Energy Bill Relief Scheme and Energy Bills Discount Scheme (Amendment) Regulations 2024

Baroness McIntosh of Pickering Excerpts

Wednesday 12th February 2025 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, these regulations, which were laid before the House on 16 December 2024, amend two schemes created by the previous Government in response to the energy crisis.

The amendments address an issue that was not considered in the rush to get the schemes into operation but which has now come to the fore as the schemes have been brought to an end. The issue is technical: both the energy bill relief scheme and the energy bills discount scheme, which I shall refer to as EBRS and EBDS respectively, supported non-domestic energy users, including businesses and heat networks. EBRS supported energy bills from October 2022 to March 2023, while EBDS supported bills from April 2023 to March 2024. Both schemes operated on a “claim back” model, meaning that suppliers paid out the discount to their customers before recouping those costs from the department.

Scheme funds were paid out on estimated and actual meter readings. As actual meter readings are received by energy suppliers, they rebill their customers, replacing earlier estimated bills, and the discount paid out by the department becomes settled. The department calls this process “actualisation”. Suppliers then come back to government to recover additional discount they have paid out or to pay back any excess discount resulting from an initial overestimation of the energy. This is right: the intention behind the schemes has always been for government to fund the discount to the consumer and not the energy suppliers.

The regulations require the Secretary of State to determine when a supplier should leave the scheme, based on an assessment that there will be no further material amount owed from the department to a supplier or vice versa. One of the supporting criteria to make that assessment is that a supplier has billed customers on actual meter readings to a threshold of 95% of gas supplied and 97% of electricity supported under the scheme, wherever possible. Once a supplier has left the scheme, it is unable to claim back any further money from the department for discounts that it has paid out on behalf of the schemes.

However, as the regulations currently stand, suppliers are still required to pay out discounts on any newly billed energy supplied during the periods of either scheme, when this situation could arise through no fault of their own; for example, when customers have moved premises and failed to notify the supplier or have been tardy in allowing access to meter readers. This could result in suppliers funding government support without the ability to recoup these costs from the department. This is contrary to the intention of the schemes. As a result, suppliers have been reluctant to leave the schemes, which must come to an end in a timely manner.

The amendments in this statutory instrument remove the obligation on suppliers to provide the discounts to customers, except in instances where the consumer has lost out due to poor practices by their energy supplier. In these instances, we have provided carve-outs to balance the interests of suppliers with the support and protection of consumers.

The first consumer protection is, when a supplier is rebilling a customer, it must still apply the discount for energy which was previously billed before the discount duties, even if the newly calculated additional consumption is exempt. The second protection relates to unbilled customers. When a customer receives a bill that falls within the scheme period, a supplier would be required to pass on the appropriate discount if it has not previously provided that customer with a bill. This is to ensure that the original policy intent of providing consumer support is realised. The third and final consumer protection is when unreasonable delay, or another failure on the part of the energy supplier, has led to the energy not being billed accurately or at all when the discount duties applied. An example might be if the bill was sent unreasonably late after exit from the scheme, rather than before. In those circumstances, the customer should not and will not lose their entitlement to the discount.

There is still an obligation on suppliers to repay the Government any discount they have recovered; for example, if actual consumption was lower than the estimated consumption and a discount is clawed back. Should any dispute arise between suppliers and customers in relation to these carve-outs, the resolution mechanisms would be those normally used in the industry: via a complaint to the Energy Ombudsman, where available; investigation and potential sanction by the regulator; or court action.

The amendment applies to energy suppliers in Great Britain. Separately, the regulations also amend the Energy Prices Act 2022 to allow the devolved Administration in Northern Ireland to make amendments to address this issue in the Northern Ireland scheme. This is because their power to amend their equivalent legislation has expired.

In very limited circumstances, it is possible that a customer could lose out on some entitlement to discount. If a supplier had already exited the schemes and had underestimated a customer’s energy consumption, the customer would not receive the discount on the additional newly billed energy unless the supplier was at fault, as I have just described. Given that the vast majority of energy supported by the schemes is based on actual meter readings, we do not expect many customers to be in this position.

Furthermore, our analysis shows that suppliers tend to slightly overestimate and that customers reduced consumption during the energy crisis, switching off non- critical operations to reduce costs. None of the suppliers that have left the scheme to date, nor any of their customers, has reported this risk materialising. We expect and hope that this amendment will give suppliers confidence to exit the scheme without the risk of ongoing financial liability through no fault of their own.

Energy prices for non-domestic consumers have dropped following record peaks, but of course we recognise that they remain high and pose issues for some businesses. We believe that our mission to deliver clean power by 2030 is the best way to break our dependence on global fossil fuel markets and permanently protect bill payers, including non-domestic consumers. In the short term, the Government are taking action to better protect businesses from being locked into unfair and expensive energy contracts. Last year, the Government launched a consultation on introducing regulation of third-party intermediaries such as energy brokers. This is aimed at enhancing consumer protection, particularly for non-domestic consumers. The consultation has now closed, and a government response will follow in due course.

The Government are also empowering businesses to challenge unfair and poor service from their suppliers. Since December last year, SMEs with fewer than 50 employees or that meet energy consumption or financial thresholds can now access free support to resolve issues with their energy supplier through the Energy Ombudsman service. This expands the service to 99% of British businesses, allowing them to access up to £20,000 in financial awards.

I propose to the Committee that this is a very sensible statutory instrument dealing with some issues that have arisen. It follows on from the previous Government’s decision and is consistent with what they sought to do. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate the Minister on the stamina he has shown over the last 48 hours. I welcome these regulations; had we remained in Government, I am sure that we would have done exactly the same—as was also said in the debate in the House of Commons.

The Minister alluded to the fact that energy prices are still quite high. I understand that within one of these regulations there is provision for an off-grid payment of £150. If that is the case, will his department look favourably on charities, public sector bodies such as schools and hospitals and, as he rightly mentioned, micro-businesses of under 15 employees—or even 50—so that they might remain eligible for that?

The noble Lord referred to unfair, and what I would call sharp, practices that are perhaps still going on. This is only anecdotal, and I cannot prove it, but there was a restaurant not too far from this building which I think partly closed and changed hands because they had an unbelievably high electricity bill in January last year, so I am delighted to hear that the Government have launched this consultation with a third party. It would be interesting to hear more about how those brokers might operate. What provision will be made to ensure that the brokers are reliable and able to operate within this sphere?

With that, I pay tribute to the previous Government for their work and the protection that was given to non-domestic customers, which was very welcome at the time. I recognise that we are still in a period of high energy prices and, with those few questions, I wish the SI a safe passage.

[Lord Offord of Garvel (Con)]

My Lords, I commend the Minister for a pretty spectacular explanation of what is quite a complicated and technical exercise. These schemes were introduced, as was said, between October 2022 and March 2024 and, as we know, they gave much-needed assistance to non-domestic customers. We are dealing now with a small yet significant minority of consumers who have not received their finalised bills, due to ongoing delays in the actualisation process. My understanding is that these delays arise mostly from the use of estimated rather than actual meter readings, but they have created significant complexities for both suppliers and consumers, especially when one of the issues around this is the concept that the supplier can become “off-boarded” when they hit the actualisation thresholds, as mentioned by the Minister, of 95% for billed gas and 97% for billed electricity, which means they are no longer required to apply further discounts.

