Tuesday 19th July 2022
(2 years, 3 months ago)
Lords ChamberEnergy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I start by acknowledging the record temperatures that we have been experiencing over recent days. I hope your Lordships remain cool while in the Chamber—which is probably the best place to be at the moment, given the air conditioning—and of course while travelling to and from the Chamber. I recognise the wealth of knowledge on energy policy in your Lordships’ House, which will no doubt be on full display in today’s debate.
This landmark Bill comes at a critical time for our country. Record high gas prices, Russia’s illegal invasion of Ukraine and the challenge of climate change all come together to highlight why we need to boost Britain’s energy independence and security. To protect households from the full impact of rising prices, we are acting now with a £37 billion package of financial support this year. This includes the expansion of the energy bills support scheme so that households will get £400 of support with their energy bills.
Secure, clean and affordable energy for the long term depends on the transformation of our energy system. That is why we are bringing forward this Bill, the most significant piece of primary legislation for energy since 2013, delivering key commitments from the energy security strategy, the Prime Minister’s 10-point plan and the net zero strategy. The Bill will help to drive an unprecedented £100 billion of private sector investment by 2030 into new British industries and will help to support around 480,000 clean jobs by the end of the decade.
I turn to the main elements of the Bill. It has 12 parts, which it will be helpful to consider under three key pillars. The first pillar leverages investment in new technologies, securing clean, homegrown industries that can help to reduce our exposure to volatile gas prices in the longer term. The Government have continually demonstrated our commitment to maintaining the security and resilience of our energy system. Investment in clean technologies is an essential part of the system transformation.
Deploying carbon capture, usage and storage—CCUS—and low-carbon hydrogen production will create new industries, helping to transform our former industrial heartlands. The Bill will introduce state-of-the-art business models for CCUS and for hydrogen. That includes provisions to establish an economic regulation and licensing framework for CO2 transport and storage, and a new levy to fund hydrogen production. These will attract private investment by providing long-term revenue certainty to investors, putting the country on a path to grow these new clean industries and reindustrialise our economy.
The Bill will enable the delivery of a large village hydrogen heating trial by 2025, providing crucial evidence to inform decisions in 2026 on the role of hydrogen in heat decarbonisation. Building on policies such as the £450 million boiler upgrade scheme, the Bill includes provisions to scale up heat-pump installation, providing the powers to establish a market-based mechanism for the low-carbon heat industry to help build the market for heat pumps to 600,000 installations per year by 2028. Through the Bill, we will also make the UK the first country to address fusion in regulation, providing clarity on the regulatory regime for fusion energy facilities.
The second pillar in the Bill will allow for the necessary reform of our energy system. It will protect consumers from unfair pricing and decarbonise our energy system. By reforming the system, we will help to scale up the installation of key clean technologies for the future, ensuring that the system is more efficient in order to enable innovation and reduce the UK’s dependency on global fossil fuel markets.
The Bill will enhance our network security by establishing a new independent system operator and planner, which will support system reform and boost energy system resilience. Working across the electricity and gas systems, the independent system operator and planner will also ensure efficient energy planning, enhance energy security, minimise cost to consumers and promote innovation.
The Bill will reform energy code governance, overhauling the way that the technical and commercial rules of the energy system are overseen and kept up to date. This will make the system more agile, enable innovation and gear our system toward net zero.
In line with our manifesto commitment, we are legislating to extend the existing energy price cap beyond 2023 if necessary. The cap is the best safety net for 22 million households, preventing suppliers over- charging consumers. The Bill also contains provisions to enable competition in onshore electricity networks, delivering up to £1 billion worth of savings for consumers on projects tendered over the next 10 years.
The provisions in the Bill about mergers of energy network enterprises will protect consumers from increasing network prices in the event of energy network company mergers. They will enable the Competition and Markets Authority to consider the impact on Ofgem’s ability to carry out its role when reviewing energy network company mergers. We estimate that this could save energy consumers up to £420 million over 10 years.
The Bill will protect consumers and the grid from cyber threats, with new powers to regulate energy smart appliances. Provisions in the Bill will support continued delivery of the smart meter rollout, which will enable consumers to manage their energy use and cut their bills to help with the cost of living.
We will introduce multipurpose interconnectors as a licensable activity. The provisions will reduce the number of cabling points, landing points and substations. This will reduce the impact on local communities and the environment. It will also support the Government’s ambition for 50 gigawatts of offshore wind by 2030, as well as providing certainty to investors in and developers of multipurpose-interconnector projects.
In line with the 2021 smart systems and flexibility plan, we are legislating to clarify electricity storage as a distinct subset of electricity generation in the Electricity Act 1989. This will facilitate the deployment of electricity storage, such as batteries and pumped hydro storage, and remove obstacles to innovation in this area.
As we committed to in the energy White Paper, we are legislating to enable the removal of obligation thresholds under the energy company obligation scheme, commonly referred to as the ECO scheme. We will do so without creating significant financial and administrative burdens for small suppliers by enabling the Government to establish a buy-out mechanism under the scheme for suppliers.
Through the Bill, we will kickstart the development of heat networks. By enabling heat network zoning in England, we will overcome barriers to deployment by identifying areas where they provide the lowest-cost solution to heating buildings. We will also ensure that families living on heat networks are better protected, by appointing Ofgem as the new regulator for heat networks in Great Britain.
The Bill will provide a replacement power to enable the UK Government to amend the EU-derived energy performance of premises regime. This will ensure that the regime is fit for purpose and reflects the UK’s ambitions on climate change.
The third pillar in the Bill is about ensuring the safety, security and resilience of the UK’s energy system. The Bill follows the British energy security strategy announced earlier this year and puts into law measures to boost long-term energy independence and security. We are clear that nuclear energy has a vital role to play in reducing our reliance on fossil fuels and in our transition to net zero, as reconfirmed in the British energy security strategy. That is why this Bill will enable UK accession to the international Convention on Supplementary Compensation for Nuclear Damage. This will make greater compensation available to potential victims in the highly unlikely event of a nuclear incident and improve the investment climate for nuclear projects.
To build our nuclear future, we also need to clean up the past. Therefore, the Bill will facilitate the safe and cost-effective clean-up of the UK’s decommissioned nuclear sites. It will bring forward the final delicensing of nuclear sites, allowing more proportionate clean-up and earlier re-use of these sites. The Bill will also make it clear that geological disposal facilities located in or under the territorial sea require a licence and are regulated by the Office for Nuclear Regulation. The Bill introduces measures to enable the Civil Nuclear Constabulary to utilise its expertise in deterrence and armed response to support the security of other critical infrastructure sites, helping to keep those sites safe.
The continuity of core fuel supplies and energy resilience has never been more important. As such, the Bill contains measures for downstream oil security, which will apply to facilities such as oil terminals and filling stations. These measures will prevent fuel supply disruption and reduce the risk of emergencies affecting fuel supplies, such as disruption from industrial action or malicious protest and emergencies resulting from wider national security risks.
As we all know, our oil and gas sector plays an important role in our transition to a cleaner energy system. The Bill will enable existing legislation to be updated, ensuring that the offshore oil and gas environmental regulatory regime maintains high standards in respect of habitat protection and pollution response. It is important that we ensure that the UK’s oil and gas and carbon storage infrastructure remains in the hands of companies with the best ability to operate it. Therefore, the Bill will allow the North Sea Transition Authority to identify and prevent a potentially undesirable change of control before it happens.
In line with the polluter pays principle, and in order to protect taxpayers, the Bill introduces a provision on charging schemes for offshore oil and gas decommissioning. This means that the Government will be able to recover the costs of these activities more fully from the industry.
I also share with the House three amendments that we intend to bring forward in Committee. To meet commitments made in the British energy security strategy we will look to amend the Bill to include measures on offshore wind habitats regulations assessment and an offshore wind environmental improvement package. This measure will help to reduce the time it takes to get planning consent for offshore wind projects from up to four years down to just one year. We will also look to include a provision on the Energy Savings Opportunity Scheme, also known as ESOS. This measure will improve the quality of ESOS audits and provide powers to expand the scheme to include net-zero elements in audits and more businesses. Finally, we will look to amend the Bill to include provisions that will bring Nuclear Decommissioning Authority pensions in line with the majority of the rest of the public sector. The new scheme was agreed with unions, and includes provision for retirement on full pension before state pension age.
The Bill will benefit every part of the UK. Some measures of course touch on devolved matters. From the outset, the Government have sought to work closely with the devolved Administrations and are committed to the Sewel convention. Where the Government believe that the Bill is legislating in an area of devolved competence, they have, in good faith, highlighted these areas to the devolved Administrations ahead of their consideration of the Bill.
This is ambitious legislation and allows for the necessary reform of our energy system. We are charged with a great responsibility to ensure the security, affordability and decarbonisation of our energy supply for many generations to come. We are also presented with huge opportunities to leverage investments in new, clean technologies that will reinforce the UK’s position as a global leader in delivering net zero. I hope noble Lords will recognise the exciting opportunity that this Bill represents to facilitate the necessary reforms, boost investment in clean technologies and ensure the security of supply in the longer term. At the same time, it will stimulate economic growth and job creation in support of our levelling-up agenda. I beg to move.
Baroness Blake of Leeds (Lab)
My Lords, I am grateful for the opportunity to debate this Bill today. I look forward to the contributions that will be made from across the House, and in particular to the closing comments from my noble friend Lord Lennie.
As the Minister mentioned, it is hard to think of a more appropriate day than today to hold this debate. That, together with the illegal Russian invasion of Ukraine, now approaching the end of a fifth month, means this is a very important moment for us to consider the sheer scale of the task ahead of us. It is clear that the Energy Bill is needed, and in this regard it is very welcome. However, we will need to consider what is missing from the Bill.
For the millions of families facing the catastrophe of soaring energy bills, I am afraid the Bill is another missed opportunity as it does not tackle the scale of the issue. It is a missed opportunity to tackle the cost of living crisis; a missed opportunity to bring forward the emergency energy efficiency measure we so desperately need; and a missed opportunity to deliver the green energy sprint that could bring down bills while creating tens of thousands of skilled jobs for future generations if the necessary training programmes and supply chains are developed.
Long-term reform of the energy market is of course necessary, but it must come alongside urgent action to cut bills, strengthen our energy security and tackle the climate crisis now. This Bill will do nothing to buck the Government’s record of failure on these issues as it stands, but perhaps there is an even bigger issue at hand: the Government who presented this Bill already no longer exist. By the time the Bill is in Committee, they will have been entirely replaced. While the leadership selection is still weeks away, we have already heard candidates putting internal politics ahead of science, evidence and the future of the country, at the same time as we experience the dangerous impact of climate change first hand. The country needs to know urgently what their commitment to net zero, for example, really is. I am pleased that they have all finally, publicly committed to net zero, but I have to say that it took a very long time for some of them to get to that point. I cannot ask the Minister to commit to what a future Government will do, but it is important to make the point regardless.
A decade of failed energy policy has left energy bills too high and the UK’s energy system too weak. This Government simply cannot answer the biggest challenges our country faces. While there is a lot in the Bill—243 clauses, as we have heard, covering three pillars, much of which we welcome—what really stands out, as I have said, is what is missing. Where are the urgent measures to help families with soaring energy costs that the Government could be offering, such as delinking the low price of renewable energy from the high price of gas? Where are the desperately needed measures for a green energy sprint that can bring down bills over the years to come? Where is the end to the effective ban on onshore wind—the quickest, cheapest way to reduce reliance on insecure international gas supplies, so starkly exposed by the current crisis in Ukraine? Where is the much-needed extension and upgrade of the national grid?
Where is the long-term mission for home insulation, beginning with the insulation of 2 million homes this year? The UK’s record on energy efficiency in housing is woeful. We need changes to planning law and building regs brought in immediately to stop the building of substandard homes and start closing the gap between our performance and that of other European countries—where, I am afraid, we rank among the lowest.
The Bill is simply not up to the problem at hand. Clauses 1 to 111 and Schedules 1 to 5 address leveraging investments in clean technologies. This sounds great, until you realise that 97 of these clauses and all five schedules relate to carbon dioxide and hydrogen, and that only 14 relate to new technology. Of those 14, 10 clauses are dedicated to low-carbon heat schemes which the Secretary of State “may” make provision for. I am afraid this hardly feels like the sprint to green energy that is needed.
The next six parts of the Bill relate to a pick and mix of energy system reform. There are some welcome and interesting ideas here. The Future System Operator consultation, published earlier this year, set out what we already knew—that the current approach towards delivering net zero was lacking—so the establishment in Part 4 of an independent system operator and planner, ISOP, for the electricity and gas supply sectors is particularly welcome. An expert, impartial body with the duty of facilitating net zero is exactly what is needed. As the pre-existing electricity system operator, which is expected to be at the heart of this new body, has pointed out, it is vital to ensure that ISOP is independent and free from actual or perceived conflicts of interest. It is further welcome that it will be established as a public corporation with operational independence from the Government. Can the Minister expand on the scale and timeline for implementation?
Also found in the second pillar are small pushes in the right direction on the energy company obligation, smart meters and heat networks, but, as is the theme with the Bill, these positive steps are just too timid. We welcome the regulations introducing ECO4 just last week but they are little more than a small step in the right direction on efficiency, and a small step in the wrong direction on bill prices. The provisions expanding the powers in this Bill, while positive for smaller suppliers, appear to be even less significant. Where is the wholesale movement on efficiency that is needed?
As for smart meters, we have heard again and again how their rollout is being developed, facilitated or extended. The provisions in the Bill do not seem to change anything. This is a major consumer issue that could be fixed through the Bill, especially if proper attention is given to using gathered data effectively. That is exactly what we need right now. Why will the Government not mandate the rollout of this legislation, rather than continuing to dither?
The provisions on heat networks are the most welcome in this area. Heat network consumers are currently woefully unprotected; regulation offering much-needed safeguards to the 480,000 consumers who currently use them is long overdue. With the number of heat networks, and the number of consumers they will supply to, expected to grow significantly in our efforts to reach net zero, this is even more pertinent and so we welcome them. However, that perhaps makes the legislation even more disappointing, in a way. It does not encompass the reality and misses yet another opportunity. These systems are poorly funded and poorly maintained; they should be renewable but are not; and they are not covered by the price cap. The legislation fixes none of these much wider issues and it is hard to see this as anything but a failure in the grand scheme of things. Where is the overhaul that heat networks really need?
The third pillar of the Bill contains provisions on maintaining the safety, security and reliance of energy systems across the UK. At this time more than ever, any additional risk of fuel shortages would be most unwelcome. Ensuring that the Government can take steps to maintain or improve fuel supply resilience, if they are needed, is welcome. It is important, however, that any powers introduced are not overextended or misused. I note the factsheet response but would be keen to hear more from the Minister on how far the powers can go—an area I am sure we will discuss at later stages of the Bill’s passage.
There are other welcome provisions in this pillar. There are also a number of provisions in Part 12 on the civil nuclear sector, including on waste storage, decommissioning and more. I would be keen to hear more from the Minister on decommissioning, where I understand we will be reducing ONR regulation as set out under the 1965 Act, which is now deemed unnecessary. The benefits of this have been clearly set out and I understand aligning with international law but, given what is at stake, the more reassurance from the Minister on this being a safe move, the better.
Those are just a few of the areas that need to be addressed, and we will look to do so at later stages if the Government do not. However, I need to ask when a coherent, cross-cutting communication strategy will be ready and when the promised energy advice service will be up and running. Taking public opinion with us and delivering through local networks will be critical to achieving the changes in behaviour that will underpin progress. We have seen from earlier versions of the energy security strategy that agreement on a number of areas is possible, not least onshore wind and solar. We hope the new Prime Minister will not abandon the ambition to deliver.
I am grateful for the amendments that the Minister shared with us this morning. We will be looking at them in greater detail. But the point, running through the Bill, is about not abandoning ambition to deliver when that is exactly what is needed now—ambition and a real commitment to urgency. The scale of the challenge will not be met with anything less.
