Draft Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2022

Alan Whitehead Excerpts

Tuesday 24th May 2022 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The statutory instrument before us is about as non-controversial as it gets. There has clearly been a regime in place previously relating to OPRED’S activities and fees. As the Minister elucidated in response to the question of the hon. Member for Kilmarnock and Loudoun, OPRED has a regime whereby the total back office costs of the activities related to its inspections and so on are calculated and categorised into the number of hours for which the activity is undertaken and what is cost-recoverable. The level of fees are then determined by the whole calculation together.

The distinction between the specialist officers and the non-specialist officers is that the first are the technical staff who carry out the relevant functions of the Secretary of State and the latter are the administrative staff who back up that work. The average number of hours per annum spent on potentially cost-recoverable activities is suggested to be 1,243. The total amount recovered by OPRED appears to be about the same under the new arrangements—the marginal increase in rates for specialist officers compared with the marginal decrease in rates for non-specialist officers—as the average recovered from industry in previous years, and that figure is £6.2 million.

The problem with all this is that the figures that have been provided by the Minister—for hours, and previous and present costs—do not add up to £6.2 million. Indeed, they add up to substantially less. Either my calculations are badly out or there is a missing money problem, concerning the total amount recovered by OPRED and the mechanism for recovery that is set out in the explanatory memorandum, as the Minister said.

I invite hon. Members to get out the calculators on their mobile phones—to do rather better business with their mobile phones than perhaps some hon. Members are doing at the moment—and just to multiply one number by the other. If they do so, they will see that the two sums do not add up. I wonder what the explanation is. I do not think that any inspiration is likely to come to the Minister this afternoon, so unless he has an explanation right now, perhaps he could write to me on the matter.

I am happy that the instrument is not controversial, but I think we ought to know what is in the total sum recovered by OPRED per annum, so that we can be sure that what is being recovered from industry is a proper representation of the work that is undertaken and the detailed rationale that is set out in the explanatory memorandum. Other than that, the Opposition have no intention of pushing the SI to a vote and are happy to see it pass, subject to that bit of information coming my way.

--- Later in debate ---

[Paul Scully]

I am glad to hear that overall I have provided the necessary assurances for the Committee to approve the statutory instrument, but I appreciate the valid questions that have been asked.

OPRED’s accrued income is about £6.2 million per year, as the hon. Member for Southampton, Test said. The majority is charged to the offshore sector, with less than £100,000 charged to the North Sea Transition Authority, which is largely for the provision of advice related to licence transfers, and the appointment of operators and monitoring compliance with an offshore licensee’s obligations to make adequate provision to cover potential environmental damage liabilities deriving from their operations.

OPRED bills about 120 companies and the NSTA on a quarterly basis, but the fees are determined by adding together the number of hours worked by specialists and non-specialists on cost-recoverable activities multiplied by the applicable hourly rates. That is the chargeable amount, but there is something like £10 million of overall running costs for OPRED’s environmental operations unit, including the cost of the office in Aberdeen and corporate support supplied from London. The recovery is 65% of those costs.

[Dr Whitehead]

Does the Minister accept that it looks like there are a number of other recoverable costs liable to OPRED that have not been mentioned this afternoon? It would be helpful to know what those costs are.

[Paul Scully]

I will write to the hon. Gentleman about the costs and to the hon. Member for Kilmarnock and Loudoun about the qualifications. OPRED’s operating costs are more than £6.2 million—about £10 million—but the recoverable costs have been established in previous years. The amendment is just a recalibration of the hourly rates according to the annual uprating, and indeed downrating for the non-specialists, as they relate to the administrative costs around the hourly rate that the individuals get themselves. I hope the hon. Member for Southampton, Test will accept my explanation if I provide more detail in writing.

[Dr Whitehead]

indicated assent.

[Paul Scully]

The regulations will enable OPRED to recover the costs, which we do not want to pass on to the taxpayer. I therefore commend them to the Committee.

Question put and agreed to.

Draft Contracts for Difference (Miscellaneous Amendments) Regulations 2022

Alan Whitehead Excerpts

Monday 23rd May 2022 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I cannot see a great deal that is terribly controversial in the draft regulations, so we will not seek to divide the Committee. Indeed, we substantially support the proposals. Clarifying the eligible generator regulations in terms of CCS systems of concern is an important change being made today in this SI. It is important because when we talk about CCS as a whole system, we tend to talk about the carbon being captured, transported and sequestered, and we always talk about that in terms of pipelines and how CCS is going to work.

Not only are we some way away from establishing decent pipelines for CCS transportation, but—particularly as far as energy-intensive industries are concerned—they are not necessarily going to where the pipelines might be. The question is how we transport the carbon to the places where the pipelines are, or we might want to barge entire shipments of CCS right around the country. Indeed, the Minister will know that the Acorn Project in Scotland is currently developing barge receipt facilities so that the CCS that is transported by barging methods can then be transferred to its place of sequestration efficiently.

The regulations are important. They clarify what is in and what is out of the process. I want to ask the Minister about processes that will inevitably come into view as far as the CCS process is concerned, but have other things added in front other than the CCS. I particularly refer to the so-called BECCS, the biomass energy with carbon capture and storage, which, again as the Minister will know, is recommended by the Committee on Climate Change. Also, the Government are keen on BECCS in the long term as it combines biomass power with a CCS capture arrangement, so that the whole arrangement is negative as far as energy is concerned.

Last year’s similarly named regulations, the Contracts for Difference (Miscellaneous Amendments) Regulations 2021, brought to an end the establishment of BECCS as a conversion arrangement from coal. They stated that biomass energy involving carbon capture and storage would be treated separately. The explanatory notes indicated that they would not be subject to today’s regulations because they were being treated separately, and they do not appear to have come into these regulations. We could, for example, have a conversion activity from a coal plant to biomass that included CCS in its arrangement from the start of the conversion process. Indeed, it is envisaged that conversion schemes can be included in the eligible generator regulations—that is, they are add-ons to existing activities, as opposed to schemes starting from new—which the Minister mentioned in his opening comments.

