Great British Energy Bill

Lord Ashcombe Excerpts

Committee stage
Tuesday 3rd December 2024 Lords Chamber

[Baroness Bloomfield of Hinton Waldrist (Con)]

I draw attention to my interests as outlined in the register and thank my noble friend for introducing this amendment. His insights underline the importance of collaboration as we address the dual challenges of energy security and achieving net-zero carbon emissions.

The amendment would build on prior commitments and take the steps needed to ensure that nuclear energy plays a full role in our energy mix. The amendment is not a new initiative but an essential next step in fulfilling the Government’s stated commitments to nuclear energy. It would ensure that we moved from exploration and consideration to concrete action in facilitating, encouraging and participating in the production of nuclear energy. By accepting it, we can bridge the gap between aspiration, implementation and participating in the production of nuclear energy.

The Government have already acknowledged the importance of nuclear energy, but acknowledgement alone will not suffice. There must be a tangible, unequivocal commitment to its production. This includes setting clear targets for both large-scale nuclear reactors and, more importantly, small and advanced modular reactors. A stronger commitment sends a signal to investors, developers and the broader energy sector that the UK is serious about leading the world in advanced nuclear technology.

Public investment is critical to establishing a foundation for nuclear development, but, equally, we must incentivise private sector involvement. This requires the Government to offer meaningful incentives, loan guarantees, tax breaks or grants so that private investors see nuclear as a viable and profitable area to support. Such a strategy will not only unlock funding but drive innovation, reduce costs and bring nuclear projects online faster.

I must also highlight the critical role of Great British Nuclear, which my noble friend mentioned earlier. Established by the previous Government, GBN is uniquely positioned to co-ordinate and drive nuclear development across the country. The Government should not only recognise the value of GBN but ensure that it is fully resourced and empowered to develop on its mission. GBN can act as a central point for collaboration between public and private stakeholders, fostering innovation and scaling up nuclear energy production.

The importance of nuclear energy in securing the UK’s future cannot be overstated. It is vital for energy independence, affordability and achieving our climate goals. By accepting this amendment, the Government would take a decisive step towards fostering a robust nuclear sector, one that combined public investment, incentivised private participation, reduced barriers to progress and built on the foundation laid by Great British Nuclear.

I was delighted to hear earlier in the Committee the Minister mention a new siting policy. As he will know, this will be crucial in supporting the ambitions of data companies such as Microsoft to base operations in the UK. If we can deliver security of supply of energy, with that will come jobs, new technologies and the possibility of levelling up those areas of the country which so desperately need it.

[Lord Ashcombe (Con)]

My Lords, I will speak very quickly in support of my noble friend Lord Offord. Nuclear fuel is very much a positive, as it is a baseload generator, which to me is critical. That is what we are short of in this country. Unfortunately, wind, solar, whatever, are not always with us. The excess that is produced by wind and solar when they are actively working, which is fantastic, could then be used to drive hydrogen production—we have touched very briefly on that in this House this afternoon. Hydrogen is the clean fuel of the future, possibly the cleanest; but we need to be able to store and then burn it, in times of need, to generate the electricity that will reduce our dependence on gas generation, particularly, which I know we are all in favour of. I just wanted to add that to this small debate, knowing that nuclear reactors are also most useful for data centres.

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Moved by

[Lord Ashcombe]

22: Clause 3, page 2, line 18, at end insert—
“(e) the exploration of oil and gas in the North Sea where the UK’s energy security is compromised.”Member’s explanatory statement
This would amend Great British Energy’s objects to include the exploration of oil and gas in the North Sea where the UK’s energy security is compromised.

[Lord Ashcombe (Con)]

My Lords, Amendment 22 in my name is about energy security. Energy security is a matter of utmost importance—a foundation on which our homes, businesses and industries depend. We must ensure that our nation can provide reliable power to keep the lights on and our economy running.

I was not in this country during the 1970s but lived in the Republic of Ireland. We suffered power cuts that caused significant disruption. I recall a farming friend who lost his entire pig herd due to a lack of ventilation—a stark reminder of the devastating consequences when power systems fail. We cannot afford to let such a situation arise here.

While I wholeheartedly support the goal of achieving net zero by 2050, we must temper ambition with pragmatism. The United Kingdom accounts for 1% of global carbon dioxide emissions, compared with 33% from China and 12.5% from the United States. While we strive for cleaner energy, we must be realistic about the scale of transformation required. Getting electricity production to net zero by 2030 is a noble aspiration, but it remains a significant challenge.

Progress has been made. According to the Department for Energy Security and Net Zero, the UK’s carbon dioxide emissions decreased by almost 50% between 1990 and 2023, including a 6.6% drop in the year ending 2023. Electricity generation contributes 11% of our greenhouse emissions. Efforts to reduce this share are ongoing. However, our energy mix relies on a delicate balance. Nuclear power—which we have just discussed—and biomass provide baseload capacity most of the time, while solar and wind offer renewable contributions that are inherently variable. Interconnectors, though helpful, depend on surplus supply from neighbouring countries.

