Debates between Lord Callanan and Lord Teverson during the 2019 Parliament

Tue 17th Oct 2023
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Energy Bill [HL]
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Energy Bill [HL]
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Climate Change: Phasing Out Fossil Fuels

Debate between Lord Callanan and Lord Teverson
Wednesday 6th December 2023

(2 months, 2 weeks ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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It is our policy to phase out the unabated use of fossil fuels. On the second question, even with the granting of any new licences, UK oil and gas production will continue to decline at a faster rate than most other productive fields in the world.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I very much welcome that the Government have sent a number of Ministers to COP 28. I am sorry that the noble Lord the Minister is not there to put the UK’s views forward. Does he realise that the good will we are building up there was undermined by the many announcements on climate change made a couple of months ago? They take away from our international leadership. When will Downing Street understand that its announcements on climate change made domestically for political purposes are heard internationally and undermine that reputation, not least with the industrial investors we need for the future?

Electricity Network Connection Action Plan

Debate between Lord Callanan and Lord Teverson
Wednesday 22nd November 2023

(3 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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Indeed, we are working with both the Scottish and Welsh Governments. There is tremendous public support for offshore wind; it has been our biggest expansion mechanism. But of course it requires a lot of onshore infrastructure as well, which is unpopular in the communities affected. There is a well-established planning process, looking at all these impacts, and we will continue to work with the devolved Administrations.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, since the Government have just dabbled with changing the planning conditions for onshore wind in England, there has been no action whatever from the industry, in that it still sees the planning restrictions as a major barrier. When does the Minister expect the next connection into the grid by onshore wind in England so that households can benefit from the cheapest form of energy we can produce in this country?

Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023

Debate between Lord Callanan and Lord Teverson
Monday 20th November 2023

(3 months ago)

Grand Committee
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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My Lords, this order was laid before the House on 19 September. The UK Emissions Trading Scheme—the ETS—was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme to encourage cost-effective emissions reductions, contributing to the UK’s emissions reduction target and, of course, ultimately our net-zero goal.

The scheme is run by the UK ETS authority, which is a joint body comprising the UK Government and the devolved Governments. Our aim is to be predictable and responsible guardians of the scheme and its markets. In doing so, we will ensure that the scheme remains a cornerstone of our ambitious climate policy.

We have brought forward this SI to implement a number of necessary changes and improvements to the scheme. The changes relating to aviation free allocation rules and to the treatment of electricity generators follow the announcements made by the UK ETS authority in July in our response to last year’s consultation on developing the UK ETS. The final change remedies an inconsistency around free allocation and carbon capture at UK ETS installations. On aviation, this SI will cap the total amount of aviation free allocation that operators are eligible to receive at 100% of their verified emissions.

This SI makes technical changes to free allocation rules regarding the electricity generator classification for industrial installations. It will amend the electricity generator classification to consider only electricity exports in the baseline period, instead of all electricity exports since 2005, allowing operators to change their installation’s electricity generator classification if they have put a stop to the export of electricity. Electricity exports represent no more than 5% of the total produced allowances and will also be excluded from consideration in this classification.

The SI will amend the electricity generator definition to exclude installations that have produced electricity for sale if that electricity was produced by means of a high-quality combined heat and power plant, operating as part of an operator’s industrial activity. This will limit reductions in free allocation entitlements and provide further encouragement for industrial operators to achieve improved efficiency for their combined heat and power plants.

The SI also makes an operational amendment to the electricity generator classification. The SI will allow electricity generators to be eligible for free allowances after the application date if they can demonstrate that they produced measurable heat by means of high-efficiency co-generation during the allocation period.

The SI also remedies an inconsistency in the legislation to make it clear that carbon capture and other types of regulated activity may be carried out on the site of the same installation. The SI will allow provision of free allowances to industrial installations at the same site as a carbon capture plant.

As the Northern Ireland Assembly is not sitting and cannot consider affirmative legislation, this statutory instrument therefore covers only Great Britain. Officials in Northern Ireland have agreed that that none of the provisions currently affects operators in Northern Ireland.

