Offshore Petroleum Licensing Bill

Lord Bruce of Bennachie Excerpts

Committee stage
Tuesday 23rd April 2024 Grand Committee

I spend much of my life having to deal with people who think about climate change in that way. They do not believe in climate change because they prefer it not to be happening. I agree with that second half, but it is happening and we have to act on it. Damage to the seabed is happening and we have to act on it. Proposals to extend and exploit more in the North Sea will damage more. Let us be serious. Let us not allow this to be passed over because it is just more convenient not to know.

[Lord Bruce of Bennachie (LD)]

My Lords, I rise to speak briefly to this group of amendments. Noble Lords will know that I have spent pretty much all my adult life in the north-east of Scotland and have seen the North Sea oil and gas industry pretty much from its inception right through to where we are today. It is a declining industry, as the right reverend Prelate rightly said, and it will continue to decline whatever we do. The question is: how quickly, and how will it impact the transition?

Turning to Amendment 1, on flaring, as far as I understand it from the transition authority, all new developments that are approved will be zero flaring, so, in a sense, the amendment is already being tested. I do not have a problem with it, but I think that is the case. I accept that the desire to reduce or eliminate flaring on existing fields leaves a tension as to timescale. It would be good if it could be speeded up, and the transition authority should be encouraged to make that happen, but it is not quite as easy as people say, because it has implications for the physical operation of platforms. However, I do not think it is a wrong aspiration.

On Amendment 2, on green skills, we should absolutely be developing them. However, the point I hear every day in the north-east of Scotland is that we are producing oil and gas and it is going to decline, but its revenue, technology and supply chain are all being redeployed to the transition. If we do not have that revenue, our ability to redeploy will be slowed down or stopped, and that is a real factor.

There is huge enthusiasm in the north-east of Scotland for the rapidest transition we can make. Indeed, just this week, one of the largest offshore wind farms in the world has been announced, off Peterhead. This is an investment of £3 billion in 35 turbines and potentially hundreds of jobs; there is huge enthusiasm for that. A lot of that will be going to companies in the oil and gas supply chain. The really important thing here is to get the balance right. If we accelerate it too quickly, that supply chain will disappear. The faster we bring in the investment in offshore, the faster we can make the transition, but it is really important to get the balance right. That is the debate the north-east of Scotland wishes to happen nationally.

That is one of the reasons why I support my noble friend’s amendment to replace “must” with “may”. As I said at Second Reading, the Bill is not necessary because we can issue licences whenever we like, and it has been up to the transition authority to determine whether that may be the case. To those who say that we should not have any more licences, I do not mean to be patronising at all, but some understanding of the North Sea reveals that there are sometimes requirements to bring things on stream in order to facilitate decommissioning, as well extending the life of existing infrastructure. Saying that it is not going to be done at all will probably almost immediately lead to a situation in which the practicalities mean that it makes more sense. So, there should be that discretion. However, the onus should be put on the transition authority to do that only if it believes it is necessary in order to achieve the transition in an orderly and efficient manner. That is essentially why the amendment makes practical sense.

Investing half the profits in renewables is a good idea. I am not sure whether one should be quite as specific as that; however, the reality is that the companies I talk to are investing increasingly in renewable energy because they can see that oil and gas is a declining asset. They know, as the noble Lord, Lord Deben, knows, that every projection for oil and gas through to net zero still has oil and gas in the mix.

So, oil and gas will be around. There is a sensible question to be asked: why should it not be ours, rather than importing it, as long as we can do that in the most efficient and least environmentally damaging way? I accept that it has an impact. In the process, we can ensure that the transition from the oil and gas industry to the renewables industry enables the jobs, the technology and the companies to be smoothly part of it. There is a real flight of investment from the UK in this sector right now, because of a combination of uncertainty—the Labour Party’s policy does not encourage people—and the Government’s confusing people, I have to say to the Minister. On the one hand, we have a Bill that says, let us have an annual licensing round; yet, on the other hand, we are saying that we are going to tax the industry to the nth degree.

Frankly, a lot of the companies are saying that the UK does not seem like a decent investment. For those in this room who are not keen on the North Sea, that may make them all happy but there are consequences. It is a successful major industry and a significant part of our economy. It is one of our high technologies. We are the world-leading experts in subsea technology. About one third of the market is UK-based, driven by what we do in the North Sea. To throw all that away, if we do things too quickly, would be a criminal waste of talent and resource, and would be an economic self-wound. We can do this properly and right, in an orderly fashion, or we can try to reverse it, which is foolish and will not work, or we can accelerate it at a level that would be damaging and destructive.

