Energy Costs for Businesses

Earl Russell Excerpts

Tuesday 17th December 2024 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, my noble friend is right to explore the contribution that nuclear will play in the lead up to 2030, but of course beyond, which is why we have the building of Hinkley Point C, then Sizewell C when we get to a financial investment decision next year, then the SMR programme and then the AMR programme. As far as small modular reactors are concerned, Great British Nuclear is conducting a technology exercise at the moment; it is in financial discussions with four of the companies concerned. We will come to the issue of spend and public support in the multiyear spending review that is taking place over the next few months.

[Earl Russell (LD)]

My Lords, I am sure the Minister will agree about the importance of making sure that we continue to make efforts to reduce the costs of energy for industry. Some 56% of UK businesses would like to increase their on-site power generation, so what are the Government doing to help industries undertake such actions to help with their renewable energy?

[Lord Hunt of Kings Heath (Lab)]

My Lords, first, of course I very much agree with the noble Earl in wishing to see a reduction in the cost of energy, particularly electricity, for our businesses. We believe that in the long term—and in the medium term, to 2030—clean power is the way to do it. He raises a very important point: one of the responses, as he will have seen in the US, is the linking of heavy energy users, which can be companies such as Amazon, with their data centres, to nuclear power generation through advanced modular reactors. Of course, the other very important issue is getting connections to the grid, which is why the clean power action plan is so important in relation to speeding up those connections.

Great British Energy Bill

Earl Russell Excerpts

Committee stage
Tuesday 17th December 2024 Lords Chamber

[Lord Teverson (LD)]

My Lords, I apologise. In my excitement to contribute in Committee, I forgot to apologise for not being able to come to previous sessions. I also forgot to declare that I am a director of Aldustria Ltd, a battery storage company, and that I chair the Cornwall & Isles of Scilly Local Nature Partnership, which is involved in biodiversity issues.

[Earl Russell (LD)]

My Lords, I will speak to my Amendment 50 and signal my support, and that of our Benches, for Amendments 46, 46A, 49 and 51A.

My Amendment 50 seeks to add a statement to the strategic priorities, including a specific priority for the advancement and production of clean energy from schemes owned, or part-owned, by community organisations. This amendment seeks simply to have community energy added to the strategic priorities for Great British Energy. I apologise for talking about community energy again, as my Amendments 11 and 15 were about the objects of the Great British Energy company; these amendments work alongside those, and, combined, we want to see community energy in the Bill, both in the objects of the company and in the strategic priorities.

Labour has looked to Europe for its inspiration—for want of a better word—for Great British Energy. In Europe, community energy is being embedded in local power networks at an ever-increasing level. Europe is doing that because it knows that it is good for energy security, continuity of supply and local communities and that it brings local benefits. Here at home, we have seen the end of the feed-in tariff, but since that time there has been very little development, with still only 0.5% of our electricity being generated from community-based energy schemes. Reports have indicated that there is a possibility for that to grow exponentially up to some possible 8 gigawatts of local community energy by working with local energy plans, provided that the investment and policy are put in place to make that happen.

I thank Power for People, which has helped me with these amendments and provided your Lordships with briefings. It believes that up to 2.2 million homes could be powered by community energy, that it could save some 2.5 million tonnes of carbon dioxide and that it could help to create some 30,000 jobs in the UK.

Community energy is good not just for us but for our communities. Without going through all the arguments I made the other day, our position is that there is no Great British Energy without a Great British community energy. Our vision is for an end-to-end community energy scheme, so that our local communities can contact one person and get an end-to-end system to help them to get the investment, planning and ideas to turn their wishes to help contribute and be part of this transition into reality.

The point is that the big players will not do this; they are not operating in this field. This simply will not happen if GB Energy does not take it on and make it part of its core strategic priorities—it just will not happen. There is no other realistic option for this. This is good for us and for our communities, and we want to see communities benefitting from the energy infra- structure that they host or run. I apologise, but there will be a third bite of the cherry, as my Amendment 118A, in group 14, argues specifically for this point.

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[Earl Russell (LD)]

My Lords, I will speak to my Amendment 54 in this group and signal our support for Amendments 51, 53, 57 and 58. I thank the noble Lord, Lord Vaux, for his excellent introduction to this group of amendments and for setting out everything so ably.

Jumping to the end, it appears to me that the settled will of the Committee is that something should be done on this issue; I suggest one way to achieve that would be for the Government to bring forward their own amendment before Report. It might be that further collective discussions happen between now and Report. Everyone has a slightly different way of doing this, and I do not think that anyone has the answer—it is something that needs more work. However, the settled opinion of the Committee seems to be that there needs to be some check on this part of the Bill.

I said previously that the Bill is a little too short for its own good. I understand the Minister’s concerns about having lists and the problems with them, and why he does not want them. We are in favour of the Bill and we do not want to stand in its way. This is a manifesto commitment that the Government are delivering. However, as it stands, it has numerous issues. No timescales are provided for when it must be done. Although there is a condition to lay this before Parliament, as has been said, there is no parliamentary process to scrutinise, question, amend, approve or reject the strategic priorities. There is a condition to consult the devolved Governments, but, if they all unanimously said that they had the same problem with the strategic objectives, there is no way for Parliament to know that that happened, and there is also no way for them to reject or change the strategic priorities. It feels a bit unusual to be in this potion, because we are being asked to scrutinise and approve the Bill but we do not have the strategic priorities in front of us.

I welcome the constructive engagement that the Minister and his Bill team have had with us to date. He has been clear with us that these strategic priorities are being written and prepared. I recognise the need for urgency and that they are a new Government, but, ultimately, we are being asked to approve something when we do not know what it is. Indeed, the organisation itself has not written the strategic priorities, so the organisation does not know exactly what they are yet. That is a difficult position to be in.

However, there are ways forward through all of this. This quandary needs to be resolved through collective compromise and a meeting of minds. At a minimum, there need to be some guard-rails. Some general principles need to be laid out, including what will be in the priorities and a general sense of the outputs that GB Energy will be responsible for. That can be done—we can find a way to do that collectively. It should be done on Report.

Between now and Report, I would welcome the chance to have a conversation in which we can talk about this collectively. I do not want to delay Report—that is not the answer to this—but the Minister could put forward a draft publication for us. There could be draft heads of terms on what the current thinking is for GB Energy and the Ministers about what will and will not be included, as well as what has already been excluded. The Minister could give verbal assurances to this House from the Dispatch Box on some of these matters.

Finally, this amendment is my hard backstop, because it requires a resolution in both Houses. I will keep it in reserve. To be clear, in the final group of amendments, I have Amendment 122, which requires that the strategic priorities are “laid before Parliament”. I also have Amendment 123, which requires that they are laid and approved by Parliament, and Amendment 124, which is maybe more of a compromise on these issues. It would mean that the Bill cannot come into force

“unless a document setting out the thematic headings of the statement of strategic priorities have been laid before Parliament”.

Maybe somewhere around there is where we might be able to coalesce. In any case, this is an issue that needs further work and constructive compromise. My sense is that there are some concerns about these matters on all sides of the Committee. In the first debate on the Bill, the noble and learned Lord, Lord Falconer, mentioned that this needs to be in the Bill—I welcome that statement. I look forward to working with the Minister to find a solution.

[Lord Howell of Guildford (Con)]

My Lords, I was going to stand aside from this debate early in the process because of the mountain of expertise that is building up on all sides of this Committee against many aspects of the Bill. It is not our job to turn it down in this House, but it is our job to try to improve and rescue some of the bits that may be particularly dangerous and damaging, of which there are several that we will no doubt come to. I was going to stay silent, but my noble friend Lord Effingham’s splendid speech touched on so many of the fundamental problems that are so obvious in this exercise—setting up this kind of body with this kind of money.

We have of course been here before. We went over this again and again in the 1960s, with the Industrial Reorganisation Corporation, when almost exactly the same arguments were used. Many of us on all sides—it was not partisan—questioned whether that bright idea of Harold Wilson and a Mr Cant, one of its designers, would work. I hope now that we leave our mark of doubt and scepticism about whether this whole approach works.

The IRC failed because the belief prevalent among economists at the time was that if you built big and created such things as British Leyland, size would deliver. Unfortunately, size did not deliver and there was a mood and a realisation—this was long before the digital revolution—that size might have diseconomies, as was then proved with projects such as British Leyland, a disaster from which Japanese inward investment 10 or 20 years later saved us. That was the third reason why I was not going to say very much at this stage.

I apologise for being a few minutes late for the Minister’s excellent speech on the last set of amendments, but there was a gap, something which he did not mention. My noble friend Lord Hamilton intervened about Sizewell. The Minister then produced the standard line on Sizewell, but he did not mention money. Yet money is the whole issue in organising our resources for the energy transition to come, which will be fearfully expensive, particularly if we have to leave unused a very large chunk of intermittent supporting energy—nuclear and other sorts—for the 3,000 hours every year when the wind does not blow. Until we get to the hydrogen stage, which we are a decade or so off, I suspect, that will leave a big gap to fill with otherwise idle machinery—which is very expensive indeed if it is not earning or producing. None of that has been touched on yet. The more that I listen to this, the more I see that we are heading into a nightmare of expenditure problems and dilemmas.

