Energy Bill [HL]
Lord Callanan ExcerptsTuesday 12th September 2023
(1 year, 2 months ago)
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Lord Callanan
That the House do agree with the Commons in their Amendment 1.
“(aa) the interim targets, as defined in section 2 of that Act;”
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, with the leave of the House, as well as moving that this House do agree with the Commons in their amendment, I will also speak to the other Commons amendments. I am pleased to bring the Energy Bill back to this House, following on from the many hours of debate that we had during its parliamentary stages in this place. The Bill is essential to the transformation of our energy system and will leverage private investment in clean technologies. It will reform our energy system so that it is fit for the future, and it contains essential provisions for ensuring the safety, security and resilience of the UK’s energy system.
The Government have listened carefully to the points raised, both in this House and in the other place, and we tabled various amendments in the other place to address many of these issues. The amendments have been gathered into three groups. First, there are the amendments making changes to the Bill in response to concerns raised across the House and where we have overturned lost votes. Secondly, there are amendments where we have introduced new government policy. Thirdly, there are amendments addressing minor and technical amendments made to the Bill. I wrote to noble Lords about this in advance of the debate, and I am grateful for the positive engagement that I have received from across the House.
I will speak first to the amendments in the first group, tabled following constructive engagement with both Houses. First, on the amendment on Ofgem’s duties, no doubt the noble Baroness, Lady Hayman, will be pleased about this—and I am grateful to her for her amendments on Report that sought to include the Government’s net-zero targets within Ofgem’s duties. The Government have now tabled a revised version of the noble Baroness’s amendment to ensure that it would not impact the hierarchy and intended effect of Ofgem’s duties, but very much in the spirit of the original amendment. The revised provision amends Ofgem’s existing duty to consider a reduction in greenhouse gases by making specific reference to the net-zero targets and carbon budgets in the Climate Change Act 2008. This reaffirms the Government’s commitment and mandate in achieving our net-zero targets and ensures that Ofgem’s role in net zero is clear.
I turn to the amendments to the hydrogen levy provisions. The Government have included these provisions following consideration of the concerns raised by colleagues in both Houses, particularly the Labour Front Bench. Following careful analysis of the implications, these amendments are similar in intent to an amendment made on Report in this House, but they help to ensure that the provisions work in a way that is practical. Specifically, they remove provisions that enable the levy to be imposed on energy suppliers in Great Britain, ensuring that within Great Britain the levy could be placed only on gas shippers. In the case of Northern Ireland, the amendments are intended to ensure that only gas supply licence holders who engage in gas shipping activities can be subject to the levy. This reflects the different approach to the licensing of gas shipping across Great Britain and Northern Ireland. The revised legislation provides a fairer approach to funding hydrogen, placing the charge higher up the supply chain, with the potential for costs to be spread to sectors expected to benefit most from early hydrogen deployment.
Finally, I remind the House that the Bill will not impose a levy on gas shippers. Instead, it will enable government to introduce such a levy through secondary legislation. Any decision to do so would take into account all relevant considerations, including the affordability of energy bills. The Government will hold a public consultation as usual, before laying regulations introducing the levy.
I turn to amendments on renewable liquid heating fuel. As the recent biomass strategy made clear, such fuels will have a critical role to play in decarbonising our economy. We recognise that these fuels have the potential to play an important role in decarbonising heat in those off-grid properties that are not suited to electric heating. I thank the noble Lord, Lord Berkeley, for his amendment and comments on Report on this issue. I am pleased to confirm that we will explore the potential of these fuels for heat by issuing a consultation within 12 months, and we are taking powers in the Bill to support the use of these fuels in heat in future. This amendment would provide government with the powers to introduce, again by regulation, measures that would impose obligations on heating fuel suppliers to supply specified amounts of renewable liquid heating fuel within specified periods. The Government also commit to consult specifically with the Scottish Government when consulting on the role of renewable liquid fuels in heating buildings off the gas grid and the implementation of a renewable liquid heating fuel obligation. The Government will look to legislate when parliamentary time allows to give statutory force to this consultation requirement.
Amendments 165 and 165A on sustainable aviation fuel commit the Government to publishing a consultation on the options for designing and implementing a revenue certainty scheme for sustainable aviation fuel within six months of the Bill being passed. The Government are also introducing a sustainable aviation fuel mandate from 2025 that will do the heavy lifting to close the cost gap between jet kerosene and sustainable aviation fuel by providing price support in the form of tradable certificates. These policies, along with the £165 million advanced fuels fund, will help to deliver our ambition of having at least five commercial-scale sustainable aviation fuel plants under construction in the UK by 2025.
I turn to community energy. The Government recognise that such projects can have real benefits for the communities in which they are based, and we are keen to ensure that they deliver value for money for consumers. That is why earlier this summer we launched a new £10 million community energy fund, which expands on the success of the previous rural community energy fund to enable both rural and urban communities across England to access grant funding to develop local renewable energy projects for investment. Alongside the proposed fund, we are committing to publishing an annual report and to consulting on the barriers the sector faces when developing projects.
Lord Lennie (Lab)
My Lords, I will make a few comments. First, I thank the noble Baroness, Lady Boycott, the noble Lord, Lord Teverson, and my noble friend Lady Blake for their amendments and will make our position on them clear. Secondly, I thank the noble Lord, Lord Callanan, for the welcome changes that he made to the Bill in the other place on the housing levy and on renewable liquid fuels.
We generally welcome the passage of the Bill. It has been a long time in gestation—15 months or more—with hundreds of changes and more today. We welcome all those too, although they probably could have been made earlier.
I turn to the three amendments. First, on coal, the new new Labour Party is no longer in favour of coal. We absolutely support what the noble Lord, Lord Teverson, said about the coal industry, and it is time to put this in legislation. It is not enough to say that we are no longer committed to coal; we need to legislate for it and so we will be supporting this amendment.
On my noble friend Lady Blake’s amendment on energy efficiency, I will restate the facts. First, the UK has the least energy-efficient homes in Europe. Domestic energy-efficiency measures have fallen 95% since 2012 and are 20 times lower than they were when Labour was last in power. The Resolution Foundation estimates that 9 million households are paying an extra £170 a year as a result of these failings.
The Minister said that the amendment is unnecessary, because it is partly in the net zero strategy and the Powering Up Britain publication, but this is legislation, and it should state what the Government propose to achieve and by what timescale. Therefore, we support the amendment.
On community energy, the noble Baroness, Lady Boycott, set out very clearly her proposal to commit the Government to finding out what the barriers inhibiting the development of community energy are, and to bring forward a plan to overcome them. That is a very modest amendment from where we were the last time around, and I can see no reason whatever for the Government not to support it. We will support those three amendments should the Members wish to test the opinion of the House.
Lord Callanan (Con)
My Lords, I thank all noble Lords who have contributed to the debate. I will start on the last issue raised by the noble Baronesses, Lady Boycott and Lady Meacher, and others: that of community energy.
The Government launched the £10 million fund this summer, and it is larger than its predecessors. From what I have seen so far, it has been welcomed across the community energy sector. It will fund projects such as Congleton Hydro, which received £73,500 in funding from the former rural community energy fund—this fund will do a similar job. Thanks to that funding, it is producing affordable, clean and secure electricity from a local weir, enough to power the equivalent of 60 homes. Not only is the project reducing emissions in the area but its success has led to the creation of an annual £5,000 fund for local community projects.
Amendments 274A and 274B aim to commit us to a consultation on the barriers preventing the development of community energy schemes. The amendments set out with whom we should consult, and commit government to bringing forward proposals to remove identified barriers to community energy. But as I referred to earlier, the Government have already committed to consult on the barriers that the sector faces when developing projects. As part of this process, we will of course involve the community energy sector in designing the consultation, through the Community Energy Contact Group. We continue to believe that it is more appropriate to allow the small-scale export market to develop with minimum intervention than to introduce a support scheme that specifies minimum prices or contract lengths for generators.
I know that the House is keen on supporting community energy, and we are the same, but it has to be done in a cost-effective manner, because the cost is borne by every other bill payer. It might be advantageous to certain islands or rural community villages, but if there is a cost in excess of the system, it is borne by every other bill payer in the country. The amendments would place an additional obligation on government to bring forward proposals to remove these barriers within a specified timeframe.
In Committee in the other place, Energy UK submitted evidence recognising the role of community energy but cautioning:
“The additional context of developing roles for future energy system operation, reform of competition in delivery of network infrastructure, and wider reforms of electricity markets including energy retail”
mean that the consideration of community energy needs to take into account this much wider context, rather than considering community energy “in isolation”, and that we need
“to give the Government, the regulator, and the industry time to fully consider”
all those issues. We must be careful not to disadvantage the majority of the population to benefit a very small minority.
We obviously cannot be sure what the consultation will conclude until we have carried it out, so in our view it is not appropriate to make a commitment to do something the outcome of which, and what barriers or proposals will come forward, we do not know at this stage. But I reassure the House that the Government will continue to work closely with the sector and the wider industry on the best way forward.
I now move on to the somewhat contentious issue of coal. Amendment 272A, on prohibiting coal extraction, was raised by a number of noble Lords, including the noble Lords, Lord Teverson and Lord Lennie, and of course the noble Baroness, Lady Bennett. I was particularly interested to hear the comments of the noble Lord, Lord Lennie, because of course we both come from the north-east of England, and there are still sitting Labour MPs in the north-east, whom the noble Lord, Lord Lennie, knows well, campaigning in favour of opening new coal mines. It is interesting that the Labour position seems to be developing from that.
A full prohibition on coal extraction is likely to prevent extensions in existing operational mining—even where that extension could enable site restoration or deliver public safety benefits. It would cut across heritage mining rights in, for instance, the Forest of Dean, which is important to its tourism offer, and perhaps also in Beamish, another area that we know well. Importantly, it would prevent domestic coal extraction projects from progressing that seek to supply industries that are still reliant on coal, such as steel manufacturing. Again, the Labour Party loses no opportunity to lecture us on the importance of the steel industry. That industry is going through a transformation, but many parts of it still require access to coal, so I hope the Labour Party has cleared its position with the steel unions, which I suspect would not support an amendment such as this—I will leave that little domestic argument to different Labour members.
The phasing out of future coal-powered generation, which we do agree with, is a more proportionate response to moving away from coal use than a complete prohibition on coal extraction. Such a ban would deny the prospect of access to domestic coal reserves for future generations, regardless of the circumstances, regardless of the use it could be put to and regardless of the fact that it could perhaps play a role with CCUS in the future.
The Secretary of State for DLUHC’s decision on the mine followed a comprehensive planning inquiry that heard from over 40 different witnesses and considered matters including the demand for coking coal and its suitability. It went into all the issues that the noble Lord, Lord Teverson, recommended, the climate change impact and, crucially, the impact on that particular local economy. While the full reasons for the Secretary of State’s decision are set out in his published letter—which should perhaps be read in its entirety—he concluded that
“there is currently a UK and European market for the coal … it is highly likely that a global demand would remain”.
While coking coal may be required for steel production for quite some time—I assume the Labour Party is not proposing that we should close the steel industry down overnight; if so, that would be a fairly radical policy change from all that it has said before—to support the decarbonisation of that industry through its transition period, as well as other industries that still rely on coking coal, we have already put in place the £315 million industrial energy transformation fund. We think that is a better way to help industry move away from coal in the future, rather than just banning their fuel source, because you would be banning British coal—you would not be banning coal; you would just import those same supplies produced by miners in other parts of the world. This helps business, in our view, with their high energy use, to cut their energy bills and reduce their carbon emissions through investing in energy efficiency and low-carbon technologies—that is a more constructive way to proceed.
On sustainable aviation fuel, again the noble Baroness, Lady Bennett, got excited and condemned us for something that we are not doing. Sustainable aviation fuel is the most developed technology pathway for aviation decarbonisation and will play a key role along with the other technologies as outlined in the jet zero strategy. Many experts view sustainable aviation fuel as the only alternative to kerosene for long-haul flights up until 2050. If the noble Baroness does not want that, she should have the courage of her convictions and say to people that what the Greens really want to do is to ban flying completely, to prevent people going on business or on their holidays. If that is her agenda, she should say so, rather than try to put amendments forward to prevent us developing those sustainable fuels that we could use in the future to decarbonise the sector.
We recognise that there is uncertainty around feedstock availability and we will continue to work closely with colleagues across government to ensure that the most up-to-date evidence and modelling are reflected throughout the policy design of the SAF mandate and the revenue certainty mechanism. We have already confirmed that the sustainable aviation fuel mandate will not support crop-based biofuels and that SAF must meet strict sustainability criteria. These measures will prevent negative environmental consequences, such as the loss of biodiversity, deforestation and the clearance of land with high-carbon stock that could be associated with the cultivation of raw materials that may be used in certain SAF production.
On energy efficiency and energy statements, of course I understand noble Lords’ desire to go further. I am passionately committed to the cause of energy efficiency, but I do not recognise some of the characterisation put forward in this House. We are making good progress in this country. In 2010, some 14% of UK homes were at EPC band C or above. Now it almost 50%. We have a particularly difficult problem because we have the oldest housing stock in Europe, but we are making progress on this matter. We could go further and faster, and we are endeavouring to do so, but we do have a good record in this country. I want to put that on the record before I talk about the specific issues.
Lord Callanan (Con)
My Lords, with the leave of the House, I will speak also to the other amendments in this group. The Government introduced amendments on Report in the Commons to commence further provisions of the Bill on Royal Assent. These amendments will ensure that key secondary legislation can progress at the pace required for the department’s policy objectives to be met.