These changes deliver on commitments made by the UK ETS authority and improve the operation of the scheme. For aviation, the SI will ensure that aviation free allocation is distributed appropriately until full auctioning for the aviation sector in 2026. This follows the decision announced in July that aviation free allocation will be phased out by 2026.

On free allocation technical changes, the SI will ensure that installations classed as electricity generators, whose eligibility for free allocation is limited, are able to change their classification if they are no longer exporting electricity. The SI will also ensure that industrial installations with high-quality combined heat and power plants which export excess electricity to the grid are not classified as electricity generators so as to not limit eligibility for free allowances.

On the electricity generator operational amendment, the SI will ensure that electricity generators can become eligible for free allowances during an allocation period if they meet the eligibility criteria. On free allocation rules around carbon capture, the SI will prevent industrial installations being disqualified from receiving free allowances if they are on the same site as a carbon capture plant—a situation that could pose a risk of disincentivising the uptake of carbon capture technology.

These changes either follow appropriate and comprehensive consultation with stakeholders or did not require consultation. In developing the UK ETS consultation in 2022, the UK ETS authority considered what technical improvements can be made to the current aviation free allocation methodology until free allocation is phased out. The responses to the consultation called for an end to the overallocation of aviation free allocation. In addition, the policy intent of aviation free allocation is to mitigate the risk of carbon leakage, and the policy did not intend for aircraft operators to receive more allowances than their verified emissions. To that end, in July the UK ETS authority announced the decision to cap aviation free allocation at 100% of verified emissions.

In the consultation on developing the UK ETS, we considered technical changes to free allocation rules regarding the electricity generator classification. The majority of respondents agreed with our suggested amendments, and the UK ETS authority announced that it would proceed with changes to the electricity generator classification. A consultation was not carried out for the CCUS free allocation amendment as this is a clarification of existing policy intention and not a change in policy.

In conclusion, these alterations to the UK Emissions Trading Scheme will support its role as a key pillar of the UK’s climate policy. They show that we will take action to improve the scheme where necessary and continue our record of delivering on our commitments. I therefore commend this order to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, perhaps I may make a few comments in front of the crowd here. I welcome the SI generally , obviously, and want to try to ensure that it works properly. I have a couple of specific questions.

I am interested in understanding how the free allocations were allocated or what the baseline was for the airlines. Also, in the scheme as a whole, what proportion of units are free issue these days? I would be very interested to hear that for the current period, which I think goes up to 2026.

The Minister referred to the UK ETS as the cornerstone of ambition in terms of net zero, but of course, that cornerstone is crumbling at the moment. I would be very interested to hear, more strategically, how the Minister sees the fall in the carbon price per tonne, which has moved this year from around £100 at one point down to under £50.

To me, that seems to be, in the words of Energy UK, a major disincentive to investment in the renewables sector. As I understand it, it has threatened the Treasury to the tune of £1 billion so far this year and will mean a hit of something like £3 billion on the Treasury per annum if that price continues. As we know, there is also a threat from the European Union’s move to a carbon border adjustment mechanism—particularly in 2026, when those measures will really start to bite. There is a feeling that UK industry’s exports to the European Union could be threatened by some £500 million per year if that price remains as it is. I want to know the Minister’s understanding of why the price has fallen so much. My economics A-level tells me that, with supply and demand, when demand stays roughly the same but the price goes down, there is an all-round surplus in the supply of those units. However, there is also a volatility there, perhaps through a lack of liquidity in the scheme as a whole.

Looking again at the trade and co-operation agreement, particularly the area of energy in 2025, I would be interested to understand whether this is an opportunity to bring those trading schemes more together again, which was a target that the Government sought to achieve when that agreement was first made. Clearly, the fall in price strongly affects the renewables and clean energy industries. It seems to me that, not just from a Treasury point of view but from an industry and net zero point of view, we need to get that price back up again. I would be interested to hear the Minister’s comments on how that can be achieved—or indeed whether the Government wish to achieve it.

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Lord Callanan Portrait Lord Callanan (Con)
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I thank the noble Lords, Lord Teverson and Lord Lennie, for their contributions. As I said in opening, the SI will implement a number of necessary changes and improvements to the scheme. The UK ETS is a cornerstone of our climate policy and it sets a cap on emissions in the sectors covered—currently, about a quarter of the UK’s emissions. In doing so, it guarantees that these sectors will reduce their emissions in line with our overall net-zero target. The carbon price generated by the need to acquire allowances within this cap incentivises the investment in decarbonisation that is needed to make sure that we can build a thriving net-zero economy.

