Baroness Verma
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Infrastructure Bill [HL]
Baroness Verma Excerpts(9 years, 11 months ago)
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The Earl of Caithness (Con)
My Lords, I have a question for my noble friend on the Front Bench arising from my work not long ago on carbon capture and storage. It concluded that every situation would be different and that it would depend not only on the oil wells but on the businesses trying to do this work. Some businesses might be able to pool their resources, and while it might be possible to set up a grid in a certain area, it might not be in another. Would not the amendments as proposed make that much more difficult? As my noble friend Lord Jenkin has reminded us, we are at a very early stage in CCS and the technology is not yet fully proven. An awful lot of work still has to be done, so to put something like this on to an industry which is in its infancy will surely cause more problems than it will solve.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, I thank the noble Baroness, Lady Worthington, for proposing these amendments and all noble Lords who have contributed to the debate. It gives me the opportunity to respond in full to both amendments in the group. They seek to extend the maximising economic principle objective to include,
“co-ordination of the transportation and storage of CO2”,
and would require,
“the establishment of a strategic vision for the permanent storage of CO2 in depleted fields”.
I reassure noble Lords that the UK has one of the most comprehensive programmes on CCS anywhere in the world in order to support the commercialisation of the technology and develop the industry. The programme includes a competition with up to £1 billion capital plus operational support for large CCS projects and a £125 million research, development and innovation programme. In addition, the Government set out how we are supporting the carbon capture and storage industry in a policy scoping document published in August. The document sought evidence and views from experts and stakeholders on a range of issues affecting the CCS industry going forward, including CCS with enhanced oil recovery. The deadline for submitting those views passed just over two weeks ago. Given that we are analysing the responses we have received and are in discussions with HM Treasury over its review of the fiscal regime for oil and gas, it would seem premature to make provision in primary legislation at this time.
The Government recognise that captured carbon dioxide could play a role in enhanced oil recovery, and likewise that enhanced oil recovery could play a role in the UK’s carbon capture and storage industry going forward, but the extent of any interaction between the CCS industry and the concept of maximising economic recovery of petroleum is not yet clear. Carbon dioxide transport and permanent geological storage is a nascent industry, so although it is important to promote the industry where possible it would be wrong to be too prescriptive now. That point was made eloquently by my noble friends Lord Jenkin and Lord Caithness. Further discussions with industry and the relevant trade associations are needed before we can say with certainty how the MER UK principle should apply to areas such as CCS.
The Oil and Gas Authority will have a significant function in considering the role of CCS when determining whether companies are operating in line with the maximising economic recovery strategy. The OGA will issue carbon dioxide storage site licences and approve carbon dioxide storage permit applications. It will also have responsibility to ensure that CCS is considered as part of a proposed decommissioning plan and will take into account the viability of utilising captured carbon dioxide in enhanced oil recovery projects. In addition, the transfer and storage of carbon dioxide is an important technology, which is why it is likely to form a key element of the technology and decommissioning sector strategies that will be developed by the OGA, in consultation with industry. These strategies will help to underpin the overarching strategy related to maximising economic recovery.
The right reverend Prelate the Bishop of Chester asked how this would help us to meet our emissions reduction aims as set out in the Climate Change Act 2008. Implementing recommendations contained in the Wood review will be done in a way compatible with the legally binding climate change targets. Our overarching energy strategy seeks to underpin secure and diverse energy supplies, including renewable, nuclear and indigenous resources. The carbon plan has shown that Britain will still need significant oil and gas supplies over the next decades while we decarbonise our economy and make a transition to a low-carbon one; projections show that in 2030 oil and gas will still be a vital part of the energy mix, providing around 70% of the UK’s primary energy requirements as we seek that transition.
The right reverend Prelate also asked about the costs of carbon capture. If he and noble Lords would allow it I would like to write to him and ensure that the Committee gets sight of the letter.
Having given those reassurances and demonstrated that the Government see that carbon capture and storage will be a part of our strategy in the future, though we are still at an early stage, I hope that the noble Baroness can be persuaded to withdraw her amendment.
Baroness Worthington
I thank the Minister for her response and for the comments of noble Lords. I am encouraged to hear these explicit references to the work of the OGA in relation to CCS and EMR. It is not unnecessarily prescriptive to add it to this part of the Bill. As we go forward and if the Government come forward with other legislation to transfer the OGA from an executive to a private company, we may have a chance to revisit this. We are in a world where CCS is being taken seriously and EMR is often associated with that. We are also in a world where offshore oil and gas fields are running down. If CCS can achieve the double aim of reducing our carbon emissions and helping to maximise economic recovery, that should certainly be pursued. I do not see why it cannot be explicitly stated, as it seems such an obvious win-win, but I am happy to withdraw my amendment.
Baroness Verma
Baroness Verma
My Lords, the UK oil and gas industry is of national importance. It makes a substantial contribution to the economy and supports around 450,000 jobs. Oil and gas will continue to be a vital part of the energy mix as we transition to a low-carbon economy, still meeting around 70% of our energy demand in 2030. Therefore it is vital that we maximise our indigenous supply, to put downward pressure on prices, support jobs and maintain secure supplies. The Government commissioned Sir Ian Wood in June 2013 to review UK offshore oil and gas recovery and its regulation, and we have been making good progress in implementing the recommendations.
Amendments 113C to 113F seek to remove from Clause 30 all references to commercial arrangements. This issue is clearly of the utmost importance, since a great deal of what industry does in its efforts to maximise the recovery of offshore oil and gas is affected through oil and gas’s commercial arrangements with one another. Never in the history of the UKCS has this been more true than today. As set out in the Wood review, collaboration between licence holders, operators and infrastructure owners will be a key requirement to meet the challenge of maximising economic recovery from the UKCS.
Clause 30 provides for this and makes collaboration a central part of the principle of maximising the economic recovery of UK petroleum. However, the Government recognise the legitimate concerns that industry has raised about the way in which commercial arrangements are dealt with in the clause. The industry is concerned that it may have an adverse impact on investment in the UK continental shelf, and we take those concerns seriously. It is not in anyone’s interests to undermine investment in the UKCS at such an important time.
We have just launched a call for evidence to discuss in further detail with interested parties the best way in which to implement the recommendations contained in the Wood review. We will use this opportunity to discuss how the maximising economic recovery strategy should apply to commercial arrangements without creating any unforeseen circumstances.
Amendment 131A is minor and technical in nature. Clauses 30 and 31 and Schedule 6 come into force on such days as the Secretary of State appoints by regulations. The purpose of the amendment to Clause 41(7) is that regulations bringing into force those provisions may appoint different days for different purposes. It is for these reasons that I propose these amendments and I beg to move.
Lord Jenkin of Roding
My Lords, it needs to be remembered—indeed, the noble Lord, Lord Davies, has acknowledged—that the industry very much welcomed the report of Sir Ian Wood.
Noble Lords will remember that perhaps the most important recommendation that Sir Ian Wood made was that in future if we are to maximise the economic recovery of oil and gas, there needs to be a tripartite partnership of the Government, the industry and the regulator. The industry signed up to that. That has been the basis of the substantial amendments which were moved in Committee with the intention of implementing the Wood review, and I am on record as having welcomed them very warmly.