It is not clear whether a biomass scheme that had CCS from the start but was not a new scheme in its own right would be within or outside these regulations. I would be interested to find out whether the Minister has considered that knock-on from last year’s regulations. Could he clarify the situation? Are such schemes considered outside or within the eligible generators for the purposes of these particular regulations?

Has the Minister yet had any sight of the biomass strategy, which—it was claimed last year—would come out in 2022? It is now 2022, and it has not arisen. It may be that the solution is in that strategy paper. It would be interesting to hear whether the Minister could give us any clarification on that particular point, or whether he wishes to leave that to when the strategy—if and when it comes out—elucidates matters.

--- Later in debate ---

[Lee Rowley]

I am grateful for the hon. Gentleman’s question. My understanding is that we are allowing BECCS to be eligible in general, but the specifics and the detail—recognising that there are two different elements of both generation and capture through the energy value chain and how they interact—will need to be dealt with on a case-by-case basis and looked at in the round when we launch a process to move on as part of this process of changing the statute book.

My hon. Friend the Member for Windsor asked about the reference price and the strike price. I do not think there is anything more apparent here than simply adding an additional layer of flexibility. We are not saying that we are definitely doing something else, or that we definitely want to move away from reference prices and strike prices; to the point raised by the hon. Member for Kilmarnock and Loudoun, this is just about ensuring that we do not have to come back again if we determine in the future that a different model is appropriate—one that does not mention reference prices and strike prices but potentially mentions some other element.

[Dr Whitehead]

I wonder how that ties in with what is in the carbon capture and storage business plan about the articulation of strike price and reference price-type arrangements in capex and opex as the system progresses. That suggests that the system is more of an RAB system than a CfD system. In the Minister’s mind, how do the two interact?

[Lee Rowley]

I am grateful for the hon. Gentleman’s question. The narrow assessment that we are doing today is to try to ensure that the statute book is as flexible as it can be in the event that alternative models emerge. The technicalities of those alternative models would need to be debated and discussed with experts. For the moment, we are trying to ensure that the legislative framework allows for that variation, should it be necessary. Whether it will ultimately be necessary is a broader question, which will be addressed in due course.

The hon. Member for Kilmarnock and Loudoun raised some important questions about timelines for power plants, the number of power plants and where they will be located. I am sure he expects me to say this, but I am not in a position to outline the precise process by which the system will be operationalised, I am not in a position to confirm whether it is one or n, and I am certainly not in a position to confirm where those locations—singular or plural—will be. This is about getting the legislative and statutory framework ready to be able to make those decisions, which will be made in due course through the appropriate processes.

I make a similar point about bespoke versus auction processes, and about some of the technical questions that the hon. Gentleman asked about comparisons between new and older. He also asked about the broad true cost of transportation, whether it is pipeline or non-pipeline. He makes an important point, and that will all need to be considered in the round when we come to operationalise the changes in due course.

I hope that I have addressed many of the key questions relating to the SI. There is obviously a broader debate about energy policy and some of its elements, but I hope that the Committee is minded to support these technical changes to the rules and regulations that govern these areas, so that we have the flexibility to ensure that we can develop this technology and operationalise it successfully. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Contracts for Difference (Miscellaneous Amendments) Regulations 2022.

Energy Price Cap: Residential Buildings with Communal Heating Systems

Alan Whitehead Excerpts

Wednesday 20th April 2022 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I will try to be as brief as possible and I will also try to recall, from what seems like an entire Session ago, the discussion that we had earlier this evening and the valuable contributions that hon. Members made to it.

Of course, I congratulate my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier) on securing this debate in the first place and indeed on bringing to our attention the real issues of regulation, price and redress that exist in the heat network system.

Before I go any further, I will say that heat networks are a good thing. They are not just a substantial part of the Government’s plans for future decarbonisation of our heat systems but provide—or should provide—a cheaper deal overall as far as heat is concerned for those who get their heat through them. Also, of course, the networks themselves are not necessarily dependent on gas. A particular network can have any particular fuel—for example, as I have said on several occasions, Southampton heat network is fuelled by geothermal means—so it is not necessarily the case that gas goes into the networks. However, it is a fact that the vast majority of the 14,000 networks, either communal or district, are gas-fuelled and will probably continue to be so for quite a while.

This afternoon, hon. Members have emphasised the imperative of getting the whole system regulated properly for the future. It is a bit of an anomaly that this area of heat and power supply, unlike pretty much anything else in the system, remains unregulated. That does not mean that every network is a rogue organisation trying to do the worst thing for its customers; indeed, most heat networks do a very good job.

However, it is essential that customers have access to the proper redress that they have by other means through the regulation of the wider energy network, particularly because energy networks of these kinds do not have the option of exit. They are run on an entirely different basis, which is quite right—there cannot be an individual exit from a collective system—but customers should have a voice. They should have the ability to get a good deal, and arrangements for redress and putting it right if they do not get a good deal. I am afraid there are energy networks that run their systems very inefficiently, put their prices up without proper justification, or do a range of other things that we would expect a regulator to intervene in and put right. The question of regulation is an imperative foundation for the expansion of energy networks, district heating networks and so on that we expect to see over the next few years, as well as putting right a number of the wrongs that are already in the system.