In July, the UK Government and the devolved Governments, who all comprise the joint UK ETS authority, set out a comprehensive package of reforms to the scheme. These reforms increase the ambition of the UK ETS, setting its cap on a path to net zero. As set out in that package of reforms in July, a wide range of changes is required to ensure that the ETS remains a key part of the UK’s approach to achieving net zero.

As part of the UK ETS authority, with the devolved Governments, we are determined to run and develop the scheme in the most effective way possible. Our aim is to be predictable and responsible guardians of the scheme and its markets. That is fundamentally why the changes in this SI are being brought forward: to deliver on our previous commitments and make essential improvements to the scheme. The alterations to the scheme that this SI brings about will support its role as a key pillar of the UK’s climate policy. They demonstrate the value of the detailed consultation that we have carried out with scheme participants. We are committed to listening to views and implementing changes where necessary to make the scheme run as efficiently as possible, so that it ultimately achieves its aims. The changes to aviation free allocation and technical changes to free allocation follow the comprehensive consultation on developing the UK ETS carried out last year. They deliver on commitments made in the response to that consultation in July.

I will now pick up on the points made in the debate, first in response to the noble Lord, Lord Teverson. We have decided to cap the total amount of aviation free allocation that operators are eligible to receive to ensure that aviation free allocation is distributed appropriately until full auctioning in 2026. In 2021, the level of aviation free allocation issued to operators surpassed the sector’s verified emissions, primarily due to the impacts of Covid-19 on aviation activity. However, even prior to the impacts of Covid-19, under the EU ETS, a number of operators received more free allocations than their verified emissions.

The current aviation free allocation methodology calculation is based on 2010 activity data, which is now of course inconsistent with current aviation activity and creates competitive distortions between participants. Not capping the amount aircraft operators are eligible to receive therefore effectively shields them from the price signal and provides an opportunity to benefit from the scheme, which, I am sure we would all agree, was not the intended aim of the policy. To answer the noble Lord’s question, in 2022, the proportion of UK ETS emissions covered by free allocations was approximately 36%.

On the noble Lord’s point on the fall of the UK ETS price, it is of course a market mechanism, and the price of carbon allowances in the emissions trading scheme is ultimately set by that market. However, in line with the net-zero cap that we announced in July, the supply of emissions allowances entering the market will fall significantly every year from 2024. Using the noble Lord’s supply and demand analogy, we can probably predict—without saying it—what will happen to the price in such circumstances.

Lord Teverson Portrait Lord Teverson (LD)
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Is the Minister happy that the price has fallen by half this year?

Lord Callanan Portrait Lord Callanan (Con)
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As it is a market mechanism, I have some sympathy with the noble Lord’s point of view, but it would probably not be wise for me to comment on the overall price. I will let the market determine what it should be. If I say what I think the ideal target price should be, that would clearly be interfering in the market, which the noble Lord can understand I should not do.

We are committed to continuing to deliver these changes, as shown by our legislating to amend the supply of allowances over the coming years and the publication of the auction calendar for 2024. The authority has also committed to exploring measures for the future of the UK ETS market, including examining the merits of the supply adjustment mechanism, which would be a means of amending the supply of carbon allowances in response to market conditions.

The noble Lord, Lord Teverson, asked about the impact of the EU CBAM. We are of course following developments closely and engaging with the Commission to discuss the technical considerations relevant to UK manufacturing because, even though EU CBAM charging does not start until 2026, companies will have to report on their emissions from 2024 to 2026, prior to charging. We will see whether the EU proceeds with charging, but it will clearly have a significant effect on many UK companies supplying into the EU market, given the additional bureaucracy they will have to go through. Noble Lords should watch this space: I am sure the Government will have more to say on this shortly.

