Energy Bill [HL]

Baroness Sheehan Excerpts

Committee stage
Monday 16th January 2023 Grand Committee

Moved by

[Baroness Sheehan]

222A: After Clause 227, insert the following new Clause—
“Transparency of decommissioning costs(1) The Secretary of State must publish, within 6 months of this Act coming into force and not less than every 3 years thereafter, a statement on decommissioning offshore installations that includes—(a) a list of decommissioning relief agreements in force and the qualifying companies which are parties to each agreement,(b) the estimated likely range of the total future amount of tax relief to be granted in respect of any decommissioning expenditure under existing decommissioning relief agreements under—(i) current oil, gas and decommissioning prices, and(ii) expected future oil, gas and decommissioning prices,in current prices and as a proportion of tax revenue paid by qualifying companies which are parties to those agreements;(c) an assessment of how the estimates under paragraph (b) would be affected by world oil and gas prices equal to the lowest cost of global oil and gas production.(2) In this section—“decommissioning relief agreement” and “qualifying company” have the meanings given in section 80 of the Finance Act 2013;“offshore installation” has the meaning given in section 44 of the Petroleum Act 1998.”Member's explanatory statement
This amendment is intended to bring greater transparency to the future taxpayer liability in respect of decommissioning relief agreements.

[Baroness Sheehan (LD)]

My Lords, I rise to speak to Amendments 222A and 227AA in my name. I put on record my support for Amendment 223 in the name of my noble friend Lord Teverson; Amendment 227 in the name of the noble Baroness, Lady Bennett of Manor Castle; Amendment 227A in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds; and Amendment 232 in the names of my noble friend Lord Teverson and the noble Baroness, Lady Bennett of Manor Castle, to which I have added my name. I regret that I cannot offer support to the remaining amendments in this group, which I am sure will come as little surprise to those who tabled them.

I start with my Amendment 222A on decommissioning tax reliefs, and why I think it necessary. I hope that I can provide some useful background information, taken mostly from the National Audit Office report of January 2019 entitled Oil and Gas in the UK—Offshore Decommissioning. The report sets out the landscape of oil and gas decommissioning so that Parliament is in a position to consider whether the various government departments involved are protecting taxpayers’ interests effectively. The report states that:

“There are currently around 320 fixed installations, such as oil platforms, in production in the UK, primarily in the North Sea. … Oil and gas operators … are increasingly decommissioning their assets as they are reaching the end of their useful economic lives … Decommissioning affects the government’s finances because operators can recover some of their costs through tax reliefs. These enable operators to deduct decommissioning costs from their taxable profits and potentially claim back some taxes that they have previously paid.”


That is all well and good, and fairly normal practice. However, the report goes on to say:

“With decommissioning activity increasing, the government is paying out more in tax reliefs for decommissioning at the same time as tax revenues have fallen due to a combination of lower production rates, a reduction in oil and gas prices and operators incurring high tax-deductible expenditure.”


That represents a triple whammy for UK taxpayers such that, as the report says:

“In 2016-17, the government paid out more to oil and gas operators in tax reliefs than it received from them … for the first time”.


While oil and gas expansion looks artificially secure, with very generous tax reliefs, it is nevertheless clear that government is, on behalf of taxpayers, taking on a liability that is ultimately unknown. The lower and upper estimates of decommissioning costs from the Oil and Gas Authority, now known as the North Sea Transition Authority, are £38 billion and £61 billion respectively, but even that is only a guestimate. With another round of new licences being issued—potentially up to another 100—the risk is enormously compounded. Furthermore, it used to be that a ceiling was kept on the overall cost to the taxpayer by the fact that a firm cannot claim back more in decommissioning tax relief than it has previously paid in tax. However, since 2017, when firms default, government has explicitly said that partner firms that pick up the Bill can claim back more in tax relief than they have ever paid.

This amendment is designed to put more information into the public domain about who the taxpayer is on the hook to; what the liability amounts to, as a proportion of tax received; and by how much this amount will increase in a low-demand world, which is the way in which we are headed.

The amendment asks for three things. First, in proposed new subsection (1)(a), it asks for

“a list of decommissioning relief agreements”

and who has signed them—because at the moment we have no idea. We know how many there are—approximately 100—but not who those agreements are with. As the taxpayer faces a liability from each of these agreements, at an average of £200 million per agreement, some public transparency is desirable.

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[Lord Moylan (Con)]

The name of the regulations that I am suggesting we review is the Gas Safety (Management) Regulations, so I fully acknowledge that this is a question of safety, but it is not necessarily the case that these regulations, passed in 1996, that we are still adhering to could not be looked at to see whether, precisely as I say in my amendment, they could be

“safely amended to allow more efficient use of extracted … gas.”

It may be that they cannot but, nearly 30 years on, it would be helpful if the Government could look more closely at this.

My principal point in raising these amendments relates to Amendment 224. A bit like the noble Baroness, Lady Worthington, earlier, I want to know whether the Government have a strategy for resilience. Do they contemplate the dependence on foreign supplies going on endlessly in very large measure, and what would they like to do about it? I think that an awful lot of people in this country were shocked to discover our level of dependency on imports and would like to hear that we are becoming more self-sufficient.

[Baroness Sheehan (LD)]

My Lords, may I address some of the noble Lord’s responses to my comments earlier? It is clear to me that we have a fundamental difference of opinion on the science behind climate change. I believe that climate change is real, as is shown by the change we are experiencing. What evidence can the noble Lord point to that climate change is not real? There is substantial evidence of it, including the unprecedented levels of the concentration of carbon dioxide in the atmosphere, as verified by ice core samples from the Antarctic and tree rings over millennia. The changes in carbon dioxide correlate precisely to the changes in climate that we have seen in historic times. That is the basis on which my amendments have been tabled, and they are clearly designed to meet the Government’s legal duties under the Climate Change Act and their need to reduce oil and gas consumption to meet net zero by 2050. The noble Lord’s amendment talks about a strategy for increasing domestic gas production. That cannot be compatible with meeting climate change targets—the Government have a legal duty to do that. Will the noble Lord, Lord Moylan, please accept that?

[Lord Moylan (Con)]

I am grateful for those points, which I will try to answer briefly since they were put to me directly.

First, I hope that nothing in what I said suggested, implied or stated that I do not accept that climate change is happening. I am also perfectly happy to accept that there is a man-made contribution to that. What I reject is the language of climate alarmism and climate crisis. The questions around the consequence, in practice, of climate change and the best means for dealing with it remain absolutely open. Over the last 20 years, we have seen wild, extravagant and unjustified claims about how large parts of the world are going to sink under water and we are all going to scorch; in fact, we see very little of that, but we see a few weather events being played up as if they are great catastrophes. Even if that were happening, the question that arises is what you do about it.

Many of us would rather put the emphasis on mitigation and adaptation rather than what we are doing at the moment, which is absolutely damaging our economy, in order that we should try to avoid those emissions. The cost of that damage to our economy has been estimated by the Climate Change Committee as at least 1% of GDP per annum—most people recognise, I think fairly, that it is closer to 4% or 5%. There are those who would say that that that cost is both necessary and justified, but it is none the less a damage to our economy, and not all of us accept that it is necessary and justified—we think that there are other methods of dealing with it.

I have not rejected climate change. I accept that net zero is a statutory target—I said nothing contrary to that. If I may repeat myself—this is my fault entirely; it is the problem with having an amateur such as myself drafting amendments—I apologised when I spoke for using the word “increase”, which I can change if we come back to this on Report. That was not quite what I meant; I meant increase relative to imports, such that I explained that my amendment would be applicable even if our consumption of gas was falling.

There is not that much in the substance of the comments that the noble Baroness, Lady Sheehan, made about my remarks. None the less, we have a profound disagreement—less about the science and more about what to do about it.