Lord Bruce of Bennachie (LD)
My Lords, I thank the Minister for his introduction and will comment briefly on his three pillars. The first, of leveraging investment, particularly in carbon capture and storage and in hydrogen, is in principle welcome but we have been talking about it for a long time. The question is whether the Bill will make a material difference and galvanise action and progress.
On the second pillar, of reform for pricing and decarbonisation, the Government must acknowledge that the price cap, essential as it is in the present crisis, is evidence of failure. A market that requires a price cap is clearly a dysfunctional market, yet the Government, right from the days of privatisation, have said throughout that competition would deliver efficiency and price competition. What it has actually done is encourage companies into the market that were not fit for purpose and have subsequently collapsed, leaving a few major players in the field—one of which has had to be wholly nationalised by its Government, as it was otherwise nearly bankrupt—so there are some issues there about how the Bill will change things for the better.
On the third issue of safety, security and resilience, a whole load of issues are of concern. The fact that the Government acknowledge that a cyberattack against the network is a very serious potential threat to the country is important, I guess, but we need to know that we have effective protection and countermeasures. The actual state of the network, speaking as somebody who has experienced it in the north of Scotland this year, is abysmal. We experienced four consecutive days without power and then, a month later, three consecutive days without it. There was no information, communication or telephones—clear evidence that the infrastructure was not fit for purpose and for a changing climate, so it is interesting that these things are all referred to in the Bill. As it progresses, I will look forward to seeing how the Government believe that this legislation will change things significantly, and for the better.
It is nearly 50 years since we experienced the first OPEC-led oil price crisis. I remember it because I was a young official with the local development authority in Aberdeen and it was the very early years of the oil boom. Although I was delighted that the UK had oil and gas reserves to develop, it was also clear to me that the world was far too dependent on fossil fuels and that we needed to use energy more efficiently and diversify our sources of energy. We also knew from a practical point of view that the quality of oil in the North Sea required it to be blended with oil from other regions; it was not usable in its raw or immediately refined state.
At that time, I wrote and co-wrote pamphlets advocating large-scale investment in energy efficiency— 50 years later and I think I am still waiting for that. I also advocated 50 years ago for investment in renewable energy, especially wind and solar but also wave and tidal. I remember there were two by-elections in Paisley in 1990 and we held a press conference with a model of a wind turbine which had been developed by shipyards in Glasgow. Our pitch was that Britain could lead the world in this technology. We did not win the by-election. We failed to persuade the Government, Denmark decided to do exactly that trick and we were left behind. It would also have transformed the workforce in many of the Scottish shipyards at a time when they were facing real difficulties.
On the issue of nuclear power, I am not viscerally opposed to it. However, it has always seemed very expensive and has a very challenging legacy of radioactive waste. I am certainly not comfortable with the idea of an undersea repository for such waste. The Government need to explain how that could be done safely, if at all.
Speaking, as we are, on a day of extreme heat—regardless of the intervention of the noble Lord, Lord Forsyth—is it impossible to deny the accelerating impact of climate change and the need to take action urgently. I think the noble Lord would be well advised to look at the graphs that have been produced of the global heat measures of 1976 and this year and see what a fundamental, radical change has taken place. I regret to say that, had the policies I have been talking about been applied 50, 40 or even 30 years ago, we would be much better placed to face the crisis we are facing now.
Faced with soaring oil prices, in the 1970s the Government stampeded into rapid development of the North Sea. That led to waste, inefficiency and, for a few years, limited opportunities for UK companies. However, 50 years on there is a strong UK involvement in the sector which has made a huge contribution to the economy over decades. This has taken the form of balance of payments benefits, high levels of consistent investment, hundreds of thousands of jobs, technical innovation by operators and over 1,000 companies in the supply chain. The challenges of the North Sea have made the UK current world leader in subsea technology.
The UK continental shelf nevertheless is a mature province. Regardless of the requirements of net zero, production and activity are declining and will continue to do so. I can tell the House that the local economy in Aberdeen experienced this only too clearly with a sharp downturn and a complete collapse of the local housing market. This has now been partially reversed by the increased oil price and the growth in investment in net-zero transition technologies.
Offshore Energies UK, the industry’s trade body, held its first parliamentary reception for two years on June 20 and made it clear that the industry was determined to be part of the solution and not just be demonised as the problem. I would like to pay tribute to Deirdre Michie, who will be standing down as the chief executive at the end of this year, almost eight years into the role. She is, of course, the daughter of a former Member of your Lordship’s House, the late Baroness Michie of Gallanach, who herself was a daughter of a former Member of this House, Lord Bannerman of Kildonan.
Deirdre and her predecessor Malcolm Webb have played a key role in promoting the importance and achievements of the industry and its supply chain over the decades, and the key role it must play in driving the transition to net zero. This is a really important point. Unsurprisingly, the reception here in Parliament was interrupted by a staged protest. Sadly, the protesters were not prepared to stay and debate or engage with us, which is a pity because the war in Ukraine has presented us with a dilemma. We need to move away from fossil fuels as fast as possible while recognising that switching the taps off now will increase the cost of living crisis and impose economically and politically unacceptable constraints.
I have reservations about windfall taxes, but no doubt the comments and actions of our two biggest oil and gas companies, Shell and BP, rather brought the roof down on themselves over that. It needs to be recognised that all plans of achieving net zero include continued, although declining, use of fossil fuels. We need to ensure that the capital and expertise of the industry is diverted to transition through investment in renewable energy, carbon capture and storage and developing hydrogen and alternative uses of C02.
All these things are being increasingly prioritised by the industry, but they need to be accelerated. Finding alternatives to Russian oil and gas means faster transition is needed. Will the Government allow such investment to be offset against the windfall tax as long as it is a genuine investment in transition and carbon reduction? The north-east of Scotland was extremely disappointed that the Acorn Project for carbon capture and storage did not get government fast-tracking in the first round, although it is government approved. If we are going to meet those targets, it should get backing sooner rather than later.
Pushing back against net zero targets is, frankly, irresponsible. I am concerned that some of those contending to become our Prime Minister seem to want to do just that; it is completely irresponsible. We need to intensify efforts to reduce carbon emissions both nationally and globally. Shutting down the UK offshore industry will not achieve that. We need to intensify the development of and the switch to hydrogen, the investment in renewable energy and increased energy efficiency.
Have we really grasped the nettle of retrofitting homes? Heat pumps alone will not do it. For many older houses, the cost of heat pumps will be far outstripped by the unaffordable cost of insulation. I had a neighbour in a Victorian granite house who asked for the cost. To get heat pumps installed and have a viable temperature inside the house, he would have to spend £10,000 to £15,000 on heat pumps, but £340,000 on insulating his house—which clearly was not viable. There are other houses which are much easier to insulate and which we could do a lot faster. That is surely what we should do.
At the same time, how quickly can we achieve the switch to electric cars? Will there be enough charging points, rapid charging for longer journeys and enough battery capacity globally to meet that requirement?
Parliament voted last year that we agreed that we are facing a climate emergency, yet the Government and their prospective leaders show no grasp of that urgency. Protesters who just try to disrupt the economy to force action seem to want to remove fossil fuels immediately. The danger of such drastic action in this direction is that it will drive counter-protests from people who may share the concern for our overheated planet and shrinking biodiversity, but cannot simply phase out their fossil fuel use without existing alternatives. Fossil fuels and their by-products are also essential feedstock for materials on which we have come to rely. We have to find carbon-free alternatives.
Facing these challenges will require the resources of money and expertise equivalent to about 100 moon or Mars projects or more. Much as I appreciate the lure of space travel, this is far more urgent. This planet needs saving before we conquer another one. Enabling measures in this Bill may make a small contribution but they do not come near to the sense of mission required. I do not see where the government action is going to come from in a party obsessed with tax and annoying the EU, rather than saving the planet and the consequential threat to our own islands.
I look forward to the debate, the Committee stage and hearing answers that might be convincing from the Government as to how this Bill is really going to be transformational.
Baroness Hayman (CB)
My Lords, I declare my interests as a co-chair of Peers for the Planet and a director of its aligned organisation. The Bill has been a long time coming, and its arrival is welcome. It provides, as the Minister very clearly delineated, many of the frameworks necessary to achieve the Government’s commitments set out in the energy security strategy: primarily, decarbonising our electricity system by 2035. As has been described already, we need to achieve that transition while ensuring security of supply and a price that people can afford. This is a task made much more urgent and challenging by the current energy price crisis and the conflict in Ukraine, issues which should have convinced even the most sceptical of the need to move away from expensive fossil fuels and to build up our renewables. Renewables are the cheapest form of energy; as well as increasing UK energy security, they would create high-skilled jobs and opportunities across the country. Therefore, the Bill is undoubtedly necessary, but even at some 360-odd pages it is not sufficient.
Both the Bill and the energy security strategy on which it is based lack the drive and focus—the mission that the noble Lord referred to—particularly on energy efficiency, where what we need is leadership and delivery. According to the CCC’s recent progress report to Parliament, the energy security strategy
“is almost entirely supply-focused and … There remains an urgent need for equivalent action to reduce demand for fossil fuels to reduce emissions and limit energy bills.”
It has been said that the cheapest form of energy is the energy that we do not use. Clear evidence that acting on both demand and energy efficiency brings positive outcomes, both short-term and long-term, is there for all to see. Providing funds for insulated properties would, alongside benefiting people and the planet, permanently lower bills and reduce the need for further subsidies in future. As the IFS has highlighted, it is simply not sustainable to continue this winter’s £17 billion energy support package year after year.
While the measures in the Bill that help to scale up the heat pump market are welcome, I fear that, without a clear strategy and delivery plan, and by not facing up to the issues that still remain in many properties, the market may not be able to deliver what is needed on its own. I hope that the Government will introduce a comprehensive energy efficiency and retrofit strategy, as well as a road map for getting there. We need long-term solutions to the problems of our cold, stifling or leaky homes, not short-term fixes. There have been calls for Ofgem to have its remit amended to include net zero, so that it can play its part in a comprehensive drive for progress. I hope that the Minister will say today that the Government will take that suggestion very seriously.
My second area of concern relates to the need for a clear vision for delivering more renewables. The Government’s ambitious target of 50 gigawatts of offshore wind by 2030 is extremely welcome, but despite the net-zero and energy security strategies recognising, on paper, that onshore wind has a key role to play in meeting net-zero targets, we do not currently have targets for onshore wind or other forms of renewables, such as solar. The Government have been urged by the industry to set a target for onshore wind of 30 gigawatts by 2030, with £45 billion of gross value added. This has strong public support; BEIS’s most recent Public Attitudes Tracker shows that 80% of the public support it.
The CCC highlighted in its progress report that:
“There remain further opportunities to reduce fossil fuel consumption on a timescale that will help people cope with current very high prices. These include a sustained push for both energy efficiency improvements and electrification, especially in the buildings sector, as well as deployment of onshore wind and solar, which can occur significantly quicker than offshore wind deployment.”
I ask again that the Government reconsider the 2015 ministerial Statement that has put an effective moratorium on onshore wind developments proceeding in England. This must be changed if we are to provide more of the cheap, renewable and homegrown energy we urgently need. If the Minister says in his reply that primary legislation is not necessary and that this does not need to be put in the Bill, I hope that he will commit today to altering the planning guidance to increase the contribution of onshore wind, therefore recognising both the need to put local communities in control and, more broadly—because I do not see it in the Bill—the crucial role of engaging and empowering local authorities if they are to bring their communities with them.
In their the energy security strategy, the Government committed to
“consult … on developing local partnerships for a limited number of supportive communities who wish to host new onshore wind infrastructure in return for benefits, including lower energy bills.”
It was hardly the wholehearted and comprehensive measure that I had hoped for, but it was something. I hope that the Minister can tell us when this consultation will commence and ensure that it aligns with planning guidance, so that communities who want onshore wind can start to access these benefits. We also need to ensure that we do not lose existing onshore wind capacity due to the current rules on the life extension of onshore wind farms. Again, a consultation has been promised: when will we see it?
A related issue raised by Power for People is the need to support community energy, so that people can purchase cheap, clean electricity direct from a local supply company or co-operative, instead of the current situation where local groups have to sell the power that they generate to large utilities that then sell it back to customers. It is asking for changes to be made to the energy market rules to make it affordable, proportionate and simpler for community energy schemes to sell their power directly to local customers. I hope that the Minister will consider including provisions within the Bill to enable these changes to be made by Ofgem.
I will speak very briefly about the use of hydrogen for home and workplace heating. It is clear that the Government view hydrogen as a key part of the future energy mix. While green hydrogen will undoubtedly have a role in some of the hard-to-decarbonise areas, such as fertiliser, cement and steel production, the question of pursuing a role for hydrogen in home heating is much more nuanced and debatable. There are alternatives readily available, and the proposals for a hydrogen levy could potentially bake in subsidies and higher bills for years to come. I hope the Government will look very carefully at the costs and environmental impacts of pursuing the strategy for the use of hydrogen in home heating.
Finally, I will pick up a theme that I have raised before: the current lack of comprehensive governance mechanisms to ensure that we deliver on net zero and, specifically, the need for a net-zero test to apply to decision-making across the Government, which we know from many reports is extremely patchy. Over the last 18 months, calls on the Government to build net zero into the structures and processes that govern departmental spending, prioritisation and decision-making have been raised by business organisations such as the CBI, the Climate Change Committee, the NAO, the Public Accounts Committee and the Environmental Audit Committee. Energy UK has recently highlighted this as a strategic issue which the Bill should address.
I must stress that no one is advocating some kind of bureaucratic tick-box exercise; energy companies and wider industry see such a test as an important mechanism for providing business certainty and clarity of direction from the Government. This sector, along with the others on which delivery of our decarbonisation goals depend, is asking for the Government to be clear, consistent and transparent in the way in which they take decisions not just within BEIS but across Whitehall. Developing a test will give them the confidence to invest, will help the Government to explain their decisions, and, by being transparent and clear, will help bring everyone, including the public, along with the Government, even when decisions are more difficult.
I hope that the Government will raise their ambitions for an energy system that is sustainable in every sense, and one that is based predominantly on homegrown, rapidly deployed renewables. This would be a system that weans us off costly fossil fuels—although I recognise the need for transition—lowers bills, provides warmer homes and improved health, and brings tens of thousands of high-skilled jobs in the energy efficiency and retrofit sector across the UK.
Lord Howell of Guildford (Con)
My Lords, I declare my interests as a former Secretary of State for Energy, former Minister of State for International Energy Security, ex-president of the Energy Industries Association and of the British Institute of Energy Economics, chair of the Windsor Energy Group, and an adviser to interested energy companies.
The stated aims of the Bill are to increase the resilience and reliability of our UK energy system, deliver commitments to climate change and reform the system in various ways. Since the first two of these three aims depend heavily on outside and international trends and conditions and on close co-operation with international partners, I was looking in the Bill for any powers, laws or strategies in the international arena, but they are quite hard to find. That makes it somewhat limited and, frankly, a little disappointing.
We are now in the midst of the worst energy crisis for half a century, with inflation being driven by stratospheric increases in all fossil fuels to dangerous levels in already fertile inflationary soil here in the UK—not the other way round, as the Governor of the Bank of England seems to think. Further disruption of Russian energy supplies to the European oil and gas markets, whether initiated by Russia or European states, will accelerate this inflation, invite recession, impose impossible further hardships on half the families in our nation, and force business shutdowns in large quantities. There is now talk of energy rationing this coming winter and possible supply interruptions, with the worst, we are told, yet likely to come.
This is not security; it is insecurity on a grand and cruel scale, begotten of dismal lack of preparedness and a stream of policy errors going back decades—not just in energy decisions but in economic and monetary responses. It is against this background that the Bill before us must be judged.
