Energy Bill [HL]

Baroness Hayman Excerpts

Report stage
Tuesday 28th March 2023 Lords Chamber

I support the other amendments in this group on Ofgem and look forward to the upcoming speeches from noble Lords on them. I also look forward to hearing from the Minister and hope that he can provide the reassurance I am asking for. I beg to move.

[Baroness Hayman (CB)]

My Lords, I declare my interest as co-chair of Peers for the Planet. I will speak to my Amendment 133. I am grateful for the support of my co-signatories: the noble Lords, Lord Hollick and Lord Teverson, and the noble Baroness, Lady Altmann.

I also very much support the case for Amendment 1 made by the noble Lord, Lord Ravensdale. One phrase stuck out for me: his advocation of a “coherent, system- level plan”. In so many of the areas around energy efficiency that we will deal with later in the Bill, this is what we have been missing—not individual initiatives but a strategic approach, with time limits, timescales and targets to be met, so that we can see delivery.

I also support Amendment 130 from the noble Lord, Lord Teverson—which is a different approach to achieving the same goal as my Amendment 133—and Amendment 132 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, which would finally ensure that the long-awaited strategy and policy statement setting out the Government’s priorities would be published within six months. I very much hope that the Minister can respond positively to that and say that that statement is imminent.

Ofgem’s current remit pre-dates the 2050 net-zero target set by Parliament in 2019. Amendment 133 gives Ofgem a specific statutory net-zero objective linked to our climate change targets, in so doing mirroring the remit that the Government are giving the future systems operator. In Committee, the Minister said of similar amendments updating Ofgem’s remit that the Government “agreed with their intent” but did not consider them necessary because of the existing decarbonisation objective, referring to the 2010 change to Ofgem’s remit, which included a non-specific greenhouse gas reduction objective.

However, this existing duty is limited and related to the reduction of electricity and gas supply emissions of targeted greenhouse gases only—in other words, to reduce greenhouse gas emissions by an unspecified amount over an unspecified timescale. It does not link to our net-zero targets and as a result is less specific and ambitious than what the Government are legislating for the future systems operator.

The change advocated in Amendment 133 has broad support, as was recognised by the Government in their consultation on the future systems operator. The Government themselves noted that

“there were several strong calls for Ofgem’s remit to be reformed to focus on enabling net zero”.

The change was recommended in a report by your Lordships’ Industry and Regulators Committee, chaired by the noble Lord, Lord Hollick, and was also recommended this year by the Skidmore review and the Climate Change Committee. The latter argued that:

“Giving Ofgem a net zero responsibility”


will help it to

“think … strategically about the changes that lie ahead so that we can minimise the cost to the consumer in the long run.”

Just yesterday, the National Infrastructure Commission, in a fairly coruscating report on the Government’s progress towards reaching net zero, recommended the change in its Infrastructure Progress Review.

Support does not end there. The new duty is strongly endorsed by the main industry trade bodies: Energy UK, whose 100 members deliver nearly 80% of the UK’s power generation and over 95% of the energy supply; RenewableUK, which represents 1,000 businesses employing 250,000 people in the UK; and the Energy Networks Association, whose members include every major electricity and gas network operator in the UK and which employs 40,000 people in Great Britain.

This is not just a matter of semantics. The reason all these organisations and bodies support this change is that they believe it essential for increasing the pace and scale of investment in the UK’s electricity grid, which we were hearing about earlier, in order to deliver net zero and ensure that long-term planning happens at the pace needed. As the noble Lord, Lord Hollick, who cannot be with us today, said when we were debating a similar amendment in Committee:

“Many of our witnesses”


at the Select Committee

“told us that the net zero target should be included explicitly within Ofgem’s strategic duties … If there is no explicit reference to net zero, there is a danger that the decisions will be very short-term in nature, focusing on short-term costs for consumers and not the long-term costs of failing to achieve net zero and invest in the infrastructure necessary to achieve that.”—[Official Report, 16/1/23; col. GC 418.]