The noble Lord, Lord Vaux, with his ruthless clarity, hinted that this is the way things are going. The only saving grace from here is to have a system of accountability, a strategy and a clear and honest recognition of the colossal dilemmas ahead and the timescale, particularly for nuclear. Perhaps we will not discuss nuclear very much, although there are related amendments, but the issues of not only cost but timescale have been totally ignored.

There is chatter around, although even the Government estimate that Sizewell C will cost about £20 billion, as opposed to whatever Hinkley C is now running at. My bet would be that it is much nearer to £20 billion than £30 billion, but never mind about that. The question is: who has the money? The Government have not got it. Governments all across the world, and certainly our Government, are underwater on debt, understandably reluctant to tax more and not really able to borrow more. It will have to be done with the private sector, but the private sector will not touch something like Sizewell C, which is a dodgy EPR design that has not worked well anywhere in the world so far.

The timescale for Sizewell C is probably the mid to late 2030s. The alternatives of the new technologies in nuclear—I am sorry to bring this into a non-nuclear discussion—are massive. Rolls-Royce is talking about being able to deliver clean green electricity by 2030 or 2031. No one, even a super-optimist, believes that Sizewell C can touch our electricity supply before 2037 or 2038; I bet it will turn out to be 2040 or later still. These things have not been touched on yet, so goodness knows how we will deal with them as we come to all the amendments lying ahead. The one saving grace is that we would have a chance for both Houses and those who are informed about these things to point out at every point some of the further dangers and damages into which this entire structure will slump.

That is what one has to add at this stage. I am afraid that the Minister will not be pleased to hear that ahead lies a vast pile of questions and doubts about this project and the philosophy behind it—a philosophy of setting up large, semi-state-owned or state-owned organisations to push through things that apparently cannot be produced by the private sector alone. The philosophy simply does not work in the digital age. It did not work with the IRC before the digital age, it will not work in the digital age, and it will not work in the AI age. The nature of the economy is quite different from even 20 or 30 years ago. These are the problems which now have to be addressed, and they certainly will not be addressed by this.

I am afraid that we are heading for a lot more amendments on the detail of everything I have said. In the meantime, both the amendments that have been debated are excellent and should be accepted by the Government as part of the vital need for Parliament to have a regular, continuous, accountable and effective say, maybe with a special Select Committee. We invented Select Committees in the 1960s and they worked very well for departments. The Select Committees here are excellent and produce superb reports. Maybe this is an area where we need to beef up our own penetrating techniques on Select Committees and reports, to ensure that there are no more blunders ahead. I would bet $100 or more, if I was a betting man, which I am not, that there are plenty of blunders coming along, written into the Bill as it stands.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, very briefly, I offer Green group support for Amendment 56 and, in particular, Amendment 116, which has broad support, as we see from the signatures. I declare my interest as a member of the advisory committee, as I think it is now called, Peers for the Planet. The noble Baroness, Lady Young of Old Scone, has already said many of the things I was going to say. I just add that I can go back even further than she did, to the Pension Schemes Act 2021. That was an historic moment, with climate being written into a finance Bill for the first time ever.

I have been in your Lordships’ House for five years, and we have had win after win, as the noble Baroness just outlined. It really is time for us to stop having to bring this to the House to be inserted, taking up so many hours of your Lordships’ time to get us to the point at which clearly the Government should have started.

I will add an additional point to what the noble Baroness, Lady Young, said. In the recent election, Labour explicitly said that it was aiming to take a joint nature and climate approach to its way of operating the Government. This surely has to be written into the Bill.

To set the context, a nature recovery duty was discussed in the other place. My honourable friends Siân Berry and Adrian Ramsay were prominent in that, along with people from other parties. We are one of the most nature-depleted corners of this battered planet, but our statutory duty is at the moment only to stop the decline, not even to make things better. We surely cannot be creating such an important new institution as this without building nature into its statutory obligations. The Government regularly remind us that the economy and GDP growth is their number one priority, but the economy is a complete subset of the environment. The parlous state of our environment is an important factor in the parlous state of our economy.

[Earl Russell (LD)]

My Lords, I will speak very briefly to Amendment 116, in the name of the noble Baroness, Lady Hayman, to which I have added my name. I am sorry the noble Baroness is unable to be here today, and I wish her well. I thank the noble Baroness, Lady Young, and the noble Lord, Lord Bourne, for speaking to this amendment.

The amendment would give Great British Energy

“a climate and nature duty requiring it to take all reasonable steps to contribute to the achievement of the Climate Change Act 2008 and Environment Act 2021 targets in exercising its functions and delivering on the objects in clauses 3 and 5”.

We face a climate change issue and a nature issue; they are interlinked and co-dependent. The actions that we take on climate change cannot be at the expense of biodiversity and nature, particularly in our seabed, which locks up so much blue carbon. We are still developing our understanding of just how important that is, and how susceptible the seabed is to disturbance. The two are interlinked and interdependent, and they have to be seen together. The more that we can do this across all our public bodies, the better we will be.

A nature recovery element to the proposed duty would give GB Energy statutory direction to invest in clean energy projects that meet the highest of environmental standards. It is really important to make sure that the work GB Energy does on climate change also supports nature. That would give it a key concentration in its broad decision-making and investment decision-making, as well as in projects, project management and delivery. A nature recovery duty would give GB Energy the power to use nature-based solutions and to review what it does and hold itself to account, and for us in Parliament to do the same.

The Crown Estate Bill and the Water (Special Measures) Bill have been mentioned already. Both those Bills have had the addition of a general climate change and nature target. This was a welcome development, which I was very pleased to see. I pay tribute to the noble Baroness, Lady Hayman, for the work she has done, and to Peers for the Planet and other Members of this House who were involved in those processes. That target is an important part of our transition.

I was pleased to see the same amendment proposed to the GB Energy Bill. The noble Baroness, Lady Hayman, worked constructively with the noble Lord, Lord Livermore, to get that done, and they found a wording that worked for both of them in the context of this Bill. The context exists: GB Energy’s primary partner is the Crown Estate, so half of this partnership has a reporting requirement already. At a very minimum, if this amendment is not accepted or amended to make it acceptable, the amendment in the Crown Estate Bill has to be mirrored in this Bill. I have tabled an amendment in a later group which picks up on that work and seeks to make sure that that happens.

These are important matters. I hope that this amendment can be carried forward. Labour made a commitment in its manifesto not only to fight climate change but to protect nature. It is important that the institutions that this Government set up to fight climate change also implement Labour’s other manifesto commitments.

[Lord Bourne of Aberystwyth (Con)]

My Lords, in speaking to Amendment 116, I declare my interest. I thank the noble Baroness, Lady Hayman, for all she has done in this area in general, and in relation to this amendment in particular.

I want to make a specific point, and I made it at Second Reading. I do not think that we have enough detail on the objects, directions or priorities; there is a lack of specificity to them. The Minister has said he does not want what he has called constraints, which I can understand, but to other people such constraints are clarifications. Somewhere between the two, there has got to be a measure of talking to see how we achieve that.

There is a case in company law called Re Introductions Ltd. I mention it because the facts illustrate how important it is to get these things right. The company in the case was set up to introduce overseas visitors to the delights of Britain at the time of the Festival of Britain. For reasons that are not entirely clear, the company changed its activities and went into pig-breeding, completely against what was said in the objects clause and in breach of directors’ duties and so on. The law on objects clauses has changed a great deal, but it is still important that we are able to see that directors are going to do the things that we want them to do. That is what Amendment 116 is all about.

I will not delay the Committee too long because the ground has already been trodden on how this is something we should be doing. It should not come as a surprise to the Government that your Lordships want this Bill to be about ensuring we take proper regard of the Climate Change Act, which has had support from across the House. We supported it during our period in government; indeed, the noble Lord, Lord Deben, chaired the Climate Change Committee. It is important that we embed it and the commitment to the environmental targets for biodiversity in the legislation, as there is a read-across between the two: if you do one it has a beneficial effect on the other, and vice versa.

As other noble Lords have said, this would be consistent with the Government’s approach. They have already done this in the Water (Special Measures) Bill, which they amended so that Ofwat has to abide by the climate and nature duty, and in the Crown Estate Bill, as has been mentioned, which was amended to ensure that the commissioners keep under review the impact of their activities on the achievement of sustainable development. I do not think it is a great deal to ask of the Government to have a consistent approach, to adhere to it and to make sure this legislation works accordingly. I hope the Minister will be able to give a favourable indication of what will happen between now and Report, because it is very reasonable to request that this be written into the legislation.

