Energy Bill [HL]

Baroness Smith of Basildon Excerpts

Tuesday 8th February 2011 Grand Committee

[Lord Lea of Crondall]

My Lords, now that the point has been put in terms of a mechanism, I begin by not having any knowledge about whether a conflict is likely. Assuming that it is conceivable, as in the case made by my noble friend Lord Whitty—my noble friend Lord O’Neill has questioned whether it is just either/or as regards renewables having preference—I thought that the general philosophy with which we deal with energy policy is that we put a price on market externalities. In other words, we level the playing field financially, whether that is through Kyoto, carbon tax or something else. Everyone pays the same price through a carbon tax or something like that, but once you have done that, you do not make a separate judgment about preferring renewables to hydrocarbons. That market externality to meet our medium-term targets should be incorporated into the fiscal system. We are gradually doing that through the myriad consultations about carbon price floor, entry tariffs, the document produced by the Treasury before Christmas entitled Carbon Price Floor, and so on.

If I could take the suggestion that has just been made a stage further, the word “criteria” is not just a mechanism because the Department of Energy and Climate Change cannot be left just holding a pup, it has to know the criteria on which it has to operate. How far is it that this famous level playing field can be made level by not treating all forms of energy alike? That is not what we mean. We are trying to make the level playing field level on the basis of market externalities which are made into financial quantities in the tax and subsidy system. We do not need to do it twice. As I understand it, that would be the criterion.

You cannot just ask the department to have a mechanism without stating so that there is no ambiguity how the market externality is translated into a level playing field price. I hope that that can also be fed into the thinking and the way in which my noble friend Lord Whitty takes forward this thought in his amendment.

[Baroness Smith of Basildon]

My Lords, I hope that noble Lords will forgive me for not standing up because I may fall over. I thank the Minister for his comments and for his good wishes to my foot, which were gratefully received. I hope that he will not mind if I do not take him up on his offer to take my wheelchair through the voting Lobby. I will rely on my noble friends to ensure that I get into the right place. On a serious note, I am grateful to him for agreeing to suspend last week’s Committee sitting so that we could sit today and I could be here. I am grateful to noble Lords for their indulgence on that.

I thank my noble friend Lord Whitty for bringing forward this amendment. It has invoked a lively discussion. I am not sure that there is as much disagreement between us as might seem apparent from some of the debates. We are all trying to seek a sensible energy mix and to ensure that there is access for all forms of energy. The Government have targets for renewable energy. If those targets are to be met there has to be some certainty for the renewable energy industry.

It is worth reminding ourselves that my noble friend’s amendment is not anti-oil or anti-gas—I did not see it in that way at all—but tries to find a way in which both can coexist sensibly on a level playing field and one does not undermine the other. Like the noble Baroness, Lady Parminter, I pay tribute to the work of RenewableUK, which has been trying to seek the kind of protocols, or guidance, required that means that problems can be addressed before they arise so that we do not have to move to the position we would have to under this amendment.

However, there may be cases where a proper disputes procedure has to be in place to ensure that we are not in the position that we are at the moment. If oil or gas is always a priority, there will be a difficulty in ensuring investment in renewables. Indeed, the amendment talks about a site that is developed or operated for renewables, or is intended to be developed or operated, or for transmitting electricity from renewables,

“in respect of which the Crown Estates that have granted a lease license, agreement to lease or agreement to license for that purpose”.

It is not just a site that has been chosen but a site that has been granted a licence already.

The proposed new clause says that the Secretary of State is not able to grant a licence for activities within an offshore renewable energy site without the agreement of the holder of the lease, licence or agreement. One problem is that, with no disputes procedure, there is no compensation for a licence-holder if their licensed renewable site is to be overridden for access to gas and oil.

I do not think that there is much disagreement. There is, and has been, a clear wish within this Committee to ensure that we maximise all our resources for all energy sources. However, I have concerns that, if some kind of dispute procedure or something along the lines suggested in the amendment is not put in place, the Government could be unable to reach their targets on many renewables. If a licence can be revoked purely on the order of a Secretary of State, that lack of certainty will lead to a lack of investment.

I understand that the Minister may have concerns about the wording and the way forward. It would extremely helpful, however, if he could take this away and give some thought to the principles behind the amendment to look for a way forward that gives certainty to licence-holders of renewable energy sites.

Baroness Northover: My Lords, the Government are committed to a rapid increase in offshore wind deployment to maintain a secure energy supply, to tackle climate change and to meet our renewable energy targets as well as to deliver green jobs for the UK, which pick up the points of both the noble Lords, Lord Whitty and Lord Judd. However, we are also committed to securing full benefit from our oil and gas resources, which remain of great potential value to our economic well-being and energy security. I hope that the noble Lord, Lord O’Neill, will be reassured by that. As the noble Baroness, Lady Smith, puts it, it is about coexistence and ensuring that this works well.

We believe that both the offshore wind industry and the oil and gas industry are needed and can successfully coexist to ensure the nation’s energy needs are met. DECC is working with both industries and their trade associations to encourage effective co-ordination and co-operation in their respective development processes. Our expectation is that suitable consultation, planning and phasing of the respective operations will in most cases allow both developments to achieve their objectives in full, or with only minor compromise. I note what the noble Lords, Lord Oxburgh and Lord Jenkin, said on this.