Before I come to what the Bill purports to achieve, let there be no doubt that well before the Ukraine invasion, the global energy system, of which we are and will remain an inextricable part, was under severe stress. Ukraine now pushes us into a new world energy order. We were, and are, engaged in a mission of global decarbonisation to prevent climate disasters, which requires, but frankly has completely lacked, the most careful synchronisation of evolving fuel supplies, needs and demands, and as great a transformation as in the Industrial Revolution of the end of the 18th century—in fact much greater, given that since then there has been a sevenfold increase in population in the world and in this country. That is what the Bill aims to assist now.
We have to ensure that creative policy-making in the present crisis can help rather than hinder tomorrow’s transition. One of the most depressing features of the current debate is the utter inability of many of those with the loudest voices to distinguish between the absolute necessity now of immediate relief measures and the long-term climate priorities. What does the Bill do to unravel this muddle and tangle? In the short term, I am afraid, very little. It is all very well to give powers to the system operator and planning office and to renew the energy cap, which the Bill does, but how does that avoid repeating the appalling policy mess which bankrupted numerous small gas suppliers at a cost of £3.2 billion? We talk about billions; that is £3,200 million, which all then had to be dumped on already overwhelmed consumers.
To start with the immediate—the here and now—we have to understand that the very frightening inflation is an energy-driven phenomenon. Being told in a resigned way, “Oh well, it’s external, it comes from the gods”—or, to quote a former Prime Minister whom I rather admired, Jim Callaghan, that we have been “blown off course”—and that there is not much to be done, except some cushioning of the impact, is never adequate in many people’s eyes and it is frankly not much comfort.
What has happened to our famed diplomacy and influence in managing and containing international crises of this kind? Rather, we are sitting here at home, struggling as we can, introducing this Bill but in fact not tackling the real international roots of the crisis. Was it not striking and chilling—I suspect it was to many watchers—that when last Friday’s panel of candidates was asked what more could be done to fend off the forecast of a “horrific” autumn that we have been promised, they all just sat there and were silent? They had nothing to add.
In fact, of course there is a great deal more we can do, but it is not much helped, I fear, by the Bill. It is meant to be about energy security, which starts now but projects into the future. If the name of the game is security of supply—not 10 years hence but now—and at affordable prices, a lot more can indeed be done. That is just what President Biden was trying to do over the weekend in Riyadh; obviously he found it a little awkward, but he was there aiming to meet essential needs and demand with more oil production. Far from staying silent, we should wish him good luck.
Whatever we do, oil and gas are going to be with us for decades. The International Energy Agency says that they will provide 28% of world energy in 2045. The focus on what are called “core fuels” in the Bill, on which there is a whole part, reminds us of this basic fact. Eventually, of course, the energy gap will largely be filled not by the wind blowing—which it does for 60% of the time in the winter, and 25% in the summer—but by stored green hydrogen and ammonia, about which the noble Baroness, Lady Hayman, has just spoken. The powers, incentives and regulations—although, please, not too many—in the Bill will one day help us to get there. We are not there yet, but this is good; it is the right way to go, and we should back it in every way we can.
In the meantime, there is a crisis at the forecourt spreading through transport costs and affecting the price of everything. How do we stop that happening again? How do we convince ourselves that we are providing the security of the future unless we can answer that question?
First, the Gulf-state members of OPEC, whom we often describe as our friends, could be induced by the right approach to pump at least another half a million barrels a day right now. Although they have at last moved a little way towards that, they could quite easily do a lot more with their remaining spare capacity, although some of them deny that it exists. Also, the gas producers could ship more gas.
Secondly, Iran could put another million barrels a day into the market, if only the US Congress would let up and move to the nuclear agreement we once had. Perhaps we should point that out to our American allies.
Thirdly, we must encourage a crash programme of refinery-capacity building and resetting, which I do not see all that much of in the Bill. This is often said to be holding up supplies of petrol and diesel products and pushing up oil prices. Powers to rebuild the gas storage that we once had and should never have been allowed to run down—I do not know why it was—are also one of the immediate needs, and the present Bill helps there a bit.
Fourthly, of course, as many others have said in many debates, we need a constant increase in user efficiency and home insulation and a decline in oil intensity—that is, using less oil per unit of output.
Our UK net-zero goal, which is very much in evidence in the Bill, is admirable but everyone knows that it is not nearly enough. It has to be asked whether we, the British, with all our skills, are making the best contribution in the right way to rescuing the situation. Is the prioritising of a rather modest 1% reduction in global emissions, which is what we would achieve if we got to net zero, anything like adequate? Of course it is not. We proclaim climate leadership, but this has to be through a vast uplift in carbon capture and recovery from the atmosphere to prevent the world boiling. This requires us to raise our sights from narrow insularity to accelerated international action everywhere we can, working with like-minded friendly nations.
Greenhouse gases will not stop at the white cliffs of Dover just because we have done quite well with our net zero so far. Somehow we must be at the forefront in off-setting the millions of tonnes of carbon which the thousands of coal-fired stations across Asia and Africa are continuing to puff into the atmosphere, with more stations being added and old ones renewed.
The twin challenges of security now and tomorrow and freedom from appalling and crushing volatility and inflation, and at the same time finding an honest and effective way forward on climate change—the path we are not now on—are right before us, staring us in the face, and they are inextricable; they cannot be separated. I agree that many proposals in this Bill are needed and overdue, from opening the way back to a realistic nuclear replacement programme, to encouraging heat networks—I think that is a grandchild of what we used to call combined heat and power, like on the famous Pimlico estate—and to halting the huge scams associated with carbon offsetting arrangements. Anything that speeds up heat pump installations and makes them cheaper is very welcome: at 600,000 houses a year, which is the proposed aim, it will take four decades to retrofit 24 million homes, and goodness knows how many hundreds of billions of pounds.
All this amounts to only a tiny fraction of what is needed. For example, the whole nuclear replacement programme is on very shaky foundations. The current proposal is to build eight more large-scale replicas of Hinkley, or similar. The one now being constructed by the French and Chinese at Hinkley is already 10 years behind time, well above budget and facing component problems to boot. I know about these sorts of initiatives and the inevitable decades-long delays which ensue, having myself launched, in the other place in 1979, a programme of eight new pressurised water reactors, of which only one ever got built, and that took 15 years. A secure nuclear future has got to rely on much smaller 300MW to 400MW reactors which can be built quickly and which are privately financeable, a prospect now made easier by the sensible EU decision to register nuclear and gas investment as ESG approved; that is, labelled as green energy sources. Does the Bill open up that pathway, or take account of the international dimension? The Bill has also given a helping hand to fusion, which is good, but of course that is still years ahead and is again a completely international project.
Finally, unless we embark on new initiatives in almost every area of our current energy and climate policies, I see insecurity and failure ahead on all three counts: failure of reliability and security; more failure of affordability than now, and we could not go much further than now; and failing to combat the much hotter, much colder and much wetter climate violence ahead. Instead, we should now be learning the lessons and building and adapting better, far better, for ourselves, for our children’s children and for the whole planet. That is what I would like to see a really focused energy security Bill do. This one, frankly, is only a start.
Lord Whitty (Lab)
My Lords, I begin by thanking the Minister for his cogent explanation of the Bill. I also very much appreciate following the very substantial intervention of the noble Lord, Lord Howell, where he really underlined the gravity of the short-term and long-term problems we face. The fact is that this is the first supposedly cross-sector Bill we have had for 10 years and it does not measure up. It follows detailed government statements on energy strategy, energy security and energy efficiency, on hydrogen, and also all the pronouncements on the path to carbon net zero, but the Bill, despite its size and its complexity, frankly, deals with only a small and limited part of those strategies.
It began life, of course, as an energy security Bill, but the “security” has been dropped and it now conveys, as I think the noble Lord, Lord Howell, was suggesting, very little sense of direction on energy security in either the national and global sense of energy self-sufficiency, nor in the domestic sense of affordability and reliability for the British economy, for households and for businesses here. I say to the Minister that, given the pressures on the legislative programme, it might have been better to have a more comprehensive Bill now; otherwise, we will be faced with further Bills in the next couple of years, dealing with the areas which this Bill, broadly speaking, omits. In default of a comprehensive Bill, perhaps he can give us an indication of what additional Bills, in both senses, we are expecting over the next couple of years. What is the programme of statutory instruments and policy statements that will be necessary to deliver the intentions of the Bill and the rest of the Government’s programme?
But let me give the Minister some comfort and say what I broadly approve of in the Bill first. I agree with the concept of a future systems operator and putting it on a new basis. We need some degree of operational controlling mind in the electricity and other markets, and I think this moves us in the right direction. We still need to see how this role is developed and precisely what its operation and structure will be. How will it relate to the existing National Grid functions and to the potentially extended role of Ofgem, which is implied by the Bill but not really spelled out in any great detail?
I also very much welcome the resurrection of a commitment to carbon capture and storage, and the provision for support for that sector. It has been a serious failure over the last 10 years: the failure to endorse the outcome of the first competition in this area and then to completely abandon the second competition in 2015. So, we have not been on the path we should have been. It is clear from what the Climate Change Committee says that we will need to have a very heavy contribution, particularly in the period up to 2035, of carbon capture and storage if we are to get anywhere near the path we have set ourselves in getting to net zero by 2050.
It is true that there has been little progress on carbon capture and storage in the rest of the world as well as here, but we need to make a new start, and the UK is probably one of the best places in the world, in that we are able to store carbon in abandoned oil and gas wells in the North Sea and the Irish Sea. Indeed, if we move away from the original idea of carbon capture and storage—that we would put it on the end of a large emitter or a power station—and look at it at the centre of or serving a hub of industries, then actually the economics work out and probably the complexity is much less. I think the commitment to carbon capture and storage is very important.
I also welcome, to some degree, the support for increased decentralisation through heat networks and district heating. In particular, I welcome the commitment to consumer protection regulations for users of district heating, because although I absolutely buy into the concept of district heating, and it will be part of any future energy system in this country, the fact is that consumers—the households that rely on district heating—are not able to switch or to change provider or in many cases to change the tariff and the way in which they are charged. We need some protection for those consumers built into any increase in district heating.
As to what is not in the Bill, we all know that energy efficiency needs to be in the Bill. I appreciate that the other day in the Moses Room, the Minister introduced some improvements in the ecosystem for delivery of that; they were very minimal, but I welcome them as far as they go. The commitment to energy efficiency needs to be much more structured and widespread, so that it is not all delivered through the ecosystem but is delivered by the kinds of schemes we used to have; the commitment from the Government and government-induced measures to improve energy efficiency has reduced by more than 80% over the last 10 years. That really needs a new approach. Some of the systems that are still in operation in Scotland and Wales would be helpful here.
Two other things need to happen, because we have had two disastrous attempts to introduce energy efficiency programmes for the able-to-pay sector, and we need to have one that actually works and ensures that the owner-occupiers, particularly those who can afford to do so, are attracted to increasing the energy efficiency of their own homes. That also requires an effective household advice scheme. The downgrading of the Energy Saving Trust over the past few years has been unreasonable and it needs to be revived in some sort of form, so that businesses, individual households and landlords can get the best advice on energy efficiency.
The long-term objective of energy policy must be pretty clear: to get away from fossil fuels. Here, I disagree with the noble Lord, Lord Howell, at least in the immediate term. The answer to the dependence on Russian oil and gas is not for Europe, Britain and the United States to switch to other gas and oil suppliers. Frankly, it is a bit sickening to see that the response of Johnson and Biden to get away from the dependency on Russian supplies because of its treatment of Ukraine is to go cap in hand to another dictator in Saudi Arabia, which has been bombing and committing war crimes against its own neighbour, Yemen, for several years.
Nor is the response of the climate sceptics—that we simply reopen North Sea oil and gas or start fracking here—right. The fact is that gas is a world market and the electricity market is still linked to that gas price. Hence, the huge hikes that we have seen in consumer prices here are caused by the world gas situation. We need to reduce global dependence on gas, not enhance it.
We need a system that will divert investment, and hence dependency, away from fossil fuels through lower carbon investment and fuel sources. Part of this legislation helps that, and part will help the transition. But I return to the carbon capture and storage provision because the large-scale carbon users, particularly those which supply the building industry with steel, glass, cement and so forth, are not going to get away from carbon use in production very easily or rapidly. We therefore need a proper system of carbon capture and storage, of the sort now being advocated.
That requires a change in approach, one which will encourage investment in that sector. The Government are now committed to it. One of the major propositions of this Bill is to support it, but the Minister will probably recognise that in order for that to happen and be delivered in practice, a support system is required similar to the one we gave to offshore wind after the last major energy Bill. We need a development programme, a clear timetable and a clear indication of the regulations and statutory instruments required to enforce the legislation which will be applied to carbon capture and storage.
I was at a very useful briefing the other day from the Carbon Capture and Storage Association. Its chair was there: my noble friend Lady Liddell. She would be here were it not for the heat of the day preventing safe transport from Scotland, and she would undoubtedly be participating in this debate. We are a point where we can turn around a failure to implement carbon capture and storage over the last 15 years. There is interest out there, nationally and internationally, and we need to ensure that we deliver that. That will require more than the bald provisions of the Bill and a follow-up from the Minister’s department to ensure it gets properly developed.
There are a few short paragraphs on hydrogen in the Bill. One of the difficulties with hydrogen is that it is touted as the solution to almost every sector’s problem —heavy transport, heavy industry, domestic heating—yet we do not yet have the ability to produce green hydrogen without serious problems. The Government have, of course, produced a hydrogen strategy but it gives rise to a number of questions that still have to be fully addressed.
I support many of the senses of direction of this Bill, but a lot more will be needed to deliver the outcomes the Government want. Here we are today on the hottest day of the year, with the temperature increase being the opposite of what we normally talk about, and which is required to transform the heating of homes in this country. We also need air cooling in our buildings and homes, and the technology exists to do that. To meet those kinds of challenges we need a very strong sense of direction from the Government. While the Bill goes some way in that direction, I fear that there will be many other Bills and we will require many other statutory instruments and policy statements from the Minister before the direction is properly set.
Baroness Sheehan (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Whitty; we agree on so very much. There may be some small differences of emphasis, not just with the noble Lord, Lord Whitty, but with others who have spoken today, that I hope I can add and bring to the debate.
I wanted to speak in this debate because I am concerned about what is happening to our planet. I do not believe the Government have seized the opportunity in the Bill to go to the nub of the issue. Before continuing, I register my interest as a director of Peers for the Planet. I think it is worth saying a few words at the outset about the fundamentals of climate change because that is the reason why many of the measures in this Bill have been brought forward. The question for me is: does the Bill move us in the right direction with a laser-like focus, at the speed needed to address climate change?
My noble friend Lord Bruce of Bennachie spoke about the mission of climate change, and that is what I really want to know: does this Bill address that mission? Energy is at the very nub of climate change, because the mass production of energy by burning fossil fuels to power the Industrial Revolution has led to the most rapid build-up of carbon dioxide in the atmosphere that our planet has ever experienced.
Today has seen the UK hit a temperature of over 40 degrees Celsius—imagine that—for the first time ever. What we need to do is to move the energy sector away from oil and gas and into the modern era. In May this year, the Mauna Loa Observatory in Hawaii recorded a concentration of carbon dioxide in the atmosphere of 421 parts per million. This is the highest ever recorded and has a direct bearing on the extreme weather events we see with increasing frequency.
For me, this figure has a particular relevance and significance. It was the last part of the discussion I had in 1989 with my fellow master’s degree students at Imperial College when we were doing a master’s in environmental technology. I will just put out there that I graduated with a distinction. The reason I bring this up is that, as a group of young scientists learning about the science behind climate change more than three decades ago—and in two decades’ time I will be able to stand here and say “five decades ago”, as my noble friend Lord Bruce did when speaking of his efforts to move forward energy efficiency—we were hugely concerned about the rise in carbon dioxide due to the Industrial Revolution. In the short period in geological time between 1850 and 1989, the concentration of carbon dioxide rose substantially: from 280 parts per million, its level for the previous many hundreds of thousands of years, to 350 parts per million—in the blink of a geological eye.
