Great British Energy Bill

Lord Ashcombe Excerpts

Committee stage
Wednesday 15th January 2025 Grand Committee

[Lord Hamilton of Epsom (Con)]

My Lords, I, too, speak in support of these amendments. It is definitely important that accountability is brought to bear here. Of course, one has the constant worry that the private sector is going to pick up all the low-hanging fruit, which is quite profitable, while GB Energy is going to be left with all of the much more speculative stuff, which will probably lose money for the taxpayer.

I want to refer in particular to subsection (2)(d) in the new clause to be inserted by Amendment 96 in the name of the noble Earl, Lord Russell, which refers to

“a just transition to green energy”.

I use that as a bit of a hook on which to return to the question I asked in Committee on Monday; I should have intervened and asked the Minister to answer before he sat down, but I had a problem at that stage, which is why I have given him advance notice today. I hope that the Minister will be able to answer my question for me because there is a dispute on our side. My noble friend Lord Fuller is a great exponent of green liquid hydrogen. Let us face it: if we could manufacture it effectively, it would be a bit of a silver bullet in solving many of these problems. But, at the same time, my noble friend Lord Roborough said that it will always be much too expensive to produce. I was slightly surprised by this because, like my noble friend Lord Fuller, I have always taken the view that the technology will develop as it goes along and the price will start to come down. It used to be the policy of the previous Government to support hydrogen; it is certainly supported by JCB.

[Lord Ashcombe (Con)]

I thank my noble friend for letting me speak. I wish to correct the record: it was actually me who described what my noble friend is describing, not my noble friend Lord Fuller.

[Lord Fuller (Con)]

Although I do of course wish to be associated with those remarks.

Great British Energy Bill

Lord Ashcombe Excerpts

Committee stage
Monday 13th January 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I want to offer a slightly different perspective on this group of amendments. All the amendments in this group, and indeed some later groups, involve a series of rather worthy things—for which there are to be reports or other consequences—to be achieved by giving a direction to Great British Energy. While I support the amendments on the basis that they are probing amendments, I find it difficult to support the structure of the amendments themselves.

It seems to me that, by using the power of direction in Clause 6, the amendments would undermine the nature of that power and subvert the effectiveness of the power of direction, which is a long-standing feature of the control framework for public corporations. Powers of direction for nationalised industries were commonplace when nationalisation took hold from the 1940s onward. I do not know whether they existed before that, but they certainly have a pedigree of nearly 80 years. The first one of which I am aware is in relation to the Bank of England Act 1946, which nationalised the Bank of England. They have been a feature of public body legislation ever since, except in relation to bodies which are created as regulatory bodies.

The power of direction was never conceived as a mechanism for giving routine instructions to public bodies, which is what all the amendments in this group and the subsequent groups are trying to do. In fact, throughout the history of nationalised industries, the power of direction has almost certainly not been used. In relation to the Bank of England, I asked the previous Government fairly recently whether they would like to give up the power of direction over the Bank of England and whether they had used it since 1946; the answer was that they had never used it since 1946, but they definitely wanted to keep it. The fact that a power has not been used does not necessarily have any meaning, because it is designed as a backstop power for use in extreme circumstances. The mere fact of its existence can be a powerful weapon in the hands of the Government of the day.

It should be an uncontested fact that the Government ultimately call the shots in relation to public corporations, however much operational independence they claim to be handing over to them when they set the bodies up. The board of a public body should be very wary of not following the wishes of the Government of the day, unless those wishes conflict with their legal and statutory objectives.

I will always defend the ability of the Government to give directions to a public body, because public bodies should not be above the Government of the day. I think there are far too many public bodies, but if we have to have them, we must have an effective power of telling them what to do when necessary. I would definitely not want that core power to be diluted by being cluttered up with a lot of more day-to-day matters, which is partly what the amendments in this group and subsequent amendments do.

The concerns of my noble friend on the Front Bench and indeed other noble Lords who have drafted these amendments would be better met by placing specific requirements in the Bill, rather than by cluttering up the power of direction which has a very special place in the control framework for public bodies.

[Lord Ashcombe (Con)]

My Lords, I support my many noble friends in their amendments in this wide-ranging group. I declare my interest as an insurance broker in the energy industry for Marsh.