The remaining government amendments are technical and minor in nature. They relate to existing policies already in the Bill. I wrote to noble Lords about these amendments, setting out what they do and our intentions behind them. Therefore, the House will forgive me if I do not speak to every amendment in detail; I will instead recap the key amendments we sought to make in the other place.
In general, the amendments have been made to improve the clarity, precision and consistency of the Bill. In Part 1, we have amended the definition of a carbon capture entity to include direct air capture projects, with the intention of supporting such projects that bolster our greenhouse gas removals efforts, as set out in the net zero strategy.
In Part 2, we have tabled amendments to the definitions of hydrogen production revenue support contract and carbon capture revenue support contract so that, while contracts can be offered only to eligible low-carbon hydrogen producers and eligible carbon capture entities, after the point of contract signature it is for the contracts to set the parameters of the ongoing support that they provide. This will help ensure that projects and their investors are clear on the terms of their support. That should inspire confidence in this new regime.
We have amended Part 5, on the independent system operator and planner, to limit the breadth of its efficiency and economy objective and clarify the definitions of ISOP functions in the Bill. These changes leave the ISOP with a mission that is more clearly defined but also flexible enough to accommodate wider developments in energy regulation. They should also help to reduce the risk of the ISOP being distracted from its core purposes and potentially incurring unnecessary costs to customers.
Part 12 on the offshore wind environmental improvement package has been amended to make clear that the clauses apply to all infrastructure in the UK marine area used or intended for use in connection with an offshore wind farm and in connection with the conveyance of electricity generated by such wind farms. Further amendments have been made on the energy performance of premises, petroleum production licensing, the disposal of radioactive waste and compensation for nuclear damage, as well as other minor drafting and clarificatory amendments. I hope noble Lords will agree that they are necessary amendments that improve the Bill. I beg to move.
Lord Callanan
Moved by
That the House do agree with the Commons in their Amendments 3 to 16.
“(7A) But regulations made by virtue of subsection (7)(a) may not make provision amending (or repealing or revoking) any provision of—
(a) an Act of the Scottish Parliament, or an instrument made under such an Act, unless the Scottish Ministers have consented to the making of that provision;
(b) a Measure or Act of Senedd Cymru, or an instrument made under such a Measure or Act, unless the Welsh Ministers have consented to the making of that provision;
(c) Northern Ireland legislation, or an instrument made under Northern Ireland legislation, unless the Department for the Economy in Northern Ireland has consented to the making of that provision.”
“carbon dioxide transport and storage revenue support contract” has the meaning given by section 59(2);”
Lord Callanan (Con)
My Lords, with the leave of the House I will speak also to the other amendments in this group, which concern new policy that was introduced in the other place. I turn first to the amendments on hydrogen transport and storage infrastructure. These amendments will enable business models to be brought forward to provide investors with the long-term revenue certainty that they will need to establish and scale up the deployment of hydrogen transport and storage infrastructure. I am sure this will be of interest to the noble Lord, Lord Whitty, and the noble Baroness, Lady Bennett, who spoke about this earlier in the Bill’s passage.
The development of this infrastructure represents the critical next step in the growth of the hydrogen economy to support the Government’s ambition to have up to 10 gigawatts of low-carbon hydrogen production capacity by 2030. The business models are intended to help overcome the key barriers to investment in this infrastructure, such as high capital costs, lengthy development lead times and uncertain financial investment returns in what is a very nascent market.
Next, on carbon capture storage information and samples, the amendments support the role of the North Sea Transition Authority—NSTA—as the regulator of carbon dioxide storage in the UK continental shelf. They achieve this by ensuring that it has the relevant powers to access and share information and samples collected through relevant carbon-storage activities. This reflects similar powers already held by the NSTA for the petroleum industry and will enhance knowledge sharing across the carbon capture, usage and storage industry. It will support innovation for the effective utilisation of the UK’s geological storage potential and help encourage private investment in the UK’s growing green economy.
The Government have also tabled amendments relating to Great British Nuclear. These amendments will enable GBN to support government in rebuilding our civil nuclear industry and facilitating the delivery of nuclear projects to achieve our net-zero ambitions. GBN will play a critical role in strengthening the UK’s energy security. By legislating for GBN, we are working to undo decades of underinvestment and inspire trust in the UK civil nuclear industry, restoring the global leadership that the UK used to have in civil nuclear power.
I move on to discuss the amendments to provide relief on network charging for energy-intensive industries. High industrial electricity prices are one of the key barriers that inhibit the most carbon-intensive sectors from adopting greener technology. The measures deliver on a fundamental element of the British industry supercharger set out in February. These amendments will give the Government the powers to deliver a scheme that will provide relief on electricity network charges for Britain’s strategic energy-intensive industries. It will bring electricity prices for these UK businesses in line with some of their global competitors, thereby helping to preserve thousands of jobs and investment and enabling greater electrification of industrial processes, removing one of the major barriers to decarbonisation. I beg to move.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to speak to Amendments 259A to 271A inclusive; your Lordships will be pleased to know that I do not intend to speak to each one individually. For technical reasons these had to be split up but, essentially, this is a chance for your Lordships’ House to reconsider again the whole Great British Nuclear introduction that the Minister just outlined.
This debate follows on in many ways from that secured for last Thursday by the noble Lord, Lord Howell of Guildford, about nuclear power. I will not revisit all the many issues raised there, although I note that the noble Lord, Lord Howell, expressed rightful and strong scepticism about the progress of both Hinkley Point C and Sizewell C, on cost and other factors. There is also the continuing cost of the clean-up of dinosaur technology from the last century of £260 billion, and issues of waste that we have still not tackled.
I said that I will not go through these amendments one by one, but I do want to speak to Amendment 262A, which disagrees with the financial assistance. In our discussion yesterday on the failure of the offshore wind contract for difference bidding process, the Minister said my suggestion that we should look at a higher strike price for offshore wind was not thinking about the bill payer. I do not know how many Members of your Lordships’ House have looked closely at the detail of government Amendment 262, but it is utterly an open slather:
“The Secretary of State may provide financial assistance … to facilitate the design, construction, commissioning and operation of nuclear energy generation”.
Proposed new subsection (2) says that this assistance
“may be provided … by way of grant, loan, guarantee or indemnity … the acquisition of shares … the acquisition of … assets … a contract, or … by incurring expenditure for the benefit of the person assisted”.
Proposed new subsection (3) says that the assistance may be considered “without interest”—it goes on and on. I will not go through the whole lot, but basically this allows the Secretary of State the open slather to do whatever they like to fund nuclear—and one thing we know about nuclear energy generation is that it costs, and the cost just keeps going up.
I am afraid there is currently a great deal of speculation. Many people accept that, essentially, Hinkley Point C and Sizewell C are ongoing disasters. We have this wonderful new idea of small-scale nuclear plants scattered all over the countryside, as a noble Lord suggested in last Thursday’s debate. Really, my Lords, how realistic is this? We are talking about something that simply does not scale down.
I am aware of the desire of your Lordships’ House to move on to votes, but I want to quote one person who perhaps has a different perspective from mine. Markus Krebber, the chief executive of RWE, suggests that investors should not and will not back nuclear plants. This comes back to the issue of finance. If there will not be private money coming in, we are talking about massive sums of government money. He told the Australian Financial Review:
“I would have a big question mark whether building new ones is really a good strategy, because if you look at the cost overruns and the delays, I think purely a renewables-based energy system including the necessary storage is probably in most of the regions already today cheaper than new nuclear”.
I think that is unarguable.
I will briefly address the issue of Sizewell C. We are talking as Japanese fishermen around the Fukushima nuclear plant suffer massive economic loss as a result of the dumping of wastewater into the sea there. In Suffolk we will see the local economy facing massive loss if Sizewell C goes ahead. Studies by the Suffolk Coast destination management organisation show that visitors would stay away, losing the tourism industry up to £40 million a year and an estimated 400 jobs.
If we look at the environmental impacts of the proposed Sizewell C, we can see that it is opposed by both the RSPB and the Suffolk Wildlife Trust. The site is surrounded by protected wildlife habitats. When it comes to water, the Planning Inspectorate was unable to recommend that Sizewell C be granted planning consent due to the lack of an identified long-term supply of potable water. There is a huge problem with access to the site. It will require a 60-metre cut-off wall so that it can be dewatered and existing soil can be swapped out for more suitable material and huge, as yet undesigned, sea defences. Looking at the state of our climate now, we are seeing significant runaway with very serious potential risks in the impact on our sea levels. I note that Cefas said that
“it is generally only possible to predict detailed changes to the coastline over the next 10 years”.
I have focused a little on Sizewell C and the deep uncertainties and concern because of the point about money. Under the government amendment, we are letting a Government go ahead and do whatever they like and spend whatever they like on a project that is so deeply problematic.
Lord Lennie (Lab)
All I would like to say is that, in response to the comments by the noble Baroness, Lady Bennett, we are interested in keeping the lights on and we are interested in nuclear being part of the mix of fuels that will keep the electricity going, particularly now that coal will no longer be part of the electricity production in this country.
Lord Callanan (Con)
I thank all noble Lords for their contributions. I will first deal directly with the points by the noble Lord, Lord Kerr. What should I say about this? He is, of course, prescient in his observations, but this has been a long-standing policy—effectively of the Treasury, which is unwilling to fund many of these policies from general taxation. Therefore, a lot of previous subsidies, such as the warm home discount, are levied on energy bills. That has been a long-standing policy through a number of Governments and different Treasuries. I wish the noble Lord luck in his campaign to change the mind of His Majesty’s Treasury on these matters.
Moving on to the other issues, let me deal first with the points made by the noble Baroness, Lady Bennett. The problem for the Greens on this is that any sensible energy system in the UK—this is recognised also by the Opposition and we are grateful for their support—needs nuclear power, because it is a source of carbon-free electricity. Of course, many Greens, the more progressive Greens who have looked at our energy system properly, also support the use of nuclear power. I would point the noble Baroness to a very interesting website that I was looking at, called Greens for Nuclear Energy. This is a statement from a series of members of the Green Party who take a sensible and progressive view about this. Looking at the needs of the energy supply system and the need for decarbonisation, they have come to the same conclusion as many other sensible experts: that there is a need for nuclear power in this country.
The website says:
“Greens For Nuclear Energy seek to influence the Green movement’s key organisations and institutions”
in favour of nuclear energy because
“We need every available low carbon power source to combat catastrophic climate change”.
They therefore believe that
“the increasingly urgent need to deal decisively with our emerging climate crisis makes continued opposition to nuclear energy irrational for environmentalists and reduces our chances of averting a climate catastrophe.”
Perhaps the noble Baroness would want to go away and look at some of the more sensible members of her own party.
The invasion of Ukraine and the subsequent rise in global energy prices have demonstrated the paramount importance of accelerating our homegrown power and strengthening our national energy security. This is in addition to the significant contribution, as I have just said, that nuclear would make to achieving our net-zero objectives because it is very low carbon. Nuclear technology generates zero direct carbon or other greenhouse gas emissions and has one of the lowest life cycle emission rates among generating technologies. The Committee on Climate Change, the International Energy Agency and the UN Economic Commission for Europe—alongside some sensible Green members—have all highlighted the role that new nuclear electricity generating capacity, in partnership with renewables, can play as part of our diverse energy mix while helping us to achieve net zero.
Great British Nuclear will de-risk new nuclear developments by, among other things, co-funding selected technologies through their development. This will provide greater certainty for investors to develop projects over the long term required to deliver new nuclear generation capacity on to the electricity grid. We intend to fund Great British Nuclear’s initial operating costs via grant in aid. It will be subject to standard NDPB reporting and accountability requirements, which will be set out in Great British Nuclear’s framework document.
The terms of investment in development projects will be bespoke and negotiated on an individual basis. The key goal will be to deliver on the Government’s commitment to increase nuclear energy capacity in Britain, while of course ensuring, as always, value for money for the taxpayer and the bill payer. We are legislating to ensure that Great British Nuclear has the long-term operational mandate needed to carry out the role that government intend for it. The amendments set out the framework within which Great British Nuclear shall operate in facilitating the deployment of nuclear reactors in Britain.
I spoke earlier about the comments of the noble Lord, Lord Kerr. The EII support levy, like the other measures in the British Industry Supercharger, would simply constitute a rebalancing of existing electricity costs away from EIIs and on to other energy users, who have traditionally received more protection from higher energy prices than some in industry.
At the end of these debates, I am grateful to all noble Lords who have contributed. In particular, I thank my colleague in the other place, Andrew Bowie, for guiding the Bill through the House of Commons. I also thank the department’s Bill team and all the other policy and legal officials across various government departments who have been involved in this huge and landmark piece of legislation. They who have worked tirelessly to deliver it. I particularly thank the House authorities, parliamentary staff, clerks and doorkeepers, and all noble Lords who have contributed to the evolution of this landmark Bill.
Lord Callanan
That the House do agree with the Commons in their Amendments 188 to 258.
“Great British Nuclear
(1) The Secretary of State may by notice designate a company as Great British Nuclear.
(2) A company may be designated under this section only if—
(a) it is limited by shares, and
(b) it is wholly-owned by the Crown.
(3) A notice under subsection (1)—
(a) must specify the time from which the designation has effect, and
(b) must be published by the Secretary of State as soon as reasonably practicable after the notice is given.
