Monday 5th September 2022
(2 years, 3 months ago)
Lords ChamberEnergy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Amendment Paper: HL Bill 39-II Second marshalled list for Committee - (5 Sep 2022)
Baroness Hayman (CB)
My Lords, I declare my interest as co-chair of Peers for the Planet. I will speak very briefly to the amendments. I have amendments of my own later in the Bill on energy demand reduction and the regulator’s responsibilities.
I support the amendments in the name of the noble Lord, Lord Ravensdale. It is important that this Bill is specific about the implementation of the aspirations that we hear from government. We have not had enough detail about the plans to implement the strategies, and we have not had enough detail in the strategy. For that reason, I have some sympathy with the amendment of the noble Lord, Lord Moylan. He raises important issues about putting flesh on the bones of the aspirations, but I disagree with him about changing the timetable. I also disagree with the noble Viscount, Lord Trenchard, on the question of whether, because our contribution to global emissions is low, we should go ahead with the contribution we can make in innovation and leadership, which completely ratchets up the effect of this country’s own policies on a global scale.
One serious point I want to make about the noble Lord’s amendment is that I am extremely worried about the suggestion that the Secretary of State should commission and publish “an independent assessment” of the costs, the implementation dates and the risks of the net zero strategy. We have the Climate Change Committee, which is admired for its work throughout the world. It is an important and respected body and it is independent of government. It would be ridiculous to try to get different independent advice: if we go down that road, we are in “anyone’s view is the best view” territory. We have an independent adviser for government. We have the Office for Budget Responsibility; we have lots of people who can comment on the advice it gives, but it would be quite wrong to put in this legislation anything that undermined its position.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
Let me say first what a pleasure it is to open for the Government in today’s discussions: I am sure we will have lots more as we go through the Bill. I thank the noble Lords, Lord Lennie, Lord Ravensdale and Lord West, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friends Lord Frost, Lord Moylan and Lady McIntosh, for their amendments, which seek to address the purpose and strategic aims of the Bill and of course the Government’s energy policy more generally. That allowed us to have a debate with more of the flavour of a Second Reading debate, rather than addressing the specifics of the Bill, but that is understandable given the nature of the amendments.
I turn first to Amendments 1, 6 and 7 from the noble Lords, Lord Lennie and Lord Ravensdale, the noble Baronesses, Lady Blake and Lady Worthington, and my noble friend Lady McIntosh. These amendments all seek to address the fundamental purpose of the Bill. While they are well-intentioned, it is my strong contention that these amendments are not necessary as the Bill already has a clear purpose. Provisions in the Bill as drafted not only have regard to the outcomes those noble Lords seek, but they are actually designed with those outcomes in mind. For example, a number of measures in the Bill will contribute to the resilience of the UK’s energy system—most obviously, those powers related to the ensuring the security of the core fuel sector. I am happy to give the assurance that my noble friend Lady McIntosh sought today: that energy security is of paramount importance to this Government.
Amendment 245 would give effect to Clause 1 once the Act is passed and, for the reasons I described, I do not believe that it is necessary. On Amendment 5, from my noble friends Lord Moylan and Lord Frost, and the noble Lord, Lord West of Spithead, relating to energy strategy statements, I reassure them that the Energy Bill is to a significant extent an expression of the Government’s strategic intent as set out in the 10-point plan, the energy White Paper, the net-zero strategy and the various sector-specific policy papers we have published. Furthermore, government policy evolves over time and strategies do not always neatly replace others. Some aspects may remain government policy, and some are updated in response to a changing landscape—of course, we have seen that very recently with the Ukrainian invasion. I submit that, rather than prescribing policy intent in primary legislation, it makes more sense to allow Ministers to exercise discretion in these matters and respond to a changing policy environment and international environment.
I move on to the requirement to publish a strategy
“for managing intermittency of electricity supply”.
Intermittency is an important issue, but the National Grid Electricity System Operator is responsible for balancing electricity supply and demand, because while production is intermittent, so is demand. The Government remain confident that they have all the tools needed to operate the electricity system reliably. We can call on a wide range of technology types to do this, some of which were mentioned in the debate today, including emergency gas-fired generation, interconnectors and, crucially, demand-side responses such as insulation, retrofit measures, et cetera.
The capacity market is the Government’s main mechanism for ensuring the security of electricity supply. It has done a great job and we have already secured the majority of Great Britain’s capacity needs to meet future peak electricity demand out to 2025-26. The Government have also committed to ensuring a flexible system which involves the use of a wide range of technologies—again, a number of them were mentioned in the debate today—including battery storage and pumped storage, which I was really interested to hear my noble friend Lord Howell talk about. In my electrical engineering degree many years ago, we studied that particular development; for those who have not been able to see it, it is an incredible feat of engineering.
This amendment also has a requirement to commission assessments of the 10-point plan and of the costs of achieving net zero. My noble friend Lord Moylan raised concerns that progressing towards net zero is a “constraint” to achieving affordable and abundant energy in the UK. I reassure him that, as we transform the energy system, the Government are committed to pursuing the most cost-effective solutions, which, at the moment, are offshore and onshore wind. Ensuring security of supply and decarbonisation, and affordability to the consumer and the Exchequer, are of critical importance. While there will be costs, the costs of inaction in this sector, as we have seen through the invasion of Ukraine, are much greater. Had we not acted over the last decade or so to secure the second-largest supply of offshore wind in the world, the costs we would be facing now would be much greater and our security of supply would be at much greater peril.
As set out in the Net Zero Strategy, we estimate that the net cost to achieving net zero, excluding air quality and emissions-savings benefits, will be the equivalent of 1% to 2% of GDP in 2050. That strategy was informed by the Treasury’s 2021 Net Zero Review, which looked at the potential costs and benefits to businesses and consumers of the transition to a net-zero economy.
Furthermore, several mechanisms already exist to analyse the path towards net zero, as mentioned by my noble friend. For example, the Government’s approach to net zero is already subject to independent scrutiny by the Climate Change Committee, whose 2022 progress report included an analysis of the economic impact of decarbonisation. Much of this work already takes place.
I turn to Amendments 2, 3 and 4, tabled by the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie. The Energy Act 2013 introduced the power for the designation of a strategy and policy statement that sets out the Government’s strategic priorities for energy policy, the roles and responsibilities of those implementing such a policy and the policy outcomes to be achieved. The Government have committed to laying a strategy and policy statement for energy policy later this year and a statement at the earliest appropriate time. Designation of a strategy and policy statement will ultimately be a decision for Parliament, not the Secretary of State. Therefore, I submit that these amendments are duplicative and unnecessary.