There was consensus that going over 400 parts per million would be a catastrophe and that mankind should do all it could to keep it under 400 parts per million. Well, that figure has been well and truly breached; the concentration of carbon dioxide is rising by 2 parts per million every year, and accelerating. We talk a lot about tipping points, but as we look at the extreme weather events we are witnessing, we can see that they are happening with greater and greater frequency and becoming more and more extreme. Who before last year had heard of the heat domes that engulfed north-west America, or atmospheric rivers? We really do need to sit up, take heed and realise that we have to act with speed. That is crucial. Are we doing that in this Bill?
It is important to dwell on why this Bill is a disappointment to so many of the people who really care about climate change, and raise their voices and act with conviction on it. It is a missed opportunity. As many previous speakers have said, it is a missed opportunity to tackle our demand for and waste of energy, as well as energy efficiency in households. Energy efficiency is universally acknowledged as an absolutely necessary first step in our fight to keep global warming to within 1.5 degrees centigrade. It must be absolutely essential given the temperature and weather extremes that we are already seeing; we have already reached a global climate rise of 1.1 degrees centigrade. It is our ambition to keep it to within 1.5 degrees centigrade, but even if all the promises made last year at COP 26 are realised and kept, we would still see a rise of 2.4 degrees centigrade by the end of the century. We are not doing enough; we have to do better.
I go back to energy efficiency. The Minister has said:
“The cheapest energy is that which we do not use.”
He is on board, but there is nothing in the Bill on energy efficiency. Perhaps I can put to the Minister the same question that I did in the debate on the IEA’s report, Net Zero by 2050:
“A 2015 report from the Association for Decentralised Energy states that 54% of energy of energy produced in this country is wasted, equivalent to more than half the average UK annual electricity bill, or about £592, in 2015. The report said that the amount wasted was equivalent to the power generated by 37 nuclear plants. Maybe the situation is better now than it was in 2015. If so, can the Minister update the House? If the data are not to hand, can he write to me and place the letter in the Library?”—[Official Report, 15/6/22; cols. 1657, 1646.]
I have not yet received a response to my question, but I hope that the Minister will take this further opportunity to reply and, if the data are still not to hand, write to me; that would be very welcome. Perhaps he could include information on how the reforms of the UK’s energy systems in the Bill will address this issue.
Can the Minister say whether there are any plans to incentivise the upgrading of owner-occupied properties, which have fallen woefully behind those in other sectors? Does he think that the minimum efficiency standards are enough?
I also want to ask about the local authority delivery scheme, which is coming to a close. Local authorities are going to play a central part in meeting our net-zero targets, and this is one small way in which they could do so. I am sure that they would welcome more information on how they can play their part.
A major barrier to retrofitting for energy efficiency is the lack of a skilled workforce. It is one of the reasons behind the failure of the green homes grant. I wonder whether addressing this shortfall in skilled labour will be a priority for the Government. We are going to need a skilled workforce, not just in retrofitting our homes but if we are to deliver a just transition. We speak so much about it, but we really need to give the people who work in fossil fuel industries and the oil and gas sector the opportunity to retrain so that they can transfer their skills to other energy sectors. Some polling has been done showing that this is what they want to do—they want to stay in the energy sector. They understand the energy sector and would like to be able to contribute further to energy provision.
I have dwelt on tackling energy waste and making homes more efficient because this is low-hanging fruit. Frankly, it is astonishing that so little has been done to date to tackle it. I hope that the Minister will work with those of us who want to rectify the situation. I am sure that he will; I know he thinks that energy efficiency is something that ought to be tackled.
The future technologies in carbon capture, usage and storage that the Government are focused on are unproven at scale. There is nowhere in the world where it is working. Denmark has some small projects but there is nowhere in the world that we can point to and say that that is what we want to do. Gas will of course be a transition fuel. No one is suggesting that we turn off the taps today. I challenge the Minister to find anywhere in Hansard where I have said that the taps must go off today. It is a transition fuel. We know that we have to move towards a fossil fuel-free future in a sensible way, but we must take hold of the opportunities that we have. We must look at what is working and at what our innovation and technology has already delivered: clean, green energy with zero pollution. These are the industries we ought to be looking at.
Presumably a vast proportion of the £100 billion investment that will be unleashed by this Bill will go towards carbon capture, usage and storage. However, we are misdirecting our efforts and incentivising the wrong industries. Carbon capture, usage and storage may be useful in mitigating the miniscule amount of fossil fuels that we will need as we transition to net zero, but that will be an ever-diminishing amount. I am not sure that the Bill in this form recognises that gas will not make up a vast amount of our energy needs—that is a fact. Perpetuating the future of fossil fuels by investing in big projects for carbon capture, usage and storage is not the right way to go and is very short-sighted.
I want to say something very quickly on stranded assets. Russia’s invasion of Ukraine has left us all reeling, but two wrongs do not make a right. It would be a mistake to use the short-term Russia-Britain gas issue to decelerate progress on the move away from fossil fuels. To use this as an excuse to invest billions in new fossil fuel infrastructure would be a crime, but this is what the Government are proposing to do—for example, by opening up a new round of licences for exploration in the North Sea this autumn. These new fields would not come online until long after the window to act to keep the global temperature rise within 1.5 degrees centigrade has passed. We are trying to limit global temperature rises to 1.5 degrees centigrade. How will the opening of new fields that come online after the date by which we need to do this has passed help? Much-needed investment in wind and sun will be diverted, and stranded assets would proliferate.
In the debate I tabled last month on the International Energy Agency’s report, Net Zero by 2050, the question of stranded assets was raised. The noble Lord, Lord Lilley, who I am sorry to say is not in his place, dismissed stranded assets, saying that the cost would be borne by those foolish enough to be saddled with them. Although I acknowledge that the noble Lord, Lord Lilley, is far more au fait with the workings of the fossil fuels sector than I, I am pleasantly surprised to hear he thinks it will be the investors in new fields who will be saddled with the losses. Can the Minister confirm that the costs of stranded assets will be picked up by those who seek to profit by them and not by the UK taxpayer?
The Lord Bishop of Carlisle
My Lords, I take many of the cogent and very well-informed points that have already been made in this debate, not least the one made by the noble Lord, Lord Howell, on the need for international co-operation. Even so, I welcome all three pillars of this Bill. Its stated direction could offer at least a step forward towards the goal of net-zero carbon.
I suggest in particular two rather domestic but, I hope, practical areas that could, in my view, do with further development in the Bill; namely, local renewable energy generation, as raised by the noble Baroness, Lady Hayman, and carbon capture, which has been addressed by the noble Lord, Lord Whitty, and the noble Baroness, Lady Sheehan.
In both cases, I hope noble Lords will forgive special reference to Cumbria, where I live. It is currently engulfed in a very contentious debate about the Woodhouse Colliery near Whitehaven that is not nearly as straightforward as it might first appear. Cumbria also has the “energy coast”—originally coal, then nuclear and now, increasingly, renewables. It has the Walney Extension offshore wind farm, which has more than 20% of the UK’s wind farm generating capacity. What is more, as a county, we have more than 50% of all the potential small-scale hydropower generation in the north-west.
I must declare an interest here, since my own diocese, the diocese of Carlisle, has developed two local hydro schemes: one at Rydal, which powers, among other things, our diocesan retreat and conference centre, and one at Scandale.
There has been little or no growth in community-led energy generation schemes over the last six years, and we need more of them. Such schemes currently provide about 0.5% of the UK’s electricity generation but, as we have been reminded by some of the many briefings that we have all received, no doubt, they have the potential to provide as much as 10% by 2030. The Church of England’s vision for net-zero carbon for its own buildings and operations by that date involves a very considerable increase in on-site renewable energy generation.
We need an enabling mechanism, such as that outlined in the previous Session’s Local Electricity Bill, which makes it possible for community energy schemes to sell power directly to local consumers. Current energy market rules make that very impractical at present. Those rules need to be changed. The benefits of more community schemes are considerable. They include a significant contribution to greenhouse gas reduction, greater energy security, more job creation opportunities, lower local energy bills, and better community ownership of the transition to net zero. Local involvement and empowerment really matter, as the noble Baroness, Lady Hayman, reminded us.
In Cumbria, community participation is already taking place through, for example, the Zero Carbon Cumbria Partnership and the Kendal Climate Change Citizens’ Jury. Of course, there is a cost to all this. In the Church of England, nationwide, as we encourage all our suitable church and school buildings to install on-site renewable energy generation, we need to mobilise both private and public investment, including public sector funding—we hope—in order to reduce our carbon emissions.
With regard to carbon capture—and much more briefly—there is no doubt that the Bill will enable much-needed further development of carbon capture, utilisation and storage, but perhaps it needs to be more clearly targeted in two areas in particular. One is that of industrial processes, such as the production of gravel and cement. The other, which again brings me back to Cumbria, involves reshaping agricultural subsidies to enhance natural capital through carbon storage in peat. In the Lake District, peatland already holds about 23 million tonnes of carbon. The intentional management of peatland across the country could make a valuable contribution to carbon capture and storage.
I look forward to the Bill’s further progress.
Lord Moylan (Con)
My Lords, it is a privilege to speak after the right reverend Prelate and to hear of the encouraging things happening in his diocese. We also heard him mention the fact that they have a cost. He is possibly the first speaker in this debate who has drawn attention to cost; I shall spend quite a lot of my time talking about exactly that.
This is a technical Bill but it has a simple purpose: to give effect to the British energy security policy. In my view, that means ensuring that energy is available abundantly and affordably to the British people and to British industry and businesses, and also that energy is, as far as possible, secure against external shocks. That is how we maintain and enhance our prosperity, and any other statement of the Government’s objective would appear to me to be traducing the obligations we have to the nation.
Net zero is not an energy strategy but a constraint on how we might achieve our energy strategy. Nobody seriously thinks that the UK’s commitment to achieve net zero by 2050 will have any significant effect on the heating of the planet, since we produce only 1% of global emissions. At best, it is setting an example to the world; its practical effect will be very small indeed. The core strategy for this Government has to remain abundant and affordable energy for the UK. If my noble friend on the Front Bench disagrees about that, I am sure he will say so when he winds up. The question is how the Bill and the energy strategy it effectuates measure up to that objective. It is a mixed bag and, like other speakers, in the interests of time I will be fairly selective about the parts of the Bill I choose to focus on at this stage.
One of the things the Bill does is encourage investment in wind power. Despite claims that the cost of wind power is constantly falling, that is simply not true. Although it has fallen from its early days, it is ceasing to fall; the fall is declining as a result of the maturity of the industry, as you would expect with any industry that matures. But even if the marginal cost of wind power can be brought down to something close to zero—in other words, that it is similar to nuclear power in that regard—none the less, the capital costs required would still require subsidies, in addition to the feed-in tariff, and these are very large indeed when it comes to offshore wind.
Moreover, despite providing in excess of 20% of our energy, there are many days when wind power falls close to zero, and much the same can be said of solar. This means that gas generation has to be available to take up the slack at those times. I heard the noble Baroness, Lady Sheehan, envisage a day when demand for gas would be zero. I do not understand what source of power she imagines will take up the slack when the wind is not blowing and the sun is not shining.
Baroness Sheehan (LD)
I challenge the noble Lord to say where I said that the need for gas would be zero. I said it would be minuscule.
Lord Moylan (Con)
I am happy to accept the correction from zero to minuscule because it does not change my argument in the slightest. I thought I had said close to zero, but either way I am more than happy to accept the word “minuscule”. I was hoping when the noble Baroness stood up that it would be to tell me what fuel it was that was going to take up the slack in the place of gas.
To make demand for gas intermittent in order to match the intermittency of wind power is, in the words of Professor Sir Dieter Helm,
“devastating to the economics of gas generation and for two reasons”.
First, it takes a much longer time to recover the capital costs, and, secondly, because the gas power is demanded only intermittently, the cost of producing that supply increases as well. So in addition to the high cost of wind generation, we have to take account of an inevitable increase in the cost of electricity generated by gas simply to match it and make up for the intermittency. Professor Helm is a great supporter and advocate of net zero. His complaint is that we are not being honest with the British public about the costs of it. My noble friend the Minister will be able to say whether he thinks the Government are being honest with the British public and that Professor Helm has got it wrong, but net zero is not cheap and the Government need to level with the public. They need to show that their energy strategy is affordable.
Then we come to the question of abundance. The noble Baroness, Lady Blake, referred, as did other speakers, to Russia’s illegal war in Ukraine. My worry was that she had not taken account of how radically that has changed our situation, but my worry on that score rather fell away when I heard my noble friend Lord Howell of Guildford. He explained very clearly that it is not some minor event; it is a radical change in the energy supply market, and it goes to the question of whether we are going to be able to maintain abundant supplies.
The noble Baroness called for three things to happen simultaneously as a result of the Bill: she wanted to cut bills, increase security and tackle climate change—I hope I have referred to her correctly. My point is that you cannot have all three. The second two require higher bills because the cost of them is largely borne by bill payers rather than taxpayers. Even if you take it out of the bills and put it on to the taxpayers, the taxpayers are of course the bill payers with a different hat on.
There are things in this Bill that I agree with. I was particularly pleased to see the reference to the promotion of nuclear fusion. It may be a very long way off—nuclear fusion as a solution has always been a long way off—and that makes one a bit sceptical, but I have confidence that something can be done. Nuclear fusion is of course an extremely clean form of energy, not like nuclear fission, and the UK Atomic Energy Authority is a leader in the field. At the moment there are half a dozen places throughout the country competing to be the home of the UK Atomic Energy Authority’s spherical tokamak, which is going to take forward Britain’s next step in developing the prospect of genuine nuclear fusion. If anything, I would encourage the Government to spend more money, as I am told that that would speed up the work; that is all very good. Nuclear fission will be core to providing our baseload, and I welcome the work the Government have done to promote that as well. But large amounts of gas will remain absolutely indispensable to our energy mix—all the more so the more we rely on wind and solar.
The gaping hole in this Bill and this strategy—not only the hole referred to by my noble friend Lord Howell of Guildford, in that we are not sufficiently encouraging increased oil production among the oil producers—is, as far as our domestic policy is concerned, its failure to put increased domestic production of gas at the heart of our energy strategy.
Viscount Hanworth (Lab)
My Lords, I am tempted to address some of the issues that the noble Lord, Lord Moylan, has raised, but I have other things to say. However, I welcome his support—if I understand him correctly—for a baseload of electricity generated by nuclear power. With regard to the recommendation that we should rely heavily on a revived supply of gas, I tend to agree with his critics.
As others have already observed, the Energy Bill is a massive document, spread across 330 pages of dense legalese. The Bill contains 243 clauses and 19 schedules which will deliver 26 separate measures of a very diverse nature. It is not possible at Second Reading to devote close attention to the details. Instead, it may be appropriate to discuss the wider context in which the Bill has arisen.
The harbingers of the Bill have been a flurry of White Papers emanating mainly from the Department for Business, Energy and Industrial Strategy. The most recent of these has been the British Energy Security Strategy, published in April 2022, which describes how Britain might generate:
“Secure, clean and affordable … energy for the long term.”
There should be no doubt about the enormity of the task facing this country in adapting to the realities of climate change and energy insecurity. Moreover, we are tardy in our preparation to meet these exigencies.
It is appropriate to compare our state of unpreparedness to that of the nation on the eve of the Second World War. In the previous decade, our politics had been dominated by a spirit of conservative laissez-faire, and during the crucial years from 1935 to 1937, the office of Prime Minister was occupied by Stanley Baldwin, who seemed to make a virtue of indolence. He was succeeded by Neville Chamberlain, who believed that the best way to ward off an increasing threat of warfare was by emollience and appeasement. We are facing threats to our prosperity, if not to our survival, with a similar lack of preparedness and concern.