I am aware of the concerns which have been voiced by the industry—to which the noble Lord, Lord Davies, has referred—but I take much comfort in the recent appointment of Andy Samuel as the chief executive officer of the Oil and Gas Authority. As my right honourable friend Mr Davey announced in the Statement last week:
“This is a significant milestone in the establishment of the OGA and demonstrates our commitment to the UK’s oil and gas industry and implementing Sir Ian’s recommendations”.—[Official Report, Commons, 6/11/14; col. 53WS.]
It has to be remembered that Andy Samuel has a very long background in the industry. He will understand as well as anybody the problems of getting industry members— hitherto seen as competing with each other all the time—to work together in this tripartite arrangement. Therefore, while I understand the concerns, I do not share the problem of the noble Lord, Lord Davies, because I think the industry is well placed to take this forward and achieve the very substantial advantages of additional production and national revenue that were outlined. I think these amendments are probably necessary to reassure the industry but I believe the industry is firmly committed to the tripartite partition for which Sir Ian called.
Baroness Verma
My Lords, I am extremely grateful to my noble friend for his intervention and contribution, because he lays out very clearly our position. In responding again to the concerns of the noble Lord, Lord Davies, we are committed to ensuring that the regulator is as strong, competent and influential as a regulator should be. However, it is important to ensure that the powers are practical and effective and do not create unintended consequences, as I stated earlier.
It is also important that we do not undermine investment in the UKCS at such an important time. As part of the call for evidence we will engage with interested parties to discuss how the strategy for maximising economic recovery should apply to commercial arrangements. The noble Lord, Lord Davies, asked if Sir Ian Wood was content with our amendments; the understanding is that he is content, but he also understands very clearly that we must not be undermining investment at this time. It is not our intent that the OGA has the ability to directly interfere with new or existing commercial arrangements. We will ensure that the strategy deals with commercial arrangements in a sensible and proportionate way.
We have listened very carefully to all concerns from industry and other stakeholders but, as my noble friend Lord Jenkin has rightly said, this is a tripartite understanding of investment within the UKCS, and therefore I hope that the noble Lord, Lord Davies, is content with my descriptions of why the amendments are important.
Baroness Verma
Baroness Verma
My Lords, I am extremely grateful to the noble Baroness for putting forward the amendment and to all noble Lords who have contributed to this very informative debate. We are absolutely clear that shale development must be safe and environmentally sound. We agree with the Opposition that the issues they raise should be thoroughly addressed but that the existing regulatory regime does so in a robust and proportionate manner. I am minded to repeat some of the contributions that have been made already today because it is necessary and important to do so. I hope that over the next few minutes I am able to allay the fears of those noble Lords who are supportive of these amendments.
As noble Lords have said, we must ensure that the public are properly informed. I agree with my noble friend Lord Deben that fracking must not be seen as a silver bullet. It can offer huge potential to ensure that we have a home-grown supply in a diverse range of energy mixes. It has been pointed out by my noble friend Lord Deben and others that evidence in the United States referencing shale developments has, on occasion, led to public mistrust. However, it is important to note that the latest evidence continues to show that such cases in the States are due to faulty surface operations or faulty well construction rather than hydraulic fracturing.
On another issue again rightly raised by most noble Lords today, it is important to emphasise that in the UK we have an entirely different regulatory system to the US. The UK benefits from a comprehensive and stringent set of statutory and non-statutory requirements. My noble friend Lord Jenkin and other noble Lords rightly pointed that out. In the US, practice between different states varies considerably and regulation is in some respects less stringent. For example, unlike some US states, we do not allow open-pit storage of chemicals or waste fluids and we require independent verification of the design of the wells. I will respond to the questions raised towards the end of my contribution.
The UK’s globally recognised expertise in the offshore oil and gas industry is well known. Noble Lords, including, I think, my noble friend Lord Caithness, referred to the fact that the UK has more than 50 years’ experience in regulating onshore oil and gas production. We are confident that the regulatory system will continue to provide robust protection for the environment. Our position is backed up by reports from the Royal Society, the Royal Academy of Engineering and Public Health England. These reports have considered a wide range of evidence and have looked at the UK regulatory system. Their advice has outlined the risks and concluded that, overall, as my noble friend Lord Jenkin pointed out, they can be managed or are low if industry meets all regulatory requirements.
I will now turn to each of the areas raised by the noble Baroness. First, where there are likely to be significant effects of a proposed scheme on the environment, environmental impact assessments are prepared by companies at an early stage in the development of proposals. They have a key role in informing regulators, planning authorities and the public about the likely significant effects of a proposed scheme on the environment. They enable mitigation measures to be identified to reduce or avoid significant effects. If the significant environmental effects cannot be mitigated, planning permission could be refused.
The UK has a strong track record in assessing the potential environmental impacts of development and in ensuring that they are appropriately mitigated. This is based on more than 20 years’ experience of adopting a proportionate, evidence-based approach to the environmental impact assessment. But what is proposed here misunderstands its purpose. Existing regulations already require the assessment of all proposals which are likely to have significant effects on the environment. Legislating to force mandatory environmental impact assessments on all shale sites, even where significant effects are not considered likely—bearing in mind that hydraulic fracturing may not even be proposed—would be disproportionate and unnecessary. Not only would it slow down or delay development for no discernible environmental benefit, it would create a damaging precedent for other new industries in the future, both in the energy sector and beyond.
The proposal to make EIAs mandatory for all shale gas activities was discussed during the recent negotiations on the revision of the environmental impact assessment directive and was roundly rejected by member states, including the United Kingdom. We appreciate the importance of building public confidence in the shale gas sector and the fact that this includes being open about environmental impacts and how they are to be addressed. The existing EIA regime is already well suited to meeting these requirements.
Changes here would also affect other areas of development. There is an ongoing issue with planning authorities taking an overly cautious approach to environmental impact assessment. To gold-plate the requirements of environmental impact assessment in this way could significantly impact upon developments such as housing. We are therefore keen to maintain the existing rigorous and consistent approach across all sectors of the economy. We welcome the industry’s public commitment to carry out environmental impact assessments for all exploration wells that involve hydraulic fracturing. This commitment has already been seen through in the planning applications that have been recently submitted by Cuadrilla in Lancashire and we will support the industry in delivering on this commitment over the coming years.
The second area concerns well inspections. The integrity of the well is critical to ensuring the safety of the site and protecting the environment. For this reason the Health and Safety Executive checks the design of all wells and approves them prior to any construction taking place. The HSE also monitors well construction based on weekly reports to its well specialists. It is the well operator’s responsibility to appoint an independent well examiner separate from the immediate line management of the well operations. This allows a scheme of quality assurance and quality control, where an operator’s employee is not responsible for verifying their own work. This approach is flexible in that it allows in-house checks but only where the appropriate safeguards are in place. In this context, it is the competence of the well examiner that is most important. In reality, due to the size of shale gas operators, the well operator will generally appoint a company to act as its well examiner.