I thank my noble friend Lord Moylan for submitting Amendment 231. He raises an important point; splitting the wholesale market into two—namely, creating one market for variable renewables and another for firm generation—is already being considered as part of the review of electricity market arrangements, or REMA. An initial consultation, which included exactly this proposal, was published in July. Splitting the market is one of many options being considered within REMA. My department is currently assessing the viability of implementing a split market and the potential costs and benefits associated with doing so.
Based on stakeholder responses to the consultation and based on further policy developments, we will publish a second consultation in 2023 to set out any feasible options in more detail. Legislative proposals on how to implement recommended reforms will then follow. Adding a clause into the Bill that commits the Secretary of State to publishing legislative proposals on splitting the market by a specific point in time would, I submit, prejudge the outcomes of both the consultation and the review.
Lord Moylan (Con)
My Lords, did I hear my noble friend say 2023? Did I hear that correctly?
Lord Callanan (Con)
Yes, it is a complicated area that requires proper and detailed policy analysis, but that work is under way, and we will do so.
Splitting the wholesale market would a necessitate a fundamental and irreversible design of our electricity market arrangements, and without the appropriate consideration of the potential costs and any potential benefits and without sufficient stakeholder input, it could well lead to higher bills for consumers, and it would create an investment hiatus which would jeopardise our ambitions for decarbonising the power sector by 2035—which is exactly the point I was making to my noble friend. So, this is an important issue, but it is one that needs to be looked at thoroughly, properly and professionally. I hope that my noble friend is assured that the issue is being closely examined and will therefore feel able to withdraw his amendment.
Baroness Worthington (CB)
My Lords, would the Minister care to comment on the fact that—and this has been mooted as a potential solution in the short term during these unprecedented times where we see such high prices and so many people suffering—there is surely a logic to take a power now, to use it in extremis and then to continue with the longer-term conversation? I think the nation wants to see some action quite quickly and we have an Energy Bill.
Lord Callanan (Con)
I do not think it is important to do that at this stage; we have published the consultation, we are closely analysing responses, as the noble Baroness will understand. It is a difficult area, it is a complicated area, there are a number of potential ramifications, and we think it is worthy of consideration. If we took a power now, that might have a very destabilising effect on the market and on the amount of investment that is flowing into many of the sectors, so the Government’s position at the moment is that we do not think that is necessary or desirable.
I reassure noble Lords that the addition of electrification to the Energy Bill is also unnecessary. The net-zero strategy sets out the Government’s view on how electrification can enable cost-effective decarbonisation in transport, in heating and in industry—to that extent, I agree with the noble Baroness, Lady Worthington, and the points that she made—along with our approach to deliver reliable, affordable and low-carbon power. The energy security strategy accelerated, as I am sure the noble Baroness is aware, our ambitions for the deployment of renewables for nuclear and for hydrogen. I can assure noble Lords that the Government will never compromise our security of supply: that remains our primary consideration. But our understanding of what the future energy system will look like and the level of the demand that we will need to meet through electrification will essentially and inevitably evolve over time. So, we are not targeting a particular solution, but we rely on competition to spur investment in the different technologies and new ways of working, and new technologies such as more efficient batteries et cetera are coming onstream every day. We will closely take all these matters under consideration. We take the view that the Government’s role is to ensure the market framework is there and that encourages effective competition and, at the same time, delivers a secure and reliable system.
Finally, let me thank the noble Lords, Lord Howell and Lord Teverson, the noble Viscount, Lord Trenchard, and the noble Baronesses, Lady Jones and Lady Hayman, for their valuable contributions to the debate. I assure my noble friend Lord Howell that we are working internationally with the US, with the EU and with our other partners to produce a secure and reliable energy system together. In response to the noble Viscount, Lord Trenchard, I am sure he will be pleased to hear that through the £385 million advanced nuclear funds, we are providing funding to support research and development for precisely the small modular reactor designs that the noble Viscount wishes to see, and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest. Therefore, with the reassurances that I have been able to provide, I hope that noble Lords will not press their amendments.
Lord Lennie (Lab)
My Lords, first, I apologise for not thanking the Minister for meeting us earlier today; that was helpful. To answer one or two points, the noble Viscount, Lord Trenchard, asked about what Boris Johnson said when he was Prime Minister—up to yesterday, or today. He raised questions about power stations being built and the figure of one a year for however many years necessary, and not being sure what power stations there were. The PM was never really good on detail and I think this proves that point. That does require some clarification.
The bigger point raised by the noble Lord, Lord Howell, and the Minister was in relation to the preambles. They asked: why these preambles? They are a combination, if you like, of the preambles to the climate change and sustainability Act and the Energy Act 2013, as the Minister pointed out. They seek to give some definition, some guidance, to what the Bill is intended to achieve, as opposed to its rather rambling, ongoing, imprecise nature. It is not so much that the Bill is objectionable; it is just not adequate to achieve what it intends.
We will look at this before Report. With those few comments, I beg leave to withdraw my amendment.
Lord Lennie (Lab)
My Lords, Amendments 11,12 and 13 in my name would all strengthen the relationship between Ministers and the economic regulator by insisting that the Secretary of State and the economic regulator are bound by the listed regulatory principles and the need to contribute to achieving sustainable development rather than just having regard to them. Further, they would oblige a Minister to be bound by their duties as a Minister, as opposed to just having regard for them. They would also require the economic regulator to be bound by the need to assist the Secretary of State, compliant with its duties and targets. It is not sufficient to have regard to these matters; it is important to be bound by them. Can the Minister say what “have regard to” means if not to be bound by them?
Amendments 15 and 16 espouse that the Bill does not specifically include carbon capture usage. To add to the example given by the noble Baroness, Lady Worthington, in January 2021, the major US oil company Chevron announced that it had made investments in the San Jose-based corporation Blue Planet Systems—then a start-up—which manufactures and develops carbon aggregates and carbon capture technology intended to reduce the carbon intensity of industrial operations. Blue Planet Systems manufactures carbon-based building aggregate from flue-gas-captured CO2. These amendments aim to encourage the use of captured carbon as opposed to its storage.
Lord Callanan (Con)
My Lords, I thank everyone who has contributed to this short debate. Addressing the amendments in turn, I will start with Amendment 8, tabled by the noble Baroness, Lady Liddell, and my old friend the noble Lord, Lord Foulkes, who is very conciliatory today—I am suspicious; something has happened to him over the summer, but I am sure that we will get the old noble Lord, Lord Foulkes, back before we get much further into the debate.