We agree that this is a legacy issue that needs to be dealt with. Our only issue—I am sure that the department is working on this—is the need to deal with unintended consequences, such as where a supplier is off-boarded but still has unbilled energy due to these administrative delays. The amendment allows for discounts to continue only in cases where a billing failure has occurred, but does that provide sufficient protection to the consumer if the errors are on the supplier’s part, for example?

Further issues might be that the amendment extends the rule limiting discounts on variable price contracts. Discounts can only be reduced, not increased, post off-boarding. Does that sufficiently accommodate fluctuations in wholesale energy prices that suppliers may face? Does it risk creating an imbalance in terms of supplier and consumer rights? Then there is the issue of disputes. While the original scheme allowed for disputes to be referred to the Secretary of State—a horrendous concept—the amendment seeks to close that avenue. I am sure that the department is all over this, but we need to ensure that, in the technicalities of actually making this happen, we get a fair balance between supplier and consumer rights. Otherwise, we support the passage of this SI.

Great British Energy Bill

Baroness McIntosh of Pickering Excerpts

Report stage
Tuesday 11th February 2025 Lords Chamber

I hope that noble Lords will feel that this amendment reflects a lot of the discussions and debate we have had. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I shall speak to my Amendment 40. I am rather disappointed that the Minister did not refer to the other amendments in this group.

[Lord Hunt of Kings Heath (Lab)]

With great respect, my Lords, I think the form is that I move my own amendment and then respond to other amendments in the group when I wind up.

[Baroness McIntosh of Pickering (Con)]

I am grateful for that clarification.

I welcome the government amendment in this group. However, I seek a specific assurance from the Minister as to exactly how and when the Government will ensure that the impact of GB Energy’s activities will not harm sustainable development in the United Kingdom. Why I prefer the wording of my amendment to the Minister’s, and why I regret the fact that the framework document will not be available before the passage of the Bill through Parliament, is because the Environment Act 2021 set out very clear environmental standards that have to be followed in subsequent legislation.

Amendment 40 addresses the issue of Great British Energy operating in such a way as to meet the criteria and environmental standards in the Environment Act 2021, which set out clear standards for environment and animal welfare that any project approved by GB Energy should meet. The projects we have discussed during the passage of the Bill potentially risk criss-crossing the countryside, covering the landscape with intrusive miles of pylons and overhead transmission lines, as well as massive solar farms and battery storage plants, the latter also posing a fire risk. Up to 10% of land currently farmed could be taken out of production, with a consequential effect on farming and food security to create a strand of energy which will bring no local benefits whatever but feed energy into the already well-fed National Grid.

I call on the Government to address offshore wind farms in a clear and pragmatic way, with one planning application for any future offshore wind farm taken at the same time as permission to build an onshore substation, to take the electricity generated and, at the same time, any proposal for onward transmission of the energy through overhead power lines and pylons.

Other damaging aspects of offshore wind farms at severe odds with sustainable development are their impact on fishers and fisheries. Wind farms damage marine life and sea mammals, and interfere with fishers going about their business. I am grateful to the National Federation of Fishermen’s Organisations for its briefing, which clearly highlights the threat from offshore renewables, primarily winds but also wave and tidal.

Ten per cent of UK seas will be designated as highly protected marine areas, where fishing will be banned. The worst-case scenario could result in the loss of half of the UK’s fishing waters, some 375,000 square kilometres: Scotland would lose 56% of its fishing waters and England and Wales 36% of theirs. Even if the worst-case assumptions are not realised, 38% of UK waters are likely to be lost, threatening the very existence of UK fishing businesses and causing severe harm to coastal communities.

I feel that the sentiments expressed in Amendment 40 sum up those also expressed in Amendments 47 and 48, in the name of my noble friend Lord Offord, and Amendment 51, in the name of my noble friend Lord Fuller. All I seek this evening is an assurance that farmland and residential properties will be protected from massive solar farms, battery storage plants and the like, and the impact of major substations bringing electricity onshore from these offshore wind farms. The long lines of unwelcome, intrusive overhead lines transmitting the energy to the National Grid should be removed or reduced and spatial rights for fishers should be recognised. I hope that the Minister will look kindly on the assurance that I seek.

[Baroness Hayman (CB)]

My Lords, I have added my name to the new clause proposed in Amendment 38 by the noble Lord, Lord Hunt of Kings Heath. I thank him and his officials for the amount of time and effort that they have put into finding what is a very good resolution to the issues that we raised at earlier stages in the Bill. Obviously, in some ways, I would have preferred my own amendment as it stood in Committee, which would have put into the Bill an obligation on GBE to contribute to the targets under both the Environment Act and the Climate Change Act.

After discussion, I understand why the Minister wants to put in the phrase “Sustainable development” and to have that contribution. That is indeed the model that we adopted as a House during the passage of the Crown Estate Bill. I would not be happy with this amendment, were it not for the assurances that the Minister has just given at the Dispatch Box on what will be included in the framework document, so that we will actually see reference to contribution to achieving targets under both those Acts in the framework document. We will also see a commitment to tackling the issue of adaptation there, because none of us who has observed or experienced the weather—and the results coming out from international institutions—in the last six months will have any doubt that we have challenges already baked in by climate change and biodiversity loss that have to be met, as well as the efforts to stop things getting worse. I am very grateful for those assurances.

In some ways, a commitment to sustainable development may seem more nebulous than tying down to those particular commitments, but I believe it is really important that we acknowledge that there are differing forces—differing demands and aspirations—that have to be taken into account when we make decisions on infrastructure and investment, or whatever it is. Sustainable development, as defined by the UN, is about taking the economic, environmental and social effects of developments into account when decisions are made. Lots of difficult decisions will have to be made and there are lots of balances that have to be struck, whether about pylons or achieving net zero, and whether about growth or biodiversity and nature. We have to be able to walk and chew gum at the same time, and to actually recognise that all those strands have to be taken into account.

If we are going to get through and make the right decisions, frankly, we will have to be, first, very smart, and secondly, very frank with people about how we assess the different pressures and how we have come to individual decisions in individual cases. I have been very impressed by the work of the Crown Estate, looking at its different drivers and objectives and how it brings those into force when it looks at decision-making for investment, and I hope that GBE will be able to do exactly the same. So once again I end by thanking the Minister for the work he has done in bringing this amendment forward.

--- Later in debate ---

Moved by

[Baroness McIntosh of Pickering]

40: After Clause 7, insert the following new Clause—
“Duty of Great British Energy to meet environmental criteriaGreat British Energy must, in the exercise of its functions, and when delivering the objects in section 3 and statement of strategic priorities in section 5 of this Act, take all reasonable steps to contribute to the achievement of environmental targets set under the Environment Act 2021.”

[Baroness McIntosh of Pickering (Con)]

My Lords, I beg to move, and I wish to test the opinion of the House.

Great British Energy Bill

Baroness McIntosh of Pickering Excerpts

Report stage
Tuesday 11th February 2025 Lords Chamber

[Baroness Hayman (CB)]

My Lords, I will intervene very briefly on this debate, and I declare my interest as chair of Peers for the Planet. I have just a couple of points on the issues that have been raised. First, to follow up on what the noble Lord, Lord Hamilton, said, the idea of ensuring that communities gain the benefits of infrastructure that is near to them applies not only to small modular reactors but to many other things. In particular, the House knows of my concern for onshore wind and an increase in onshore wind developments. We have to do that in a way so the community, first, understands why we are doing it, and secondly, sees some benefit from those projects, whether on an individual or community level.