As I said, UK ETS prices are set by the market, as it is ultimately a market mechanism. The UK market is clearly separate from the EU market. It is therefore possible that prices will fluctuate and differ, although it is worth saying that both have similar levels of ambition. We will continue to work domestically and internationally to find solutions to any risk of carbon leakage and our ambitious climate commitments rightly require our industries to decarbonise. This includes our running a consultation earlier this year on domestic measures to mitigate carbon leakage, including a potential UK CBAM and mandatory product standards. We are looking at all these issues holistically to see which is the most appropriate carbon leakage mitigation across a number of policy designs. The response to that consultation will be published—to use the phraseology—in due course, and a further consultation on free allocation policy is due later this year.

On the point of the noble Lord, Lord Lennie, on linking the UK ETS and the EU ETS, as he correctly pointed out, under the terms of the TCA, the UK and the EU agreed to consider linking our respective carbon pricing schemes and to co-operate on carbon pricing. We are open to the possibility of discussing linking the UK ETS internationally with other schemes—it is not just the EU’s; there are a number of other schemes across the world—and we will continue to work collaboratively with other jurisdictions to tackle shared challenges and learn from the experience of others as we continue to develop the UK ETS. Indeed, I attended a meeting with a number of other jurisdictions only last week to discuss that very topic.

On the point raised by the noble Lord, Lord Lennie, on carbon capture and storage, there is currently an inconsistency in how capture activities and installations are dealt with in the ETS legislation, and that does not currently reflect the department’s policy. Some areas of the legislation recognise that capture and other regulated activities might occur at the same installation, but in other areas it is assumed that capture activities will be self-contained. The amendments clarify that carbon capture may take place on the same site as other UK ETS installations or regulated activities without the loss of free allocation in respect, of course, of non-capture activities. There has been no negative impact to date, as this technology is still very new and CCUS activity is not yet taking place, but the amendment will help incentivise the uptake of CCUS technology in the future and ensure that no negative impacts occur as it continues to develop.

On the electricity generator amendments and the impact of the previous baseline period, these rules were simply carried over from the existing EU ETS for consistency and we are now amending them to tailor them to the UK system. I hope I have answered all the points I was asked about and commend the order to the House.

Climate Financing

Debate between Lord Callanan and Lord Teverson
Tuesday 17th October 2023

(4 months, 1 week ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I must disagree with the noble Baroness. There has not been any rollback on the Government’s targets. There is a legally binding commitment, which we will maintain, and of course we have a number of legally binding carbon budgets, which we will also maintain. We are adamant that we are on track to meet all of them.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I very much welcome the Minister’s confirmation of the UK’s role in international finance on climate change, but money is not the only thing. Technological transfer and transfer of expertise are equally important. Will the Minister tell us what the UK Government are doing to ensure the transfer of expertise and technology that we have in the UK, particularly in areas where we lead, such as offshore wind and other technologies? Are we working strongly to transfer that to economies in the south who can use it even more than we can?

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord is absolutely right. We are world leaders in many technological developments. Offshore wind is one example, floating offshore wind would be another, and a third would be the deployment of solar technology, which could be immensely valuable in many parts of the developing world. We share expertise through the good offices of the Foreign Office as much as we possibly can.

Net Zero (Economic Affairs Committee Report)

Debate between Lord Callanan and Lord Teverson
Monday 16th October 2023

(4 months, 1 week ago)

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Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I also declare my interest: it is in a company called Aldustria Ltd, which is into energy storage. I absolutely agree with the noble Lord, Lord Frost, that there are many issues around energy storage, particularly in the long term, on which I know the Government have done a number of consultations.

I congratulate my noble friend Lady Kramer on her introduction to this report. She is absolutely right: it has taken far too long to get it to the Floor of the House. As the noble Viscount, Lord Chandos, said, there have been three Prime Ministers since the report came out. The only thing that I would say is that it has actually managed to get to the end of its process slightly quicker than the Government’s Energy Bill, which started in the same month that this report was published but has still to be completed. I hope that that will happen before the end of this month. That shows the urgency that the Government wanted to put into their energy strategy but did not, particularly on electricity and carbon capture and storage.

I shall come back on energy costs for a minute, in response to the noble Lord, Lord Frost. The noble Viscount, Lord Chandos, is absolutely right about 2050. It is not about reaching net zero that year—you have to get it all the way through. I do not think that methane was mentioned in the report—I may be wrong—but that is one area where there may be some quicker wins.

