear about the importance of continued efficient electricity and gas interconnection between the island of Ireland and Great Britain, which the committee’s report rightly highlights. In the ongoing negotiations with the EU, we are making good progress on agreeing a basis on which the single electricity market can continue, as part of the draft withdrawal agreement. We are confident that we will secure a UK-EU future partnership that will achieve that shared objective.
Can I say a little about electricity interconnection? The UK and the EU have a common ambition to make energy trading easier and more efficient by opening up national markets and by increasing the level of interconnection between them. Facilitating cross-border energy trade so that it is as efficient as possible will remain in the interests of not only ourselves in the United Kingdom but of the EU, following our exit. The UK is continuing to develop more electricity interconnection and to open up trade with neighbouring markets. In addition to the 4 gigawatts of existing interconnection capacity, a further 4.4 gigawatts is now under construction and, beyond this, 9.4 gigawatts of potential additional interconnection projects already have regulatory approval from Ofgem.
Positive investment decisions on new interconnectors have taken place since the referendum. There have been final investment decisions on two interconnector projects, with approximately €1 billion of construction contracts being awarded. The ElecLink interconnector awarded contracts worth approximately €400 million in November 2016, and the IFA2 interconnector awarded contracts worth approximately €600 million in April 2017. So progress is being made and we are working to ensure that we can continue trading as efficiently as possible over those assets. We also want to continue with the gas interconnectors—mentioned by other noble Lords—with Belgium, the Netherlands and Ireland, which support the gas markets in those regions.
Moving on to Euratom, I dealt with quite a lot of that earlier today and throughout the passage of the Nuclear Safeguards Bill. I do not want to repeat all the points that I made earlier today and at other times, but I assure the noble Lord, Lord Davies, that there is no threat to medical radioisotopes. We will still be able to import them from Europe and the rest of the world. Those assurances have been given by myself and by other Ministers on other occasions. The simple fact is that it has been agreed that we will leave Euratom when we leave the European Union; the two are interconnected. As stated in the Prime Minister’s Mansion House speech, the UK will continue to seek a close association with Euratom, which shows our commitment to maintaining close and effective arrangements relating to civil nuclear co-operation, safeguards and safety with Euratom and the rest of the world. Maintaining continuity for the nuclear sector is a key priority.
I say to the noble Lord, Lord Rooker, that we also recognise the importance of being able to attract the right workers and we recognise the challenges that he mentioned in relation to Hinkley Point. The noble Lord, Lord Teverson, mentioned those with a wonderful spoonerism when he talked about steel-fixers—I will not try to repeat it. We recognise the importance for the nuclear sector and we must remember that “skilled” is not always the same as “highly qualified”. We know that we need construction workers in that industry and we are working closely with the Home Office—a department that the noble Lord, Lord Rooker, knows well—to ensure that the needs of the nuclear sector are understood and will be addressed.
I repeat what I made clear earlier today—although I think the noble Viscount, Lord Hanworth, was not here at the time—that as part of developing our policies for coming out of Euratom, in Vienna today we received an agreement from the International Atomic Energy Agency which provides for the voluntary application of international civil nuclear safeguards. That was formally approved by its board of governors today. In addition, looking across the Atlantic, I am delighted that we have now signed a new nuclear co-operation agreement with the United States of America, which will go through the ratification process both there and here. Although the noble Lord, Lord Teverson, seems to think that it will take rather a long time, I am confident that that will come into play in due course.
In Brussels, our negotiations with the European Commission on separation issues have gone well. We have reached agreement with the EU on the majority of Euratom issues under discussion, including on the legal text to be included in the withdrawal agreement.
The noble Lords, Lord Krebs and Lord Hunt of Chesterton, and others expressed considerable concern about continuing collaboration on science and innovation. We have a strong history of collaborating with our European partners through the EU, pan-European, and other multilateral and bilateral initiatives on science and innovation, and we are committed to establishing a far-reaching science and innovation pact with the EU, facilitating the exchange of ideas and researchers. In her recent speech at Jodrell Bank the Prime Minister stated that she would like the option to fully associate with the excellence-based European science and innovation programmes, including the successor to Horizon 2020 and the Euratom Research and Training Programme.
Finally, on investment, we are very mindful of the need to give certainty to investors. The UK is a global leader in attracting investment, and there is still significant appetite to invest in UK renewables, including offshore wind, from developers and financial investors. The UK will remain a great place to do business after we leave the EU, and we expect the strong investment climate in the energy sector to persist, attracting inward investment from all over the world.
I do not think that the noble Baroness, Lady Featherstone, would expect me to end without saying just a little about shale gas and the opportunities it gives us. As stated in the government response, the UK Government are committed to ensuring we have secure energy supplies that are reliable, affordable and clean. As part of this, shale gas has the potential to be a home-grown energy source which can lead to jobs and economic growth, contribute to our security of supply, and help us to achieve our climate change objectives. The Government are clear that shale development in the UK must be safe and environmentally sound, and we have a strong regulatory system in place. I hope that the noble Baroness and her party will come round to my way of thinking in due course. She looks as though that is unlikely, but I live in hope.
I hope that I have dealt with most of the problems but, as I said, I will reply by letter in due course. I am grateful to the noble Lord, Lord Teverson, for taking the opportunity to bring this report before the House and for the hard work that he and his committee put into it.