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[Lord Lilley (Con)]

If that the best argument against the thesis I put forward, I know I am on strong ground. The noble Baroness says that we might end up with cheap fuel and the oil companies losing money: well, I can cope with both those things.

[Baroness Sheehan (LD)]

Will the noble Lord at least agree that, when we are looking at supply and demand and prices going up and down, that will work only where we have a level playing field? Where you have a market that is skewed, with perverse incentives, such as tax reliefs in the example I gave on my first amendment, that really negates his argument: you cannot say supply is going to be one factor and then have it overridden by incentives to investment that reduce the risks for the people taking them.

[Lord Lilley (Con)]

I think that is a rather different set of arguments. My point is that we can approach net zero by reducing demand and let supply find its own level, with or without incentives. Incidentally, the idea that there are incentives to oil production, when the taxes at our pumps are a massive proportion of the price we pay and when oil in the North Sea pays double the corporation tax rate that other companies do in any other industry, is simple nonsense.

However, now I will turn, if I may, to my own Amendment 226, which would ensure that the conditions relating to vibrations from drilling for shale should not exceed those applied to other industries, for example under British Standard 5228. There is no reason that shale drilling should face different conditions as to the tremors it may cause from, say, quarrying, mining, construction or pile driving. In particular, there is no reason, other than environmentalist virtue signalling, why standards for shale as far as tremors are concerned should be stricter than drilling for geothermal or carbon capture and storage—other than that they get positive ticks from the green lobby whereas shale does not, even though we are going to continue using gas for many decades to come.

Indeed, recently, there was a 1.6 magnitude tremor in Cornwall as a result of drilling for geothermal. People could feel it. It did not do any damage, of course, and it is an order of magnitude higher than the maximum tremor that we allow without stopping production in shale. The level set by Sir Ed Davey when he was Secretary of State for Energy was a magnitude of 0.5 and the one in Cornwall was 1.6. Sir Ed Davey has since admitted that he was proud that, by setting this limit, he effectively stopped the fracking industry in this country. Of course, that was not what he said at the time.

At the time, he said that he was accepting the report that came out at the time. It was an excellent report, produced by the Royal Society for Science and the Royal Academy of Engineering, called Shale Gas Extraction in the UK: a Review of Hydraulic Fracturing. The opening paragraph states:

“The health, safety and environmental risks associated with hydraulic fracturing (often termed ‘fracking’) as a means to extract shale gas can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation.”


So it gave a pretty clear vote of support. It said that the

“magnitude of seismicity induced by hydraulic fracturing would be no greater than”

magnitude 3, which would be

“felt by few people and result in negligible, if any, surface impacts.”

So we are left with this absurdly low criterion, which is an order of magnitude more severe than that applied to any other industry.

It is not only an order of magnitude; it is entirely unreasonable. Natural earthquakes in this country can be several orders of magnitude greater than is permitted as a result of fracturing for shale gas, and these natural earthquakes occur with little damage. I can remember being woken up at midnight on 23 September 2002 in London. My whole house shook and the windows rattled and I was woken. It was the only time—no, I will not say anything about that. The earthquake was actually centred in Dudley in the Midlands and was a force 4.7 and had that effect in London. There were no reports of damage anywhere in the United Kingdom as result of it—and that was 500 times greater than the highest seismicity induced so far by fracking in the UK, let alone the low 0.5 standard set. Over the last 50 years, according to the British Geological Survey, there have been 25 natural earthquakes of greater than or equal to magnitude 4 and in the last 60 days we have had 29 minor earthquakes in the United Kingdom about which no one has complained at all.

The University of Liverpool produced a study using seismicity measurements which showed the impact of a whole range of household events. I have a copy of it here. It showed that, for example, a door slamming uses more vibration at its surface than the maximum magnitude permitted from fracking in the United Kingdom. So does sitting down suddenly on an office chair, or a building site piledriver 15 metres away. They are all similar orders of magnitude—they are 0.6—but you can find things which are an order of magnitude higher, and we should remember that this is a logarithmic scale. Dropping a large bag of shopping has a magnitude of 1.5 and a toddler playing on a wooden floor, I am astonished to learn, can produce seismicity of 2.1. So we are talking about having such a degree of security against any seismic shock resulting from fracking as to be completely ridiculous.

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[Lord Callanan (Con)]

Well done to the noble Baroness, Lady Blake, for avoiding the question.

I thank everyone who has contributed today; it has been a fascinating debate. In the context of the Energy Bill, I think it is the first we have had on the fundamentals of our energy policy, with both sides: those who, in the case of the noble Baroness, Lady Bennett, seem to want to ban everything, and those who take a more pragmatic view of the issues. I will attempt to set a centre course of a sensible, pragmatic energy policy, which is the one we will follow.

I will address the various amendments, starting with Amendments 224 and 227, tabled by that fascinating pairing: on the one hand my noble friend Lord Moylan and on the other the noble Baroness, Lady Bennett. I will also address the contribution from the noble Baroness, Lady Worthington.

I begin by stating our fundamental policy of driving down demand for fossil fuels as we transition to our legally binding net-zero economy. Of course, the noble Baroness’s Amendment 227 would have significant ramifications. At a time of global energy crisis, an orderly transition underpinned by oil and gas is the best approach and it is crucial to maintaining our energy security of supply.

Outside the rarefied world that the noble Baroness lives in, Greens in other parts of the world are having to live up to these difficult choices in the real world, in real policy. At the moment, the German Greens are quite hilariously justifying the expansion of a massive new coal mine—producing lignite coal, one of the dirtiest forms of coal—in northern Germany, because of the energy crisis. The noble Baroness, Lady Bennett, might think it is funny for us all to sit in the cold and dark, relying on unstable sources of power, but the rest of us think that we need to supply this country with the energy it needs. We need to set the country on a net-zero transition, but we need to do it gradually and responsibly. We set this out in the British Energy Security Strategy, where we set out our long-term plan for greater energy security, including references to domestic gas supply. In the Autumn Statement, the Chancellor built on that and set out that the Business and Energy Secretary will publish further details on our energy independence plans in due course, and we will do so.

The North Sea Transition Authority launched the 33rd licensing round on 7 October 2022. This is expected to deliver over 100 new licences, which will put more UK gas on the grid. I repeat: it will not put more gas on the grid—it will put more UK gas on the grid. I have had this debate many times in the Chamber with the noble Baroness, Lady Sheehan, and I still fail to see how she does not think that this is a good idea. In our transition, as we are reducing our demand, it makes sense to have that gas from relatively low carbon-producing sources rather than importing highly polluting, high-carbon fracked gas from other parts of the world.

[Baroness Sheehan (LD)]

So the gas produced from the licences that will be issued in the 33rd round will not be traded on the commodities market—is that what the Minister is saying?

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[Lord Callanan (Con)]

The decision was taken by a different department, by DLUHC, in a quasi-judicial manner. It is likely to be the subject of judicial proceedings, so I cannot comment in detail on that decision, as the noble Lord will understand. I am sure we will be having this debate lots of times in future.

I move on to the question from the noble Baroness, Lady Blake. The reasons for the Secretary of State’s decision are set out in full in his published letter on GOV.UK, which takes into account matters like the demand for coal, climate change and the impact on the local economy. To reiterate the point of my noble friend, coking coal is used in the production of steel—it is not used in power generation—which is, of course, crucial to building the infrastructure that we all wish to see more of, such as offshore wind turbines.

On fracking, I thank my noble friend Lady McIntosh for her contribution. The Government have been clear that in line with the commitment made in the 2019 Conservative manifesto, it is adopting a presumption against issuing any further hydraulic fracturing consents for the extraction of shale gas. That position is, in effect, a moratorium. This will be maintained until compelling new evidence is provided that addresses the concerns around prediction and management of induced seismicity.