The swing producer in our energy system remains gas, which under certain circumstances—when the wind is not blowing and the sun is not shining—supplies upwards of 60% of our energy needs. As the Government push for greater electrification, whether in transport, heating or industry, the strain on our grid will only increase. Targets for offshore and floating wind are ambitious, as are those for solar power, which raises concerns about land use and its impact on food production—an amendment for later discussion, I am sure.

Onshore wind also faces resistance, and these challenges make clear that gas generation will remain a critical component of our energy mix for years to come. Let us not forget that electricity accounts for only 20% to 25% of the energy consumed in this country, and that 87% of UK homes rely on gas for heating and hot water, yet domestic gas production declined by 10% between 2022 and 2023 and nearly 14% to August this year, according to Offshore Energies UK.

This leaves us increasingly reliant on imports, as our current production is about 40% of requirements. Imported gas comes via pipelines from Europe or as LNG shipments. Global instability, such as sanctions on Russia, has tightened supply, while demand in Europe has risen. Norway, a trusted ally, provides the majority of gas imported by pipeline, some 35%, placing many of our eggs in one basket. The additional 25% required comes as LNG, sourced from countries such as the United States and Qatar, both of which have indicated that their supplies will increase. This has a significantly higher carbon footprint—on average four times more than our domestic production—due to transport and production methods.

The North Sea Transition Authority’s 2024 Emissions Monitoring Report indicates that UK gas production is a top-quartile performer according to kilograms of carbon dioxide equivalent per barrel of oil equivalent—kgCO₂e/boe. The NSTA report also shows a good methane emissions performance—arguably a greater concern than carbon dioxide emissions—with the UK having an intensity of 1 kgCO₂e/boe versus the global average of 16 kgCO₂e/boe. I apologise for all the figures.

New UK developments are being delivered far more cleanly than the average of current existing UK developments. New UK developments are significantly cleaner than imports, producing emissions roughly 10 times cleaner than LNG imports. We are fortunate to have an abundance of hydrocarbons in our offshore waters. Despite the decline, there is still potential for two or three decades of production, as I mentioned at Second Reading. Exploiting this resource responsibly would protect some 200,000 direct and indirect jobs, sustain some critical industries and provide a bridge to the renewable future. Moreover, recommencing the issuance of oil and gas licences would help reduce global emissions by avoiding the higher carbon intensity of imports, stabilise our energy and bolster our economy.

However, I must caution that the current tax regime risks an 80% slump in investment in the UK oil and gas industry over the next five years, according to OEUK. This would undermine both energy security and our ability to transition effectively. Lifting the ban on new exploration and production licences, while ensuring robust environmental standards, offers a pragmatic path forward. It will protect jobs, reduce emissions and, most importantly, help secure the energy future of the United Kingdom. I very much look forward to the Minister’s response and beg to move.

[Lord Offord of Garvel (Con)]

My Lords, I thank my noble friend Lord Ashcombe, whose amendment I support, for his insightful contributions on the important issue of energy security. This issue cannot go unaddressed when discussing the Bill because of the consequences to our country’s energy production, supply and security. Indeed, Clause 3 explicitly states that GBE’s objects

“are restricted to facilitating, encouraging and participating in … measures for ensuring the security of the supply of energy”.

However, the Bill makes no provision to ensure the security and future of our energy supply, and I express my deepest concern that the tunnel-vision focus on renewable energy to achieve the Government’s overly ambitious target of clean energy by 2030 will inevitably compromise our energy security.

The UK’s energy security should indeed be at the forefront of the debate on the Bill. The Government have said that Great British Energy is part of their plans to ramp up renewables, which they say will result in cheaper energy and greater energy security. However, this is simply not true. Instead, the Government’s renewable plans will cost the British people and our national energy security.

We on these Benches of course recognise the need to cut household energy bills for families, to accelerate private investment in energy infrastructure, and to protect and create jobs in the energy industry across the UK, but the Bill gives no indication as to how this will be achieved. It does not include any measures to ensure the effective delivery of a reduction in household energy bills, nor an increase in British jobs, nor the long-term security of our energy supply. We understand that the purpose of Great British Energy will be to assist the Government in ramping up renewables to achieve their self-imposed target of 100% clean energy by 2030. This is a target that I believe to be driven by political ideology and which industry experts have described as aggressive, unrealistic and expensive, requiring far more than the allocated £8.3 billion of funding.

It is an undeniable truth that renewable energy will always be naturally unreliable. As my noble friend Lady Bloomfield brought to our attention at Second Reading, over the last couple of months, as was the case this time last year and in March, we have seen another dunkelflaute. Indeed, in March, the measure of how often turbines generate their maximum power failed to reach 20%, and we have recently seen levels drop to nearly zero. Relying on new interconnectors to Belgium and Holland will not offer energy security if their wind farms suffer the same weather conditions as ours or if their countries’ needs are greater than ours.