Private Low-carbon Investment: Green Finance Institute Report

Earl Russell Excerpts

Monday 9th December 2024 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, I cannot really respond better than by saying that my noble friend answered the point thoroughly. We at the Department for Energy Security and Net Zero keep a close eye on skills needs. In fact, the whole energy sector has great potential for growth in really high-skilled jobs in the future. Since 2021 the department has invested over £28 million in skills and training, which has resulted in 33,000 training opportunities in retrofit, clean heat and energy efficiency roles. I take the noble Baroness’s point and we keep this issue under very close review.

[Earl Russell (LD)]

My Lords, cold homes drive up ill health, our energy bills and our emissions. At least one-fifth of the UK’s CO₂ emissions come from home heating and our homes are some of the worst insulated in western Europe, with 27 million of our homes needing to be retrofitted. Does the Minister agree that property-linked finance makes sense? I ask him to look at it in relation to heat pumps, particularly with a view to bringing in enabling legislation and pilot programmes so that the Government can find the schemes that really work.

[Lord Hunt of Kings Heath (Lab)]

I agree with the premise of the challenge that we face. We responded positively, as do I, to the proposals made by the Green Finance Institute, which is why we are working on this seriously and discussing it with it, and we will be looking at the outcome of the pilots in commercial properties that the GFI is going to take forward in the next few months. But I have to point out to the House that this is not easy. Current experience suggests that unless you can ensure that a scheme is easy for people to understand and know what they are getting themselves into, and can offer competitive interest rates, it is not going to fly. We need to make this a credible scheme.

Great British Energy Bill

Earl Russell Excerpts

Committee stage
Tuesday 3rd December 2024 Lords Chamber

[Earl Russell (LD)]

My Lords, I rise very briefly. I thank noble Lords for bringing forward these amendments. These are really important issues that are worth examining in Committee. However, on these Benches we do not feel that any of these amendments really provide proper solutions to some of the problems that are contained within this Bill.

We feel that GB Energy is separate and distinct from the National Wealth Fund; as GB Energy grows and develops over time, that will become clearer. We welcome the setting up of GB Energy, and we think it is absolutely essential that Britain has a chance to own and manage part of its energy resources and that we are investing in having our energy security and independence.

I read recently on the old Government’s website a press brief from No. 10 during the Sunak Government, which proudly proclaimed that they had spent £40 billion subsidising home owners and businesses through the energy price crisis that we had in the last few years. Obviously, that cannot continue, and our bill payers are suffering, which is not good for us.

We do not really feel that having minority equity stakes is the answer to these problems either. There are problems in this Bill: the Government have chosen to have a very short Bill; the strategic priorities are not written up and are not ready; Clauses 5 and 6 give more control than the Government should have without adequate parliamentary scrutiny—I recognise that this has been picked up by reports in this House. Those are all matters we can discuss and work constructively with the Government to find solutions to them. Ultimately, this is a useful conversation, but we do not see the answers within these amendments; we see the answers within other amendments that are yet to come.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, we have started our proceedings in Committee with a very interesting discussion about the relationship between Great British Energy and the National Wealth Fund. I certainly agree with the noble Lord, Lord Offord, on the importance of our debates on energy and net zero more generally and with the noble Lord, Lord Howell, about the complexities of our energy system and the challenges that we have undoubtedly set ourselves. The recent report by NESO, the National Energy System Operator, sets out those challenges, but gives us some confidence that we can achieve them.

Amendment 1, in the name of the noble Lord, Lord Offord, seeks to require that Great British Energy must be a subsidiary of the National Wealth Fund. Clearly, he indicated he wanted to explore in more detail the relationship between the two organisations. I should say at once to the noble Lord, Lord Howell, that we are certainly not creating organisations for the sake of it. As someone who has spent most of my life dealing with NHS structures and restructuring, I have learnt over the painful years that simply creating new organisations and merging other ones very rarely leads to a successful outcome. We believe that Great British Energy is a key component of our energy and net-zero strategy; that is why it was a manifesto commitment and why we are determined to plough on with this proposal.

On the relationship and the difference between the National Wealth Fund and Great British Energy, the Government have stated very clearly that we see the National Wealth Fund as the state-owned investment bank and wealth fund. It will invest across clean energy sectors, including green hydrogen, green steel, gigafactories and ports, as well as other sectors central to delivering our industrial strategy. On the other hand, Great British Energy will be the UK’s state-owned energy company. It will own, manage and operate key energy projects across the country, including making investments across the clean energy sector and supporting the development of clean energy technologies. It will also support local power and community energy projects as well as supply chains. This is a distinct role, which is why GBE should be a stand-alone company focused on its important mission.

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It will help to achieve net zero. GB Energy is the flagship policy of this Government’s plans to reach net zero by 2050, and I support that. Hydrogen has a wide range of uses, from local transport to aviation to industrial decarbonisation, and is essential for decarbonising hard-to-reach sectors of business. It would show good global leadership. That is really thanks to the healthy pipeline of projects, a supportive policy environment and existing energy expertise. The UK is well positioned to become a global hydrogen leader and build robust supply chains here. But, above all, it supplies energy security. CCUS-enabled hydrogen has a critical role to play in protecting the UK’s energy security, because hydrogen can store energy to balance offshore wind and solar. When the wind is not blowing and the sun is not shining, hydrogen is there to give us the future energy security that we need as a nation. I believe that what this industry has done and is doing is vital to enhance this Bill and I look forward to hearing what the Minister has to say.

[Earl Russell (LD)]

My Lords, I rise to speak to five amendments in this group, so I apologise that I will be a few minutes—but at least they are not in five different groups. I start with two amendments on heat pump technology. They both seek to explore how Great British Energy could have a greater and more useful and productive role in helping with the uptake of heat pumps.

Amendment 16 would set an objective for GB Energy to ensure the uptake and use of heat pumps. Amendment 17 would set an objective for GB Energy to ensure the uptake and use of heat pumps, including by leading efforts to develop a mortgage opt-in financing scheme, where payments for heat pumps could be included in mortgages on an opt-in basis. Helping people to decarbonise home heating has been a long-running and difficult issue. Very little progress has been made in these areas, which are responsible for a quarter of our total CO₂ emissions. We all need to recognise and work together to ensure that policies and plans are put forward to bring people with us on the journey to net zero, and that means ensuring that vulnerable and low-income households are supported through the transition.

Heat pumps are up to four times more energy-efficient than gas boilers and they are a crucial element of the Government’s plans to decarbonise home heating. I welcome a lot of the measures that have recently been announced by the Government as part of the warm homes plan, including boosting the budget for the boiler upgrade scheme, supporting more households to switch to a heat pump and removing unnecessary planning restrictions which were a blockage to people taking up and installing heat pumps. While I recognise that these measures are useful and help to remove some barriers, my worry remains that they are still not enough to get us back on track to meet our heat-pump targets.

To meet the UK’s climate change target, the Government need to install 600,000 low-carbon heat pumps annually by 2028. The 2024 progress report to Parliament from the Climate Change Committee identified heat-pump installations and the training of heat-pump installers as being “significantly off track”. In 2023, less than half the number of heat pumps were installed to keep us on track for these goals. While figures have improved a little this year, it has not been dramatic enough to make progress. The marketplace faces continued resistance from many of the gas boiler companies; there is still a prevalence of disinformation and cost barriers and a lack of installers necessary to get these heat pumps installed. So I wish to explore with the Minister and with the House whether it is worthwhile giving GB Energy a role in this space, to help progress with the installation of heat pumps and to help us meet these challenging targets. To be frank, I do not see much of another plan from the Government that is going to get us anywhere near where we need to be in time. Furthermore, has any consideration been given to bringing the warm homes plan and the associated budget within the control of GB Energy?

Turning to Amendment 17, I wish to acknowledge from the outset that this is not my idea; this is an idea I read about and it originates from the noble Lord, Lord Deben. It made sense to me. This would be a way of helping people who own a house and have a mortgage to overcome the cost barrier to the installation of heat pumps. I think it is sensible and possibly worth pursuing further. So, I wanted to ask the Minister and to explore with the House whether GB Energy could act as a facilitator and a broker to help make this happen. There are significant government grants available—£7,500 for installing a heat pump—but that still leaves over half the cost with the householder. That is still a significant amount of money and it is a barrier to people taking this up. However, if the total cost of the heat pumps that was left over could be put on a mortgage, that could spread over a longer term and the process would become inherently much more affordable. So I will be interested in the Minister’s comments on whether that is something that GB Energy might have a role in helping to facilitate.

I will now move on to Amendment 23. To be clear, this is a probing amendment. Sorry, that was not written in the amendment. The amendment prevents GB Energy facilitating, encouraging and participating in carbon capture and storage, as the Government have already allocated a budget for CCS to be spent elsewhere. I tabled this amendment so that the whole House could gain a better understanding of the proposed role for GB Energy in the CCS sector and in this space. I want to hear from the Minister what the objectives are. What value will GB Energy add here, why are they investing in it and what are the proposed outcomes that will flow from that investment?