I move on to my noble friend Lord Lilley’s amendment. I welcome his thoughtful contributions to today’s debate, as well of those of my noble friend Lady Altmann. British Standard 5228, which my noble friend quoted, recommends procedures for noise and vibration control in respect of construction and open-site operations. It is not a measure designed to reduce the risk of induced seismicity. The potential for induced seismicity from hydraulic fracturing is a result of the injection of fluid deep underground, at depths of one kilometre or more. Seismicity induced by hydraulic fracturing is therefore different in nature from vibration directly induced by a construction site, and the application of BS 5228 would therefore not be appropriate.

My noble friend Lord Moylan tabled an amendment about the composition of our domestic gas supply. A review of the Gas Safety (Management) Regulations 1996 is currently under way. The Health and Safety Executive has been reviewing these regulations, which govern gas quality, and is consulting on a set of proposed changes. The HSE’s consultation closed in March 2022, and it will be aiming to publish its response in due course. BEIS has worked closely with the HSE and has taken regular opportunities to input into the process in both an analytical and a policy capacity. A statement by the Secretary of State at this stage is therefore unnecessary as the publication of the Government’s formal response will be tantamount to just that. I hope my noble friend will understand that in advance of that document, I cannot comment as it would not be proper.

The noble Baroness, Lady Sheehan, tabled two amendments in this group. On Amendment 222A, I should say at the outset that tax matters are an area for the Treasury. Since the introduction of decommissioning relief deeds—DRDs—the Treasury issues a Written Ministerial Statement at the end of each financial year updating on DRDs, including the total number of DRDs in force during the past financial year, past payments under DRDs and the projected value of future payments under ongoing DRD claims. While a DRD claim may arise where a company has defaulted on its decommissioning obligations, the tax system also provides tax relief for decommissioning costs in recognition that decommissioning is a significantly expensive and statutory obligation. HMRC publishes information annually on the estimated sum of all forecast tax relief payments due to decommissioning as part of its annual report and accounts.

[Baroness Sheehan (LD)]

I thank the Minister for his comments on decommissioning. He is unwilling to move further on the amendment, but will he at least commit to writing with the current estimate of the Exchequer costs of decommissioning if prices were to fall to less than $5, in line with Clause 1(3)(c), and to explain how these risks are being managed? I think that would be within scope.

[Lord Callanan (Con)]

Decommissioning relief deeds are private contracts between the Treasury and the relevant company. That is a matter for the Treasury. I cannot give a commitment on behalf of the Treasury. I suspect that the best option would be for the noble Baroness to take it up with Treasury Ministers.

[Baroness Sheehan (LD)]

I hope the Minister will not mind me pressing on this issue. I am not asking for anything commercially secret but just for some assurance, which I think the PAC and the NAO have sought, that the Government have a handle on the liability and risks which they are potentially exposing taxpayers to in the future.

[Lord Callanan (Con)]

As I said, the noble Baroness should take this matter up with the Treasury. I cannot give commitments on its behalf. I do not know the details. I have set out the position on DRDs. As far as I am aware, this is not tax or revenue legislation. I suggest that the noble Baroness take this up with a Treasury Minister.

I move on to Amendment 227AA on the prohibition of flaring. The Government are already taking steps to drive down routine flaring and the similar practice of venting. The UK has committed to the World Bank’s Zero Routine Flaring by 2030 initiative, and we are working with regulators towards eliminating this practice as soon as possible. Through the North Sea transition deal, industry has committed to accelerating compliance with the World Bank initiative ahead of 2030. We are making good progress: in 2021, total flared gas and vented gas reduced by 20% and 22% respectively, relative to 2020. Furthermore, the North Sea Transition Authority, as the lead regulator on these matters, expects all new developments to be planned and developed on the basis of zero routine flaring and venting.

With the explanations on these various points, I hope that the noble Baroness will feel able to withdraw her amendment.

[Baroness Sheehan (LD)]

I thank the Minister, but I have to say that I am not hugely satisfied with the responses on decommissioning tax reliefs. I take up the point made by the noble Lord, Lord Lilley, about stranded assets and who will pick up the risk. In a scenario where, say, Shell decides that a particular field has become uneconomic for it to exploit commercially and decides to sell on that asset, which is then picked up by another entity which, in turn, goes bust, who will pick up the cost of that decommissioning? I hope that the Minister will be able to quickly address that.

In terms of flaring, I am really disappointed. It is such a no-brainer. Since 1991, Norway has been able to ban flaring—and, within that, I would include venting—yet our Government cannot give that commitment, when we have made commitments at COP 26 and COP 27 under the Global Methane Pledge, and we continue to do this. It really is on a par with asking countries to ban coal and then giving permission for our own coal mine in Cumbria to go ahead. It is just incomprehensible, and I hope that the Minister can quickly address that before I withdraw my amendment.

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Tabled by

[Baroness Sheehan]

227AA: After Clause 229, insert the following new Clause—
“Prohibition on flaring(1) The Secretary of State must by regulations prohibit the practice of flaring by oil and gas installations within the jurisdiction of the United Kingdom.(2) In this section “flaring” means the burning of gas, produced during oil extraction, in order to dispose of it.(3) Regulations under this section must be made so as to bring the prohibition into force by 31 December 2025.”Member’s explanatory statement
This amendment would prohibit ‘flaring’ which is the burning of gas, produced during oil extraction, to dispose of it. This is in line with recommendations made by the Commons Environmental Audit Committee and would help ensure the UK fulfils commitments it made at COP26 and COP27 under the Global Methane Pledge.

[Baroness Sheehan (LD)]

Despite the Minister’s lack of response to my comments, I will not move the amendment at this stage.

Amendment 227AA not moved.

Business: Greenwashing

Baroness Sheehan Excerpts

Tuesday 10th January 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Baroness is right that we need some consistency on these matters. The work on a green taxonomy is being taken forward by the Treasury and as far as I am aware it is proceeding.

[Baroness Sheehan (LD)]

My Lords, last year the Advertising Standards Authority ruled that HSBC’s greenwash ads were not adequately qualified and left out material information about its greenhouse gas emissions. Does the Minister agree that a ticking off from the ASA after an ad has gone out is not a deterrent? Will he request the CMA to incorporate this into its green claims code so that financial penalties can be imposed if firms breach the rules repeatedly?

[Lord Callanan (Con)]

The ASA has taken action against a number of companies, including one that made green artificial grass, over their environmental claims. I think this is a very real deterrent to businesses repeating unfair advertising, but I know that the CMA is looking at a number of different sectors: it has already published an investigation into the fashion sector and is moving its investigations on to other areas of the economy as well.

Electricity: Decarbonisation

Baroness Sheehan Excerpts

Wednesday 21st December 2022 Lords Chamber

[Lord Ravensdale]

To ask His Majesty’s Government what assessment they have made of the achievability of their target to decarbonise the electricity system by 2035.

[Baroness Sheehan (LD)]

My Lords, on behalf of my friend the noble Lord, Lord Ravensdale, and with his permission, I beg leave to ask the Question standing in his name on the Order Paper.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the Government are confident that the policies and programmes set out in the net-zero strategy and the British energy security strategy will deliver our ambition to decarbonise electricity generation in line with net zero while enhancing security of supply and keeping energy affordable.

[Baroness Sheehan (LD)]

My Lords, I thank the Minister for his reply and will now read the supplementary question from the noble Lord, Lord Ravensdale. The fundamental problem is that we are not building anywhere near enough low-carbon energy capacity or grid infrastructure to allow us to meet the 2035 target. One of the priority recommendations of the Climate Change Committee’s 2022 progress report is that we need a delivery plan to provide visibility and confidence for private sector investors to reduce costs and to build up supply chains. There is a key gap here, in comparison with other sectors, because, while we have the heat and building strategy and the transport decarbonisation plan, we do not have a plan for electricity decarbonisation, despite it being so important as an enabler for those other plans. Does the Minister agree that it needs urgently to be brought forward?