What was remarkable about Britain’s response to the demands of waging war was its abandonment of the laissez-faire ideology in favour of a co-ordinated, strategic direction, accompanied by a broad national consensus on the purpose and necessity of the endeavour. Despite the absence of any precedent for this, the wartime Government sponsored two generations of innovative military technology, the second being the basis of the post-war aviation, civil nuclear and native computer industries. We should hope that a similar strength of purpose and national cohesion would arise to confront the current threats. However, we are a long way from achieving this and are obstructed by some powerful legacies.
The first of these is a legacy that comes from a prolonged era of material aspiration and amelioration. Over much of the post-war period, the citizens of the UK have experienced continuous material betterment, and they have aspired to see this process continue or even accelerate. Occasionally, their aspirations have been frustrated, and then rising anger has threatened social and economic dislocations. We are due to witness something of this sort in the near future in consequence of the cost of living crisis and the escalating price of energy. The anger that is arising will be exacerbated by the realisation that the increasing inequalities of our society have ensured that the distress will be felt to very different degrees among the rich and the poor.
The second inconvenient legacy is the economic doctrines of Margaret Thatcher that still dominate the minds of the incumbent Administration. These doctrines are averse to centralised strategic direction of the economy. Such nostrums discourage the Government from taking the initiatives that would most effectively address the emerging problems of energy insecurity. They have been largely responsible for our woeful lack of investment in our energy infrastructure. The ideology that led to the privatisation of our public utilities, including power and transport, has proposed that the private sector is best equipped to run and invest in such enterprises.
An adjunct of privatisation has been the creation of the economic regulators. According to a government document, their role is to monitor compliance with contractual obligations to the Government and users and to establish technical, safety and quality standards. This description of their role does not include ensuring that infrastructure services are delivered efficiently or that adequate investments are forthcoming. It is interesting to note that, in certain connections, the Energy Bill is proposing unprecedented interventions by agencies created by the Government. The proposed independent system operator and planner will have powers to raise levies to fund the hydrogen business model and to raise similar levies to support carbon capture and storage. These are minor departures from the true faith of conservative neoclassical economics.
The continued willingness to allow the private sector to determine the investments in energy infrastructure without significant central guidance has been largely a consequence of an experience that arose out of the privatisation of the electricity industry. This occurred at the time when the supply of North Sea gas was reaching a peak. The private electricity utilities were able to invest rapidly and cheaply in combined-cycle gas turbine generating plant, which displaced many of the ageing coal-fired power stations. This was a pre-existing technology that was easy to implement. The utilities have been able, subsequently, to invest in wind turbine generation, the technology of which has also been relatively undemanding, notwithstanding the progress that it has been making. The success of these episodes seemed to confirm the effectiveness of a policy of laissez-faire.
More recently, there has been a persuasive demonstration of the unwillingness of private industry to invest in infrastructure projects that cannot achieve immediate financial returns. This has been demonstrated by the successive failures of projects to build the much-needed nuclear power stations. For the purpose of constructing nuclear power stations, the Government are now hoping to mobilise the capital invested in pension funds. They intend to rely on a so-called regulated asset base that allows construction projects to impose levies on consumers of electricity during the course of construction. It is doubtful whether this will be a sufficient inducement to build nuclear power stations.
The first generation of civil nuclear power stations embodied a new technology, the development of which was fully supported by the Government, as were the costs of constructing the stations. The current Government have shown themselves unwilling to adopt such a role. They have been unwilling to offer more than a grudging modicum of support to assist the development of small modular nuclear reactors. Apart from the minor support that is hinted at in the Bill, the same is true of the development of the technology and infrastructure for hydrogen fuel, synthetic aviation fuel and carbon capture and storage.
There is no mention in the Bill of the technology that is required to be developed if we are to replace the use of fossil fuels in steel production, in manufacturing cement, glass and bricks, in surface transport and aviation, and in many other applications. It is assumed that this technology will arise automatically.
To meet the objectives of securing the nation’s energy and of staunching its emissions of carbon dioxide, the Government must engage fully in a technological and an economic revolution; otherwise, their plans are bound to fail. The Energy Bill is a bizarre document. It contains detailed provisions to meet contingencies within scenarios which will not transpire unless the Government act very differently—and unless they do, we will be destined for economic misery and social discord.
Lord Ravensdale (CB)
My Lords, I declare my interests as a director of Peers for the Planet and as a project director in the energy industry, working for Atkins. I really welcome the Bill. It comes at a time of unprecedented challenge for energy, as many other noble Lords have alluded to. Any modern economy requires copious amounts of energy at a price that people, industry and business can afford; that is the economy side of the energy trilemma. But added to this are the other two sides of the trilemma: sustainable supplies that are secure. When considering alternative energy options, it is essential to consider all aspects of the trilemma and it is the resulting complexity of the modern energy system that makes a controlling mind so vital to delivering it. The noble Lord, Lord Moylan, made an articulate case for the issues in balancing the three sides of that trilemma.
Following on from that, most of all I welcome the establishment in the Bill of the future systems operator to be that controlling mind. I have consistently argued in this House over the last three years for an independent architect to oversee and deliver, on a systems level, the net-zero energy system. I was delighted to listen to Sir Patrick Vallance speak at a briefing organised by Peers for the Planet and the Climate Change APPG last week. He strongly made the point at that briefing about the importance of a systems approach to net zero, stating:
“This is a systems-wide problem; it affects virtually every part of every department, and therefore you need a systems approach”.
The future systems operator is exactly what we need to implement that systems approach and deliver the energy system that we need.
However, there is really an elephant in the room regarding the energy system and the Bill: the build rate of new capacity. The noble Lord, Lord Howell, touched upon that in his powerful contribution. We have a world-leading target of decarbonising our electricity system by 2035 but my concern is about delivery. Atkins has undertaken a calculation of the build rate of new capacity required to hit that 2035 target. This is nothing complex; it looked simply at the total capacity required in the BEIS scenarios for 2035 and divided that by 12.5 years, allowing for an estimate of capacity that will need to be decommissioned over that timeframe. The results are eye-opening, to say the least.
From the BEIS scenarios, a minimum of an average of 12 gigawatts of annual installed capacity is needed every year between now and 2035 to hit the target. The next question is: what have we managed in recent years? In 2019, we managed 2.8 gigawatts; in 2020, we managed 1.1 gigawatts; in 2021, it was 1.6 gigawatts. If we go on like this, it is very hard to see how we are going to meet the 2035 target. A real step-change is required because the upshot is that to replace ageing power plants and ensure enough generation is built to meet the peak demand requirements, the UK needs to build a minimum of 159 gigawatts of new generating assets by 2035. That is the equivalent of building the UK’s entire electricity generation system one and a half times over, in under 13 years. That illustrates the real scale of the challenge.
So I ask the Minister: at what point will the Government publish a clear national plan for achieving that 2035 target and move to a large-scale programme of delivery on a fleet approach for proven technologies such as offshore wind and nuclear generation to speed up the build rate and maintain security of supply?
Continuing on the systems thinking theme, another area I have highlighted previously that needs more attention is the role of local authorities in delivering net zero, building on the remarks of the noble Baroness, Lady Hayman, and the right reverend Prelate the Bishop of Carlisle. Local authorities know their areas best and so will play a key role in areas such as the rollout of clean heat and energy efficiency. Searching through this vast Bill, I was somewhat disappointed to see the word “local” used only 10 times. This is very welcome in the context of heat networks, but we need to do much more.
For example, the Bill could be changed to widen the focus of zoning to cover not only heat networks but also heat pumps and urgent retrofit. The Government already accept that local authorities will be central to decarbonising heat and local area energy planning in particular, but until recently councils have had to competitively tender for funding in these areas. This favours those well-organised councils that have the means to bid for funding, and the result is a patchwork which does not address the overall need. If the Bill could also define clean-heat zones, this would start to address on a systems basis one of the biggest challenges we face in decarbonising our economy. So can the Minister state what plans the Government have to take a wider look at defining the role of local authorities and zoning beyond heat networks to cover heat pumps and urgent retrofit?
I would also like to continue discussions with the Minister on the inclusion of nuclear within the energy sources that are eligible for RTFO—renewable transport fuel obligation—support, placing it on an equal footing with other low-carbon sources. There remains an opportunity here to kick-start the UK hydrogen industry in the near term through Sizewell C’s construction. I look forward to exploring these and other issues in more detail when we return from the Recess.
Baroness Bennett of Manor Castle (GP)
My Lords, rising to speak at this point, I feel I need to respond directly to the noble Lord, Lord Moylan, who asked about what zero or a miniscule amount of fossil fuel in the global energy system or Britain’s energy system by 2050 would look like. I am not going to address this in great detail, but I will point the noble Lord to a study published in 2019 by LUT University in Finland and the Energy Watch Group in Germany.
It mapped out in great detail what a 100% global renewable—no fossil fuels and no nuclear—energy system would look like. It would be economically competitive with the current fossil fuel and nuclear system. Before the noble Lord leaps up, he made much of the issue of intermittency of renewable sources. I point out that in this study 23% of electricity demand and 26% of heat demand is provided from stored sources to meet the need when necessary.
I will also address the suggestion made by the noble Lord, Lord Moylan, that net zero was a constraint on energy policy. The practical reality is—we are reminded of this fact today, as many noble Lords have noted—that we are now globally at 1.1 or 1.2 degrees above pre-industrial levels of warming. This is what 1.1 or 1.2 degrees looks like; 1.5 degrees would be much worse and beyond 1.5 degrees, as the world collectively agreed in Paris at the climate talks, is unthinkable. To sum it up, this is not politics; it is physics. It is the limit we have to meet, and that means not burning fossil fuels.
Coming to my main remarks, I declare my position on the advisory panel of Peers for the Planet and my positions as vice-president of the Local Government Association and the National Association of Local Councils.
I am delighted to see that my noble friend Lady Jones of Moulsecoomb is foreshadowing the future: by occupying what might be a Front Bench wrap-up position on this debate, she will provide an overview of this Bill. A Green in that position is something that your Lordships’ House is clearly going to need more and more as the issues of the climate emergency and social justice, which are so central to Green political philosophy, become more and more pressing. She will be covering the utterly “inadequate and unlawful” state of government policies—these are not my words or those of my noble friend but the words of yesterday’s High Court judgment—and the solutions already on tap, including the Climate and Ecology Bill introduced by the noble Lord, Lord Redesdale, that had its Second Reading on Friday.
I will focus on some very specific elements of the Bill, and the ways in which we, as Greens, will be working with others to improve it. On improvements, I will begin by identifying some of the missing elements, which I am delighted to say have all been highlighted to varying degrees by other noble Lords.
First, we need enabling legislation to establish local energy supplies, aimed at reigniting the growth of community-run renewable energy schemes that were just taking off when the rug was pulled out from underneath them. The right reverend Prelate the Bishop of Carlisle, among others, has highlighted the importance of this. In the last Session of Parliament, we saw 308 MPs, including 120 Conservatives and 119 Labour MPs, supporting a local electricity Bill that would have created a local energy supply mechanism, enabling smaller-scale renewable generation schemes to sell their power directly to local people. This would have made many of these schemes more viable than they are now. I spoke about the rug being pulled out: we have seen hardly any growth in community energy schemes in the last six years. Those are not just six lost years in terms of cutting emissions but six lost years of local prosperity that could have been generated, particularly in those communities which are the subject of the Government’s levelling-up agenda. Money is being taken from the pockets of people who can ill afford it.
We have also seen the impact on so many small independent businesses and co-operatives; solar installers and small hydro scheme designers will certainly not accept that the Conservative Party is any sort of supporter of their sort of business. My understanding is that the Government have said that they will accept the aims of the Bill and that there have been preliminary meetings with the Energy Minister and BEIS officials. So I have direct question for the Minister: why is this not already in the Bill? This is something that is oven-ready, to use a popular phrase.
Secondly, another point that noble Lords have picked up, including the noble Lord, Lord Ravensdale, is the crucial role of local authorities and local communities in delivering net zero. The Climate Emergency UK website—which I checked this morning—shows that 409 councils have declared a climate emergency. Action is being taken locally, where it is acknowledged that this is of great importance, and there is huge potential for municipal energy and, crucially, for energy saving schemes. It is crucial for policy in the energy area, as in so many other areas, to get away from the deadening centralism of Westminster and to unleash the energy, enthusiasm and knowledge of democracy in local communities. As the noble Lord, Lord Ravensdale, set out, the money that has gone out to local communities is still being doled out on the decisions of central government, which is hanging on to the purse strings and handing over money only to those who will jump through the hoops that Westminster wants them to jump through.
This is something that is recognised on the global scale: I watched over several COPs as the Green councillor Andrew Cooper drove an acknowledgment of locally determined contributions into the international COP agreement. I am sure that all noble Lords in this debate have heard of nationally determined contributions as a part of COP, but locally determined contributions are also recognised, and we as a nation should be making much more of them.
Thirdly, in terms of missing areas, as several other noble Lords have already pointed to, we must end the barriers to new onshore wind. According to the Government’s own research, 80% of people in the UK now support onshore wind and only 4% oppose it. There is no relaxing of the planning rules around onshore wind in the recently published energy security strategy; the document says that the Government
“will consult this year on developing local partnerships”.
In his response, can the Minister tell me how that is going, and why there is nothing in the Bill for onshore wind?
It is clear that those three elements that I have identified as missing are all interrelated. In this Bill, we have the Government privileging the large corporates, the gigantic multinational corporations and the lobbying-driven interests of the financial sector over the empowering of communities, small businesses and co-operatives and the interests of the planet. It is the role of your Lordships’ House to turn that around.
I will briefly skip through some of the areas of the Bill and what could be improved. I very much agree with the noble Baroness, Lady Blake of Leeds, about the Bill’s strange balance towards carbon capture and storage and hydrogen, even if you look just at the sheer number of clauses and words.
The planet does not give us a “get out of jail free” card from the climate emergency, but all too often it seems that carbon capture and storage is treated as that card. The sums for continuing to treat this planet as a mine and a dumping ground are made to add up with this magic, expandable—and unproven and uncertain at scale—addition, rather than there being any acknowledgement of the need to live within the physical limits of this planet. The maths gets particularly magical when it comes to biomass carbon capture and storage, where the trees that might, if they survive, store carbon in 100 years are treated as though they are delivered and locked down today. Part 2 of the Bill needs close attention from your Lordships’ House.
Part 3 covers hydrogen, which no doubt has a place in our renewable energy future as a method of storage at times of high generation and for use in hard-to-decarbonise sectors such as ocean and land freight and steel production. But the Government have failed to clearly identify these as the place for hydrogen. The Bill seems to point towards its use in home heating, where it is grossly inefficient and definitely not the direction in which we should travel. Electrification is a more effective and far more energy-efficient method of displacing gas for most purposes.
I move on to another major part, Part 8 on energy-smart appliances and load control. We need to get away from thinking about the energy system as a tap that can carelessly be turned on and off at will. Indeed, we also need to think a great deal more about water conservation, addressing the ideas behind that metaphor. Energy use needs to be thoughtful. Is the energy we are using right now a good use of this scarce resource that, no matter how it is generated, will cause environmental damage? As many noble Lords have said, the best energy is the energy you do not need to use.
I will be interested to hear how many times we hear “world-leading” from the Minister, but where are the really simple measures in the Bill? I have talked about home energy efficiency and the energy efficiency of buildings so many other times, and I shall not run through that at length. In fact, with reference to Part 9 on the energy performance of new premises, all we need do is point to the healthy homes debate last Friday from the noble Lord, Lord Crisp. We could take that wholesale and put it into the Bill. Why do we have office buildings with nobody in them but lights blazing all night? Why do we have so many invasive, unpleasant video advertising screens blaring at us from every public space? Those are the kinds of things that other countries have acted to control, to reduce energy demand for things we do not need. We need to see that happening.