This amendment seeks to amend the principal objective applying to the Secretary of State and the Gas and Electricity Markets Authority in respect of consumer protections. Under the current drafting of this principal objective, it is for the Secretary of State or the economic regulator to protect the interests of consumers who they consider may be affected by regulatory decisions. This drafting is intended to ensure that the economic regulator and Secretary of State have discretion as to the consumer impacts that are taken into account. While the noble Lord’s and the noble Baroness’s amendment is intended to ensure that only actual or likely impacts are taken into account, we consider that the existing drafting already provides for this. Therefore, I submit that the amendment is unnecessary.
I turn next to Amendment 9, which is also in the name of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, joined on this occasion by the noble Baroness, Lady Bennett. The amendment as drafted would place an additional principal objective on the Secretary of State and the economic regulator to assist in the delivery of the net-zero objective. I know that we have had this discussion on a number of Bills, but I will reiterate that, under the Climate Change Act 2008, the Secretary of State is already bound by law to ensure that the targets to reduce greenhouse gas emissions are met.
Under Clause 1(6), the economic regulator is required to have regard to the need to assist the Secretary of State in complying with his duties to achieve carbon emissions reduction targets and to have regard to these targets in each of the devolved Administrations. I therefore submit that the economic regulator is already required to take these net-zero targets into account in its regulatory determinations.
Next, I turn to Amendment 10, proposed by the noble Lord, Lord Teverson. This amendment seeks to ensure that cross-subsidy of carbon dioxide transport and storage activities, from users of other networks, is avoided. Clause 1 of the Bill establishes the Gas and Electricity Markets Authority as the economic regulator of carbon dioxide transport and storage. It also establishes the principal objectives and general duties for the Secretary of State and the economic regulator in the exercise of their respective functions in relation to the economic regulation of carbon dioxide transport and storage.
The principal objectives in Clause 1 include protecting the interests of current and future users of the network and those of consumers. In relation to the regulation of gas and electricity, the Secretary of State and the Gas and Electricity Markets Authority remain bound by the principal objectives to, respectively, protect the interests of current and future consumers in relation to gas conveyed through pipes, and in relation to electricity conveyed by distribution systems. Different principal objectives are appropriate to reflect that the objectives for carbon dioxide transport and storage networks are different from those of the gas and electricity networks.
Under the provisions in the Bill, the economic regulator should be able to take into account, in its decision-making in relation to CO2 transport and storage activities, any impacts on users of gas and electricity networks that may arise from those decisions. I hope that the noble Lord is sufficiently reassured on this point.
I move on to Amendment 11, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. This seeks to ensure that the Secretary of State and the Gas and Electricity Markets Authority are bound by the principles of regulatory best practice and the need to contribute to the achievement of sustainable development. Clause 1 sets out the principal objectives and general duties of the Secretary of State and the economic regulator. The principal objectives are complemented by statutory duties on the Secretary of State and the economic regulator to have regard to certain matters. This includes having regard to principles of regulatory best practice and the need to contribute to the achievement of sustainable development. To have regard to these matters means that the Secretary of State or the economic regulator, as the case may be, must give genuine attention and thought to these matters.
In a complex sector with varying objectives that can sometimes conflict, it is important that the regulator’s duties strike the right balance between setting out all relevant issues and considerations, while giving some necessary discretion to the regulator to balance those considerations in its decision-making process and to have sufficient authority and independence in that decision-making. I hope that explains the point for the benefit of the noble Lord, Lord Lennie.
The formulation of the statutory duty as proposed by the noble Lord and the noble Baroness in our view risks compromising what is quite a delicate balance. The greater the number of statutory duties, and the more binding their nature, the more difficult the act of balancing the different, possibly conflicting, duties becomes. I hope that provides sufficient reassurance.
Amendments 12 and 13, again from the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, also seek to amend the statutory duties applying to the Secretary of State and the Gas and Electricity Markets Authority to ensure that the greenhouse gas emissions reduction targets under the Climate Change Act 2008 are a binding consideration in regulatory determinations. In relation to Amendment 12, as I have already set out, under the Climate Change Act the Secretary of State is already bound by law to ensure that the targets to reduce emissions are met. We therefore do not consider that this amendment is necessary.
Baroness Worthington (CB)
I have a point of clarification. Are the definitions different because regulation over transportation is not needed or is the Minister saying, “We have picked a winner. It is going to be storage through this mechanism and we are not interested in the innovation that is coming through in these other sources of permanent storage.”? If it is the latter, I would find that very hard to understand in a Bill that is seeking to support new technologies.
I think it is the case—the noble Baroness, Lady Bennett, mentioned it—that there is a company in the UK already doing this, with limited support from government. It can scale. It is not a silver bullet by any means but there is not a single operational carbon capture and storage facility in the UK apart from that one, and yet the Bill does not seem interested in supporting it. I would like to understand: if the Government is interested in supporting new technologies, can we make that as broad as possible?
Lord Callanan (Con)
The Bill is intended to establish an economic means of support for geological formation. Of course, I commend the company referred to by the noble Baroness, which is managing to find ways of—I hope—permanently storing carbon dioxide in a form other than geological formation; indeed, there are other potential support mechanisms that could be deployed towards that. There is lots of research and development funding through UKRI and there is a whole range of other advanced technologies that we are supporting. In this case, in relation to economic regulation, the market mechanism that we want to set up on CCUS is dedicated principally towards geological long-term storage; we think that is the area that needs support under this system. That would provide the vast majority of storage that we can envisage at the moment but, of course, we are always willing to consider other methods. If this company is proving to be a success, that is great and I would be very happy to look at alternative ways of supporting it.
Baroness Blake of Leeds (Lab)
My Lords, it gives me great pleasure to contribute on this set of amendments. I add my admiration and support for my noble friend Lord Foulkes, who has stepped into the breach admirably in the unfortunate absence of my noble friend Lady Liddell. I very much look forward to her return. I also add my thanks to the Minister for giving us time today to discuss this very important Bill; I think all of us recognise its significance at this time. Without reopening the debate from Second Reading, it is clear to us all that there are gaps. We need to take the opportunity to fill those gaps, given the state of crisis that the country is entering.
I want to speak to the amendments in the name of my noble friend Lord Lennie, starting with Amendments 21 and 22. They seek to make it clear that a licence can be granted for transportation or storage, or both if wanted, but that a licence need not be granted for everything. The activities that Clause 7 relates to are
“(a) operating a site for the disposal of carbon dioxide by way of geological storage; (b) providing a service of transporting carbon dioxide by a licensable means of transportation”.