(4) The designation of a company terminates—
(a) if it ceases to be wholly-owned by the Crown, or
(b) if the Secretary of State revokes its designation by notice.
(5) A notice under subsection (4)(b)—
(a) must specify the time from which the revocation has effect, and
(b) must be published by the Secretary of State as soon as reasonably practicable after the notice is given.
(6) For the purposes of this section a company is wholly-owned by the Crown if each share in the company is held by—
(a) a Minister of the Crown,
(b) the Nuclear Decommissioning Authority established by section 1 of the Energy Act 2004,
(c) the United Kingdom Atomic Energy Authority established by section 1 of the Atomic Energy Authority Act 1954,
(d) a company which is wholly-owned by the Crown, or
(e) a nominee of a person falling within any of paragraphs (a) to (d).
(7) A company designated as Great British Nuclear under this section is exempt from the requirement in section 59 of the Companies Act 2006 (requirement as to use of “limited” in company name).
(8) In this section—
“company” means a company registered under the Companies Act 2006;
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act).”
“Crown status
(1) Great British Nuclear is not to be regarded as a servant or agent of the Crown or as enjoying any status, immunity or privilege of the Crown.
(2) Great British Nuclear’s property is not to be regarded as property of, or property held on behalf of, the Crown.”
“Great British Nuclear’s objects
Great British Nuclear’s objects are to facilitate the design, construction, commissioning and operation of nuclear energy generation projects for the purpose of furthering any policies published by His Majesty's government.”
“Financial assistance
(1) The Secretary of State may provide financial assistance—
(a) to Great British Nuclear, or
(b) to any other person to facilitate the design, construction, commissioning and operation of nuclear energy generation projects.
(2) Financial assistance under this section may be provided in any form and in particular may be provided—
(a) by way of grant, loan, guarantee or indemnity,
(b) by the acquisition of shares or any other interest in, or securities of, a body corporate,
(c) by the acquisition of any undertaking or of any assets,
(d) pursuant to a contract, or
(e) by incurring expenditure for the benefit of the person assisted.
(3) Financial assistance under this section may be provided subject to such conditions as the Secretary of State considers appropriate, which may include—
(a) conditions about repayment with or without interest or other return, or
(b) conditions with which Great British Nuclear or any recipient of financial assistance under subsection (1)(b) must comply if the financial assistance is used for—
(i) acquiring shares or any other interest in, or securities of, a body corporate, or
(ii) participating in a partnership or joint venture.
(4) The power to provide financial assistance under this section is in addition to (and does not limit or replace) any other power of a Minister of the Crown to provide financial assistance.
(5) In this section—
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act);
“partnership” means—
(a) a partnership within the meaning of the Partnership Act 1890, or
(b) a limited partnership within the meaning of the Limited Partnerships Act 1907.”
“Secretary of State directions and guidance
(1) The Secretary of State may from time to time give Great British Nuclear directions or guidance.
(2) Before giving a direction or issuing guidance the Secretary of State must consult Great British Nuclear and such other persons as the Secretary of State considers appropriate.
(3) Directions may be general or particular in character.
(4) Great British Nuclear must—
(a) comply with any directions given to it under this section, and
(b) have regard to any guidance given to it under this section.
(5) The Secretary of State must—
(a) publish and lay before Parliament any directions given to Great British Nuclear under this section, and
(b) publish any guidance given to Great British Nuclear under this section.”
“Annual report
(1) Great British Nuclear must, after the end of each reporting year, send a report to the Secretary of State about the activities it has undertaken during that year.
(2) The Secretary of State must lay a copy of the report before Parliament together with any comments that the Secretary of State considers appropriate.
(3) In this section “reporting year”, in relation to Great British Nuclear, means a period of 12 months ending with 31 March (but does not include any period before its designation as Great British Nuclear).”
“Annual accounts
(1) Great British Nuclear must send a copy of its accounts and reports for each financial year to the Secretary of State before the end of the period for filing those accounts and reports.
(2) The Secretary of State must lay a copy of any accounts and reports received under subsection (1) before Parliament.
(3) In this section—
“accounts and reports” means, in relation to Great British Nuclear, the annual accounts and reports that Great British Nuclear’s directors must deliver to the registrar under section 441 of the Companies Act 2006;
“financial year”, in relation to Great British Nuclear, means Great British Nuclear’s financial year determined in accordance with section 390 of the Companies Act 2006;
“period for filing”, in relation to accounts and reports for a financial year, has the same meaning as in the Companies Acts (see section 442 of the Companies Act 2006);
“the registrar” has the meaning given by section 1060(3) of the Companies Act 2006.”
“Transfer schemes
(1) The Secretary of State may make one or more schemes for the transfer of property, rights and liabilities—
(a) to a GBN body or a proposed GBN body from—
(i) a former GBN body;
(ii) a GBN body;
(iii) a proposed GBN body;
(iv) a Minister of the Crown or Crown body;
(v) a designated BNFL body;
(vi) an NDA body;
(vii) a UKAEA body;
(viii) a nominee of a person falling within any of sub- paragraphs (i) to (vii);
(b) to a former GBN body, a Minister of the Crown or Crown body, a designated BNFL body or a public body from—
(i) a former GBN body;
(ii) a GBN body.
(2) The things that may be transferred under a transfer scheme include—
(a) rights and liabilities relating to a contract of employment;
(b) property, rights and liabilities that could not otherwise be transferred;
(c) property acquired, and rights and liabilities arising, after the making of the scheme;
(d) criminal liabilities.
(3) A transfer scheme may—
(a) create rights, or impose liabilities, in relation to property, rights or liabilities transferred;
(b) make provision about the continuing effect of things done by a transferor in respect of anything transferred;
(c) make provision about the continuation of things (including legal proceedings) in the process of being done by, on behalf of or in relation to a transferor in respect of anything transferred;
(d) make provision for references to a transferor in an instrument or other document in respect of anything transferred to be treated as references to the transferee;
(e) make provision for shared ownership or use of the property;
(f) make provision for apportioning property, rights or liabilities;
(g) require a transferor, an associate of a transferor, or a transferee, to enter into any agreement of any kind, or for a purpose, specified in or determined in accordance with the scheme;
(h) make provision for transferring property, rights and liabilities irrespective of any requirement for consent that would otherwise apply;
(i) make provision for preventing a right of pre-emption, right of reverter, right of forfeiture, right to compensation or other similar right from arising or becoming exercisable as a result of the transfer of property, rights or liabilities;
(j) make provision for dispensing with any formality in relation to the transfer of property, rights or liabilities by the scheme;
(k) make provision for reimbursing any person in respect of expenditure reasonably incurred by the person in connection with the making of a transfer scheme;
(l) make provision that has the same or similar effect to the TUPE regulations;
(m) make other consequential, supplementary, incidental or transitional provision.
(4) A transfer scheme may provide—
(a) for modifications by agreement;
(b) for modifications to have effect from the date when the original scheme came into effect.
(5) A transfer scheme may make provision requiring a transferor to provide such co-operation to a transferee as the transferee may reasonably require in connection with the implementation of the scheme.
(6) The co-operation that may be required by virtue of subsection (5) includes, in particular, co-operation in relation to—
(a) the provision of information;
(b) consultation with representatives of employees transferred by the scheme.
(7) Any requirement imposed on a person by a transfer scheme is enforceable by the Secretary of State in civil proceedings—
(a) for an injunction,
(b) for specific performance of a statutory duty under section 45 of the Court of Session Act 1988, or
(c) for any other appropriate remedy or relief.
(8) Before making a transfer scheme, the Secretary of State must consult—
(a) the transferor (or, if there is more than one transferor, the transferors), and
(b) such other persons as the Secretary of State considers appropriate.
(9) Subsection (8) may be satisfied by consultation before the passing of this Act (as well as by consultation after that time).
(10) The making of a transfer scheme is not a trigger event for the purposes of the National Security and Investment Act 2021.
(11) In this section—
“associate” has the meaning given by section 1152 of the Companies Act 2006; “company” means a company registered under the Companies Act 2006; “Crown body” means any body corporate in which a Minister of the Crown holds, directly or indirectly, any shares or other interest;
“designated BNFL body” means a company designated for the purposes of Schedule 7 to the Energy Act 2004 or any body corporate in which a company designated for those purposes holds, directly or indirectly, any shares or other interest;
“former GBN body” means—
(a) a company formerly designated as Great British Nuclear, or
(b) any body corporate in which a company formerly designated as Great British Nuclear—
(i) holds, directly or indirectly, any shares or other interest, and
(ii) held, directly or indirectly, any shares or other interest, at a time at which it was designated as Great British Nuclear;
“GBN body” means Great British Nuclear or any body corporate in which Great British Nuclear holds, directly or indirectly, any shares or other interest;
“information” includes documents;
“Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975 (see section 8(1) of that Act);
“NDA company” means the Nuclear Decommissioning Authority (established by section 1 of the Energy Act 2004) or any body corporate in which the Nuclear Decommissioning Authority holds, directly or indirectly, any shares or other interest;
“proposed GBN body” means a company that the Secretary of State proposes to designate as Great British Nuclear or any body corporate in which a company proposed to be designated for those purposes holds, directly or indirectly, any shares or other interest;
“public body” means a body established by an enactment (within the meaning of Part 1 of this Act) or any body corporate in which a body established by an enactment holds, directly or indirectly, any shares or other interest;
“the TUPE regulations” means the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246);
“UKAEA body” means the United Kingdom Atomic Energy Authority (established by section 1 of the Atomic Energy Authority Act 1954) or any body corporate in which the United Kingdom Atomic Energy Authority holds, directly or indirectly, any shares or other interest.”
“Transfer schemes: compensation
(1) A scheme under section (Transfer schemes) may provide for a transferor or any person who has suffered loss or damage in consequence of the scheme to be entitled to compensation from the Secretary of State or a transferee under the scheme, in accordance with provision made by or under the scheme.
(2) Where a person is entitled to compensation, the amount of compensation is to be the amount—
(a) agreed by the Secretary of State and the person, or
(b) in the absence of such agreement, determined by an independent valuer.
(3) An independent valuer appointed for the purposes of subsection (2) must be appointed—
(a) by the Secretary of State and the person, or
(b) in the absence of such agreement, by the Secretary of State on behalf of both the Secretary of State and the person.
(4) The Secretary of State may by regulations make provision about compensation under this section that corresponds or is similar to any provision about compensation that may be made by the Secretary of State by regulations under paragraph 8(5) of Schedule 7.
(5) Regulations under this section are subject to the negative procedure.”
“Transfer schemes: taxation
(1) The Treasury may by regulations make provision varying the way in which a relevant tax has effect in relation to—
(a) anything transferred under a scheme under section (Transfer schemes), or
(b) anything done for the purposes of, or in relation to, a transfer under such a scheme.
(2) The provision that may be made under subsection (1)(a) includes, in particular, provision for—
(a) a tax provision not to apply, or to apply with modifications, in relation to anything transferred;
(b) anything transferred to be treated in a specified way for the purposes of a tax provision;
(c) the Secretary of State to be required or permitted to determine, or to specify the method for determining, anything that needs to be determined for the purposes of any tax provision so far as relating to anything transferred.
(3) The provision that may be made under subsection (1)(b) includes, in particular, provision for—
(a) a tax provision not to apply, or to apply with modifications, in relation to anything done for the purposes of, or in relation to, the transfer;
(b) anything done for the purposes of, or in relation to, the transfer to have or not have a specified consequence or be treated in a specified way;
(c) the Secretary of State to be required or permitted to determine, or to specify the method for determining, anything that needs to be determined for the purposes of any tax provision so far as relating to anything done for the purposes of, or in relation to, the transfer.
(4) In this section—
(a) “relevant tax” means income tax, corporation tax, capital gains tax, stamp duty, stamp duty reserve tax, stamp duty land tax or value added tax;
(b) “tax provision” means any provision—
(i) about a relevant tax, and
(ii) made by an enactment (within the meaning of Part 1 of this Act);
(c) references to the transfer of a property include the grant of the lease.
(5) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.”
“Transfer schemes: provision of information or assistance
(1) The Secretary of State may direct a person within subsection (2) to provide the Secretary of State with such specified information or assistance as the Secretary of State may reasonably require in connection with the making of a scheme under section (Transfer schemes).
(2) A person is within this subsection if—
(a) property, rights or liabilities are likely to be transferred from or to the person by such a scheme, or
(b) the person is a body corporate that is likely to be transferred under such a scheme.
(3) Paragraph 12(4), (6), (7) and (8) of Schedule 7 apply to a direction under this section as they apply to a direction under sub-paragraph (1) of that paragraph.
(4) In this section—
“assistance” includes assistance provided in a country or territory other than the United Kingdom;
“information” includes documents;
“specified” means specified in the direction.”
“Reimbursement and compensation in connection with designation
The Secretary of State may reimburse a person in respect of expenditure reasonably incurred by the person in preparation for or in connection with the designation of a company under section (Great British Nuclear) (other than any expenditure incurred in connection with the making of a scheme under section (Transfer schemes)).”
“Pension arrangements in connection with Great British Nuclear
(1) The Secretary of State may by regulations make provision about pension arrangements in relation to Great British Nuclear that corresponds or is similar to any provision about pension arrangements in relation to the ISOP that may be made by the Secretary of State by regulations under paragraph 2 or 3 of Schedule 8 (see paragraph 4 of that Schedule for restrictions on how the power to make regulations under paragraph 2 or 3 of that Schedule may be exercised).