Members have already mentioned how long the Government have taken to get the idea of regulation properly on board. I am pleased that after the CMA inquiry, the Government’s original proposals for consultation, and the response to that consultation—which took over a year to come in—the Government have now committed to proposals in regulation within this Parliament. I am anxious to hear from the Minister what is meant by that. I emphasise, as I have on previous occasions, that we just have to get on with it: we have to do it now, as soon as possible. We have done all the consultations, so there is now no impediment to getting that regulation on the statute books other than ministerial clout and will to make room for this in legislation as soon as possible. I hope the Minister will be able to enlighten us about what will come forward in future.

Of course, the other part of the regulatory process is that because these systems are not regulated, they are not covered by the price regulation that covers the rest of the system at the moment through price caps and so on. When it comes to deciding how we can give customers the benefit and protection of a price cap in a way that is at least partly similar to the rest of the market, we have a particular problem with the difference between the regulation of the system as it stands and the regulation of other systems. That is because the district networks that supply the heat are effectively all miniature energy retailers, in as much as they buy their gas—mainly—on the wholesale market, and then supply the heat as a result of the purchase of the gas, and obviously the purchased gas prices then go through to customers.

If, indeed, we had a price cap regime, without any other activities going on behind it, we may well see a whole series of those miniature retail energy companies collapsing due to being unable to make up the difference between what they were required to pay—as far as the gas prices are concerned—and the price they could charge to supply that heat. They would not be able to balance up their purchase costs.

More would need to be done, in terms of a price cap arrangement within regulation, given the present volatile state of the gas market, and the unlikelihood that prices will fall in the near future. At the very least, it would need a Government arrangement for pooled purchasing of gas by those district network operators, or, perhaps better still, some form of purchase price cap, allowing the wholesale purchased gas to be supplied to the networks at a reasonable and stable rate over the next period.

I think we may well have wider debates about how that works for the market as a whole, but this is one area where we must be clear. An intervention is needed to protect those 500,000 people on district heating networks from the consequences of the volatile gas market for the future, and also to protect those people who are running those heat networks from the consequences of a one-sided price cap. We must appreciate that they operate in very different ways to the rest of the energy market, and need different protections to ensure that they are fit for purpose now, and are available for the future. We will certainly need them to operate effectively within the low-carbon economy, and to provide the low-carbon heat that we all know is desperately needed as we decarbonise our energy systems as a whole.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 29th March 2022 Commons Chamber

[Mr Speaker]

I call the shadow Minister, Dr Alan Whitehead.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Well, we know what measures the Government have in place to assist customers to manage the sky-high energy price increases now due in April, and frankly pretty miserable they are. They will not remotely cover the bulk of the increases, and we still do not know how some of them are to be delivered—the “lend you your own money” scheme, for example, as it relates to the 7 million customers on prepaid meters.

I am concerned about how the Government will respond to what we now know will be an equally steep additional price rise in October under the price cap, with authoritative sources calculating that we are likely to see the average energy bill rise by a further £700 to £2,900 or £3,000. What serious additional measures is the Secretary of State planning to help customers to face that further enormous rise? Might he after all be interested in a windfall tax against those companies that continue to profit enormously from escalating gas prices, which could fund substantial assistance to cope with the next price hike?

Energy

Alan Whitehead Excerpts

Wednesday 23rd March 2022 Commons Chamber

[Dr Alan Whitehead (Southampton, Test) (Lab)]

There is a great deal of agreement between us this afternoon on a number of the issues that the Minister raised about the role that heat pumps will play in the future low-carbon energy economy, including how many heat pumps we will need over the period. We need to ensure that as we transition away from heating systems predominantly run by gas—and in the domestic environment, by boilers—we can look forward to substantial replacement of those high-carbon heating measures by the low-carbon heating arrangements offered by heat pumps.

I hope hon. Members will bear in mind a very important figure that the Minister mentioned: 600,000 heat pumps to be installed a year by 2028. That figure derives from the Prime Minister’s “Ten Point Plan” and is an ambition for the number of installations that we should reach, which will continue after that point at 600,000 or so a year. That, among other things, will get us more or less in line with what the Climate Change Committee has suggested on the roll-out of heat pumps to ensure that our heat decarbonisation targets are realised. That is therefore a key figure, and it should be the yardstick against which this measure is judged.

We heard from the Minister that this is a £450 million scheme—£150 million per annum over three years. That is, by the way, a slight uprating from the initial consultation on what was the clean heat grant and now is the boiler upgrade scheme. However, that is what we have in the pot over the next three years for the installation of heat pumps. By fairly simple arithmetic, that translates—if we assume that the amount of grant per heat pump installation is £5,000—to about 30,000 heat pumps per year for those three years. That is 90,000 heat pumps installed under the scheme by the year 2025 so. So we then have three years to get another 500,000 or so heat pumps installed by 2028-29. On the basis of the report I mentioned, that is just not going to happen. Even if we assume that a number of heat pumps will be otherwise installed in new build properties—this scheme is predominantly about existing properties that can be retrofitted with heat pumps—we can see just how far from the stated ambition this scheme leaves us over this period.

I am not kicking against the scheme as it stands, because it is good that we have some underwriting for heat pumps, but it is woefully inadequate for the task that we have ahead of us. It will get us nowhere near the target figure that I mentioned, and I think we should at least quadruple the scheme to get us on a trajectory that will actually get us to the 600,000 heat pump installations we have been talking about.

However, I am afraid that it gets worse for the scheme as it stands. As the Minister mentioned, the scheme is not just for heat pumps; it is also for biomass boilers—all of that is to be included in that £450 million cash limit. Unless no boilers are installed under the scheme, there will be quite a lot fewer than 30,000 heat pumps installed per year under the scheme.