The third area relates to chemical disclosure. One of the problems we have seen in parts of the United States is where companies have refused to disclose the chemicals used in their fracking fluid, which raises safety concerns and alarms the public. In the UK in contrast, full disclosure is already required of every chemical the operator proposes to use, ahead of any fracking being allowed to take place. The environmental regulator requires this information when companies apply for the relevant permits to assess the safety of what is proposed and any potential risks to the environment. The Environment Agency has confirmed that it will publish the permit with this information, including naming each chemical and the maximum concentration of each at each well. In addition, the industry has committed to publish this information itself at each well along with the total volume of fluid used.
The fourth area concerns water companies. We recognise the importance of ensuring that water companies are fully engaged in shale gas development. Their role underpins the strict controls that are in place to protect the quality and availability of water supplies. The environmental regulator is already required to check the potential impact on groundwater of any shale gas proposal for which permission is sought and will not grant a permit where our water supplies could be affected. The Opposition are seeking to ensure that oil and gas operators will consult with the relevant water company. However, the water industry and shale operators have already agreed a memorandum of understanding to engage early and share plans for water demand and wastewater management. Making this a legal requirement does not add any value to an existing arrangement.
The fifth area is baseline monitoring of environmental indicators, including methane levels in groundwater. Good quality baseline monitoring, prior to operations, is essential to enable a rigorous assessment of any subsequent changes. It also provides local communities with information on the current state of their environment, potentially preventing those unfounded scare stories later. The UK already has a good set of regional groundwater data, thanks to the work conducted by the British Geological Survey since early 2012. At the more local level, the Environment Agency has confirmed that it would typically require baseline monitoring of groundwater methane for each specific site proposing to undertake fracking. It would not normally require this where no fracking is proposed, because there is no discharge to the environment. Moreover, the environmental regulator has the powers to require baseline monitoring of those environmental indicators it considers appropriate and for the length of time that it deems suitable for each site.
Baroness Farrington of Ribbleton
My Lords, I said that this was one of the stories that is circulating. I asked the Minister for an assurance that the companies that are drilling and maintaining the wells would not appoint the people who will judge their safety, either while they are being built or when they are being used.
Baroness Verma
My Lords, I am grateful for the correction, and I think I mentioned that issue in my response on independent well operators. Perhaps I may clarify the position as regards the concerns of the noble Baroness. The Health and Safety Executive scrutinises well design and monitors progress to ensure that the operator is managing risk effectively, and will continue to do so throughout the life cycle of the well. An independent well examiner will also review its design and construction. To date, onshore operators have used separate companies to provide this service; they have not delivered in-house.
Lord Young of Norwood Green
As I understand it, seismic monitoring is done on a continuous basis. While I cannot remember the exact figures, I think that if a tremor registers 0.5, the operation is stopped. That is a very low-level seismic shock and reflects a high level of safety precaution. Can the Minister confirm that?
Baroness Verma
I am extremely grateful to the noble Lord, Lord Young. He is absolutely right to point out that exploration is immediately stopped once the level of 0.5 is reached. However, I will clarify the point and write to him, and put a copy of the letter in the Library.
With these reassurances, I hope that I have been able to convince the noble Baroness to withdraw her amendment.
Baroness Worthington
My Lords, I am grateful to the Minister for her comments and to noble Lords on all sides of the House who have spoken in this illuminating debate. As is characteristic of this place, it has been based on fact and has reflected the care and understanding that is always applied to these issues. However, having listened to the noble Baroness’s response, I have to say that she has not reassured me that the Government are listening on the very important issue of the need, for the industry’s own sake and for the economic benefit of this country, to be absolutely certain that, while we have a world-class regulatory system in place today, we will not see it become overwhelmed as the use of this form of extraction of the UK’s natural resources expands. There is an absolute and clear link between requirements in statute and the resources that are made available to meet those legal standards. I think it was the noble Baroness, Lady Young of Old Scone, who pointed out that it is imperative that we have a clear and transparent regulatory system so that we know what is required of everyone and so that adequate resources are made available to ensure that, in the future, fracking has the best chance of proving to its detractors that it can be done safely. It is not correct to say that everything is in place for a world-class regulatory system today. There are loopholes and, while the noble Baroness has sought to give us some reassurances on independent inspection, I do not believe that she has addressed all the questions that have been raised in the debate. On that basis, I will not withdraw the amendment and I seek to test the opinion of the House.
Baroness Worthington
My Lords, I am grateful to noble Lords who have contributed to this debate, which has been another interesting exchange of views on how best to get the fracking industry off on the right foot and to minimise the degree of public opposition that might arise.
I recently visited the Lake District, which is one of my favourite parts of the country. I visited a mining museum and, in doing so, I realised that we often see such parts of the country as having a great value now in terms of tourism, wildlife and appreciation of scenic beauty, but that they have in previous times been quite diversely economically active and been able to accommodate different activities within the boundaries of the parks as we know them today. Therefore, I for one am not of the opinion that these special places need to be preserved in aspic but that it is about achieving the right level of balance.
That said, it is absolutely clear that, when you have a Government who say that they are all out for fracking and that it will be the silver bullet that solves all our energy needs, and slightly overhype it, you can see why people get nervous that all due consideration and care are not being taken. I shall be interested to hear the Minister’s responses to the two amendments. The second of them, Amendment 115, points to something of an inconsistency, with planning guidance having been issued for national parks and AONBs but not for other nationally significant sites. Such sites, because they tend to be smaller, more fragmented and under considerable pressure from a wide range of economic activities already, arguably deserve even greater levels of protection than those larger national parks and AONBs, which I think can accommodate economic activity within them and generate jobs and economic benefits. I look forward to hearing the Minister’s response.
Baroness Verma
My Lords, I welcome the commitment of the noble Baroness, Lady Young, to protected areas and was grateful for our meeting prior to today. Such areas are nationally and internationally important in terms of their environment, and all noble Lords who have contributed today, from whichever perspective, have highlighted their significance.
As the noble Baroness made clear in Committee, these areas are the jewels of our country and we agree that they need to be accorded appropriate protection. While I recognise the intent behind the noble Baroness’s amendments, which is to ensure the necessary protection for habitats and species in or near to protected areas, I assure her that such areas are already offered a high level of protection derived from EU directives transposed into domestic policy and through the planning system, as noble Lords have alluded to today. The National Planning Policy Framework, the supporting planning guidance and a government circular on biodiversity and geological conservation all recognise that there are areas designated for natural conservation and biodiversity value, including sites of special scientific interest, special protection areas, special areas of conservation and Ramsar sites, and that they should be given a high level of protection. They are clear that protected areas need to be fully and appropriately considered by mineral planning authorities when exercising their planning duties, both in preparing local plans and determining planning applications.
The planning authorities assess each application for shale and geothermal development on a case-by-case basis. For example, the National Planning Policy Framework makes it clear that development should not normally be permitted if, either individually or in combination with other developments, it is likely to have an adverse effect on a site of special scientific interest. That applies even if the development is outside site of special scientific interest boundaries.
