Energy Bill [HL]

Baroness Maddock Excerpts

Monday 7th September 2015 Lords Chamber

Lastly, I want to echo the comment about the people who will naturally be at the heart of this process. All of us are creatures of our experience and knowledge and all of us find ourselves more at home with the things with which we are at home. In this particular area it is easy to have reached the sort of level that would mean that we would be suitable for work in this new authority without perhaps spending a great deal of time on carbon capture and storage. So there is a serious reason why we should add to the Bill in this way and I hope that my noble friend, if not necessarily agreeing to any of these amendments—and, like others, I say that it is a collection that might well have been brought together more effectively—will say, to benefit the Committee, that he will bring forward amendments to at least ensure that the transportation and storage of greenhouse gases becomes a serious part of the activities that we are discussing today.

[Baroness Maddock (LD)]

My Lords, we on these Benches very much share the concerns voiced in all parts of the House today about this Bill. It may have two main parts—on the oil and gas industry, and onshore wind—but I agree with the noble Lord, Lord Oxburgh, that we have been asked to deal with it in a very unsatisfactory way. We had Second Reading on the last day of Parliament before the summer recess, and here we are in Committee today. I find that quite difficult.

In addition, amendments were tabled in the middle of last week and we still do not have some of the information we need to look at the Bill properly in Committee—and it is not just me saying this. Other people may have big offices to help them, but the beauty of this House is that we have lots of Back-Benchers with expertise who would like to take part in debates such as this; if we treat Bills in this way, it is very difficult for them to take part. I feel particularly strongly about energy Bills. Some of us have dealt with several energy Bills in this House, and we often find that very few people take part. That is partly because such Bills are often technical and, if Back-Benchers are going to take part, they need time to look at what the amendments mean and to get advice on them. I hope the House authorities will look seriously at this issue. I can understand some of the reasons why this has happened, but the situation is very unsatisfactory.

As I said, we agree with many of the things that have been said today. In setting up the Oil and Gas Authority, the Government are proposing, as we heard at Second Reading, to give some of their powers to this body. The Oil and Gas Authority will have ownership of carbon dioxide storage licensing but the responsibility for policy and strategy is going to remain, as I understand it, with DECC. The problems associated with this were highlighted by the noble Lord, Lord Deben. I understand from briefings I have received that DECC and the Oil and Gas Authority have been rather reluctant to consider applying the authority’s expertise to support future strategy development. I hope the Minister will tell us a little more about that. As the noble Lord said, the main reason seems to be that it is beyond the authority’s licensing remit. The problem is that if people do not think that something is within their remit, they do not think outside the box and they will not do anything else. The authority said that it was not very keen on that happening; it thinks that it is outside the scope of its remit and it is not willing to fund it. I hope the Minister will reassure us on this issue and that, as we scrutinise the Bill not just in Committee but on Report, we can deal with some of these matters. I have also received a rather interesting letter from Professor Stuart Haszeldine of the University of Edinburgh on how we might go forward, and perhaps there will be a chance to discuss that at a future date.

It seems to me and my colleagues on these Benches that there is a danger—I am not the only person to say this today—that the Bill might create institutional barriers to the development of carbon capture and storage. Other noble Lords have said today that that does not help us with the purpose of the Oil and Gas Authority, which is to make sure that we make the best of what is in the North Sea. I am sure that the Minister will try to respond to that.

Many of the amendments before us today cover these issues—as everybody has said, we have a whole series of amendments on the same area—and had we not been so rushed into considering the Bill, we might have been able to address them more logically. However, I hope that the Minister will sense the feeling of the Committee and be able to respond positively. I hope he will assure us that he and the department are considering these matters, so that we can put such concerns to rest and come forward with something a bit more sensible on Report.

[Lord Bourne of Aberystwyth]

My Lords, perhaps I may first pick up on a point made by the noble Baroness, Lady Worthington on the impact assessment. It is only by splitting the impact assessment between the parts of the Bill dealing with oil and gas, and those dealing with wind, that we are able to publish tomorrow the impact assessment relating to the Oil and Gas Authority. I will update the Committee on Wednesday on where we are on the wind issue and on the dialogue about grace periods.