Of course, the cost of Ofgem administration of the scheme—£10 million a year—is also included in the cash limit. By the way, I am glad that the Government have decided to curtail their interest in Canadian consultancies for energy efficiency schemes and to go with Ofgem as the administrator and manager of this scheme. However, I do wonder who will be responsible for regulating and reporting on the progress of the scheme. I think it may well be Ofgem, so I will be interested to see how that potential circularity plays out in how the scheme proceeds.

Furthermore, the money for the scheme is not new. The scheme replaces the domestic renewable heat incentive scheme. The Government have trumpeted how the scheme is going to turbocharge the installation of heat pumps, sort out supply chains and various other things, but it is essentially trying to do that with no new money at all. The RHI was based not on a levy but on taxpayer funding, and there was a line in the Red Book that allocated RHI funding historically. What was that line? Well, the cost of domestic RHI last year was £150 million—exactly what is available each year for this new scheme. In other words, the same amount of money is being turned over to carry out the same sort of activity that the RHI did. It is only that, as a result of £5,000 grants, we will apparently get far more heat pumps. It was not that the RHI did not support heat pumps—it did, and it also supported biomass boilers and solar thermal, which is not included in this scheme. The scheme also does not include hybrid heat pumps, which could make a real difference in terms of heating off-grid properties.

The interesting figures for installations in 2019-20 under the RHI were 10,400 air source heat pumps, 1,175 ground source heat pumps, and small numbers of biomass boilers and solar thermal systems—in other words, 11,500 heat pumps from a similar level of funding. I wonder whether the Government are as confident as they make out that we can do so much better than those numbers, even assuming that we get near to 30,000 heat pumps in the scheme, from the same amount of money as the renewable heat incentive.

I also question whether it is a good idea to pursue heat pumps in the way that this scheme is doing without having a concomitant drive to uprate the energy efficiency of properties that are likely to be concerned with the installation of heat pumps. That is not an issue with new house building, because new houses are likely to have good enough energy efficiency to take a heat pump, but I am sure that the Minister will be aware that heat pumps simply do not work very well in poorly insulated homes, as they struggle to get the house up to its required background temperature if their long-term slow input is continually leaking out due to the energy efficiency of the property.

The predominant Government scheme for energy efficiency at the moment is the energy company obligation. ECO is moving very shortly from ECO3 to ECO4 at a similar sized budget to when it started—ECO3 at £750 million and ECO4 at £1.2 billion. That was the amount of money that was in ECO when it was first started, so the money in the ECO fund is also standing still. That fund also needs quadrupling in size in order to run alongside the proposal we are discussing, so that whole-house treatments can work for heat pumps. ECO4 also needs putting into general taxation—or at least the difference between the original budget and its new budget, so that the two schemes can work well alongside each other.

Finally, I have a small point concerning the run-on from the renewable heat incentive into the boiler upgrade scheme. The Minister mentioned the timetable by which the new scheme will come into place. At present, it looks as though there will be quite a hiatus, as no new orders under the RHI will be taken and they will effectively stop until the boiler upgrade process—the vouchers, the certification and various other things—comes in. We could lose up to six months of heat pump installation and face various other problems due to that dislocation, with the two schemes not running together seamlessly. It is also pretty bad for installers’ order books to have that hiatus in their order books between their activities under RHI and what they think they may be doing under the new boiler upgrade scheme.

The scheme should come in seamlessly alongside the phasing out of the RHI. I do not know whether the Minister considers it too late to look at running on the RHI a little bit until the new scheme is in place, so that it can have the maximum impact from the word go as it comes in and takes over.

However, as I have said, we will not be opposing this measure this afternoon because of the high degree of agreement that we have on the purpose of the scheme. What we do not particularly agree with the Government on is their low-key response to the imperative of getting those 600,000 heat pumps in by the end of decade. It apparently remains low-key in this scheme. I would be happy to hear from the Minister if he has other plans to get us further up to date with heat pumps in the future, but at the moment that seems not to be the case.

Draft Electricity Supplier Payments (Amendment) Regulations 2022

Alan Whitehead Excerpts

Wednesday 16th March 2022 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The SI is clearly not controversial, except for a number of points on which I would like to ask the Minister for clarification. The Opposition do not oppose the SI, and there will be no need for the Committee to divide today. I will restrict my remarks to questions for the Minister about the LCCC, the settlements body, the budgets, what that means for value for money, and a review of the functions of the LCCC and the settlements body. One would hope that the review of the workings of the capacity market and CfDs, which is supposed to be coming up, will include a review of a number of the issues that I will raise.

First, we have two separate bodies essentially doing the same thing. They were set up by different pieces of secondary legislation. Each body has a budget for its work, but they do the same work and even, I think, have the same address. They are essentially counterparty bodies—one for the capacity market and one for CfDs. It is beyond me why there is not one organisation with one set of costs and arrangements. I am sure the costs would be rather less than we have now. That may be something that the Government might like to include in a review of the workings of the capacity market and CfDs.

The report of that review was supposed to be with us in 2019, five years after the Energy Act 2013 was passed. It is still not here. I note that the explanatory memorandum states that

“the findings for the review are expected to be laid in Parliament shortly.”

They have not been. What is the progress of that review? When is it likely to be laid before Parliament, if it is indeed ready? There has been a two-year hiatus in getting the report organised. Why has it been so difficult to it bring forward? If there is any time for reconsideration of any aspects of the report, perhaps some of the things that I raise—particularly the companies’ status—could be included in it.

My second question relates to the capacity market settlement body and how the funds for capacity auctions are being administered. I will shed a small spotlight on the recent T-1 capacity auction. The Secretary of State—I think it was the Secretary of State, rather than the Minister who is present this afternoon—decided that the amount to be procured in that auction would be identical to the amount of pre-qualified capacity in the auction. One can see fairly clearly that that move meant that there would not be an auction in the way that auctions are normally decided, in so far as all the capacity that decided to enter the auction would get a place because there was no room for anything pre-qualified to be outside the auction.