The Conservation of Habitats and Species Regulations 2010, which transpose the EU habitats and wild birds directives, ensure strict controls on any plan or project that might affect European sites such as special protection areas and special areas of conservation. Development cannot occur on or near such protected areas unless it can be shown to a high degree of scientific certainty that there will be no adverse impact on the integrity of the site. This is a very high bar for securing development in such areas. In addition, the Natural Environment and Rural Communities Act 2006 and the Nature Conservation (Scotland) Act 2004 place a duty on all public authorities, including the Secretary of State for Energy and Climate Change, when exercising their functions, to have regard to the purpose of conserving biodiversity. Public bodies also have comparable duties relating to national parks, areas of outstanding natural beauty and sites of special scientific interest.
It is important to note that the regulatory system in the UK fully recognises these protections. Before any oil or gas operations can begin, operators must gain a permit from the environmental regulator, the Environment Agency or an equivalent agency. The Department for Environment, Food and Rural Affairs is currently preparing revised guidance on protected wildlife sites as part of a wider project to make all the department’s guidance quicker to use and easier to understand—the noble Baroness raised that when we had our meeting the other day. This will help ensure that these requirements are clearly communicated to developers and regulators.
The noble Baroness, Lady Worthington, said that the Government looked on shale as being a silver bullet. We have always maintained that we do not see it as a silver bullet but that we see its potential for ensuring that we have home-grown supply and energy security and for helping drive down costs to the consumer. The debate should be in that context rather than shale being taken out of context in the wider arena.
In drawing the attention of the noble Baroness, Lady Young, to the robust regulatory regime that is already in place and the full recognition that the planning system already gives to protected areas, I hope that she is reassured that such areas are already accorded significant protection and, on that basis, will withdraw her amendment.
Baroness Verma
My Lords, I note the clause stand part amendments and the amendment proposed by the noble Lord, Lord Wigley, regarding the application of the right to use deep-level land for the purposes of exploiting petroleum or deep geothermal energy in Wales. The Government support the development of shale gas and oil. Natural gas from shale could play a crucial role in supporting UK energy security, as well as an important role as a part of the transition to a low-carbon economy, and that was well debated previously. The carbon footprint of UK-produced shale gas would likely be significantly less than coal and lower than imported liquefied natural gas. Domestic shale gas could also benefit the UK in terms of jobs, tax revenues and growth, mitigating some of the falling revenues from the North Sea.
However, it has become clear that difficulties in obtaining underground access pose a barrier to exploring this new industry. The same problem also applies to the deep geothermal industry, which is likewise at an early stage of development in the UK. New lateral drilling methods that can cover much larger areas underground mean that existing processes for obtaining underground access can be disproportionately costly and time consuming in relation to the potential benefits. Currently, companies must negotiate rights of access with every landowner living above underground drilling. If these negotiations fail, an oil and gas operator can make an application to the Secretary of State, who may refer the matter to the courts. This process gives a single landowner the power to delay a development significantly and, in the case of geothermal, it is likely to stop the project entirely.
The right to use deep-level land would help unlock exploration for shale gas and deep geothermal as we move towards a low-carbon economy. However, let me be clear that we are not proposing any changes to the regime for surface access, and the regulatory system that deals with the potential risks associated with drilling and hydraulic fracturing will remain the same. I can reassure noble Lords that a company looking to develop shale or geothermal would still need to obtain all the necessary permissions, such as planning and environmental permits. The onshore oil and gas industry has committed to engage with communities at the early stage of operations, as well as consulting through the planning application process. Our robust regulation will protect residents while allowing this source of homegrown energy to develop in a way that is fair to communities.
EY has estimated a thriving industry could mean 64,500 jobs nationally. Locally, that could mean cementing contracts, new facilities and jobs for local companies. Communities that host shale development could see a share of this, which is why we welcome the developers community benefit package, similar to other technologies such as wind. This will pay communities £100,000 per hydraulically fractured well site at exploratory stage and 1% of revenue if it successfully goes into production. As with wind farms, wider communities will benefit too, as local councils will also be able to retain 100% of the business rates that they collect from productive shale gas. Therefore, there are many potentials of this industry to communities in Wales if shale production takes place.
Petroleum extraction is a non-devolved matter. As such, the proposals for oil and gas will apply across England, Wales and Scotland. The proposals on deep geothermal energy also cover England, Wales and Scotland, where in Scotland deep geothermal energy is exploited for the sole, or main purpose of electricity generation. Schedule 7 to the Government of Wales Act 2006 sets out the conferred subjects over which the Welsh Assembly can exercise legislative competence. Oil and gas are clear exemptions from the conferred list of economic development and, furthermore, the exploitation of deep geothermal resources could not be considered to have been conferred under any of the subjects in Schedule 7.
Although deep geothermal and oil and gas activity may impact upon conferred subjects such as environmental protection, that is not what they properly relate to for the purposes of the legislative competence test in the Government of Wales Act 2006. In addition, the right of use clauses are not removing any existing regulatory requirements. We therefore see no ground on which this measure would be within the legislative competence of the Welsh Assembly. On that basis, there is no rationale for requiring approval by the Welsh Assembly before the section can apply in Wales.
It is also worth noting that, while oil and gas are non-devolved matters, all existing planning authority procedures and powers will remain in place. As such, the different UK planning regimes will continue to regulate shale gas or geothermal developments according to their existing planning procedures. I have reflected on the noble Lord’s amendment and in response to his concerns I have offered him a government perspective. Therefore, I hope that the noble Lord, Lord Wigley, will withdraw his amendment.
Lord Wigley
I am very grateful to those who have taken part in the debate and to the Minister for her response. Quite clearly, I would be unlikely to carry the House on the amendment that the clause should not stand part of the Bill. Although my heart would want me to go down that road, I suspect that I would come to a blind alley. Therefore, I will not press it on this occasion because there will be opportunities in another place. I have no doubt that many Members of all parties in the other place will wish to come back to this because there is deep concern outside.
Even if one was in favour of fracking in principle, I would have thought that it would be very wise to pay attention and take the maximum possible notice of the reservations that exist outside, because these are the real fears of real people in real communities, and they need to be addressed. Members in all parts of the House have expressed that in the series of debates we have had tonight.
Turning to the lead amendment in the group, which relates to the powers of the National Assembly for Wales, I think that it is ironic that at a little earlier than this time tomorrow—as the noble Lord, Lord Bourne, on the Government Front Bench, will be well aware—we will consider an amendment that would change the model of devolution for Wales to a reserved-powers model of the sort that exists for Northern Ireland and Scotland. This was a recommendation of the Silk commission, of which the noble Lord, Lord Bourne, was a member, and which appeared to have all-party support in Committee in this House. The Report stage of that Bill takes place tomorrow. That being so, unless there was a specific exemption made for these purposes, it would not be enough to rely on the 2006 Act, which the Minister has relied on in the debate tonight.
