Energy Bill [HL]
Debate between Baroness Worthington and Viscount Ridley(8 years ago)
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Baroness Worthington (Lab)
My Lords, I, too, express some concerns about the removal of the amendment in the Commons. Although I have listened to the argument that it would detract from the intention behind the OGA, I seriously hope that the Government will look back at the primary objectives that they have given it and conduct a timely review—I know that that will happen.
Since we last considered the amendment, we have had two important events. The first was referred to by the noble Baroness, Lady Featherstone: the cancellation of the carbon capture and storage project. I do not intend to debate the whys and wherefores of that, but it is clear that there has been a significant dent in investor confidence. People have invested in good faith in this technology knowing that, to meet our long-term climate targets, we need a form of capture and storage for certain sectors of our industry.
The second big event is the signing of the Paris agreement, when the Government and the Secretary of State, Amber Rudd, played an enormous role in making it the success that it was. That states a very clear target for the world: that we must get our anthropogenic sources, our sources of carbon emissions, matched and cancelled by anthropogenic sinks. That largely means capturing and storing carbon and putting it underground. We need to take that Paris equation seriously.
Viscount Ridley (Con)
I suggest to the noble Baroness that a third event has happened—we have the early results from the Canadian carbon capture and storage project, which is by far the most advanced in the world. They are very disappointing in terms of the amount of carbon dioxide reduction and the cost that it has taken to achieve it.
Baroness Worthington
I note that, but I would just say that we are not Canada and we are very fortunate to have the North Sea as a reserve to use, which I believe would make it more cost efficient if we could do it in a timely fashion—obviously, not wanting to gold-plate anything, but making the best of the resource that we have in this nation. As I said, we need some reassurances from the Government. I am part of the group that the noble Lord, Lord Oxburgh, has now set up, which is looking at the whole issue afresh. We do not want to push carbon capture and storage for its own sake, but only in so far as it gives us options to decarbonise at least cost. I hope that the Minister will be able to say some words of reassurance about that process and the seriousness with which the Government will take the recommendations of that group.
Energy Bill [HL]
Debate between Baroness Worthington and Viscount Ridley(8 years, 6 months ago)
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Baroness Worthington
I am grateful to my noble friend for his support. The concerns that I have raised consistently throughout the passage of the Bill relate to the Government’s analysis which concludes that we simply do not need any more onshore wind. This is based on false projections of how we are doing in relation to our legally binding EU renewable energy targets. Those targets relate to power, heat and transport. It is true that we are doing reasonably well on power but we are not on track for delivery of our targets on transport or heat. The projections that the department is now having to produce to pretend that it will get to those targets stretch credibility. There is a hockey stick of deployment expected in the other two sectors which is simply not credible. We are tying our hands behind our back, removing from our low-carbon armoury one of the cheapest, safest and most easily deliverable technologies—onshore wind.
I almost feel that I ought to be presenting a eulogy for the wind industry in the UK because it deserves respect. It has a 25-year history. The House almost certainly knows that it was first supported by Margaret Thatcher in 1990. The first support mechanisms were brought in for wind around that time. She recognised the science of climate change and she knew that we needed to address it. She also knew that it would be sensible for the UK to make the most use of its assets. We happen to be one of the windiest countries in Europe, something we should celebrate. In fact, we have been one of the best markets for wind technologies. Our shores have seen innovations and the development of new technologies that we can be very proud of. We have seen investment in jobs and infrastructure, particularly in those parts of the country that need inward investment—I am referring to Scotland and Wales—a great pouring-in of interest and money that has helped to generate jobs at a time when they are sorely needed.
I am not saying that wind farms need to be put everywhere and that everyone should accept them. I actually think that the Government’s other manifesto commitment that local people should have a say in them is a sensible measure. That is something that the Government have sought to introduce through planning. The closure of the support mechanism has to be taken in the context of the other things the Government have done to stop onshore wind, including quite significant changes to planning.
Viscount Ridley (Con)
Before the noble Baroness gets to the end of her eulogy for the wind industry, will she confirm that this is the new Corbyn Labour Party’s policy—to eulogise an industry that is particularly good at rewarding rich people, including landowners, by loading the bills that hurt poor people most?
Baroness Worthington
We can debate who benefits most from our low-carbon agenda—possibly it is the Chinese at this particular juncture. However, in the context of closing the RO early, it is some of the smaller schemes—the independent developers and the independent renewable companies—that are suffering the most, and it is the larger companies that seem to be getting the grace period amendments that they need. It is the smaller guys who are losing out. This is not about rewarding the richest or the most powerful lobbyists—that is not what we are seeking to do.