In the Labour manifesto under the section entitled “Make Britain a clean energy superpower”, its second mission to rebuild Britain, there is a plan to create 650,000 jobs by 2030. This will obviously need to include the supply chain, as the number of jobs required for running energy projects will never reach this amount.

In the Great British Energy Founding Statement, we learn:

“Backed by a capitalisation of £8.3 billion of new money over this Parliament, Great British Energy will work closely with industry, local authorities, communities and other public sector organisations to help accelerate Britain’s pathway to energy independence. That means installing thousands of clean power projects across the country, crowding in investment for next-generation technologies, and providing vital support to accelerate large-scale projects”.


For new money, we can read taxpayers’ money.

When taxpayers’ money is being spent, it simply cannot be thought of as a blank cheque, in this case with a large upper limit. It is imperative that there are checks and balances in the system to ensure that money is spent wisely to the benefit of the country. I suggest to the Minister that some of these measures might include the following: the need to demonstrate the benefit in each venture towards the £300 saving so heavily touted in the run-up to the general election; the need to demonstrate the benefit in each venture towards the creation of 650,000 jobs on the back of this clean energy drive and again touted in the run-up to the general election; and the need to ensure that grid connections, as have been mentioned, to connect the new generating assets are available as and when needed, something that has been very difficult to achieve in the past. That would also prevent ludicrous curtailment payments. The costs from NESO to do this are enormous—I believe I am right in saying some £40 billion a year until 2030.

The measures also need to show the net effect of carbon emissions and the reductions being made as the years progress, which is what this Bill is all about. However, it is especially important to consider not only scope 1 emissions, being direct greenhouse gas emissions that occur from sources that are controlled or owned by an organisation, and scope 2 emissions, being indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling but also—and possibly most importantly—scope 3 emissions, being the greenhouse emissions resulting from activities from assets not owned or controlled by the reporting organisation but that the organisation indirectly affects in its value chain. My noble friend Lord Hamilton talked about one specific example. In my opinion, this has specific reference to solar panels, which are manufactured predominantly—some 85%—in China, and wind turbines, of which 60% are manufactured in China, which has certainly not demonstrated any restraint in curbing emissions. Then, there is the subsequent voyage to the final destination. Let us not forget what the noble Lord, Lord Alton, said.

There is also the need to show a reduction in imported energy—both via electrical interconnectors and hydrocarbons as LNG or by pipe from Norway and the continent—balanced against the production of our own North Sea gas and being allowed to continue to search for more off our abundant coasts.

Further, there is the need to show that a significant percentage of the materials used in any work done is generated in the UK and the need to demonstrate that we are becoming more self-sufficient in power generation—something we have not got to yet. Finally, but of no lesser importance, there is the need to demonstrate financial return to the benefit of the taxpayer.

In a number of these amendments, various timeframes have been suggested to produce a fair audit trail for Parliament and the taxpayer. Without them, who will know the real benefits of all this expense? Does the Minister agree that measurement provides results and therefore helps to determine the way forward?

--- Later in debate ---

[The Earl of Caithness (Con)]

My Lords, I apologise to the Committee for missing the first bit of my noble friend’s introduction to his amendments. I take this opportunity to ask the Minister whether he could update the Committee on where we are with the land use strategy. Like the noble Lord, Lord Cameron, I, too, have been banging that drum for some time.

As the noble Baroness, Lady Young of Old Scone, gently chided my noble friend for the length of his introduction, I say to her that he is perfectly entitled to speak for 12 and a half minutes when introducing an amendment. That would not be the case if he were just one of the rest of us.

[Lord Ashcombe (Con)]

My Lords, I support my noble friend Lord Fuller’s group of amendments. Significant construction projects inevitably bring competing interests. In this case, the clash is between renewable energy development and agriculture, as well as other environmental considerations beyond decarbonisation. Land use, particularly on a densely populated island, must be approached with great care. Currently, we import approximately 40% of our food. While today’s discussions may focus on volatile oil and gas prices, tomorrow’s may shift to the cost and availability of food. This creates a fundamental dilemma. What should take precedence: food or energy?

Food security highlights the need to prioritise high-grade land for agriculture. However, the Government’s plan to build 1.5 million homes—typically on the edge of towns and villages—threatens this priority. Settlements have historically been sited on fertile land, and expanding housing developments will inevitably consume some of it. Essential services such as schools and shops will require further land use, compounding the problem.