Finally, skipping through even faster, Chapter 3 of Part 3 is on fusion energy. Oh dear. As long as I have been a grown adult, it has been only 20 years away, and I have been a grown adult for quite a long while. It is a noticeable contrast that this is in the Bill and onshore wind is not.
Clause 162 is on electricity storage; it is extraordinarily brief and sketchy. As I said in commenting on the references made by the noble Lord, Lord Moylan, this is a crucial area, which surely needs more work. I invite noble Lords, people watching this debate, interested NGOs and campaign groups to contact me about what more we need to do in this area.
Finally—and I shall not major on this today, because the debates will also be held elsewhere—Part 12 addresses the civil nuclear sector and the whole idea of undersea nuclear waste storage. I ask the Minister how this squares with the 1972 Convention on the Prevention of Marine Pollution by Dumping of Wastes and other Matter—known, neatly enough, as the London convention —which acknowledges the limited capacity of the oceans to assimilate wastes and render them harmless and their limited ability to regenerate natural resources. Originally, it only covered high-level radioactive waste, but it was amended in 1992 to ban the dumping of low- level radioactive waste as well; that is known as the 1996 London protocol. I note the statement signed by the Minister on the front of the Bill about environmental law, so I ask him how this proposal squares with that convention.
Baroness McIntosh of Pickering (Con)
My Lords, I am delighted to follow the noble Baroness, who speaks with great knowledge and great passion. I refer to my interests on the register, in particular that I am president of National Energy Action.
I take this opportunity to welcome what is a significant Bill, about which our expectations are extremely high. We are looking to achieve security of supply with stable prices against the backdrop of the implications arising from the war in Ukraine. Clearly, the impact on households, families and businesses has been considerable, so I particularly welcome the package of measures to which my noble friend referred in introducing the Bill this afternoon.
I take this opportunity to ask my noble friend to what extent the Bill will encompass not necessarily new sources of energy but sources of energy that I believe we have not developed to the extent that we should. I am thinking in particular of energy from waste. The reason why I am firmly committed to energy from waste is that it solves two problems in one go. It not only takes waste that would otherwise go to landfill—in many instances, these sites are now full—or that cannot be reused or recycled, but it creates a new source of energy at the same time. One successful example is in North Yorkshire, in the heart of my old constituency of the Vale of York, at Flaxby. In that case, the energy that was created was fed into the national grid, which I think is a mistake. I believe that it should be fed to the local community, to enable it to feel the benefits from this locally sourced energy.
I believe that, as others have suggested this afternoon, we should learn from other countries. I am particularly pleased that just this week the EU has signed a memorandum of understanding with Azerbaijan, securing a more stable gas supply than from other unreliable and less dependable sources—let us face it, that means Russia. Gas imports from Azerbaijan will be doubled to 20 billion cubic metres by 2027. That has to be extremely welcome.
Others have referred to Denmark—and, being half Danish, it would be remiss of me not to refer to Denmark too. Denmark was completely caught out in 1973, in the original oil crisis. It did not have natural sources of oil or gas to the extent that Norway and other states did, but it turned that around in a short period and now relies almost totally on renewables, including distance warming and energy from waste. In Denmark, the local community benefits from the reduced cost of heating, energy and hot water in their homes. I believe that that immediately makes the community accept what in this country there can be huge resistance to, such as a chimney being part of a facility, as I found out to my cost.
I would like to take this opportunity to ask my noble friend the Minister a number of questions that arise from a first reading—on this occasion, a Second Reading—of the Bill, if I may. He referred to the part of the Bill that talks about offshore wind. What research has been done on the impact of offshore wind farms on marine mammals and wildlife? In its latter days, the Energy and Environment Sub-Committee took evidence in which we heard various academics state that they estimated the damage to marine mammals and wildlife to be considerable. I suggest that, before we consider having any further offshore wind farms, we consider what research lends itself to the damage that can be done.
I take issue with what the noble Baroness, Lady Hayman, said with regard to onshore wind farms. One of the dangers of both offshore and onshore wind farms that we are not necessarily told about when planning permission is first sought—I hope that, on a different occasion, there will be an opportunity to amend this in the levelling-up Bill—is that, once an offshore farm reaches shore and when an onshore farm is onshore, each relies on ghastly overhead wires and pylons to transmit the electricity to the national grid or, in the case of North Yorkshire, to some distant southern part. We must accept that 30% of the electricity is lost in transmission; it is utterly wasted. We have to look carefully at why we still rely on the overhead transmission of electricity. I remind your Lordships of the damage caused by Storm Arwen, when thousands of houses lost their electricity—for six days in some cases—last autumn. To a large extent, that was because we in the north are completely dependent on transmission via overheard wires.
On the role of Ofgem, my noble friend the Minister referred to it being appointed to regulate the heat networks. For what reason does the Bill not give heat network customers equal market protections as would apply to gas and electricity customers? For example, the Bill should include a price cap and rules to regulate customers fairly to ensure that debt is collected at a rate that is affordable to customers. If it is in the Bill and I have missed it, perhaps my noble friend could explain to me where it is.
As I am sure all noble Lords have, I have received a number of helpful briefings for this afternoon. I refer to one of them, from the Association of Convenience Stores. It points to the part of the Bill—Part 10, I think—on fuel retailers without a wetstock management system. Can my noble friend the Minister confirm that they will be requested to provide information on their fuel stock levels only in emergency circumstances? I remind him that the association includes more than 7,000 convenience stores that trade from fuel sites, which provide 88,000 jobs across the UK.
I also want to look at how the Bill seeks to empower the raising of new levies on customer bills, in particular the new levy on gas bills to fund hydrogen. Will my noble friend give the House an assurance today that these new costs will not be put on the standing charge? As he will recall from the statutory instrument that we debated in Grand Committee last week, I believe that standing charges have already been increased by too high a level and that any further increase should be seriously considered before being imposed on a standing charge.
I am delighted to see that Ofgem has raised an investigation into potentially unjustified increases in the direct debits of households by six energy companies. I am struggling to think which the other companies are—I thought we were down to about six major energy companies—so I look forward to the outcome of that investigation with great interest. With those few remarks and those few questions, I give the Bill, for the most part, a very warm welcome this afternoon.
Lord Haworth (Lab)
My Lords, this Bill, referred to as the energy security Bill in the Queen’s Speech, must be one of the biggest pieces of legislation introduced in your Lordships’ House in a very long time, if not the biggest. It comprises 13 parts, 25 chapters and 19 schedules and runs to 328 pages, not counting the 14 pages merely listing the contents, and weighs in at 1 kilogram on my bathroom scales. Will it make much difference?
The Bill’s stated aim is to
“Make provision about energy production and security and the regulation of the energy market, including provision about the licensing of carbon dioxide transport and storage; about commercial arrangements for industrial carbon capture and storage and for hydrogen production; about new technology, including low-carbon heat schemes and hydrogen grid trials; about the Independent System Operator and Planner; about gas and electricity industry codes; about heat networks; about energy smart appliances and load control; about the energy performance of premises; about the resilience of the core fuel sector; about offshore energy production, including environmental protection, licensing and decommissioning; about the civil nuclear sector, including the Civil Nuclear Constabulary; and for connected purposes.”
In addition to all this, it is worth noting that the accompanying Delegated Powers Memorandum, which clarifies and justifies the necessary powers and which has been prepared to assist the Delegated Powers and Regulatory Reform Committee in its scrutiny of the Bill, runs to a further 189 pages. This is truly a mammoth piece of legislation, and the above description was not complete, as there are three further sets of provisions to be added during the passage of the Bill, as the Minister mentioned in his opening speech.
It is the first major energy Bill for many years and has been long in gestation, though an added impetus to its scope and comprehensiveness has been given by the COP 26 commitments, which the Government have so far been keen to support, and the sharpened realisation of the vulnerability of our energy security in light of the Russian invasion of Ukraine and the ongoing war. The fact that it is deemed suitable for starting its passage in the Lords suggests that the Bill will not be seen as highly controversial, notwithstanding that it has now appeared as the Energy Bill, a much shorter title than the previous one: this must be the only thing that is shorter.
The Secretary of State and the Minister of State wrote to all Peers on 6 July, setting out the rationale for this “landmark legislation”. The letter helpfully sought to simplify the description of the overall approach under three headings or pillars. To recap, pillar 1 is leveraging in private investment in clean technologies and building a homegrown energy system. Pillar 2 is reforming our energy system to protect consumers from unfair pricing. Pillar 3 is ensuring the safety, security and resilience of the UK’s energy system. It is the provisions under this third pillar that I wish to briefly comment on and broadly welcome.
It has long been a feature of our energy system, and the effect of privatisation all those years ago, that it moved from being one that was nationalised and under central control to one in which the hidden hand of the market would be central. That was the whole point. Those who did not share the enthusiasm for this ideological approach tended to point out that trusting to luck and hoping for the best was not an adequate policy, but the zeitgeist of that era was dogmatic. Adam Smith’s hidden hand must be allowed to prevail, and so it has for over 30 years, albeit, as the Minister is keen to emphasis, in a regulated market.
It was because of the Prime Minister’s clear statement in the British Energy Security Strategy White Paper in April this year, saying that action would be taken to drive future energy policy rather than leaving it to market forces, that I welcomed the Bill in the debate on the Queen’s Speech. Prime Minister Johnson committed in that document to establishing the “Great British Nuclear Vehicle”. I have searched the Bill high and low and cannot find any mention of this very Johnsonian concept. What has happened to it?
The Bill does provide for the establishing of an independent system operator, apparently hitherto known as the future system operator. This is to be
“an independent, first of a kind body, acting as a trusted voice at the heart of the energy sector.”
If that means what I think it means, there will at last be a strategic planning mechanism, and then I would be wholly in favour of it. The background briefing notes note that this body will provide strategic oversight across electricity and gas systems, though with no particular mention of nuclear. It will drive progress towards net zero, energy security and minimising consumer costs.
Confusing changes in terminology and the seeming disappearance of “Great British Nuclear”, whatever it was, do need a fuller explanation. Nevertheless, I welcome this Bill and look forward to the Minister’s response and to the on-going passage of this landmark —we hope—legislation.
Baroness Boycott (CB)
My Lords, it is a great pleasure to follow the noble Lord, Lord Haworth. I think everyone will agree this is a very substantial Bill indeed. Like most noble Lords, I welcome it; anything that will make the energy sector make provisions towards net zero and a stable future has to be welcomed. There are areas, as I say, where we can agree, but there are some conspicuous absences and some need for massive improvement.
There have been, as many noble Lords have pointed out, a lot of mentions of hydrogen. While everyone agrees that it will have a key role to play in decarbonising certain hard-to-abate sectors, the thought of having hydrogen pumped into people’s homes seems at best really inefficient and at worse plainly dangerous. Would noble Lords want hydrogen pumped into their homes? This Bill will allow for a hydrogen village trial to be built, and the fact sheet states that:
“Low carbon hydrogen could be a key option for decarbonising heat in buildings”.
However, 18 independent studies—and that includes the IPCC’s and IEA’s—have ruled out hydrogen as playing a major role in the heating of buildings. It is expensive, inefficient and it is high carbon. Research by the Hydrogen Science Coalition shows that delivering one unit of heat with green hydrogen requires six times more renewable electricity, which will also be hard to practically deliver, as we have heard from many noble Lords this afternoon, and is significantly less energy efficient compared to heat pumps. There is also a risk that, due to insufficient green hydrogen, blue hydrogen—that comes from natural gas with carbon capture and storage, emits methane and will lead to increased gas sales—could be used instead. This would maintain the use of the fossil fuel network into the future.
Just before I go on, I would like to make a point, as a journalist, about the use of green hydrogen, blue hydrogen and “natural” gas—there is no such thing. Natural gas might be natural, but we are not talking here about a safe, organic product. The fossil fuel industry has done a brilliant job with all these labels. We all, quite niftily, say “natural gas” as if, in some way, that is a perfectly okay thing to have around us.
As others have said, most notably the noble Baroness, Lady Sheehan, carbon capture is not working at scale, may never work at scale and we cannot plan an energy system on the basis that it will come to our rescue like a knight in shining armour. It sounds slightly as if the Government’s policy on hydrogen is actually the oil and gas sector’s future wish list for how it will stay relevant in our decarbonising world. The main reason, however, that noble Lords should be against this is the sheer cost. It is a cost that this Bill will put on consumers’ bills via a levy. This is so not the time to add any additional costs to any household bills.
On the subject of unproven carbon capture and vast subsidies, I want to turn to electricity generation from biomass, which I have talked about before, which weirdly gets no mention in the Bill. I welcome that as it is a very controversial means of extracting energy. I understand that the Government are shortly going to publish their biomass strategy which will set out beyond 2027, when the current contracts lapse, and will say what kind of investment is going to go into the future. BECCS, which stands for “bio-energy carbon capture and storage” is entirely dependent on a technology that does not yet work at scale. Even if it did work perfectly, and all the trees that were planted to make the bioenergy carbon neutral did grow tall and were not encumbered by rising temperatures, like today, or disease, it would, according to briefings that we all had last week, take 140 years to become carbon neutral. We need to take into account the life cycle of emissions from biomass when we consider deploying it, as we do not have 140 years to play with. We barely have 30 years. There are many measures which seem to me to kick the can down the road, which we have been doing for ever anyway, and we must stop.
I shall focus on a couple of areas that I think are missing. The most glaring omission is taxing demand. There is a technology we have in abundance and know how to work: insulation. The Minister admitted last week during a debate on the energy company obligation that if the Government had spent the money that they will spend this winter to help households cope with the extra cost of gas, it might have been much more efficient in the long run. That makes the omission of something along the lines of a national retrofit strategy all the more puzzling, and it begs the question of whether the Government are able to learn from their mistakes. We are having this debate on what has already turned out to be the hottest day we have ever experienced, so it would be amiss not to remind noble Lords that, beyond this Bill, on the adaptation and mitigation measures we need to carry out to address climate change, if we do not pay for them now it will be far more expensive later. Noble Lords do not need to take my word for it; they can take the word of the ONS, the OBR or the CPC—they have all said it. If we do not act now, we will be in the position we are in with energy in the future, only it would be our entire economy.
On the specifics of the Bill, can the Minister enlighten me about why Clause 163, which will allow energy companies to buy out their ECO payments, is part of the Bill? We know that the ECO scheme has been a success. Energy UK told us that it has saved households £17.5 billion on their energy bills since 2013 and that, due to the high price of gas this autumn, an EPC C grade home will save £900 compared to an EPC D grade home. Can the Minister provide an assurance that this buy-out will not be set at a level that would have been lower than the money that the companies would have had to spend on upgrades? The Secretary of State can set the buy-out price, and I understand that we do not want to put a figure on it in the Bill, as it would become out of date, but is there something more that we could do to index-link it so that it cannot fall below the level it would otherwise be?
Finally, I reiterate the points made by my noble friends Lady Hayman and Lord Ravensdale on the need for local energy. I think that at the next stage of the Bill I will back amendments that allow local communities to generate their own electricity as people know this goes way beyond energy security, builds community cohesion and is good for all of us.
Baroness Jones of Moulsecoomb (GP)
My Lords, it is a pleasure to follow the noble Baroness, Lady Boycott. I agree with everything she said. My noble friend Lady Bennett of Manor Castle suggested that I would sum up other people, but she has done a better job of it than I could, so I am just going to rant about the Bill.
The Minister said in his opening remarks something about the weather. Of course, this is an extraordinary day for us to be debating this Energy Bill. The temperature when I came into the Chamber was 40.2 degrees at Heathrow, and it is quite possibly higher now. It is highest UK temperature ever recorded, and possibly not the highest this year or in many years to come. The roads are melting, outdoor workers cannot do their jobs and London is on fire. I do not know whether the Minister has seen pictures of the fires in London that the fire brigade is tackling at the moment.
Then there are the buses that our Prime Minister, Boris Johnson, put on the roads, which I said at the time were inadequate. They have terrible ventilation, and now they are stifling ovens. I invite noble Lords opposite to go and test one today and see what they think about them. They will find them extremely unpleasant.