Indeed, that is what happened, and the auction closed at a very high price of £75—a record high for a capacity auction. I suggest that that was particularly due to the Secretary of State’s declaration that the amount to be procured would be identical to that which had been pre-qualified. Indeed, the amount that was procured was actually less than the amount that was pre-qualified, and that added to the inflation of the price in the capacity auction. I would be grateful for the Minister’s explanation, because there is a much higher price for capacity being procured and therefore administered by the settlements body than would otherwise have been the case, and there is possibly also a greater administrative cost.

The inflation in the budgets for the two bodies is actually quite staggering. For example, the CfD counterparty’s operational budget will increase by 14% between ’21 and ’22, by 10.3% between ’22 and ’23, and by 7% between ’23 and ’24. That is a cumulative increase over three years of 34%. That is enormous, by anybody’s reckoning, for any Government Department or sub-department or agency. I am not convinced that the explanation put forward today—that the CfD counterparty body will have a larger number of CfDs to deal with—justifies a cumulative 34% increase in budget over that three-year period, particularly as a similar, but smaller, increase is contemplated for the capacity market settlements body at the same time.

It is a considerable increase in budget, which, by the way, lands back on customers’ bills. Hon. Members will see in the explanatory memorandum that the estimated effect on household bills will be about 50p added to each customer’s bill per year. That is set out in the explanatory memorandum as one of those “only” calculations—“it is only 50p on bills”—but that is, of course, a cumulative £1.50 on bills over the settlement period. Indeed, the Government have levied similar increases on customer bills—for example, with the green gas levy—in order to deal with arrangements for the management of the market.

We are therefore faced with a number increases that are very small individually but collectively add up to quite a bit of money on customer bills, at a time when those bills are going through the roof. We need to find every method we can to ensure that bills are cheaper. Let us be clear: these measures will add to the problem, not take away from it. Is the Minister absolutely satisfied that the increase in operational budgets is justifiable? Is there merit in reviewing it, now or in the near future, to ensure that we have got the figures right?

I would like to run a final point by the Minister. As he knows, the LCCC, as the body responsible for CfDs, has the function of collecting the money where the difference between the strike price and the reference price on the CfD is positive and giving the money back where the difference is negative. What I mean by that is where a project has a CfD at a certain price, that price would normally be above the prevailing price on the electricity market. Where the price on the electricity market goes above the strike price, which it has done more recently with a number of bodies that have CfDs, the body that has a CfD starts paying the money back to the LCCC. The estimates for this year are about £1.5 billion to be paid back over a period, which is substantially larger than the operational budgets of these bodies, as hon. Members will see.

That arrangement being in place, I would have thought that a useful way of underwriting the operational budgets of such bodies would be to take those repayments back into account as part of the operational budget arrangements for the companies, so that prior to redistributing those moneys on the way back, they could incorporate part of that payback into their operational budget, circumstances permitting. Alternatively, if they build up reserves as a result of the payback arrangements, they could use those reserves for their operational budget instead of levying a further cost on customer bills, as they are at the moment.

Those are fairly modest suggestions for the Minister. I will be grateful if he considers those points, if he thinks that they are reasonably valid. If he does not think they are, perhaps he will say so. They all have the objective of ensuring that what we have, as far as the counterparty bodies are concerned, is the most efficient way of running them; the most appropriate way of procuring the finances to make sure that they run in the best possible way; and the best possible way of organising them so that they are as lean as possible in the operation of their duties.

[Greg Hands]

I thank the hon. Member for Southampton, Test for living up to the name of his constituency—he set some testing questions for us. Let me deal with the five questions that he asked.

First, why are there two companies? It is worth stating that the two functions are very different: the capacity market and running the contracts for difference auctions. I am sure the hon. Gentleman is fully aware of that. The idea is also to separate out the liabilities of the two companies. During the consultation on electricity market reform, investors and other stakeholders believed that it would be better to have two legally separate companies to keep the liabilities separate. We rolled them together because, in essence, they are funded in a similar way, but they have two different functions. However, I appreciate the hon. Gentleman’s testing question about that.

The hon. Gentleman is right that the report due under the Energy Act 2013 has been delayed. That is, essentially, because of the pandemic and to ensure that it did not get in the way of the recent contracts for difference auction by taking people off that. The recent CfD auction that started in December is the largest ever—in fact, larger than the previous three auctions put together. We will publish the report in due course. I expect to see advice on it shortly.

The hon. Gentleman asked why the Secretary of State and/or I recommended increasing the amount that was bought at the recent capacity market auction. It was a prudent decision, in these times of high and volatile energy prices, to ensure that we were as covered as we could be going into next year. The Secretary of State and I very much took the same view—we always take the same view in the Government; there is never such a thing as different views—that it was a very prudent decision to be able to maximise that. The hon. Gentleman asked whether that resulted in a higher price. The answer is no. There was obviously a very high price going in to that auction, reflecting high energy prices at the moment.

[Dr Whitehead]

Is the Minister saying that the exact comparability of the pre-qualifying amount of capacity for the T-1 auction and the amount of capacity that the Ministers decided was the right thing, which was an increase in the recommendation, was a coincidence? Or is he saying that that was carefully designed to ensure that the capacity available and the capacity bid for was the same?

[Greg Hands]

I thank the hon. Gentleman for that further question. I would not say that it was a coincidence, but what we wanted to do was make sure that the British consumer had the maximum positive protection looking forward, particularly at a time of high and volatile gas and electricity prices combined with the previous parts of the auctions and the previous years rolled into that one period. For example, the previous T-4 auction meant that, overall, the ’22-23 capacity market year, which we are about to go into, is the second cheapest yet because of the cheaper prices in previous auction years. Although there was a high price paid in the T-1 auction this year, when we look at the whole period, we took advantage of lower prices to have the second cheapest delivery overall in terms of the capacity market for ’22-23.