[Lord Callanan (Con)]

We will be setting out further plans on the matter in due course. I remind the noble Baroness that, during 2021, almost 55% of electricity generated in the UK came from low-carbon sources. We have an ambitious target of rolling out 50 gigawatts of offshore wind by 2030, and we have an excellent record in this area.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, given that it is Christmas, I—

[Baroness Sheehan (LD)]

My Lords, on Monday in Grand Committee, on day 5 of the Energy Bill, the Minister said, in defence of the Government’s stonewalling of support for community energy, that these schemes rely on people subsidising uncompetitive forms of energy. That is rich, coming from a Government who, for example, have made communities pay more for their energy as a consequence of their seven-year ban on onshore wind, and are presiding over bizarre Ofgem connection policies that leave ready-to-go renewable installations unconnected for long periods.

[Noble Lords]

Too long!

[Baroness Sheehan (LD)]

Could I ask the Minister what estimate his Government or department have made of the additional costs to communities of their inefficient energy policies?

[Lord Callanan (Con)]

I apologise to the noble Baroness, but I really did not catch most of what her question was.

Energy Bill [HL]

Baroness Sheehan Excerpts

Committee stage
Monday 19th December 2022 Grand Committee

[Baroness Sheehan (LD)]

My Lords, so much has already been said that there is little for me to add. I have put my name to Amendment 192.

The only thing I want to say is that the Government need to understand the strength of feeling across the Committee on the complete lack of emphasis in this Bill on something that is doable, that is within our grasp and that the Government have recognised needs to be done but have done nothing whatever to implement it. Noble Lords are trying to help the Government here by tabling what I think are very sensible amendments; I hope that the Government will take note of them.

We have had lots of briefings on this issue. There is huge depth of feeling in the communities of Britain on this. One of the NGOs that we received some briefings from, the UK Green Building Council—sorry, it is not an NGO; it is, however, a body that knows an awful lot about this matter—published a scorecard assessing the Government’s progress since they published their Heat and Buildings Strategy in October 2021. The council concluded that

“most of the Government’s proposals or plans fail to deliver progress towards—or even actively hinder—a net zero carbon built environment.”

In its Review of Energy Policy 2022, the UK Energy Research Centre is equally scathing.

I hope that the Government will take note of these telling criticisms and do something in the Bill to rectify that.

[Lord Lennie (Lab)]

My Lords, I thank noble Lords who have spoken in this debate so far. We on the Labour Benches certainly welcome Amendment 192 in the names of the noble Baronesses, Lady Sheehan and Lady Hayman, and others, which would create a requirement to publish a national energy demand reduction strategy. It seems an obvious point to make.

We received some information from Energy UK. It says that, although we cannot deal with the current crisis in this Bill, it can ensure that long-term strategies are put in place to tackle the energy efficiency of the UK’s housing stock. This powerful point was made by the noble Lord, Lord Foster. If we do not have targets to measure it against, we cannot really manage it; we just have—I do not quite know what—a sort of wish list, I suppose. We support the targets suggested by the noble Lord, Lord Foster.

The Bill outlines its intention to create powers to remove the European energy performance of buildings directive, or EPBD, requirements in the UK. Those requirements are not perfect, but they have been in place in the supply chain, effectively delivering energy efficiency measures and low-carbon technologies. How will the Government safeguard against the potential for the UK to roll back on energy performance of buildings regulations when we remove the European energy performance of buildings regulations? We risk falling behind the rest of Europe, if we have not done so already, in this space.

We also need to see the detail regarding how the Government will safeguard against the potential for the UK to fall behind the rest of Europe. We need clarification on what measures the Government will take to ensure that all buildings are fit for the future, given the lack of measures in the Bill to reform planning and building regulations. The latter requirement could also be backed by the introduction of a net-zero test, as previously set out, but what measures will the Government take to ensure that all buildings are fit for the future, given the lack of measures in the Bill to reform planning and building regulations or set specific targets for delivery?

Finally, in relation to what the noble Lord, Lord Foster, said about the 19 million homes requiring energy efficiency measures to be put in place pretty quickly, I recommend to the Government Labour’s warm homes plan, which will deliver fully costed upgrades to 19 million homes, cutting bills and creating thousands of good jobs for the future.

Energy Bill [HL]

Baroness Sheehan Excerpts

Committee stage
Monday 12th December 2022 Grand Committee

[Lord Naseby (Con)]

On Amendment 121, the Minister knows as well as I do that extensive work is being done on a 20% hydrogen/natural gas trial to provide central heating, et cetera, in homes. If that is the situation, either this amendment should be accepted or perhaps the Minister could explain how it will be possible for that work to continue.

[Baroness Sheehan (LD)]

I rise in support of Amendments 117, 118 and 122. If we are to move towards cleaning up heat, we really need to get on with it and put sensible deadlines in place rather than leaving it open-ended, as it currently stands in the Bill.

Amendment 118 tightens up what needs to happen by when and makes some very sensible suggestions on timeframes for

“the banning of the installation of unabated gas boilers in new properties from March 2025 … the banning of the sale and installation of unabated gas boilers in all properties after March 2035.”

We need to get on with this. I support the amendment wholeheartedly.

Likewise, Amendment 122 would introduce a deadline

“to include the number of heat pumps in the latest figures on recommendations from the CCC.”

On Amendment 121, like the noble Baroness, Lady Worthington, I add my note of caution about reliance on hydrogen. It is an unproven technology. There are ample studies and research that point to there being substantial barriers before it can be delivered at a low enough cost. Not least, there are technical difficulties: we know that the existing pipelines will not be suitable. So it will not be a straightforward case of replacing a natural gas boiler with a hydrogen or blend boiler. There are far greater changes that need to be made to the whole infrastructure before deployment.

[Lord Callanan (Con)]

My Lords, I will start with my Amendments 123 and 124. Amendment 123 seeks to provide additional clarity to Clause 100. Clause 100(1) provides examples of how targets for a low-carbon heat scheme may be set. The amendment’s addition of proposed new subsection (2A) clarifies that an average appliance efficiency or emissions intensity target could apply to all of a given manufacturer’s heating appliances sold in the UK, whether or not they were sold or installed by the manufacturer itself. This had been explicit in one of the examples in the list in subsection (1) but not in others. The Government believe that it is prudent to make this explicit and it provides additional clarity.

The Government have tabled Amendment 124 purely to correct a minor drafting error in Clause 100(4), replacing “activity” with “appliance” so that the subsection has its intended meaning.

Moving on to the amendments tabled by other noble Lords, I will start with Amendment 117 from the noble Baroness, Lady Worthington. The Government have always been clear that they intend to introduce the low-carbon heat scheme provided for by this chapter in very short order; namely, from 2024. However, it is the Government’s view that it would not be appropriate to incorporate a timeline into the Bill. If the noble Baroness will take my word for it, we intend to get on with this fairly quickly. It is important that the legislation retains the opportunity, if necessary, to respond to any unforeseen changes in market conditions, et cetera, and to ensure that the necessary administrative and enforcement systems are established. We are indeed looking at the appropriate enforcement mechanism at the moment.

I turn to Amendment 118, the first of four in this group in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I also thank the noble Baroness, Lady Sheehan, for her contribution. This amendment would require there to be a link between the introduction of a low-carbon heat scheme and a ban on the installation of gas boilers in new-build and existing properties respectively.

Noble Lords will be aware that the Government will introduce a future homes standard in 2025, which will effectively require that new properties are equipped with low-carbon heating and high energy efficiency, avoiding the need for future retrofitting. New properties would be taken care of in that respect. It would be premature to decide exactly what policy approaches will be best suited to implement the phase-out of natural gas boilers in existing properties.

I do not believe that it is helpful to create a dependency between the ability to launch a scheme on the one hand and a particular, separate measure such as an appliance ban, as the amendment proposes, on the other. That would risk delaying the introduction of such a scheme altogether.