We have to acknowledge the importance of this section of the Bill. Indeed, the Climate Change Committee has referred to all of this area as a necessity, not an option, particularly as we move forward and technologies improve. As drafted, the Bill provides a single licence for both but, given that they are separate activities, we see no reason why individual licences could not be provided for each activity—even if it may be the case that most of the persons carrying out these activities carry out both.
A broad portfolio of technologies is needed to achieve deep emissions reductions, practically and cost effectively; carbon capture and storage is just one of them. In the International Energy Agency’s sustainable development scenario, in which
“global CO2 emissions from the energy sector fall to zero on a net basis by 2070”
carbon capture and storage
“accounts for nearly 15% of the cumulative reduction in emissions, compared with the Stated Policies Scenario. The contribution grows over time as the technology improves, costs fall and cheaper abatement options in some sectors are exhausted. In 2070, 10.4 Gt of CO2 is captured from across the energy sector”.
This would provide more flexibility for a developing market, with the intention of driving down price within it.
We have already heard just how expensive carbon capture is and how, despite its importance for achieving clean energy, it has been rather slow to take off. According to the IEA, there were only around 20 commercial operations worldwide midway through last year. Commentators often cite carbon capture as being too expensive and unable to compete with wind and solar, given their falling costs over the last decade, but to dismiss the technology on cost grounds would be to ignore its unique strengths, its competitiveness in key sectors and its potential to enter the mainstream of low-carbon solutions. I am pleased that the Government have not done this. However, as we have made clear, we feel that not enough attention has been given to solar and onshore wind, in particular. It is important that we take whatever steps we can to make the market as attractive as possible and encourage licensing from fit and proper persons.
The noble Baroness, Lady Bennett, has already spoken to the next set of amendments, particularly Amendment 23. We feel that the phrase “fit and proper”, having already had a usage in the National Security and Investment Act, is something that we should take very seriously. The aim of these amendments is to put the responsibility on the Secretary of State to personally deem the individual fit and proper.
Perhaps the greatest concern that we have to acknowledge is the environmental risk associated with long-term storage of captured CO2, as any gradual or catastrophic leakage would likely negate the initial environmental benefits of capturing and storing CO2 emissions. It is worth itemising those key risks, just so that we have them on record. First, there are technical hazards: we know that the construction of plants needed to capture and process CO2 can be complex. Whether for new facilities or retrofitting and enabling the separation of CO2 from other gases, there are inherent technical exposures in the CO2 separation process relating to the compression and cooling of gases flying through pipes and the use of chemical solvents, for instance.
Secondly, on fire and explosion, as we know, there are lifting, handling and accidental damage risks at carbon capture plants, as is the case at any construction site. When carbon-capture technology is retrofitted to operate in industrial plants or facilities in typically high-hazard locations such as power stations, the risk of accidental damage and subsequent fire and explosion risks to existing assets might be enhanced. As I have stated, the risk of leakage must clearly be the subject of much consideration as we go forward.
Business interruption is another risk that we have to acknowledge in the failure to meet the carbon goals as they are laid out. Pure carbon dioxide gas can be compressed so that it reaches its dense and supercritical phase. In some cases, it can instead be cooled, which transforms it into a liquid state. Mechanical failures or breakdowns affecting this stage of the process could lead to lengthy business interruptions for clients. If the captured CO2 cannot be transported, this may affect the emissions targets and carbon credits committed to by clients. Therefore, the need to look at all proper precautions is absolutely vital, and the persons tasked with doing this need to have the confidence of the whole sector.
Amendment 24, in the name of my noble friend Lord Lennie, would make regulations related to carbon dioxide transport and storage licence applications subject to the affirmative procedure. Surely it is sensible that Parliament has a full say in any regulations to ensure that licensing is done both to encourage carbon capture and storage and to ensure that it is properly safeguarded.
We have to see this in the context of an enormous possibility to create significant numbers of jobs—the estimate is 50,000 by as soon as 2030—across industry, power, transport and storage networks. It is absolutely essential that the confidence is there and that all the people who will be engaged in the work we intend to do are properly protected wherever possible.
Lord Callanan (Con)
My Lords, this group of amendments considers the licensing of carbon dioxide transport and storage, and I thank everyone for their contributions. I will speak to Amendment 25, in my name, which relates to the definition of “decommissioning costs”. Carbon dioxide transport and storage licence holders will be expected to establish decommissioning funds for each of their transport and storage networks. These funds will accrue money over the operational life of the network to pay for the expected offshore decommissioning and post-closure costs associated with the network.
As originally drafted, the Bill enables the Secretary of State to make regulations about the provision of security for decommissioning in relation to carbon storage installations. This is to ensure that regulations could require relevant persons to provide security for costs that reflect the full range of decommissioning obligations that arise in relation to carbon transportation and storage activities.
Regulations will provide the framework for how the decommissioning funds are to ensure that the funding is secure and available when it is required to pay for the decommissioning and post-closure obligations. The costs are likely to be those associated with the obligations that the licence holder will have under the permit, which could include costs associated with preparatory works between closure and the commencement of decommissioning activities and post-closure monitoring.
As noble Lords will be aware, a series of amendments has been tabled relating to the financing of the decommissioning of carbon storage assets, and I look forward to the forthcoming debate on those amendments. Should our amendments be accepted to apply these decommissioning fund powers to the new defined term “decommissioning costs”, explained in Amendment 70, the previous definition of “decommissioning and legacy costs” becomes redundant and should therefore be omitted from Clause 11.
I will move on to the amendments tabled by noble Lords in this group. Amendment 17, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, seeks to amend the scope of the prohibition on operating a CO2 transport and storage network without an economically regulated licence. Although there is an existing framework for the licensing of carbon dioxide storage activities, established under the Energy Act 2008, that Act provides for technical regulation to ensure the secure geological storage of carbon dioxide. It therefore does not provide any powers in relation to economic regulation.
Baroness Bennett of Manor Castle (GP)
Perhaps I may come back to Amendment 27 and the associated amendments about a “fit and proper person”. Throughout his response, the Minister referred to the granting and awarding of licences at the initial point. However, Amendment 27 is concerned in particular with the transferring of licences. I drew a parallel with our water companies. Most of those have been through multiple ownerships, including hedge funds and companies based in overseas tax havens, et cetera. These companies have a similar nature and have been operated through continual financial transactions and financialisation. Could the Minister comment, either now or in writing, on how the Government see that ongoing process? Okay, you have checked out the person and granted a licence, but then, in a year or two’s time, the company might be bought by someone else and then again by someone else, including companies that may be very unclear. How will the Government keep control?
Lord Callanan (Con)
If the licence is transferred to another body, it will also have to be approved under the same process. You cannot just wake up in the morning and decide to transfer your legal obligations to somebody else who is not an appropriate, fit and proper person. So, of course, that will be taken into consideration.