The hon. Gentleman asked some fair questions about the budget increases. The budgets overall put less than 50p on the average electricity bill in the previous year, 2020-21. He is right that there is a significant increase; I have laid out why and shall do so again, but this is not a big part of consumers’ electricity bills.

The hon. Gentleman made the perfectly reasonable point that surely we should do everything we can to make bills cheaper, and that is exactly why the Chancellor announced on 3 February the package of measures to help households and bill payers through council tax payments and the different support funds for those who do not qualify for the council tax rebate but none the less have high energy prices.

The budget increase reflects the increase in the number of CfDs. Over this budget period, there has been a 400% increase as a result of the success of the Government’s renewables policy and of more renewable energy providers wanting to take part. That will mean a necessary increase in the number of people needed to go through all the bids in the CfD process. There are also more capacity market providers and the development of new technologies such as power CCUS. I also remind the hon. Gentleman that during the consultation, no one was against this proposal. I do not think that we received a response from him—

[Dr Whitehead]

rose—

[Greg Hands]

But it is never too late to make one.

[Dr Whitehead]

I wonder whether the Minister would like to reflect on the numbers taking part in the consultation. Does he have an answer as to how many people responded to that? What conclusions does he think can be drawn from the total number of responses?

[Greg Hands]

I am happy to answer that. We had one response during the consultation, which was not from the hon. Gentleman but was from one of the power companies. The one response was not principally against the increase in the cost of the scheme. The increase in the cost, particularly in the LCCC, reflects a hugely increased workload with the 400% increase in the number of CfDs during the course of the budget period.

Finally, on the LCCC paying back the money, to put it more in the vernacular, when it comes to the strike price referencing the reference price, I do not think that it is practical to take that into the LCCC’s budget or in some way to pay for the LCCC that way. This is the right way to pay for the LCCC. The scheme is working in the way that it is designed to.

[Dr Whitehead]

If the Minister does not think that that is the case, does he think that some method of making sure that those repayments go back directly to customers rather than indirectly, as is the case at the moment, might be a better way of doing things?

Large Solar Farms

Alan Whitehead Excerpts

Wednesday 9th March 2022 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I will attempt to follow the hon. Member for Aberdeen South (Stephen Flynn) in being as brief as possible and finishing within five minutes, but right hon. and hon. Members will understand that we have a large number of issues to discuss.

The first thing to say is that I congratulate the hon. Member for Bassetlaw (Brendan Clarke-Smith) on securing the debate, because it gives rise to all the issues that we have to consider in the development of renewables and particularly solar. He has drawn attention to a particular scheme in his constituency, which is quite right, given his role as a constituency MP. However, I caution against expressing proper and justified concerns about the siting of particular solar farms in particular places while failing to understand just how much we need renewables, especially of the solar variety, over the next period.

I have just come from the statement in the main Chamber, and all sides agreed that our way out of the oil and gas problem, which has been driven by the situation in Ukraine and Russia, is to go very fast on renewables. The point is that if we go fast on renewables, the renewables have to be somewhere, and it is really not sufficient for people to say, “Yes, I’m very much in favour of renewables, but I’m not in favour of them being in any particular place.” I am not saying that that is what right hon. and hon. Members have said this afternoon, and a number of Members were very thoughtful and clear about the circumstances under which solar should be developed. I think that should perhaps be the watchword, and I agree with a number of Members that we need a much more strategic and planned approach to the arrangements. We need to understand what renewables we need, but also where we need them. However, it is not an option to have them nowhere at all.

In that context, we know that solar has already been a considerable success in the UK. It is being developed at the moment on no subsidies. We have 14 GW installed across the country, and 65% of that is ground-mounted solar. Frankly, it is a fantasy to believe that we can get to the sorts of targets we now need on solar—perhaps 40 GW by 2030, which is what the Climate Change Committee says—by simply installing them in small numbers on roofs in cities and towns. Of course we should go with that, and we ought to have a lot more imagination about how we put solar in towns and cities or alongside motorways and various things such as that.

[Wera Hobhouse]

I agree with everybody that not engaging with communities is simply not on, and it is important that those who want to install renewable energy installations and solar farms need to engage with their communities. What does the hon. Gentleman think should be done to improve community engagement?

[Dr Whitehead]

The hon. Member is quite right. Any form of renewable power—indeed, any form of power—ought to be based on extensive community consultation and the community being on board with the idea of that particular power source coming to their area. Hon. Members have raised a number of issues about agricultural land and its quality, the visual aspects of particular solar farms, and various other things, which need to be discussed in great detail at the local level by communities faced with these proposals.

Solar farms, and particularly the West Burton solar farm, which was the subject of the concerns raised by the hon. Member for Bassetlaw, actually have quite a good grid connection. That solar farm would potentially be based around the West Burton A power station, which as I am sure the hon. Member will be aware is going offline in 2022, as is the Cottam power station just down the road. However, if we had had a discussion when someone decided to build the West Burton A power station and the Cottam power station in the middle of the countryside—which is where they are—a number of years ago, we probably would have had exactly this sort of debate in the Chamber.

That underlines the fact that, although we are transferring what we do as far as power stations and power are concerned, the issue remains just the same: where we put those power stations and renewables into operation, not whether we put them into operation. It is imperative that we have this amount of renewable energy across our country for the future. Be it offshore wind or onshore wind, city-based solar or field-based solar—all of those have to be considered as imperative for delivering our renewable power supplies. Solar happens to be the cheapest power available, and it is one of the quickest to introduce if we are thinking about a dash for renewables in the future.