Designating renewable energy as part of the nationally significant infrastructure plan risks bypassing legislation designed to protect communities and high-grade land. Restricting onshore renewable projects to grade 4 and 5 land would safeguard high-quality agricultural land and reduce the impact on the more heavily populated areas. According to Solar Energy UK, currently solar installations take almost 20 times the amount of grade 1 land available as opposed to grade 5. I seriously question whether this is the right ratio and ask the Minister whether he believes that it is.

With the Government’s ambitious housing targets, should it not be mandated that all new building, including homes and commercial premises, be fitted with solar panels, as mentioned partially by the noble Earl, Lord Russell? This would make better use of land already out of agricultural use and reduce the pressure while advancing renewable energy goals.

Great British Energy should refrain from developing high-grade agricultural land, nor is there any justification for it to acquire such land unless Amendment 104 is adhered to. Once agricultural land is repurposed for construction, it is rarely restored. At the end of their operational life, renewable projects will leave behind brownfield sites that will probably be redeveloped, permanently altering the land’s use, leading to unintended consequences for the environment.

I draw attention to the potential conflicts between decarbonisation and other environmental concerns—for example, the low-level but persistent noise from onshore wind and solar farms, generated by inverters and transformers, which can disturb rural communities. Biodiversity loss is another critical concern, also highlighted by my noble friend Lord Fuller.

I strongly support the amendments and urge the Committee to carefully balance food security, environmental protection and renewable energy expansion.

[Viscount Goschen (Con)]

My Lords, I remind the Committee of my interests in that I own a farm in Devon.

My noble friend Lord Fuller has done the Committee a service by raising the issues of planning and land resource allocation more generally in the context of the Bill. I listened carefully to the remarks of the noble Baroness, Lady Young of Old Scone, and I think she is right: this is a very much broader issue than this relatively narrow Bill. None the less, this is an important moment to raise such issues. I very much hope that we will get a substantive response from the Minister when he addresses these considerations.

--- Later in debate ---

[Lord Murray of Blidworth (Con)]

My Lords, I rise to speak to Amendments 85D and 85E in my name. I regret that I was unable to speak at Second Reading, but I am pleased to be able to take part in this debate in Committee.

My amendment seeks to address a lacuna in the Bill. As many noble Lords before me have observed, the Bill lacks a vital detail. Parliament is being asked to approve the establishment of a vehicle for the investment of £8.3 billion of taxpayer money, and yet we have no clarity on how this money will be spent. All these decisions will be for Great British Energy to make under the direction of the Secretary of State. We believe that this is a most unsatisfactory way to proceed, and my amendment seeks to probe the Government’s intention on energy storage, as well as giving the Government the opportunity to improve the Bill with a clear statutory duty to invest in energy storage.

Just last Thursday we had a debate in this House on the importance of energy storage, and I agree with the amendments that my noble friend Lord Lilley has tabled. Improvements in energy storage infrastructure will be crucial if we are to continue on our journey to greater reliance on renewable sources of energy. I am pleased that the noble Baroness, Lady Gustafsson, has recognised the importance of energy storage as part of our path to clean energy, as she did last week when she said the Government

“recognises the value of strategic energy reserves as a source of energy resilience and security of supply, balancing system flexibility, particularly during periods of energy supply shortage”.—[Official Report, 9/1/25; col. 845.]

Given the importance of investing in energy storage as part of our long-term strategy, we should surely put this at the centre of this Bill. In fact, the objects of GB Energy, as outlined in Clause 3, include

“facilitating, encouraging and participating in … the … storage … of clean energy”.

It is therefore deeply concerning that the Bill makes no provisions to effect that objective.

Amendment 85E in my name complements Amendment 85D. It is a simple amendment and merely requires an annual report from Great British Energy on the overall cost to the taxpayer of curtailing the supply of renewable energy. This will principally apply to offshore wind, which frequently produces excess supply. Under the current arrangements, the taxpayer pays offshore energy producers to reduce their supply and this has been extremely costly, driving up energy prices for consumers.