The other thing—and I of course welcome the government amendment on community energy—is that I very much agree with the spirit of what the noble Lord, Lord Whitty, said. Some of us get very weary trying to inject the same issues of principle into legislation after legislation. Skills and the needs of the workforce, and the way we practically turn aspirations for green growth and green jobs into satisfying, well-paid, sustainable jobs, has to be done through the nitty-gritty of skills training, passporting and making sure that the opportunities are there for transition and for young people. It is enormously important that the Government and GBE do not lose sight of that.

In exactly the same spirit, we have banged on—if that is a parliamentary phrase—about home insulation and energy efficiency on any number of Bills. If I may say so to the noble Earl, Lord Russell, it is probably slightly inelegant to put that in the Bill as a hypothetical for what GBE might want to do, but the spirit of what he is saying, and the fact that this has been such a recurring theme, is absolutely central: it has so many benefits in saving money, saving emissions, increasing health and ensuring that we lift people out of the poverty that is occasioned by the housing in which they live. I hope that the Minister can give us some encouragement that the warm homes strategy, or whatever we are calling it this time—we have called it lots of different things over the years but have not been very successful in delivering it—will be a high priority for the Government.

[Baroness McIntosh of Pickering (Con)]

My Lords, I will speak to Amendment 22, in my name and those of the noble Baronesses, Lady Boycott and Lady Young, and the noble Lord, Lord Teverson. I congratulate the Government on bringing forward their Amendment 8. I imagine that it will find favour with the House rather than Amendment 22, but I will take the opportunity to press the Minister on a couple of aspects, just to give me reassurance that he means more than the warm words that we see expressed in his amendment.

In particular, how do the Government intend to deal with the current uncertainty over the community energy fund’s future? Is the Minister able to give us a guarantee of how that will pan out? Also, does he intend to take, or encourage GB Energy to take, early action to ensure that the fund will be matched by other funds, as I understand needs to be done, and that clear instructions on the above will indeed be set out in the strategic priorities for Great British Energy, as required by Clause 5?

I am not that familiar with community energy schemes, but I have seen how they operate in Denmark—I declare my interest, being half Danish and taking a great interest in Danish matters. I understand that they are so successful in Denmark because there is a system where local citizens, often organised in co-operatives, which again is very Danish—Arla is a co-operative in the milk industry that many here are familiar with—own a significant portion of renewable energy sources, such as wind farms and heat networks. Does the Minister agree that community ownership is part of the success of these schemes and that that is a path down which he would seek to go?

[Lord Fuller (Con)]

My Lords, I will speak briefly to my Amendment 53, which seeks to ensure that the voices of local people are heard when proposals are made or encouraged by GB Energy for renewable energy projects that impact on local areas. This is a group about community involvement and consultation, and how people might have their say. I regret to say that, in so many cases, local people have been airbrushed from the debate, which has been conducted above their heads. We build resentment, scepticism and resistance when local people are denied their say. I speak with authority when I say that the NSIP system is being systematically abused by developers of solar farms, who string together otherwise stand-alone and discrete proposals for small-scale solar and aggregate them together as a device to somehow creep over the threshold. The voices of the local planning authority, locally elected representatives, local people and business are excised from the record.

The NSIP system was designed to allow truly exceptional and impactful infrastructure projects to be considered in the national context. I completely support that principle, but I see in my own area, for example, that one proposal, extending to 1,100 hectares but covering 40 square kilometres and at least a dozen separate landowners some 15 miles apart, has been cobbled together in the crudest and most cynical manner to creep over that 100-megawatt capacity line. It undermines public confidence in our planning system and acts as a recruiting sergeant for conspiracy theorists and their superficial, fundamentalist views. We will all become tainted and tarred by their brush while we deny the public due process and a proper say on these schemes, which should be decided locally but are not.

Later, on Amendments 50 and 52, I will say that solar should not be permitted on the best and most versatile land—grades 1 to 3A. I recognise that other land could be used for large-scale renewables, but we need to exercise care and caution. Even grade 4 or grade 5 land has a value, but that is more likely to include amenity value, outstanding landscape contribution or wider social benefit, perhaps in areas of outstanding natural beauty or other designations. It is for that reason that, for all land—even in cases where land may be at the poorer end of agricultural quality—changes in use to renewables more widely should be consulted on for residents within a 20-mile buffer of the widest proposed land extent. My amendment provides for this stipulation.

It is because the NSIP system is being abused and has fallen into disrepute that I have brought this amendment to repair the damage and indignation that local people rightly feel. We are storing up some terrible problems if the political class structurally sidelines views in an unthinking dash for renewables and fails to consider those wider impacts.

Great British Energy Bill

Baroness McIntosh of Pickering Excerpts

Committee stage
Wednesday 22nd January 2025 Grand Committee

[Viscount Trenchard (Con)]

My Lords, I rise to support my noble friend Lord Offord’s Amendments 111 and 112, to which I have added my name. It has become increasingly apparent, from many points of view, that impact assessments are necessary. In particular, in exercising its functions, GBE should be required to consider the environmental impact and the effect on sea-birds and marine life of its installation of offshore wind facilities, as well as of its decommissioning of oil and gas structures.

I also support my noble friend Lord Fuller’s Amendment 113, which seeks to place the same obligation on GBE with reference to tidal energy projects. I have looked for information on both the Sound of Islay project and the Bristol Channel project, both of which I was reasonably familiar with some years ago but about which I have heard nothing in recent years. I am heartened by my noble friend’s enthusiasm for the sector and look forward to hearing whether the Minister expects that GBE will be encouraged to make investments in it. As my noble friend Lord Fuller said, this is a slim Bill with fat consequences. We have to make sure that GBE will act in the public interest.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am grateful to my noble friends Lord Offord and Lord Fuller for tabling the three amendments in this group, all of which I support. I want to address a few remarks to Amendment 111.

I had not realised that we are the second-largest renewable energy market in the world. Most of the equipment is made outside the UK; I hope this is something we will do better on in future. I do not think my noble friend referred to the position of porpoises and dolphins, which have been causing me great concern over the past few years for the same reasons that my noble friend Lord Offord gave. We took evidence on this from the RSPB and from the department of ocean systems—I think it was called that—at the University of Plymouth in 2020-21.

Two issues arose from that which I would like to put to the Minister. The first, from the RSPB, said that “substantial sums” are being made, which really should be

“reinvested back into the natural environment from which”

these sums are derived. Is that something the Government are keen to do? The reason I ask is simple: I asked for a moratorium at that time, when we were under a Conservative Administration, until we had established what the impact was on birds and other marine life, such as whales, porpoises and dolphins. Over the last five years, we have had a number of inexplicable bankings of whales in particular but also of dolphins and porpoises. It is up to the industry to fund this work, so that we better understand why this is happening. If, as my noble friend Lord Offord argued, there is interference with the sonar of marine life, that should be established before we build the next stage of these massive developments at sea.