As the noble Baroness, Lady Young, pointed out, this is about fairness and a common-sense test of whether, when you read those words in a manifesto in May, you then think, “Ah yes, I know what that means; it means that in about the middle of June, I will see an announcement from the Government that closes a scheme in which I have invested hundreds of millions of pounds, which is already closing with no consultation”. I hesitate to say that that passes the common-sense test, as I do not think it does. Indeed, we know it does not, because we have had a large number of investors come to us to say that this is not the way that they should be dealt with.
Normally, a consultation exercise is undertaken and then the results of that consultation are published. In this case, because we have been racing since 18 June to get everything ready in order to close the scheme early, even though it is closing anyway, we have not had a proper public consultation or publication of the results of any consultation. Therefore we are flying blind and having to work with large numbers of people contacting us to express their concern and dismay at being handled in this way by the Government.
The specific issue raised under Amendment 78C is another important one. As I have said before, I do not think this House will discuss this, but it will certainly be discussed, with far greater passion potentially, when it moves to the other place. Amendment 78C would simply repatriate the closure of the RO to Scottish Ministers. The reason for this is that during the passage of the Energy Bill in 2013, the Government had to take a power to repatriate the renewables obligation back to Westminster. We were told at the time that this would be a technical amendment and that this had to be done simply to make the closure easier, tidier and more efficient. However, we now see that this was not the case: this was a cynical move that gave the Government the power to close a scheme for Scotland without due consultation with Scottish interests. It flies against the spirit of the Smith commission agreement, which is seeking to repatriate more powers to Scotland and allow Scottish people to determine what they want to see built to provide them with clean energy in the future.
That brings me on to the question of fairness and whether the Government’s amendments, and their proposals for grace periods, are fit for purpose. It should be noted that although the announcement was made on 18 June—and a very hard guillotine introduced at that point—and some details were provided about potential grace periods, it was not until 8 October that we were given the full detail of the proposals. That is not a long period for us to consider them, and they are incredibly complex—I am very grateful to the noble and learned Lord, Lord Wallace, for his forensic and expert deconstruction of some of these issues. It is not appropriate for us to have to wait four months before we see the detail and, when we do see it, for it to be so substandard. This is a cause of great concern. It was of course quite a heated debate in Committee in the Moses Room the other week. That resulted in the withdrawal of the amendments, for which we were grateful. We hoped then that that would result in a bit of reflection and some clearer amendments coming forward.
I am grateful to the Minister for presenting the changes that were incorporated. By and large they were merely technical issues of clarification, but the biggest one, about planning and when you deem planning consent to have been given, remains unresolved. This is what is so strange about these grace periods. The anomaly here could not be more strange: because of the way the Government are interpreting this and putting it into legislation, if you are refused planning permission—if the local council signals that it is not content—and you then appeal and win that appeal, you will be able to get a subsidy. However, if you had consent from the local committee and it was clear that the community wished to see the development, but you were waiting for various formalities to be concluded which then came after the artificial 18 June deadline, you would not be eligible. That seems to fly in the face of the Government’s manifesto commitment—they are evidently keen on their manifesto commitments, as I am sure is right and proper—which is that they want local people to have the final say. There are clearly still weaknesses and great anomalies within the grace periods. The provisions already run to many pages, but we still need the department to go back to think again and come forward with something workable.
I do not want anything that I have said today to be interpreted as our desire to see endless subsidies for particular technologies continuing indefinitely. That is absolutely not the case. As I have said on previous occasions, the issue we should look at on which the Government have refused to give any clarity is what is happening with the new form of support, the contracts for difference, which replace the RO. That is the pertinent question, but whenever I have asked it, I am told that the Government will make a Statement in the autumn. It is not a good answer for an industry with 25 long years of history to be proud of to be told, “We will tell you your fate in our own good time at some point”—presumably, after the Bill has passed its crucial stages. It is not appropriate to be closing one scheme and not giving any clarity over what is to replace it.
My final concern is that the Government have left us little choice but to object to the provision. It demonstrates a Government who put ideology ahead of evidence. There is no place for ideology in energy policy. If the Government have set their mind against onshore wind, as they are demonstrating—that is evident from all that they have done—they are no better than those who take an ideological principle against fracking or nuclear. We should not be singling out technologies; we need every technology to play its part. Some technologies are better than others in certain circumstances, but there is no reason to decide that we should cease to support one over another, especially when it turns out to be cheaper than many of the alternatives, has a proven track record of delivery and is sustaining investment in our country.
I look forward to hearing from the Minister, but I doubt that he will be able to reassure me on those points, and it is for that reason that I reserve the right to press the amendment that follows.
Baroness Worthington
My Lords, I am sure that people will be very pleased to hear that I do not intend to repeat the speech that I made in the previous debate. As noble Lords will be aware, we have tabled an amendment to delete Clause 66 from the Bill. The reason for this is that we do not believe this legislation is ready or has had the right consultation applied to it to ensure that it is fair. We do not find it satisfactory to be told that we will hear about the replacement mechanism in the autumn; it is the autumn now, and in the course of the Bill we should have information about what the Government are planning. As I have said, we have detailed concerns about the grace period.