However, rather than argue technical, legalistic points arising out of legislation, I put this to the Minister in conclusion. When the National Assembly for Wales has responsibility for the environment, particularly for town and country planning, transport, and economic development within Wales, as well as health proposals, then surely it makes all sense to put the responsibility for this area also into its hands—at the very least to make sure that there is a working together. That surely was the intention of the Government when they responded to the Select Committee on Welsh Affairs report. I will not quote it again, but it underlined the fact that planning policy is a devolved matter and that planning is integrally involved in the decisions we are talking about in regard to fracking.
Therefore, I ask the Minister whether she will take this away between now and the debates in another place and give further thought, particularly in the light of the debate we will have on the Wales Bill tomorrow, as to whether there is a mechanism to make sure that the National Assembly for Wales and the Government of Wales are totally on board in a dialogue on these matters so that, in keeping with the principle of subsidiarity, the decisions affecting communities can be taken as close as possible to those communities—in this context, decisions affecting Wales can be taken by the National Assembly where possible. On that basis, I beg leave to withdraw the amendment.
Baroness Worthington
My Lords, I am grateful to my noble friend for tabling his amendment and for continuing the discussion that we started in Committee. I am sympathetic to the intention behind these amendments and am particularly interested in the aspect of liability arising from orphaned sites. We are talking about a potential new industry that will see a large number of distributed sites developed. We may well see smaller companies that perhaps do not have the assets or deep pockets of more traditional extractive companies, and there would be considerable potential for orphaned sites. I am very interested to hear from the Minister how we would address any liability arising from such orphaned sites.
I think my noble friend Lord Whitty said that he is seeking for the Government to demonstrate foresight. It strikes me that the Government are demonstrating foresight in some respects of fracking, in imagining the future benefits and future economic wealth that will come. Over the weekend, we even heard comments about the imagined spending of all this great tax revenue. We shall debate that aspect shortly. That foresight is possible, but perhaps we should apply it in the slightly more realistic context of learning from previous experiences of extractive industries in trying to plan for what happens if everything does not go according to plan. I would have thought that companies would be able to take out insurance against some of these liabilities. Again, I would be interested to hear from the Minister about what type of insurance she might expect companies to undertake and what liabilities would be insured. We are entering uncharted territory in the types of company, the types of project and their distribution across the country. It is right that we should proceed with caution.
There is a lot of merit in the amendments tabled by my noble friend Lord Whitty. He started by saying that he was trying to help out the Government. A number of us have tried to help out the Government during tonight’s debate. However, I suspect that the Government are not listening and do not want to be helped out, but there we are. I look forward to the comments from the Minister in response to this amendment.
Baroness Verma
My Lords, I am always grateful to the noble Lord, Lord Whitty, for trying to help out the Government. I have listened very carefully and of course I recognise his concerns and those raised by the noble Lord, Lord Judd. However, as my noble friend Lord Jenkin very eloquently put it, there is already a lot in place that addresses the concerns raised by the noble Lord, Lord Whitty. The existing regulatory system covering onshore oil and gas is robust. We already have more than 50 years’ experience of regulating the onshore oil and gas industry. There are controls and regulations in place to ensure on-site safety, prevent water contamination, mitigate seismic activity and minimise air emissions.
While the Government are keen for shale and geothermal exploration to go ahead, shale gas development must be safe and environmentally sound. I agree with noble Lords that we need to be sure that we are responding robustly to the perceived concerns that the public raise. One of the central aims of the current regulatory framework is to ensure that wells are appropriately designed and operated, and that when operations cease they are properly decommissioned.
A petroleum licensee cannot search for, bore for or get petroleum without a petroleum exploration and development licence, the terms of which are in the model clauses set out in secondary legislation. All drilling or production operations, and the abandonment of any well, require the consent of the Secretary of State. In addition, there are regulators and controls that can be relied on to minimise risk and any impacts associated with oil and gas activities. Those controls include conditions attached to environmental permits issued under the Environmental Permitting Regulations 2010 in England and Wales and the equivalent regime in Scotland, as well as safety scrutiny by the Health and Safety Executive.
The current regime, as it applies to shale gas, includes the management of mining waste and naturally occurring radioactive minerals, the scrutiny of well design and construction, the suitable restoration of sites, the protection of habitats and 10 different EU directives addressing environmental concerns. In addition, the Environmental Protection Act 1990 and the domestic Environmental Damage (Prevention and Remediation) Regulations 2009 provide for the remediation of contaminated land and serious environmental damage. This regime, together with the operators’ responsibilities under their licences and permits, is sufficiently robust to ensure that operators are required to remediate any damage or pollution to the environment.
If, for any reason, these controls were not enough—we have no reason to think that this would be the case because the UK has a well developed and very strong regulatory regime—and if any damage were to occur, in accordance with statutory requirements and government policy, remediation of the damage would be dealt with under the main regimes for dealing with contamination. These regimes are sufficiently robust to ensure that, if a company causes damage, harm or pollution to the environment, operators can be required to remediate the effects and prevent further damage or pollution. This is the same approach that applies to other industries, and we believe that the existing law is robust.
Lord Judd
I am sure that my noble friend shares my gratitude for the full way in which the Minister is replying. However, there is just one point she made which intrigues me. She said that the regulator has powers that he can use in these contexts. However, if the taxpayer is faced with the possibility of having to foot the bill, why is it not compulsory to require that these things are covered?
Baroness Verma
My Lords, I hoped that I had reassured noble Lords that we do not wish to see the taxpayer foot the bill or any bill, and that there will be processes in place to ensure that that is the case. Having gone through the amendment of the noble Lord, Lord Whitty, and his concerns, I hope that he will see fit to withdraw it.
Lord Whitty
My Lords, I am very grateful to the noble Baroness for her full reply and for the matters that the noble Lord, Lord Jenkin, drew to our attention. It has always been clear to me that the Government and the regulatory authorities have the powers to require remediation. The issue I was attempting to cover was if sufficient funds were not available to do that. The Minister said that the authorities, in granting a licence, have the ability to say, “You have to provide some money upfront”. There was also reference to a mutual industry scheme. It seems to me prudent for the Government to make that a condition of the licence—either that a fund is established or that the relevant body is a member of the scheme being established by the industry. Otherwise, we will end up with a situation whereby, as a result of an unforeseen accident combined with financial problems for the company, or, as a result of a situation whereby, many years hence, there is an abandoned site, orphan site or a site that has been badly decommissioned, there is damage but there are no funds available to cover it, so at the end of the day the taxpayer will pay for that.
I accept a lot of what the Minister and the noble Lord, Lord Jenkin, said but unless this is a condition of a licence, either through insurance or by establishing a fund, we will not have the situation entirely covered, and that is not entirely reassuring to those who are worried about the potential impact of that on their environment, business or dwellings. The Minister has gone some considerable way on this issue and I will certainly not press the amendment any further tonight, but her reply was not quite as reassuring as I had hoped. Nevertheless, I thank her and others who have contributed to this debate. I beg leave to withdraw the amendment.
Baroness Verma
“Renewable heat incentives
(1) Section 100 of the Energy Act 2008 (renewable heat incentives) is amended in accordance with subsections (2) to (4).
(2) After subsection (1) insert—
“(1A) Regulations under this section may confer any function on any person.