On Amendment 119, the Government have been clear that a range of low-carbon technologies are likely to play a role in decarbonising heating. District heat networks have an important role to play in all future heating scenarios, as do electric heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting gas networks to supply 100% hydrogen for heating. As the noble Baroness, Lady Sheehan, said, it is indeed a considerable challenge, but we need to do the studies to work out whether it is feasible. Of course, other technologies may also play a supporting role.

To establish whether or not it is a feasible technology, the Government have an extensive programme of work already under way to develop the strategic and policy options for all these technologies and for different building segments. Another plan, seeking restrictively to prescribe the right solution for all properties now and out to 2050, is not particularly necessary or helpful.

I thank my noble friend Lord Naseby for his contribution on Amendment 121. This amendment would expand the potential set of low-carbon heating appliances that could be supported by a scheme established under the power in this chapter. However, I emphasise that the set of potential relevant low-carbon heating appliances established in this clause is solely for the purposes of a scheme under this power. It does not in any way serve as a comprehensive statement of all potential low-carbon heating appliances, and it has no wider bearing on what could be considered low-carbon heating appliances in any other policies, schemes or legislation.

The Government recognise that low-carbon hydrogen could be one of a few key options for decarbonising heat in buildings. To that end, the Government are working to enable strategic decisions in 2026 on the role of hydrogen in heat decarbonisation; I note the scepticism of a number of noble Members about this. The Government will bring forward the necessary policies and schemes to support the deployment of hydrogen heating, depending on the outcome of these decisions. We will also shortly consult on the option of requiring that all domestic gas boilers are hydrogen-ready from 2026. Since the scheme provided for by this measure would not be suitable or necessary to support the rollout of hydrogen-using or hydrogen-ready heating appliances, it would not be helpful to expand the scope of the power in this way.

Finally, Amendment 122 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, would require that three specific targets be incorporated into regulations for a low-carbon heat scheme. Again, the Government believe that targets are best set and adjusted in the scheme regulations, based on an assessment of the market conditions at the time, rather than in the enabling legislation in advance.

I turn to the specific targets that the noble Lord proposed. I have said a number of times that the Government’s ambition is to develop the market towards 600,000 heat pump installations per year in 2028. That is what we assess to be a scale necessary for and compatible with all strategic scenarios for decarbonising heating by 2050. Although the Government have clear plans to support industry to build a thriving manufacturing sector for heat pumps in the UK, we do not believe that a production quota is an appropriate way to achieve this.

In the light of what I have been able to say, particularly on the consultation, I hope that the noble Baroness, Lady Worthington, will agree to withdraw her amendment.

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[Baroness Worthington (CB)]

My Lords, I am sorry to speak a second time—I am not sure whether I am allowed—but may I speak to Amendments 130A and 130B? In my excitement I forgot to speak to them. Those amendments in my name seek to address the carbon removals questions in the Bill.

Amendment 130A is to try to interrogate the Government’s amendments to the definitions of carbon removals, as stated in the Climate Change Act. My amendment would reinstate reference to forestry and other physical activities in the UK. I think this amendment is necessary because we do not want to see definitions used in the Climate Change Act, which are foundational to our understanding of what we need to do to tackle climate change domestically, to somehow allow vague processes such as the purchasing of offsets or some other financial instrument to be eligible for the net-zero accounting. I seek reassurances on that. I also seek reassurances that we acknowledge that forestry and land use need to be referenced alongside mechanical sinks to keep the system holistic and inclusive. So I am probing on those two questions: forestry and land use, and making sure we are talking about physical activity and not financial chicanery or accounting trickery.

I feel quite passionate about Amendment 130B. I am sure the UK will emerge as a world leader in this regard. If we are to become the centre of a market or set of policies that are economy-wide in decarbonising our system, we will have to get to grips with the MRV—the monitoring, reporting and verification of carbon removals—to get to a net-zero position. It is hugely important. When you burn a tonne of fossil fuel the impacts are certain and very low in error bars, but when it comes to the biospheric removal of carbon in particular, there are huge uncertainties and an absolute paucity of data. It really has not been looked at comprehensively enough, especially now that large sums of money may be resting on this approach to reaching net zero.

I urge the Minister and the department to really assess what the UK could do to set some gold-standard regulations regarding carbon removals. Let us start the debate with this Bill, pursue it and continue with it. Given that we are at the forefront of reaching these challenging carbon budgets that we have set ourselves, I have no doubt that carbon removals will have a role to play. But let us do it in a world-class way and not use it as a weasel-word excuse for allowing fossil fuels to continue, without the certainty that those removals are genuine, additional and permanent and can offset the almost permanent damage that we know occurs from the release of fossil fuels. It is hugely important that we do this. I tabled this as an opportunity to spark a debate, and I hope we will come back and consider it in more detail. The UK has a great potential role to play in this area.

[Baroness Sheehan (LD)]

My Lords, as a member of the House of Lords Science and Technology Committee, I took part in the report we produced on batteries. The genie is out of the bottle on domestic EVs. That is going to happen; I think we are well on the road to better and better battery technology.

When the committee examined transport, we heard that batteries are heavy—a battery to power a bus would be very heavy—so there is a role for hydrogen in public transport for return-to-base vehicles where hydrogen does not have to be moved too far. Where there is a limited number of filling stations, that is a model that could work. Shipping and heavy industry, such as cement, are other applications for hydrogen.

My noble friend Lady Randerson mentioned fuel cells. We found in our report that for some reason the Government are not backing research on fuel cells to the extent that they could. Fuel cells would be another potentially sensible source of power for heavy transport vehicles, so I support the basic thrust of my noble friend’s amendment.

Amendments 130A and 130B, tabled by the noble Baroness, Lady Worthington, are really crucial. We are going to have to look at carbon removals, as the noble Baroness, Lady Jones, said earlier. We need to do it in a way that gives confidence against greenwashing, of which there is far too much. The only way to do that is if accounting for carbon is rigorous.

--- Later in debate ---

[Lord Lennie (Lab)]

Can I briefly support that? The place to put it is under protection of consumers in the Bill. There is a clause entitled “Regulations for protection of consumers”, and the right not to take part in the trial would be one of those protections.

[Baroness Sheehan (LD)]

I completely agree with the noble Lord, Lord Lennie, and the noble Baroness, Lady Worthington, on this—but could I ask the Minister a separate point about how the trials will be carried out? The Minister said they were going to provide evidence. I want to ask how long the trials will last. One of the issues with hydrogen, if I understand it, is its impact on the pipes that carry the gas to the boilers, et cetera. Those pipes perish in time, because the hydrogen makes them brittle in a way that natural gas does not. Of course, that will lead to cracks and leakages. Will the trial take place over a long enough period to see whether that is indeed the case and what the jeopardy from those pipes might be?

[Lord Callanan (Con)]

Let me reiterate once again. Noble Lords are getting involved in the detail of what these trials will comprise—timescales, consumer protections, et cetera. This Bill is about giving the Secretary of State the powers to make the regulations, which will then come back this House, when I am sure that we will have a massively long and involved discussion about all these precise and important details—but this Bill is not the place.

Energy Security

Baroness Sheehan Excerpts

Monday 5th December 2022 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I thank the Minister for the Statement that we are discussing now. The key announcements in the Statement—the green light for Sizewell C and the return of the Energy Bill—are both overdue, but better late than never, and we welcome both. Nuclear must play a role as part of the balanced pathway to net zero, as the Climate Change Committee says, and we on these Benches support new nuclear projects, so it is about time that the Government finally gave Sizewell C the go-ahead. The reports a month ago that it was being put under review were very worrying after a decade of government dithering, so we are pleased that this has been put to bed.

We also welcome the return of the Energy Bill, which of course should never have been paused while Conservative Party infighting took precedence over national need. We look forward to picking up where we left off next week. Given that this is the second Government since it was paused, my first question is: can we expect any government amendments to the Bill when it returns?