I want to pick up on the issue of costs, which has been raised by the right reverend Prelate the Bishop of Chester and the noble Lord, Lord Howell. To be clear, in the Government’s impact assessment the overall estimation of what the measure will save is 30p for a household for a year. The sum that the Minister was kind enough to present us with was £270 million overall, which is a tiny proportion of the amount of money that we are going to have to spend to decarbonise and renew our energy system. It is certainly less than the £350 million in capital that has been sunk into projects that are now falling foul of the artificial grace period. Overall, then, Clause 66 does not deliver a great deal of value to the country as a whole—certainly not to the wind industry, but it does not serve UK plc’s purposes either.
Turning to the point made by the noble Lord, Lord Howell, about the steel industry, I completely accept that the situation is now very grave. The answer to the steel problem is about enabling it to invest in new, cleaner infrastructure. Not only is there a vast global oversupply of steel but we ourselves also have an ageing and inefficient infrastructure. We need reinvestment, and I believe that the way to do that is by helping the industry to invest in green infrastructure and carbon capture and storage. It will actually be through more green measures, not fewer, that we save ourselves. The steel industry’s electricity bills are a tiny proportion compared with its process emissions; in fact, it is true to say that for nearly all the green measures that apply to electricity the steel industry receives compensation. Please let no one be under any illusion that anything we are doing today will help to bring about the demise of the steel industry—far from it.
Viscount Ridley
I am grateful to the noble Baroness for allowing me to intervene again. She and I have had an exchange on Twitter about this and now I am bringing it forward to this House. Is she aware of the comments made in July this year by Karl-Ulrich Köhler, the European head of Tata Steel, when commenting on European green emissions policies? He said,
“it is very difficult for the colleagues”,
in India,
“to understand why Europe’s politicians undermine the competitiveness of their steelmakers”.
Baroness Worthington
I sometimes also wonder about the European policy and in particular why we have not moved further and faster on carbon capture and storage. It makes sense to me that that should be the technology that will enable us to have steel and still meet our climate change targets. As with many things in Europe, it all boils down to what Germany thinks, and unfortunately, Germany has set its mind against carbon capture and storage. We do not need to, thankfully, and we should press ahead.
To return to another form of low-carbon energy which has an important role to play—onshore wind—I have made it quite clear that I do not believe that this is good legislation, and I have not been reassured why it is being pursued other than it seems to be quite a political move by the Government. The costs certainly should not be a reason for us to consider that this should be brought through. As regards meeting the EU targets, it is simply not true that there is no more room for onshore wind and that we should be throttling back.
We have greatly destabilised investment in the UK, which used to be one of the leading destinations for investment. The hasty, rash and poorly thought-through policies of this Government in their early months in government have produced shock waves. Many other people are also saying this, such as John Cridland at the CBI, and the Government’s funder, Dennis Clark, has sounded an alarm that the Government’s policy now appears to be having very little positive effect and a great deal of negative effect on investor confidence.
For all those reasons and for the reasons I have outlined with regard to it being inappropriate to proceed with this poor legislation, I suggest that we delete it, give the Government more time to consider this in the other place, where I am sure the debate will continue. I beg to move.
Viscount Ridley
My Lords, in declaring my interests at the start, I reassure the noble Lord, Lord Foulkes, that my family benefits from one wind turbine but that I give the money away to charity. I thought that he might like to know that.
This is a manifesto commitment and I have never heard such extraordinary legal sophistry from the Opposition on this question. Under the “Foulkes convention”, as we may have to call it, at the next election we will have to have a negotiation between lawyers representing both parties to get the exact wording of manifestos agreed or nothing will be able to get through the House of Lords. That is essentially what is being argued. It is a perfectly common-sense statement that was in the manifesto and we are committing to it—and we are facing a potential constitutional crisis in the way that the Opposition are treating the Salisbury convention.
It is an astonishing suggestion to hear that reducing a subsidy to an industry is an ideological objection to that industry. My objection to the wind industry is not ideological: it is economic and scientific. Wind is making a trivial contribution to our energy supplies—it supplied 4% of our total energy use last year—and an even smaller contribution to carbon dioxide reductions. At Second Reading, the noble and learned Lord, Lord Wallace, responded to my question about how much carbon dioxide emissions have actually been reduced by the wind power industry by very kindly sending me a link to a calculation that 1,800 tonnes of carbon dioxide emissions are displaced or reduced by each 2 megawatt wind turbine. Well, do the maths on that. That means that with 10,000 turbines of roughly that size in this country, 20 million tonnes or so would be reduced. But that is out of 700 million tonnes of emissions, so it is a reduction in carbon dioxide emissions of less than 3%—and that assumes that it is displacing grid average emissions, which it is not: it is mostly displacing gas. Nor does it take into account the intermittency or back-up—the point made by my noble friend Lord Spicer—which means that our total wind fleet that we have built up over 25 years, hugely subsidised, is giving us a reduction in emissions of about 2%. That is lost in the statistics. It is an Asterix—sorry, I mean an asterisk—and it comes at a huge cost. Wind subsidies cost this country about £4 billion a year. For that money, one could buy an extra 25% of electricity at the wholesale price, which is an enormous amount.