(1B) Regulations under this section may provide for a function conferred on a person to be exercisable on behalf of another person.”
(3) In subsection (2)—
(a) in paragraph (a), for the words before sub-paragraph (i) substitute—“(a) make provision giving any of the following persons entitlements to payments (“RHI payments”) in specified circumstances—”;(b) in paragraph (b), for “such payments” substitute “RHI payments”;(c) after paragraph (b) insert—“(ba) make provision about the circumstances in which, and descriptions of persons to whom, the whole or a part of an entitlement to an RHI payment may be assigned (whether the person has the entitlement by virtue of regulations under paragraph (a) or regulations under this paragraph);(bb) authorise or require the Secretary of State, the Authority, designated fossil fuel suppliers, or any person with any other administration function, to make an RHI payment—(i) to the person who is entitled to the payment by virtue of regulations under paragraph (a), or(ii) where that entitlement has been wholly or partly assigned in accordance with regulations under this section, to the person or persons for the time being enjoying the entitlement or any part of it;”;(d) in paragraph (c), for “such payments” substitute “RHI payments”;(e) for paragraph (d) substitute—“(d) authorise or require a person to provide specified information;”;(f) in paragraph (e), omit “to the Secretary of State or the Authority”;(g) in paragraph (h), omit “for the Secretary of State or the Authority”;(h) omit paragraph (i);(i) at the end insert—“(j) authorise the Secretary of State to make payments to a person in respect of the exercise by the person of functions under regulations under this section;(k) make provision about the resolution of disputes relating to the exercise of functions under regulations under this section, including provision about arbitration or appeals (which may, in particular, provide for the person conducting an arbitration or determining an appeal to order the payment of costs or compensation).”(4) In subsection (3), after the definition of “fossil fuel supplier” insert—
““other administration function” means a function relating to the administration of a scheme established under this section, other than a function conferred by regulations under subsection (2)(bb);”.
(5) Section 105 of the Energy Act 2008 (Parliamentary control of subordinate legislation) is amended in accordance with subsections (6) to (8).
(6) In subsection (2)—
(a) in paragraph (a), omit sub-paragraph (vi);(b) after paragraph (aa) insert—“(ab) regulations which contain (whether alone or together with other provision) affirmative resolution provision made under section 100 (renewable heat incentives);”. (7) In subsection (3), after “(2)(a)” insert “, (ab)”
(8) After subsection (3) insert—
“(3A) Provision made under section 100 is affirmative resolution provision if—
(a) the provision is made under any of the powers which always attract the affirmative resolution procedure, or(b) the provision—(i) is not made under any of those powers, and(ii) meets condition A, B, C or D.(3B) The powers which always attract the affirmative resolution procedure are the powers conferred by—
(a) section 100(2)(c), (e), (f), (g), (h) and (k),(b) section 100(5), and(c) section 100(6).(3C) Provision meets condition A if—
(a) it is made under the power conferred by section 100(2)(bb), and(b) it requires a designated fossil fuel supplier to make a payment under an RHI scheme.(3D) Provision meets condition B if—
(a) it confers an administration function on a person who is not the Secretary of State or the Authority, and(b) the time when the provision comes into force will be the first time that an administration function under the RHI scheme concerned is exercisable by a person who is not the Secretary of State or the Authority.(3E) Provision meets condition C if—
(a) it is made under a power conferred by paragraph (ba) or (bb)(ii) of section 100(2),(b) it is made in relation to an RHI scheme that was in existence immediately before the coming into force of this subsection, and(c) it is the first provision to be made under that power in relation to that RHI scheme.(3F) Provision meets condition D if—
(a) it is made under a power conferred by paragraph (a), (b), (ba), (bb), (d) or (j) of section 100(2),(b) it is made in relation to an RHI scheme that was not in existence immediately before the coming into force of this subsection, and(c) it is the first provision to be made under that power in relation to that RHI scheme.(3G) In deciding whether provision meets condition B, the following matters must be ignored—
(a) for the purposes of subsection (3D)(a): any provision which confers a payment function on designated fossil fuel suppliers;(b) for the purposes of subsection (3D)(b): any payment function under the RHI scheme concerned which (before the time when the provision comes into force) is, or has been, exercisable by designated fossil fuel suppliers.(3H) The fact that provision is to some extent made under a power conferred by section 100(1), (1A) or (1B) does not prevent that provision from being taken (for the purposes of subsections (3A) to (3F)) as being made under any other power conferred by section 100.
(3I) In subsections (3B) to (3H) and this subsection—
“administration function” means a function relating to the administration of an RHI scheme;
“designated fossil fuel suppliers” has the same meaning as in section 100;
“payment function” means a function of making a payment under an RHI scheme (whether the function authorises or requires the making of the payment);
“RHI scheme” means a scheme under section 100 to facilitate and encourage renewable generation of heat.”
(9) In section 105 of the Utilities Act 2000 (general restrictions on disclosure of information), in subsection (3)—
(a) in paragraph (a), omit “or section 100”;(b) after paragraph (a) insert—“(aa) it is made for the purpose of facilitating any functions of any person under section 100 of the Energy Act 2008;”.”
Baroness Verma
My Lords, as noble Lords know, this Government are committed to ambitious action to reduce carbon emissions and increase renewable energy generation in the UK. To this end, the non-domestic renewable heat incentive was introduced in November 2011 and followed with a domestic scheme in April this year. These schemes are the world’s first long-term financial support programmes for renewable heat. Switching to renewable heat can in some circumstances bring significant bill savings to businesses and households and helps the Government meet their challenging targets on climate change.
The government amendment before the House responds to one tabled by the noble Baroness, Lady Eaton, in Grand Committee, on which I undertook to return to noble Lords on Report. The new clause proposes three changes to Section 100 of the Energy Act 2008, which provided for the creation of the schemes. I shall take each of the changes in turn. As noble Lords will be aware, administration of the schemes is currently limited to either Ofgem or the Secretary of State. While Ofgem is successfully administering both schemes, our inability to run a competitive process is a constraint on achieving best value for money. The Government, therefore, signalled their intention to seek the necessary legal powers to enable an alternative administrator to be appointed in their consultation on the domestic scheme in 2012.
Ofgem will continue to administer the scheme for the time being and in making this change the Government will retain the power to appoint Ofgem to administer the scheme in the future. The ability to appoint a new administrator means that the Government will require the flexibility to adapt the appeals processes to any new administrator and to ensure that these remain robust. The amendment therefore also allows the Government to make regulations covering dispute resolution through appeals processes.
The second change deals with payments. Payments under the scheme must currently be made to the owner of the renewable heat installation or to the producers of biomethane, biogas and biofuels for heating. The amendment will allow the schemes to be redesigned to mean that these parties can have the option to assign their payments to a third party. For the domestic scheme, this would mean that the upfront cost of renewable heating systems could be funded by third parties for households unable to afford them, with scheme payments then made directly to the third party, making this an attractive opportunity for investors. For the non-domestic scheme, assigning rights to payments may allow for simpler financial arrangements between parties, reducing the costs of, and barriers to, the installation of renewable heating. By incentivising new funding arrangements, this change could lead to an increase in both demand for and supply of renewable heat technologies and a mix of higher deployment and lower costs.