I understand from the Minister that the Government do not want to put a list in the Bill and that they are keen to maintain flexibility for GB Energy. GB Energy is about investing in emerging technologies, helping them to get off the ground and taking on some of the risk that needs to be taken to help create new markets. It is about crowding in and not crowding out private capital. Those are clear objectives. It is a tightrope that needs to be walked, but there is a clear purpose there. I am not against GB Energy having a role in CCS, but I wish to understand a little better what that role is, what is planned and what percentage of GBE’s proposed budget might be spent in this area.

Against that background, I am concerned about the availability of budget and government resources for GB Energy. I know that government discussions around budget resources are ongoing, that £100 million has so far been pledged over the first two years, and that a total of £8 billion over the five years of this Parliament is proposed, but that is not a huge budget resource and there is a growing list of priorities and possible areas for GBE to invest in. Eventually, we could end up in a position where the cake is cut so small that each slice begins to have a very diminishing value.

Of course we need to set up the organisation, but only £100 million-worth of investment will be available to GBE for the year 2025-26, other than what might come from the National Wealth Fund. Time is running out for GB Energy to make these investments, because the ambition here is obviously to decarbonise our energy by 2030. If you are 25 or 26 making these investments, once you have made them they need to create real things that make a real difference. We are running out of time.

I speak also to Amendment 24, which is similar to Amendment 23 but looks at GB Energy’s role in nuclear and at the relationship between GB Energy and GBN. I do not have time to go through it all, but basically I want to explore all the points I made on CCS in relation to GBN. I note the Minister said in the letter he wrote to us that the detail is being worked through and that considerations are being given to how GBN’s functions could be best aligned with GBE. Briefly, can he confirm that there are no plans for GBN to become part of GBE, and that the plan is that they will always be separate organisations but will have close working relationships with each other? Again, I assume that that is about initial investment and risk-taking in new nuclear technology.

My worry these amendments address is that, without proper strategic priorities, the ever-growing areas that GB Energy could invest in will leave it with inadequate resources to do the core job that I want to see, which is renewable energy. The Government have made £200 billion available for carbon capture and storage, so I do not quite see why GBE also needs to be involved in it.

Amendment 25, to which I have added my name, is in the name of my noble friend Lord Bruce. Unfortunately, he cannot be here, so I will speak to his amendment, which would require GBE to have consideration

“to measures that ensure oil and gas supply chains contribute to … the development of renewable technology during transition to net zero … the decarbonisation of remaining oil and gas production, and … the reduction of oil and gas production consistent with net zero”.

I pay tribute to my noble friend and his years of experience in Aberdeen and the North Sea oil and gas sectors, and his very real concern to ensure the transition is indeed just. These processes are extremely difficult even in the best of times and with the best will, so it is important to ensure oil and gas workers are protected and treated fairly, that adequate support is given to them, and that they are able to transition into the green energy and technologies of the future. We need these people and their skills, and we need these industries to ensure we can deliver the green technology that we need. However, these processes can be bumpy. It is in all our interests to ensure that their rights and futures are protected, and that these British industries continue to be supported and flourish, and are able to transition. All projections to and through net zero envisage oil and gas as part of the plan, so this will continue to be part of our energy mix even in net zero.

The oil and gas sector currently accounts for £25 billion of UK GDP and supports around 200,000 jobs. The plans are that even more people will be employed in the green sectors. The simple purpose of the amendment is to ensure that the decline of the oil and gas supply chain does not proceed faster than the expansion of the renewable sector. If we get the balance right, the UK can deliver net zero at home and help develop it abroad; if we get it wrong, we could depress one successful if declining sector before the new sector arrives to take it forward.

Just before I finish, I give my support to Amendment 18, which will no doubt be spoken to very well by my noble friend Lady Grender. It calls for GB Energy to support an emergency home insulation programme. This is one of the key amendments to the Bill from my party. The best energy of all is the energy we never need to burn, use and consume. More must be done on energy efficiency to support our home owners and bill payers to make sure that they can afford to keep their homes warm and safe. Finally, I lend my support to Amendment 91 on tidal barrages. With that, I think I have run out of time.

--- Later in debate ---

[Lord Hunt of Kings Heath (Lab)]

Yes, I want to be absolutely clear: nuclear clearly falls within the definition of clean power, so it would be within the competence of Great British Energy to invest and do the other things in the Bill in relation to nuclear. However, we have Great British Nuclear, which I believe will continue. We are still finalising discussions, but GBN is focusing at the moment on small modular reactors. The department is involved in major funding of the nuclear developments, but GBE could also invest in nuclear energy. I hope that is clear.

I turn to oil and gas. Amendment 25 from the noble Earl, Lord Russell—and the noble Lord, Lord Bruce, who was not able to be present—would require Great British Energy to consider oil and gas supply chains and a reduction in and decarbonisation of oil and gas production. I say to the noble Earl that I understand the need for a just transition and acknowledge the skills of people working in oil and gas in the North Sea.

The Bill is focused on making the minimum necessary provisions to enable the establishment of this operationally independent company. Clause 3 provides the framework for Great British Energy’s functions and limits the areas where it can act, but it does not say how Great British Energy should deliver its functions or objectives. One of the worries about the noble Earl’s amendment is that it would widen the intention of this clause, perhaps unnecessarily. I say to him that, as we invest in the UK’s energy potential, we want to rebuild supply chains at home, of course. In relation to oil and gas, we want to help the transition and use the skilled workers in the most effective way possible. Oil and gas production in the North Sea will be with us for decades to come, so we want to manage the North Sea in a way that ensures continued support for that sector but enables some of the workers there to transition to other sectors, particularly in energy where they have such expertise.

Amendments 30 and 33 in the name of the noble Baroness, Lady Boycott, wish the Government to confirm or state that biomass is not included in the definition of clean energy in the Bill. Although I understand that many noble Lords share her viewpoint, as was clear from the Oral Question we had a few weeks ago, the Government believe that biomass plays a role in balancing the energy grid when intermittent renewables are not available. It is well evidenced that sustainably sourced biomass can provide a low-carbon and renewable energy source. That view is supported by both the Inter- governmental Panel on Climate Change and the Climate Change Committee.

Biomass sourced in line with strict sustainability criteria can be used as a low-carbon source of energy. Woody biomass that is sustainably sourced from well-managed forests is a renewable, low-carbon source of energy, as carbon dioxide emissions released during combustion are absorbed continuously by new forest growth.

The noble Baroness mentioned the Ofgem investigation, which she will know was about incorrect data being provided. It would be fair to say that Ofgem did not find the process at fault; it was the data provided. She asked me what visits officials in my department had made to the US. Officials have been in contact with US regulators but I would be happy to provide her with more details on what we have been doing.

The noble Baroness also mentioned BECCS, as it is known, or bioenergy with carbon capture and storage. Again, the Committee on Climate Change and the International Energy Agency recognise that BECCS can play a significant role in supporting net-zero targets through the delivery of negative carbon emissions with the co-benefit of producing low-carbon energy.

The noble Lord, Lord Alton, spoke eloquently and passionately to Amendment 91 on tidal barrages. I listened to the noble Lord, Lord Cameron, too, who suggested that tidal barrage and, in particular, lagoons play to the UK’s strength. The noble Lord, Lord Wigley, also spoke. The National Energy System Operator—NESO—is leading a network innovation allowance project aimed at establishing a holistic knowledge base on the potential development and impacts of tidal barrage in Great Britain within the context of grid operability. That is a very important development that I hope picks up the point that noble Lords have raised—the situation may have changed over the past 10 or 20 years.

I look forward to discussing the Mersey barrage with the noble Lord, Lord Alton. When I did this job at the Department of Energy and Climate Change from 2008 to 2010, I chaired a forum that we established on the Severn estuary potential, so I would certainly be interested in taking discussions forward on the Mersey barrage.

I hope that I have reassured most noble Lords that the energy technologies they wish to see supported can be covered in the Bill, but Great British Energy must be allowed to make its own decisions within the context of the objectives and strategic priorities the Secretary of State will set.

[Earl Russell (LD)]

I thank the Minister for his detailed response to all the amendments in this group. I want to follow up with a quick question. I and the noble Baroness, Lady Grender, asked the Minister whether any consideration will be given to rolling the warm homes plan into GB Energy. The answer might be that no consideration will be given, or that the Minister does not have an answer—though he could possibly have one in a minute. I am happy to take a written response or come back to it at a later stage.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am not aware of any intention. I will certainly write to him if I have got that wrong but I am not aware of any intention to do it. The whole issue of home insulation and heating is crucial to getting to net zero and we are giving it a huge amount of attention.