These amendments set the balance, I hope. We can make sure that if we are going to manage this transition and the decline in the North Sea, it is done in a way that respects the contribution that the people who have developed this industry over the past 40 years have given and can give. It would also allow us to develop the new technologies at a pace that will create a viable industry quickly, without causing a huge dip in economic activity and unemployment, which can be avoided.

[Lord Moynihan (Con)]

My Lords, my interests are set out in the register. The noble Lord, Lord Bruce, did not quite do himself a service by saying that he was there at the start 50 years ago; I am sure it is little bit less than that. I was very much involved some 35 years ago as Minister for Energy, at the time when this whole question started. There was extensive gas flaring in those days and no value was associated with gas. Therefore, the environmental impact was appalling and we wanted to assess it, especially when it came to the central North Sea. The southern North Sea had yet to be moved forward. The northern North Sea had far less of a problem of associated gas, but the central North Sea fields were very much in the context of what we are discussing.

I echo many of the comments of the noble Lord, Lord Bruce, about these amendments, in particular Amendment 1, which I want to address. The important points he has raised go to the comments of my noble friend Lord Deben. All new developments absolutely should be planned on the basis of zero routine flaring and venting. That is the case, as of today. I hope that the Minister can echo that point, because that is substantively what the amendment seeks to achieve.

My second point is that it is not wise to put equal weight on the environmental impact of venting and flaring. Venting is far worse. Methane is about 30 times more damaging to the environment than CO₂, which comes, effectively, from the flaring process. However, both are recognised by everyone who works in the oil and gas sector, particularly the supply and service sector, as practices we should end. There is a clear, unequivocal decision by government and by everyone working in the sector that we should bring these practices to an end by 2030.

The question is one of timing. As I read it—I may be wrong—the amendment is really about whether, two years on from the Bill receiving Royal Assent, we start the process as though it is 2026 rather than 2030. There is merit in considering that in detail, but we should also look at the industry’s capacity to retrofit by that timetable. It may be possible, but my research shows that it is quite difficult, and we would have to move from the current voluntary system. To be fair, that system has worked well. Progress has already been made in reducing flaring. It is down by some 50% since 2018 and we can get the rest of it removed by 2030.

The question is: should that be accelerated? In fairness, I think that is what the noble Baroness, Lady Hayman, is putting to us today—that this amendment, if passed, would not affect the new developments that are already being planned, on the basis that there was zero routine flaring and venting, but would accelerate the timetable for the rest of the platforms. My question to the Minister concerns that timetable and speeding it up. Do he and the Government believe, and can they demonstrate, that the voluntary-based momentum that needs to accelerate —the industry recognises that it must accelerate in order to achieve the 2030 deadline—is better or worse than a slower, compliance-based mechanism, which would require a complete infrastructure from government to achieve the sort of timetable that is set out in this amendment? That is the real question. By the way, the amendment is not precise because it will depend on when the secondary legislation is introduced before Parliament, so it might be implemented quite close to the 2030s or in the late 2020s.

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[Lord Bruce of Bennachie (LD)]

I share the frustration of many people that we produce our own oil and gas but base it on world market prices, and there is no immediate direct benefit to the consumer. I understand the reasoning behind it, but the public feel very frustrated: if we are oil and gas producers, there should be a direct economic benefit. Can the Government be a bit more creative and imaginative? They would argue that during the height of the crisis, they effectively used excess taxes to cut consumer bills, but is there a way in which to build in a formula that might have a more long-term connection that would be of some benefit?

It is also fair to say that I reject the argument that because we export a lot of the oil and gas, we do not really need it and therefore should not produce it. Of course, balance of payments do matter. The reality is that we have always exported a very substantial amount of our oil production and we import it back in refined products—more so than we did, because we no longer have the capacity to refine. Nevertheless, one pays for the other, but that is not immediately apparent. It is equally true that if we are producing our own oil and gas, and it is profitable, there is tax accruing to the Government which presumably funds public services or other tax cuts that could be directly connected to the consumer if the Government were prepared to be creative.