Implementing changes would require secondary legislation, on which we intend to engage with stakeholders. In making any changes, we will also work with the scheme administrator and other parties to ensure appropriate design of the consumer protection framework and to integrate the assignment of rights into the scheme’s existing cost control mechanism.
The amendment would also allow some changes to the schemes to be made by the negative resolution procedure. At present, all changes must be made by the affirmative procedure, regardless of their complexity or materiality. In practice this is much slower than the negative procedure. The Government have found that their inability to make changes to the schemes quickly, in response to market changes and other factors, may risk undermining confidence in them. For example, we cannot update regulations quickly to allow them to reference updated technical industry standards.
The amendment tabled by the noble Baroness, Lady Eaton, proposed that all secondary legislation in relation to the schemes be made by the negative procedure. I have considered the comments made in Grand Committee in response to that proposal. The amendment now before us aims to achieve greater flexibility while still ensuring appropriate parliamentary scrutiny. It stipulates that some uses of the powers in important areas remain subject to the affirmative resolution procedure. For example, this would include making provision covering sanctions, enforcement and appeals, establishing requirements on fossil fuel suppliers to fund the renewable heat incentive, or amending Section 100 of the Energy Act to change the general type of heat-generating methods that can be funded through the scheme.
For other powers, the amendment stipulates that the first use of the power should be via the affirmative procedure, but allows for use of the negative resolution procedure for subsequent uses of the power in relation to the same scheme. This will allow for appropriate scrutiny where powers are first used, such as to provide for assignment of payments in the schemes, but means that minor subsequent changes can be made by negative resolution.
The Government expect that future changes to the existing schemes are likely to be straightforward and uncontroversial—for example, measures to reduce red tape, or technical changes to allow the schemes to keep pace with market innovation. I do not consider use of the affirmative procedure necessary in these circumstances. The negative procedure, while still allowing for adequate parliamentary scrutiny, provides flexibility to address issues as they arise, rather than delaying matters while suitable legislative opportunities are sought.
Together, these changes will allow significant improvement in the efficiency and cost-effectiveness of renewable heat incentive schemes, allowing the UK to meet its carbon reduction and renewables targets, while also making efficient use of taxpayers’ money. I beg to move.
Lord Teverson
My Lords, I welcome these moves, which will make financing much more flexible, and mean that money really can flow into the RHI. I therefore congratulate the Minister on the amendments, and on moving this matter forward.
Baroness Worthington
My Lords, I am grateful to the Minister for speaking to her amendments. As she said, there are three aspects to this group. The first is the potential for somebody other than Ofgem to administer the RHI. I am intrigued by this aspect and I wonder whether we may be creeping towards a bit more joined-up government in terms of renewable energy. There is always a tendency to equate renewables with electricity, whereas under the EU mandatory targets agreed for 2020 we are required to move forward on renewable energy, which means electricity, transport and heat. There has been rather a stop-start process of renewable transport fuel support, and a separate body oversees that. Under the RO the renewable electricity side has been the responsibility of Ofgem, and it is now moving to the department, for the Secretary of State specifically to oversee, while Ofgem has been given the RHI to look after. It would seem sensible to me to have one consolidated agency to deal with all renewable energy, so that we could properly assess the best application of our renewable resources to the different markets.
If we apply a biomass unit of energy to the generation of heat we get far more efficiency and far more displacement of carbon in the heat market than we would by going into electricity—or, indeed, into transport fuels. We need a bit of joined-up thinking on our various ways of supporting renewable energy. I wonder whether this gives us an opportunity to have a look at the regulatory framework.
On the second part, about third-party payments, I am very supportive of the amendment. It will help to overcome a barrier about which people have personally petitioned me, and said how much of a barrier it is.
On the third point, however, I am afraid that I am not quite so supportive. I do not want to detain us too long, but the Minister and I have spent many a pleasurable afternoon in Committee discussing the RHI. It has not been unnecessarily time-consuming or difficult—we generally tend to get through SIs quickly—but it gives us an opportunity to revisit the RHI and see how it is doing. It would be a shame if we were to create any uncertainty in the industry by moving to the negative resolution procedure. I seek clarification from the Minister. She speaks of uncontroversial straightforward changes and describes them as technical. If that group of potential changes included changes to the subsidy levels for different technologies, that might cause alarm for some people in the sector—particularly if they felt that they would not have the opportunity to petition Members on both sides of the House, to discuss and to raise concerns.
This is an industry that has seen quite a lot of changes, and is subject to rigorous derogations and price control mechanisms. They are incredibly complex, and I do not really want to spend any more afternoons debating them—but I would do so if that would give comfort to the industry. It is a new and growing industry, and we are not quite on track yet for meeting our targets. We need to see considerably higher growth in renewable heat if we are to meet the challenging targets that we have set ourselves. I am seeking reassurances from the Minister that these negative resolution procedures will not increase uncertainty in an industry that we need to see getting stuck into the job of delivering and putting us on a strong footing with regard to our EU targets.
Baroness Verma
My Lords, I agree completely with the noble Baroness that we must ensure that there is proper parliamentary scrutiny. I assure her that the amendment aims to achieve greater flexibility while retaining appropriate parliamentary scrutiny. The amendment stipulates that some use of the powers is important in areas that remain subject to the affirmative resolution procedure. We will not move away from that where there is cause for it. Where we just want to make some minor, technical changes is where it is probably more likely that we would wish to use the negative resolution procedure.
Baroness Worthington
Will the noble Baroness write to me? What I am most interested in is change to the level of subsidy given to different technology bandings.
Baroness Verma
I of course undertake to write to the noble Baroness and place a copy in the Library.
Baroness Verma
The Earl of Caithness
My Lords, we were treated yet again to an exposition by the noble Baroness on a matter that we debated at length and voted on last year on the Energy Bill. Here we are doing it again. If the noble Baroness and her party had really wanted to meet some of the targets then they should not have flapped around like wet hens in a thunderstorm when they were in power and got on with doing something about nuclear. As a result of this Government, the energy programme is taking off in a way that it should have done a long time ago. We all agree that we want to get coal out of the system. It is about getting the timing right for that, without creating extra costs for the consumer and without switching the lights off. The coal power stations have to meet the new directive on, I think, 1 January 2016. This subject has been debated long and often and we have voted often. We will obviously continue to do so, but thankfully we are now heading in the right direction. I hope that my noble friend on the Front Bench will not accept the amendment.
Baroness Verma
My Lords, I thank the noble Baroness, Lady Worthington, for yet again bringing this subject to the attention of the House. As my noble friend Lord Caithness eloquently said, we debated this amendment during the passage of the Energy Bill less than a year ago. Noble Lords will recall that, after careful consideration, this House and the other place decided that it should not be adopted. I do not propose to set out in detail again the reasons why the Government did not support this amendment when it was last considered. However, noble Lords will recall that the Government’s main concern was that it could lead to circumstances where existing coal plants closed prematurely, leading to a need for more generation capacity to be built earlier than would otherwise be necessary, and resulting in totally unnecessary and avoidable cost to consumers.