In December 2023 the think tank Carbon Tracker estimated that wasted wind power would add £40 to consumer bills, and predicted that this figure would rise to £150 in 2026. Clearly, consumers have a direct interest in us getting to grips with this problem, and the Government would surely agree that the establishment of Great British Energy presents an opportunity to do this. It is therefore critical that GB Energy looks to invest in long-duration energy storage, which would mitigate the increased cost to consumers resulting from wasted energy.

With this said, can the Minister clarify whether the Government anticipate that the Secretary of State will give a direction to GB Energy to invest in energy storage, to ensure we are prepared for what the Germans call Dunkelflaute periods, such as we had just last week when several gas power stations were fired up at great expense to the taxpayer? Do the Government see a role for Great British Energy in helping to improve planning for energy supply deficits in the future? Finally, do the Government agree that improved energy storage infrastructure will reduce our reliance on gas-powered power stations in the future? I beg to move.

[Lord Ashcombe (Con)]

My Lords, I speak in support of these two important amendments, proposed by my noble friend Lord Murray of Blidworth. Thanks to the Library research team, I have gained greater knowledge of the size of constraint payments to the power producers for either constraining production or to rebalance the system. These payments are not insignificant, and I would like to advise them to your Lordships. The years that I am about to cite run April to March. In 2020-21, the amount was £1,070 million; in 2021-22, it was almost £1.5 billion; in 2022-23, it was £600 million; in 2023-24, it was £1.3 billion; and, in this year from April to October, it was £960 million. This gives a total of £4.78 billion. As mentioned by my noble friend, these amounts get added to the bills of consumers, businesses and households.

--- Later in debate ---

[Viscount Trenchard (Con)]

My Lords, I support Amendment 85F, tabled by my noble friend Lord Murray and Amendments 85G and 85H tabled by my noble friend Lord Fuller. As I explained in an earlier group, it is very clear that the price of electricity is presently adversely affected by the pricing mechanism applied by NESO, which is the price being determined by the last price of gas as used. If you are using gas only as a balancing item—that is, when the wind is not blowing and the sun is not shining, you fire up a gas power station to make sure the lights do not go out—it is much more expensive. The electricity generated by that last switch on of a gas power station determines the price of electricity, and that has a huge negative effect on the consumer, obviously. That is why these amendments are so necessary.

I would like to ask the Minister if he thinks that it is right that the electricity price is determined by the last firing up of a gas power station, which is being used simply as a balancing item when the wind does not blow and the sun does not shine. As we have seen over the last few days, there have been many days when the proportion of our electricity generated from wind is under 10% and that generated by gas goes above 50%, which means that power stations that are used only occasionally are being fired up, and that is very expensive.

[Lord Ashcombe (Con)]

My Lords, it is worth stating what is going on out there on the national grid right now. Gas and wind are supplying between 42% and 43% each; therefore, it is the gas price that is driving the price for everything. We are in the unusual position right now where we are exporting electricity to the continent because they need it more than we do. To have 42% driven by gas, with the price at over £100 a megawatt hour at the moment, seems worrying, and what we can do to curtail that must be important; but gas is not going away any time soon, and we have to be careful about how we moderate the reduction in it.

[Lord Offord of Garvel (Con)]

My Lords, I whole-heartedly support Amendments 85G and 85H in the name of my noble friend Lord Fuller, as well as Amendment 85F in the name of my noble friend Lord Murray of Blidworth. The objects of GB Energy, as outlined in Clause 3, state that they are restricted to

“facilitating, encouraging and participating in ... the production, distribution, storage and supply of clean energy”.

The Minister has made a virtue in this House that the Bill does not focus on any one particular technology or solution, but would it not be correct to assume that GB Energy has actually been set up in an effort to boost the production of renewable energy in the UK? Otherwise, what is the investment of £8 billion to be spent on? The Government say that GB Energy is part of their mission to make the UK a clean energy superpower, but how can we ensure that it delivers on these promises? I have seen in both the previous days of debate in Committee that the details in this Bill are at best scarce, and the Bill makes no provisions to report on the impact of each investment that GBE makes on renewable energy production. How, again, are we supposed to measure its success in delivering for the British people, as promised throughout the election campaign?