As I said earlier, in subsidising wind farms we are robbing the poor to pay the rich. It is a regressive subsidy. It hits poor people harder than rich people and rewards rich people more than poor people—not just landowners, but investors of other kinds. We are also killing jobs. We know that the high cost of electricity has killed a number of energy-intensive industries: for example, the aluminium smelter at Lynemouth, in Northumberland, to which I drew attention a number of years ago in this House.
Baroness Worthington
I am grateful to the noble Viscount for giving way. He makes a lovely speech, but actually we are debating the impacts of Clause 66, which, as I have pointed out, saves 30p on a household’s bill. We can have a lovely debate about the role of CFDs and replacement subsidies, but we are here, on Report, looking at Clause 66, which is a very specific intervention that has destabilised investor confidence.
Viscount Ridley
I do not know where I was five or 10 minutes ago then, when I was listening to a lot of very wide-ranging remarks about whether our opposition to the wind industry was ideological.
I find it odd that the parties opposite are so keen to defend one particular industry—one that is really good at taking money from poor people and giving it to rich people while doing the square root of nothing to reduce emissions, killing eagles, hurting tourism, spoiling landscapes and killing jobs.
Energy Bill [HL]
Debate between Baroness Worthington and Viscount Ridley(8 years, 8 months ago)
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Baroness Worthington
I apologise if I have risen too soon; I look forward to hearing what the noble Viscount is about to say. It is true, is it not, that there is a time lag between our emissions and changes in temperature? We are therefore likely to have a 30 to 40-year period in which we know we have committed ourselves to higher temperatures, and yet we are waiting for the impact. That surely means that we should be concerned sooner, rather than later. Secondly, does the noble Viscount not acknowledge that a global average temperature rise of 1 degree would be double that in the Arctic? A 2 degree global rise would therefore be 4 degrees in the Arctic, which could have a significant impact on the melt, leading to sea level rise.
Viscount Ridley
On the first point about the lag, yes, but the whole point is that I am comparing the rate of temperature increase with the rate predicted by the IPCC, which knew about the lag and built it into its models. Essentially, the noble Baroness is talking about the difference between equilibrium climate sensitivity, which is reached after many centuries, and transient climate response, which is what you immediately get. Yes, there is a big difference there, but the climate sensitivity figures—I was coming on to this—are based on 14 new studies, one of which Myles Allen co-authored.
Energy Bill [HL]
Debate between Baroness Worthington and Viscount Ridley(8 years, 9 months ago)
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Baroness Worthington (Lab)
My Lords, it is a genuine pleasure to respond to a debate that has had a veritable all-star list of energy experts contributing to it. I begin by thanking the Minister for his introductory comments. My sense is that we now have a very capable and committed Minister but, sadly, he comes before us with a rather shoddy and politically tawdry Bill. That is to be greatly regretted because important things need to be done in energy policy. There are big issues to be tackled and 2015 is a big year for climate change. I fear that we will waste precious parliamentary time on a Bill that is not complete, is lacking in important detail and is very confusing and conflicting in the messages that it is sending.
As many noble Lords have mentioned, the Bill is in two parts, the first relating to the setting up of the Oil and Gas Authority and the second consisting of a meagre two clauses that seem to be designed to destabilise the wind industry.
Many noble Lords have spoken very eloquently about the first part of the Bill. It is indeed necessary to implement the findings of the Wood review. However, the timing of the review was rather unfortunate, being published in February 2014—mere months before we saw a radical resetting of the global oil price. The noble Lord, Lord Howell, and my noble friend Lady Liddell pointed out to us that things are changing rapidly in the global oil and gas industry, and my fear is that this aspect of the Bill reads slightly as though it is out of touch and out of time with what is happening in the industry today.
I say that because we have seen a dramatic falling off of revenues from oil and gas from the North Sea continental shelf. It is now a very different place. I am sure that we will go through this in detail in Committee but we must ask whether the Government have truly reflected on whether the powers they are giving the OGA will be fit for purpose.