Yesterday, the High Court ruled that, as many of us have said for so long, the Government’s climate plans are barely worth the paper they are written on. The High Court ruled that the strategy was “inadequate and unlawful”. That is quite strong language. What were the Tory leadership hopefuls promising until Alok Sharma, bless him, forced them to acknowledge previous government commitments? They were promising to rip up our net-zero targets so that we can cut taxes for the rich. It is incredible that they think that that will win them the general election at some point.
Clearly, the 2050 net-zero target is too little too late to keep the 1.5 degrees centigrade goal alive, and even then, the Government look set to miss it. The Bill could have been an opportunity to correct course and get the country on track to meet the targets, but the Government miss the mark again and again. We must limit our greenhouse gas emissions to no more than the UK’s proportionate share of the global carbon budget. This emissions reduction has to be done as rapidly as possible. Yes, there are costs, but they are nothing compared to the costs of inaction and delay.
This transition must include an end to exploration, extraction and the trade in fossil fuels. As other noble Lords have mentioned, the Government talk of gas as a transition fuel. Although I reject this argument, if the Government truly believe it, they should put this transition status in the Bill, with a legally binding pathway to phase out gas entirely. However, they have plans for new UK oil, gas and even coal extraction. None of this is sustainable; none of it is transitionary. It is all damaging, destructive, and dooms any hope of keeping 1.5 alive.
Then there is the other energy source that is described as a panacea, as the future: nuclear. We hear of small nuclear reactors, thorium reactors, nuclear fusion; a never-ending wish list of science-fiction solutions to the very real crises that we face. I call it science fiction; my noble friend called it magical maths—I think I prefer that. Magical maths: that is what the Government keep trying to do. Of course, as with magic, it is not real—let us face it. Today we heard about “jet zero”. I give it 10 out of 10 for the label, but minus 10 out of 10 for the concept of making aviation net zero.
The noble Baroness, Lady McIntosh, mentioned energy from waste. I am sympathetic to that, but we have found that when we have incinerators, recycling rates go down. The councils have a commitment to deliver a certain amount of waste to the incinerator companies, but they cannot supply all that waste because people are reducing—
Baroness Jones of Moulsecoomb (GP)
I will not take any interventions. I am so sorry; we are all tired and we want to get going, but I am happy to chat to the noble Baroness outside.
Perhaps the most objectionable part of the Bill is the Government’s quiet plan to bury nuclear waste under the sea—it is not quiet any more, of course. It is yet another example of passing on the burden of our terrible decisions to future generations. We will not solve the climate crisis by passing on a nuclear waste crisis instead.
As other noble Lords have said, insulation and energy efficiency are key to solving the crisis by significantly reducing our energy usage, but what does the Bill provide? A new energy performance certificate and a power—not even a duty—to make regulations about the energy efficiency of new buildings. It is inexcusable that new buildings are not meeting the very highest standards of energy efficiency.
One of this Government’s worst legacies will be the hundreds of thousands of leaky new-build homes that were built in the years since they scrapped the zero-carbon homes policy in 2015. Since then, we have had five years of inadequate homes being built, almost all of which will require expensive retrofitting as a result of this Government’s short-sightedness. This legislation should fix that mess, ensure that all new-build homes are zero carbon and set out a workable plan for deep retrofit of the entire UK housing stock, beginning with the communities that are struggling most in this cost-of-living crisis.
The Bill also misses the crucial role that local authorities and community energy must play in reaching net zero. Local government can be unleashed with new powers, new duties and the corresponding funding and fundraising ability to deliver. When the Minister comes back at Committee, will he table an amendment on community energy schemes? We can actually encourage people to go from “not in my backyard” to “let’s have it in our area”. That is a direct request to the Minister. It would be a real gesture of understanding what we need for the future.
The Bill has also missed the opportunity to align the UK’s emissions reductions target and strategy to the all-important 1.5 degrees centigrade threshold. Also, as others have mentioned, there is another catastrophic legacy from David Cameron’s tenure as Prime Minister: the whole issue of onshore wind. Perhaps the Minister could also table an amendment on that as a gesture towards all those in this House who care so much about that issue.
Of course, the Energy Bill should also ensure that any proposed solutions to the climate crisis as far as possible minimise damage to ecosystems, food and water availability and human health. I do not believe for one minute that this Government can rise to that challenge—but I live in hope—and nor, it seems, does the High Court.
Your Lordships’ House will work diligently, spending countless hours through countless days improving this legislation; then the Government will take it down the Corridor, as they always do, to undo all our hard work, whipping their MPs to do the wrong thing, no matter how obviously wrong it is. It is deeply disheartening and I can only plead to your Lordships that we put our collective foot down and insist on a realistic pathway to achieve that net-zero climate target.
However, luckily for the Government, who seem short of ideas at the moment, there are two Private Members’ Bills going through Parliament at this very moment that will fix their problem and fix it for the rest of us. They supply all the ideas necessary to actually get towards a carbon-neutral future. There is the Climate and Ecology Bill, which would make up for the gaps in the Energy Bill and ensure that the UK plays its full role in the global effort towards achieving 1.5 degrees centigrade, with its science-led target that we emit no more than our fair share of the remaining global carbon budget. It addresses the full extent of the climate and nature crisis, in line with the most up-to-date science. It will ensure a comprehensive and joined up approach. The Bill was written by scientists, experts and campaigners, was first introduced in Parliament by Caroline Lucas MP in September 2020 and has just been introduced in this House by the noble Lord, Lord Redesdale, who is not in his place.
Noble Lords
Baroness Jones of Moulsecoomb (GP)
I am so sorry; my side vision was not working.
Secondly, there is my clean air Bill, which is a great piece of legislation and would aid the health of people and the planet by reducing fossil fuel pollution. Before there is any of this “whataboutery” that we hear so much of when we are outside this House about China and India doing their share and so on, we Brits rampaged and pillaged around the globe for a couple of hundred years as the British Empire and snatched what we could. It is time to give back. It is time to do our duty as British people and give back to the rest of the world. I really hope that on this issue we do our best.
Lord Teverson (LD)
My Lords, it is always a real pleasure to follow the noble Baroness, Lady Jones of Moulsecoomb, because of her rather special style in this House, which I think we genuinely welcome, and her plain speaking.
I must declare a couple of interests. I chair a company called Aldustria Ltd, which is into energy storage—I say to the noble Lord, Lord Moylan, that that is actually one of the answers to variability on renewables—and I am a trustee of the Green Purposes Company, which holds the green share in the Green Investment Bank.
I want to go back into history, not as far as the noble Viscount, Lord Hanworth, did, to Baldwin and Chamberlain, nor to the OPEC crisis that my noble friend Lord Bruce mentioned, but to 2013 and the last major energy Act, which was presented and introduced by Ed Davey as the Liberal Democrat coalition Secretary of State. It did a number of things but there were two key measures. First, it introduced contracts for difference, which were a major step forward at the time. Again referring to the noble Lord, Lord Moylan, to some degree, CfDs now produce money for both the contract company and, effectively, the Treasury; the present reference price is much higher than the strike price, so the taxpayer does really well at the moment in that area. We do not have to worry about levies on producers because it is a self-balancing mechanism that comes back to the taxpayer when energy prices are high. The second thing introduced by that Act was the capacity market; it had its issues, particularly with diesel generators, but a lot of that has been solved now.
The 2013 Act changed the way that the energy market worked in this country and it has been very successful. The Bill before us does not change that but is an evolution of it. The noble Lord, Lord Haworth, talked about the weight of the Bill. It might be a thick book but it is not a blockbuster in what it is trying to achieve. It does a number of things and it is a bit of a Christmas tree Bill; I hope we will not have thousands of amendments as we go through eight days of Committee, but there are a lot of areas where we can add things in.
I have referred a couple of times to the noble Lord, Lord Moylan, but I liked seeing decarbonisation and net zero as a constraint. That is an interesting way of looking at this issue and I do not disagree; it is an objective that we are dynamically moving towards but it is a constraint in how we move on energy.
We are looking at energy security, which is particularly important at the moment; decarbonisation of the economy; and, particularly at this time, the cost of energy and the effects that that has. Those of us who were involved in the 2013 Act remember that the big issue we were trying to solve was the energy trilemma of security versus price versus decarbonisation. Amazingly, over the nine years since then, there has been a convergence of those needs. It seems, practically and evidentially, that we can solve all three of them. By decarbonisation and the additional use of renewables and other technologies, we can solve security and decarbonisation, and help to bring down prices, literally, against the fossil fuel crisis at the same time. We have that ability.
We on these Benches welcome the Bill. It has a number of good parts, including on hydrogen—although I entirely agree that its use will be highly constrained. I was interested that the experiment involves gas heating, which is maybe not one of the best areas in which to do it. I shall come to the future system operator later, but it is much more of a strategic look, and I welcome that. On heat networks, heat pumps and carbon capture, storage and usage, I am somewhat sceptical about their overuse but it is good that we move them forward. I also welcome the fact that we are going to continue our interest in fusion.
Let me talk about energy security. One thing that surprises me goes back to a point made by the noble Lord, Lord Howell. Part 10 talks about resilience and the core fuels. I went through that part of the Bill and—the Minister may correct me—it relates only to petrol and oil; it does not refer anywhere to gas. So we still have a resilience problem in an area of energy policy that is very important at the minute. Exactly as the noble Lord, Lord Howell, pointed out, in 2017 we effectively stopped gas storage in this country when the Rough storage facility was closed. To give the Government Benches their due, the cry went up from that side of the House asking why this was happening. I understand that there are now negotiations to try to reopen that facility. I would be interested to hear from the Minister how they are progressing and whether that will happen.
On the speed of transition, let us remind ourselves that we have a target to decarbonise electricity by 2035, which is only 13 years away, and the Prime Minister has said that we should have 40 gigawatts of offshore wind in eight years’ time. That is really quite something. How do we go about meeting that? One of my criticisms is that there is nothing in the Bill to reduce gestation timescales—an offshore wind farm can take 10 years to go from start to finish. I am interested that the Minister said that one of the areas of amendment to the Bill is around trying to reduce approvals from four years, which was optimistic, to one year because of the change of environmental rules. I would be the first to say that the way that environmental regulation works around offshore wind is probably not the best way it could go. We will want to look at what those regulations will become to achieve that sort of level in timescale.
As other Members have mentioned, the objectives of the regulators get in the way on transition—partly the North Sea Transition Authority, but particularly Ofgem not having a zero-carbon objective. I know the Government feel that that is already covered in the remit but it is not, and it gets in the way. That is one area which it is important to change in the Bill.
The other area is the system operator, or ISOP. I read that long section through. The ISOP is called an independent operator, but there is nothing in the Bill guaranteeing its independence or how that regulator—or planner or operator—is appointed. I see no reason why it should have any real authority. It is unfortunate that this detail is not there. I think back to when the Labour Government put in the Strategic Rail Authority, which in the end did not manage to achieve anything because it did not have any real authority, and so it was abolished. I would like to understand how the ISOP will work and have authority, and not be just an animal of BEIS or the Treasury. I was going ask, “Is ISOP a fable?”, but I decided that it would not work in the House.
A number of noble Lords have mentioned onshore wind. From my house in Cornwall I can see 35 wind turbines. That is fantastic. When I go out on my bike I can tell, as they move, whether I will be cycling against the wind or with it. Most people think that they add character to the countryside. The Government are just not brave enough in that area.
One of the areas completely missing in terms of transition, which I see as vital, is electric vehicle charging. We do not have the infrastructure to support the revolution which is happening through market forces as much as anything else. I know that is for the Department for Transport but, if we really want to transition, the Bill needs to achieve it, so let us not get too much into silos.
In terms of grid investment, we have had the announcement that National Grid is going to spend some £54 billion bringing offshore electricity to the mainland, but what about the money required to upgrade the grid in Great Britain? When it comes to getting access to the grid, whether for storage or renewable energy, we are running out of capacity.
I was speaking to one of the DNOs today, and of its 8 million households, only 2 million have smart meters—an appalling ratio. I am sorry, but that is what a DNO told me this morning on the figures for its area. If you include SMETS 1, the figure rises to 3 million. That is a fact.
I will talk about bringing costs down. Clearly this Bill does not deal with immediate issues, but it could be about the near-medium term. Demand reduction—particularly through energy efficiency, as many have mentioned—is really important.
The price cap is still an imperfect mechanism. It may have served its purpose to a degree, but should we not now be moving to something such as perhaps a social tariff? I would be interested to hear from the Minister about what the Government are looking at post the energy cap.
Many have mentioned local authorities and communities. I word-searched the Bill as well, and local authorities are mentioned in regard to heat networks, as obviously you can hardly do these at all without local authorities. They, and local communities, must be involved. Only through these means can we bring costs down in this industry in the medium term. Yet what have we got? We have already passed this year the Nuclear Energy (Financing) Act, which actually puts up energy prices for households. The new Prime Minister might consider scrapping that for a start.
As I said, the Bill is important, and there are many parts that I and these Benches support. It is not a blockbuster, but it is a big Bill. Let us make sure that the really important areas, such as energy efficiency and the systems operator being able to ensure we have a full and proper strategic view into the future, are actually achieved. There is a lot to do.
Lord Lennie (Lab)
My Lords, I thank the Minister for his detailed introduction and for the meeting we had yesterday about the Bill. I also thank all other noble Lords who have taken part in the debate.
We began with the noble Lord, Lord Bruce, who gave us a bit of a personal history. It is unusual to find a Scot who has not been elected opposing oil and gas in Scotland these days—that is the way it is. The noble Baroness, Lady Hayman, talked about onshore wind, Ofgem having a net-zero remit and the local community generation of fuels, which we would certainly support.
We had a warning from the noble Lord, Lord Howell. With his international experience, he was disappointed in the Bill, warning of worse to come and the way in which renewables are seen to replace fossil fuels. The noble Lord, Lord Whitty, spoke of the gravity of the situation and of the Bill not standing up to that, while welcoming the ISOP and CCUS; and the noble Baroness, Lady Sheehan, talked of CCUS not working at scale and being insufficient to deal with the carbon capture issue.
The right reverend Prelate the Bishop of Carlisle welcomed the Bill—he was a bit of a sore thumb among those who spoke—and all three pillars of it, which is good news. He also talked about local generation and carbon capture. The noble Lord, Lord Moylan, reminded us that he is a big advocate for the gas industry, based on cost. I do not know about the detail of his analysis, but he warned that renewables will be more expensive and unaffordable. My noble friend Lord Hanworth predicted social unrest because of the price of fuel and energy costs. The noble Lord, Lord Ravensdale, talked about the trilemma he is in between the three parts of the Bill. The noble Baroness, Lady Bennett, warned about local suppliers, onshore wind, efficiency and fusion.
The noble Baroness, Lady McIntosh, talked about local sources of waste energy, generating for local use and transmission. She criticised the use of overhead lines for the transmission of electricity and the 30% waste it produces. My noble friend Lord Haworth reminded us of the Bill’s size, expressed disappointment at its overall effect but welcomed the ISOP. The noble Baroness, Lady Boycott, welcomed the Bill but with a lot of reservations about the effects it will have and the high costs. She was very much anti-hydrogen, although the hydrogen pilot has yet to be gone into in detail. The noble Baroness, Lady Jones, gave us a rant: we are doomed, there is no support and there is nothing on onshore wind. Then we finished with the noble Lord, Lord Teverson, who thanked the former Energy Minister from the Liberal party, Ed Davey—what happened to him?—for giving us the 2030 Bill, and welcomed certain aspects of the Bill in his presentation.
The Bill has been a year in the creation so we welcome its publication, but despite its length—300-plus pages, 243 clauses, 13 parts and 19 schedules—it represents a bit of a missed opportunity to address the catastrophe facing millions of ordinary, hard-working families who face soaring energy bills. It does not meet the scale of the crisis. Having taken a year, it is a bit of a disappointment and misses the target of the cost of living crisis. The Bill does not go far enough in establishing new green energy sources, nor in its energy-efficiency measures, which are at best not a leap from where we are now.