It is a perfectly reasonable proposition to ask why, if we are maintaining our oil and gas production, we cannot give a direct benefit to the consumer from that. I acknowledge that there are real benefits. Those who suggest that because we go for the world economic price there is no benefit ignore the balance of payment effect and the taxation effect. I am sorry that the noble Lord, Lord Deben, is not in his place because in a Committee exchange I asked him why, if oil and gas is part of the mix, right to and through net zero, we would not maintain some of our own production, if we can do it sensibly, efficiently and rationally while we are accelerating the transition? His reply was that we should set an example to the world, that plenty of other people produce oil and gas and we can import it. I found that extraordinary and irresponsible. If we are going to use it anyway—there is a further group of amendments that relate to the carbon base of our gas, for example—we know perfectly well that domestic gas has a much lower carbon footprint than imported gas, certainly liquid gas.

It is naive to suggest that there are no real benefits from producing oil and gas. There is a real economic benefit, but I tease the Government to say that it might be interesting if they could find a way of making a direct connection that people could feel in their cost of living, specifically in their fuel bills. People would find that an extra justification for maintaining what we are trying to do.

[Lord Kerr of Kinlochard (CB)]

I intervene briefly to express a little scepticism about Amendments 5 and 17. I declare an interest because I used to be deputy chairman of Shell for a time. I think the answer to the very fair question of the noble Lord, Lord Bruce, is that we cannot, unless we nationalise the companies or direct their sales, because they will sell at the market price. I do not think that the condition that Amendments 5 and 17 would impose will ever be met. We will never be able clearly to demonstrate that prices and the cost of living would be lower X many years out. First, one cannot be clear. It takes five, seven or eight years for a project to come into production and guessing prices and the cost of living that far ahead, as I saw at Shell, is not an exact science. It is difficult to do “clearly”—the wording in the amendment.

Secondly, I am not clear whether this third test is a cumulative condition, like the carbon intensity test and the net importer test. If it is cumulative, then no licenses will be issued at all, because that will never be able to be proved.

I am afraid that, for the same reasons, my scepticism also extends to the net importer test. I do not understand the Bill. We are setting out a perfectly reasonable set of propositions for a nationalised industry, but if you want the North Sea to be developed as it is now, or for the development to continue as it is now, run by commercial companies, then the commercial companies will sell at the world price. They will not allocate a little bit to you at a better price so that you can satisfy your tests; in particular, a cost of living test. It does not work like that. I am making everybody in the room angry, because I do not really agree with Amendments 5 and 17, and I do not actually agree with the Bill when it comes to the net importer test.

Offshore Petroleum Licensing Bill

Lord Bruce of Bennachie Excerpts

2nd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Young, with her very long credibility and experience in environmental protection. I am interested in some of the points she made; if they do come to amendments, I think we could work together.

I feel that, in some ways, I might be holding the ring in this debate. The whole transition to net zero is incredibly complicated and the energy mix is incredibly complicated. Many people seem to me to reduce it to a binary choice, in a very difficult way.

I declare a political and economic interest, if not a personal one. I have no financial stake in the oil and gas industry, but I have lived for over 50 years in the north-east of Scotland and represented it for many years, and have monitored the industry closely for more than 50 years. I have seen what it has achieved. As the Minister said, it has made a huge contribution to this country economically—jobs, balance of payments and technical innovation—of which we should be proud, while facing very great challenges. There have been mistakes, yes, and disasters on occasion, but also fantastic achievements, and it still has a lot to give. I agree with much of the analysis of the Minister’s introduction, but I do not see the value of the Bill at all—I will develop that point a little later.

Living as I do in the north-east of Scotland, the people I meet absolutely accept that this is a declining industry and that we have to move towards net zero. However, they are hurt and resentful that they are demonised as part of the problem, when they actually delivered what people wanted for the last 50 years, and believe they can help deliver what people want for the next 50 years, if they have the time and space to make that transition in an orderly and reasonable fashion. Quite a lot of the things that are green, and which we wish to have and which are happening fast, are still not happening fast enough to move us away from fossil fuel as quickly as some people think we can or would wish—all the projections make that absolutely clear.

It is still quite a significant industry, worth over £20 billion to the economy—it is not entirely clear because it spreads wide. Directly and indirectly, the figure is around 200,000 jobs, thousands of which are in the north-east of Scotland but the majority of which, believe it or not, are in England. We deliver a third of the subsea technology in the world, and it is an £8 billion to £10 billion industry.

New exploration and development, even if it is allowed to go forward, will not reverse the decline—that decline is inevitable and historic—but it will slow it. However, halting licences will unnecessarily accelerate the decline. It is not about new oil fields; very often it is about tying back existing reserves to the existing infra- structure, which can then be upgraded and decarbonised in the process, so that you are actually cleaning it up as well as getting the benefit of the revenue. As has been said, all the forecasts to and through achieving net zero include oil and gas in the mix. Obviously, the UK has been a net importer for 20 years, and we will import more and more, whatever happens in the future. The faster we build up renewables the better. In the process of doing that, we will naturally suppress oil demand, because people can switch to the alternatives, but it will not eliminate it.