The trade bodies that represent the industry have been clear that they consider the lack of a clear duty that specifically refers to our net-zero targets as a reason why there has been historic underinvestment in the grid. Ofgem is not currently empowered to consider the benefit of long-term investments with sufficient weight, meaning that new renewable infrastructure is having to wait years to connect to the grid in some cases. This is not a case of it saving the consumer money, as it will cost more in the long term if we continually, but only slowly and incrementally, improve localised energy grid infrastructure. To put it colloquially, it will mean repeatedly digging up the road many times over, rather than digging it up once and for ever.

As RenewableUK has commented to us, at present

“grid development only takes place when there is overwhelming demand for it”,

rather than in future anticipation. That would make sense in a situation where there were uncertainties, but we are certain that we are going to have vastly increased demand for electricity in the near future and that the grid will be decarbonised. We know that every street in every town is going to need to be able to install EV charging points, and we hope that new developments will need to install solar panels and heat pumps, which will all need to connect to the grid. This is something we all know we need to do, but as things stand, by the time there is what is seen as overwhelming demand for grid expansion, it is very hard for grid development to catch up.

Responding to this amendment in Committee, the Minster also said that Ofgem would be keen to avoid any confusion over the need to balance decarbonisation, affordability and security of supply. I agree: Ofgem has repeatedly made it clear that it would welcome such clarification. My amendment does not alter those other aspects of Ofgem’s remit or weaken them in any way. It is for the Government to clarify to Ofgem how those various trade-offs can be balanced.

As I said, Amendment 132 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, would ensure that the long-awaited strategy and policy statement setting out the Government’s priorities is published within six months—something that is overdue and badly needed. But as all the committees and trade bodies I have cited make clear, doing this does not detract from the need for legislative change to reflect our 2050 targets.

We should not miss the opportunity given by the Bill to update the consumer interests that must be protected when Ofgem carries out its functions to include our statutory responsibilities to achieve net zero by 2050. I end by reminding the House of the contribution from the noble Lord, Lord Hollick, in Committee. He said that it would be ironic if the regulator most responsible for regulating the journey to net zero is one of the only regulators which does not have a specific responsibility in its remit. I hope we can persuade the Minister to agree.

[Baroness Altmann (Con)]

My Lords, I declare my interest as a member of Peers for the Planet. I am speaking specifically to Amendment 133—so excellently spoken to by the noble Baroness, Lady Hayman—to which I have added my name. I also support the other amendments in this group.

As the noble Baroness, Lady Hayman, has made clear, the future systems operator, which will regulate under the terms of the Bill in future, will have a statutory net-zero objective linked specifically to our climate change targets. Currently, Ofgem does not have that, and this amendment simply seeks to bring it into line. The consequences of an ill-defined and time-limited free objective to reduce greenhouse gas emissions is that Ofgem is not giving sufficient weight to net zero and focusing instead on near-term energy costs, which do not properly recognise the cost impacts for future consumers of delaying specific action to achieve net zero.

The network companies are therefore currently incentivised not to plan ahead. Instead, they are encouraged to defer investment to the last possible moment, and not to anticipate the increases in long-term demand that we are all aware are coming. This has discouraged future-proofing of our energy infrastructure and left us with an ageing network infrastructure that is not really fit for purpose now, let alone for 2050, with constraints and delayed reinforcements being a barrier to connections for housing developments and to the connection of low-carbon power, transport and heating. The reality is that we will need much more grid infrastructure due to the decarbonisation of heat—which is commendably legislated for in the Bill—and of transport through the increased take-up of electric vehicles.

The Financial Times reported last year that renewable energy developers are being told that they will have to wait six to 10 years to connect to regional distribution networks. RenewableUK has highlighted that, in Scotland, a significant number of offshore wind farms that were granted leases last year by the Crown Estate Scotland will not be able to get a grid connection until the mid-2030s. Clearly, there is not a sufficient sense of urgency. Indeed, part of this is likely to be due to the non-specificity of the timescale for achieving net zero that Ofgem currently has.

