Revised Draft Overarching National Policy Statement for Energy (EN-1)

Baroness Smith of Basildon Excerpts

Tuesday 11th January 2011 Grand Committee

[Baroness Smith of Basildon]

My Lords, many of us here today saw the old parliamentary year out with an energy debate, and we are seeing the new year in with another one. I hope that that is not just an accident of parliamentary timing by the usual channels; I think that it shows the importance and urgency of the issues before us today and the other issues that we are debating. Today’s debate is welcome. I thank the Government for ensuring that we have two debates; there will be a separate debate later this week on the nuclear statement.

Unfortunately, I was not part of your Lordships’ House during the previous debates. Having read them, though, it is clear to me that the Minister has taken on board a number of comments that were made, which has been welcomed by the noble Lords, Lord Giddens, Lord Teverson and Lord Jenkin of Roding. I congratulate the Government on recognising the scale of the challenge that is before us and on taking on board the comments that have been made. In many ways, these revised policy statements are aspirational, which emphasises how crucial they are—they are the framework under which the decisions, including how we secure energy supplies and the infrastructure to deliver them, will be made in future.

We have heard today that there is evidence of the urgency of the need to address infrastructure. By 2018 one-quarter of our energy capacity will close, and as much as 30 per cent will have to be replaced by 2020. We see many of our nuclear power stations coming to the end of their lives and coal-fired power stations being retired, but at the same time, by the Government’s own projections, we are seeing energy demand increasing and forecast to continue to increase significantly. If we are to meet the nation’s and our citizens’ energy demands, we have to create enough energy generation to meet them at all times.

These are huge issues that, as the statements recognise, can be addressed only by a combination or a blend of solutions. We will need to invest in carbon capture and storage and the rapid decarbonisation of the electricity sector. We will need to see increased capacity in renewables, in low-carbon energy and decentralised energy. As other noble Lords have indicated, we have to take this in the context of other issues under debate. The energy and market reform proposals, although not being debated today, are vital to progress, as will be our forthcoming debate, which I am sure we all look forward to, on the Government’s Energy Bill. None of these issues can be seen in isolation.

Can I first ask the Minister about the process? This has been also raised by noble Lords. The Government’s response to the Select Committee, which was emphasised by the Minister, made it clear that they want the “strongest possible democratic legitimacy” for these statements, and I am sure that all of us would applaud that aim. Now that the Localism Bill has been published, we have had the opportunity to look at Clause 109 on national policy statements and how Parliament should ratify them. Under this clause, if an NPS is an amended version of an earlier proposal, further consultation need not be carried out if the earlier proposal was consulted on and the amendments that have been made do not materially affect the policy. The clause goes on to state that where a proposal is laid before Parliament for approval by the House of Commons, it is not necessary to comply with the parliamentary scrutiny requirements in relation to the proposal, if they have been complied with in an earlier proposal.

I therefore have two questions—and one that occurred to me during the comments of the noble Lord, Lord Crickhowell. The first relates to the definition of material amendments. Perhaps I have picked up on the scepticism of my noble friend Lord Judd about the language. The definition of material amendments is a matter of judgment for the Secretary of State. Would the amendments in these revised documents be classified by the Minister as being material and, as such, if the Localism Bill’s provisions were in force today, would these changes be subject to parliamentary scrutiny, in the way that they are now?

Secondly, what is the level of parliamentary scrutiny that would not be required? Does this mean that if the Secretary of State in future does not consider that any revisions made to the policy statements are not material, parliamentary scrutiny or ratification would not be required? I raise this because, given the significant legal weight that will be given to the national policy statements under the proposals in the Localism Bill to get rid of the IPC, I would totally support the Government’s intention to ensure that these statements have “the strongest possible democratic legitimacy”. What I am not clear about is how this will be achieved under the proposals. It would be helpful if the Minister could clarify and reassure me on those points.

Particularly after listening to my noble friend Lord Judd and the noble Lord, Lord Crickhowell, it strikes me that if the Minister and his colleagues are to take on board comments made in this debate and, as a result, seek to make amendments to the national policy statements, will we have to go through the entire process of consultation, revised documents and procedures in this House again. Or is the debate today simply an opportunity for noble Lords to speak and will have no impact on what can go in the documents and what changes can be made?

Finally, given that the ratification process refers only to the House of Commons and not your Lordships’ House, would it be helpful for the other place if, prior to its deliberations, there were always to be an advisory debate in your Lordships’ House that could help inform the process?