--- Later in debate ---

[Lord Vaux of Harrowden (CB)]

My Lords, given the relevance of this amendment, I remind the Committee of my interests as a generator of small-scale hydro.

Before I get on to the specifics of the amendment, I will try to clear up a confusion that crept into the debate on the previous group, at the risk of reopening the mini debate we had at the end of the second group. There is still confusion between “objective” and “object”, and the Minister is still guilty of falling into that trap. The objectives are what the company has to try to achieve. The “objects” in Clause 3 are what the company is restricted to being able to do. If it is not in the objects, the company cannot do it—it is not allowed to. If it is in the objects, the company is allowed to do it but does not have to. Therefore, putting something into Clause 3 does not mean, as the Minister has suggested, that we specify what GBE should be doing or making, or in any way restrict its ability to make its own decisions. That is a really important difference. I suspect that a number of noble Lords who tabled amendments to Clause 3 think that they are adding an objective. They are not.

That said, my Amendment 10 is designed to allow GBE to do something, not to tell it to do it. Since the removal of the feed-in tariff system, of which I am a recipient, there has been only a very limited incentive for people to install greater domestic renewable generation capacity than the amount that covers their own usage. Own usage brings quite a substantial return because it replaces the cost of buying electricity from a main supplier plus the VAT, but the only way to be paid anything for any excess you send into the grid is the smart export guarantee, and the rules around that are simply that the amount has to be positive. That can be, and in many cases is, as low as a penny per kilowatt hour. That is not much of an incentive to add an extra couple of panels on to your roof, or whatever it might be beyond your own needs.

There are now some higher smart export guarantee rates but they can be reduced at will by the electricity companies. There is no guarantee of them, so when you consider installing solar panels or any other renewable generation there is no incentive to install more than you want to use yourself. The cheapest and easiest way of increasing renewable generation—because you already have the scaffolding up and the builders—is to add two or three more panels, but you will do that only if there is a return from doing so.

So would it not be a great thing if you were able to sell your excess to your neighbours, at a discount from the full retail price but at more than the smart export guarantee? That way, both the generator and the consumer would win. At the moment, the only way to achieve that is to hardwire your neighbours into your system, and that is an extremely expensive and not very practical thing to have to do.

One potential solution to that problem is peer-to-peer trading, which would allow neighbours to buy your excess electricity over a trading platform. With trading via peer-to-peer networks, neighbourhoods, districts or entire towns can join forces and trade their self-produced electricity. This is not just a theoretical concept; there are projects all over the world investigating the possibilities of this approach in field trials. There are working examples as far afield as Spain, Switzerland, Bangladesh, the Netherlands and many more. There are also studies in the UK, such as the one by Repowering London, UK Power Networks and EDF in Brixton. The technology is available now.

The huge advantage of peer-to-peer trading is that it can incentivise greater installation of solar and other technologies at no cost to the Government or to the consumer. GBE can take a role in this process as a trading hub, or it could support local trading hubs. The trading operations themselves could be financed by taking a fee for using the trading platform. It is also a great way to create community energy networks. There are wider advantages than the purely financial. Peer-to-peer networks can improve resilience, improve energy access and reduce losses from long-distance transmission.

That links quite nicely, I think, to the Amendments 11 and 15, tabled by the noble Earl, Lord Russell, which would add community energy to the objects, and to Amendment 20, tabled by the noble Lord, Lord Ravensdale, which looks at local energy planning. I would support both of those amendments, alongside Amendment 10, as I believe they are highly complementary.

All that Amendment 10 does is add the trading of electricity to the allowed objects of GBE. This would allow it to create, manage or support peer-to-peer trading arrangements, for all the reasons that I have given. I hope, therefore, that the Minister will look favourably on it. It would be odd and rather sad if this interesting and relatively new technological way of incentivising small-scale generation was not allowed under GBE’s objectives.

I shall not comment on the other amendments in this group as the tablers have not yet spoken to them, but a number certainly appear to be very sensible and constructive suggestions. I look forward to hearing more detail. I beg to move.

[Earl Russell (LD)]

My Lords, I will speak to two amendments in this group: Amendments 11 and 15. Before I do so, I want to thank the noble Lord, Lord Naseby, for his amendments. They fit well with the amendments on community energy. I was thinking about this subject myself. It is an essential system that needs to be put into place as part of that broader community energy scheme so that people can trade their energy; that would be better for all of us.

Amendments 11 and 15 both seek to include community energy in the objects of the Great British Energy company. It would be

“restricted to facilitating, encouraging, and participating”.

One of our key aims in debating this Bill is to work to ensure that community energy is both in the objectives for GB Energy and on the face of the Bill. The development of community energy has ground to a halt since the end of the feed-in tariff here in the UK. In Europe, by contrast, it is a very different story, where these systems are far wider, better understood and embedded in local societies. They are championed by their Governments and they are bringing great local benefits.

Community energy accounts for only around 0.5% of the UK’s electricity, but it has been estimated by the Environmental Audit Committee and others that it has scope for exceptional growth and could generate up to 8 gigawatts in combination with local power networks. Power for People, which has been supporting these amendments, estimates that community energy could power 2.2 million homes, save 2.5 million tonnes of CO₂ and help to create some 30,000 jobs. Community energy programmes are good ways of providing local jobs and are a useful means of addressing local fuel poverty. This is a continuation of the work that was started by Pippa Heylings in the other place; I have promised her that I will continue that work here as the Bill progresses.

Our view is quite simply that there is no Great British Energy without Great British community energy. Our vision for this Bill is that there should be an “out of the box” system, whereby every hamlet, local parish, town council and small village can pick up the phone and find an end-to-end system for creating a small-scale community energy programme.

GB Energy is perfectly placed to provide this tailored service. It is a one-stop shop turning ideas into reality, helping with systems choices, design, planning, building, local grid connections, finance arrangements, shared part ownership, et cetera. GB Energy should crowd in finance and not crowd out private investment, and this is one area where development is well suited to that. The big players and big companies are not investing in community energy; this stuff will not get off the ground unless GB Energy does it. There is no other market here; there is no competition.

Local community energy should be included in the energy transition, and communities should benefit from the local energy that they host or generate. We have tabled a forthcoming amendment on community benefit, which will be published shortly and debated in January when we come back for the second day of Committee. It seeks proposals for ensuring that local communities benefit from the renewable energy projects undertaken by Great British Energy.

We can make the national grid more resilient; it saves wasting energy in unnecessary transmission. We are currently transmitting energy from far up north to down south, losing a third of it on the way. As has been said, a trading system should be established so that local communities can sell excess energy. These systems make the grid more resilient, more robust and more stable. They help our communities to prosper and to benefit from that which they host.

The energy transition affects us all, in much the same ways that the Industrial Revolution did. We all need to make changes to the way we heat our homes, the way we travel and many other aspects of our daily lives. Such societal-level changes require broad and continuing levels of community engagement, participation and support if they are to be successfully enacted and carried through to completion, especially when the changes needed must take place at the speed and scale that is required here.

My personal view is that too much of what has been done to date is overly centrally controlled; it is much more “done to” than “done with”. We need community buy-in. We need to provide ways and means for our local communities to both participate in and benefit locally from the changes that we require them to make. Without this sustained local support, the whole net-zero project is in danger of being derailed by a lack of common purpose and want of determination to be part of the change that is required. Community public support is the key factor for the success of the whole project.

In some ways, this has been a strange task. There is broad cross-party support for the need for community energy. This was shown quite clearly in the other place, with many MPs supporting a Motion on this issue. There have been reassuring words of support in the other place, particularly from the right honourable Ed Miliband, the Energy Secretary, who said:

“I know that many Members of the House are passionate about the issue of local power, so let me reassure them that the Government are committed to delivering the biggest expansion of support for community-owned energy in history”.—[Official Report, Commons, 29/10/24; col. 776.]


Equally, here in your Lordships’ House, the Minister responded positively at Second Reading to the issue of local community energy. He has already spoken about his involvement in Birmingham and I know that he is passionate about the work that he did. He knows the difference that this makes.

The founding statement for GB Energy itself also has strong words of support for the principle and objectives of community energy, saying that

“we will be investing in community-owned energy generation, reducing the pressures on the transmission grid while giving local people a stake in their transition to net zero”.

Great British Energy Bill

Earl Russell Excerpts

Committee stage
Tuesday 3rd December 2024 Lords Chamber

I hope that I have not exhausted the Committee, but these are crucial questions, and they involve much of the £8 billion that we are setting aside for these programmes. Rebuilding our national resilience and reducing our dependency on authoritarian states who threaten our freedoms should be in the DNA of every policy the Government promulgate. I beg to move.

[Earl Russell (LD)]

My Lords, my Amendment 100 seeks to insert a new clause after Clause 7 that would require Great British Energy to verify its supply chain in respect of unethical practices and to attempt to engage in ethical supply chain practices only. I will also speak in favour of the principles contained in Amendments 43 and 109 in this group, moved by the noble Lord, Lord Alton, and supported by others.