(2) Before making regulations under subsection (1) that make provision corresponding or similar to the provision that may be made by regulations under paragraph 2(1) of Schedule 8, the Secretary of State must carry out a consultation corresponding to the consultation required by paragraph 2(5) of that Schedule.
(3) Before making regulations under subsection (1) that make provision corresponding or similar to the provision that may be made by regulations under paragraph 3(1) of Schedule 8, the Secretary of State must carry out a consultation corresponding to the consultation required by paragraph 3(4) of that Schedule.
(4) Subsections (2) and (3) may be satisfied by consultation before the passing of this Act (as well as by consultation after that time).
(5) The Secretary of State may direct a person within subsection (6) to provide the Secretary of State with specified pensions information or such specified assistance as the Secretary of State may reasonably require in preparation for or in connection with the exercise of the power conferred on the Secretary of State by subsection (1).
(6) The following persons are within this subsection—
(a) the trustee of a qualifying pension scheme;
(b) any person who exercises functions on behalf of a person within paragraph (a);
(c) any person who is or has been an employer of a qualifying member of a qualifying pension scheme.
(7) Sub-paragraphs (5) to (7) of paragraph 5 of Schedule 8 apply to a direction given under subsection (5) as they apply to a direction given under sub-paragraph (1) of that paragraph.
(8) The exercise of the power conferred on the Secretary of State by subsection (1) is not a trigger event for the purposes of the National Security and Investment Act 2021.
(9) In this section—
“pensions information” means information that—
(a) relates to pensions or other benefits under a qualifying pension scheme, or
(b) relates to the administration of a qualifying pension scheme in respect of pensions or other benefits under the scheme;
“qualifying member”, in relation to a qualifying pension scheme, means a person who is or has been a member (as defined by section 124(1) of the Pensions Act 1995) of the scheme;
“qualifying pension scheme” means a pension scheme that provides for the payment of pensions or other benefits to or in respect of employees or former employees of—
(a) a transferor in relation to a transfer scheme under section (Transfer schemes), or
(b) an associate (as defined by section 1152 of the Companies Act 2006) of such a transferor;
“specified” means specified in the direction.
(10) Regulations under this section are subject to the negative procedure.”
Lord Callanan
That the House do agree with the Commons in their Amendments 275 to 338.
Offshore Wind
Lord Callanan Excerpts(1 year, 2 months ago)
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Baroness Bennett of Manor Castle
To ask His Majesty’s Government what steps they plan to take to ensure the continued development of the offshore wind industry following the failure to attract bids in the latest Contracts for Difference round.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, the Government are disappointed that no offshore or floating offshore wind projects secured contracts for difference in the most recent allocation round. The results provide valuable learning for subsequent auctions. Work has already started on allocation round 6, incorporating the results of the recent round, and we look forward to a strong pipeline of technologies participating. The Government remain fully committed to our target of decarbonising the power system by 2035 and to our ambitions for 50 gigawatts of offshore wind, including up to 5 gigawatts of floating wind.
Baroness Bennett of Manor Castle (GP)
I thank the Minister for his Answer, but can we really wait? Look at what has happened in other countries: for example, Germany had a similar experience in December then, in the subsequent two quarters, lifted its price cap and increased its number of bids by several times. In the US, Massachusetts had a failure and New York is now considering petitions to offer a higher price. This is the low-cost, low-carbon alternative: the industry is now suggesting that there is a 24-gigawatt gap for the 2030 target. Surely the Government should be taking immediate action in the shorter term to fix this problem of their own creation, given that this was widely predicted to happen before the contracts closed.
Lord Callanan (Con)
I am happy to hear the noble Baroness be so cavalier with bill payers’ funds; she is, in effect, talking about increasing the strike price. It is always difficult for the Government to strike the right balance: we want to get the best value possible for bill payers, as opposed to providing sufficient revenue for the companies to build. I obviously know which side the noble Baroness is on but I want to be on the side of the bill payer. We have already secured the largest offshore wind sector in Europe by far; she quotes the example of Germany, which should be very jealous of the amount of offshore wind capacity that we have. We secured almost 7 gigawatts in the last allocation round and, in this round, secured 91 projects with other technologies. There is a viable long-term pipeline of about 77 gigawatts of wind available to this Government and we will take advantage of it, but we will make sure that we do it at the right price for consumers.
Lord Deben (Con)
My Lords, I am on the side of bill payers. The problem is that they will have to pay more, because we will not have the renewable energy that we would have had and will have to use more expensive gas instead. This was the Government’s fault; everybody warned that the reserve price was too low. But let us forget the past. Why can emergency legislation not pass through the House, which I am sure would be supported by all sides, so that we can replay this very quickly for the bill payer?
Lord Callanan (Con)
The bill payer will be very grateful that 7.5 gigawatts of construction is already under way, as we speak. We all want to see more, but at the right price. I understand why industry is urging us to pay more for this. That is understandable and in its commercial interests, but I would have expected most Members of this House to be on the side of bill payers as well. We can do both: we can get a good deal for the bill payer and take advantage of the many gigawatts of potential construction in there, which has either been consented or is under consent. Following a contract being let, it takes three to four years, on average, for the capacity to come on stream. Obviously, the capacity let in previous rounds is coming on stream gradually, as we speak. As I said, we consented to about 7.5 gigawatts in the last round. There will be another auction in about six months and it would take almost that long to pass new legislation.
Baroness Walmsley (LD)
My Lords, what assessment have the Government made of the increase in potential of both productivity and profitability for wind power companies to fit turbines to the base of their installations, where conditions allow, to take advantage of tidal energy, which provides a baseload. What support are the Government giving companies prepared to do that?
Lord Callanan (Con)
The noble Baroness asks a very good question. Eleven tidal stream projects were consented in this allocation round, totalling about 41 megawatts. The price for that is currently higher but we need to develop this technology. I hope, as has been the case with offshore wind, that if we continue to let more CfDs the price will continue to come down over time. That was one area of the round that was successful.
Lord Lennie (Lab)
My Lords, given the Government’s monumental failure—and they were warned about it, as has been said around this House—to attract any interest whatever from the energy sector in their recent CfD bidding process for offshore wind projects, can we assume there will not be any similar complacency when it comes to developing onshore wind projects, which, in light of the current failure, must now be the Government’s priority towards achieving net zero?
Lord Callanan (Con)
Again, there is no complacency. I understand that there are many projects wanting the go-ahead, but we must be careful in making sure that the consumer gets a fair deal. Lots were consented to last year; I am sure that lots will be consented to in the future. The noble Lord talks about onshore wind. I am pleased to tell him that 24 onshore wind projects were consented to and were successful in this round, totalling 888 megawatts.
Lord Naseby (Con)
Is my noble friend aware that a number of us have taken an interest in this market, recognising the enormous steps that His Majesty’s Government have taken on the development of offshore wind? At a time when it is stated that we are facing a possible bill of £65 billion to replace the internal grid to all our homes in the United Kingdom, is it not more appropriate that the resources we do have should be used for research such as that into the mix of hydrogen with LPG to see whether it can be used in the existing pipelines available to every house in the country?
Lord Callanan (Con)
The noble Lord asks a lot of different questions within what he said. I think his figure of £65 billion refers to the cost of upgrading property to EPC level C, which is a long-term aim. His separate question on hydrogen for heating is indeed a controversial subject. We will make a decision on whether to go ahead with a hydrogen village trial by the end of the year. Similarly, another issue facing us is whether to allow blending of hydrogen into the gas network; you can blend up to about 25% with the current network. Again, that is an issue where, frankly, there are a lot of pros and cons on both sides of the argument. We will make a decision on that by the end of the year as well.
Lord Harries of Pentregarth (CB)
The next round comes in six months’ time. Are the Government confident that the price will be set at the right level to attract a good number of significant bids?
Lord Callanan (Con)
Of course, that will be our aim. As I said, we want to see more projects consented to and we will try to get the balance right. We will certainly learn the lessons from this round. It is obviously disappointing that we did not attract bids this time, but the offshore wind industry has been a tremendous success for the UK. We have by far the largest capacity in Europe. We have the largest offshore wind farm in the world, the second largest, the third largest and the fourth largest. One reason that developers were unable to proceed this time was pressure in the supply chain. There is pressure in the supply chain because every other country in Europe wants to copy our example, because they can see the success we have made of the offshore wind allocation rounds through the contracts for difference price system. Most other European countries are trying to adopt the same model; they are a long way behind us but trying to adopt the same model now. Of course, that brings pressure in the supply chain, which, adding in the Covid pressures as well, contributes to the increase in costs that industry is experiencing.
Lord Trefgarne (Con)
My Lords, is it not the case that wind-generating facilities in the North Sea tend to cause mayhem with the wild bird population? Can anything be done about that?
Lord Callanan (Con)
My noble friend certainly highlights a concern, but lots of protections are built in and lots of environmental regulations need to be adhered to when these projects are consented to and all the matters are gone into fully, in both environmental and regulatory permitting. Every energy source has its drawbacks. Those who are against nuclear would point to its drawbacks; with coal-fired power stations, there are obviously drawbacks; gas-fired power stations have their drawbacks. There has been an increase in new solar farms being developed in the UK. I can assure noble Lords that, from my postbag, lots of people write in to complain about those as well. We have to get generation capacity and electricity supplies from somewhere. No system is absolutely perfect but offshore wind is certainly one of the best.
Baroness Sheehan (LD)
My Lords, it is unacceptable that last week’s offshore wind auction was a failure because of the Government’s insistence on an unrealistic strike price, yet we remain none the wiser about the cost of another source of electricity—nuclear energy. The cost of Sizewell C’s electricity remains shrouded in secrecy. The only thing we can be sure of is that it will be exceedingly expensive. The Commons Science, Innovation and Technology Committee has called for greater transparency on Sizewell’s cost. Will the Minister take this opportunity to give an updated cost estimate for Sizewell C? We need to be sure that we are on a level playing field.
Lord Callanan (Con)
I will be happy to supply those figures to the noble Baroness in writing if I can. Again, it is worth saying that, in a diversified energy system, it is important to have different sources of supply. I am very enthusiastic about solar and offshore wind; they are intermittent but they are cheap when they are generating. We also need baseload supply, so there will a role for nuclear and for gas-fired power stations, ideally with CCUS fitted as well. It is important that we have diversity of supply, including such things as tidal on a relatively small scale. Geothermal is another technology that was successful in getting contracts under this allocation round. Again, these are nascent technologies that are starting to build up. We need diversity of supply for our future generating mix.
Lord Cormack (Con)
My Lords, I agree with my noble friend that Britain is a world leader in offshore wind; he is right to boast gently about that. But he also said that lessons would be learned from what has just happened. Is my noble friend Lord Deben not right that we got it wrong—and that we must make absolutely sure that in six months’ time we get it right?
Lord Callanan (Con)
I have said that lessons will be learned. As I said, there is a healthy stream of projects wanting to come forward. Understandably, the developers want to be paid as much as possible. The unique thing about offshore wind is that it involves very high initial capital investment costs. Once the things are built, they are relatively cheap to operate, unlike some other sources of generation. It is all about providing long-term guarantees of revenue for those developers. There is always a process of negotiation; the CfD auction rounds have been successful in the past and I am sure that they will be in the future.
Baroness Hayman (CB)
My Lords, I declare my interest as chair of Peers for the Planet. The Minister recognises that the offshore wind industry raised these issues some time before this round of contracts for difference. The Government did not listen and we have the results with offshore wind, as we have seen. At this time, the onshore wind industry is saying to the Government that the, frankly, puny changes in the planning regime that they announced will not bring forward the large-scale increase in onshore wind production in this country. Will the Government listen in time this time and put the planning regime for onshore wind on a level playing field with other renewable infrastructure?
Lord Callanan (Con)
I know that the noble Baroness is passionate about onshore wind. I hope the changes that we announced will produce more capacity. As I said, we have just let 24 projects under the latest CfD round. She is right that the industry said in advance of this round that it wanted to be paid more. Across all the different areas of government for which I have been responsible, I have never met a private developer who want to be paid less for what they do. Let us be realistic: this is a negotiation process. Of course, industry will say, “We need to be paid more; we need to be given larger contracts”. That is entirely understandable. We have to bear in mind our responsibility to the bill payer who ends up paying these costs. We of course want to see more renewable capacity laid out—it is intermittent but it is cheap. We need to produce a strike price that is fair to the developers, so that they get a return, but also to the bill payers.
Lord West of Spithead (Lab)
My Lords, the Minister is right that we should praise ourselves for the offshore wind farms, which I must say are most impressive. However, the interconnectors and so on lie along the seabed. Like so many other aspects of our energy supply and other things, the seabed has certain vulnerabilities. We have seen Russian ships from the main directorate of undersea research regularly in the North Sea, going along areas where these lie. Is the Minister happy that we have put enough effort into monitoring and tracking where they are all the time and then using ships, aircraft and whatever else to go and make sure that those lines are still safe?
Lord Callanan (Con)
The noble Lord makes a good point. There are a number of such areas of critical national infrastructure, including gas-interlinking pipelines and electricity interconnector cables with other countries, as well as our interconnector cables with the offshore wind farms. These are all critical vulnerabilities and the noble Lord can be assured that we monitor these things closely. We are well aware of the possible threat presented to them.