From these statements, there has to be the political will to tackle the issues. As much as we welcome what is in these documents, the Government will want to show that they will put support and investment behind these policy statements for them to be truly effective. In this regard, can I raise two areas of concern? The first relates to another clause in the Localism Bill and the Government’s plans to abolish the Infrastructure Planning Commission and replace it with a new body called the major infrastructure planning unit, within the Planning Inspectorate. When the IPC was established in 2008, the intention was for it to be an independent body with the expertise to make balanced independent decisions without ministerial political influence. It sought to make the planning system for major infrastructure projects quicker, more efficient and set within clear guidelines, whereby it would be more predictable. That laid down the right conditions for investment in the kind of energy infrastructure that we urgently need.

Under the new system proposed by the Government, the new body, the MIPU, will make recommendations to the Secretary of State, who will make decisions in accordance with these national policy statements. The Government will have to ensure that these plans do not add delays to the system or remove the clarity and certainty that the industry needs if it is to invest in energy infrastructure, particularly renewables and, as we will be discussing later in the week, nuclear.

Also, given that the Localism Bill is not due to be enacted until 2012, it would be helpful if the Minister said something about the transitional arrangements and what will happen before the MIPU is established. I am sure he will understand that we are anxious that a further change in the system should not create delays that have a potential impact on energy security.

My other concern is about the investment required. I concur entirely with the noble Lord, Lord Teverson, about the need for certainty in this. Can I ask the Minister for further information on the green investment bank in this regard? We already know that the £1 billion investment being proposed is significantly less than the suggested figure of around £6 billion needed to make the necessary impact, but I know that the Government hope that private investment will be brought in.

Can I share with the Minister one of my concerns about this? The green investment bank will be tempted to invest in and focus on tried and trusted technologies—that is, the safe bets that it is pretty certain will deliver results—rather than seek to develop new, potentially more risky technologies that could have greater long-term potential. Can the Government give any further information about how the bank will operate and how it will guard against those problems?

Turning to the specifics of the documents, I will look at the need case. Although we agree that there is an urgent need for a diverse range of new, nationally significant energy infrastructure—I emphasise “diverse range”—does the Minister consider that enough is being done to avoid this dash for gas without any carbon abatement; and that the case for additional electricity capacity has been effectively made?

In the overarching document it is calculated that the 26 gigawatts of required new electricity energy supply, over and above the 33 gigawatts that would need to come from renewables, would in effect be determined by industry. As the right reverend Prelate the Bishop of Liverpool said, there is a concern that the balance could come largely from gas, thus undermining both the Government’s declared commitment to an energy mix and carbon reduction. Since the earlier NPS, projections for gas demand have changed significantly. It would be helpful if the Minister could explain why that is the case. Given that this is a significant change, when does he think the NPSs will next be updated?

If we look at the new gas capacity in the pipeline—forgive the pun—there is already over 14 gigawatts with consent, being built or still in the pre-IPC regime. There are also further gas and nuclear applications in the IPC system at the moment. The noble Lord, Lord Judd, and the right reverend Prelate the Bishop of Liverpool raised concerns on this issue about the need to assess those applications at different stages of the planning process. Obviously, the Government want to encourage greater capacity for renewables as part of the diverse range, but there is a concern that the new gas and nuclear applications could crowd out the renewables. Can the Minister give an assurance that this will not happen? How will he ensure that we strengthen our renewable capacity as part of ensuring that we have a diverse range of new energy infrastructure and meet our target for renewables of 15 per cent by 2020?

The noble Lord, Lord Giddens, spoke of progress on renewables in Spain, particularly on wind energy. Does the Minister share my concern that Renewables UK has reported a 50 per cent drop in planning approvals for wind farms in England over the last year? What plans do the Government have to reverse this trend?

Looking at the figures for projections of capacity in part 3 of the overarching statement, the Minister will be aware of the potential for a significant energy gap. At the same time, there are doubts about the assessment on which this is based. There will need to be a more thorough assessment of electricity demand and generation, including of that already in the pipeline of the planning process. It would be helpful and I would appreciate it if the Minister could share that information with both the House and the wider public as he gets it.

These are highly complex issues. Significant planning and risk analysis is essential. If, for any reason, any of the assumptions on which the Government have based their plans are wrong, or if there are delays in providing infrastructure caused by planning or other reasons, the Government will have to find other ways of meeting the targets to ensure energy security and low-carbon energy. The noble Lords, Lord Giddens and Lord Teverson, also raised this issue in relation to carbon capture and storage. What if it proves not to be successful? I take on board the comments of the noble Lord about its effectiveness but that has yet to be tested so that we and investors can have absolute confidence. What are the implications if it is not successful? Is there a plan B?