I absolutely agree with the noble Lord, Lord Turnbull, about Rough storage, although I think that only a small amount of that facility is contracted to the Government. Centrica is hanging on to the rest of it, and there is no guarantee that it will be there long term. That is a real vulnerability.

As for new gas and oil and, particularly, coal facilities, I do not see any UK Government banning exports of those products. I do not see that ever happening, which is why I do not think that there is any effect on our energy security or, indeed, on global pricing for those new openings.

I shall come back on demand reduction in a minute in response to the noble Baroness, Lady Bennett, as it is an important area. But I just say to the noble Baroness, Lady Noakes, that I came up as a traditional economist, and it always seemed to me that it was really important to cost the idea of externalities into actual pricing systems. With carbon emissions we have huge externalities that are not priced into market competition—and that is why there have to be differences.

I also say to the noble Baroness that, of course, there is a huge kickback at the moment to the Government on contracts for difference through the Low Carbon Contracts Company, whereby at the moment actual market prices are hugely higher than strike prices. I would be interested to understand from the Minister—

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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It is not a kickback to the Government—it is a kickback to the consumer.

Lord Teverson Portrait Lord Teverson (LD)
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Yes, exactly. The Minister corrects me. That is even more to the point. I think it has got to several billion pounds in terms of coming back into that sector working the other way, which probably exceeds now the green costs that there were. That is quite an optimistic look at that.

It seems to me that one real problem in this area—because the world has moved on since last July—is with those recent announcements that my noble friend went through from the Prime Minister. They probably did not have as big an effect as some people said, but they did drive a horse and carriage through our international reputation, as indeed did the coal decision in Cumbria. Our being seen as a global leader in this area, which the report was keen to emphasise, has been trashed to a large degree, and has been seen as such by allies such as America and the European Union.

I want to come back to those announcements, one of which was to abolish the Energy Efficiency Taskforce. The Minister was chair of that, and I understand that four meetings took place. Whether you look at security or at cost, the most secure energy is the energy that you do not need. The energy-efficiency side is important in that area, as well as cost. I would be interested to understand from the Minister why he was made redundant by the abolition of that committee. The UK should be a real leader, and really move in this area. The report asks for an energy demand reduction strategy, and that is really called for. It is not just around buildings, as the Government’s response said that it was; it is around a much broader area, including appliances and other interests.

One thing that has been emphasised during this debate is private investment, which it is clear is absolutely essential to deliver net zero. I am not pessimistic about this. Most private investment takes place to reduce costs, not to increase them. Companies do not invest to increase prices; they invest to reduce prices, and that is what we should aim for with the net-zero strategy.

One problem with the Prime Minister’s announcement, and all the other issues that have happened, is that we have a wobble with investor confidence—absolutely we do. Those messages that go out to industry and the investment sector say that we are no longer reliable on our government policy or on the foundation of confidence going forward. That has an even bigger effect when we have the Inflation Reduction Act in the United States and the EU green deal industrial plan on the other side of the channel. I would be interested to understand from the Minister when the Government will really respond to that huge financial challenge, which really prejudices how we can deliver net zero through the private sector in future.

I will make one or two further points, as I am sure the House will want to move on. The noble Baroness mentioned the UK Emissions Trading Scheme. I have been very hopeful—not because I am pro-European but because of liquidity and various other areas—that there should be a tie-up between the UK Emissions Trading Scheme and the EU equivalent. I understood that that was a government objective, but now we have a huge divergence in prices. The UK ETS a year ago was about £100 per carbon tonne; it is now down below £40. In the EU, it was around €100 per tonne a year ago but is now down to about €80. A huge difference has opened up. I would be interested to hear the Minister’s reaction on how the carbon border adjustment mechanism will affect that, as Europe starts to develop it over the next few years. That price signal is so important in terms of taxation and disappearing incentives for investment in our economy.