I want to address the points made by the noble Baroness that developments since we last considered this amendment make it necessary to reconsider the conclusion we reached at the time. It is true that there have been a number of developments over the course of this year. We have set about implementing our electricity market reforms, which include taking the actions that are delivering new investment and our plans for a secure, affordable and low-carbon electricity system. That is well demonstrated by the allocation in April of the first contracts for difference to eight renewables projects. These projects include offshore wind farms and coal to biomass conversions, which alone will provide up to £12 billion of private sector investment by 2020, supporting around 8,500 jobs and providing a further 4.5 gigawatts of low-carbon generation capacity to Britain’s energy mix.
The noble Baroness pointed to the capacity market and the fact that four of the 11 remaining coal plants are seeking a three-year capacity agreement to refurbish their plant. She said that that is evidence that these plants will upgrade to comply with the industrial emissions directive allowing them to continue operation long into the future and generating at levels inconsistent with our decarbonisation plans. She also pointed out that the freezing of the carbon price floor improves the economics of continuing to operate coal-fired power stations. The fact is that neither of these developments is expected to have a significant impact on the overall future outlook for coal.
The Government’s latest projections, which take into account recent changes to the carbon price floor, suggest that virtually all coal will have retired by the end of 2025. Only one of the four plants seeking a three-year capacity agreement has fitted the equipment needed to comply with the directive and operate without constraint when it comes into force on 1 January 2016, as my noble friend Lord Caithness rightly said. We are not aware of evidence that any of the other plants will be compliant with the directive at the time it comes into force.
Even were these plants to achieve compliance at some point in the future, our assessment remains that overall levels of generation from coal will decline over time as multiple factors, including age, environmental regulation, increasing levels of low carbon generation and a strengthening carbon price, act to reduce coal generation, although the additional resilience to our energy system that comes from a small number of compliant plants while they are still economic to operate would not be unwelcome.
The risks that would be created by this amendment are also more immediate. I would like to draw the attention of noble Lords to the first auction under the capacity market that will be held in December, which is our response to ensuring security of supply at the least cost to the consumer. A potential impact of this amendment is to constrain the ability of plants to generate when it is otherwise economic for them to do so. Accepting this amendment will therefore create a significant regulatory risk to those plants seeking refurbishment contracts in the capacity market. Their response may therefore be to seek a higher capacity clearing price to compensate for this possible reduction in electricity market revenue, particularly in the years preceding the first delivery year in 2018-19. Alternatively, these investments may not go-ahead. Neither scenario is desirable, with the risk that the cost of the capacity market is pushed upwards with no accompanying benefit to security of supply.
We should also consider what sort of signal it sends to investors of all types of generation, not just coal, now and in the future. They will interpret this as further intervention of a measure that has already been rejected by this House and so close to the first capacity market auction where we will be seeking competitive commitments from over 48 gigawatts of capacity to ensure continued security of our electricity supplies over the course of this decade. It is also important to remember that over 10 gigawatts of new gas has come forward to participate in the December auction, highlighting that we have the right incentives in place to ensure security of supply at the least cost to consumers and to encourage competition through new investment. As we discussed last year, I will oppose an amendment that has the potential to increase consumer bills and increase the risks to security of supply.
There is an almost unanimous consensus on the need to substantially decarbonise our electricity system on the pathway to cutting our greenhouse gas emissions by at least 80% by 2050. There is a similar consensus that it is only with carbon capture and storage that coal will continue to play a role in that future. The measures we agreed last year to reform our electricity market are already bringing forward the investment needed to achieve this cost effectively and securely. Against this background we continue to believe that applying the EPS as proposed by this amendment is a potentially risky intervention in the market.
I hope I have gone half way to convincing the noble Baroness that the developments since the Energy Bill was before this House less than a year ago are unlikely to have the impact she assumes and I hope on that basis she will be willing to withdraw her amendment.
Baroness Worthington
My Lords, I thank the Minister for her response. It may well be true that up to 10 gigawatts has bid into the capacity market but my point is that not one of those apart from Carrington, which is already under construction, will successfully be awarded a capacity mechanism contract. They are going to be frozen out by contracts that will be given to existing coal. It is pointless telling me that lots of people out there want to build gas if in reality we are going to keep coal open at the expense of those investments in cleaner, more efficient technology.
We have spent the largest part of this evening talking about fracking rather than the need to develop the resource of gas so that we can use it as a bridging fuel. There is absolutely no point us investing in that if there are not going to be any stations in which we can burn it efficiently. The losers in this capacity mechanism at the moment are the operators of existing gas stations and those who wish to build new ones. That is because we continue to tell ourselves that the lights will go out if we constrain coal and that that will necessarily force a higher price on to consumers. The money we are spending on propping up old coal is going to be money wasted—we will have to shut these stations anyway at some point. Why we seem to be perpetually telling ourselves that we cannot do without these ageing dinosaurs in our electricity system is beyond me.
I do not intend to detain the House any longer at this stage and I will, of course, withdraw my amendment. However, I reiterate the words of Dr Gross from Imperial College that we will not see the end of old coal without government intervention. If this Government refuse to do it then it will fall to another Government. There is a future for coal; it is with CCS and only with CCS. Unabated coal is simply not something we should be sustaining through the 21st century and no end of anyone telling me otherwise is going to persuade me. However, I will withdraw this amendment now.
Baroness Verma
Baroness Verma
My Lords, as part of our proposals on the right to use underground land to exploit oil and gas and deep geothermal energy, each of these industries has put forward a voluntary offer for a payment and notification system. The Government support this offer. We think that the offer is in the communities’ best interests because it ensures that the payment scheme will be flexible and tailored to the specific requirements of each community. We have proposed to take a delegated power in the Bill, both as an incentive to adhere to the voluntary agreement and, if it becomes necessary, to set out the voluntary agreement on payment and notification in secondary legislation.
For instance, if the scheme were not honoured by industry, we would look at making the notification and payment schemes a statutory requirement under secondary legislation. Any regulations made by statutory instrument to set up a payment or notification scheme will be subject to the affirmative resolution procedure. Under the sunsetting provision, the powers to make these regulations are subject to a one-off review and must be repealed if they have not been used within seven years of commencement.
The Delegated Powers and Regulatory Reform Committee recommended that regulations made under the sunsetting clause should be subject to the affirmative resolution procedure. We have agreed to this approach and therefore propose an amendment that seeks to apply the affirmative procedure to regulations made under Clause 36. I beg to move.
Baroness Verma
“(1A) In Part 1A (powers of British Transport Police Force)—
(a) section (Powers of British Transport Police Force)(1) extends to England and Wales only, and(b) section (Powers of British Transport Police Force)(2) extends to England and Wales and Scotland.”
Baroness Verma
Baroness Verma
“(1A) Part 1A (powers of British Transport Police Force) comes into force at the end of the period of two months beginning with the day on which this Act is passed.”
Baroness Verma
(ab) section 29 and sections 32 to 37”
Baroness Verma
Baroness Verma