The Minister made a reasonably rational statement, but it did not justify the case for the Bill. The Government are putting out very confused messages, claiming that we are doing really well on climate change but then saying that we need to issue more licences, which, as I said, the industry does not really feel the need for. The industry wants to know that, as and when needed, on a case-by-case basis and where it is appropriate, it will be considered and allowed for. We have never had to have an annual licence; it has just been done on a case-by-case basis, as and when needed. My position is that the Bill is unnecessary, and I do not think it is wise to have a policy of saying that there will be no more licences. The circumstances may well dictate that, rationally, some licences will be required. It is sensible to leave some space for that.

In addition, the Government have—this is not a slight confusion—in a separate decision, pushed back the date for electric cars by five years. Whether you think it is a good or bad idea, the message it sends is that we are in favour of addressing climate change but in an Augustinian way—not just yet. We need to be a little clearer about what we are doing.

We also need to recognise that baseload electricity is a challenge. Some green campaigners say that nuclear is the answer, and it may be the only alternative. I have never had a visceral objection to nuclear, but my experience of monitoring the nuclear industry is that it takes a hell of a long time, costs a hell of a lot, and creates a waste problem that is costly and intractable. On the other hand, I am not sure what the alternative is. It is difficult to see—I do not see it—any projections for 10 or 15 years from now where we are not still generating electricity with gas. It makes sense not to get rid of it faster than we have to, when we are still importing it anyway.

We have another issue, with offshore wind. I happened to fly in from Finland on Saturday, over massive offshore installations as you come to the shore of the UK. It is impressive, but I hear that there are problems with getting connections and landfall. It is no good generating the wind if you cannot get it into the system. We need to address those problems, and fast.

We need to make the investment, and we need to do it as fast as we can, and we need to recognise that climate change is real and probably accelerating. The people who say that we should have no licences, but that we are not shutting down production and are happy to allow any licences that have been granted to continue, seem a little inconsistent. If you are happy to accept them, why would you stop them? I think I have made the point that we need a sensible, balanced approach.

It is interesting to ask which of the oil and gas-producing countries in the world are operating a planned reduction of commercially viable production? The answer is only those that have not got very much. Norway certainly is not; Norway has made it clear that it will produce all the oil and gas that it can. That is not surprising, as it has one big customer just desperate for it, and that is where most of our gas is coming from. I do not see why we should swap Norwegian gas for UK gas when we need both, but that is the reality.

The sector will continue to decline, but, from meeting people in the industry and attending their various events, I know that every company in the supply chain that I meet is increasingly focusing their attention on developing renewable technology. They see it as the future, and they want to be part of the future. They tell me that they are transferring their expertise into that sector and using the revenue they get from oil and gas in the short run to fund it, and that if that revenue chokes off faster, their ability to fund the transition will be lower.

I would be perfectly happy—maybe this could be an amendment—to make it a condition of licensing that operators must ensure that a proportion of their profits is invested in UK renewable technology. They might also be required to demonstrate that they can contribute to lowering energy costs or the cost of living. I am in favour of making the industry contribute more, but I am not in favour of artificially depressing it and leaving us, potentially, risking supply gaps and cost overruns.

We export most of our oil to the Netherlands for refining, and there exists an argument that, because we export it, we should not bother to produce it. I can remember the 1970 election, when one bad month of balance of payments led to a change of Government. Nobody seems to care about the balance of payments any more, but what of the idea that £15 billion-worth of exports should just be discarded? As the noble Lord, Lord Lilley, to be fair, acknowledged, we pay for the imported product, to some extent, by the exports that we make. It is disingenuous to suggest that, because we export it, it has no value to our economy. That goes against normal economics.

We need to focus on how we can get the industry and the public to adopt renewable technologies as fast as possible, and to harness the energies across the energy sector—including oil and gas—towards that, while recognising that managing the transition requires neither a ridiculous stoking up of oil and gas exploration nor an unnecessarily rapid depression of oil and gas. It is naturally declining, and the industry, left to its own devices, will diminish, because it is not there to be invested.