As for the third announcement in the Statement, on ECO+, a drive towards energy efficiency is needed but in reality, at the current rate of installation, the 19 million homes below energy performance band C will not reach that level until the next century—yet this announcement gives neither extra resources to fix that nor any indication of how it will change. Perhaps the Minister can elaborate a bit further and offer some reassurance here.

While we are on energy efficiency, it is one of the best ways to reduce reliance on fossil fuels, but the Government have failed on that over and again. Household energy bills are £1,000 more as a result, and earlier this month we had another reheated announcement with no new resources for energy efficiency. When are the Government going to get a grip on this issue?

As ever, the real problem with the Statement is everything that is not in it. New nuclear and Sizewell C in particular are indeed positive steps, but they are just one part of the pathway to net zero. They simply must be accompanied by a sprint for cheap, clean, homegrown renewables, yet all that we have seen recently instead is another round of government infighting, this time on onshore wind.

Just this week, new research from the ECIU has found that if the moratorium on onshore wind had not been put in place in 2015, turbines could have built to power 1.5 million homes through this winter, reducing the reliance on gas enough to heat more than half a million extra homes. The research also estimated that this will be costing £800 million on bills this winter, so why have the Government not yet cleared this up?

Unless the Minister answers that the Government will finally act in the national interest and end the ban, I am sure his argument will be that it is just up to local consent. But RenewableUK warned this weekend that a planning rule means that renewed permission must be sought from local authorities for every onshore wind farm after an initial 25-year lifespan, with at least two coming up for renewal next year. So we could see existing onshore wind farms starting to disappear, at a time when we desperately need more. It says that the UK could lose 2 gigawatts of capacity by 2032 because of this—more than 14% of the total from this energy source. So when will the Government finally bring the consenting regime in line with other infrastructure?

There is one more thing on onshore wind. In the other place on Tuesday, the Business Secretary suggested that one reason for avoiding onshore wind was that wind turbines are too big to be constructed onshore. As Greenpeace and Friends of the Earth said, this is complete nonsense. So can the Minister confirm whether the Government are aware that the biggest barrier to the development of onshore wind is not turbine size but their policy?

On solar, the story is the same. Back in August, the Prime Minister said he would

“protect our best agricultural land”

from swathes of solar farms—before an apparent change of tack. But just last month the new Environment Secretary repeated this sentiment. This would be a mistake: blocking solar risks preventing the equivalent of 10 nuclear power stations-worth of power being built. It is one of the most cost-effective ways that renewable energy technologies can be deployed today and, importantly, deployed rapidly, with sites able to begin supplying electricity to the grid within six months of beginning construction.

The Committee on Climate Change’s projections state that 40 gigawatts of installed solar capacity will be needed by 2030 to keep on track to achieve net zero by 2050. At the end of 2021, the total installed capacity of solar PV in the UK was under 14 gigawatts. The previous Environment Secretary wanted to block solar power on land entirely; the current one is openly hostile. Neither of these stances will allow us to build the necessary capacity to reach net zero by 2050, let alone any sooner. Will the Secretary of State therefore rule out the plans to block further solar power on land?

I have one final question. Amongst all this, oil and gas giants still enjoy a massive loophole for investing in more fossil fuels. Why do the Government think it right to be leaving billions of unearned, unexpected windfall gains in the pockets of oil and gas giants, forcing the public to pick up so much more of the cost of this support in higher borrowing and taxes in the future?

[Baroness Sheehan (LD)]

My Lords, I thank the Minister for bringing the Statement to the House. I of course also welcome the return of the Energy Bill.

I will start with nuclear, and the Government’s generosity with British taxpayers’ money in rebooting Sizewell C. I understand that common sense has prevailed: reports are circulating that China General Nuclear has been bought out. Can the Minister confirm that that has in fact already happened, and is not just an aspiration? Can he also comment on a recent article in the New Civil Engineer about fears of an 11-year delay to Hinkley Point C, on the back of news of a new contract between the Government and EDF, stipulating that Hinkley C will still be funded even if it does not start operating until 2036? If this were to be the case it would not be surprising, since no nuclear reactor has ever been built on time or on budget.

Finally on nuclear, the Secretary of State in his Statement cites it as a key plank in our bid for energy sovereignty. Can the Minister say where the raw uranium fuel for nuclear power generation originates from? The last time I looked, we do not mine any of it in the UK. I hope the Minister will agree that nuclear cannot be said to be the indigenous energy we need in the same way that energy farmed from our sun, wind and waves undoubtedly is.

Intermittency concerns about energy from renewables are often cited as a reason why nuclear is necessary. However, those concerns have been comprehensively debunked. There are many, much cheaper answers to intermittency if the Government were but minded to invest in them seriously. Energy storage is an example, including in the form of green hydrogen generated from the excess wind power that the grid is unable to harness in real time. There is also pumped hydro, more solar and onshore wind geographically spread out, marine energy, smart energy and demand management et cetera.

I have not even mentioned interconnectors. Can the Minister outline the Government’s view on the Morocco-UK interconnector power project? A project that is expected to provide low-cost, clean energy to more than 7 million UK homes by the end of 2030 with no taxpayer inputs and create 1,350 permanent jobs in the UK is surely worth a mention in any government energy Statement in 2022.

Moving on to fossil fuels, why do the Government persist in preferential treatment for the fossil fuel sector, for example, through subsidies? The OECD reports UK subsidies in 2021 of £200 million on decommissioning, £250 million on oil and gas investment, £1 billion on fuel oil, £1.5 billion on ring-fenced oil and gas trade corporate income tax relief and £2.1 billion on red diesel fuel. That is £5 billion of subsidies, which is unjustifiable.

On investment allowances, I agree with every word that the noble Lord, Lord Lennie, said. In the windfall tax paid by oil and gas extractors, they benefit from an investment allowance. However, no equivalent relief is available for renewable energy generators. This is nothing short of outrageous and will disincentivise investment in that sector.

Finally, on decommissioning, the subsidy regime may be even more costly than the £200 million reported by the OECD, because decommissioning relief deeds risk leaving taxpayers paying out to companies which never made a contribution to the Exchequer. That is madness. Can the Minister say to what extent the Exchequer is exposed to these types of deed? Currently we have no visibility of the assumptions behind those deeds or the liability that might result from them.

In conclusion, a Government who produce a Statement on energy needs which does not give immediate full-throttle support and investment impetus to energy efficiency of the built sector, on-ground solar, onshore wind and community energy projects are a Government who do not get the urgency of the situation the planet faces. The lack of ambition on energy saving is breathtaking. These are the low-hanging fruit which can do so much to wean us off expensive and immoral payments to the Russian pariah state as well as other unstable regions of the world. The Government could and should have done much more on these easy wins if they are serious about energy sovereignty. I am sure that many of these things will come up in the Energy Bill that we will debate next week.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I thank the noble Lord, Lord Lennie, and the noble Baroness, Lady Sheehan, for their questions. I will start with nuclear, and I thank the noble Lord, Lord Lennie, and Labour for their support for it. The noble Baroness, Lady Sheehan, and the Liberal Democrats are absolutely wrong on this. The idea that we can satisfy all of our baseload capacity from a little bit of pumped hydro storage, a few batteries and a bit of hydrogen is nonsensical, I am afraid. If the Liberal Democrats are serious about ever being in government, they need to seriously address these issues of how to provide long-term energy security. I am afraid that, at the moment, nuclear is the only carbon-free option that will do so at scale. The option that the noble Baroness talks about produces puny amounts of power.

In the British Energy Security Strategy, we provided a clear, long-term plan to accelerate our energy transition towards net zero and away from fossil fuel prices set by global markets beyond our control, and we are making serious progress towards that. We have more offshore wind than the rest of Europe put together; we have the second-largest offshore wind sector in the world, and the contracts for difference scheme has made a massive difference. I get that the Opposition think we should go even further and even faster, and we are expanding our ambition, but the turbines are being rolled out at a rate of many hundreds a year, and there are a number of supply chain limits. I assure the noble Lord that we will continue to roll them out because, at the moment, it is the cheapest form of generation—albeit intermittent, and we therefore need to provide back-up power for it.