I am glad to see the noble Lord, Lord West, is here, because one of the key issues in energy security at the moment is defence, which has not been mentioned in this debate. In Finland, we have seen potential interference with the explosion of one of its energy pipelines and we have seen Nord Stream 1 and 2 destroyed. We know from our intelligence that the Russian Federation is keeping a very close eye on our undersea energy and communication networks. The Minister may not have an answer to this, but it is one of our major concerns in energy security as we move forward and have more interconnectors offshore. I am sure he agrees that this is a major thing we must look at.

Finally, coming back to consumers, the energy companies and Ofgem estimate that, as we reach the end of summer and enter winter and higher bills, the outstanding energy bills from consumers will be about £2.6 billion. Are the Government happy with that? Do they think it is sustainable for low-income families? Do they intend to do anything about it? This is probably the biggest challenge of all. Although the noble Lord, Lord Frost, talked about the importance of gas, which will be important for many years, the gas price has driven inflation and the high costs to families of keeping warm. It has led to inflation, which has led to the failure of those offshore wind projects. It is important that we restart that, but the problem is not the technology and the price coming down in real terms; the problem is inflation. What will happen to families over this winter?

Climate Change Policies

Debate between Lord Callanan and Lord Teverson
Wednesday 20th September 2023

(5 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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The noble Baroness makes a number of statements before she has even heard what the Prime Minister has to say later; perhaps she might want to read what the Prime Minister actually announces and revise her statements in light of that.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, the Minister has provided a list of things that all of us have been proud of in the past, but the point is that is the past. This announcement is a tragedy for this nation because that leadership that we had globally, of which we all were proud, is about to disappear. The Prime Minister is likely to say that the target of net zero still exists, which is a fabrication. We know from the Climate Change Committee, the Government’s own adviser, that we are already behind that in terms of policy. This will kill that objective.

We have the IRA in the United States and the green investment plan in the EU. We are now retreating from international investment. The question I ask the Minister is where the investment will come from to get us to net zero, but the question I really want to ask is how come any Ministers are still in the department for net zero. They should have all resigned this morning.

Lord Callanan Portrait Lord Callanan (Con)
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As the noble Lord knows, net zero is a legal commitment imposed on us by Parliament; it is the duty of Ministers to meet that commitment, and we will do so. As I have said, we are currently overachieving on carbon budgets 4 and 5; carbon budget six does not start until 2033. I have sat down with policy officials, and we are confident that we are on track to meet that as well. We are attracting record amounts of inward investment into this country. I talked earlier about the windfarm industry; we could talk about hydrogen or CCUS—the UK is world-leading on all those policies and many global companies are rushing to invest in the UK. Our difficulty is prioritising some of that investment.

2030 Emissions Reduction Target: Heating

Debate between Lord Callanan and Lord Teverson
Tuesday 5th September 2023

(5 months, 2 weeks ago)

Lords Chamber
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Lord Teverson Portrait Lord Teverson
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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.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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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 Portrait Lord Teverson (LD)
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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 Portrait Lord Callanan (Con)
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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.

Oil and Gas Windfall Tax

Debate between Lord Callanan and Lord Teverson
Wednesday 19th July 2023

(7 months, 1 week ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Lord Teverson (LD)
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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 Portrait Lord Callanan (Con)
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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.

Decarbonisation

Debate between Lord Callanan and Lord Teverson
Thursday 13th July 2023

(7 months, 2 weeks ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Lord Teverson (LD)
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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 Portrait Lord Callanan (Con)
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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.

Cement Industry: Carbon Dioxide

Debate between Lord Callanan and Lord Teverson
Wednesday 12th July 2023

(7 months, 2 weeks ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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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 Portrait Lord Teverson (LD)
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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 Portrait Lord Callanan (Con)
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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.

SMEs: Net-zero Targets

Debate between Lord Callanan and Lord Teverson
Wednesday 7th June 2023

(8 months, 2 weeks ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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The noble Baroness makes an important point. The encouragement of green jobs and helping workers to go from the old fossil fuel economy to new jobs is a challenge. We are spending several billion pounds a year working with the DfE and across the various green homes grants. We have a number of highly skilled green jobs funds, which industry accessed. There is no one simple answer but she is right; it is a job that we are working on.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, earlier today, I spoke to an owner-manager of an SME in the print industry in my part of the world. She said that her biggest issue in trying to become a B Corp SME is getting information from big suppliers on their scope 3 emissions, which is really important for SMEs that want to go down this path. Could the Minister take this issue and how it might be solved back to his department, or give me an idea of how that issue might be approached by the Government in future?