The statistics are quite astounding. Revenues from offshore oil and gas have already tumbled by 40% but they are likely to tumble again from £2.1 billion last year to only £0.7 billion in 2015-16. This is a serious issue. The future scenarios upon which we are relying that might see rising receipts are predicated on an oil price of between $70 and $100 a barrel. We must ask ourselves whether that is likely. It is possible—everything is possible—and even plausible that, with renewed investment in the North Sea and a renewed commitment, we will see production levels creep back up again. However, no matter how much wishful thinking we might apply to this problem, we will not see a return to the activity levels that we had in the heady days of the 1970s, 1980s and 1990s. Production peaked in 2000 and has been falling steeply since the start of this century. My noble friends Lady Liddell and Lord O’Neill hinted that there is a future for the North Sea but it is likely to be very different from the one we see today.
It is likely that some of the skills will be transferable into the offshore renewables industry and equally likely—again, the noble Lord, Lord Oxburgh, spoke eloquently on this, as did my noble friend Lord Whitty—that the North Sea will reinvent itself as a source of storage for CO2 as we move to decarbonise our fossil fuel industries. This creates a challenge for the OGA because part of its job, in addition to trying to create some transparency and openly negotiate reinvestment in the North Sea, will be considering decommissioning—the rolling out and management of decommissioning. However, the risk is that, because it is largely determined by private sector players, the decommissioning may occur out of sync with our needs for carbon capture and storage.
If we do not get on with the carbon capture and storage element of our energy strategy, we could see a mismatch where infrastructure that would otherwise be re-used for carbon capture and storage is simply decommissioned because the carbon capture and storage project is not yet up and running. Will the Government consider creating a hierarchy in the OGA’s thinking—where the talk is about efficiencies and investment but then thought is given to re-use for CCS, and only then is thought given to decommissioning—so that we do not run the risk of a timing mismatch?
Another subject which I am sure we will talk about in Committee and which was mentioned by my noble friend Lord Grantchester is the core functions of the OGA and whether they are fit for purpose and comprehensive enough, given today’s concerns. I certainly echo my noble friend’s comments that the core functions should include references to environmental considerations and climate change. One aspect of the new regulatory authority will be that it can levy fees and raise finance for necessary expenditure, including on environmental issues. A very interesting proposal has been posited by the academic Myles Allen from Oxford University. He has been asking whether the time has now come to ask the extractive industries, which are currently extracting fossil fuels to be burned for our energy sources, to pay a levy towards the climate change damage that arises from the use of their products. We may wish to explore that in Committee.
The Bill has two functions—looking at oil and gas and the more minor measures on onshore wind—but I am left wondering whether it could have been different. Could we not have had a much more positive Energy Bill from the Government? There is an agenda here that I support. The Government said in their manifesto that they will seek to decarbonise at least cost. That is a very sensible aim. I am a technology neutralist—neutral in terms of which technologies we should be deploying. I do not believe that there should be holy cows within the energy sector, where certain technologies are protected. I honestly believe that market forces should help us to determine which of the technologies should succeed. That should be overlaid with strategic oversight from government to determine which technologies will play to the UK’s strengths and to ask where we can invest in and develop technologies that will give us a lead in the global race towards decarbonisation.
That leads me to think that we are missing a trick on carbon capture and storage. The Bill, had it perhaps not been rushed through at quite the speed that it has been and had a little more consideration been applied to it, could have been an excellent vehicle for kick-starting our focus on carbon capture and storage, not least because of the measures regarding the Oil and Gas Authority but also because we have now recognised that we need to do something to help industry to decarbonise. We talk a lot about electricity decarbonising but there are still large sources of greenhouse gas emissions in this country that will need to be decarbonised or these industries will simply be forced to leave the European Union and move elsewhere, because the caps on those emissions are tightening.
There has been some very good work on the subject of how to decarbonise our industrial sector. A recent report commissioned by DECC or the DTI—I forget which—asked the Teesside Collective to think about policy mechanisms for funding industrial decarbonisation. There are some very interesting ideas there. When will the Government start to take this seriously? When will we see some policy consultation on how we are affordably to provide industry with decarbonisation options that mean that it can reinvest in the UK and get primary production of materials going again, safe in the knowledge that we are insulated against carbon prices in future? That is the sort of Energy Bill that I would have liked the Government to have come forward with, had they given themselves a little more time to reflect and to produce a more strategic set of measures.
On process, there is no impact assessment for the Bill, which I find curious. When will we see an impact assessment? It has been mentioned by noble Lords today that the methodologies that the Government are using are opaque. The Government say with great confidence that they are on track to meet their renewables targets. Can we see those figures written in black and white please? As my noble friend Lord Grantchester mentioned, it is simply not true that we are on track to meet our EU renewables targets. We may be doing reasonably well in electricity, but we are falling drastically behind on heat and transport, and the target represents all energy, not just electricity.