The Bill should have had achieving net zero woven into every measure it proposes, not run away from it. One of the leadership candidates described net zero as “unilateral economic disarmament”. I think she is no longer a candidate, but I do not know whether she has revised her view of net zero more in line with what policy should be.
The Bill is a missed opportunity to bring forward energy-efficiency measures, which are desperately needed and should be the starting point of the Bill. Never mind the green energy sprint towards net zero and helping with the cost of living crisis that my noble friend Lady Blake referred to in her opening speech—that sprint seems to be more of a gentle walk and the crisis merely a blip. A decade of failed energy policy has left energy bills too high and our energy system too weak.
What is remarkable in this long Bill, divided into three key pillars, is what is missing. It will not be a surprise to the Minister that this is how we feel, as these matters have been raised continuously over the recent past. Where is the urgent help needed to help with soaring energy costs, including the delinking of low-price renewables from the high price of gas? Where is any mention of onshore wind, the cheapest and most efficient form of our potential new energy sources? Where is the encouragement for a green energy sprint to help keep costs down? Where is the long-overdue upgrade to the national grid, as referred to by other contributors? Where are the simple efficiency measures for home insulation? How many more times will the Government assert that smart meters can play a crucial role in helping to bring down costs but then fail to make them mandatory?
There are some welcome initiatives, of course. The introduction of the independent system operator and planner for electricity and gas suppliers is very welcome and should help to facilitate delivering net zero. However, the key to becoming a successful ISOP will be establishing true independence from government. The unprotected heat networks, with their half a million customers, will benefit from being regulated by Ofgem, especially as that number is due to grow significantly as we move towards net zero.
As I asked at the beginning, what is missing? The Labour Party will concentrate its efforts on the next stages of the Bill. What measures should the Government bring forward to relieve customers from the immediate cost of living crisis? Why is there no mention of onshore wind farms in the Bill? How reliable is net zero, given the uncertainty about the leadership of the Conservatives and the country? The next leader must have a plan, as Alok Sharma said, or they will be off too. Unless the Government propose amendments of their own, the Labour Party will support and propose amendments on energy efficiency, onshore wind and solar, and seek to establish that net zero 2050 means net zero 2050—if not earlier.
I look forward to the Minister’s response.
Lord Callanan (Con)
First, let me thank all noble Lords for their contributions to what I think has been an excellent, important and constructive debate. I will attempt to answer as many of the questions asked as possible, and of course, I look forward to debating many of these issues further as the Bill proceeds through Committee.
One of the most pressing issues facing many hard-working households and businesses today is the cost of living, particularly the cost of energy. Unsurprisingly, many noble Lords—including the noble Baronesses, Lady Blake and Lady Hayman, and my noble friend Lord Howell—asked how the Bill will address this issue. The Government are acting now to protect households from the full impact of rising prices with a package of financial support worth £37 billion.
However, the cost of living crisis is not just about providing support today. It is also about ensuring that we have an energy system that is affordable for many years to come. This Bill will create a more cost-efficient energy system by increasing innovation and competition, for example by introducing competition in onshore electricity networks and attracting investment in a strong, low-carbon energy sector. The Bill will also help to reduce our exposure to volatile gas prices.
My noble friends Lord Moylan and Lord Howell and the noble Baroness, Lady Sheehan, touched on the important issue of energy security. It is an absolute priority for this Government. Thankfully, Britain benefits from highly diverse and flexible sources of gas supply and a diverse electricity energy mix, which ensures that households, businesses and heavy industry can get the energy they need. I am happy to confirm that the UK is in no way dependent on Russian gas. We have highly diverse sources of gas supply, providing us with one of the largest liquified natural gas import infrastructures in Europe, for which, I am happy to say, the EU is particularly grateful at the moment, as we support it. Natural gas has an important ongoing role to play in future as the UK decarbonises its energy system. However, how natural gas is used will need to change to eliminate the CO2 associated with burning it.
In response to my noble friend Lord Moylan, affordability is of course absolutely key to delivering on our energy strategy. The value for money of the measures that we introduce is completely critical.
As many noble Lords have noted, this is a wide-ranging Bill. I welcome the many questions that were asked in the debate about the wider energy sector; most of them do not necessarily relate to the Bill but I will nevertheless attempt to address them anyway.
A number of noble Lords, including the noble Baronesses, Lady Blake and Lady Sheehan, and the noble Lords, Lord Bruce and Lord Whitty, raised the knotty subject of energy efficiency, which we have debated long and hard in this House. Let me say at the start that huge progress is already being made on the energy efficiency of UK homes. We are investing more than £.6.6 billion over this Parliament to improve energy efficiency. However, cost of living pressures mean that now is not the right time to bring in additional requirements for home owners regarding further regulations on minimum energy efficiency standards. However, we will bring forward measures at a more appropriate time.
The noble Lord, Lord Bruce, asked if the Government will introduce windfall taxes back into the oil and gas industry. The energy profits levy will raise around £5 billion in its first 12 months, which will go towards supporting people with the new cost of living measures announced by the previous Chancellor.
The noble Lord, Lord Whitty, asked about the programme of policy statements and secondary legislation. To implement the commitments in this Bill we will of course publish policy statements for the Lords Committee stage, helping your Lordships to understand the intention of the regulation-making powers in the Bill and the next steps which will follow that.
The noble Baronesses, Lady Hayman and Lady Bennett, and the noble Lord, Lord Lennie, asked about onshore wind. On consultation, we are going to introduce a clear route which enables local communities and authorities to work together to signal their support for onshore wind and for onshore wind developers to respond quickly to this. On planning guidance, while we will not introduce wholesale changes to current planning regulations for onshore wind in England, we have committed to developing local partnerships for a limited number of supportive communities which wish to host new onshore wind infrastructure in return for appropriate benefits, including, for example, lower energy bills.
The right reverend Prelate the Bishop of Carlisle, the noble Baroness, Lady Bennett, and my noble friend Lady McIntosh all spoke about community energy. Through the introduction of UK-wide growth funding schemes, the Government are enabling local areas to tackle net-zero goals in ways that best suit their particular community needs.
The noble Lord, Lord Bruce, asked if there would be enough electric vehicle charging points. We are committed to ensuring that an inclusively designed EV charging network is available that works for all consumers.
My noble friend Lord Moylan asked what will take up the slack when the wind is not blowing and the sun is not shining, which is an important question. The Government’s long-term ambition is to increase our plans for the deployment of civil nuclear power up to 24 gigawatts by 2050, which would be around 25% of our projected 2050 electricity demand.
The noble Baroness, Lady Boycott, and my noble friend Lady McIntosh asked about the use of waste for energy. I can inform both that the forthcoming biomass strategy will consider evidence on the likely support for and sustainability of biomass feedstocks and the best use of biomass across the economy to help us achieve net zero.
I turn to some of the points made about measures in the Bill, starting with pillar 1. The noble Baroness, Lady Hayman, and the noble Lord, Lord Bruce, mentioned the cost and viability of heat pumps—a matter dear to my own heart. With the low-carbon heat scheme and other policies, we are confident that the instalment cost of heat pumps will come down significantly over the coming years as the market scales up, making heat pumps an increasingly attractive and affordable option for more and more UK households.
The noble Baroness, Lady Hayman, also questioned whether hydrogen was the appropriate technology for heating homes. Indeed, that is a very good question to pose. It has the potential to make a contribution to fully decarbonising heat by offering consumers a future heating option that works in a very similar way to natural gas, but without the carbon emissions. However, it is important to point out that hydrogen for heat is not yet an established technology. Much further work is required to assess the feasibility, costs and potential benefits. As part of that, a neighbourhood trial will start next year, with a hydrogen village expected to go live in 2025. This is all part of the plan to work out the feasibility of the wide scale use of hydrogen for home heating.
The noble Baroness, Lady Sheehan, the noble Lord, Lord Whitty, and the noble Baroness, Lady Bennett, all questioned whether CCS was an appropriate technology for the UK. The Climate Change Committee has described carbon capture usage and storage—CCUS—as
“a necessity, not an option”
for the transition to net zero, which will enable the UK to deliver upon its global climate commitments. Contrary to what some noble Lords said, CCUS is a proven technology with CCUS projects operating safely globally, in countries such as Norway, the US and Canada. CO2 storage is a mature and safe technology.
The noble Lords, Lord Bruce and Lord Whitty, spoke of the need to accelerate CCUS delivery and have a clear deployment plan. I agree with them; we remain committed to industrial decarbonisation across all nations and regions of the UK. As we work towards net zero, we are clear that CCUS will continue to play a key role in the process. In April 2022, the British Energy Security Strategy restated our commitment to support the deployment of four CCUS clusters by 2030. Following on from a process to select the first CCUS track 1 clusters to be deployed by the mid-2020s, we intend to bring forth further details on the outcome of phase 2 emitter projects in due course.
My noble friend Lady McIntosh and the noble Baroness, Lady Boycott, asked about the hydrogen levy. The detailed design of the levy is ongoing, including decisions on where it will be placed in the energy value chain. The levy design will reflect wider government priorities and policies to ensure that consumer energy bills are, of course, affordable and that the costs are distributed fairly. We anticipate some public engagement on options for the detailed levy design in early 2023.
I move on to some points that were raised on pillar 2 of the Bill. I thank the noble Baroness, Lady Blake, and the noble Lord, Lord Ravensdale, for their positive stance on the independent system operator. We are also seeing that across the energy sector. I was asked about the timeline for implementation. BEIS and Ofgem are currently working with National Grid and the electricity system operator on the next steps. Depending on several factors, including the passage of legislation and continued discussion with key parties, the ISOP could be established by or in 2024.
The noble Lord, Lord Whitty, asked about the interaction with Ofgem and National Grid. The Bill actually provides a power to set out a strategy and policy statement for the ISOP; that is where the Secretary of State will set out their direction for Ofgem and ISOP. The Bill also provides for Ofgem to license and regulate the ISOP, overseeing its activities in its capacity as the independent regulator.
My noble friend Lady McIntosh raised the important point about why heat network customers do not get protection equal to that of gas and electricity consumers. That is because heat networks typically buy their energy through commercial contracts, which are not covered by the existing default tariff price cap. However, I am pleased to confirm to my noble friend that the legislation provides the BEIS Secretary of State with powers to introduce a price cap, should it be necessary to protect consumers.
The noble Baroness, Lady Blake, asked whether the Bill provides the overhaul needed for the heat networks sector. I very much believe that it does. To address her points on poor design and maintenance, about which I agree, the Bill will include minimum technical standards. It will also introduce powers to regulate decarbonisation; as mentioned, it will also enable powers to set price caps.
The noble Lord, Lord Ravensdale, asked whether zoning, which will of course be run by local authorities as the most appropriate bodies, can be extended beyond heat networks. Our strategic approach in the Heat and Buildings Strategy follows, in our view, the grain of the market. Our policy levers are aligned to certain points of action; for example, when people are replacing their heating systems. Extending zoning to other technologies in our view risks removing choice for households and businesses when consumer choice over heating technology will be best for the transition.
The noble Lord, Lord Bruce, asked about the effectiveness of the price cap. That is a valid question. The price cap remains, of course, a temporary measure until competition in the market improves. BEIS is currently considering what reforms are needed for energy retail market regulation to ensure that the market is resilient and sustainable and continues to protect consumers.
On the points raised that come under pillar 3 of the Bill, the noble Baroness, Lady Blake, asked for more detail on the nuclear decommissioning measures. The proposals do not result in any relaxation in the standards for public protection. Former nuclear sites will continue to be regulated by the relevant environmental agency and the Health and Safety Executive, rather than the Office for Nuclear Regulation, which will regulate health and safety at work activities. She also questioned the reach of the Bill’s core fuel resilience powers. These measures, also raised by the noble Lord, Lord Teverson, are intended to be used in a light-touch way to complement the additional voluntary approach. The Government will use these powers in a proportionate way, including providing for certain rights of appeal and consultation requirements.
The noble Lord, Lord Bruce of Bennachie, and the noble Baroness, Lady Bennett, raised a question in relation to the disposal of nuclear waste. The Bill makes provision in relation to geological disposal facilities which will encapsulate and isolate radioactive waste at great depths. Nuclear Waste Services, the developer of the geological disposal facility, is confident it can meet the additional requirements from new nuclear as set out in the British Energy Security Strategy.
Moving to the point raised by the noble Baronesses, Lady Bennett and Lady Jones, in their double act, about dumping radioactive waste in the sea, of course, disposal of radioactive waste in the sea is banned by international conventions and let me be absolutely clear that no part of a geological disposal facility will be in the sea. The waste will be isolated deep underground, within multiple barriers, to ensure that no harmful quantities of radioactivity reach anywhere near the surface environment.
My noble friend Lord Howell and the noble Viscount, Lord Hanworth, both asked about small modular reactors. Through the nuclear fund, we are providing funding to support research and development for a small modular reactor design and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest.
The noble Lord, Lord Ravensdale, asked whether the Government could make sure that nuclear power is eligible for the renewable transport fuel obligation, including hydrogen produced from nuclear power. I know this is something we have had exchanges on in the past. We believe this would be complex and would require firmer, further evidence for industry to understand how exactly it might be compatible with wider RTFO eligibility criteria.
I welcome my noble friend Lord Moylan’s support for the promotion of nuclear fusion, and I also welcome the support from the noble Lord, Lord Bruce of Bennachie, for the continuation of North Sea oil and gas production. Perhaps he would like to have a word with his noble friend, the noble Baroness, Lady Sheehan, about this important point, although I welcome her confirmation that she is now apparently in favour of gas as a continuity fuel. My point, which I keep making to the noble Baroness, is that since we produce only about 40% of our own gas in the North Sea and we still import considerable quantities of LNG to be used as a transition fuel, it makes eminent good sense, in my view, to obtain those reserves from our own resources in the North Sea, which of course is of much lower carbon intensity than LNG. I am sure we will continue to have these debates going forward.
Baroness Sheehan (LD)
Will the Minister address the point made by the noble Lord, Lord Whitty, as well as by me, that the gas we produce in the North Sea no longer belongs to us? It is a global commodity and has to be traded as a global commodity.
Lord Callanan (Con)
It is produced by private sector companies under regulation, and there are interconnectors connecting us to the continent. I am sure that the noble Baroness would want us to support the EU in its time of need at the moment. With our energy terminals, those interconnectors play a crucial role in helping our EU friends with their current difficulties. It is of course a global commodity and the price is set globally. However, if the noble Baroness’s question is about carbon intensity, the carbon intensity of domestically produced resources is much lower than imported LNG. As I have pointed out a number of times before, I fail to see why it is, in her view, more sensible to import gas through LNG rather than getting it from our own North Sea resources. I am sure we will have that debate many times again in future.
Finally, I will deal with the challenge from the noble Lord, Lord Teverson, regarding smart meters. I can tell the noble Lord that we have now installed 27 million smart meters in the UK, and the vast majority of SMETS1 meters have now been upgraded with software upgrades to SMETS2 standards, so that they operate exactly the same as SMETS2 meters and provide full smart meter functionality. Only this morning, I met the DCC to review the progress on that upgrade and was told that the number of meters still to be migrated is tiny—a few tens of thousands of early meters that the DCC will continue to attempt to migrate; if that does not work, they eventually may be upgraded to full SMETS2 meters.
I have addressed most of the points raised by noble Lords. I am sure that noble Lords will say if I have not covered all their points, but we will debate these matters further in Committee. Many of the points made were things that noble Peers would like to see happen separately and outside the provisions in the Bill. However, I think that most of the measures received a wide degree of support in your Lordships’ House. I look forward to continuing this constructive engagement and detailed scrutiny as the Bill progresses through Committee.