Clean Heat Market Mechanism Regulations 2024

Baroness McIntosh of Pickering Excerpts

Monday 20th January 2025 Grand Committee

[Lord Lilley (Con)]

My Lords, here we have it: 32 pages of regulation to introduce something that some would consider a mere mouse in terms of its impact on this market. After all, it introduces a £500 fine for selling each excess gas boiler, relative to the proportion that is prescribed in the regulation. That £500 is actually quite big relative to the cost of a gas boiler, which is typically around a couple of thousand pounds, even though it is relatively small relative to the cost of a heat pump. None the less, I ask the Minister this: will that £500 fine, which then becomes a marketable instrument, be available to importers? If I have correctly understood how the system will work, someone who exports to this country heat pumps from abroad could sell the certificate that this measure will give them to a domestic producer who has not sold enough electric heat pumps for up to £500—that is a jolly nice subsidy for importers of heat pumps into this country, even if it is not massive.

It is expected that this measure will raise the number of heat pumps sold from roughly 40,500 last year, nearly 3% of the boiler market, to 77,000 pumps—6% of the expected market this year. That is not a huge increase. The Minister said that last year, without the benefit of this measure, the number of heat pumps sold increased substantially. So it will not be a huge increase in the coming year. Why do we think this measure is necessary if these things are proving so attractive and the market is growing anyway? Can the Minister confirm that the 6% target is what is introduced, and that it will continue and persist unless and until he introduces, via further legislation—I also ask him to confirm that this will require further legislation—a higher target?

Failing the introduction of a higher target, any future growth in the market will depend on hopes on the cost of heat pumps coming down as manufacturers find more efficient ways of making them. When I was still in the House of Commons I had a meeting with Octopus Energy, which reckoned that the materials involved in making a heat pump cost about £2,000. Obviously, a huge amount of processing goes into making a heat pump, but it suggested that the potential for bringing down the cost over time was significant. One hopes that will happen. Failing that, the only other thing—we are stuck with the 6% target and this £500 fine—will be the lure of subsidies for consumers to buy heat pumps instead of fossil fuel boilers.

The costs and benefits of the whole procedure are spelled out in the impact assessment. It says the net present value of the costs involved is £195 million. The benefits were put at £220 million, of which those that result from the main purpose of the operation, to reduce carbon, were less than the costs. The total benefit is above the costs only if you allow for the impact it will have on cleaner air. As well as reducing the amount of CO₂, which is a very clean thing that we breathe all the time, the reduction in the other impurities put in the air by fossil fuels just about brings it to a net benefit. We are talking about the costs and benefits being roughly the same order of magnitude. Once again, an almost religious fanaticism, which does not take the costs and benefits into account, is driving this policy.

I will make a few observations about the situation in France, because I have a house in France and I observe what is happening there. Two of my French neighbours have installed heat pumps. One in a comparatively small cottage cost over €20,000—not for the pump but for the insulation—all paid by the French taxpayer. Bully for him. Another friend has a rather more substantial old house. It cost the French taxpayer €100,000 to install the heat pump and the necessary insulation. In his case, it would not work for a year because the installers were so busy—because it is free to users—that they would not come back and tell him how to make it work. It took him a long time to find anyone who would. I noticed, when I went round to enjoy his hospitality over the new year, that he had wood fires burning as well.

I sincerely hope that we do not go down the path of subsidising something at the huge costs that the French taxpayer is having to absorb, when the costs and benefits of the whole process, even without subsidies, are so marginal. We do not want to put ourselves as near bankruptcy as the French state is.

[Baroness McIntosh of Pickering (Con)]

I am grateful to the Minister for setting out the contents of the regulations before us. I am afraid that I share some of the scepticism of my noble friend Lord Lilley. I am grateful to the noble Lord, Lord Hunt, for referring to the warm homes scheme. He is aware of my disappointment that the discount is not going to be revisited, and I say that as honorary president of National Energy Action.

My understanding is that the heat pumps that are the subject of this measure simply are not as efficient as oil-fired central heating. I say that as where I live in the north of England, it is all oil-fired central heating; we are off grid and we cannot use gas. I walked past a surgery in the north of England that did not have just one heat pump; it had fitted three heat pumps, which probably means that one heat pump was not sufficient to generate the heat required.

My understanding—and I would be grateful if the noble Lord, Lord Hunt, could confirm this—is that, without log fires or some other secondary heating, heat pumps heat only to a top temperature of about 16 degrees. If you are retrofitting an existing building, as many of the windows may not be able to accommodate the size of the heat pump or the radiators that connect to it, substantial renovation may be required.

Furthermore, I am grateful to the Secondary Legislation Scrutiny Committee, which highlighted that the starting point referred to by the noble Lord, Lord Hunt, of around 40,500 installations per year is—in its word, at paragraph 56 of its 10th report—“ambitious”. The department expects the scheme to help ensure the installation of at least 77,000 heat pumps a year in existing homes between 2024-25 and 2028-29. I ask the Minister a simple question: is that feasible and realistic?

My noble friend Lord Lilley quoted £2,000 as the cost of an ordinary boiler. I recently got two quotes for a boiler. The boiler itself was not the issue. For the fitting, even that of an oil-fired boiler, you are looking at something in the region of £8,000 to £10,000. I repeat: if you live off-grid in a very rural area, it would be nice to think that heat pumps were an alternative, but, given the state of the current market, I just do not see them as feasible if they heat up to only 16 degrees when, in just the past two weeks, we have regularly had temperatures of freezing or down to minus 10. With those few remarks, I press the Minister to comment on these queries.

[Earl Russell (LD)]

My Lords, we are supportive of these regulations and the other actions that this Government have already taken—particularly in removing the outdated 1-metre rule on the requirement for planning permission—since coming into office. We are hopeful that, taken together with the other measures that the Government talk about, these measures will help us begin to make progress towards the target of 600,000 heat pumps by 2028 and help us to fulfil the need to meet these same figures every year going forward.

There are both supply-side actions and demand-side actions in this SI. We feel that the combination makes some valuable reforms. Most of all we welcome the work that has been done with industry after listening to concerns, making some much-needed reforms and finding ways forward on these issues. Our worry, though, is that, as welcome as these changes in the regulations are, they may not be sufficient in and of themselves to deal with the scale of the problem. In making this point, I quote the conclusion of the House of Lords Secondary Legislation Scrutiny Committee, which has already been mentioned:

“The DESNZ expects the scheme to help ensure the installation of at least 77,000 heat pumps a year in existing homes between 2024/25 and 2028/29. We consider this, from a starting point of around 40,500 installations per year, to be ambitious”.


Before I turn to the SI, judging by the debate on this measure in the other House, a little background information would be useful.

These regulations amend and reform a system that the Conservative Government brought in but mainly failed to make work in practice. The last Government compounded these problems by failing to work alongside and with industry and others in order to find amendments to the proposals, such that industry itself was prepared fully to support them and get behind them. These problems then led to further internal discussions about the policy itself, which further derailed progress. This problem meant that the implementation never really got resolved and, as a result, we are a long way behind on these targets. In short, the Conservatives had clear targets for the installation of heat pumps but failed to deliver them.

I give this background only because the Conservative Opposition spokesperson appeared to disown or not acknowledge that this is a reform of their policy. It may be that the Conservative policy has changed. If that is the case, I hope that the Conservative spokesman can make that clear.