I noted that the recommendation from the Committee on Climate Change, endorsed by the Select Committee in another place, that it should be clear in the NPS that the electricity sector should be fully decarbonised by 2030. That was rejected by the Government. I hope that the Government can look at this issue again to see if it is possible.

Finally, there is something that I was disappointed that the Minister did not raise in his speech. He will understand why I am doing so. The previous Government paved the way on these policy statements and did much of the groundwork on the documents. The greatest fear now must be delay. That means getting the planning, assumptions and alternatives right. If we do not, we underestimate the seriousness of the issue and the implications of not getting it right. I welcome our debate today. The challenge now is to ensure that the Government can deliver these objectives. We will do our best, as always, to co-operate with the Government to ensure that we have energy security and—as I pointed out in my question to the noble Lord in the House earlier, when I was grateful for his answer—that consumers do not pay the highest price. I look forward to the Minister’s comments.

--- Later in debate ---

[Lord Marland]

As I said, the noble Lord has great knowledge in this area and we take on board what he has to say. I am perfectly happy to discuss this with him later to see how we can improve. It is a complicated area, as the noble Lord knows.

I will deal with the issue, raised by the right reverend Prelate the Bishop of Chester, of nuclear subsidy. The Government do not intend to provide a subsidy for nuclear because it is a very mature market. Subsidies should be for new technologies, which we can pump-prime to generate electricity. Of course we should maximise our resources in oil and gas, but we should also husband them because they do not last forever, as the noble Lord, Lord Deben, said. That requirement is satisfied. We have just granted licences in the Shetlands to allow new oil drilling to happen.

I thank the noble Lord, Lord Oxburgh, for answering half my questions and the noble Lord, Lord Deben, for his sage-like remarks and for laying out the landscape for us. He rightly says, in the true Conservative way, that we will look at the costs. We cannot waste taxpayers’ money and must be careful. We must also remove any impediments to this substantial development.

I will be as brief as I can in answering the noble Baroness, Lady Smith, whom I thank for her co-operation. She asked about the Localism Bill and what is material in the Secretary of State putting a matter to the vote. I am not the arbiter of what is material and neither is she. We all know in our heart of hearts what is material and what we would expect. We will bring the usual pressures to bear through the other place or here to make sure that anything material gets debated because of the cross-relationship.

I mentioned earlier our reason for abolishing the IPC. The noble Baroness asked me to talk about the green investment bank, which is complicated. We have committed money to it. It is being set up primarily to commit to new technologies. We are investing taxpayers’ money and other banking institutions’ money in it. Therefore, there will be a rigorous test of whether it is a profitable enterprise. It is not a giveaway bank; it is an investment bank. However, it is an investment opportunity that will be available to people with new technologies to help them develop, provided they have a profitable end to them. We are not in the business of unprofitable enterprises.

The need case that was referred to is set out clearly in the 2050 Pathways Analysis, which is a very substantive document. If the noble Baroness would like to discuss issues on that after the event, I am very happy to do so. She also mentioned Renewables UK, the “dash for gas” and all those sorts of things. We need to have a broad portfolio in order to achieve our 2050 pathway, which is an enormous task. There is no point in saying, “I don’t like that, and I don’t like that”. We have to like it all because we need it, and we owe it to the next generations among us here to provide it. We cannot say, in our own isolated world, that we think this and we think that. We owe it to the next generations to deliver their requirements in a low-carbon, secure-energy framework. That is why I commend these NPSs to the Committee.

[Baroness Smith of Basildon]

I thank the noble Lord for the time and care that he has taken to address many of the questions asked of him today. Perhaps I can press him on one point that I do not think he was able to answer. He said, in response to the comments of the noble Lord, Lord Crickhowell, that he would look at it again and take it back and discuss it with colleagues. If he were to do that and if changes were made to the national policy statement as a result, would that have to go through another round of consultation and another revised document, or could it be inserted as a result of the consultation and before it was put to a vote in the House of Commons?

[Lord Marland]

This matter goes to the House of Commons for a vote, where they can vote. It will happen in the spring. They are perfectly entitled to have amendments put in there for consultation. It may or may not be feasible that the comments of the noble Lord, Lord Crickhowell, will be something that the Government want to achieve. I am happy to explore them with him, as one would with any development of a policy, but whether that would come in this policy, in an attachment to the energy policy or in future national policy statements is another matter. We are trying to achieve what we have set out here in this policy.