I must say that the noble Baroness is wrong to provide the parallel with the existing water companies. I do not think that anybody is arguing that people who hold those licences are not fit and proper to do the job. There is a legitimate argument about levels of investment and how that money is being spent, et cetera. However, no one is arguing about their competence; the noble Baroness is trying to draw a very bad parallel there.
Lord Teverson (LD)
My Lords, I hope the Minister will forgive me for not understanding some of this, because it has raised a number of questions in my mind. If the CO2 is put, say, under the sea—as we have been talking about—who actually owns the CO2 once it has gone there? Who is liable for it and who has the legal right to the storage area itself? Given that most of these are created from the oil and gas that has been extracted, does that belong to the lease of the fossil fuel company that extracted them and does that last for ever? I do not understand how this works and where the liabilities land.
As the noble Baroness, Lady Bennett, said, if an organisation says, “I don’t want to do this any more”, there is no obligation for anybody else to take it on—so there will be a legal limbo. Perhaps the Minister could explain how this licensing works within that context. It seems to me that the Crown Estate will come into this somewhere, but maybe the Minister could enlighten me. I apologise again, because I should know the answer to all of these questions.
Lord Callanan (Con)
I am happy to confirm the legal detail of the system to the noble Lord in writing, but my understanding is that the operator of the site would bear the responsibility. That is precisely why we have built in the relative decommissioning costs. The fund will have to be established and the operator will have to show that the ability is there to decommission the relevant pipe work, et cetera. I assume that that assurance and other long-term effects will also be built into that condition, but I will be very happy to confirm that in writing to the noble Lord.
Lord Callanan
Member's explanatory statement
This amendment is consequential on the amendment in the name of Lord Callanan at page 72, line 25.
Lord Callanan (Con)
My Lords, the noble Lord will know that I hate to disappoint him on any occasion, so I shall say something unprecedented, which, as far as I am aware, has never been said in this House before: on this specific and limited occasion, the noble Lord is right on this point. I can say with the full force of the Government behind me that we are prepared to accept his Amendment 28, and I thank the noble Lord for pointing out this typographical error.
I move on to the noble Lord’s more substantial amendments, Amendment 29 to 31 and 37, for which I thank him and the noble Baroness, Lady Liddell. These amendments aim to set out further detail on the economic licence for the transport and storage of carbon dioxide. In particular, they concern the protection of a licence holder’s commercially sensitive information from certain disclosure requirements contained in Parts 1 and 2 of the Bill. These provisions, as drafted, enable the Secretary of State and the economic regulator to access information that is necessary for the conduct of their functions. It may be appropriate in some cases for the economic regulator to provide such information to relevant regulatory bodies or entities on which powers or duties have been conferred by legislation, such as the counterparty to the emitter contracts, or to obtain relevant information from those entities to ensure that decision-making is robust and takes into account all relevant considerations. Meanwhile, provision has been made in Clauses 26 and 27 to confirm that appropriate data protection requirements would continue to apply.
The noble Lord can be reassured, I hope, that these provisions were not drafted to facilitate any widespread publication of commercially sensitive information but to enable robust, informed decision-making. Further, the powers limit information requests to those which the economic regulator or Secretary of State consider necessary to facilitate the proper exercise of their functions.
Amendment 32, again tabled by the noble Lord, Lord Foulkes, seeks to ensure that the economic regulator must reasonably consider whether the urgency of a matter makes it impracticable or inappropriate to carry out and publish an impact assessment for major proposals, or to make a statement as to why it is unnecessary for it to do so. Under current drafting of the Bill, it is where the economic regulator is minded to pursue a proposal which could have a significant impact on licence holders, persons engaged in activities associated with licensable activities, or on the general public or the environment. In such instances, the economic regulator is required to carry out and publish an assessment of the likely impact of implementing the proposal, or to confirm that it considers it unnecessary to carry out an assessment, with the reasons being given for this conclusion. This requirement does not apply if it appears to the economic regulator that it would be impractical or inappropriate, given the urgency of the matter to which the proposal relates.
In some situations, the urgency of the proposal would make it impractical for the economic regulator either to conduct the impact assessment before implementing a proposal or to publish a statement explaining why an assessment would be unnecessary. We think that it is important that the economic regulator is empowered to act swiftly without the need to produce such documentation in the unlikely event that that need arises.
I hope that I have been able to offer sufficient reassurance to the noble Lord in respect of the requirement for the economic regulator to conduct an impact assessment where required before implementing a major proposal, except in the limited situation of potential urgency or emergency. Therefore, with the reassurances that I have provided him, I hope that the noble Lord will feel able to withdraw or not press all his amendments, except for Amendment 28, which we accept.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I am most grateful to the Minister for accepting and agreeing to Amendment 28. I can assure him that I will not let that go to my head, but I will keep on trying with other amendments. I listened carefully to his explanation in relation to the other amendments. I understand what he is saying and I think it is right, so I will not pursue them.
Lord Callanan
Member's explanatory statement
This amendment, the amendment in the name of Lord Callanan at page 30, line 28, and New Schedule (Enforcement of obligations of licence holders) provide for the enforcement of obligations of licence holders and accordingly omit the powers in clause 32 to make corresponding provision by regulations.
Lord Callanan (Con)
My Lords, in moving Amendment 33 I will also speak to Amendments 34 and 36 standing in my name. These amendments seek to amend Clause 32, concerning the enforcement of obligations of licence holders in the carbon dioxide transport and storage sector.
Clause 32, as drafted at introduction, establishes a delegated power for the Secretary of State to make, by regulations, the conditions of a carbon dioxide transport and storage licence enforceable by the economic regulator. In particular, this clause as originally drafted stipulates that regulations may provide that both the conditions within licences and notices served on the licence holder to provide information to the economic regulator may be enforced in the manner provided for in Section 25 of the Electricity Act 1989. However, Amendments 33, 34 and 36 would instead provide for the necessary enforcement measures in the Bill.
The powers available to the economic regulator to enforce licensable carbon dioxide transport and storage activities are intended to align broadly with enforcement powers in the gas and electricity sectors. However, in our view, setting out these powers in the primary legislation, which establishes the new economic regulation and licensing framework for carbon dioxide transport and storage, provides greater clarity for both the regulator and those who are to be regulated. This will remove any potential for debate regarding the different principal objectives and general duties that the economic regulator would be subject to when exercising these powers and the territorial extent of such powers.