Great British Energy Bill

Baroness McIntosh of Pickering Excerpts

Committee stage
Monday 13th January 2025 Lords Chamber

Such is the great lack of clarity in how GBE will operate that I believe there is even justification for Amendment 87, in the name of my noble friend Lady McIntosh, to which I have added my name. This would require a Motion for resolution in both Houses before the Secretary of State could issue any directions. I look forward to hearing my noble friend introduce her amendment. I expect that the Minister will not be inclined to accept it in its present form, but I certainly look forward to hearing from him about how he proposes to ensure that GBE is more accountable and more transparent in pursuing its objectives and believe that the Government need to bring forward their own amendments on Report.

[Baroness McIntosh of Pickering (Con)]

My Lords, I wish to speak to Amendment 87 in my name and to take this opportunity to thank my noble friend Lord Trenchard for lending his most welcome support to the amendment and the noble Earl, Lord Russell, for introducing this little group so eloquently and strategically. He is absolutely right to point out that the difference between his amendment and the amendment in my name and that of my noble friend Lord Trenchard is the difference between an Oral Statement which can just be debated and, in our case, the need for a Motion of resolution in each House of Parliament. To put his mind at rest, I cannot believe that that would need to delay the process at all. It could be called in exactly the same amount of time—probably half a day, an Oral Statement possibly taking an hour, or 30 minutes in each House.

The Minister, who I do not think is replying to this group, said in response to the first group that he believes and hopes that Clause 6 will never be used. But the very fact that it is in the Bill means that it is there to be used should the circumstances arise and I believe that the magnitude is such that it is important to debate it and to carry each House with the Government. I cannot believe that that would be a delaying tactic; I think it is absolutely essential. The noble Lord also, in reference to the question of giving directions, equated the situation to that of the National Health Service. It is clear to me that, were such a direction to be given to the National Health Service, that would be debated in each House of Parliament as well, particularly in the circumstances that the noble Earl, Lord Russell, related of a potentially dangerous one-off situation which we understand Clause 6 envisages.

Words were said earlier about Drax and I do not wish to dwell on that, but Drax is a major contributor to the whole of the Yorkshire and Humberside regional economy. I believe that we should go back to growing the fast-growing willow coppice and—a name I can never pronounce—miscanthus, as that would help Drax to have a local source of produce on which to rely. It would also help the farmers at this very difficult time for them.

On the question of directions and consultation raised by the noble Lord, Lord Cameron, and others such as my noble friend Lord Trenchard, it is important for it to be in the Bill that, before giving a direction, the Secretary of State must consult. Clause 6(3)(b) simply says

“such other persons as the Secretary of State considers appropriate”.

Well, it would be helpful, if there were a situation of some danger, for local authorities to be consulted, because they are the first responders in many cases. I am slightly baffled that they have not been mentioned so far. Do the Government intend to consult them? In previous debates it was also raised by the Association of British Insurers that, in these circumstances, potential and actual investors may need to be consulted if such an emergency were to arise. I do not think they have been mentioned so far. Again, is that something the Government have in mind?

I want to sound fairly relaxed about this, but I do believe that the amendment in the names of myself and my noble friend Lord Trenchard is preferable to the wording of the noble Earl’s Amendment 66 and I hope that the Government will respond favourably to our very modest request that a resolution should be debated in each House of Parliament and potentially voted on before the directions are adopted. I hope the Minister will also respond to my queries about who is to be consulted and why there are not more of them listed in the Bill. With those few remarks, I commend my amendment.

[Lord Howell of Guildford (Con)]

My Lords, it must be maddening for the Minister that a Bill specifically designed to exclude investment in the nuclear sector keeps on dragging back to the nuclear sector. This is for the obvious reason that these issues are completely and utterly inseparable. Investment in the energy sector generally has got to take account of all the different aspects, and nuclear is obviously one of them.

The Minister raised the question yet again of Sizewell C being a replica, and obviously he thinks I am being very boring on this, but can I plead with him to go back to his department and point out the obvious fallacies in the whole replica concept? If Sizewell C were to go ahead, it would be being constructed in the late 2020s and the early 2030s, probably for completion and producing kilowatts in the late 2030s or later. That will be approximately 25 years beyond the original design of Hinkley C, which was originally conceived under the Blair/Brown Government in the late 2010s.

Everyone in the civil nuclear sector knows that this is a highly fluid situation in which technology is rapidly developing and is going to create, along with the arrival of new things such as AI, a completely new set of designs, which will mean that by the late 2020s the Hinkley design will be frankly out of date. The idea that something that is 20 years old should be replicated is absurd in any advanced technology, and particularly absurd when it comes to electricity generation and civil nuclear power. If one just thinks about it for a moment, one will realise the replica argument carries absolutely no weight at all. I very much hope that any new nuclear installations—whether 300, 500 or gigawatt size—are definitely not going to be a replica of what has occurred at Hinkley C.

This is a view that is held very widely in France, where they say this design is unbuildable and should never be repeated, and it is the view of many other technicians involved in new nuclear development, which I strongly welcome in all sorts of shapes and sizes, but the idea that we should build a replica 20 years after the last one is frankly absurd. Please would the Minister go back to his department and point this out?

--- Later in debate ---

[Baroness McIntosh of Pickering (Con)]

My Lords, I lend my support to my noble friend and congratulate him on moving his first amendment. As in Norfolk, there is a huge problem across North and East Yorkshire, where tenant farmers face being bounced off the land that they currently farm for solar panels. I hope that the Minister responding to this little group of amendments will use their good offices to ensure that solar panels are best built in more appropriate places. I say that as honorary president of the UK Warehousing Association, which has a campaign—of which the Minister, the noble Lord, Lord Hunt, is aware and, I hope, supportive—to ensure that we can get solar panels off the ground, particularly in productive grade 1, 2 and 3 agricultural land, while also helping warehouses to create more of their own energy.

I believe this is a debate to be had. I support those who say that it is perhaps not the role of Great British Energy to do this, but we have to raise this at every turn. If we run out of productive farmland on which to grow food—and to allow tenant farmers of every generation, including new entrants, to enter the market—it would be a very sorry state indeed.

Great British Energy Bill

Baroness McIntosh of Pickering Excerpts

Committee stage
Tuesday 17th December 2024 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I have a short but crucial amendment in this group—Amendment 51A—which deals with the key issue of employment. It rather shocked me when I checked the wording of the Bill that the words “employment”, “skills” “training”, “retraining”, “upgrading” or even “fair transition” are not mentioned in it. At one of his briefing meetings, I asked my noble friend the Minister for a clear chart of the various bodies we are now envisaging having influence on energy policy—NESO, Ofgem and now Great British Energy and Great British Nuclear. None of them have as a central mission to provide the new and upskilled workforce that will be needed to deliver both the grid and the new forms of energy which will take us to clean energy by 2030 or 2035.

I also looked through the previous Act of the last government—the Energy Act 2023—which is 473 pages long. It provides much of the body of approach to energy policy which the new Government have largely adopted. From a rough-and-ready word check, I do not think that the words “employment”, “skills” and “new skills” appear in that either.

If we are to deliver a clean energy system, from generation to delivery, and energy efficiency in our homes, offices and buildings, as well as a transformation of our industry and transport, we will need a much more skilled, or differently skilled, workforce than the one we have at the moment. That requires somebody to take responsibility for that. None of the bodies has that as one of its central tasks. That needs to be remedied before this Bill disappears from this House.