To be clear, I believe in people and planet, and we should not have to choose one or the other. The two are intertwined and co-dependent. Our goal of reaching net zero must not come at the expense of supporting repressive regimes which do not support the human rights of their own citizens, or on the back of slave labour.

The truth is that it is certain that a proportion of the supplies and materials used in this country as part of our efforts to decarbonise have unknown ethical origins or, if we look more closely, are probably produced in regimes with modern slavery practices.

Polysilicon manufacturers in China account for some 45% of the world’s supply, and some 80% of the world’s solar panel manufacturing. As the noble Lord, Lord Alton, alluded to, Sheffield Hallam University has linked forced labour in China’s labour transfer programme directly to the global supply chain of solar panels. Some 11 companies were identified as engaging in forced labour transfer, including all four of China’s largest polysilicon producers. Some 2.7 million Uighurs are subject to state detention and coerced work programmes.

The combination of unethical practices, cheap labour and deliberate foreign policies means that China controls much of the world’s rare earth materials and manufacturing that is necessary to produce solar panels. China built more renewable technology than the rest of the world combined last year. But China is still opening and highly dependent on coal mines. It is time for China itself to choose which side of the green revolution it is on.

It is not in our national interest to continue with such foreign power dependence in order to secure our net-zero goals. What actions are the Government considering or planning to undertake, along with our allies and partners, to verify supply chains and build our own manufacturing capacity, particularly for solar panels, so that we are not dependent on foreign countries for the materials we need to decarbonise, and so that we can be certain that the products we use are not the result of human suffering? I hope the Prime Minister raised these important issues in his recent meeting with the Chinese President.

My amendment would place a duty on GB Energy to verify and engage in ethical supply chain practices. This is not the end of the journey, but it is a start. Of course, these problems extend way beyond GB Energy and these measures should be implemented nationally.

Amendment 43 says that no financial assistance must be provided

“if there exists credible evidence of modern slavery in the energy supply chain”.

Amendment 109 calls for a warning to be placed on any products sourced from China that are used by GB Energy. Although I support the spirit and intention of both these amendments, my worry is that the Government will not be able to support them and that they will fail.

My fear is that if Amendment 43 passed it would put GB Energy at an unfair disadvantage in relation to other competitors in the industry operating in the UK. For this reason, the Government will most likely reject it. On Amendment 109, I expect that the implication of labelling these products might simply be to prevent their purchase by GB Energy, while other competitors in place in the UK marketplace without this labelling requirement would be able to continue their supply. Again, my worry is that this would do more to put GB Energy at a disadvantage versus its competitors operating in this country. The Government will probably reject the amendment on those grounds.

My hope is that my amendment or a newly tabled one on Report might help us to find a way forward together on this important issue, which we all need to make progress on. To be clear, this issue goes well beyond GB Energy, and the real long-term solutions to it sit with the verification of supply chains, strong and determined diplomacy, the creation of and investment in solar panel manufacturing on our own or along with our allies, or the research and development of new forms of manufacturing processes for these technologies. These are essential issues, but I suspect we will need to engage constructively together to find a way forward prior to Report, and that the solution, ultimately, goes beyond the scope of the Bill and GB Energy.

[Lord Offord of Garvel (Con)]

My Lords, I thank the noble Lord, Lord Alton of Liverpool, and the noble Earl, Lord Russell, for their amendments. We all agree that modern slavery is one of the great scourges of our time. It is estimated that tens of millions of people are trapped in forced labour worldwide, many of them in sectors tied to energy production and manufacturing. Indeed, as the noble Lord and the noble Earl pointed out very eloquently, renewable energy technologies such as solar panels rely on materials such as polysilicon, much of which is sourced from regions where reports of forced labour and human rights abuses are widespread.

These amendments seek to ensure that GBE operates with integrity and accountability in its supply chain practices. Each amendment addresses a crucial aspect of ethical responsibility, and together they would bind the Government to ensure clean energy does not come at the expense of human rights, ethical labour practices or transparency. I encourage the Government to look at this matter carefully. Can the Minister explain what measures will be put in place to ensure that there is oversight of Great British Energy’s supply chains? If Great British Energy is to represent the values of this nation, there is a strong case for tougher measures to prevent public funds being spent in a way that supports or sustains supply chains that exploit human beings.

On Amendment 109, while I recognise the sensitivity and complexity of this issue, it is crucial that we approach it with transparency and courage. Consumers and stakeholders have a right to know the origins of the products they use and the conditions under which they are made. I hope the Minister will listen carefully to the arguments made on this matter; we on these Benches will be very interested to hear his reply.

As a publicly backed entity, Great British Energy has an opportunity to set an example and be a model to other countries. I am sure the Government agree there are opportunities here and we look forward to hearing their response.

Great British Nuclear: Modular Reactors

Earl Russell Excerpts

Monday 2nd December 2024 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, I understand the point the noble Lord is raising. My department is exercised by the advantage that could be brought. We are in discussions with the Welsh Assembly Government and my colleagues in the Department of Health and Social Care. I cannot say at this stage whether we can bring this to a successful outcome, but I certainly see the merits in what he is arguing.

[Earl Russell (LD)]

My Lords, can the Minister update the House on the importance of the agreement reached on the sidelines of the COP summit with the United States, which seeks to speed up the deployment of cutting-edge nuclear technology, helping to decarbonise our industry? The agreement aims to support information sharing on advanced nuclear technologies to help make them available to industry by 2030. How important is this agreement, and how will it help us to make sure that this technology is actually deployed?

[Lord Hunt of Kings Heath (Lab)]

My Lords, it is a very important agreement. We have a very good relationship with the US on all things civil nuclear, and this will enable us to enhance that. I should also say that at COP, six new countries joined existing countries in declaration of an aim to triple nuclear power globally by 2050. There are now 31 signatures, which is very important. It is an indication that globally we are seeing a renaissance in nuclear, in which this Government wish our own nuclear industry to be a part.

Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024

Earl Russell Excerpts

Monday 2nd December 2024 Grand Committee

I am keen to see the order pass, but answers to these questions would help with my greater understanding of the background.

[Earl Russell (LD)]

My Lords, in the main, I support the changes that this statutory instrument enables to the previous scheme. It resets the UK ETS cap to be in line with the top of the net-zero consistent range. The cap is the limit on how many allowances can be created over the trading period, which runs from 2021 to 2030, and in each year. The cap is set to reduce over time to drive down total emissions. When the scheme was established in 2020, the cap was set at 5% of the UK’s expected notional share of the EU ETS cap. The statutory instrument now brings the overall ETS cap in line with our net-zero target and carbon budgets under the Climate Change Act.

I was a little confused on one point. Why has the previous scheme come to be so out of line with the UK net-zero trajectory for the traded sector? Was it really a question of our leaving the EU and its schemes and setting our own national standards, or is there something else going on? An explanation on that would be appreciated.

The SI reduces the industry cap, which is the total number of allowances that can be made available to existing installations for free. The SI reduces the absolute level of the industry cap while increasing its proportion of the overall cap. The share of allowances set aside for the purpose increases from 37% to 40% but the reduction in the overall UK ETS cap means that the industry cap will fall. It is argued that this will help to mitigate the risk of carbon leakage across participating sectors, while maintaining an effective incentive to decarbonise.

We welcome that this SI expands the scope of the ETS to the venting of CO₂ in the upstream oil and gas sector for installations already covered by the scheme. This means that such emissions will also be subject to a carbon price. The SI removes what is described as a perverse incentive whereby operators could routinely vent gases that contain carbon dioxide without being subject to a carbon price, even though they would, if flared, constitute reportable emissions for the purposes of the scheme. It also extends the scope to cover flights departing from aerodromes in Northern Ireland to arrive at one in Switzerland. My understanding is that this change reflects the return of the Northern Ireland Assembly and its ability to consider legislation.

The SI makes a number of amendments to the levels of the scheme penalties to ensure consistency and proportionality in enforcement for all operators and introduces a new deficit notice. It makes several corrections and clarifications to existing legislation following consultations in August 2022 and July 2023, mainly on small penalty amendments. It also reflects a reduction in the cap on allowances and strengthens enforcement and penalties for non-compliance, including by introducing a deficit notice. It accounts for a reverse price for stability during excessive market volatility.

What actions are the Government taking to improve the monitoring of venting and flaring? Do they hope to bring forward plans to move that forward or are they sticking with the date previously announced? What estimates do they have of the associated costs of upstream venting and flaring that this SI might impose? While we welcome that the proposed changes will bring in a cap consistent with net zero, we call on the Government to do more to support a just transition, particularly for the North Sea oil and gas sector, to ensure that companies have adequate resources and help, particularly training, for their staff to transition to other industries.