When it comes to assessing how well we have done, if I were the European Union DG responsible for assessing our performance, I would look very gravely on a Government who come out of the traps with this short-sighted set of measures to rein back on renewables at a time when we have no comprehensive plan and no confidence that we will hit our targets. That seems to me to be wilfully trying to miss targets, and I would take a dim view of it. That will cost the UK taxpayer money, let us be clear, because we cannot simply flout the rules having signed up to them. There will be financial consequences to our missing those targets. Let us see the analysis and see how the Government can be so confident that they can tie their hands behind their back by destabilising some of the most successful aspects of our energy industry.
I have moved seamlessly on to the second part of the Bill, which is clearly the most controversial. It contains merely two clauses at the moment, although, as the noble Lord, Lord Purvis, stated very clearly, we need to see the detail. We need to scrutinise it. There has been no consultation and there is no impact assessment. The Government owe it to Parliament to bring forward that detail as soon as they can so that we can scrutinise it. We have only these two clauses and we must try to derive from them the Government’s intentions and plans. It seems to me that the reality is that this is obviously just narrow party politics. When she announced the early closure of the RO, the Secretary of State namechecked several Conservative Back-Bench MPs. This is clearly more about party politics than anything else. What angers me the most is that it puts in jeopardy the UK’s economic growth for the sake of narrow interests raised by a very small number of MPs. The whole of the UK economy is benefiting from our investment in our energy infrastructure. To put that at risk and seriously damage investor confidence in the way that the Government are is wholly irresponsible.
Several noble Lords mentioned investor confidence, including my noble friend Lord Whitty, the noble Baroness, Lady Maddock, and the noble Lord, Lord Cameron. It is a serious problem. The think tank E3G states:
“Every time these announcements come out, the U.K. looks like a less attractive place in which to invest. I think a number of investors will be pricing in much higher risk now”.
That was true when the Bill was published; it is even more true after today’s announcements. It is really regrettable that we should kick off this new Government with something so short-sighted and tawdry—that is the only word that I can come up with. They are simply enabling a very small but vocal group to issue self-congratulatory press releases while putting serious investment and serious jobs at risk and making us appear to be a country that does not know which way it is going when talking about the need to address climate change and to decarbonise.
The noble Viscount, Lord Ridley, made good points and some of them are obviously being listened to. He and I agree on a few things, and one of them is that there should be a focus on a least-cost approach to this. I am not saying that we should continue to provide subsidies when they are no longer necessary; that is not my aim at all. My aim is that we conduct ourselves in a way that gives investors confidence and allows for an orderly transition—a phrase that has been repeated here today. That is the phrase that the Government have used. An orderly transition is what is needed. This is a long distance from that; the Bill does not represent that.
Viscount Ridley
I am very grateful to the noble Baroness for allowing me to intervene briefly, since she mentioned me. The central point to all this is that we are on course to overspend—from £7.6 billion up to £9.1 billion—on subsidies for those industries. What would the Opposition’s position, or anyone else’s, be about reining in that expenditure, because the cost is falling most heavily on the people who can least afford to pay it?
Baroness Worthington
I thank the noble Viscount for that intervention.
On the levy control framework, there is an interesting policy that the Treasury invented. I honestly think that it was invented simply for us to have this conversation later down the line. That number represents a partial figure for what is being added to bills as a result of government policy. It is incomplete; it does not include everything. It also makes no reference to the counterfactual. We live in a world with infrastructure built in the 1960s that has now served its time, is closing and will need to be replaced. That involves higher capital costs. You cannot replace assets that have already had their capital costs paid and expect energy prices to stay the same: they will not. The counterfactual is that we will have to spend more money on electricity as we build a new infrastructure.
That is not taken into account in the Treasury’s levy control framework, so it is a particularly redundant policy, and I would not use it as my measure of whether we should be cutting an industry off at the knees just as it is showing signs of success, in the false belief that we are on track with our targets. We are not. We desperately need inward investment and jobs in the UK. The Government do not have a great record in stimulating growth in the economy—far from it. They are desperately cutting costs to mask the fact that economic growth is virtually stagnant—or would be if it were not for immigration. Here we see them recklessly upsetting investor confidence in one of our success stories.
It could have been so different. It could have been done in a much better way. We could have made it clear that we are encouraging a wider range of technologies. We could have talked positively about some of them. We could have heard more about the fact that an increasingly wide range of renewables is now being deployed, but we have not. Unfortunately, we have had a very negative spin on what has been a success story for the UK.
I have not done justice to the debate, because it has been so rich and varied, but I thank noble Lords for all their contributions. As noble Lords can see, this is a subject I feel great passion about. I hope that, as we go into Committee, we will find some way to improve the Bill. I am sure that there are some measures in it that are necessary, but it is not the Energy Bill that we would have brought forward. I hope that through the scrutiny process of Committee we can make changes to make it something worthy of our efforts.