We need to ensure that those currently employed in sectors of energy which will reduce in gas and oil have a high level of skills which will be relatively easily transformed into skills delivering the new clean energy—or those further down the line delivering home efficiency and other forms. We do not have that in the energy policy. It is mentioned in passing in one of the White Papers, but it is nowhere in proposed legislation. This amendment would at least put it in the statement of priorities required to be issued by NESO early in the transition. It will need following up; it will need more than that. It will need substantial intervention, provision of retraining, apprenticeships and skills, and redefinition of jobs if we are to achieve the timescale and trajectory to net zero that we are envisaging.

This amendment, which is supported by the TUC, would put a marker down that we need to address this issue. Without a transformation and extension of the workforce, we will not deliver the full energy system in anything like the timescale currently envisaged. Can my noble friend the Minister ensure that the Government come back with some way of reflecting in this Bill that employment and the transformation of employment are an important priority, as is assigning responsibility for them to one of the many bodies now in this arena? It may not be regarded by many as central to this Bill, but it is central to the delivery of the outcome. I put down this simple amendment at this point, and I will return to it at a later stage.

[Baroness McIntosh of Pickering (Con)]

My Lords, there are a number of interesting and thought-provoking amendments in this group. I am delighted to follow the noble Lord, Lord Whitty, in speaking to his. I will speak to my Amendment 55 and ask the Minister to respond on a number of issues when he winds up on this group.

I felt that this amendment was necessary to probe the thinking of the Government. Clause 5(7), on strategic priorities and plans, says:

“The duties to consult imposed by subsections (4) to (6) may be satisfied by consultation carried out before this Act comes into force”.


What is the timetable for those consultations? Can the Minister assure the Committee that they will be meaningful and last, as in the terms of my Amendment 55, for the usual 12 weeks—ideally not covering the summer or Christmas holidays, which is so often the case? Will they be meaningful and be over a 12-week period, and will they consult farmers, fishermen and local communities?

Why are those three groups important? With farmers, as the Minister knows because we debated this in Questions and earlier in Committee, the Government are minded to take over highly productive land—often grade 2 or 3 land—for solar farms. In preparing for today, I have been issued information from David Rogers, an emeritus professor of ecology at the Department of Zoology at the University of Oxford. He is not personally known to me, but he has some very good figures.

I think the Government are underestimating, as of today, the amount of agricultural land that will be taken out of useful production. Let us look at the five most affected constituencies. In Newark, it is a land take of 7.9%. In Rayleigh and Wickford—I declare that I represented Rayleigh many years ago in the European Parliament—4.9% would be taken out of production. Sleaford and North Hykeham will have a reduction of 4.62%. In Newport East, the figure will be 4.6%, and Bicester and Woodstock will see 3.96% out of production.

We have to have a very grown-up debate about what the land use framework will be. I do not think that it will be published before this Bill passes, but I pay tribute to the work of the noble Baroness, Lady Young, in this regard. She has put an inordinate amount of work into this. There will be other opportunities to discuss the impact on farming. I hope the Minister will give us an assurance today that farmers will be included in the consultation and say what form the consultation will take.

I turn now to fishers and the spatial squeeze they face. The National Federation of Fishermen’s Organisations provided a briefing, at my request. It is the first to understand that fishers must share the sea, and if other industries expand so much that fishing is squeezed out of its traditional grounds, they obviously do not want to see the industry collapse. In the NFFO’s view, it is a mistake that when a new wind power station is built or protected areas are designated, the fishers who previously worked there are deemed simply to go and fish somewhere else; that is often not the case. Fish can be caught only in the places where they live and breed. They have been caught commercially in UK waters for centuries, and the areas where they feed, migrate and breed are well known, so expecting displaced fishing efforts to simply resume somewhere else entirely misses the point.

In the NFFO’s view, there is an absolute need for a strategic approach. The UK’s needs for food, energy, communication, transportation, waste disposal and recreation all intersect at sea, and the interests of fishers —and, in fact, of all users—can be met only with a strategic approach to using the marine space. How will the Government use the consultation to ensure that that is achieved, and that fishers’ voices will be heard when such a plan is developed, to ensure their future?

I turn to the work we did on the EU Environment Sub-Committee, chaired by the noble Lord, Lord Teverson. We took evidence on the environmental impacts of these developments, particularly offshore wind farms and their future replacements, on marine life and the future of the fishers. The NFFO views with increasing concern the environmental impacts of such vast industrial developments in the sea. It makes a plea that, as we go forward, any strategic overview will be consulted on. A ban on fishing is obviously not an option, in its view. We hope that fishing will not be automatically damaged through any development of the marine environment, but that common ground will be found, so to speak, in any consultations on developing strategic priorities and plans within the remit of Clause 5.

I turn finally to local communities. It is regrettable that in the past, planning permission has been granted separately for offshore and onshore wind farms, because then, a separate planning application takes place, particularly for offshore windfarms, wherever the energy reaches the shore. That poses all sorts of problems that really came to life during the general election. Perhaps it is no surprise that we have a Green Member of Parliament for part of the Suffolk coast, because if you are going to have a large substation created separately from the original planning application for the offshore windfarm, that poses problems for the Government—whichever Government it happens to be.

Also, there is alarm that the Government are planning to take back control, so to speak, of planning decisions. Under the proposals the Government envisage, we are taking the decision away from local communities— I pay tribute to all who have served and who continue to serve as local council representatives—and giving it to the Secretary of State. That is wrong, because local communities should be asked to decide where these electricity substation superstructures will be placed and, just as woefully, where the overhead pylons will be placed. I still bear the scars, as the then newly elected Member for the Vale of York, from when we were deemed to take an additional, second overhead line of pylons. This does not go down well with local communities.

I hope the Minister will look kindly on the points I have made and listen to the voices of the farmers, fishermen and local communities as the Government proceed to develop their strategic priorities and plans.

--- Later in debate ---

This has been an interesting debate. We think we have got the balance right between what should be in the legislation and what should be left to a proper government statement of strategic priorities, within the constraints set by Clause 3. I have no doubt that we will have further debates on this, but this has been a very good airing of some of these important issues.

[Baroness McIntosh of Pickering (Con)]

May I have a reply, if possible, on having joined-up planning applications for offshore oilfields and substations or pylons, so there is one planning application for the whole project?

[Lord Hunt of Kings Heath (Lab)]

I am sorry, I should have responded. Clearly, the noble Baroness will know from the Clean Power 2030 Action Plan the Government’s intent with regard to planning generally. She will have seen what we said in it about seeking to reform the whole planning process. I will ensure that the point she makes is embraced within that. I see the force of her arguments.

--- Later in debate ---

[Baroness Noakes (Con)]

My Lords, I have added my name to Amendment 51 from the noble Lord, Lord Vaux, and I also have four other amendments in this group. One of my concerns about the Bill is that Great British Energy is the last in a long line of unelected quangos, which have precious little parliamentary oversight and weak accountability processes. All the amendments in this group in one way or another seek to increase the role of Parliament, and thereby go some way towards remedying the accountability deficit that exists in the Bill.

As the noble Lord, Lord Vaux, has already reminded the Committee, the Constitution Committee has called out Clause 5 as being disguised legislation. I agree with that. I do not agree with it in relation to Clause 6, which I will explain when we get to that clause. The important thing is that this underlines the need for strong parliamentary processes around Clause 5.