I thank noble Lords for the amendments and for the non-partisan way in which points have been made. I do not think there is a material difference—certainly not from the speeches I have heard today—between the Government’s position on the importance of CCS and points made by noble Lords today. The best way forward might be if I go through where we stand at the moment in relation to the various amendments, and where we might be by Report.

My noble friends Lord Deben and Lord Howell, the noble Lord, Lord Oxburgh, the noble Baronesses, Lady Worthington and Lady Liddell, and various others spoke about the non-partisan nature of getting it right on energy for this country and for the planet—that is a very useful way forward and we certainly have a shared interest in it.

Let me address the pot pourri of amendments in this group. On Amendment 1, I acknowledge that it is important that regulatory measures be kept under review and for Parliament to be informed of the outcome of such activities. I also acknowledge the point made about the rapid nature of change in this area and in many other areas.

The noble Baroness’s amendment would require a review to be undertaken within one year—rather than the six months that she mentioned; perhaps I misunderstood her—of the coming into force of Clause 2. Neither I nor the department think that such a period is sufficient to enable an effective review of the Oil and Gas Authority’s activities, it being a new body in a new area. For this reason, I am not able to accept the amendment. However, the noble Baroness and others have raised interesting and valid points about a review which my officials are already considering, and we will return to this topic on Report. I hope that that addresses the immediate concerns. It is clear that we need to see how the legislation is working, how effective it is and whether there may be a need for a touch on the tiller or more. I accept that there is some need to look at how the legislation is working.

I thank those noble Lords who spoke to Amendments 3 and 23, which are significant and would extend the maximising economic recovery principal objective and, in the case of Amendment 3, the subsequent strategy to include transportation and storage of carbon dioxide. I accept that CCS is central to what we are seeking to do on decarbonisation, but I reassure noble Lords that things are happening—it is not as though we are not doing anything on this issue. The Office of Carbon Capture and Storage is already committed to comprehensive programmes on CCS, perhaps the most comprehensive anywhere in the world, to support the commercialisation of the technology and develop the industry.

My noble friend Lord Howell mentioned Norway, which is indeed important. However, Canada—where it is working on a commercial basis—is especially important in this context. Officials from DECC are going out to look at this on a fairly regular and sustained basis.

It is not as though no work is happening on carbon capture and storage. We are committed to a competition with up to £1 billion capital—that is current, and we will make an announcement on it early in 2016—plus operational support for large carbon capture and storage projects and a £125 million research and development and innovation programme. That is already happening.

I accept that we need to ensure that this dovetails with the work done by the Oil and Gas Authority. From my study of it, the Wood review—I accept that things move very quickly—said only two things about CCS, which perhaps illustrates how quickly it is moving, and both those are being picked up. The review suggested that the Oil and Gas Authority should work with industry to develop a technology strategy that will underpin the UK strategy of maximising economic return, and should include enhanced oil recovery and carbon capture and storage. A draft is already being prepared on that, and it is going to happen. Page 49 of the Wood review goes on to say that the Office of Carbon Capture and Storage should continue to work closely with the Oil and Gas Authority and oil and gas licensees,

“to examine the business case for the use of depleted reservoirs for carbon storage and possibly EOR”—

or enhanced oil recovery. That, too, will be happening. I am sure that that provides some reassurance to the noble Lords who raised this issue.

If I may, I will come back to the purpose of the Bill, which seeks to incorporate all the key proposals of the Wood review into legislation. The Wood review has therefore to some extent tested and explored the new regime envisaged for the oil and gas industry, and the justifications for such changes are set out in the document. There has been no such exploration of how such an extension would affect carbon capture and storage, so I believe that more time is needed to consider fully how the OGA can take forward its role—it does have a role—in supporting carbon capture and storage.

--- Later in debate ---

[Baroness Worthington]

My Lords, I thank the noble Baroness for introducing her amendment. I shall speak to amendments also in this group: Amendments 5, 6, 8, 20 and 21 in my name and Amendments 4, 10 and 11 in the names of my noble friends Lord Whitty and Lord Grantchester. This could be described as another pot pourri of amendments. I echo the noble Lords who mentioned that, had we had a bit more time and not been caught trying to table all our amendments in the last week of the Recess, we might have come forward with a slightly different grid with different groupings. However, we are where we are. What all these amendments have in common is that they relate to Clauses 4 and 9, which set out the core functions of the OGA and—Clause 9 in particular—the matters to which the OGA should have regard.