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord makes an important point. We are aware of this issue. We are increasing the reporting requirements for bigger companies. We must be careful to make sure that we do not put too many undue burdens on business but I will certainly have a look at the issue for the noble Lord.

Energy Bills Discount Scheme Regulations 2023

Debate between Lord Callanan and Lord Teverson
Monday 22nd May 2023

(9 months ago)

Grand Committee
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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My Lords, these regulations were laid before the House on 25 April this year, as were the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023, the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023, the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 and the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023.

These instruments ensure that essential energy bill support continues to be provided to eligible UK businesses, charities and public sector organisations, following on from the energy bill relief scheme support, which ended on 31 March this year. Each of them is a replacement for an earlier set of regulations that implemented that original scheme. Together, they cover UK businesses that are supplied by both licensed gas and electricity suppliers and licence-exempt suppliers. They also ensure that any end user receiving energy that is supplied with the benefit of these schemes through an intermediary will get a “just and reasonable” share of that benefit. In the absence of an intervention of this kind, energy bill support would no longer be provided to non-domestic customers where they were exposed to the impact of high wholesale market prices.

The Energy Bills Discount Scheme Regulations for Great Britain, the Energy Bills Discount Scheme (Northern Ireland) Regulations, the Energy Bills Discount Scheme (Non-Standard Cases) Regulations, the Energy Bills Discount Scheme Pass-through Requirement Regulations and the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations, which I will refer to collectively as the “EBDS Regulations”, have been created under the Energy Prices Act, which the Committee will recall gained Royal Assent on 25 October last year.

The Energy Prices Act, introduced in Parliament on 12 October last year, provided the legislative footing needed to ensure that businesses across the UK receive support with their energy bills through the energy bills discount scheme. The EBDS regulations are essential secondary legislation needed to implement and operationalise the scheme. The purpose of the regulations is to provide a discount on the wholesale costs for electricity and gas supplied by licensed and non-licensed energy suppliers to eligible non-domestic customers, and to make payments to suppliers in respect of those reductions in Great Britain and Northern Ireland. To protect eligible non-domestic customers from excessively high energy bills, the EBDS will run for a 12-month period from 1 April this year to 31 March 2024.

I thank the Secondary Legislation Scrutiny Committee for reviewing these regulations. We welcome the conclusion it reached and that it took some assurance regarding the effectiveness of the energy bills relief scheme pass-through requirements. I reaffirm that we will continue to monitor the effectiveness of the EBDS and that we expect to publish a report on both the Great Britain and Northern Ireland EBDS before the end of 2024, including the effectiveness of the pass-through requirements. We will continue to review our pass-through requirement communications strategy, including reviewing guidance on GOV.UK and offering engagement sessions to ensure that intermediaries understand their obligations and that customers receive the benefits that they are entitled to.

I turn to the details of the regulations. The EBDS regulations set out that, with few exceptions, all non-domestic customers with electricity and gas contracts from both licensed and licence-exempt non-domestic energy suppliers will be eligible for a discount when the wholesale element of their contract is above a certain level. Licence-exempt supply includes energy taken from the public electricity grid or received via wire or pipe.

The EBDS GB and EBDS Northern Ireland regulations provide for three elements to the scheme for end users of licensed suppliers. The EBDS (Non-standard Cases) regulations replicate this for end users of licence-exempt suppliers. First, there is a baseline per unit discount applicable to all eligible non-domestic customers’ energy bills throughout the scheme’s duration. The discount will be applied if wholesale prices are above a certain price threshold. Secondly, a higher rate of relief will be provided to those non-domestic customers that carry out a substantial part of their UK activities in certain energy and trade-intensive industry sectors—so-called ETIIs.

Thirdly, there is the support aimed at domestic customers on heat networks. There will be a specific higher EBDS rate for heat networks supplying domestic customers set at a level to ensure that these customers do not face disproportionately higher prices than other domestic customers receiving the energy price guarantee. The EBDS regulations set out the process by which the energy supplier is reimbursed by the Secretary of State for the discounts that it gives. The EBDS (Northern Ireland) Regulations prevent end users who are outside Northern Ireland receiving the discount to their bills.