It is in the public’s interest to disclose the impact of GBE’s energy investments and activities on the level of energy produced from renewable sources, whether that be solar, wind or hydrogen. It seems incredible that this Bill, which establishes a so-called clean energy company, does not include a means by which GB Energy is required to report on the generation of clean energy. Indeed, this is an alarming oversight.

My noble friend Lord Fuller has rightly outlined an additional reason as to why the reporting on the impact of GB Energy’s investment on the levels of renewable energy generated is so critical. As has been mentioned many times, Europe has recently experienced another dunkelflaute. Just last month, for three consecutive days, more than 60% of electricity generation in the UK had to come from gas, as wind output dropped. At the same time, our partners in Germany paid the highest average price per megawatt since the Russian invasion of Ukraine, with a lack of wind being the main factor behind this escalation.

It is essential that renewable energy generation associated with GB Energy’s functions is closely monitored, if we are to maintain our energy security. The Secretary of State has said that one of the aims of GB Energy would be to improve our energy security— this, too, is mentioned in Clause 3. However, I am deeply concerned that the Government’s tunnel-visioned focus on green energy alone risks threatening our energy security. I am sure the Minister will want to see the successes, maybe even the failures, of GB Energy in helping to generate renewable energy. If this is true, he will have no problem in offering support to the amendments in my noble friends’ names. Ultimately, these amendments require the most basic and necessary levels of reporting.

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.

--- Later in debate ---

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.

--- Later in debate ---

[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.

Great British Energy Bill

Lord Ashcombe Excerpts

2nd reading
Monday 18th November 2024 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, I declare my interests as an insurance broker for the energy industry, as set out in the register.

The Bill before us, dealing with the creation of Great British Energy, has the laudable aim of decarbonising the power sector by 2030. That is an ambitious target, especially given the broader commitment for the United Kingdom to reach net zero by 2050. Achieving such a transformative goal requires careful handling, not only in its practical implementation but in securing the support and understanding of the population. 

Energy is foundational to growth for any nation, and growth is something we undoubtedly need. As outlined in the founding statement of GBE, published by DESNZ on 25 July, the company’s mission is to

“drive clean energy deployment, boost energy independence, create jobs and ensure UK taxpayers, billpayers, and communities reap the benefits of clean, secure, home-grown energy”.

However, such aspirational language does not appear within the Bill itself, nor are there clear metrics by which Parliament might assess its ongoing success. Other noble Lords, including the noble Lord, Lord Vaux, have addressed these omissions in great depth. I am not going to repeat their arguments here other than to say that I agree.

Instead I shall turn to Clause 3 and the stated objectives of GBE. Electricity generation accounts for approximately 20% of the UK’s overall energy demand. Our current energy mix highlights the challenges ahead: 31% from wind; 28% from gas; 15% from nuclear as a constant baseload; 8% from biomass, largely from Drax, whose environmental credentials merit scrutiny; and 5% from solar, with the balance met by interconnectors with Europe. The other 80% of UK energy is hydrocarbon-based.

The Bill envisages that most of the new clean power will come from offshore wind, onshore wind and solar. However, the scale of expansion is extremely challenging. According to the National Energy System Operator’s report Clean Power 2030, offshore wind capacity must triple and solar capacity must more than triple, while onshore wind needs to double. These are staggering targets that far exceed our historical rate of progress.

As has been noted many times in your Lordships’ House, the wind does not always blow, and the sun does not always shine. Gas, as the swing fuel, is consequently frequently called on, sometimes accounting for 60% or more of generation—it has been 55% this afternoon—during lean or cold periods. Conversely, during periods of overproduction, typically when the wind blows too hard, surplus power must be shed, meaning that the producers are paid a curtailment fee to not generate. The situation will be exacerbated as more renewable power comes online. Hydrogen production, which has been discussed by various noble Lords and which I will address shortly, has the potential to address that issue.

While the construction of fixed wind and solar farms is well understood, it is unlikely that GBE will play a significant role in that technological development. It will need to deploy resources in the floating offshore wind arena, which is still in its infancy but has a significant upside. In addition, GBE might contribute to solving the associated planning, environmental and conservation challenges by encouraging the integration of clean energy production in all new infrastructure.

Equally daunting are the upgrades to our grid infrastructure. An estimated £40 billion will need to be invested annually until 2030 to enable the increased generation targets. I am afraid that collectively that dwarfs the £8 billion available to GBE. I am all for ambition, but one must ask: are these goals realistic and achievable?