I do not intend to go over again the importance of CCS and the need to facilitate development of storage and transportation, as we have obviously rehearsed those arguments. However, if we do not change the primary objective, as set out in the Petroleum Act and amended by the Infrastructure Act, we will probably have to amend the Bill in numerous other places to ensure that CCS is properly taken into account. Clauses 4 and 9 are two places where we would expect something in the Bill to reassure us that this will be taken with due seriousness, and that the OGA will have the right legal backing needed to do its job properly.

Amendment 4, which is in my noble friend Lord Whitty’s name, refers to the need for decarbonisation strategies. Having spoken to him, I know that the purpose of probing on this is that it is absolutely clear that, as we face climate change and start to absorb the implications of what we need to do, there is a great need for a holistic view of our pursuit and extraction of hydrocarbons. We are either going to change drastically our demand for hydrocarbons by moving into other sources of energy, or we will be capturing and storing the waste gases and putting them somewhere where they are not released into the atmosphere. I think both have quite profound implications and it is right that the OGA must have regard to the meeting of climate change targets and carbon budgets, and to the need for decarbonisation of energy. This is meant to be a Bill for the 21st century, not for the last century. Therefore, if we are to list specific areas to which the OGA must have regard, it would seem odd if climate change mitigation and decarbonisation were not specifically mentioned.

Amendment 5, which is in my name, is, as I said, an alternate way of ensuring that geological carbon storage is included within the matters to which the OGA has regard. Amendment 6 is similar to Amendment 4 in that it asks for consideration of the Climate Change Act and the targets within it.

We then turn to Amendment 10, which is in the name of my noble friend Lord Whitty and refers to energy efficiency. I think I am right to say that my noble friend would have preferred to write a wider amendment about energy efficiency in general, because that is a long-held area of great interest to him. There is certainly a need for any energy Bill to consider the role of demand reduction and energy efficiency but, as the scope of this Bill is relatively narrow as it stands, this amendment relates to increasing energy efficiency within the areas of extraction of oil and gas, as related to the OGA. Amendment 11 relates to carbon capture and storage policy again.

The last two amendments in this group, Amendments 20 and 21, relate to Clause 9. They seek to make sure that the interpretations in the Bill are sufficiently clear that when we talk about licensees and operators, and data sharing and meetings—all the various powers being given to the OGA—we know it is explicit that those powers include those activities that relate to CCS. As I say, this could be made a whole lot simpler if we were to change the primary objectives but it seems that there are many ways of skinning this particular cat, and many of them are presented here today. That is the purpose of tabling these amendments and I look forward to the Minister’s responses to these matters relating to Clauses 4 and 9.

[Baroness Maddock]

My Lords, I support the comments of the noble Baroness, Lady Worthington, on the amendments tabled by the noble Lord, Lord Whitty, particularly regarding climate change, carbon-reduction targets and energy efficiency. I compliment the noble Lord, Lord Whitty, on trying to get energy efficiency into the Bill because it is something that he, I and others on all energy Bills have tried to make the Government look seriously at always including. If we are concerned about reducing demand, which is another area we had to pursue energetically in the previous Energy Bill, we need to look at this if we are to meet a lot of the targets we have signed up to, not only in Europe but internationally. I support the thrust behind this and I admire the noble Lord, Lord Whitty, for getting energy efficiency into the Bill.

[Baroness Young of Old Scone (Lab)]

My Lords, I also support Amendments 4 and 6 in respect of the matters to which the OGA must have regard, particularly climate change. The Climate Change Act set a statutory target to reduce greenhouse gas emissions by at least 80% from 1990 levels by 2050. In the shorter term, the Committee on Climate Change, under the noble Lord, Lord Deben, has recommended that the UK should have a virtually carbon-free electricity sector by 2030. We are clear that many of these targets will not be met under current scenarios, and this is an area in which it will be pretty strenuous to try to achieve them. Every tool in the toolbox will need to be used.