There is a specific example of a 3-gigawatt east coast offshore wind farm being developed by RWE. This will be instrumental in meeting the Government’s 2030 net-zero target, but it has a grid connection date of 2032.

--- Later in debate ---

Ultimately, we agree with the intent of the amendments and will continue to consider the matter during the Bill’s passage in the other place. However, I encourage Peers to reconsider them at this point and note that, for the strategy and policy statement to be designated, it must of course come before Parliament and be approved by a resolution of each House, so Members will get the opportunity to have their say on such a strategy in the future.

[Baroness Hayman (CB)]

Before the noble Lord sits down, I would be very grateful if he can tell me why he thinks so many other people disagree with him on this—so many people who are regulated by the regulator, and so many reports, from your Lordships’ House, the Skidmore report, and from the CCC. Why does the rest of the world not get it?

[Lord Callanan (Con)]

I think it is very easy for other people who are not directly engaged in the business of regulation to think that adding a statutory duty will be the magical cause of all the different elements of the energy system that they want to contribute to. But, of course, what we should also remember is that placing a duty in primary legislation also makes it justiciable.

I am sure there are plenty of lawyers in this House, and lots of litigation is already flying around on net-zero duties—the Government, indeed, need to respond to further litigation by the end of the week. If the House wants to give yet more work to their learned friends—of course, all the costs of that are ultimately borne by consumers—then the House is free to do that. We continue to keep the matter under review, but we are very clear, as is Ofgem, that Ofgem feels as though it already has this responsibility. I hope that Peers will think again.

Cleaner Energy Technologies

Baroness Hayman Excerpts

Tuesday 14th March 2023 Lords Chamber

[Lord Callanan (Con)]

I certainly agree with my noble friend that we need to expand both the potential and the deployment of nuclear reactors, and we are doing just that. We recently passed the Nuclear Energy (Financing) Bill, for which I am grateful for the House’s support. We have invested several hundred million pounds in the new Sizewell plant and are supporting Rolls-Royce to develop the next generation of small modular reactors.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register. I think the Minister would be disappointed if I did not raise with him one established clean technology: onshore wind. Can he tell the House what progress we are making with the consultations about lifting the effective ban on new onshore wind developments? Yesterday, the noble Lord, Lord Naseby, referred to the parliamentary pension fund and its investments and report. As a pensioner, I read its report and was delighted to see a photograph of a wind turbine in which the pension fund had invested. My disappointment was that it was in Sweden, not the UK. When can we get some investment and some jobs in onshore wind in this country?

[Lord Callanan (Con)]

I would indeed be disappointed if the noble Baroness did not raise the subject of onshore wind. She partly answered her own question in that she knows that we are consulting on revising the planning policy framework. I think she is doing us a bit of a disservice. Sweden has a different topography and interests from those of this country. Where we have a world-leading operation is, of course, in offshore wind, where we have the biggest offshore wind farm in the world—and the second, third and fourth. We are truly world leading.

Green Investment

Baroness Hayman Excerpts

Tuesday 7th March 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Baroness would not expect me to go into detail but we will set out our plans shortly. However, it is important to recognise that the UK has made excellent progress in attracting private investment into low-carbon sectors. PwC’s 2023 annual global CEO survey found that the UK is now in the top three in the global investment market, second only to the US and China. Bloomberg New Energy Finance estimated that, in 2021 and 2022, the UK saw £48 billion of net-zero investment coming into the UK.

[Baroness Hayman (CB)]

My Lords, while I recognise the concerns about the anti-competitiveness issues with the Inflation Reduction Act, I wonder whether the Minister has looked at the specific provisions in it in relation to onshore wind. There is support for investment and production, whereas in this country we make the infrastructure of onshore wind subject to far more difficult provisions than any other sort of infrastructure and we have kept it out of investment incentives. When are we going to change those policies?

[Lord Callanan (Con)]

The noble Baroness is dogged in her support for onshore wind and makes an important point. She will know that it is now eligible for CfDs and we are looking at how we can ensure more onshore wind investment with the support of local communities.