Importantly, how does that correlate with the much-touted £300 saving per household that was so widely discussed before the election? It seems increasingly elusive.

It is certain that gas will remain a key component of our energy mix for years to come. The UK currently consumes nearly 1 billion barrels of oil equivalent annually for its energy. We are fortunate to have significant hydrocarbon reserves within our territorial waters. At the end of 2023, the North Sea Transition Authority estimated 3.3 billion barrels of oil equivalent in reserves, which are likely to be produced; 6.1 billion BOE in contingent resources, representing known but undeveloped assets awaiting regulatory or investment approval; and 3.5 billion BOE in mean exploration prospects—that is, potential resources yet to be discovered. These reserves, weighted 70% towards oil and 30% towards gas, could meet over half the UK’s expected energy demand over the next two to three decades. However, production is falling at more than 10% annually, outpacing reductions in consumption and exposing us to increased reliance on imports.

The 200,000 jobs connected to the hydrocarbon industry, both directly and within the supply chain, which will decline rapidly as the industry is shut in, are hugely significant. While some of these skilled workers may transition into the renewable power industry, we must ask ourselves: will it be all of them?

Beyond employment, the economic contribution of oil and gas remains substantial. According to the Office for Budget Responsibility, revenues from offshore corporation tax, petroleum tax and the energy profits levy raised £5 billion in 2023-24. Although those revenues will decline over time, they remain significant. Furthermore, the Office for National Statistics reported that the extraction of crude petroleum and natural gas contributed £27.6 billion to the UK economy in 2023, accounting for 1.2% of the total economic output of £2,369 billion. These figures remind us of the industry’s enduring impact and the need for a carefully managed transition.

Recent gas discoveries, such as the Selene and Baker fields, underscore the remaining potential of the North Sea, yet these projects depend on competitive regulatory and fiscal conditions, which are not guaranteed. Projects already licensed, such as Jackdaw and Rosebank, which are essential to our energy security, are before the courts, resulting in further delays and potential cancellation, which could put further strain on our domestic production.

It cannot be right that we are importing increasing volumes of LNG to satisfy our gas needs when we have abundant resources of our own. Imported LNG is often produced under less stringent environmental controls and must be transported across oceans, increasing our carbon footprint threefold. Furthermore, are we not merely transferring the problems to others rather than addressing them ourselves? This does not reduce emissions, which is the ultimate goal, and it undermines our commitment to true environmental responsibility. That clearly highlights the need for the ongoing issuance of licences in our territorial waters. I strongly urge the Government to reconsider their current position and take action to support this vital initiative.

Other noble Lords have discussed nuclear generation. It is certain that the country needs a smorgasbord of generation types, and nuclear must be an important part.

I see two further areas in which GBE may make a positive impact. First, renewable generation is inherently intermittent and, while battery storage can address short-term issues, it cannot manage significant downtimes. Excess renewable electricity could be used to produce green hydrogen by electrolysis with no greenhouse gas emissions, which in turn could fuel hydrogen turbines during low renewable production periods. Developing the necessary storage and turbine infrastructure should be a priority for GBE, preventing curtailment payments and generating electricity with the cleanest of fuels.

Secondly, the development of carbon capture, utilisation and storage is crucial to the UK and to other countries. Due to geology, the UK has significant CCUS potential, amounting to the equivalent of approximately 200 years of current carbon emissions. Its development will be crucial to UK decarbonisation and that of other countries. It is of course not a single solution to emissions reduction but could provide a crucial route for some sectors, such as large industrial users and gas-fired power generation. GBE should play a leading role in advancing this technology.

While I commend the ambition of the Bill, I fear it may overreach in its expectations of the industry’s capacity to deliver. Simultaneously, it underestimates the continued importance of hydrocarbon resource in ensuring our energy security. Without sufficient oversight or clear metrics, GBE risks becoming an unchecked entity with uncertain outcomes. Nevertheless, we must remain steadfast in our commitment to net zero by 2050. If managed prudently, we may even reach that target sooner, without jeopardising the growth and prosperity of our nation.