2030 Emissions Reduction Target: Heating
Lord Callanan Excerpts(1 year, 2 months ago)
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Lord Teverson
To ask His Majesty’s Government how they intend to decarbonise heating in order to meet the 2030 target of a 68 per cent reduction in emissions.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, the Government are investing £6.6 billion over this Parliament in improving energy efficiency and installing low-carbon heating. A further £6 billion has already been committed for 2025 to 2028. Heat pumps are the key technology for decarbonising heating in the near term and are essential in all 2050 scenarios. Therefore, the Government’s aim is for 600,000 heat pump installations annually by 2028. However, a range of technologies will be needed to decarbonise heating, including expanding heat networks in the longer term.
Lord Teverson (LD)
My Lords, the Government’s emission targets are both ambitious and critical, so why are we still allowing gas boilers to be installed in new housing developments right now?
Lord Callanan (Con)
As the noble Lord knows, that is a matter for building regulations. The future homes standard will come in from 2025; it will not specify the type of heating but it will put in place standards that will, in effect, end gas boiler installations in new homes.
Lord Birt (CB)
My Lords, the Minister will know that heat pumps are a very efficient means of turning electricity into heat, but does he think that, while electricity costs roughly three times as much as gas, there is any prospect whatever of them taking off in the UK?
Lord Callanan (Con)
The noble Lord is right about the efficiency of heat pumps and about the cost of electricity. Later this year we will issue a consultation on so-called price rebalancing, which will attempt to bring the electricity price down relative to gas.
Baroness Whitaker (Lab)
My Lords, will the Government turn their mind to trying to encourage heat pump installers to install them in flats, where a large proportion of UK residents live? In other countries, they can do this; obviously, it is not feasible in all cases, but in many cases it is.
Lord Callanan (Con)
The noble Baroness makes a valid point. Heat networks are probably more appropriate for most flats—for instance, you could have one heat pump in the basement that would heat all the flats—but for some cases she is right.
Lord Forsyth of Drumlean (Con)
My Lords, what is the Government’s estimate of the cost of meeting this target and who will pay for it?
Lord Callanan (Con)
That depends on what target the noble Lord is referring to. There are a number of different targets but a substantial amount of government funding is going into this—some £450 million for the boiler upgrade scheme and £6.6 billion to decarbonise heating generally.
Baroness Sheehan (LD)
My Lords, this July, residents of Whitby in Ellesmere Port vetoed plans to be one of two proposed sites for hydrogen village trials out of safety concerns—concerns which were extremely well-founded, I might add, given that hydrogen is the lightest element in the periodic table and notoriously difficult to control. I have two questions. Can the Minister confirm that the residents of Redcar in Teesside will have a similar right of veto? Which other locations are now being considered for these ill-advised hydrogen boiler trials?
Lord Callanan (Con)
Public acceptability is a key component; that is why we ruled out Whitby for the trial. Redcar is the only other location being considered.
Baroness McIntosh of Pickering (Con)
My Lords, does my noble friend agree that decarbonisation would be faster if we had better insulated rental properties, rather than seeing most of the heat go through single-glazed windows, particularly in the north of England?
Lord Callanan (Con)
I would not characterise just rental properties in that way; whatever form of heating is used, better insulation and better performance of buildings is a good thing.
Baroness Hayman (CB)
My Lords, I declare my interest as chair of Peers for the Planet. As the noble Lord, Lord Birt, made clear, the decarbonisation of home heating will require an even greater supply of clean electricity. I therefore welcome the Government’s announcement today that they will finally end the destructive and irrational effective ban on onshore wind development that we have lived with since 2015 by updating the National Planning Policy Framework. What scale of difference does the Minister think this will make to the amount of electricity generated by onshore wind? I am sure he will be aware that, last year, we managed two new onshore wind developments while Ukraine managed 19.
Lord Callanan (Con)
The noble Baroness has been dogged in her pursuit of this. It is very difficult to give an estimate, as she asks me to do. It would depend on the number of applications and its acceptability for local communities.
Baroness Blake of Leeds (Lab)
My Lords, including industrial processes, heating accounts for about 37% of total UK carbon emissions. Of the 17% of carbon emissions from heating and cooling in buildings, the vast majority can be attributed to domestic homes. Analysis shows that a third of the money pledged for retrofitting and alternative systems has not yet been allocated. That is approximately £2.1 billion unspent. When and how will this be resolved, or do the Government believe that they are on track to reduce emissions as planned without it?
Lord Callanan (Con)
I will have to look very closely at the noble Baroness’s figures. I do not recognise £2.1 billion as being unspent; in many of the schemes we are oversubscribed in applications, but we will press on with the progress in many of these schemes. In fact, I went to visit a number of them in the noble Baroness’s home area of Leeds only a few weeks ago, and they are proving extremely successful.
Lord Hope of Craighead (CB)
My Lords, what are the Government’s proposals for increasing the number of transmission lines? Electricity once generated must reach the people who are going to use it and at the moment we do not have enough transmission lines.
Lord Callanan (Con)
The noble and learned Lord is right. His home area of Scotland will see the installation of a number of transmission lines to help to get power to other parts of the country. This is very important. Ofgem has allowed billions of pounds in the settlement to the DNOs, which will help electricity upgrades, but as he will be aware it is not without its controversial elements.
Baroness Walmsley (LD)
My Lords, is the Minister aware that, last year, France installed nearly six times as many heat pumps as the UK? Does he think that a coherent government decarbonisation heat policy, a more effective new-build efficiency regulation, support for a professionalised end-to-end supply chain and independent advice for consumers have anything to do with France’s success? Are the Government planning to adopt any of those strategies?
Lord Callanan (Con)
Indeed we are. The situation in France and for ourselves is very different, because France has not had the availability of domestic gas that we have had over the years. Nevertheless, I agree with the noble Baroness’s point: we need to expand the number of heat pumps being installed. In fact, we are already doing many of the measures that she outlined.
Lord Geddes (Con)
My Lords, would my noble friend please put greater emphasis on the development of tidal energy, which would greatly reduce carbon emissions? I think he will tell us that the infrastructure is extremely expensive; that is true, but thereafter it is utterly free and totally predictable.
Lord Callanan (Con)
That is the case for many renewables. Tidal power is an emerging technology and it is eligible for contracts for difference schemes. We made a number of allocations of tidal power support in the last round. I agree with the noble Lord, but we must look at the costs of that against the costs of other renewable technologies and get the best value for the bill payer and the taxpayer.
Lord Grantchester (Lab)
My Lords, it is an unfortunate feature of Conservative Governments that they constantly churn grant schemes—
The Lord Bishop of St Edmundsbury and Ipswich
I will be very brief. A crucial component of the decarbonisation of heat in homes agenda is to have enough skilled technicians and engineers to install the various heating solutions. Can the Minister update the House on the progress of creating the necessary training opportunities?
Lord Callanan (Con)
I can indeed update the right reverend Prelate. There are a number of schemes and training competitions, and we have recently allocated tens of millions of pounds, training thousands of new installers. I am pleased to say that many of the boiler and heat pump manufacturing companies are running their own training courses, and there are now, I think, about 2,000 registered firms with the Microgeneration Certification Scheme.
Lord Grantchester (Lab)
I apologise; I had not noticed the right reverend Prelate rise to ask his question.
It is an unfortunate feature of Conservative Governments that they constantly churn grant schemes and support. The Government is way off on their targets for the boiler upgrade scheme and have now, in consequence, in their usual pattern, extended the support for heat pumps until 2028. Do the Government recognise that this constant lack of commitment undermines the confidence of businesses and householders to plan ahead?
Lord Callanan (Con)
The noble Lord is asking a self-contradictory question. He starts off by saying that the Government have no long-term schemes and then admits that we have extended the boiler upgrade scheme through until 2028—precisely to address the point that he is talking about. We need more long-term schemes and we need a greater commitment over the longer term. That is precisely what the Treasury has allowed us to do, by already announcing £6 billion of extra funding from 2025 to 2028 to provide exactly that certainty. We need to build up the skills base and the supply chains in the longer term.
Strikes (Minimum Service Levels) Bill
Lord Callanan ExcerptsThursday 20th July 2023
(1 year, 4 months ago)
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Lord Callanan
That this House do not insist on its Amendment 2D to which the Commons have disagreed for their Reason 2E.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, the House will be pleased to know that I can again be brief, as we have debated this Bill and the remaining issue at length on a number of occasions. The other place has again considered the Bill, as requested by this House. The House will be unsurprised to hear that it has come to the same conclusion as previously, again with a significant majority. This is now the third time that the other place has made its will clear, and I therefore hope that noble Lords will take that into account today.
Noble Lords last sent the Bill back to the other place with the justification that the International Labour Organization had issued new information. As my colleague, the Minister for Enterprise, Markets and Small Business, noted in the debate there earlier this week, this is ground which has already been well covered by both Houses. I therefore hope that knowing that the other place has considered the issue again, and voted with that in mind, will give noble Lords the confidence that this issue has now been extensively scrutinised.
The Minister in the other place also explained that the Government will provide clarity in respect of the reasonable steps which a union must take to be compliant with the legislation. I know that this has been a concern for the noble Lord, Lord Collins, in our previous debates. I am therefore pleased to confirm that the Government will bring forward a statutory code of practice on the reasonable steps which a union must take. We will do that using existing powers under Section 203 of the Trade Union and Labour Relations (Consolidation) Act 1992. That code will be subject to statutory consultation, including with ACAS, and will of course need to be approved by both Houses of Parliament. This consultation will provide an opportunity for trade unions, employers and any other interested parties to contribute to providing practical guidance on the steps that a union must take to make the code as practicable, durable and effective as possible.
I hope these steps go some way to reassuring the House that the Government’s plans for minimum service levels are within our international obligations and that we will provide clarity where that is required. I hope therefore that this House will now feel able to allow this legislation to pass to Royal Assent. I beg to move.
Lord Hendy (Lab)
My Lords, in form, this skeleton legislation with its Henry VIII powers defies every legislative principle, as the Delegated Powers and Regulatory Reform Committee, the Secondary Legislation Scrutiny Committee and the Select Committee on the Constitution have reported. As to content, the less said the better. Although the Government’s impact assessment was held by the Regulatory Policy Committee to be not fit for purpose, it contains the revealing analysis that, far from obviating the disruption that strikes inevitably cause, the Bill
“could mean a general increase in tension between unions and employers. This may result in more adverse impacts in the long term, such as an increased frequency of strikes for each dispute”.
No doubt that is part of the reason why employers, as well as trade unions, have opposed the Bill.
This House tried to redeem the Bill with amendments to protect workers from unfair dismissal and unions from damages and injunctions, as required by international law, but the Government’s majority in the other place rejected them. This House, in its latest modest amendment, sought to mitigate the Bill’s excesses by requiring consultation before regulations were made, but even this was rejected by the other place on Monday.
The fact is that the Bill abridges the right to strike, a right established by many international treaties to which the UK adheres. A letter written by the general secretary of the European Trade Union Confederation to the Secretary of State the day before yesterday sums it up. She said:
“It is clear that the Bill introduces provisions which weaken or reduce existing law in relation to the protection of the fundamental right to strike and which do not respect or implement ILO Convention 87”.
The Joint Committee on Human Rights said the same thing. The letter points out the specific respects in which the Bill fails to meet ILO conditions for permissible MSL legislation. Among its list of non-compliances, the letter points to the absence in the Bill of: any requirement for trade union and employer dialogue in the setting of MSLs; any obligation on the employer to negotiate an agreement with the trade union about service levels; and any independent adjudication mechanism in the event of a failure to agree.
Your Lordships’ amendment would have gone a long way to rectify these non-compliances without such remedial action. As ETUC points out, the UK will not only be in breach of ILO Convention 87 and paragraph 4 of Article 6 of the European Social Charter, but it will also violate Articles 387 and 399 of the trade and co-operation agreement. However, the Government have a problem with consultation with the social partners. Just a week ago, the High Court held that the purpose of the statutory obligation to consult before making regulations under the Employment Agencies Act was that:
“Parliament can then proceed on the basis that the case for the measure has been tested with interested parties in the sector and that their views and interests have been taken into consideration in fashioning the draft regulations which are laid before it”.
The Government’s failure to consult was, the court held,
“so unfair as to be unlawful and, indeed, irrational”.
Less than a month ago, the relevant ILO committee told
“the Government to provide information to and facilitate the dialogue between and with the social partners with a view to … improve consultation of the social partners on legislation of relevance to them”.
Of course I accept that the undertaking by the noble Lord to introduce a code of practice imports a duty to consult, but such consultation is apparently limited solely to the issue of reasonable steps. It does not require the social dialogue that compliance with international law does. In truth, as was said by Mick Whitley MP in the other place,
“no number of amendments could ever salvage this Bill”.—[Official Report, Commons, 17/7/23; col. 721.]
That is why the Labour Party is committed to repealing it.
Lord Fox (LD)
My Lords, it is a great pleasure to follow the noble Lords, Lord Hendy and Lord Collins, and I completely associate myself with their critical process and legal analysis of this Bill. From the outset, this was a political Bill and I make no apology at the end of this process for making a political comment.
It may have escaped your Lordships’ notice, but there are three by-elections going on today across different parts of the country. In knocking on those doors, the number one or number two concern of the people in those houses in those communities is the delivery of the health service in this country. I refer to this Bill and the challenge that this Government have in dealing with the industrial disputes going on within the health service. It is quite clear that this Bill will do nothing to bring those disputes to an end and, if it is deployed, it would exacerbate them. Those people answering their doors and talking to politicians as they are being canvassed would love to have a minimum service level every day of the week. The Government need to solve this industrial issue as well as the service delivery within the health service, and this Bill when it becomes an Act will do nothing towards doing that.