What other industries and sectors are the Government considering bringing under the ETS and what are their plans to do so? Are there any plans for further convergence with the EU ETS on carbon leakage? Do the Government feel this could help stop further carbon leakage? Finally, I note that there was no impact assessment for this SI, though I understand that the Government conducted a number of consultations. Can the Minister say why?

[Lord Offord of Garvel (Con)]

My Lords, I support this instrument. This order will expand the scope of the UK Emissions Trading Scheme to include carbon dioxide venting in the upstream oil and gas sector. It will introduce deficit notices to allow regulators to penalise operators for failing to surrender allowances by a set date and makes technical changes to penalties. There is no doubt that climate change is an issue that any Government need to take steps to tackle. That is why the Conservative Government introduced the UK ETS, to ensure that businesses monitored, reported on and surrendered allowances in respect of their greenhouse gas emissions. We are glad that the Government recognise the benefits of the scheme and are taking steps to continue to use it.

However, this Government have prioritised their climate policy above financial and economic concerns. While we understand that there must be trade-offs to reach our net-zero targets, I caution them on raising taxes consistently on the North Sea oil industry—they are now running at 78%. This could put significant costs on companies already navigating a complicated regulatory environment. We must remember that net zero by 2050 does not mean zero hydrocarbons. We will still have about 25%. However, as this ETS will provide support by removing venting and flaring, we can have clean hydrocarbons. We must also consider the impact of the hydrocarbon companies in investing in renewables and the people required in the transition to net zero.

With that being said, I will ask the Minister one question that was left largely unanswered in the other place, to do with the impact of the carbon price rise to £147, as highlighted by NESO. What will the impact be on employment, industry and households, and will there be an impact assessment on those key areas?

Contracts for Difference (Miscellaneous Amendments) Regulations 2024

Earl Russell Excerpts

Monday 2nd December 2024 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, these regulations were laid before the House on 28 October. They form an important part of the Government’s commitment to accelerate the deployment of the low-carbon electricity technologies that are critical to achieving the Government’s clean energy mission.

The contracts for difference scheme is the Government’s main mechanism for supporting new low-carbon electricity generating projects in Great Britain. Contracts for difference are awarded through annual, competitive auctions where the lowest-priced bids are successful. The sixth allocation round, which ran earlier this year, was the largest round ever and more than double last year’s round held by the previous Government. It awarded contracts to 128 clean energy projects across Great Britain, capturing 9.6 gigawatts of renewable capacity and generating enough electricity to power the equivalent of 11 million homes.

We must, though, ensure its continued success and evolve the contracts for difference scheme to drive progress towards 2030. So, building on auction round 6, we want to update the scheme through this instrument to continue our march towards a low-carbon power system. We propose, first, to extend the option of phased contracts for difference to floating offshore wind projects and, secondly, to enable the eligibility of repowered onshore wind projects to apply for a contract for difference.

On the first point, the Government have committed to radically increasing the UK’s offshore wind capacity, including floating offshore wind. As an emerging technology with less than 250 megawatts of capacity deployed worldwide, the floating offshore wind construction process is yet to be industrialised. Floating wind projects are likely to have a slower buildout rate than established fixed-bottom offshore wind, for reasons including limitations on suitable port capacity and increased sensitivity to adverse weather.

Phasing in the contract for difference allows projects to be built in multiple stages. It was designed to provide support for early fixed-base offshore wind projects by mitigating the specific commercial risks inherent in offshore project construction. Extending this policy to floating offshore wind projects will allow for greater flexibility in the construction phase, allowing delivery to more realistic timelines and providing more certainty and confidence to the wider supply chain. This reduction in project risk will, in turn, increase investor confidence in the UK’s growing floating offshore wind sector.

On the second amendment—to enable repowering for onshore wind—our analysis suggests that approximately 1 gigawatt of onshore wind will come to the end of its operating life between 2027 and the end of 2030. Repowering can help ensure that renewable generation capacity is not lost from older projects. It also provides an opportunity to increase the renewable generating capacity of existing sites through improvements in technology and more efficient use of the site. Enabling access to the contract for difference for repowered onshore wind projects offers them revenue certainty, encouraging retention and expansion of existing capacity. This supports our ambition to achieve clean power by 2030 and make Great Britain a leading place for onshore wind investment.

We have ensured a balance between decarbonisation, consumer value for money and security of supply objectives by enabling repowering only for projects which align to the fundamental contract for difference case for intervention, including high upfront capital costs, and which have reached the end of their operating life. At this point, this applies only to onshore wind. These principles will help enable us to protect the consumer, ensuring we intervene only when and where needed and where it is cost-effective to do so.

The consultation for these policy interventions sought views and supporting evidence on specific changes proposed for allocation round 7. We received a range of responses from across industry, including developers, electricity traders and suppliers, businesses operating in the offshore wind sector, and consumer and environmental groups with an interest in the electricity sector. Most respondents agreed with implementing phasing for floating offshore wind and repowering for onshore wind. Respondents also provided input on how the department should implement these policies. The department continues to engage closely with industry in the development of contracts for difference.

The instrument facilitates the evolution of the contracts for difference scheme by amending two statutory instruments made under the Energy Act 2013. It amends the Contracts for Difference (Allocation) Regulations 2014 and the Contracts for Difference (Definition of Eligible Generator) Regulations 2014. The amendments will have two effects. First, they will expand the existing phasing policy to floating offshore wind projects. The allocation regulations will be amended to allow floating offshore wind contracts for difference units to be constructed in accordance with phasing rules. The second effect is to permit repowered projects to apply for a contract for difference. The contracts for difference scheme did not previously have a formal policy in relation to repowering applications. The amendments ensure that certain generators who repower eligible generating stations can be eligible for the contract for difference. They also remove barriers which would prevent repowering applications being made.

To conclude, we think this is an important step forward in delivering clean power. It builds on the existing success of the contracts for difference scheme, which is evolving to better reflect global market realities and drive progress towards clean power targets. I beg to move.

[Earl Russell (LD)]

My Lords, I rise to speak very briefly to this one. We are happy to support the amendment.

I have a couple of questions for the Minister. First, what measures are the Government taking to ensure that consumers continue to get value for money from these contracts? Secondly, is the Minister certain that the repowering process is treading the right path between getting value for money for the Government with these contracts, while not impeding further development of onshore wind energy?

[Lord Offord of Garvel (Con)]

My Lords, I rise to support His Majesty’s Government’s draft Contracts for Difference (Miscellaneous Amendments) Regulations 2024. These regulations will enable further construction of wind sites and will increase investment in the wind sector by increasing the options for using contracts for difference. The regulations will extend the option to phase projects under the contracts for difference to floating offshore wind and for repowering onshore wind farms, as well as allowing onshore wind projects to apply for contracts for difference.

We on these Benches recognise the importance of using CfDs in the renewable sector to allow for increased investment in projects that have high upfront costs but long lifetimes and low running costs. Investment must be at the core of our green energy plans to ensure their financial viability. As it stands, CfDs are the main scheme for supporting new low carbon electricity generation projects across the UK, and these measures will derisk the construction process for offshore wind and to repower onshore wind.

The Government introduced the CfD scheme in 2014 to support the UK’s journey to net zero and, by 2022, projects managed under contracts for difference generated the energy to power 7 million homes and mitigated over 5 million CO₂ emissions. Therefore, we welcome this Government’s continued use of these important and helpful schemes. We support the increased use of contracts for difference and, as such, support these regulations to increase the use of wind power to reach net zero targets while maintaining the importance of investment in the sector.

COP 29

Earl Russell Excerpts

Thursday 28th November 2024 Lords Chamber

[The Earl of Courtown (Con)]

My Lords, I must acknowledge that, for the past 14 years, the UK has been a global leader in this area. We are the only major economy to have halved carbon emissions since 1990. In that time, the US’s emissions have stayed the same and China’s have tripled. In fact, we account for just 1% of global emissions. Despite this, we have seen that other countries are not persuaded just because the United Kingdom is going further and faster than others; they are persuaded by living standards and prosperity.

At COP, the Secretary of State announced a new target to cut our greenhouse gas emissions by 81% by 2035, but he has not explained what this will cost the British public. Why is this? He also argues that he will deliver savings through energy policy, and that those plans will boost jobs, growth and national security, and will cut household energy bills. This is very debatable.

The Institute for Fiscal Studies has said that the Secretary of State’s climate agenda will not lead to growth. There were also concerns about the National Energy System Operator’s report, which shows that the Government’s rush for clean power by 2030 will add costs to our energy system. In addition, the head of offshore wind development at RWE has warned that the RHG’s rush to meet the 2030 target will lead to price spikes, with consumers losing out. Yet, despite the costs, His Majesty’s Government’s plans would still leave gas pricing the system around 50% of the time, or they would leave the equivalent of a million of homes in the dark, waiting for the wind to blow or the sun to shine.