However, we are at a point where the Government seem to be removing some of the tools from the toolbox. We see in the Bill proposed changes to planning for onshore wind, changes to planning for low-carbon homes, the feed-in tariff support and the renewables obligation, and changes to proposals on tax incentives for low-emission vehicles. There is a concern, certainly in my mind, that if we remove too many tools it will become an even more strenuous and difficult task. That is why management of the oil and gas industry in the future is absolutely vital. It is important that the matters to which the OGA must have regard take account of UK and international obligations for greenhouse gas reduction, decarbonisation of energy and the carbon budgets set by the noble Lord, Lord Deben.

The Minister may say that the OGA already has a prime objective of maximising economic recovery, although I have not heard it put quite that way before. Indeed, one of the matters to which the OGA must have regard is minimising future public expenditure. It would be a bit of a stretch to say that that was a nod towards climate change. So, I ask the Minister to consider whether an explicit reference to having regard to climate change should be added to this list. If we do not make sure that all bodies involved in the energy business also have climate change at their heart, we will see huge effects on public expenditure from the impact of climate change in the future.

Energy Bill [HL]

Baroness Maddock Excerpts

Monday 7th September 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I shall speak to the amendments in this group and I thank noble Lords who have participated in the debate for speaking to their amendments. Amendments 12 to 15 relate to Clause 5 of Part 1 of the Bill, which concerns directions the Secretary of State may give to the Oil and Gas Authority. As the noble Baroness, Lady Worthington, said at the outset of our consideration in Committee, most of what we are looking at in the non-government amendments relates to carbon capture and storage. That is certainly a point well made. As I have indicated, we have undertaken that we will look at the issues relating to carbon capture and storage prior to Report.

As has been said, Clause 5 gives the Secretary of State power to direct the Oil and Gas Authority in the exercise of its functions if the Secretary of State considers the directions in the interest of national security or otherwise in the public interest. The noble Baroness, Lady Worthington, asked for examples of that and I will try to provide a couple. First, if a licence is applied for by a person who is suspected of corruption and whose possession of a licence the Secretary of State thinks would lead to reputational embarrassment or political damage to the United Kingdom, the intention is that the Secretary of State should be able to direct the Oil and Gas Authority not to issue a licence to such a person.

Secondly, another instance may be if there are other competing uses for a particular area of the seabed in respect of which the Oil and Gas Authority may grant licences. The intention then is that the Secretary of State should be able to give a direction to the Oil and Gas Authority as to over which areas it should or should not exercise its licensing powers so as not to prejudice those other uses.

Finally, another example may be that the Secretary of State should be able to direct the Oil and Gas Authority not to grant further consents for development in the face of public concern about the scientific evidence in relation to the methods used or a change in government policy. Clearly, that is not an exclusive list but those are some situations that may be covered by it.

The amendment makes it clear that the power in Clause 5 can extend to the Oil and Gas Authority’s functions in relation to the carbon capture and storage sector. We believe that it is unnecessary to do this because the Secretary of State’s power to give directions to the Oil and Gas Authority as to the exercise of its functions already applies to the carbon capture and storage sector in so far as it is in the ambit of the Bill.

[Baroness Maddock (LD)]

I thank the Minister for allowing me to ask a question on this issue. At Second Reading I asked how much the Government had looked at the way Norway had organised its oil and gas industry. When Norway looked at these areas, I wondered how far it looked at carbon capture and storage and whether we have learnt anything from that in relation to what we are discussing at the moment.

[Lord Bourne of Aberystwyth]

I have no direct knowledge about lessons we have learnt from Norway, but I can certainly reassure the noble Baroness that we look closely at the Norwegian experience and the Canadian experience of carbon capture and storage. If I may, I will drop her a line on that and copy it to other Peers who have participated in today’s debate.

We believe this amendment is unnecessary as the Secretary of State’s power to give directions to the Oil and Gas Authority in the exercise of its functions already applies to the carbon capture and storage sector, as I have said. On that basis, we do not see the need for this amendment. Similarly, Amendment 15 makes it clear that the Secretary of State’s directions to the Oil and Gas Authority may include requirements on the development of storage facilities for gas and oil, or storage of carbon dioxide, as part of a carbon capture and storage scheme. Once again, the Secretary of State’s functions of licensing the storage and unloading of gas and the storage of carbon dioxide are being transferred to the Oil and Gas Authority by the Bill. As such, the Secretary of State’s power to give directions to the Oil and Gas Authority in the exercise of its functions already applies to these sectors. Were additional functions to be added to the Bill, they, too, would be covered by this provision and an amendment would not be necessary.