That is why the investment in nuclear was announced. We are confirming the first state backing for a nuclear project in over 30 years, with a £679 million investment to support the UK on our journey to greater energy freedom. We are taking a 50% stake in the project’s development, with EDF. Sizewell C is set to generate reliable and clean homegrown electricity for 6 million UK homes, but it will of course also deliver thousands of high-value jobs in East Anglia and nationwide. We are also working hard to set up Great British Nuclear with support from the industry and our expert adviser, Simon Bowen. Great British Nuclear will aim to develop a resilient pipeline of new-build projects, supporting them through every stage of development. There are a number of exciting developments, such as small modular reactors, which will come on stream in a few years’ time.

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[Lord Callanan (Con)]

I do recall the Question from the noble Baroness. We do not have precise data on how many digital advertising screens there are in the country and what energy they might be using. I do not think we want to get into micromanaging people’s energy consumption to that extent. We do not want the whole country to be in darkness, and there will be some important display screens that provide key information for people—so getting into heavy-handed government dictating to companies when they can switch their advertising screens on or off might be a policy beloved of the top-down, controlling Greens, but I do not think it is a practical solution.

[Baroness Sheehan (LD)]

My Lords, if there is time I would like to ask another question and put the record straight on what I said about energy efficiency. I am fully aware that the Statement mentions energy efficiency, but I was referring to the lack of ambition the Government are showing. I think 15% by 2030 is really not good enough. We need to do so much better, and it is so easy to do so much better that it really is a missed opportunity.

Secondly, I want to talk about the interconnector from Morocco to the UK. The 3.8 gigawatts of energy it will generate is not an insignificant amount. It could help enormously with intermittency. The Minister mentioned the length of the cable that will be required. It will be immensely long, but the good news is that that cable will be manufactured in the UK, in Hunterston in Scotland, Port Talbot in Wales and parts of the north-east of England—so it is a good news story all round and I hope the Government will give it their full support.

[Lord Callanan (Con)]

I think I said in response to the noble Baroness’s earlier question that I welcome this fantastic project and wish the developers well in producing it, particularly as I believe that it can be built without taxpayer support, so we should welcome it even more—and of course we will do everything we can to support such a fantastic achievement. If it can be built, it will produce a very useful contribution to the UK’s energy security.

I have to disagree with the noble Baroness, who does not think a target of 15% by 2030 is enough. I can assure her, looking at the analysis of it, that it is an extremely ambitious target. It will require a huge amount of resource to be put into the sector, both public and private, in order to achieve such a target—but if you do not reach for the stars you will never make it, and it is important that we set an ambitious target. We will do all we can to achieve it.

I said in my initial answer that we are spending £6.6 billion on energy efficiency schemes in this Parliament; the Chancellor committed another £6 billion for 2025 to 2028. We are also consulting on the £1 billion ECO+ scheme. We are doing an awful lot in the energy efficiency space and the answer will actually not be in total cash resources, but in the building up of the supply chain, which is constrained in many aspects at the moment. That is what is providing me with food for thought: to make sure that we actually have the resources on the ground, in terms of materials and personnel, to implement all these ambitious schemes.

COP 27: Commitments

Baroness Sheehan Excerpts

Thursday 24th November 2022 Lords Chamber

[Baroness Sheehan (LD)]

My Lords, it is always a pleasure to follow the noble Baroness, Lady Hayman. I add my support to her words on onshore shore: it really is a missed opportunity of mammoth proportions. It is low-hanging fruit, so we should grab it and not put artificial barriers in its way. I also thank the noble and right reverend Lord, Lord Harries of Pentregarth, for securing this very important debate. I add my congratulations to the noble Lord, Lord Leong, on his excellent maiden speech—it will be good to have yet another strong voice in support of tackling climate change.

I declare my interest on the register as a director of Peers for the Planet. I begin by saying a few words about why the COPs—the Conferences of the Parties—matter. Recently, there has been much said about them being only a talking-shop, where promises are made but not followed through—much of which is warranted. However, while there is much truth in this assertion, it misses the bigger picture. The COPs are important for several reasons.

First, they have great convening power, particularly of world leaders—witness our own Prime Minister bowing to the inevitable and succumbing to the pressure to attend COP 27. The power of crowds is a sociological phenomenon and describes the crowd’s ability to exert influence. When world leaders are physically together, the atmosphere palpably changes to one of “can do”, and agreements are reached which previously seemed impossible. Secondly, COPs give climate scientists a forum where they have the attention of world leaders. Thirdly, they are important in giving voice to smaller developing countries which are already suffering massively under the impact of climate change. It allows them to share a stage with the big emitters. Last but not least, COPs attract a media gathering par excellence, with a resultant high profile of the main issues under discussion. For a period of two weeks, climate issues are at, or very near, the top of the news agenda.

Without the COPs, progress that has been made to date would not have been possible. The rise in energy from renewable sources has been given momentum by these annual talking-shops, and the role of fossil fuels is becoming more marginalised. We could all hope for a far faster elimination of fossil fuels, but I think that is only a matter of time, given that the economics are so much against fossil fuels at the moment.

What has the 27th Conference of the Parties achieved and not achieved? I will focus primarily on two issues: first, one that is seen as a success of this COP, that of climate justice for vulnerable countries, known as loss and damage; and, secondly and to a lesser extent, on fossil fuels, a lack of action on which can be seen as a shortcoming of this COP.

First, the bald fact is that loss and damage matters, because countries in the global South cannot lift themselves out of poverty if they face increasing devastation from climate-related disasters, which for some of them are becoming routine occurrences. Failure to tackle the climate crisis has been perpetuating reliance on a humanitarian aid system that was not designed to respond to cyclical shocks of such scale and frequency. The polluter pays principle is well established, but are we really saying that it is only applicable for western entities? Why does it not apply to countries in the global South that are bearing the brunt of climate devastation, which they, in practical terms, did not cause? Justice must prevail. It is utter hypocrisy to insist that developing countries must reduce their reliance on fossil fuels when they are the ones suffering the effects of our historic emissions today, with, to date, no funds in place to help them cope with the loss and damage they suffer. So I welcome the major achievement of COP 27 in establishing for the first time a fund for loss and damage. This is a historic achievement, and it is crucial that it is urgently operationalised so that countries on the front line of the climate crisis can quickly access fair and automatic financial assistance and support in the wake of immediate climate impacts and slow-onset impacts such as sea level rise.

I have two questions for the Minister. How does His Majesty’s Government believe that a loss and damage finance facility should function, and how should contributions be calculated? Will the Government consider a debt swap arrangement, like the one advocated by the Maldives, where the debt of vulnerable countries is cancelled in exchange for commitments to invest in high-quality decarbonisation projects, which they would dearly like to do but cannot afford to do both?

Secondly, I turn to fossil fuels. While emissions already in the atmosphere mean that further heating of the planet and associated loss and damage are unavoidable, the best way of minimising loss and damage is to ensure that fossil fuels stay in the ground. It is deeply concerning that countries have failed to agree on an equitable and urgent phase-out of all fossil fuels at COP 27, and, as hard as it may be to believe, it is a fact that coal, oil and gas still enjoy massive financial support from both state players and commercial entities.

The COP 27 decision text agrees to phasing out inefficient fossil fuel subsidies. Our Government have argued that they do not give any fossil fuel subsidies because they use an International Energy Agency definition of consumption subsidies as

“measures that reduce the effective price of fossil fuels below world market prices”.

However, the IEA does not claim that this is the only type of subsidy. Indeed, the OECD has done a more detailed analysis of consumption and production subsidies, which found that UK subsidies in 2021 gave £200 million for decommissioning, £250 million for oil and gas investment, £l billion for fuel oil, £1.5 billion for ring-fenced oil and gas trade corporate income tax relief and £2.1 billion for red diesel. Each of these measures provides support to the oil and gas industry which could otherwise be supporting rollout of low-carbon electricity, heating and transport.