All this being said, it is therefore vital that we acknowledge the UK’s North Sea oil and gas industry when we discuss the future of our energy production and security. This industry has suffered under the Government, as they increase their taxes on North Sea oil to punitive levels. Energy firms have described increasing the windfall tax by 3%—with the headline rate of tax now a staggering 78%—and extending this to 2030 as a devastating blow. This hike will cut investment in UK natural resources and oil and gas production, as indicated by my noble friend Lord Ashcombe, which will make the UK increasingly dependent on imported supply. This will compromise our energy security, but consumers will also be exposed to price fluctuations. The country will become increasingly dependent on imported electricity and will therefore be forced to pay the market price for power as fossil fuel powered generators are closed at a quicker pace than we are ramping up the necessary capacity to replace them.

Not only this, but if investment in UK oil and gas decreases then the revenue generated from the energy profit levy, which the Government are relying on to help fund GBE, will decrease. By pressing ahead with ending oil and gas licences—a move no other major economy has taken—£12 billion in tax receipts have been lost from the North Sea. This, combined with the £8 billion which will be spent on GBE, is a staggering £20 billion of taxpayers’ money.

Analysts have spoken out and warned about relying on North Sea oil taxes to fund the Government’s green energy plans while the Government tax the operators to the point that revenues fall by 80%, as indicated by my noble friend Lord Ashcombe. We must address the fact that the revenue generated from the energy profit levy, or windfall tax, may fall if investment in UK oil and gas decreases. Alongside private sector investment, the Government are relying on windfall tax revenues to fund GBE and support the transition to clean power by 2030. Furthermore, the £8 billion allocated to GBE does not compensate for the amount of investment in energy projects that will be doomed by the Government’s plans to prematurely shut down the UK oil and gas sector.

The North Sea oil and gas industry is not only critical to the UK energy supply but a bedrock for many economies and communities. Economic ecosystems have developed around this industry. It is therefore critical that we manage the energy transition properly. The Government’s plan for GBE, combined with the energy profits levy, puts the industry at risk at this vital time. The proposed increases and the removal of the investment allowances could be detrimental to investment. Offshore Energies UK has warned that the tax increase could see investment in the UK cut from £14 billion to £2 billion between now and 2029. That is not scaremongering; it is what the industry is telling us.

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[Lord Hunt of Kings Heath (Lab)]

My Lords, one of the joys of debating energy is that, on every occasion, we come back to the substance of the whole argument about energy and where we are going. I am grateful to the noble Lord, Lord Ashcombe, for stimulating such an interesting discussion. The noble Lord, Lord Hamilton, in a sense, has brought this into the open. Clearly, it was his Government who signed up to the legislation on net zero by 2050. The last Government, as much as we do, saw the huge risks involved in climate change and the need to take action.

The international position is that, despite what the noble Lord says, the fastest growth in use of renewable energy is occurring in China. The International Energy Agency indicated in its recent renewable energy report that we will see a 2.7 times increase in the use of renewables globally between now and 2030. So, there is a global movement towards clean power and net zero. Yes, it is going at different paces, but we believe the UK can gain great advantage by taking a leadership role. The National Energy System Operator—NESO—has shown that there is a pathway to clean power by 2030. We are now committed to taking that and turning it into an action plan, which I hope we will be able to publish very shortly.

I would not deny that North Sea oil and gas still have important roles to play, and I am of course listening to what noble Lords say about the tax situation and proposals, and the investment issue. Clearly, the Government are in very close discussions with the industry. Our aim is an orderly transition, and that is what we mean to achieve. So we clearly see the value of what happens in the North Sea, and we need it to continue to provide supplies to the UK in the years ahead. Equally, however, we need to manage the transition to clean power and net zero.

On the issue of jobs, obviously, the number of people employed by GBE will not balance out the people who may be lost to the oil and gas industry in the future. This is important. It does not really matter where the chair comes from; the point is that the headquarters of GBE will be firmly based in Aberdeen. I have already referred to the extra 40,000 people we need in nuclear by 2030. If you look at the other sectors we are talking about investing in—CCUS, hydrogen—all of them will need more people. So, the energy sector as a whole will provide a huge number of opportunities, but I accept that, if there is a reduction in the number of people employed in the North Sea, it is our responsibility, with industry, to help manage that transition effectively.

In the end, we may disagree about this, but the Government are confident that we are right to go towards clean power as quickly as possible. We have had endorsement, both from the Committee on Climate Change and the Office for Budget Responsibility, that investing in clean energy now will pay dividends in the long term.

[Lord Ashcombe (Con)]

I am grateful to the Minister and, indeed, to my noble friends. I continue to worry that, as we import LNG, our effective emissions, by passing the problem elsewhere, are significantly higher than they would be using our own production. That is an important fact in this debate. We may have to come back to this issue on Report, but for now, I beg leave to withdraw my amendment.

Amendment 22 withdrawn.