The Bill creates the wrong signal and is completely unnecessary. The industry does not want it, but rather wants recognition that it is part of the solution and should not simply be demonised as being the cause of the problem. That is not a good way to treat an industry that has been the backbone of our economy for 50 years.

Overhead Electrical Transmission Lines

Lord Bruce of Bennachie Excerpts

Thursday 29th February 2024 Grand Committee

[Lord Bruce of Bennachie (LD)]

My Lords, I am grateful to the noble Lord, Lord Swire, for initiating this debate. He and the noble Earl, Lord Effingham, outlined some very powerful points for consideration. I will address a different and more parochial aspect, but also the massive expansion we are likely to face in the coming years.

To give a bit of a personal connection to this, during the winter of 2021-22, two very severe storms hit the UK, Storm Arwen and Storm Malik. This had a direct and dramatic impact, certainly in my part of the world, in Aberdeenshire, but in many other places as well. My home was without power for more than four days during Arwen, and more than three days during Malik. Many others suffered much longer disruption and outages.

It is important to take on board that not only were we without power but so were all the mobile phone masts within a fairly large area. This was aggravated by the fact that BT had replaced its fixed lines with digital lines, which require broadband. Those who were wise enough not to respond to BT or who ignored the email found that they had power. Those of us who did what we were told found we had no communication whatever. The power companies were unaware of this, so they were happily broadcasting online all kinds of information that was totally inaccessible to the people it was aimed at. That was a pretty powerful experience of how these things happen.

To share with noble Lords the consequences of all that, the temperature inside our house dropped to 8 degrees. We were lucky compared with some, as we had a contingency back-up, in that we had not replaced an old solid fuel burning stove, which gave us heat in one room and some hot water. Other people in houses whose fireplaces had been removed had no back-up at all. We were incredibly isolated and incredibly disadvantaged.

The point about this is that the overhead power lines were extremely vulnerable to wind and debris, which brought them down, in addition to which the access roads were blocked by falling trees, so even though people were brought in from all over the UK to tackle this problem, they could not access the places where the cables had broken. Indeed, the local council eventually contacted the Ministry of Defence, and, thankfully, 150 members of the Armed Forces came to our area. All they actually did was house-to-house calls to check where people were and what they needed. As the situation progressed, the companies then provided hot food stands, with no charge to anybody who turned up.

I accept that lessons were learned; nevertheless, this was an emergency that people had not experienced on such a scale, although every time the wind blows, we expect some kind of a power cut. I want to stress that I genuinely believe that undergrounding is about security of supply as well as visual impact.

As it happened, at the end of Storm Arwen the house was coming back and my wife said to me, “There’s no point in you staying here. It’s cold—you might as well go down to London”. The BBC asked, “Are you affected by this?” so I posted on Twitter, not with my title or saying who I was but just as a member of the public. The BBC said, “Would you like to come into a studio somewhere?” I said, “Well, I could come into Millbank”. Only when I walked into the studio did they recognise who I was. My point was that I did not do that because of who I was; I was just a member of the public who was affected by this. When the next storm happened, my neighbour, who I have to say is a very staunch Conservative, said to me, “Will you go back on the BBC again? As soon as you went on, the power came back on”. However, there is a serious point here, and the BBC was impressed by the fact that people were completely incommunicado as well as in a serious situation.

I genuinely want to believe that the idea of undergrounding power lines is about security of supply. We were not the only people affected; the north-east of England was badly affected, as were a lot of other places, so that is an issue. However, in the north-east of Scotland we are of course very familiar with the oil and gas industry, and nobody suggested stringing oil and gas pipes on high poles across the countryside; they have all been undergrounded, right from the outset. It was quite disruptive at the time, but it is totally invisible now. On the interesting point about ploughing, and so on, I believe that with proper planning, the cost of undergrounding could be managed. You might say that water and electricity do not mix, but you could use the same trenches with enough separation. The point that I want to make to the Minister is that the Government should be prepared—though not in all situations; we accept that—to have a proper look as to whether this can be done and in an affordable way.

The other point, which is obviously what prompted the debate in the name of the noble Lord, Lord Swire, is the expansion of onshore and offshore wind and the whole drive towards net zero. Again, I can testify just to local situations in my area where we have offshore wind farms coming ashore. We have already had a massive campaign about an onshore station. That is exactly the point: if you are to have them, why not offshore, and why not collect them together rather than having each one? Surely that has to be addressed. I do not know how it is going to be resolved, because the company has said, “We’re not going ahead with that”. However, it has not said what it will do, so it will have to come up with some alternative. It was interesting that the protest was such that, in one of the few Conservative-held constituencies in Scotland, that changed the policy.