Are our Government committed to phasing out all forms of fossil fuel subsidy, and in a way which supports the UK’s net zero objective by transferring the support to low carbon technology? We must walk the talk at home and fulfil promises made on the world stage to phase down reliance on fossil fuels. A year ago at COP 26 we asked countries to accept that fossil fuels must be phased out. How does the Minister reconcile that statement with the announcement that we will resume the issuing of new licences for oil and gas exploration? The fact is that just a few weeks ago, the UK opened up a new licensing round to allow oil and gas companies to explore for fossil fuels in the North Sea, despite threats of a legal battle from climate campaigners. Almost 900 locations are being offered up for exploration.

Finally, will the Minister urge the Government to revoke licences for North Sea oil and gas exploration, scrap plans for the Whitehaven coal mine in Cumbria, and urgently roll out a just transition to renewables, which would secure our energy supply and prevent further emissions in the atmosphere devastating communities and the environment?

Battery Strategy (Science and Technology Committee Report)

Baroness Sheehan Excerpts

Wednesday 23rd November 2022 Grand Committee

[Baroness Sheehan (LD)]

My Lords, I start by commending the noble Lord, Lord Patel, for his skill in chairing the committee that put together this report. I am proud to say that I am a member of that committee. I also congratulate him on the way in which he introduced the debate, which leaves me with very little to say except that I agree with the remarks that he has already made.

It is a shame that it has taken over a year since the report was published for it to come before your Lordships’ House for debate. Batteries powered by zero-emission energy sources are on the front line of our battle against climate catastrophe, and this report concludes that the Government need to do much more to secure Britain’s place in the forefront of the battery revolution.

The bans on the sale of new petrol and diesel cars and vans by 2030, hybrids by 2035 and heavy goods vehicles by 2040 were welcome announcements, given that emissions from the transport sector make up about one-fifth of all greenhouse gas emissions in the UK, and had shown themselves to be resistant to efforts to bring them down. However, ambition without action is pure hubris and doomed to failure. The committee’s conclusion that it could not identify a government plan for the rapid action needed to achieve the Government’s stated aims has not been disproven with the passage of time.

Since the report was published, there has been a revolution in the car industry. Changes have been hastened by the unpredictable events of Russia’s invasion of Ukraine and the ensuing chaos in the production and cost of fuel. The sales of new EVs in the UK have increased enormously. In the half-year to June 2022, pure-battery electric vehicles enjoyed the biggest growth in any fuel type, with 56% more registrations—and that was in the context of an overall market that shrank by nearly 12%. Furthermore, despite the worldwide semi- conductor shortage and Covid lockdowns in China, global sales of EVs rose 61% in quarter 2 of this year.

Our car manufacturers are first class, but the sharp increase in sales of EVs is steeper than predicted. Can they meet the numerous challenges? For example, we will need a secure supply of critical resource materials— the noble Lord, Lord Lilley, spoke at length about those—chief among them lithium and cobalt. So the Government’s publication, finally, of the 2022 critical minerals strategy is welcome. Some might say it is too little, too late, but it is here now. However, it lacks any statement of where we might find some resilience in the supply of these critical minerals. These supply chains are always risky and fragile and are currently disrupted due to the war in Ukraine, Brexit, Covid-19, and other conflicts in producer regions. So the Government miss a trick when they fail, yet again, to address demand reduction to increase resilience.

According to research by Greener UK—and I thank it for its briefing—reducing demand for electricity in our homes by heat pumps, and on our roads by improving public transport infrastructure, are two examples that could halve the UK’s total future use of critical resources by 2030, compared with the current trajectory. This is a no-brainer, so why are the Government still resistant to action on reducing demand for electricity?

Secondly, I urge the Government, through the Minister, to address recommendation 30 in the report that the Government should set out clear plans for developing industrial-scale recycling of batteries in the UK, including ecodesign rules to make them easier to disassemble. It is another oversight of the critical materials strategy in that it fails to expedite a circular economy and create a market for safer, cheaper and more secure supply chains of recycled materials for battery manufacture. The EU has already introduced rules, and it is time that we tried at least to match them.

We have an excellent car manufacturing industry, but the report concludes that we risk losing it to our European competitors if we cannot meet the deadline of 2027, by when the rules of origin conditions for sale of vehicles to the EU will kick in. This will require the battery in EVs to be wholly made in the UK or EU, and 55% of the rest of the car to be made in the UK or EU, for tariff-free access to the EU. At our current trajectory of battery manufacturing capacity, we will lose production to the EU or other competitors abroad. In October, BMW announced that its hatchback and small SUV electric Minis will start being built in China. Its electric Countryman model will be built in Leipzig, Germany. The noble Lord, Lord Patel, has cited several other examples. This, I fear, is a sign of things to come.

Can the Minister say what urgent steps the Government are taking to meet the 2027 deadline agreed in the TCA? It might be too late for some of our car manufacturers, but it might protect others. In his response, can he reference the situation at Britishvolt and bring us up to date with the Government’s views on its future viability?

In 2017, the then Business Secretary, Greg Clark, announced the launch of the £246 million Faraday Challenge to establish the UK as world leader in battery technology. It was a start, but since then there has been little follow-through. Investor and industry confidence has been further damaged by the abolition of the Industrial Strategy Council.

In conclusion, I refer to recommendation 31 of the report, that the

“Government should explain to industry what will replace the industrial strategy”—

something that is sorely needed if we are to stay at the forefront of next-generation batteries and realise a successful future for our fuel cell manufacturers.

Energy Supplies

Baroness Sheehan Excerpts

Wednesday 12th October 2022 Lords Chamber

[Lord Callanan (Con)]

I am happy to agree with my noble friend that energy from waste is an excellent production technique. There are many successful energy-from-waste projects; it is another technology that will make a contribution to our energy supply.

[Baroness Sheehan (LD)]

My Lords, a short while ago in the Commons, the Prime Minister stated that fracking would go ahead only where there was community support, and the Minister has just corroborated that. Can he categorically state that community support will be gauged neither by the fracking companies themselves, of which there is a rumour, nor by Jacob Rees-Mogg’s department, given the debacle of his consultation on imperial measurements, in which “no” was not an option?

[Lord Callanan (Con)]

I am happy to hear from the noble Baroness the great news that the Prime Minister agrees with me and has said the same thing, which is always good for a Minister to hear. However, the reality is that the issuing of hydraulic fracturing consents is a matter for BEIS and the Secretary of State for BEIS.

Prepayment Meters: Pricing

Baroness Sheehan Excerpts

Tuesday 11th October 2022 Lords Chamber

[Lord Callanan (Con)]

The noble Baroness makes a very important point. Obviously, we are doing everything we can to make sure that there are no blackouts, but if that very unlikely eventuality comes to pass, of course we will want to do all we can to make sure that the most vulnerable are protected.

[Baroness Sheehan (LD)]

My Lords, I am sure the Minister will agree that although the situation now with the differential is not as extreme as it used to be, we could easily go back to a situation in which those on prepayment meters will be paying the highest tariff. If the Government were minded to, they could easily remedy the situation; for example, simply by removing the ability of Ofgem to set differential rates for people with prepayment meters. If they did that, that would sort the problem. Does the Minister agree that this would do the job and would get rid of the injustice whereby the poorest are being asked to pay the most?

[Lord Callanan (Con)]

I refer the noble Baroness to the Answer I gave earlier: using a prepayment meter is not the most expensive way, and many customers choose to do it for their convenience. The licensing conditions for Ofgem reflect the cost of serving different groups of customers. Of course, we keep these matters under review, but if we equalised it, then those paying by direct debit—often those who are fuel poor as well; there is a higher percentage of customers on that level —would end up paying more. There are no easy answers to this.