Turning to Amendments 13 and 14, the Oil and Gas Authority will be established formally so that it is an effective, robust and independent regulator. As part of this, it will deliver on the strategy to maximise the economic recovery of petroleum from the United Kingdom continental shelfs. The Oil and Gas Authority is purposely not an environmental regulator and environmental regulation will continue to sit within the Department of Energy and Climate Change, which has the expertise and experience in this field. There are synergies between the two forms of regulation and the existing strong relationship between the Oil and Gas Authority and the department will continue. The department will continue with its vital mission of seeking secure and diverse energy supplies, including renewables, nuclear and indigenous resources. The United Kingdom has adopted ambitious climate change targets, committing us to an 80% reduction in emissions from 1990 levels by 2050. Emissions are already down by 29% on those levels.

As I indicated on a previous amendment that was brought forward on environmental concerns, these amendments also raise issues of compliance with the offshore safety directive, which is legally enforceable against us. This requires a separation of oil and gas licensing from environmental functions. So it may not be legally possible to do this either.

Energy Bill [HL]

Baroness Maddock Excerpts

Wednesday 22nd July 2015 Lords Chamber

[Baroness Maddock (LD)]

My Lords, before I begin, I declare one or two interests. I am a vice-president of the Local Government Association, president of the Sustainable Energy Association and vice-president of National Energy Action, which is a fuel poverty charity. If we are serious about tackling climate change we need not only to reduce the amount of carbon we produce but to make sure we find sustainable solutions for our energy needs. In scrutinising the Energy Bill, the Liberal Democrat Benches will be looking to see how it stands up to those criteria.

As has already been made clear, the Bill falls into two parts. We want to maximise the potential of our North Sea oil and gas reserves but we are also planning to change the way we subsidise and plan onshore wind power. The first is by far the greatest part of the Bill. It implements, as we have heard, the recommendations of the Wood review into maximising the economic recovery of oil and gas from the North Sea, which was set up during the previous coalition Government under the leadership of the right honourable Ed Davey, who was Secretary of State at the Department of Energy and Climate Change.

As we have heard, it establishes the Oil and Gas Authority, which will be an independent regulator, but it also transfers functions from the Secretary of State for Energy and Climate Change. It would seem in many ways to be the least controversial part of the Bill. It looks forward and sets out a long-term framework, and I understand that it draws quite closely on what Norway has done to maximise its gas reserves in the North Sea. Last year, I was part of a parliamentary delegation to Norway, and we had a series of meetings and presentations in Stavanger about how Norway has made the most of its oil and gas resources in the past and its plans for the future.

As we have already heard from the Minister, the North Sea is very important to us. It provides 56% of our oil product and just over half of our gas demand. There is every reason to believe that there is the potential to supply a significant proportion of our needs to 2020. Indeed, we know that these resources are needed as we transition to a low-carbon future. We also know that large numbers of jobs are involved—the noble Lord, Lord Grantchester, said more than 400,000, although my figure is a bit less than that. Particularly where I come from in the north-east of England, this is a very important contribution to our economy.

Those involved with North Sea oil and gas extraction support the recommendations of the Wood review, but consultations on the levy that will fund the oil and gas body are still ongoing. I understand that the levy structure and amounts will be introduced through secondary legislation, under powers contained in the Infrastructure Act 2015, and that the Government are still analysing the feedback from the consultation. Will the Minister be able to give us this information before the Committee stage of the Bill in September?

There are numerous points in the Bill where the Secretary of State is given powers to make regulations. When will we get details of these? We are in recess between now and Committee, and the ability for scrutiny of secondary legislation is somewhat limited. However, I have no doubt that this House will, as usual, give thorough scrutiny to this part of the Bill in due course.