The other problem is that once we have it onshore, we will transmit it to the grid, and you are talking about potentially massively additional power lines to those already there. I do not think any of us are saying that in the short run we should demolish the ones we have, although over time maybe we should replace them. But certainly, on the idea that new power lines should not have a proper assessment of undergrounding, the point the noble Lord, Lord Effingham, made about relative cost over the lifetime relating to the cost of electricity, was interesting. Of course, that cost goes up and down rather sharply but, nevertheless, this seems to suggest that, while it is more expensive, it may be not as expensive as it appears. There are also the benefits in security of supply and the lack of interruption, there are big costs associated with restoring the supply, and then there is the visual impact.

This is a valuable debate and, in a way, I am pleased to see the development. Obviously, a lot of people oppose wind farms offshore and onshore. They are controversial. A very contentious one is currently being applied for, literally at the back of my village, which absolutely nobody supports because of the scale of it. I support them, generally speaking, and feel that most of the ones that have gone ahead in my area have been properly and visually acceptable. However, this one is out of all proportion. We are talking about an 1,800-foot hill with 900-foot turbines installed on it, and I just do not believe that is sensible or credible. But generally speaking, they are fine.

More and more offshore is where we are going, and all that has to be transmitted. So it seems absolutely clear that we have to give a serious think as to how we do that. I would say to any Government, “You’re going to get an awful lot of political reaction to this. There will be public anxiety and there will be protests, so it is better to anticipate it and at least think through what could be done, and consider where and how and at what cost it may make sense to put these cables underground”. However, my own belief is that it will secure the supply and will also meet the environmental requirements of the public.

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[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, I start by thanking my noble friend Lord Swire for bringing forward this extremely important issue. It is right that we should debate it. I also thank all noble Lords who have contributed to this debate.

I remind noble Lords that the revised national policy statements for energy infrastructure, including a specific one with the catchy title of EN-5 on network infrastructure, came into force less than two months ago. Among other things, these set out the Government’s expectations for the use of undergrounding, which is the practice of laying electricity transmission cables underground and the subject of this debate.

That National Policy Statement for Electricity Networks Infrastructure states, as other noble Lords also recognised, that

“overhead lines should be the strong starting presumption for electricity networks developments in general”.

However, in nationally designated landscapes, such as national parks or areas of outstanding natural beauty—for example, Dedham Vale, which my noble friend mentioned—

“the strong starting presumption will be that”

developers

“should underground the relevant section of the line”.

That accounts for the importance of protecting the natural beauty of these areas. That strong starting presumption for overhead lines remains flexible, however, and undergrounding may be used in other areas in certain circumstances—namely, where there is

“a high potential for widespread adverse landscape and/or visual impacts”.

The noble Baroness, Lady Blake, acknowledged this point.

I hope that my noble friends Lord Swire and Lord Effingham are at least partly reassured on the flexibility available in certain locations. Such decisions will be weighed up by the Secretary of State. Furthermore, my noble friend Lord Effingham asked what proportion of overhead cables will be replaced with underground ones. I can advise that only those in protected landscapes would be. It is a relatively small or modest proportion. We acknowledge the beauty of our areas of outstanding natural beauty, hence our starting presumption of undergrounding in these areas.

My noble friends also asked about communications with Ofgem. I am not aware of any specific discussions that we have had with it on the possibility of increasing funding for the visual impact provision projected by the energy industry, but my officials will go back to Ofgem and I will write if we discover any further information or discussions on that subject.

The Government arrived at this policy position for various technical, operational, environmental and, of course, cost reasons. I seek the indulgence of the Committee to talk noble Lords through them, but before we delve into the depths of underground cables, if noble Lords will forgive the pun, and before I turn to the specific points raised I will give some context to the debate.

As Members of the Committee and, I assume, everyone taking part in this debate will know, the Government remain committed to our net-zero targets. To get there, we are accelerating domestic energy production. However, it is similarly critical that we expand our network infrastructure—a point recognised by all noble Lords. Without that, how are we to get the electricity generated in the North Sea, off the coast of Aberdeenshire and the rest of Scotland to the consumers who wish to use it?

To achieve this, we need to build about four times as much transmission infrastructure by 2030 as we built in the previous 30 years. I repeat that point: we need to build four times as much infrastructure by 2030—in five or six years’ time—as was built in the previous 30 years. It will require an estimated £40 billion to £60 billion of investment in our electricity transmission infrastructure by 2050. Let me be straight: in practice that will include building more overhead lines to connect supply to demand. I accept that will be an unpleasant pill to swallow for many in the Committee and, undoubtedly, within the country as a whole and some rural areas. However, it is one that we cannot shy away from.