Billions of pounds of British taxpayers’ money will go to China, the world’s largest polluter, powered 60% by coal, which dominates clean-tech supply chains. Will the Minister set out an assessment of the increased reliance on coal-powered Chinese imports for the Government’s clean power by 2030 goal? What does this mean for global emissions?

The Government’s plans will result in the opposite of what is being promised: low growth, high bills, jobs lost and even blackouts, for more carbon in the atmosphere. Yet, in Baku, the Secretary of State signed the UK up to a $300 billion annual climate finance target. Can the Minister tell the House what this new target means for the British taxpayer?

Although I do believe that Britian has a role to play in global leadership, we must focus on delivering cheap energy, innovation, exports and, ultimately, living standards. If the Secretary of State continues down the path he has set out, our country will possibly face hardship.

[Earl Russell (LD)]

My Lords, we welcome this Statement and the progress made at COP 29. The world—indeed the very future of humanity—stands at a cross-roads. One path leads to a near-term end of the viable future of humanity on planet earth, and the other leads to concerted, collective and constructive change and a willingness to fight for humanity’s future. Time is a luxury that is rapidly running out. We are on the cusp of breaching our collective goal of limiting climate change to 1.5 degrees. We must keep hope alive. We must fight for further rapid progress with the little time we have left.

The near future—one that our children will experience—is one where they will need to fight climate change and deal with the ever-growing consequences of the failure to do so earlier. The tragic loss of life and destruction from Storm Bert is the latest reminder of this fact. It is not acceptable that funding shortfalls mean that the number of properties to be protected from flooding by 2027 was cut by the previous Government by 40%. Will the Minister commit to including natural flood defences as a central part of the £5.2 billion flood-defence spending to protect our communities? Much more work is also needed on adaption and resilience programmes.

COP 29 concluded with a deal that, while welcome, still leaves much to be desired. The $300 billion a year is a start, but the developed world must do more to support the developing world to implement its own clean energy and adaption programmes. It is estimated that this funding can deliver reductions equivalent to more than 15 times the UK’s annual emissions. Simply put, we can either pay now or we can pay more later. The greatest cost of all is always that of doing nothing.

We very much welcome the return of UK leadership on the world stage on climate issues, after the dying days of the Conservative Government did so much damage to our international standing and reputation with their retreat from reality. I congratulate our negotiators on their work. We welcome the commitments to new ambitious emissions targets, including the reduction by at least 81% by 2035. Delivery depends on bolder and more decisive action. We support this programme and I express our willingness to work with the Minister to help the UK to seize this opportunity.

We need concentrated and immediate action to insulate our homes, reduce energy costs and ensure that no one has to choose between heating and eating. The delay to Labour’s warm homes plan until spring 2025 is unacceptable when millions of people, including 1.2 million pensioners, face a cold and uncomfortable winter due to the cut in the winter fuel allowance. We need clearer plans to roll out heat pumps, to increase the update of electric vehicles, to fix the unacceptable delays to grid connections, and to achieve rapid progress in improving our energy security and enabling a swift reduction in energy bills.

We will work to progress the GB Energy Bill through this House, but we call on the Minister to give clear commitments to deliver clear community energy programmes. Labour must do more to decentralise the energy transition, bring much-needed jobs and growth from the green economy, and work to ensure that the benefits of our transition and increased energy security are properly communicated. Climate leadership must prioritise solutions that protect communities and restore nature. The nature and climate crises are interlinked and intertwined. We are one of the most nature-deprived countries in the world. Our 30 by 30 target still has unrealistic delivery pathways.

I note that the Statement says:

“The UK will decide what our own contribution will be in the context of our spending review and fiscal situation, and that will come from within the UK aid budget”.


On loss and damage, are these funds ring-fenced against the development cuts announced in the Budget? Lastly, I call on the Government to give the gift of time to the Climate and Nature Bill—a Private Member’s Bill being discussed in the other place. It is so important that we update our climate legislation.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, I thank both noble Earls for their comments and questions. I must say that it is good to welcome the noble Earl, Lord Courtown, to the Dispatch Box to talk on such an important issue; it is like old times. His comments were interesting because he started by talking about his own Government’s achievements in the area of climate change, net zero and the decarbonisation of our power supplies. But then he moved away from that, and it is worth reflecting that, of course, it was Prime Minister May who showed leadership on net zero, and it was the last Government who signed up to the £11.6 billion in international climate finance for the period 2021-26. They also signed up to the national adaption programme 2023-28.

It was the noble Lord, Lord Sharma, who so ably led the COP 26 Glasgow negotiations. I was just reminding myself of the ministerial meeting in Copenhagen only two years ago, co-chaired by the noble Lord, Lord Sharma, in which Ministers agreed the urgency of responding to climate change and of the need to accelerate practical action and support for a just transition to low greenhouse gas emissions. It seems to me that the Conservative leadership is essentially turning its back on climate change, and it seems to be obsessed with fossil fuels.

As we heard from the noble Earl, Lord Russell, both just now and in the Oral Question earlier, climate change is here. It is having damaging impacts in this country and globally. We simply cannot hold back: we have to charge on. I agree with the noble Earl, Lord Russell, on the importance of flood defences, charging on to net zero, heat pumps, and grid connections. His comments on the GBE Bill were helpful, and I noted his point on community energy. He mentioned the warm homes plan: we have that and continue to work on it, but we have already made some substantive announcements, which I hope he will be able to study.

There has been a lot of comment on the outcome of the negotiations, which were obviously very challenging. Developing countries were disappointed with some of the outcomes. The fact is that the focus was on finance, and the agreement calls on all actors to scale up financing to $1.3 trillion for developing countries by 2035 from all sources, public and private. Also agreed was a goal for public and publicly mobilised finances of at least $300 billion per year for developing countries by 2035. I should say that this new goal will take account of contributions from major economies such as China that are in a position to support developing countries.

Although we made strides in relation to finance and carbon markets, COP did not make progress elsewhere. We wanted much stronger outcomes on taking forward the global stocktake, agreed at COP 28, on the transition away from fossil fuels and on keeping 1.5 degrees Celsius alive. We will continue to push that as we move towards the run-up to COP 30 in Brazil.

I acknowledge that both noble Earls have welcomed UK leadership, which has been very important. The visit of the Prime Minister and the Secretary of State was influential, and it is right that Britain should be there at the negotiating table. I know that noble Lords say that we produce only 1% emissions, but there are many countries with 1% emissions, and collectively, we are very powerful. I acknowledge that we want to build on what the last Government achieved in this area. National consensus here is very important indeed.

On the 81% target for 2035, we think that that is in line with the advice from the Climate Change Committee. Clearly, we will now need to work through the implications of that. On our contribution to the £300 billion of public and publicly mobilised finance, clearly, I cannot be drawn on what that will be. As we have said, this will go into the multiyear spending review. However, overall, we can at least recognise that agreement was reached in very difficult negotiations.

I know that noble Lords are concerned about China, and I understand the issues they raise. The fact is that China disclosed that it has contributed £24 billion in climate finance to developing countries since 2016. We know that part of the COP agreement is to encourage more voluntary contributions on that basis. It is interesting that International Energy Agency figures show that China is accelerating its use of renewable energy.

There is clearly much to discuss and to tease out of the agreement, and a lot of work has to be done on the pathway to Brazil. But at least an agreement has been reached which gives us some hope that we can move forward, and for this country, the message is to charge on.

Domestic Solar Panels

Earl Russell Excerpts

Monday 25th November 2024 Lords Chamber

Asked by

[Earl Russell]

To ask His Majesty’s Government how they plan to increase the number of homes fitted with solar panels.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, rooftop solar on homes and buildings will play an important role in the drive for clean power. Details about how the Government will increase deployments of domestic solar panels will be set out in the forthcoming solar road map.

[Earl Russell (LD)]

My Lords, Labour promised a rooftop solar revolution, which I welcome, tripling solar power by 2030. It now appears that this commitment has not survived contact with the housebuilding industry. Are this Government still requiring that, as part of the future homes standards, all new homes will have to have solar panels installed, as promised? If not, why? Further, France is maintaining solar panel installations on all parking lots greater than 80 spaces, generating power for 8 million homes. What consideration has been given to doing the same here?

[Lord Hunt of Kings Heath (Lab)]

My Lords, we are not moving away at all from the idea of a solar revolution. The noble Earl will know that, in its scenarios for 2030, the National Energy System Operator—NESO—reckons that we will need 47 gigawatts by that time. We are committed to publishing a clean power action plan, which will embrace solar plans, very soon. The Solar Taskforce is there to provide clear advice and actions on how we will take that forward. What the noble Earl said about French car parks was interesting. There has been an easing up of development rights in this country in relation to that. On the 1.5 million homes that we pledged to build in the lifetime of this Parliament, we are in close discussion with our colleagues across government about mandation, and we very much take his point on that.