[Sir John Hayes]

The hon. Gentleman and I have been debating these issues for longer than either of us care to remember. I am sure he will acknowledge that against that backdrop—the objective he set out—it is important to measure the environmental cost of renewables. The manufacture, siting and anchoring, for example, of wind turbines bring an environmental payback period. The same applies to solar. We need to test these things on a specific basis against the very criteria he set out.

[Dr Whitehead]

The right hon. Member is absolutely right that we need to test these things and take the environmental benefits as a whole, but these tests have pretty much been carried out, and there is an overwhelming environmental benefit to solar, which is a cheap and reliable power source. By the way, the batteries associated with it that make it more reliable do not need to be sited in the same place as solar farms, so things can be designed in such a way that the environmental disbenefits are not all concentrated in one place.

[Matt Hancock]

In the case of the Sunnica proposal, the battery farm is much bigger than the power that would come from the solar that is part of the same proposal. That being the case, and the argument he is making being important and thoughtful, would the hon. Member not agree that keeping the public onside with the development of solar and its location is an incredibly important part of meeting the very environmental objectives he so cherishes?

[Dr Whitehead]

Yes, the right hon. Member is absolutely right. The public should be on board with any development that is going on anywhere concerned with anything. That is a starting point as far as the developments are concerned. It is worth reflecting on the Government’s onshore wind policy. Despite the fact that the public in many areas of England and Wales were in favour of hosting onshore wind, the Government put a moratorium on it. We do not want to go in the other direction as far as public support and renewables are concerned.

I have indulged myself by taking interventions and have gone a little over my time. I hope that Members will understand, however, that my comments are founded on the imperative of solar for the future. Solar needs public support, and a sensible approach must be taken to its deployment if it is to take its desired place in our future renewable firmament.

[Sir Charles Walker (in the Chair)]

Minister, could you sit down at 3.58 pm, so that our mover can wind up after you have wound up?

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 22nd February 2022 Commons Chamber

[Kwasi Kwarteng]

We are constantly engaging with Citizens Advice, Ofgem and a huge range of stakeholders about how to protect the most vulnerable consumers. The package announced by my right hon. Friend the Chancellor only a couple of weeks ago includes £350, which goes halfway towards addressing the increase that the hon. Member for Makerfield (Yvonne Fovargue) describes. The warm home discount is being extended from 2 million people to 3 million people, and the uplift will be to £150.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The 4 million pre-payment meter customers in this country will be profoundly unimpressed by the Secretary of State’s answers this morning. Not only are they paying far more than the £693 increase on the price cap for customers with accounts, but it is uncertain whether they will have access to the £200 Government scheme to lend customers their own money, as they do not have accounts through which to do this. Indeed, many of them will miss out on the council tax rebate, too.

Would it not have been much more straightforward and fairer for prepayment meter customers if we had levied a windfall tax on companies that are profiting from high gas prices and provided those customers with a direct and non-refundable discount on their bills through their meter?

North Sea Oil and Gas

Alan Whitehead Excerpts

Wednesday 9th February 2022 Commons Chamber

[Greg Hands]

I entirely agree. A very important announcement on fusion is being made today by the Under-Secretary of State, my hon. Friend the Member for Mid Norfolk (George Freeman). My hon. Friend the Member for Harrow East (Bob Blackman) is quite right about the progress we are making in this place, which is opposed by the hon. Member for Brighton, Pavilion (Caroline Lucas), her party and various other Opposition parties. We are moving forward on nuclear. Money is going into the Rolls-Royce small modular reactors programme; Hinkley Point C is being built; we are moving towards a final investment case for a further nuclear power plant in this Parliament; and we have a future nuclear enabling fund. We are moving forward on nuclear, which is an essential part of this country’s future energy needs and energy security.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The truth is that the Government are thrashing around after what we now know has been a decade of failure on energy, particularly on the transition to a low-carbon energy economy. They have no answer to the energy crisis that millions of families in our country face.

This is not a long-term answer either. The energy price crisis is a fossil fuel crisis, so the long-term answer must be to go further and faster on zero-carbon energy, energy efficiency and clean energy storage. On energy security, the Opposition believe that the long-term answer lies in zero-carbon energy. We need a phased and just transition in the North sea, but that cannot be an excuse for business as usual and pretending that the climate crisis does not exist.

There is one crucial climate test that should be applied to the current proposals and other proposals: whether they are compatible with keeping global warming to 1.5°. In the energy White Paper, the Government said that they would

“develop the existing checkpoints in our processes before proceeding with future licensing rounds.”

Is the Minister saying that the proposals he describes are exempt from that statement in the energy White Paper? Can he explain how what he has said today is consistent with its approach? Can he tell the House whether he believes that any future licensing decisions must be compatible with keeping global warming to 1.5°? Can he tell us how that assessment will be made?

Edmonton EcoPark: Proposed Expansion

Alan Whitehead Excerpts

Wednesday 9th February 2022 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I congratulate the right hon. Member for Chingford and Wood Green—

[Catherine West]

Woodford Green.

[Dr Whitehead]

Sorry, the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith). My office companion is my hon. Friend the Member for Hornsey and Wood Green (Catherine West), so that is on my mind all the time, as it should be. I need to get my nomenclature absolutely straight.

I congratulate the right hon. Member for Chingford and Woodford Green on having secured today’s debate. The debate appears to be about a specific incinerator in a specific place with specific proposals for its extension, but it encapsulates much wider questions: how do we deal with our waste in modern times, and what are the best ways of dealing with it and, indeed, the energy that might come from it? By examining those wider questions, we loop back to the best thing to do with the North London Waste Authority, and the Edmonton incinerator in particular.