At the stage of formal consent, an application from either industry to exploit the natural resources of our marine environment would be considered as part of the standard procedures of the relevant authority and be consulted upon with interested stakeholders. Any user of the sea—including oil and gas and offshore renewables industry players—is able to make representations at a number of stages, including the formal consent process and the environmental impact assessment. We recommend that interested parties do so, so that their views can be taken into account in any decision-making.

It is worth noting that the Government are well aware that this issue is causing concern, particularly to the offshore wind industry. Therefore, the department is working on a solution that is acceptable to all parties. I hope that that will help to reassure the noble Lord, Lord Whitty.

Clearly, in terms of the financial compensation that has been referred to, if the oil company is not prepared to offer appropriate compensation, there is no question of the Secretary of State intervening to override what is happening there.

We understand the motivation behind what the noble Lord, Lord Whitty, is proposing, and it is extremely important that there is equal treatment. I am a great believer in equal treatment. Therefore, we understand why he has brought this forward. We do not think it appropriate at this stage to agree this amendment to primary legislation—to hardwire it in—but we understand the issue. It is being looked at currently in DECC. Obviously we do not want any situation to develop that will disadvantage what we are trying to do with the Bill as a whole. As the noble Lord, Lord Judd, pointed out, it is the vision of where we are going as a whole that is important in this Bill. That is apparent from the Bill and everybody's involvement in it. If we bear that in mind, it is important that these issues are resolved and DECC is looking at that at the moment. I hope that in the light of that explanation, the noble Lord will feel able to withdraw his amendment.

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Moved by

[Baroness Smith of Basildon]

36A: Clause 99, page 75, line 31, leave out subsection (2)

[Baroness Smith of Basildon]

My Lords, this is a probing amendment. It may help the Minister to know that I am just seeking some clarification because I was puzzled. In an earlier debate, the noble Lord, Lord Jenkin of Roding, referred to the complexity of some of the legislation. We have to go back to previous legislation and previous Energy Acts to understand the Bill before us today. I did that. Section 46 of the Energy Act 2008 relates to the approval of funded decommissioning programmes and the Section 48 referred to here is about the modification of such funded decommissioning programmes. I do not understand why it is necessary—and if it is necessary, it seems rather a Henry VIII clause—to insert into Section 48 of the Energy Act that: “When approving a” funded decommissioning,

“programme the Secretary of State may agree to exercise, or not to exercise, the section 48 power … in a particular manner … within a particular period”.

What on earth does that mean? If the Minister can enlighten me, I will be very grateful.

The rest of the clause goes on in the same way. It seems unnecessary because if you read Section 48 of the 2008 Act, those powers seem to be available already. “In a particular manner” and “within a particular period” are very wide and do not make much sense to enable the reader to understand this legislation. Why does the Minister think we need to insert those phrases in legislation that seems already clear to me? If he is able to enlighten me, I will be very grateful.

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[Lord Marland]

My Lords, I am grateful for this amendment because it provoked my noble friend Lord Jenkin to use the full majesty of what used to be his office, and probably should be again, to demonstrate clearly the reasoning for this subsection staying in the Bill. I am grateful that we should have the support of no greater or more august figure than the chairman of the NIA itself, the noble Lord, Lord O'Neill of Clackmannan. Both noble Lords gave extremely good reasons for it.

I will explain briefly that the real reason for this change is to remove the power to subsequently modify an approved programme that has the potential to create uncertainty for operators and investors financing significant long-term investments. The key to this is giving long-term investment commitment to those who are investing in new nuclear. I have nothing to add to what the two noble Lords have so aptly said with their greater experience of the subject, and I invite the noble Baroness to withdraw her amendment.

[Baroness Smith of Basildon]

I beg leave to withdraw the amendment.

Amendment 36A withdrawn.

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Debate on whether Clause 100 should stand part of the Bill.

[Baroness Smith of Basildon]

I rise to speak—or not, as the case may be. One of the oddities of procedure in your Lordships’ House is that sometimes it seems that we have to say the exact opposite of what we want to say in order to have the opportunity to, in this case, congratulate the Minister. I have had to give notice of my intention to oppose the Question that the clause stand part of the Bill, which is the opposite of what I want to do. In fact, I congratulate the Minister: he will recall that, under Schedule 7 to the Public Bodies Bill, I have proposed an amendment to delete the Coal Authority from that Bill. It seemed to me that any change to the functions of the Coal Authority should be undertaken not by secondary legislation—by order—but by primary legislation. That is exactly what the Minister has done in Clause 100 of this Bill, so I merely congratulate him as it is the appropriate way to make such changes. I hope that he will either support my amendment to Schedule 7 to the Public Bodies Bill or take other action to ensure that the Coal Authority is no longer in it.

[Lord Jenkin of Roding]

I understand from the impact statement on this that some possible competition issues will need to be addressed as to whether the Coal Authority will have, in some way, a preferred position as against other contractors that may compete for the business. I hope that my noble friend can give me some assurance that that will be taken account of.

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[Baroness Northover]

I confirm that Clause 101 mirrors the clause and extends the powers to Scotland, so I hope that it is not room 101.

[Baroness Smith of Basildon]

My Lords, I am grateful to the noble Baroness who I think has taken on board my comments about Schedule 7. I apologise if I was not more explicit when I asked the noble Baroness the question, but will there be extra funding to go with those extra responsibilities for the Coal Authority?

[Baroness Northover]

To clarify, this is not an extra responsibility. It extends the powers of the Coal Authority. This would not lead to an additional call on the public purse as the authority would be able to charge for this additional non-coal work if it wishes to undertake it. It is not appropriate even to be thinking about whether this should be a further charge to the public purse.