King’s Speech

Lord Ashcombe Excerpts

Thursday 18th July 2024 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, it is a pleasure to welcome the noble Baroness and the noble Lord to the Front Bench. Like many others, I wish them well. I too shall speak to the energy industry and its mix in this country, in particular oil and gas. I declare my interest as an insurance broker for Marsh Ltd, in the energy practice.

Without energy in the economy, the country would grind to an abrupt halt. Today, the United Kingdom derives approximately 20% of its energy from electricity and 75% from hydrocarbons, with the expectation that this number will reduce to 25% when we meet the 2050 target for net zero, which I believe everyone wants to achieve.

Currently, wind, solar and nuclear power do not produce enough energy for 100% totally renewable electricity generation. The split of electricity generation last year was as follows: wind 32%; solar a modest 5%; hydrocarbons 30%, of which almost all was gas; nuclear 14.5%, the very best baseload we have; and other sources, including interconnector cables with Europe, some 21%. The mix will remain important for security purposes.

I ask noble Lords to please remember that the sun does not always shine and the wind does not always blow—sometimes at the same time—which leaves a large shortage that currently can be made up only through predominantly gas generation. This shows that the United Kingdom’s energy security remains important. The more we can produce domestically the better, and we should not be reliant on more imports than are necessary.

Energy is greater than just electricity generation. On the world scale, UK emissions are about 1%. Oil and gas emissions in this country are currently about 3% of that number and have been reduced by 24% since 2018. We are on track for targets of 50% by 2030 and 100% by 2050 for that which we produce. This is by no means perfect: the UK is still in the top 20 countries for emissions.

We use the majority of our domestic gas to generate electricity and heat homes, but we still need to import about 50% of our requirements. This comes by pipeline from Europe, predominantly Norway, and is then topped up by importing LNG as needed. LNG is emissions-heavy in comparison to domestic production, due to the manufacturing process and the need for it to be transported significant distances. We already import the majority of the crude oil refined here. The refineries are not compatible with North Sea oil, which we export predominantly to Europe, then reimporting the refined product primarily for transport. The emissions caused by more importation than necessary would be more detrimental to the atmosphere and should be avoided.

The oil and gas industry employs some 200,000 people directly or indirectly, according to OEUK, and produces substantial revenue for this country. The temptation to significantly reduce any future activity in our oil hydrocarbon basins would have a harmful effect on these employees and would quite possibly lead to an exodus of highly qualified individuals, who would look to use their skills overseas. This was the experience in New Zealand when the issuing of new licences slowed significantly. It is now in the process of trying to reverse this trend and potentially issue more licences.

We need to provide an environment where we can use the skills in this country as we manage the provision of energy in the future: offshore wind, hydrogen and carbon sequestration, as the noble Baroness, Lady Liddell of Coatdyke, so beautifully described. The increase in offshore wind power—of which I am an advocate, as we have one of the best resources in the world in this respect—is the best use of these transferable skills across industries. However, onshore wind and solar farms will use significant amounts of land, which has to be taken out of agricultural production. The areas required are frightening, and the Minister specifically addressed the protection of the environment.

Nothing is ever simple, and the increase in power generation has a drawback: the grid is straining to provide sufficient capacity to move the electricity required from production sites to areas of use. Many of the oil and gas producers are also investors in the renewables sector. However, they need stability in their cost base in order to continue to produce oil and gas to fund the renewable growth, all to the long-term benefit of this country. The projects that generate the returns for taxpayers carry significant costs, and changes in any cost structure, including investment allowances, can play havoc with their continuation and may make projects unviable. There is still a significant amount of oil and gas to be found and developed in our waters, so let us continue to be an oil-producing and gas-producing nation well into the future while keeping, importantly, to our net-zero commitments.

Greater taxation of domestic oil and gas, or any reduction in the granting of licences, will make it less likely that this production will continue, resulting in a drop in revenues to the Exchequer and in a potential exodus of talents and skills. This will reduce our energy security. Given that, during the transition to net zero and afterwards, the United Kingdom will continue to need hydrocarbons, a further consequence would effectively be outsourcing our environmental responsibilities and commitments to countries that may well have lower levels of green regulation than us, ironically resulting in a net increase in global emissions.

Offshore Petroleum Licensing Bill

Lord Ashcombe Excerpts

2nd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, it is a pleasure to be able to follow the noble Baroness. I declare my interest as an insurance broker for the energy sector, but I work with companies from America rather than the UK.