Lord Callanan (Con)
My Lords, I thank all three noble Lords who have contributed to today’s debate. The Government always listen carefully to the views of this House.
In response to the noble Lord, Lord Hendy, I have seen the letter from the European TUC, which I read with interest. I am sure the noble Lord will accept that it is hardly an impartial referee on these matters. It is also fair to say that it had nothing new to say. We have been over all this ground many times before and have provided explanations of the type it has sought.
It is also fair to point out that, in our view, this legislation is compatible with the ILO convention, and I am sure the noble Lord will accept that there are many other ILO states that already have minimum service levels as part of their domestic legislation. We will, of course, ensure that any secondary legislation is also in compliance with all our international obligations.
I can also confirm in response to the noble Lord, Lord Collins, that the Government will launch a consultation on the draft code this summer, following consultation with ACAS. The code will be put to both Houses for approval in line with the procedure set out in Section 204 of the Trade Union and Labour Relations (Consolidation) Act, and we will consult for an appropriate period.
Lord Collins of Highbury (Lab)
Can the noble Lord be more explicit? We are just about to go into the Summer Recess. August is a month when many people take holidays. I hope that he will be able to confirm, as with the previous statutory codes, that the public consultation will start in September and run for 12 weeks at least.
Lord Callanan (Con)
I am afraid I cannot confirm that for the noble Lord. No final decisions have been taken yet, but it is our intention to get on with this as quickly as possible, so we will consult over the summer. We will leave an adequate period for responses to that consultation and then, as I said, the code will have to be approved by both Houses.
I understand the Opposition’s principled objection to this Bill. Taking on board the point made by the noble Lord, Lord Fox, I suppose all legislation is political. We are a political House at the end of the day. We are all party politicians, so it should not be a great surprise to find that legislation is also political.
We have thoroughly debated this matter now on many different occasions. The House has asked the Commons to think again on a number of occasions; they have done so and have responded. I appreciate that noble Lords opposite do not like the outcome, but it is what it is. In our view, this is a vital piece of legislation that will give the public confidence that, when workers strike—which they are fully entitled to do—lives and livelihoods are not put at undue risk.
I hope the House, despite the reservations of noble Lords opposite, will now let this legislation pass to Royal Assent.
Oil and Gas Windfall Tax
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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.
Lord Leigh of Hurley (Con)
My Lords, I refer to my interests in the register and to the previous questions I have raised on this matter in Treasury Questions. The point is that the EPL has had a dramatic effect on investment in North Sea oil. The question from the noble Lord, Lord Bruce, asks what assessment the Government have made of it. Would the Minister include in that assessment an analysis of the bids that have been made—for example, for Chevron oil in the Republic of Congo and in the Gulf of Mexico—by North Sea oil companies that are no longer investing in the North Sea?
Lord Callanan (Con)
My noble friend makes an important point. Taxation levels are obviously a matter for the Chancellor and the Treasury. However, there are a number of concerning stories from investors that they have pulled out of investments in the North Sea; in fact, one remarked that parts of Africa were a more stable tax environment.
Lord West of Spithead (Lab)
My Lords, I congratulate the Government on the £20 billion they put into the small modular reactor enterprise, and the work they have done for the STEP fission reactor. Does the Minister agree that the best net-zero way of ensuring that we have energy to provide the electrical baseload is to press ahead rapidly with Hinkley C and Sizewell because, if we do not get this nuclear power online, we are not going to make it?
Lord Callanan (Con)
I do agree with the noble Lord. Nuclear reactors, whether it be Sizewell or Hinkley, and small modular reactors will play an important part in the net-zero transition. Of course, we want a diverse supply mix; we want as much renewable energy as possible, but nuclear will play an important role.
Lord Stern of Brentford (CB)
My Lords, does the Minister recognise that the Paris Agreement implies the use of much less oil and gas in the 2030s than now? Therefore, issuing permits for exploration that usually requires at least seven years to generate flows makes little sense, particularly as the effect on prices and security would be negligible. Does he recognise that issuing such permits is essentially enabling and fostering bets on climate failure?
Lord Callanan (Con)
No, I would not agree with the noble Lord, I am afraid; he is absolutely dead wrong. Even with any new licences that might be issued in the UK, UK production will continue to decline at the rate of about 7% a year. It is estimated that global production decline needs to be about 3% to 4% in order to ensure the net-zero transition, so we will be declining at a faster rate than what is required globally.
Lord Teverson (LD)
My Lords, the windfall tax that the Minister mentions taxes profits but also gives a substantial kickback on investment. On renewables, the levy is against revenue and there is no such kickback. When will the Department for Energy Security and Net Zero stop discriminating against renewables?
Lord Callanan (Con)
My Lords, what the noble Lord refers to as a “kickback” is actually an investment allowance. If I am right, the same noble Lord was asking me about reducing flaring and about introducing electrification of fields. It is those investment allowances that pay for the very policies that he asked me to introduce.
Lord Bellingham (Con)
My Lords, in concurring with the noble Lord, Lord Bruce, in his statement that oil and gas are a vital part of transition to net zero, can I ask the Minister what the situation is with the Rosebank oil project, which is a world-class asset and one of the largest of its kind anywhere in the world?
Lord Callanan (Con)
I thank my noble friend for the kind invitation to respond to that. He will understand that I cannot comment on licensing decisions.
Baroness Blake of Leeds (Lab)
My Lords, analysis of the Office for Budget Responsibility data in May this year showed the extent to which oil and gas firms were able to reduce their energy profits levy while still making record profits. Between this loophole, the decision against a 78% rate and the decision not to backdate to catch all the surging profits, it is estimated that over £10 billion of potential tax will be missed between 2022-23 and 2023-24. I ask the Minister: have the Government given any consideration to fixing the levy to deliver the full benefits proposed since these figures came out?
Lord Callanan (Con)
I do not know where the noble Baroness gets her figures. I responded in my previous answer to the question about investment allowances—policies that the Opposition have called for. The energy profits levy is expected to raise about £26 billion and is set at a rate of 75%, which is one of the highest in the world. I realise that the Labour Party’s policy is to tax firms into extinction, but we need to leave them with some profits. Much of the profits of oil and gas companies goes towards pension funds and other shareholders which many pensioners and others rely on for their income.
Baroness Sheehan (LD)
My Lords, the IEA’s report World Energy Outlook 2022 is clear that the solution to the energy trilemma of economic, climate and security issues is to accelerate the move to greener energy. For us in the UK, among other things, that means urgently equipping our workforce with transferable skills for the energy transition. What are the Government doing to make sure that a single offshore energy skills passport that aligns training standards in all offshore energy sectors is introduced?
Lord Callanan (Con)
The noble Baroness is essentially right: of course we need to transition to renewable energy sources, and that is exactly what we are doing. The North Sea transition deal between the Government and North Sea companies is helping to move them, as far as the transition is going, to transfer their skills to many of the new industries. For example, many drilling companies operating in the North Sea also drill geothermal heat sources to use for renewable energy. The two things are not mutually incompatible.
The Lord Bishop of Bristol
My Lords, what assessment is the North Sea Transition Authority making of the alignment of company commitments, especially on net- zero targets covering scopes 1, 2 and 3, over the short, medium and long term as well as company alignment on capital expenditure towards those targets? Can the Minister assure us that, before licensing any expansion in North Sea exploration, the authority will factor this into consideration when judging projects under alignment with the UK’s net-zero legal commitment?
Lord Callanan (Con)
As I said in response to a previous question, I cannot comment on any licensing decisions—we will know about them before too long—but I can assure the right reverend Prelate that all the appropriate considerations are being taken into account by the Government and the North Sea Transition Authority on the issuing of those licences.
Lord Rooker (Lab)
I agree 100% with the Government’s nuclear policy but, bearing in mind that we want the success of renewables and the end of oil and gas, what assessment has been made of the fact that by 2050—which is not that far away—when the oil and gas is gone, we will be relying on nuclear for intermittency? That will leave the nuclear situation as a stranded asset, because it really does not work that way; it has got to be a formal baseload. Once the rest has gone and we are on renewables and left with nuclear, how can it be intermittent?
Lord Callanan (Con)
I totally understand the point the noble Lord is making. He is right that many renewables are very cheap but intermittent, and nuclear will contribute towards the baseload. He is asking for long-term energy storage; the answer is hydrogen. We can store large quantities of hydrogen—some really exciting projects are coming forward—and it can then be burned, with no emissions, in a power station to provide the supplies that we will need when the wind is not blowing and the sun is not shining.
Decarbonisation
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Baroness Blackstone
To ask His Majesty’s Government, further to their consultation on ‘Addressing carbon leakage risk to support decarbonisation’ published on 30 March, what assessment they have made of the case for extending green procurement targets beyond steel and cement to include other carbon-intensive sectors covered by the UK Emissions Trading Scheme, such as paper and power, and products made from materials covered by the UK ETS, such as vehicles.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, the Government are currently exploring options for utilising public procurement to create demand for green industrial products. We have sought views via consultation to help develop proposals for policy measures that support the growth of low-carbon industries. The Government’s Construction Playbook advises that projects should be accompanied by a whole-life carbon assessment and PPN 06/21 requires suppliers bidding for major government contracts to commit to net zero by 2050 and to publish a carbon reduction plan.
Baroness Blackstone (Lab)
My Lords, I am grateful to the Minister for his response, but I wonder whether I can press him a little further. In the Government’s consultation, they propose to use minimum product standards to protect just two or three sectors from unfair competition from overseas and not to bring in these measures until late in the 2020s. Should not the Government be setting minimum product standards across a wider range of sectors, and sooner, to protect domestic manufacturing from unfair competition, especially from China, where grid electricity has twice the carbon intensity and is half the price compared with the UK?
Lord Callanan (Con)
The consultation only closed at the end of last month, so the noble Baroness will need to give us a bit of time to analyse the hundreds of responses that we received. It is a complicated issue, and we of course understand the desire for quicker action, but there is a whole range of factors to be taken into account. We have to be very careful not to indulge in some form of green protectionism, where we incentivise lower-standard products against others that are better performing. Across a whole range of sectors and procurement areas, it is a complicated issue that deserves to be studied properly.
Lord Hannan of Kingsclere (Con)
My Lords, the essence of climate change is that it is global and does not recognise borders. It is very disappointing that we have so many calls for responses that are essentially protectionist, introverted and selfish. Will my noble friend confirm that, just because our allies in the United States—and indeed in the European Union—are going down the road towards protectionism, carbon adjustment taxes and so on, this country will not disadvantage itself or raise the price of the green technologies that we need to combat this global problem?
Lord Callanan (Con)
My noble friend has been steadfast for many years in his support for free trade—a cause that I manifestly agree with. But it is a complicated issue. It looks as though the EU and US are going down the road of carbon adjustment mechanism taxes, but, as I said in my Answer to the noble Baroness, Lady Blackstone, it is a complicated issue. For instance, do we want to incentivise the installation of poorer-quality solar panels that may be constructed with lower carbon intensity, or better-quality solar panels? That is one example of millions that I could give.
Lord Jones (Lab)
My Lords, does the Minister acknowledge that, while we need green policies, there is a major problem concerning the British steel industry? Successive Governments have imposed what have been, in effect, green taxes on a great foundation industry. Now, very little of the steel industry remains. For example, does he realise that the great integrated steelworks—the only remaining integrated steelworks in Britain—is hanging on by its fingertips? The ailing steel company Tata calls for more investment. How can he see his Government urgently giving more investment to save Britain’s steel industry? If Britain is to remain a great nation, as she must, she needs the foundation industry of steel. If ever there shall be war, you need steel.
Lord Callanan (Con)
I totally understand the point that the noble Lord is making. He highlights the dilemma of carbon-reduction policies in these areas, where we impose carbon taxes and emissions trading systems and schemes, and of course that has an effect on domestic industries that emit a lot of carbon—the so-called carbon leakage problem. We are working closely with the steel industry to try to help it adjust to greener manufacturing methods, and of course it receives free emissions permits.
Baroness Sheehan (LD)
My Lords, recent reports that the Government are considering rowing back on their flagship climate finance commitment of £11.6 billion to assist lower-income countries to reduce their emissions, adapt to climate change and protect the natural environment are to be deplored. Those global benefits affect us all and would be lost to us all. Does the Minister agree that using a proportion of the funds raised through CBAM, the carbon border adjustment mechanism, to support low-carbon transition in least-developed and climate-vulnerable countries would be enlightened self-interest?
Lord Callanan (Con)
The noble Baroness is asking me to comment on tax policies and hypothecation of taxes, which are matters in the purview of the Chancellor of the Exchequer. I shall make sure her views are communicated to him.
Lord Lennie (Lab)
My Lords, the Government’s IDDI consultation, which the noble Baroness, Lady Blackstone, referred to, sets out four levels that are being considered. The Government make a firm statement about their policies achieving levels 1 and 2. With level 3, the Government say that they are minded to achieve it. As for level 4, which is about achieving the UK’s decarbonisation objectives, the Government say that they may commit to it. When can we expect decisive leadership so that we commit to achieving all four of these IDDI objectives?
Lord Callanan (Con)
My Lords, I am slightly disappointed by the tone of the question. We are already showing decisive leadership: we are one of the only countries in the world to already have green procurement strategies for major public procurement. This is a complicated area, as has been illustrated by the questions from the noble Lord’s own Benches. We need to make sure that we get it right and do not disadvantage British industries or drive up the cost for consumers.