Renewables Obligation (Amendment) Order 2014
Debate between Baroness Worthington and Viscount Ridley
Viscount Ridley (Con)
My Lords, I declare an interest in various forms of energy as detailed in the register, including both coal and forestry. I welcome what the Minister said about improvements to the requirements on auditing, sustainability and reporting, but I draw her attention to a report in the Mail on Sunday last weekend on exactly where the fuel for Drax biomass is coming from in the Carolinas. It is clear that whole trees are being logged for that. I draw her attention also to a report that came out last month from the International Council on Clean Transportation, which stated:
“Consistent with earlier studies, we find that pathways based on whole-tree logging in forests offer little or no climate mitigation over 50 years. We also show that reduced impact logging does not deliver GHG savings within 50 years. These bioenergy feedstocks are not good candidates from a climate policy point of view”.
I would just continue the debate with those points.
Baroness Worthington (Lab)
My Lords, I am grateful to the Minister for introducing these changes to the RO. They cover two issues: the non-duplication of being able to receive funding through both the RO and CFDs, which seems eminently sensible and an important tidying-up. On the sustainability of biomass, this is obviously a complicated issue, but I say in response to the comments made by the noble Viscount, Lord Ridley, that we have to keep a sense of proportion about this. There is a danger that we start to confuse the CO2 emitted from the chimney of a biomass plant with the fossilised CO2 that comes from the burning of fossil fuels. One is a function of the flow of biospheric carbon, meaning that trees absorb carbon while they are growing and then emit it when they are burnt. This has been happening since man crawled out of a cave and is not of the order of magnitude that we see with the fossil-fuel impact, whereby one is taking carbon stored over many millennia and releasing it into the atmosphere. I am glad that the noble Viscount made reference to the article in the Mail on Sunday because there is a real danger that we are slipping into a misunderstanding whereby we equate CO2 from a chimney with adding to the stock in the atmosphere. That would be regrettable, because biomass does not contribute in the same way as fossil fuels.
However, we are of course keen that all biomass should be sustainable and I think that we all agree that its best use is probably not in power generation but in the generation of heat. Therefore, CHP plants and use of biomass in district and smaller-scale heating is probably the most sustainable use. We also face the great challenge of reducing the carbon intensity of our power sector. There are sustainable sources of biomass out there from well managed forestry. We have used forestry to a far greater extent for paper production. While that is decreasing, we are now seeing an increase in use for energy to displace fossil fuels. That cannot be something that we want to stop; it is something that we want to manage, with good, strong reporting. It creates livelihoods; it creates income. Management of forests is a well established form of economic activity and we should not seek to stop it.
It strikes me as slightly odd that the Minister should state that municipal waste has a lower sustainability impact, because much of the calorific content of municipal waste comes from plastics, which are obviously a fossil fuel. I am trying to avoid the singling-out of biomass for special treatment when other forms of energy are not perhaps treated in the same way. It is true that biomass should be under scrutiny because it is a less energy-dense form of material and its upstream emissions can therefore have a disproportionate impact, but it is also true that we do not add on the life-cycle emissions to gas—LNG, for example, has a different carbon intensity if taken on a whole well-to-wheel basis from natural gas or fracked gas. We do not load our normal carbon accounting to those fuels, yet we do with biomass. I am arguing in favour of proportion and trying to get the balance right.
This is especially important in the UK as we consider how we are to meet our targets at 2020. I am sure that the demise of a couple of high-profile biomass projects—the Eggborough project and the REA’s dedicated biomass project—will not have escaped the Minister’s attention, both signalling that they are no longer seeking to pursue renewable options. That raises questions, because it means that we might be more reliant on more expensive forms of renewable power. It would be regrettable if that were the outcome: that an overzealous approach to biomass forces us into ever more expensive options. With offshore wind, we have the added cost of having to make sure that we have security of supply and back-up. Biomass has at least one very strong benefit, and that is its firm power. It can be stored, it is reliable and it will be there when the wind is not blowing and the sun is not shining. As I said at the beginning, we are keen that all biomass is sustainable, so we welcome the proposals. It is all about getting the proportion right and treating biomass fairly, relative to other sources.
I want to raise just one other issue. The noble Baroness referred to the fact that we have further changes to the RO coming forward. I have had representation from the Low Carbon Finance Investment Group that DECC has recently raised the possibility of introducing competition into the RO and that, in line with the desire to move towards competitive auctions in the CFD, it was mooted that we might require some form of competition in the RO. This would be a significant change and not one that would be welcomed, because it would almost certainly be retroactive in its application.
Therefore, I would like some reassurance from the noble Baroness that, although it has been put out that we might seek to do this to the RO, this is not the case. I am sure that it would significantly change the way in which the instrument operates to its detriment. Those are the comments that we see. This is an order that we welcome because it is tidying up, but it raises some concerns and I hope that the Minister will be able to make some reassuring statements.