The reason for that is that there are many benefits to so doing. Overhead lines are much easier to maintain. Trying to identify a fault in an underground cable is like finding a needle in a haystack, with multiple disruptive excavations needed, and often takes many weeks to complete. Overhead lines are much cheaper to build, as has been said. Some estimates suggest that undergrounding may be between five and 10 times more expensive, as the noble Lord, Lord Bruce, mentioned. Costs depend on the topography of an area and other factors. Those costs are ultimately passed on to consumers through their electricity bills. That is a difficult case to make to families up and down this country who are struggling with the cost of living, and it sets a high bar to meet for changing the Government’s policy.

I have talked about the urgent need to accelerate the deployment of new transmission infrastructure, and overhead lines are much quicker to build than underground lines. Some of us think that the time taken to build overground lines is long enough, but it would cost much more if we had to put them all underground. As noble Lords will well know, and have raised, time equals money and the longer the delays to rolling out transmission infrastructure, the higher developers’ constraint costs. Network constraints occur when the electricity transmission system is unable to transmit power to electricity users because the maximum capacity of the circuit is reached. The National Grid electricity system operator manages those constraints by paying generators to switch off or turn down in locations where the network is congested, and to switch on or turn off in locations closer to electricity users. Those constraint costs are ultimately passed on to consumers.

Analysis from National Grid indicates that, if delays to network build persist, annual constraint costs could rise from around £2 billion per year in 2022 to around £8 billion per year in the late 2020s. That would be the equivalent of an extra £80 per household per year. Undergrounding more of our essential transmission infrastructure would, I am afraid to say, only increase that cost to consumers even further.

Let me be clear that undergrounding has an important part to play in developing and delivering our critical network infrastructure, and is rightly the default starting position for protecting our most important landscapes, where overhead lines cannot be rerouted. This helps to mitigate the visual impact associated with overhead lines and pylons, which many communities are understandably concerned about—such as with those natural landscapes in East Anglia to which my noble friend Lord Swire referred. Burying cables underground, as the noble Lord, Lord Bruce, ably demonstrated and pointed out, also protects them against adverse weather conditions.

Another question that my noble friend Lord Effingham asked was about whether all future consultations on overhead lines can factor in the benefits of undergrounding. It is important for me to emphasise that developers, not government, are responsible for bringing forward the preferred design of an electricity networks project. The noble Baroness, Lady Blake of Leeds, asked how the balance was achieved in all cases by developers—and I assure the noble Baroness that developers take into account many things, including regulatory requirements, planning policy, cost, technical feasibility and environmental impacts. In doing so, it is all about striking a balance between all those different and often competing considerations. The consenting process considers and scrutinises those proposals. Undergrounding transmission is, I am afraid, not a simple change that can be made late in the process of a project’s development; it is something that needs to be considered very early in that process.

My noble friend also warned in his speech that something awful was about to happen to our countryside, by which I presume he is referring to the pipeline of overhead transmission infrastructure waiting to be built. It is equally important to emphasise that we must not downplay the environmental impacts of undergrounding. In fact, installing underground cables requires significant engineering works, which not only prolongs the construction time compared to overhead lines but causes significant damage to the surrounding area. The breadth of land needed for trench cabling, for example, is around the width of a football pitch. To the point made by the noble Lord, Lord Bruce, about situating water pipes next to underground electricity cables, I am afraid that that might not be such an efficient prospect after all. Of course, it would serve only to widen that trench even wider.

I move on to the point about the environmental and ecological impacts of overhead cables. The environmental impact of undergrounding, as I said, can be significant and indeed permanent, not only during installation but during operation. It can, in essence, create a somewhat sterilised strip of land where there were once trees and hedgerows, causing habitat and species loss. We should ask ourselves whether that is a price worth paying because of the visual impact of overhead lines; we may have different opinions about that. As with many discussions and considerations of energy policy, it is about balancing out different risks and problems in every area.

[Lord Bruce of Bennachie (LD)]

I understand what the Minister is saying, but we have certainly had experience of quite a number of pipelines being laid from the north of Scotland right across Scotland. That was years ago, but you would not know where they are now. So, yes, there was disruption at the time, but it settled completely.