Lord Kamall (Con)
My Lords, while one of the advantages of carbon border adjustment measures and other green taxes is that they tax negative externalities, hopefully to encourage better green policies, one of the downsides is obviously that that might then feed into the cost of production and that cost is then passed on to consumers. One concern for many people about green policies, even though they support them, is that when we introduce green taxes, they are often not fiscally neutral, so people end up paying more. Have the Government looked at how they can balance these challenges to make sure that, when a green tax is introduced, tax is removed elsewhere to encourage better behaviour and have a positive outcome for green policies?
Lord Callanan (Con)
My noble friend makes an important point. On all these policies, we have to make sure that we get the balance right between fulfilling our legally binding commitments and making sure we do not disadvantage consumers and drive up costs for ordinary men and women.
Lord Inglewood (Non-Afl)
My Lords, does the Minister agree that emissions trading schemes offer a very valuable opportunity for regions of both this country and elsewhere that are essentially rural and agricultural, away from centres of population and wealth at present, to generate an income that they desperately need to level up the living standards of people in these places to some kind of equivalence with the richer parts of the country?
Lord Callanan (Con)
I understand the point that my noble friend is making. A happy by-product for the Treasury of the emissions trading scheme is the considerable revenue that it generates, and I am sure that it is spending all this money very wisely.
Lord Teverson (LD)
My Lords, the EU-UK Trade and Cooperation Agreement, which the Government negotiated, had a clause that said that the two sides should talk further about the EU and UK emissions trading systems, and that they should be connected and start to work together. That has been strongly endorsed by most sectors of British industry. Have those negotiations started? If so, great; if not, why not?
Lord Callanan (Con)
My Lords, I appreciate the desire of the Liberal Democrats to get us into the EU regulatory orbit as quickly as possible. As with many things, there are arguments for and against the linking of the two ETS systems. They are equivalent—in fact, ours is probably slightly more ambitious than that of the EU. We will continue to explore this policy with the Commission.
Baroness Hayman (CB)
My Lords, I declare my interests as set out in the register. Does the Minister agree that, far from investment in and nurturing of green initiatives and technologies being detrimental to this country—as the noble Lord, Lord Hannan, said—investing in green technology for things such as steel and cement production not only helps those industries in this country but helps our economy and international competitiveness?
Lord Callanan (Con)
I do not want to put words into my noble friend’s mouth, but I do not think that he was attempting to argue that we should not invest in green products and services. He was merely pointing out the difficulties in international trade where, for some countries, there will be a temptation to use green excuses to introduce protectionist policies. Free trade has been an immense benefit to all of us in the developed and developing world, and we should be very careful to make sure that we maintain those benefits.
Cement Industry: Carbon Dioxide
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Lord Lucas
To ask His Majesty’s Government what proposals they have to support lower volumes of carbon dioxide production, as well as increased carbon capture and storage, in the cement industry.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, the Government are committed to working with the cement sector to explore decarbonisation options and are pursuing several strategic funding and policy initiatives. This includes developing options for access to CCUS. In March this year, as part of the CCUS cluster sequencing process, the Government published the Track-1 project negotiation list, which included the Hanson Padeswood cement works project. That was one of five projects to proceed to negotiations for support through the relevant business model.
Lord Lucas (Con)
I thank my noble friend for that encouraging Answer. As cement accounts for about 8% of our carbon dioxide output, this is a crucial area for us to pay attention to. May I draw my noble friend’s attention to the importance of standards in this area? So many specify which materials should be used, rather than what performance should be achieved. If the Government could help the transformation of that, there would be much more ability to use bath furnace slag and more modern additives such as graphene.
Lord Callanan (Con)
The figures I have are slightly different; my figures say that the sector accounts for 1.5% of the UK’s total greenhouse gas emissions. The sector has made strong progress in reducing its emissions. Of course, we stand by to help it further. It is a particularly difficult sector to decarbonise, given that 70% of its emissions are process-related.
Lord Teverson (LD)
My Lords, I have to admit that I agree with the Minister; I think the figure is 1.5%. We have an important cement industry in this country on which many other sectors are dependent. However, five out of 10 plants are not in one of the industrial areas in which we are going to have a concentration of carbon capture and storage—there are five others outside those areas. In the past, the Government have suggested that there would be a lifeline for enabling carbon capture and storage for those other five. Where are we on that? Are the Government still positive about aiding the whole sector to decarbonise?
Lord Callanan (Con)
I thank the Liberal Democrats for agreeing with something I have said, for a change; that is a welcome departure from normal practice. I agree with the noble Lord, and as I said, this is a difficult sector to decarbonise. We are working with it and having regular meetings. There are 10 cement plants in the UK, only one of which is situated in an existing cluster. Of course, we are considering expressions of interest from additional clusters at the moment. I would not want to predict that process. Whatever happens, CCUS will clearly be a key technology for many cement plants. We have funded a number of feasibility projects with existing suppliers and will continue to work with them.
Lord Berkeley (Lab)
My Lords, what are the Government doing to encourage alternative building methods that do not need cement, or need much smaller volumes of cement? That would help with the carbon issue quite dramatically.
Lord Callanan (Con)
The noble Lord makes a good point. We are exploring the role that demand-side policies could play in creating demand for low-carbon cement, or indeed less demand for cement. We recently concluded a consultation which sought feedback on proposals for low-carbon standards, and we will continue to pursue that.
Lord Ravensdale (CB)
My Lords, as well as CO2 being produced as a by-product of the chemical reaction in cement production, the other main source of emissions is the high heat required: around 1,400 degrees centigrade or more. What work are the Government doing to support a road map for the development of electric kilns?
Lord Callanan (Con)
That is one of technologies we are looking at. We also gave £3.2 million to the Mineral Products Association to develop a low-carbon fuel mix for cement. It held a trial at Hanson’s Ribblesdale plant and Tarmac’s Tunstead plant using a mix of 100% net-zero fuels, including hydrogen.
Lord Lennie (Lab)
My Lords, I too agree with the Minister that the concrete industry accounts for approximately 1.5% of emissions in this country. Globally, the figure rises to 8%, as the noble Lord, Lord Lucas, said. Last year, a report from the Low Carbon Concrete Group suggested that the UK concrete industry could become a carbon sink by the 2040s. Welcome though this prediction is, we must recognise that this is a global problem. What steps are the Government taking to encourage other countries to set out and achieve similarly ambitious goals?
Lord Callanan (Con)
Both the Liberal Democrats and Labour agreeing with me is destroying my credibility on this side of the House. I agree with the noble Lord; we are seeking to work with other countries as well. One of the issues in the sector, as we look to reform the ETS, is carbon leakage. We must make sure we do all we can to avoid it.
Lord Wallace of Saltaire (LD)
My Lords, if we are to reduce the use of cement, the move from demolishing buildings and rebuilding them—particularly in the commercial sector—to adaptation is an important part of that. As I walk down Victoria Street every morning, I see buildings being demolished and buildings replacing others which are only 40 years old. That is clearly crazy, and adaptation is a way for us to build a more sustainable economy. What are the Government doing to improve incentives and regulations to make the adaptation of established buildings, rather than their replacement, a priority?
Lord Callanan (Con)
The noble Lord makes a good point. We should, of course, always look at adaptation. As for his particular example, I can think of one building on Victoria Street, occupied by my department, which definitely should be demolished as soon as possible—
Lord Callanan (Con)
There is too much agreement in the House today with the Liberal Democrats. Setting aside personal views, his overall point is right: of course we should look at adaptation and reuse if possible.
Baroness Jones of Moulsecoomb (GP)
What are the Government doing about adaptation—not just looking at it; are they doing anything?
Lord Callanan (Con)
This is one of a number of different policies that we need to look at. Does the noble Baroness mean adaptation to climate change, or does she mean adaptation of existing buildings? Of course we are looking at both.
Geothermal Heat and Power
Lord Callanan Excerpts(1 year, 4 months ago)
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The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, first, I join noble Lords in thanking the noble Lord, Lord Cameron, for securing this debate on a fascinating and exciting topic. I do not think there is any difference between us. I think we all share a passion for renewable energy and for the green transition. That undoubtedly includes geothermal energy which is, as noble Lords have pointed out, a significant store of energy beneath our feet.
Before I get on to the topic of the debate, as always, I greatly enjoyed the contribution from the noble Baroness, Lady Jones. It was typically entertaining; it was of course total nonsense but very entertaining none the less. I have a couple of facts for the noble Baroness. We have not scrapped our contribution to international climate funds, and we do not give tax breaks, as she described it, to fossil fuel producers. In fact, the opposite is the case: they pay increased levels of taxation compared with other businesses. I am very proud of our decarbonisation record, which is in fact the best of all the G7 countries. Of course, the noble Baroness is perfectly entitled to push us to go further and faster, but let us not pretend that we are not doing anything. We have the best record in the G7, and it is much better than in some of the countries where the Greens are in government—I could point out Germany as an example.
However, back to the subject of the debate, the Government recognise the massive potential of geothermal energy in many parts of the UK. It has the potential to deliver low-carbon heat and power, as well as many critical minerals such as lithium. In the British Energy Security Strategy, the Government set out that they would explore renewable energy opportunities afforded by our geography and geology, including geothermal. I reassure the noble Lord, Lord Cameron, that geothermal technologies that generate power are in fact eligible for contracts for difference awards, which is the Government’s main mechanism for supporting low-carbon electricity generation.
I can also inform my noble friend Lord Moynihan that evidence from my department suggests that geothermal is one of the cheaper emerging technologies that are eligible for the contracts for difference scheme. That builds on the point from my noble friend Lord Lucas that we are also exploring a range of other support mechanisms to de-risk and bring down the high capital cost of drilling down—there is a lot of risk there for private investors.
The UK’s first geothermal plant that will generate electricity, located at the United Downs site in Cornwall, is set to start generating next year. It is expected to deliver a baseload capacity of 12 megawatts, roughly the equivalent of 12 onshore wind turbines, which will rise to 25 megawatts by 2028—a project supported by the Government.
The most significant potential for geothermal energy within the UK lies in extracting geothermal heat for use with heat pumps in district heating or heat networks, as a number of noble Lords mentioned. This resource is more widespread, closer to the surface and more economic to extract. Accessing geothermal heat at scale will rely on the existence of heat networks to distribute the heat—the noble Baroness, Lady Walmsley, was right about that.
I did not quite understand the point the noble Baroness made about heat network zoning; she suggested that we should spread it to the whole of the country but of course we are extending it to all the country. I apologise if that was the noble Baroness, Lady Sheehan. The noble Baroness often calls on us to work with local authorities; the Energy Bill will give local authorities the power to designate heat network zones throughout the whole of England in particular—obviously it is devolved in the devolved nations—but it will be up to local authorities to decide whether they wish to designate heat network zones in their areas. We will of course support them in central government, and we are in talks and discussions with a number of local authorities —dozens of them—that are interested in doing exactly that.
I am also grateful to the noble Lord, Lord Cameron, and the noble Baroness, Lady Sheehan, for highlighting the importance of heat networks and zoning. As I said, the Energy Bill will enable all of local government to designate heat network zones.
I am also grateful for the support, on this occasion, from the noble Baroness, Lady Jones, for community heating and enabling towns to bring this forward. That is indeed why the Government have provided funding to many local authorities through the Heat Networks Delivery Unit to support them to develop heat networks in their own towns. These heat networks will of course also need to correspond to the suitable geological conditions; I can confirm to my noble friend Lord Moynihan that we have in fact supported the north-east LEP to commission research into the potential contribution that deep geothermal technologies could make in the United Kingdom.
The British Geological Survey has been a lead author of that study, which is due to be published later this month—I am sure that the noble Lord will be interested to read it. It has considered many of the options for supporting the industry that the noble Lord, Lord Cameron, summarised in his excellent opening speech. The Government will use it to consider the next steps to support what at the moment is a nascent industry. That includes the provision of easy access to geological data. It will contribute to our understanding of the possible benefits and the options for achieving them, and it will inform future policy development.
We are actively supporting and encouraging the development of geothermal heating projects through the current Green Heat Network Fund, which supports the development of low-carbon heat networks. The noble Lord, Lord Berkeley, correctly referred to the tremendous potential of Cornwall. Through the fund that I have mentioned, the Government have announced £22 million of funding to Cornwall Council to develop the Langarth Deep Geothermal Heat Network, connecting to the United Downs deep geothermal site. This will be the UK’s first heating system to use deep geothermal energy and it will heat nearly 4,000 local homes and public facilities.
I am pleased to tell my noble friend Lord Lucas that the Government support his view that this opportunity can deliver benefits for communities across the country. The Government have previously awarded funds of £5.9 million and £4.3 million through the Heat Networks Investment Project to shallow geothermal schemes in Gateshead and Seaham, respectively. The noble Lord, Lord Lennie, referred to the opportunities in our home region, in the north-east of England. On his way home to Tynemouth, he could stop off in Gateshead and look at one of the government-funded schemes that is delivering excellent heat network funding for a mine water recovery project. In fact, if he looks over to his right when he crosses the Tyne Bridge, he will almost be able to see the project from the train—another government-supported project that is delivering precisely the benefits that he suggested.
I am also happy to confirm to the noble Baroness, Lady Sheehan, that there is value in supporting new renewable heat sources to come forward. One of the major benefits of the Heat Networks Investment Project has been the range of networks that have been supported through its funding.