The first thing that is important in addressing this modern debate is to recognise—as my right hon. Friend the Member for Islington North (Jeremy Corbyn) has correctly pointed out—that although we have been talking about waste this afternoon, we should not be talking about it in this way, because the vast majority of waste is actually a resource. In the context of the modern circular economy, the idea that we place a material that we have used into a stream, and then it is gone out of the system one way or another—it used to be buried; now it is incinerated—is clearly not appropriate if we regard that waste primarily as a resource. The duty of authorities dealing with waste should be to make sure that as much of that resource as possible can be recovered for use elsewhere, one way or another.

[Jeremy Corbyn]

I thank my hon. Friend for what he is saying. Does he not think we should be recording the level of composting, as well as recycling? Sadly, a huge amount of food waste and green waste probably ends up in incineration or landfill when it could be efficiently composted and provide compost for local people.

[Dr Whitehead]

My right hon. Friend is absolutely right: that is one of the elements of regarding waste as a resource, because waste—particularly municipal waste—will have a number of elements in it. It will have putrescibles in it, it will have waste from household activities, it may well have wood waste and metal waste and it will certainly have plastic waste. All those types of waste can be reused, recovered and dealt with in different ways. The very last thing that we should do with such products—what we should do only when nothing else can be done with them—is to burn them, even if we think we are recovering energy.

In 1971, when the Edmonton incinerator first came into production, the convention was that we took the rubbish from the bins, put it in a truck, took it smartly down to the local tip and buried it in landfill. That was it. For a long time, we were the worst country in Europe for landfilling our waste. In recent years, that has turned around but, unfortunately, only into the next stage up on the waste hierarchy, which is to incinerate, rather than to bury in the ground. Both the right hon. Member for Chingford and Woodford Green and my right hon. Friend the Member for Islington North mentioned in their excellent contributions that we have come a long way since that sort of analysis—not just whether we should move waste up the hierarchy more efficiently than we used to, but what is available to work with once we decide what we want to do.

I appreciate that the task for a waste authority, such as the North London Waste Authority, is difficult. It has huge amounts of waste coming in every day, it has to do something with it, the task never ends and, in recent years, the Government have not helped, providing little support for innovative and novel ways of dealing with waste, separating resources out and so on. A little while ago, for example, the Government pulled a number of PFI—private finance initiative—plants that local authorities had in the pipeline for waste. Authorities are pretty much left to their own devices to bring forward innovation.

A waste authority under such pressure might well think, “This is a real problem. Here’s the easiest way to solve it without putting it into landfill.” That seems to be what has happened with the Edmonton incinerator. Not only have we had a large incinerator there for a number of years, but plans are now in place to extend it, which would make the past even more nailed down in the future, with that future being incineration. Believe me—this has happened across the country, including in my own county—once a contract for a large-scale incineration facility such as that is entered into, it is with us for a long time. It freezes the technology in time, at that particular point.

As the right hon. Member for Chingford and Woodford Green mentioned, however, that means that, as we begin to go up through the waste hierarchy, we start by taking further fractions out of the waste. It becomes a beast that is more and more hungry to be fed, because of the contracts for the incineration plants. So, waste is pulled in from a wider and wider area and, in the end, it can start to impede efforts to move up the waste hierarchy with all that waste.

Those concerns are over and above the one expressed by hon. Members this afternoon about what comes out of the chimney stack from incineration. We have learnt a lot more these days, than we had in the early ’70s when the arrangements first came into place. Although techniques for dampening emissions such as nitrous oxide, particulates and various other things that come out of the chimney stack have improved, that is still a very real issue, as hon. Members have mentioned, for the health of the neighbourhoods around incineration plants and, indeed, a wider area, as we have seen from studies that have taken place on the subject.

We have a proposal, which I have described on other occasions as a throwback. It tries to take technology from two decades ago into the next decade and land us with it for a long time to come. It should not happen.

There are several other ways, both emerging and in quite widespread practice, of dealing with those waste streams, particularly through fractionalising them out. Another small matter to put at the Government’s door: we still do not have sufficient plastics recycling and reprocessing facilities in this country. We are still in the business, possibly for a long time to come, of exporting plastics waste. We need Government action to make sure that those plastics recycling plants are available so that waste authorities can ensure that their plastics collection is properly dealt with afterwards.

We also know that there are techniques available to gasify waste in general and produce syngas and dimethyl ether for use in vehicles and various other plants. It is a renewable form of gas that could be useful for the future of heating, which is very topical. Those techniques do not produce the sort of emissions that arise from incineration plants. They can deal with massive amounts of waste. Indeed, anaerobic digestion, which is a rather grand way of talking about composting—

[Jeremy Corbyn]

It is more or less the same thing.

[Dr Whitehead]

Indeed. It is more or less the same thing.

[Stewart Hosie (in the Chair)]

Order. I hope that the hon. Gentleman is coming close to the end of his remarks. I want to leave time for the Minister.

[Dr Whitehead]

Indeed, Mr Hosie, I am approaching the end of my remarks and I am guided by your instruction.

There are modern techniques that can deal with waste. My first plea to the North London Waste Authority is to think about those new techniques in a positive way and not simply decide to take the same old tried and tested routes. There are so much better ways of doing it. My second plea is that, if the North London Waste Authority decides to have a review of the matter, the Government will support that. I know that the right hon. Member for Chingford and Woodford Green has written on several occasions to request the Government’s support for some of the new measures that can deal with waste and resource in a different way.

We have the low carbon future to think about. We have got to get waste and resource management techniques in place that address that, either through carbon capture and storage or new methods of collection and dealing with waste. I am certain that the current proposal, should it go ahead, will not stand the test of the future. We should have our eyes on that future and together make sure that the waste arrangements for north-west London are fit for it rather than harking back to the past.