The second area covered by the Bill is onshore wind, and this is somewhat more controversial. Clause 59 changes the planning regime for onshore wind turbines and Clause 60 changes the closure date of the renewables obligation for this sector. The Department of Energy and Climate Change briefing for the Bill claims that onshore wind has deployed successfully to date, and that we have enough onshore wind in the pipeline to meet our 2020 aim of generating 30% of electricity from renewable resources. Have the Government at any time indicated that this was the point at which they would consider changing their commitment to subsidy for onshore wind? Is the Minister aware that RenewableUK, which represents the wind and marine energy sectors, does not agree with DECC’s analysis of the situation, saying:

“The share of renewable electricity will need to increase if we are to meet out 2020 renewables target. Ruling out … further contribution from onshore will increase our dependence on more expensive technologies and, hence, the cost of meeting the 2020 renewables target and longer-term low carbon reduction objectives”.

The Minister must be aware—the noble Lord, Lord Grantchester, talked about this—that this change of direction sends a terrible message to those prepared to develop all forms of renewables and, equally and very importantly, puts off those who are prepared to provide finance for projects. Again, I quote from RenewableUK, which says:

“Early RO closure threatens investor confidence in the stability of UK energy policy and increases the risk premium attached to energy infrastructure investments—projects which make up the largest part of the national infrastructure pipeline identified by the Treasury. Confidence has been further undermined by the retroactive cut to LECS”—

and, indeed, by the announcements that I woke up to on Radio 4 this morning.

Many of the UK’s independent renewable-power developers and generators have collectively invested millions of pounds in onshore wind generation. They point to the commitment given by the noble Baroness, Lady Verma, at the beginning of this year and pointed out by the noble Lord, Lord Grantchester. It is clear that removing the support mechanism for onshore wind has the potential to destroy investor confidence in the wider energy market, putting investment in all energy infrastructure at risk. Wind, as has already been noted, is the lowest-cost source of low-carbon power we have. Without onshore wind, British bill-payers will have to pay hundreds of millions of pounds more every year as more expensive alternative technologies are substituted for it. Uncertainty around the arrangements for grace periods needs to be removed at the earliest opportunity if we are not to lose valuable projects that are already in the pipeline. What information can the Minister give us on these matters today?

Turning to the changes in the planning regime for onshore wind, it is not clear to me exactly how this will work. We on these Benches have always believed in devolution but believing in devolution when you come late to it means that sometimes you do not always carry it out in a way that works and is democratic. I am still not clear how the changes will work. We heard from the noble Lord, Lord Grantchester, about his concerns about this. I hope that our deliberations in Committee will give more clarity, especially as it seems that so much of the detail will be in secondary legislation.

Finally, I should like to dwell for a moment on two areas that have not been considered: energy efficiency and fuel poverty. Can the Minister explain a little more clearly how the measures in this Bill support the Department of Energy and Climate Change’s work,

“to power the economy with clean, secure, affordable energy supplies while keeping bills as low as possible for hard-working people and businesses”?

We know that meeting the UK’s energy needs through increased domestic energy efficiency can reduce the UK’s dependence on imported fossil fuels, so it does increase our energy security. It is also a part of tackling fuel poverty at the same time as supporting many other national priorities, including carbon reduction, reduced pressure on general practices and emergency services, economic development and regeneration, to name but a few. Currently, not £1 of the UK’s public infrastructure budget has been spent on initiatives to make homes warmer and healthier and to, in turn, encourage economic growth. This is in spite of Her Majesty’s Treasury receiving a significant windfall from domestic energy consumers, some of whom are in fuel poverty.

In the first few months of this new Government, we have found it very disappointing to see us moving a little backwards in our efforts to combat climate change. It is particularly so in the light of the joint pledge made in the last Parliament. Only last February, Mr Cameron, Mr Clegg and Mr Miliband agreed a pledge to tackle climate change which they said would protect the United Kingdom’s national security and economic prosperity. The pledge committed them to seeking a fair, strong, legally binding, global climate deal which limits temperature rises to below 2 degrees centigrade and to work across party lines to agree UK carbon budgets and accelerate the transition to a competitive, energy-efficient, low-carbon economy. My colleagues on these Benches, particularly my noble friend Lord Purvis, will enlarge on some of these matters later in the debate. Meanwhile, I have indicated the thrust of how we on these Liberal Democrat Benches view the Energy Bill. I look forward to the Minister’s response to some of my questions and to our deliberations when we return from the Recess in September.