Amendment 51 from the noble Lord, Lord Vaux, is important. If the Secretary of State delays setting out his strategic priorities, the company, Great British Energy, will be left rudderless and may start to spend taxpayers’ money in ways that are not in line with what the Secretary of State wishes to prioritise. Alternatively, a less generous perspective is that the Secretary of State might delay issuing the statement of strategic priorities in order to delay laying it before Parliament and thereby exposing it to public scrutiny.

There is no unanimity even among the green lobby as to what would amount to a good use of taxpayers’ money under the Great British Energy banner. Some of the things that the Secretary of State might choose to prioritise may well horrify some of the climate activists. We might expect nuclear to be one of those examples. The Secretary of State could probably get Great British Energy to act in accordance with his wishes without going through the Clause 5 process by using—or more likely, threatening to use—the Clause 6 power of direction, which we will debate later. He could thereby sidestep public and parliamentary scrutiny for quite some time.

Whichever analysis is the correct one, it is clearly important that we ensure that there is a public statement of priorities as soon as possible. The amendment from the noble Lord, Lord Vaux, generously allows for six months after the Act comes into force. I could easily argue for less time, but six months is good enough for today’s debate.

On the question of timing, I also note that in Clause 3 there is no time limit for the Secretary of State to lay his statement after he has prepared it. Amendment 51 concentrates on a time limit for the preparation of the statement, but similarly does not have a time for when it has to be laid before Parliament. That is another defect in this clause that we will need to seek to remedy on Report.

The noble Lord, Lord Vaux, has already referred to some of my amendments. Amendment 119 is another way of making sure that the strategic priorities statement is pursued quickly. It allows Clause 5 to come into effect immediately after Royal Assent, but the rest of the Bill cannot come into effect until the statement is laid before Parliament. Importantly, that means that Great British Energy could not make any practical progress until the statement of strategic priorities had been dealt with in accordance with Clause 5.

Amendment 52 tackles a different problem, namely the toothless involvement of Parliament in the statement of strategic priorities. As we have heard, under Clause 5 the Secretary of State merely has to lay a copy of that statement, or any replacement statement, before Parliament. That is it. Parliament has no say whatever. My Amendment 52 gives each House of Parliament 40 sitting days to resolve not to approve it, and in that event the Secretary of State has to withdraw it and have another go. That is the procedure adopted, for example, in relation to the national procurement policy statement published under Section 13 of the Procurement Act 2023. As the noble Lord, Lord Vaux, has suggested, it is probably the lightest of the parliamentary procedures that are available to give Parliament some opportunity to challenge the Secretary of State’s priorities.

The amendment from the noble Earl, Lord Russell, is in similar territory but would require the Secretary of State to table a Motion. It does not, however, specify what that Motion might be or the consequences if the Motion were not agreed. There could be other formulations for parliamentary oversight of the strategic priorities. The important point is that it should not be a “take it or leave it” situation when Parliament is given the statement of strategic priorities. Parliament is entitled to some substantive involvement in the priorities.

My Amendment 128 is a companion amendment to Amendment 52. It is similar in structure to Amendment 119 so that the commencement of the Act after Royal Assent, other than in relation to Clause 5, would be delayed until 40 sitting days had passed. That would ensure that GBE could not be operationalised until Parliament had had an opportunity to consider the statement of priorities. That is a belt-and-braces addition to Amendment 52.

Lastly, my Amendment 58 in this group is also intended to enhance Parliament’s oversight of Great British Energy. Under Clause 5(8), Great British Energy’s articles of association have to ensure that GBE will publish its own strategic plans and act in accordance with the statement of strategic priorities. My Amendment 58 goes further and would require GBE to send a copy of the plans to the Secretary of State, who then has to lay them before Parliament. It is clearly insufficient for Great British Energy simply to upload its strategic plans to its website. There needs to be a formal communication of those plans to Parliament. That is all that my amendment is aimed at, and I hope that is not controversial.

The broad thrust of all the amendments in this group is effective parliamentary engagement. The Minister might not like the detail of the amendments, but he ought to subscribe to the notion that effective parliamentary engagement in the work of quangos is necessary. I hope he will see that the parliamentary involvement allowed for in the Bill falls short by some way. I am sure the whole Committee would be delighted if the Minister were to take this issue away and bring forward government amendments to achieve proper recognition of the role of Parliament in Great British Energy’s scrutiny. If he is unable to do that, I am sure we will need to return to this aspect on Report.

[Baroness McIntosh of Pickering (Con)]

I will speak to Amendments 53 and 90 in my name. Before I do, I lend my support to the two authors of the other amendments who have spoken. In particular, I congratulate the noble Lord, Lord Vaux, on his amendment and on setting out the problems of Clause 5.

I am a fan of the National Wealth Fund. I have been watching the Norwegian series on BBC Four, which ended at the point when Norway set up its sovereign wealth fund with the proceeds from oil and gas in the North Sea. I could not quite understand why we did not do the same when we were receiving all the profits that we did. We have fallen behind Norway in living standards in that time.

The points from the noble Lord, Lord Vaux, about the relationships of GBE and its ability to raise funds, were very well made. Previously in Committee we have questioned what its relationship to the National Wealth Fund will be. This goes to the heart of what the national transition plan for the National Wealth Fund will be. We keep hearing that there will be a transition plan, but I would be interested to know what that plan will be and what its relationship with the National Wealth Fund and GB Energy will be.

When will we see the sector-specific road maps for the five priority sectors? Will they be in the impact assessment or come at a later stage? Some clarity in this regard would be good, as well as some greater engagement at this stage between investors, both those of the National Wealth Fund and GBE, to raise these new funds, and to have local authorities develop projects and propositions which are investable as well. I lend my support to the amendments in this group in the names of the noble Lord, Lord Vaux, and my noble friend Lady Noakes.

Private Low-carbon Investment: Green Finance Institute Report

Baroness McIntosh of Pickering Excerpts

Monday 9th December 2024 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, the noble Lord is absolutely right that this is an important area of policy. We reckon that buildings account for 31% of total UK emissions, and heating is 75% of that proportion of emissions, so I very much take his point that there is an urgent need to make progress. I cannot give him an exact time. Looking at international experience of these kinds of schemes, it is not altogether positive. In the US experience, for instance, it may have worked for multi-occupational commercial properties but, for individuals, it does not seem to have made much progress.

[Baroness McIntosh of Pickering (Con)]

My Lords, does the Minister not share my disappointment that his Government have no plans to review the level of the warm homes discount? Given that there does not seem to be any urgency in renovating existing homes, will he use his good offices to put pressure on the Government to review the level of the warm homes discount? I refer to my interest as president of National Energy Action.

[Lord Hunt of Kings Heath (Lab)]

My Lords, this is the third time the noble Baroness has asked me this question in the last two weeks. I am afraid that we have not moved on from that position. On the warm homes plan, as she will know, we made it clear in the Budget that we will see a total investment of £3.2 billion in warmer homes across 2025-26. She is right that making progress in relation to energy-efficient homes is very important indeed.

Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024

Baroness McIntosh of Pickering Excerpts

Monday 2nd December 2024 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, the draft order was laid before Parliament on 22 October. The UK Emissions Trading Scheme, the UK ETS, was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020, otherwise known as the 2020 order, as a UK-wide greenhouse gas emissions trading scheme contributing to the UK’s emissions reduction targets and net-zero goal. The scheme is run by the UK ETS authority, a joint body comprising the UK Government and the devolved Governments. Our aim is to be predictable and responsible guardians of the scheme and its markets.