My noble friend Lord Moynihan asked me about the economics of deep geothermal. He is right: at present, the cost of extracting the heat is uncertain, due to the uncertainties associated with the geology until it is tested. Uncertainty in capital costs, operational costs and revenues means that very few projects have been shown to be financially viable without government support. The potential for costs to reduce with scale is also uncertain and it depends on what we will learn from some of the early projects that I have mentioned that we are already supporting with considerable government funding.
My noble friend also made a very good point about the potential for battery-grade lithium extraction from the waters pumped by geothermal plants. That shows great promise. Some predict that geothermal lithium extraction could account for up to a quarter of domestic demand and help drive transport decarbonisation—another happy benefit of some of the geothermal schemes. Geothermal Engineering in Cornwall has been successful in securing £12 million from the Government’s Automotive Transformation Fund for precisely that purpose.
I thank again the noble Lord, Lord Cameron, for securing this debate today as well as all other noble Lords for their insightful contributions. As I set out today, the Government recognise the tremendous potential of geothermal energy in many parts of the UK and we remain committed, as set out in the British energy security strategy, to explore the renewable energy opportunities afforded by our geography and geology, including geothermal. Despite the challenges currently experienced by the sector, we believe that there is an opportunity for geothermal energy to be one of the wide range of technologies that we can deploy to help us to meet our climate change targets and provide energy security—and, you never know, in the meantime, we might even keep the noble Baroness, Lady Jones, happy.
Electricity Capacity (Amendment) Regulations 2023
Lord Callanan Excerpts(1 year, 4 months ago)
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Lord Callanan
That the Grand Committee do consider the Electricity Capacity (Amendment) Regulations 2023.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, these regulations were laid before the House on 12 June 2023. Before I outline the provisions made by this draft instrument, I will provide some context. The capacity market is at the heart of the Government’s strategy for maintaining the security of electricity supply in Great Britain. Through capacity auctions, we secure the capacity needed to meet future peak demand under a range of scenarios, based on advice from the capacity market delivery body, the National Grid Electricity System Operator.
Existing and new-build capacity compete in technology- neutral auctions, held one year and four years ahead of delivery, to obtain agreements. Those which win capacity agreements, known as capacity providers, commit to making their capacity available when needed in return for guaranteed payments. This supports the necessary investment in new and existing capacity to ensure security of electricity supply. The most recent capacity auctions, held in February 2023, secured the electricity capacity that Britain needs to cope with peaks in winter demand for 2023-24. Capacity providers that fail to deliver against their obligations are subject to financial penalties. Capacity payments are funded by electricity suppliers, which recover this cost from electricity consumers.
Since its introduction in 2014, the capacity market has contributed to investment in just under 17.5 gigawatts of new, flexible capacity to replace older, less efficient plant as we transition to a net-zero economy. To ensure that the capacity market continues to function effectively, we regularly make adjustments to the implementing legislation based on our day-to-day experiences of operating the scheme. Although the future geopolitical context is, of course, still uncertain, we recognise that the world is likely to face continued challenges next winter around the security of energy supply, considering Russia’s illegal invasion of Ukraine. The Government continue to work closely with Ofgem, the gas and electricity system operators, and all relevant stakeholders to build on the measures we put in place for winter 2022-23 and ensure we have the appropriate tools available to secure our energy supply for winter 2023-24.
The changes we are making to the capacity market this year, through both this draft instrument and changes to the capacity market rules, focus on longer-term changes that will impact capacity auctions held from February 2024 onwards, for delivery from winter 2024-25. In this context, this draft instrument makes changes to three electricity capacity regulations to deliver technical improvements that support the functioning of the capacity market, which have been identified and explored over the past year through consultation.
Lord Lennie (Lab)
My Lords, I thank the Minister for setting out the instrument and giving us advance warning that more is to come shortly. The capacity market is at the heart of maintaining a secure and reliable electricity system. It provides all forms of electricity capacity on a system during periods of electricity shortage and stress, such as when it is extremely cold or when the wind is low while demand is high. As the Minister said, the capacity market works by allowing eligible bidders to compete in T-1 or T-4 auctions on a one-year or four-year basis ahead of when they must deliver capacity. A successful bidder is awarded a capacity agreement which requires delivery during times of stress.
As the Minister said, this instrument makes changes to three areas of regulation. First, Regulation 10 of the 2014 regulations obliges the Secretary of State to set out whether capacity auctions are to be held. The change will require the Secretary of State to publish a decision only if the Government determine that an auction will not be held, helping to improve administrative efficiency. Does this effectively enrol a current capacity provider into the scheme automatically?
Secondly, Regulation 34 of the 2014 regulations allows capacity providers to seek termination of their capacity agreement with a view to becoming eligible to participate in the contracts for difference scheme. I think the Minister said that they are mutually exclusive as things stand. Currently, the LCCC, as the counterparty, has to give notice of such an intention. However, it cannot know in advance if the CMU will be successful in its bid for a contract for difference.
This instrument means that notice comes from a capacity provider seeking termination of their capacity agreement in order to become eligible to apply in a contract for difference allocation round. How many capacity providers have thus far been unable to use the process set out in Regulation 34? The Minister may say all of them, but how many would have wanted to use the termination process? Have the Government made any assessment of the impact of this, and will this change be kept under review?
Thirdly, I turn to Regulation 41 of the 2014 regulations. Capacity providers can be financially penalised, as the Minister said, if they fail to provide capacity in times of stress. Currently, the settlement body has 21 days to calculate the relevant penalty and to invoice capacity providers which must pay such penalties. This instrument increases the timeframe to 35 days. Does that mean that penalties that should have been paid were previously missed because they were not calculated in time? If so, could the Minister indicate the value of those? By contrast, is this change expected to increase the number and value of penalties that are enforced? I look forward to the Minister’s response.
Lord Callanan (Con)
First, I thank the noble Lords, Lord Naseby and Lord Lennie, and the noble Baroness, Lady Walmsley, for their valuable contributions on an important subject for the nation’s electricity supplies.
As I mentioned in my introduction, the capacity market is our main mechanism for ensuring the security of electricity supply. To address the point made by the noble Lord, Lord Naseby, I say that it has already secured the majority of Great Britain’s capacity needs right out to 2026-27, because the Government take no chances with the security of supply. We continue to believe that the capacity market is an effective insurance mechanism, providing secure and affordable electricity that families and businesses can rely on.
The capacity market is, indeed, tried and tested. The fact that it has supported investment in just under 17.5 gigawatts of new-build, flexible capacity since its introduction demonstrates that it can bring forward the capacity needed to meet future peak demand and replace older capacity as it retires and as we transition to a net-zero economy.
Furthermore, we continue to take steps to ensure its ongoing, efficient and effective operation. The Government are committed to ensuring that the right policy tools are in place for delivering a secure and affordable electricity system as we transition to net zero. That includes regularly assessing the performance of the capacity market and, as we are debating today, exploring improvements to the scheme.
As we noted in our 2023 government response to the capacity market consultation, we have set out a two-phased approach for reforms in the capacity market. This instrument seeks to implement purely technical amendments under the first phase to improve the administrative arrangements. In the next phase of reforms to the capacity market, the Government intend to undertake further analysis and development on the remaining proposals prior to taking a final decision on implementation. This includes proposals to align the capacity market with net zero, such as reducing the emission intensity limits for new-build plants and enabling low-carbon capacity with low capital expenditure to access multi-year agreements.
We will also look ahead to the future as part of the review of electricity market arrangements programme. REMA is exploring options to create an electricity market design that will enable us to transition efficiently from fossil fuels to renewables and other forms of low-carbon generation, which I hope will make us more resilient to overseas energy shocks and ensure energy security.
Strikes (Minimum Service Levels) Bill
Lord Callanan ExcerptsTuesday 4th July 2023
(1 year, 4 months ago)
Lords ChamberRead Full debate Strikes (Minimum Service Levels) Act 2023 View all Strikes (Minimum Service Levels) Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 152-I Marshalled list for Consideration of Commons Reasons - (3 Jul 2023)
Lord Callanan
That this House do not insist on its Amendment 2B to which the Commons have disagreed for their Reason 2C.
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, in moving Motion A, with the leave of the House, I will speak also to Motions B and C.
The Bill returns to us once again from the other place. That House has been consistently very clear, for the second time now, that it is firm in its position on the remaining three amendments. When we were last here, this House asked the Commons to reconsider its position and, unsurprisingly, it has reached exactly the same conclusion as it did previously. Indeed, it has done so by greater majorities than before and, in some cases, by the greatest majority that we have so far seen on the Bill. Therefore, I propose Motions to accept the Commons position on the Bill and give way to the elected House.
We have discussed these amendments in detail throughout the Bill’s passage. The Government’s position remains that they cannot accept amendments which would delay the implementation of this much-needed legislation or, indeed, render it entirely inoperable. The Government have been clear in both Houses that they are willing to consider providing clarity on the nature of the “reasonable steps” which unions are expected to take to fulfil their obligations under the Bill. This is a significant issue, which I know a number of Members of this House have raised throughout the Bill’s passage. However, as yet, we have not had any indication that this would be widely supported.
Amendment 2D significantly expands on previous versions of Lords Amendment 2 in a way that will not, I believe, add to the effectiveness of the regulations. The Government have already undertaken public consultations on their intentions to bring forward minimum service levels for passenger rail services, ambulance services and fire and rescue services. We will bring forward regulations for approval in Parliament in due course. This is an entirely reasonable legislative approach enabling the Government to consider all relevant factors, including our international obligations, while at the same time ensuring that minimum service levels are introduced in good time.
I remind the House that, as the Government have made clear through the passage of the Bill, employees will lose their automatic unfair dismissal protection for going on strike in contravention of a work notice only if they receive notification from the employer that they are required to work under a work notice and notification of the work that they must carry out. Finally, impact assessments will be published alongside the final regulations.
I am sure that the noble Lord, Lord Collins, will acknowledge that the effect of his amendment would be to delay significantly the implementation of minimum service levels, given the additional and lengthy consultation and parliamentary requirements; I heavily suspect that that is probably its purpose. On behalf of the Government, I must therefore resist it today. I hope that the noble Lord will not feel the need to put it to a vote.
This amendment remains unnecessary and would delay the implementation of this vital legislation, which is designed to protect the public from the disproportionate impacts of the ongoing strike action. I therefore ask noble Lords to support the Government’s Motions on the Order Paper today. I beg to move.
Motion A1 (as an amendment to Motion A)
Lord Fox (LD)
My Lords, it is a pleasure to support the amendment, as set out so thoroughly and excellently by the noble Lord, Lord Collins. I have very little to say; I will make just three points.
First, noble Lords who have been observing will remember that on a number of occasions I have proposed amendments that try to give Parliament more say on what is going on. Having got to where we are, I am happy to subsume that objective within the amendment that the noble Lord, Lord Collins, has set forward, but it remains an important and missing element in the Bill. We should not forget that.
The noble Lord also set a lot of store by the recent ILO announcement. He is right to do so, but this amendment is necessary with or without it. The announcement makes it clear to us on these Benches that the Commons should be given another chance to reassess the Bill in the light of the details coming in from the ILO.
Finally, the Minister talks about delay. The first iteration of this Bill was drafted and laid before Parliament about a year ago. If the Government really are that breathless about getting this on the statute book, they could have moved a little quicker. This is about politics, not actually doing anything real out there. The noble Lord, Lord Balfe, is right in that concern. Because of that, we will certainly support the noble Lord, Lord Collins, if he chooses to put this to a vote.
Lord Callanan (Con)
My Lords, as I said in my opening remarks, we have had a very similar debate a number of times, so I can keep my response brief. I have responded to these points previously, but I will make one point on the ILO report in response to the noble Lords, Lord Collins, Lord Pannick and Lord Fox.
The ILO did not say that this legislation did not comply with the convention; it simply said that it should and that we should ensure that it does. In my view it does, as our response to the Parliamentary Question rightly said. I have made the point many times in this House that the ILO has been clear over many years that minimum service levels can be appropriate in public services of fundamental public importance. That is why many other countries in Europe and around the world that are signatories to the ILO have had minimum service levels in place for many years. The Liberal Democrats and the noble Lord, Lord Fox, normally urge us to go the way of Europe and follow what EU countries are doing. In this case, we are doing precisely that.
I therefore hope, although without a great deal of optimism, that noble Lords will cede to the wishes of the elected House and agree to the Government’s Motions, which would then bring this Bill’s passage to a close.
Lord Collins of Highbury (Lab)
My Lords, I will take the unusual but reasonable step of pressing this, for one good reason. The Minister talks about the ILO not saying that the Bill is non-compliant. Part of the problem is that no one knows what this law means. Trade unions do not know what reasonable steps they need to take to protect the right to strike. We heard the Minister confirm that workers who receive a work notice will lose protection from dismissal.
The Minister talks about the ILO and minimum service levels in Europe. Nobody is against minimum service levels. They are essential, but in every European country they work because they are agreed by voluntary agreement and because people consent. As soon as you remove that consent, you are in trouble. That is why employers are so against what the Government are arguing.
I know that it might feel a bit repetitive, but the ILO report is new and the Commons needs to consider it. I plead with all noble Lords: please support my Motion. I wish to test the opinion of the House.
Lord Callanan
That this House do not insist on its Amendment 4B to which the Commons have disagreed for their Reason 4C.
Lord Callanan
That this House do not insist on its Amendments 5B, 5C and 5D to which the Commons have disagreed for their Reason 5E.