I believe that the Bill brings only benefits to the United Kingdom in energy security, assisting the climate goals to which we are committed and, importantly, supporting the economy in many parts of the country. As a country, we are fortunate to have several oil and gas basins within our territorial waters. Since their discovery and development in the late 1960s and early 1970s, they have enabled us to reduce our dependence on imports. At their peak in 1999, they produced some 4.5 million barrels of oil equivalent a day. It is projected that this year, that will reduce to 1.1 million barrels of oil a day. Since demand is currently somewhere around 2.7 million barrels of oil equivalent a day, the country is a net importer of both oil and gas.

The UK’s dependence on hydrocarbon fuels for our energy needs is about 75%, as we have heard. It is predicted to be still 25% when we reach net zero. Sadly, the reserves are becoming depleted; the decline is predicted to be 7% per annum going forward and we will be ever more reliant on imports. The UK’s oil and gas industry is regarded as a leader on the world stage, employing, as we have heard, a highly valued, skilled and diverse workforce of a debated 200,000 directly for and associated with the offshore industry. Many of these jobs will, over time, move into the energy industry of the future: more offshore wind, hydrogen production and carbon sequestration. It is essential that we keep these skills alive, as they will be required in the transition of the UK to net zero by 2050.

Earlier this afternoon, we were using about 15% from wind, 8% from solar, 17% from the interconnectors and a further 12% from our ageing nuclear fleet to generate electricity. Even with the significant and welcome increased projection in these areas, there will be a shortfall. The sun goes down every night and the wind does not always blow; it is gas that makes up the difference—37% this afternoon. We produce only about 47% of the total current gas demand in the country, remembering particularly home heat in addition to its use in generating electricity. The shortfall must come from somewhere until renewable resources provide sufficient energy, which I wholeheartedly support.

The position with oil is slightly different as, again, there is a significant shortfall, as described by the noble Lord, Lord Lilley. The options we can take to ensure the energy security of the country are limited, particularly when considering our net-zero commitments. We can either start to rely more heavily on imports of oil and gas, which is more carbon intensive, or be able to exploit our domestic reserves, which is less so.

The Bill has two logical climate targets to meet: the carbon intensity test and the net importer test. In respect of gas, the average carbon intensity of domestic gas produced during the assessment period was lower than the average carbon intensity of liquefied natural gas imported into the United Kingdom during that period.

Gas is imported in two ways. The first is natural gas via the pipeline system from Norway, which is the majority. Norway certainly produces the cleanest gas—it is cleaner than our production—but its reserves are not infinite. While the Ukraine conflict sadly continues, with sanctions preventing Russian gas entering the European system, gas from the Norwegian fields is highly desirable and in demand across northern Europe. However, there is to be a significant decline in Norway’s gas production before the end of the decade.

The second alternative is importing LNG, which we also do. Wherever it comes from, it imposes a significant increase to our carbon footprint, of three to four times that of our domestic production, notwithstanding the challenges of getting it here. Let us not forget that in the United States, from where we import most of our LNG, the Biden Administration has imposed a ban on the development of more LNG liquefaction plants designed for export. We bring LNG also from the Middle East via the Red Sea, which has its own issues. We bring it too from Peru via the Panama Canal, which has water restrictions. On this basis, the country needs to limit LNG imports as much as possible.

The net importer test is important for gas, and it is the key test for the continued production of domestic oil. As I said, we are a net importer of oil. At this time, the North Sea Transition Authority—the licensing authority—has no requirement to offer blocks or parts thereof with any frequency, other than when it deems licences are required. There was a four-year gap between the two most recent licensing rounds. This Bill ensures that licences will be offered annually, allowing industry participants to plan with more predictability. It is they who have the expertise and capacity to fund a significant number of wind, solar, hydrogen, and carbon sequestration projects driven by their oil and gas revenues. That will continue to ensure that the energy industry benefits the economy and provides significant tax revenues. Most importantly, it will help secure the jobs currently in the industry and transfer them to the renewable industry as demand requires. This is against a backdrop of added energy security for the country while keeping to our climate commitments and goals by using the two embedded tests in the Bill. I am pleased to support this Bill.