We have brought forward this SI to enable several important changes and improvements to the scheme. It resets the UK ETS cap to be in line with the top of the net-zero consistent range. The cap sets a limit on how many allowances can be created over the trading period, which runs from 2021 to 2030, and in each year. That level reduces over time to drive down total emissions. When this scheme was established, the cap for the legislated period of the UK ETS, from 2021 to 2030, was set at 5% below the UK’s expected notional share of the EU ETS cap for the same period. However, this was not consistent with the UK’s net-zero trajectory for the traded sector. This instrument brings the overall UK ETS cap in line with our net-zero target and carbon budgets under the Climate Change Act.

This statutory instrument also reduces the industry cap, which is the total number of allowances which can be made available to existing installations for free, if no cross-sectoral correction factor mitigation is applied. This SI reduces the absolute level of the industry cap while increasing its proportion of the overall cap. While the share of allowances set aside for this purpose will increase from 37% to 40%, the reduction in the overall UK ETS cap means that the industry cap will fall. That will help to mitigate the risk of carbon leakage across participating sectors while maintaining an effective incentive to decarbonise.

The statutory instrument creates a flexible reserve of allowances for maintaining market stability and sufficient carbon leakage mitigation. In addition to allowances specifically created for this reserve, unallocated free allowances from the industry cap and designated free allowances that are returned by operators due to changes in participant eligibility or activity level reductions will also stock the flexible reserve. The flexible reserve can be used to increase allowance supply for market stability purposes, if the cost containment mechanism is triggered. The flexible reserve can also mitigate application of the CSCF through a uniform reduction to all eligible existing participants’ free allocation if the eligibility for free allocation exceeds the industry cap.

Under current legislation, carbon dioxide released through flaring in the upstream oil and gas sector is included in the UK ETS, as it is within the scope of the regulated activity of combustion. This SI introduces CO₂ released through venting in the upstream oil and gas sector into the scope of the UK ETS for installations already covered by the scheme. That means that such emissions will also be subject to a carbon price.

The controlled processes of venting and flaring can sometimes be essential for safety purposes. They are also used in more routine situations where the oil and gas hydrocarbons are unable to be used, exported or reinjected without the CO₂ being removed. The removed CO₂ can then be released in the process of flaring, when waste gas—including the stripped-out CO₂, as well as combustible elements—is ignited, or venting, where unignited gas is released through a vent. The legislation will remove a perverse incentive whereby operators could routinely vent gas that contains carbon dioxide without it being subject to a carbon price, even though it would, if flared, constitute reportable emissions for the purpose of the scheme.

In line with the original policy intent, the instrument extends legislative amendments made by the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 to Northern Ireland. The amendments include capping aviation free allocation at 100% of emissions, clarifying the treatment of carbon capture and storage plants, and amendments to free allocation rules for electricity generation.

In 2022, a memorandum of understanding between the UK Government and the Swiss Government was signed, setting out the intention to include flights from the UK to Switzerland in the UK ETS. Flights from Great Britain to Switzerland were brought into the scope of the UK ETS on 1 January 2023 by the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Order 2022. The statutory instrument before us extends the scope to cover flights that depart from an aerodrome in Northern Ireland and arrive at an aerodrome in Switzerland.

On enforcement and penalties, scheme regulators are responsible for enforcing compliance, including operational functions such as issuing penalties. The statutory instrument makes a number of amendments to the levels of scheme penalties to ensure consistency and proportionality of enforcement for all operators. It also introduces a new deficit notice, with an associated penalty, to strengthen enforcement of the fundamental scheme obligation to surrender allowances equal to an operator’s annual emissions.

Finally, this instrument makes several corrections and clarifications to existing legislation. The changes follow appropriate and comprehensive consultation with stakeholders. In the Developing the UK Emissions Trading Scheme (UK ETS) consultation in 2022, the UK ETS Authority considered proposals on changes to the rules for sectors covered by the UK ETS to ensure that more greenhouse gas emissions were covered by the scheme, along with changes to the cap.

The authority’s response to this consultation was published in two parts: in August 2023 and July 2023. A majority of respondents agreed with the UK ETS Authority’s proposals on creating a flexible share reserve of allowances; on bringing venting in the upstream oil and gas sector into the scope of the ETS; and on the addition of a new penalty and deficit notice. Several respondents expressed concern regarding the reduction of the cap and the changes to the industry cap.

An assessment of these responses informed the decision to set the cap at the top of the net-zero consistent range. Between 23 February 2024 and 8 March 2024, the UK ETS Authority ran a targeted consultation on the minor penalty amendments. The responses to this consultation were in broad agreement with the proposals or noted that they were not affected by them. The authority’s response to this targeted consultation has been published in advance of the laying of this statutory instrument.

In conclusion, the changes in the draft order will deliver on commitments made by the UK ETS Authority and improve the operation of the scheme. The alterations to the UK Emissions Trading Scheme will support its role as a key pillar of the UK’s climate policy. They show that we will take action to extend and improve the scheme where necessary. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank the Minister for setting out the contents of the instrument so concisely but comprehensively. I support it but have a number of questions. Obviously, the issue of flaring would arise if the Government were to introduce a policy of fracking—hydraulic fracturing. Can the Minister confirm that the Government have a moratorium on fracking? It was a very real issue in North Yorkshire when I was still a Member of Parliament there; it caused real concern among the locals. It would be interesting to know the answer because flaring would be an issue there.

Secondly, I see that an impact assessment has not been prepared on this occasion because it is not a regulatory provision, but in fact one was done already in 2023, and before that in 2020. Can the Minister confirm that the costs in light of the change to the cap will not be deemed wildly different from the results of those impact assessments in 2020 and 2023, which I understand were different in nature in each case?

It is interesting that the Minister, the instrument and the Explanatory Memorandum refer to the amendment to include flights from Great Britain to Switzerland within the scope. Why was this excluded in the first instance? Were there no flights from that airport? Have they suddenly increased in capacity? Out of interest, which flights are included? In the normal scheme of things, would all major airports and flights to the European Union and Switzerland be included? I imagine they would be, but it would be helpful if the Minister could confirm that.

COP 29

Baroness McIntosh of Pickering Excerpts

Thursday 28th November 2024 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, it is clearly an interesting question. The noble Lord will have seen that some of the country participants in Baku were very unhappy with parts of the process. Some felt excluded from some of the key corridor discussions, if I can put it that way. The problem is that it is the only forum that we have for discussing and negotiating these important matters. Whatever fora you have, if you have over 190 countries involved, it is going to be very complex. Notwithstanding that I understand the frustrations of many countries and the difficulties, the fact that agreement was reached and we can now see clear a line to Brazil next year means that we need to continue to work with the process and encourage it to be run as effectively as possible. I do not see any option but to go with the COP process.

[Baroness McIntosh of Pickering (Con)]

The noble Earl, Lord Russell, raised the warm homes discount. I am the honorary president of National Energy Action. I see that the discount rate is still £150. Given the current level of electricity bills, this seems quite low and not to have been reviewed for some time. Will the Minister review this and look at the level of the warm homes discount?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I have to say to the noble Baroness that at the moment we do not have any plans to review it.