I hope that noble Lords will agree that this further clarity and separation will serve to effectively enable the economic regulator to take appropriate action against any breach of the CO2 transport and storage licence conditions and in the event of non-compliance with information requests. Appropriate enforcement powers are essential to ensure that the licensing framework operates as intended, to ensure that licence conditions are adhered to and to prevent anti-competitive behaviour. This amendment to provide the economic regulator with complete powers for enforcement would therefore further secure its ability to support the establishment of the UK’s CCUS industry. I beg to move.
Lord Lennie (Lab)
My Lords, the government amendments appear to correct an oversight in the Bill. If noble Lords are confused then so am I. I am not entirely sure what the Minister was saying, but it appears to me that there was a stage missing in the original drafting of this Bill and the attempt now is to put in that stage—which is, in effect, a final warning to licence holders to act in specific ways in order to become compliant. If that is right, then I understand it and I do not oppose it, but I want to make sure that I understand correctly what the Government are trying to do. If I am right then, other than to point out the original omission, we do not oppose these measures; we just want clarification of what is being put into the Bill.
Lord Callanan (Con)
I am happy to provide the reassurance that the noble Lord, Lord Lennie, asks for. It was simply a matter where, originally, we intended to take a power to do this through secondary legislation but, as we got to a later stage of drafting on the Bill, we thought that it would be more appropriate to put it in primary legislation. That is normally something that the House asks us to do. We were, on this occasion, trying to pre-empt some of the points that may be made by Peers to say that we should not do so much under powers and secondary legislation and should put it in the Bill—that is in fact what we are doing.
With regard to the point made by the noble Lord, Lord Teverson, on resourcing, it is very early days—we have not even set up the regulator yet—so I cannot give him any specific figures on what resourcing the regulator will have. The Treasury will no doubt want to have considerable input into this, but we will want to make sure that it is appropriately resourced and that we have the appropriate technical abilities, technical inspectors and so on to make sure that this activity is appropriately licensed and enforced and, of course, is safe for operators, personnel and the public.
Lord Callanan
Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 30, line 25.
Lord Callanan
“ScheduleEnforcement of obligations of licence holdersOrders for securing compliance with certain provisions
(1) Where the economic regulator is satisfied that a licence holder is contravening, or is likely to contravene, any relevant condition or requirement, the economic regulator must make an order (a “final order”) containing such provision as appears to the economic regulator to be necessary for the purpose of securing compliance with that condition or requirement (but this sub-paragraph does not apply if the economic regulator is required to by sub-paragraph (2) to make a provisional order in respect of the contravention or likely contravention).(2) Where it appears to the economic regulator—(a) that a licence holder is contravening, or is likely to contravene, any relevant condition or requirement, and(b) that it is appropriate to make an order under this sub-paragraph,the economic regulator must (instead of taking steps towards the making of final order) make an order (a “provisional order”) containing such provision as appears to the economic regulator to be necessary for the purpose of securing compliance with that condition or requirement.(3) In determining for the purposes of sub-paragraph (2)(b) whether it is appropriate to make a provisional order, the economic regulator must have regard, in particular, to the extent to which any person is likely to sustain loss or damage in consequence of anything that is likely to be done (or omitted to be done) in contravention of the relevant condition or requirement before a final order may be made.(4) The economic regulator must confirm a provisional order, with or without modifications, if—(a) the economic regulator is satisfied that the licence holder is contravening, or is likely to contravene, any relevant condition or requirement, and(b) the provision made by the order (with any modifications) is necessary for the purpose of securing compliance with that condition or requirement.(5) If a provisional order is not previously confirmed under sub-paragraph (4), it is to cease to have effect at the end of such period (not exceeding three months) as is determined by or under the order.(6) Sub-paragraphs (1) to (4) are subject to sub-paragraphs (7) to (9) and paragraph 2. (7) The economic regulator—(a) must, before making a final order or making or confirming a provisional order, consider whether it would be more appropriate to proceed under the Competition Act 1998 (see section 37);(b) must not make a final order, or make or confirm a provisional order, if the economic regulator considers that it would be more appropriate to proceed under that Act.(8) The economic regulator may not make a final order or make or confirm a provisional order if the economic regulator is satisfied that the duties imposed on the economic regulator by section 1 preclude the making or, as the case may be, the confirmation of the order.(9) The economic regulator is not required to make a final order or make or confirm a provisional order if it is satisfied—(a) that the licence holder has agreed to take and is taking all such steps as appear to the economic regulator to be for the time being appropriate for the purpose of securing or facilitating compliance with the condition or requirement in question, or(b) that the contraventions were, or the apprehended contraventions are, of a trivial nature.(10) Where the economic regulator decides that it would be more appropriate to proceed under the Competition Act 1998 or is satisfied as mentioned in sub-paragraphs (8) and (9), the economic regulator must—(a) give notice to the licence holder that the economic regulator has so decided or is so satisfied, and(b) publish a copy of the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them.(11) A final or provisional order—(a) must require the licence holder (according to the circumstances of the case) to do, or not to do, such things as are specified in the order or are of a description so specified,(b) must take effect at such time as is determined by or under the order, which must be the earliest practicable time, and(c) may be revoked at any time by the economic regulator.(12) In this Schedule—“final order” means an order under sub-paragraph (1);“provisional order” means an order under sub-paragraph (2);“relevant condition” , in relation to a licence holder, means any condition of any licence (as defined in section 7) held by that person;“relevant requirement” , in relation to a licence holder, means any requirement imposed on the licence holder by or under this Part.Procedural requirements
2 (1) Before making a final order or confirming a provisional order, the economic regulator must give notice—(a) stating that the economic regulator proposes to make or confirm the order and setting out its effect,(b) stating—(i) the relevant condition or requirement,(ii) the acts or omissions which, in the economic regulator’s opinion, constitute or would constitute contraventions of it, and (iii) the other facts which, in the economic regulator’s opinion, justify the making or confirmation of the order, and(c) specifying the time (which must not be less than 21 days from the date of publication of the notice) within which representations or objections to the proposed order or confirmation of the order may be made,and must consider any representations or objections which are duly made and not withdrawn.(2) A notice under sub-paragraph (1) is given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by sending a copy of the notice, and a copy of the proposed order or of the order proposed to be confirmed, to the licence holder.(3) The economic regulator must not make a final order with modifications, or confirm a provisional order with modifications, except with the consent of the licence holder or after complying with the requirements of sub-paragraph (4).