The Minister acknowledged as well that security of supply could be an issue. Is that a factor that should be weighed a bit more heavily where there are lines that are systematically prone to disruption on a regular basis, so that undergrounding might be a better offer?

[Lord Callanan (Con)]

Yes, I absolutely concede the noble Lord’s points but, given the modern policy environment and all the legal impacts, much energy infrastructure that was built many years ago would be very difficult to build today. In past generations, consumers were perhaps much more understanding of installations of nationally significant infrastructure than they are now. I absolutely accept the noble Lord’s point. In all these considerations, it is also about balance—balancing out competing factors, of which cost is one and convenience is another, but security of supply is an equal factor that also needs to be considered. I suspect that the noble Lord is probably considering the low-voltage distribution network rather than the high-voltage transmission aspect of the supply.

My noble friend Lord Swire talked about the different creative technologies available for laying underground cables and asked whether the Government had considered those factors. Ultimately, it is not for the Government to opine on those matters. Those innovative solutions are quite rightly being driven forward by industry and they are a brilliant example of how we can use such innovations to support the delivery of our energy infrastructure ambitions and our net-zero infrastructure. The transmission owners and others are the experts in this field and, of course, we will continue to liaise with and support them in their endeavours.

I hope I have—but I suspect I have not—succeeded in persuading noble Lords that undergrounding is far from being the silver bullet in our endeavour to expand our network transmission infrastructure and meet our net-zero targets. In fact, using underground rather than overhead lines may in some respects have the opposite effect and lead to more delays rather than fewer, given that the installation takes much longer. In some cases, the upfront costs are perhaps not worth it in the longer term, as my noble friend Lord Effingham suggested. In our bid to greatly expand our domestic energy production and meet the needs of households up and down the country, I am afraid that we need to act and build networks faster than we have ever done in the past.

It is for those reasons, which I have talked the Committee through, that the Government have decided to maintain our policy position of a starting presumption of overhead lines for electricity network developments in general. That is not to say that the Government stand idly by while communities living in the path of new transmission infrastructure are affected; it is quite the opposite. That is why, at last year’s Autumn Statement, the Chancellor announced proposals for a community benefits scheme for communities living near transmission network infrastructure, which the noble Baroness, Lady Blake, asked about. The communications campaign is due this year and I invite the noble Baroness to get in touch directly so that we can provide more details on it.

I am afraid that I am running out of time, so I will move to my conclusion. I will write to noble Lords if I have not answered any of their points.

I do not need to tell the Committee that, as with so many issues, no policy is etched in stone indefinitely. In fact, the Government would not be doing our job properly if we did not keep policies under review. However, that falls far short of committing to look again at the Government’s current policy on undergrounding less than two months after it came into force. Now is not the time. The Government can determine whether this should be reassessed if and when more evidence is provided by industry. For now, the best place for the majority of transmission infrastructure is—I am sorry to say—up in the air, for technical, operational, environmental and cost reasons and, most importantly, to protect consumer bills.

Oil and Gas Windfall Tax

Lord Bruce of Bennachie Excerpts

Wednesday 19th July 2023 Lords Chamber

Asked by

[Lord Bruce of Bennachie]

To ask His Majesty’s Government what assessment they have made of the impact of the oil and gas windfall tax on investment and jobs, and the capacity of the energy sector and supply chain to deliver key components of the transition for achieving the United Kingdom’s net zero objectives.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, the Government introduced the energy profits levy to respond to exceptionally high prices that mean that oil and gas companies are benefiting from extraordinary profits. The Government have been clear that we want to see producers reinvest profits to support the economy, jobs and the UK’s energy security, which is why we have introduced generous investment allowances. Our North Sea transition deal reflects the key role of the sector in that energy transition.

[Lord Bruce of Bennachie (LD)]

I thank the Minister for that reply. As we increase our efforts to meet net zero, which we clearly must, does he agree that through all the projections to and through net zero, we will continue to use fossil fuel, albeit on a declining basis? Therefore, is it not essential, because Norway has said that it will produce every ounce of oil and gas that is commercial in its sector, that we do nothing to prevent the transition being led by the energy industry, which is increasing its investment in the necessary technology such as carbon capture and storage, hydrogen and green electricity, and that we need to ensure that it can continue to do that?

[Lord Callanan (Con)]

I am very happy to agree with the noble Lord. I am tempted to observe that he might want to talk to some of his colleagues on his Benches about that message. He is right that it makes much more sense as we go through the transition to obtain those resources from our own fields rather than import them at a much higher carbon content.