Viscount Ridley
Before the noble Baroness sits down, I may have misunderstood what she said, but as far as an infrared beam is concerned, is there really a difference between a carbon dioxide molecule that came from burnt gas and one that came from burnt wood?
Baroness Worthington
No, absolutely not. It is about the flow, compared to the stock. I am sure that CO2 values differ throughout the year and a large part of that depends on how much foliage we have. CO2 is not permanently in the atmosphere, it is sucked in and out, depending on the atmosphere and the biosphere and how those interrelate. What we are doing with fossil fuel, as noble Lords will know, is extracting carbon that was once stored and releasing it very rapidly into the atmosphere, which is changing its composition. Concentrations in the atmosphere are now at record levels, touching 400 parts per million, and they have not been at that level for many hundreds of thousands of years.
Energy Bill
Debate between Baroness Worthington and Viscount Ridley
Viscount Ridley
Would the noble Lord accept that the figure that came out last week for the amount of shale gas under the UK is far higher than was assumed when his report was written? I went to talk to Cuadrilla at one point last year. I said that the 200 trillion cubic feet that they were talking about under Lancashire was being ridiculed as a very high number and asked whether they stood by it. They said, “Privately, we think it is much higher. It is about 300 trillion cubic feet but we dare not say so because people will not take that seriously”. Then an independent consultant, Nick Grealy, said 700 trillion cubic feet and everybody laughed at it. Now, the British Geological Survey has said there is 1,300 trillion cubic feet. This is the largest find of shale gas ever on the planet. The shale rock we are talking about, the Bowland shale, is in places 10 times as thick as the Marcellus shale in Pennsylvania.
I went to see shale gas extraction in the Marcellus shale in 2011 because I had heard about it and thought it was interesting. You could hardly find these well pads—they are tiny and hidden among the trees. There was a flock of wild turkeys running across the road on the way to one. I asked somebody for a calculation of just how much energy can come out of a small area when you are drilling for shale gas. The answer is that about 25 acres of well pad in Pennsylvania can produce as much energy from shale gas as the entire UK wind industry produces at the moment.
Baroness Worthington
I am sure that that is a fascinating discussion and one we will probably return to, but can the noble Viscount point to where in this part of the Bill there is anything that prevents shale gas contributing to the meeting of our decarbonisation targets? I would embrace it and would hope that it came along quickly if it could be done sustainably; there is nothing in this part of the Bill that prevents it.
Viscount Ridley
If we embrace within the next couple of years a decarbonisation target that is stricter than shale gas can help us to get to, I think that there will be a problem in the way of shale gas.
Perhaps I may turn briefly to climate change. This is not the time to re-fight the climate change debate, but others have brought it up. Given that shale gas offers the possibility of a slower rate of decarbonisation—not to as low a level of target as we are talking about—we need to retain the flexibility of that and to take into account where the climate change science has shifted to. It is simply not the case that the science has become more alarming in the past few years. There has been a series of studies of climate sensitivity in recent years by Otto et al., Aldrin et al., Ring and Searchinger and many others. The biggest of those, the Otto et al. study, which had 14 leading authors, two of whom are co-ordinating lead authors of the Intergovernmental Panel on Climate Change, concluded that transient climate sensitivity—that is, the number that we are likely to reach in about 50 years—is about half of what we thought it was. It is about 1.3 degrees centigrade, of which we have had nearly half already. It is not true to say that we are seeing damaging effects on weather from climate change. Weather is not climate change. The Intergovernmental Panel on Climate Change SREX report in late 2011 came to the very firm conclusion that you could not see a signal of climate change in current climate events, neither in droughts, floods, storms nor any of those kinds of things. Professor Roger Pielke at the University of Colorado has come to exactly the same conclusion. There is no evidence yet that we are seeing damage. Meanwhile, we are seeing clear damage from climate change policies. The denial of cheap electricity to people in poor countries and the effect of biofuels on food prices are having a demonstrable effect on both hunger and well-being in other parts of the world. We have to take these things into account.
I hasten to add that I accept the science of climate change. By that, I mean I accept that carbon dioxide has its full greenhouse effect. At Second Reading, the noble Lord, Lord Prescott, said that I was denying this, but I accept that it has the full effect. However, the full effect is only 1.2 degrees centigrade warming for a doubling of the quantity of carbon dioxide—it is there in section 8.6.2.3 of the latest report of the Intergovernmental Panel on Climate Change. The danger arises from the potential feedback effects from water vapour in the atmosphere. We can measure whether those are happening and it is clear they are happening more slowly than expected—that is what those papers I cited are all about.
This is not about saying that climate change is or is not happening; it is about saying that potentially the world is changing. We are finding flexibilities in the way in which the world is changing which mean that we should retain flexibility in policy. That is why I oppose the amendment.