(4) The requirements are that the economic regulator must—(a) give to the licence holder such notice as the economic regulator considers necessary of the economic regulator’s proposal to make or confirm the order with modifications,(b) specify the time (which must not be less than 21 days from the date of the service of the notice) within which representations or objections to the proposed modifications may be made, and(c) consider any representations or objections which are duly made and not withdrawn.(5) Where the economic regulator decides to proceed under the Competition Act 1998 in a case falling within paragraph 1(7)(b), the economic regulator must—(a) inform the licence holder concerned of that decision, and(b) publish the notice in a manner that the economic regulator thinks appropriate for bringing the notice to the attention of persons likely to be affected by the decision.(6) Before revoking a final order or a provisional order which has been confirmed, the economic regulator must give notice—(a) stating that the economic regulator proposes to revoke the order and setting out its effect, and(b) specifying the time (which must not be less than 28 days) from the date of publication of the notice within which representations or objections to the proposed revocation may be made,and must consider any representations or objections which are duly made and not withdrawn.(7) A notice under sub-paragraph (6) is given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by sending a copy of the notice to the licence holder.(8) As soon as practicable after a final order is made or a provisional order is made or confirmed, the economic regulator must— (a) serve a copy of the order on the licence holder, and(b) publish such a copy in such manner as the economic regulator considers appropriate for the purpose of bringing the order to the attention of persons likely to be affected by it.Validity and effect of orders
(1) If the licence holder is aggrieved by a final or provisional order and wishes to question its validity on the ground that the making or confirmation of it was not within the powers of paragraph 1, or that any of the requirements of paragraph 2 have not been complied with in relation to it, the licence holder may within 42 days from the date of service on the licence holder of a copy of the order make an application to the court under this paragraph.(2) On any such application the court, if satisfied that the making or confirmation of the order was not within those powers or that the interests of the licence holder have been substantially prejudiced by a failure to comply with those requirements, may quash the order or any provision of the order.(3) Except as provided by this paragraph, the validity of a final or provisional order may not be questioned by any legal proceedings whatever.(4) The obligation to comply with a final or provisional order is a duty owed to any person who may be affected by a contravention of it.(5) Where a duty is owed by virtue of sub-paragraph (4) to any person any breach of the duty which causes that person to sustain loss or damage is to be actionable at the suit or instance of that person.(6) In any proceedings brought against any person in pursuance of sub-paragraph (5), it is a defence for the person to prove that they took all reasonable steps and exercised all due diligence to avoid contravening the order.(7) Without prejudice to any right which any person may have by virtue of sub-paragraph (5) to bring civil proceedings in respect of any contravention or apprehended contravention of a final or provisional order, compliance with any such order is to be enforceable by civil proceedings by the economic regulator for an injunction or interdict or for any other appropriate relief.(8) In this paragraph “the court” means—(a) in relation to England and Wales and Northern Ireland, the High Court;(b) in relation to Scotland, the Court of Session.Penalties
(1) Where the economic regulator is satisfied that a licence holder has contravened or is contravening any relevant condition or requirement, the economic regulator may, subject to paragraph 6, impose on the licence holder a penalty of such amount as is reasonable in all the circumstances of the case.(2) Before imposing a penalty on a licence holder under sub-paragraph (1), the economic regulator must consider whether it would be more appropriate to proceed under the Competition Act 1998.(3) The economic regulator must not impose a penalty on a licence holder under sub-paragraph (1) if it considers that it would be more appropriate to proceed under the Competition Act 1998.(4) Before imposing a penalty on a licence holder under sub-paragraph (1) the economic regulator must give notice—(a) stating that it proposes to impose a penalty and the amount of the penalty proposed to be imposed,(b) setting out the relevant condition or requirement, (c) specifying the acts or omissions which, in the opinion of the economic regulator, constitute the contravention in question and the other facts which, in the opinion of the economic regulator, justify the imposition of a penalty and the amount of the penalty proposed, and(d) specifying the period (which must not be less than 21 days from the date of publication of the notice) within which representations or objections with respect to the proposed penalty may be made,and must consider any representations or objections which are duly made and not withdrawn.(5) Before varying any proposal stated in a notice under sub-paragraph (4)(a) the economic regulator must give notice—(a) setting out the proposed variation and the reasons for it, and(b) specifying the period (which must be at least 21 days from the date of publication of the notice) within which representations or objections with respect to the proposed variation may be made,and must consider any representations or objections which are duly made and not withdrawn.(6) As soon as practicable after imposing a penalty, the economic regulator must give notice—(a) stating that it has imposed a penalty on the licence holder and its amount,(b) setting out the relevant condition or requirement in question,(c) specifying the acts or omissions which, in the opinion of the economic regulator, constitute the contravention in question and the other facts which, in the opinion of the economic regulator, justify the imposition of the penalty and its amount, and(d) specifying a date, no earlier than the end of the period of 42 days from the date of service of the notice on the licence holder, by which the penalty is required to be paid.(7) The licence holder may, within 21 days of the date of service on the licence holder of a notice under sub-paragraph (6), make an application to the economic regulator for it to specify different dates by which different portions of the penalty are to be paid.(8) Any notice required to be given under this paragraph must be given—(a) by publishing the notice in such manner as the economic regulator considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be affected by them, and(b) by serving a copy of the notice on the licence holder.(9) This paragraph is subject to paragraph 10 (maximum amount of penalty that may be imposed).(10) Any sums received by the economic regulator by way of penalty under this paragraph must be paid into the Consolidated Fund.Statement of policy with respect to penalties
5 (1) The economic regulator must prepare and publish a statement of policy with respect to the imposition of penalties and the determination of their amount.(2) In deciding whether to impose a penalty, and in determining the amount of any penalty, in respect of a contravention the economic regulator must have regard to its statement of policy most recently published at the time when the contravention occurred. (3) The economic regulator may revise its statement of policy and where it does so must publish the revised statement.(4) Publication under this paragraph must be in such manner as the economic regulator considers appropriate for the purpose of bringing the matters contained in the statement of policy to the attention of persons likely to be affected by them.(5) The economic regulator must undertake such consultation as it considers appropriate when preparing or revising its statement of policy.Time limits on the imposition of penalties
6 (1) Where no final or provisional order has been made in relation to a contravention, the economic regulator may not impose a penalty in respect of the contravention later than the end of the period of five years from the time of the contravention, unless before the end of that period—(a) the notice under paragraph 4(4) relating to the penalty is served on the licence holder under paragraph 4(8), or(b) a notice under section 29(2)(b) is served on the licence holder which specifies that the notice is served in connection with a concern on the part of the economic regulator that the licence holder may be contravening, or may have contravened, a relevant condition or requirement.(2) Where a final or provisional order has been made in relation to a contravention, the economic regulator may not impose a penalty in respect of the contravention unless the notice relating to the penalty under paragraph 4(4) was served on the licence holder under paragraph 4(8)—(a) within three months from the confirmation of the provisional order or the making of the final order, or(b) where the provisional order is not confirmed, within six months from the making of the provisional order.Interest and payment of instalments
7 (1) If the whole or any part of a penalty is not paid by the date by which it is required to be paid, the unpaid balance from time to time is to carry interest at the rate for the time being specified in section 17 of the Judgments Act 1838.(2) If an application is made under paragraph 4(7) in relation to a penalty, the penalty is not required to be paid until the application has been determined.(3) If the economic regulator grants an application under that sub-paragraph in relation to a penalty but any portion of the penalty is not paid by the date specified in relation to it by the economic regulator under that sub-paragraph, the economic regulator may where it considers it appropriate require so much of the penalty as has not already been paid to be paid immediately.Appeals against penalties
8 (1) If the licence holder on whom a penalty is imposed is aggrieved by—(a) the imposition of the penalty,(b) the amount of the penalty, or(c) the date by which the penalty is required to be paid, or the different dates by which different portions of the penalty are required to be paid,the licence holder may make an application to the court under this paragraph.(2) An application under sub-paragraph (1) must be made— (a) within 42 days from the date of service on the licence holder of a notice under paragraph 4(6), or(b) where the application relates to a decision of the economic regulator on an application by the licence holder under paragraph 4(7), within 42 days from the date the licence holder is notified of the decision.(3) On any such application, where the court considers it appropriate to do so in all the circumstances of the case and is satisfied of one or more of the grounds falling within sub-paragraph (4), the court—(a) may quash the penalty,(b) may substitute a penalty of such lesser amount as the court considers appropriate in all the circumstances of the case, or(c) in the case of an application under sub-paragraph (1)(c), may substitute for the date or dates imposed by the economic regulator an alternative date or dates.(4) The grounds falling within this sub-paragraph are—(a) that the imposition of the penalty was not within the power of the economic regulator under paragraph 4,(b) that any of the requirements of sub-paragraphs (4) to (6) or (8) of paragraph 4 have not been complied with in relation to the imposition of the penalty and the interests of the licence holder have been substantially prejudiced by the non-compliance, or(c) that it was unreasonable of the economic regulator to require the penalty imposed, or any portion of it, to be paid by the date or dates by which it was required to be paid.(5) If an application is made under this paragraph in relation to a penalty, the penalty is not required to be paid until the application has been determined.(6) Where the court substitutes a penalty of a lesser amount it may require the payment of interest on the substituted penalty at such rate, and from such date, as it considers just and equitable.(7) Where the court specifies, as a date by which the penalty or a portion of the penalty is to be paid, a date before the determination of the application under this paragraph it may require the payment of interest on the penalty, or portion, from that date at such rate as it considers just and equitable.(8) Except as provided by this paragraph, the validity of a penalty is not to be questioned by any legal proceedings whatever.(9) In this paragraph “the court” means—(a) in relation to England and Wales or Northern Ireland, the High Court, and(b) in relation to Scotland, the Court of Session.Recovery of penalties
9 Where a penalty imposed under paragraph 4(1), or any portion of it, has not been paid by the date on which it is required to be paid and—(a) no application relating to the penalty has been made under paragraph 8 during the period within which such an application can be made, or(b) an application has been made under that paragraph and determined,the economic regulator may recover from the licence holder, as a civil debt due to it, any of the penalty and any interest which has not been paid.Maximum amount of penalty
10 (1) The maximum amount of penalty that may be imposed on a licence holder in respect of a contravention may not exceed 10 per cent of the licence holder's turnover.(2) The Secretary of State may by regulations provide for how a person's turnover is to be determined for the purposes of this paragraph.(3) Regulations under sub-paragraph (2) are subject to the affirmative procedure.(4) In this paragraph “penalty” means a penalty imposed on a licence holder under paragraph 4.”Member’s explanatory statement
See the explanatory statement for the amendment in the name of Lord Callanan at page 30, line 25.
Baroness Blake of Leeds (Lab)
I do not have an enormous amount to add to the comments of the noble Lord, Lord Teverson. I highlight again the significance of linking strategy and policy: that is crucial. We will discuss in future debates the issues around the role of the ISOP and its independence, and, particularly in the context of this afternoon’s debate, look at long-term thinking, making sure that we get all the checks and balances in place. We are in a very fast-moving environment and need to make sure that we are absolutely on top of all the changes that are taking place. The noble Lord, Lord Teverson, highlighted the risk of lack of coherence: we need to make sure that everything is nailed down, line by line, and I am sure we will have further discussion on these areas as we go through different aspects of the Bill. I look forward to the Minister’s conclusions on this group of amendments.
Lord Callanan (Con)
I thank the noble Lord, Lord Teverson, for his amendments, beginning with Amendments 38 and 112. The Bill provides that the Secretary of State may designate a CCUS strategy and policy statement to set out the strategic priorities of the Government in formulating their CCUS policy. This would also need to take account of any statement designated under Section 131 of the Energy Act 2013. The Secretary of State must carry out their functions under this part in the manner they consider is best to further deliver the policy outcomes set out in the statement. In addition, parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement before it can be designated, as is provided for by Clause 91(10). Setting out in a strategic policy statement possible scenarios for policy change would start to introduce considerable uncertainty for both investors and the regulator which would, in my view, hamper the stability of the sector.
Amendment 120 to Clause 98 would require that, when making regulations establishing or adjusting a low-carbon heat scheme, the Secretary of State must publish a statement demonstrating how the scheme would deliver in line with both the carbon capture usage and storage strategy and policy statement and any overall strategy and policy statement provided for by the Energy Act 2013. Of course, I agree with the noble Lord in his principle that policy-making should be aligned with the broader strategy and the latest science: that is why all policy on heat and building decarbonisation is and will continue to be developed in line with wider government energy and decarbonisation strategy. As we said in a recent government response to a consultation, the plan to introduce, for instance, the market-based low-carbon heat scheme is aligned with the aim to expand the deployment of heat pumps towards 600,000 installations per year by 2028. I am afraid I do not agree with the noble Lord, and therefore do not believe that requiring another series of publications each time new regulations are made is ultimately necessary. I therefore hope he will feel able to withdraw his amendment.
Turning to Amendment 128, Clauses 108 and 109 will enable the safe and effective delivery of a village-scale hydrogen heating trial to gather vital evidence to help make decisions on the potential role of hydrogen in heat decarbonisation. I reassure the noble Lord that trial development is already following the latest science. This amendment would delay the introduction of new regulations which are focused on the protection of consumers until two strategy and policy statements are published. The exact contents of these documents would also need to be properly consulted on before they are issued.