Finally, the EBDS regulations set out essential operational matters, including information and reporting obligations, enforcement powers and powers to impose civil penalties in respect of missing or defective declarations. Customers who receive gas or electricity from non-licensed suppliers—non-standard cases—will be supported under agreements on standard scheme terms. Due to the complexity of some licence-exempt supply chains, the non-standard cases regulations provide the Secretary of State with powers to obtain information from those involved and imply some terms into the contracts to help the scheme work more smoothly. Additionally, the regulations allow for revised EBRS terms, which expand eligibility under EBRS to include the cohort of non-standard customers who receive their energy via private wire or pipe, at a price pegged to wholesale rates.

The EBDS Pass-through Requirement Regulations, EBDS Pass-through Requirement (Heat Suppliers) Regulations, and EBDS (Non-standard Cases) Regulations provide for certain intermediary businesses, often landlords, that receive a benefit under the scheme but in turn provide energy to others to pass a just and reasonable amount of the benefit that they receive on to their end users. The regulations set out obligations on the intermediary, including calculating the amount and providing end users with information about this, as well as passing on the benefit as soon as reasonably practicable. They also set out the dispute mechanisms available.

To accompany the regulations, we have published a suite of non-statutory guidance, which provides further detail on how the schemes work. The objectives of these regulations are to protect businesses and non-domestic customers against the volatility of the variable market and avoid firm closures and redundancies, particularly for ETIIs. They also ensure that domestic end users on qualifying heat networks are offered appropriate support.

In conclusion, the EBDS schemes will be a source of critical support for non-domestic customers in the UK, particularly those in energy-intensive sectors, many of which are essential national infrastructure. I emphasise that the measures in these regulations are crucial, because they bring the schemes into legal existence. The EBDS Great Britain, EBDS Northern Ireland and EBDS non-standard cases schemes complement the existing large-scale support that the Government are providing during the energy crisis.

I hope the Committee will support these measures and their objectives, and I commend the regulations to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, that is quite a long introduction, and I thank the Minister for it. I have to admit to him that I was looking around at the pictures, and thinking that it was interesting that Moses managed to base Judaeo-Christian law on 10 paragraphs, whereas here we have about 100 pages on energy. We will perhaps move on to that.

I wanted, while not trying to be disingenuous, to actually congratulate the Government on something in these particular instruments. In the instrument on heat suppliers, no. 455, on page 12, in paragraph 1E(6)(c), we actually have the court being able to apply a fine of up to £5,000 in terms of enforcement, which is how I read it. I thought, “bingo”: there is actually a way in which, when we go through all these pass-through regulations, we could actually have something which might appear like a civil on-the-spot fine, which is a way to deter or provide some jeopardy if these pass-through arrangements are not adhered to. But needless to say, in instrument no. 463, we are back to the 2% on the outstanding amount. I am not asking the Minister to go through that again, but I genuinely believe that there was a sensible solution in terms of enforcement and that sort of approach, which could have been used in the other SIs.

On the energy and trade-intensive industries, one of the sectors that is not there is agriculture. I know that the Minister has a very good relationship with Defra, but I wondered whether he could perhaps take back again the fact that the horticulture sector—poultry, I understand, as well—is equally energy intensive, yet that primary industry sector has been left out. I realise, clearly, that this SI cannot be amended to do that, but I show my regret in this context that the agricultural industry has been left out of that. Perhaps the Minister would like to offer an explanation of why.

There is a cap here, which I am not necessarily against, of £5.5 billion. Is it on a first come, first served basis, or are the Government completely assured that that limit will not be hit?

Lastly, my only other question is whether the Northern Ireland situation has been sorted out with the European Union, in terms of approval, which I understand is in process.

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Lord Callanan Portrait Lord Callanan (Con)
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I thank the noble Lord, Lord Teverson, and the noble Baroness, Lady Blake, for their valuable contributions. I start by saying that the Government have implemented the EBDS to protect businesses and non-domestic consumers from the volatility of the market and, of course, to deliver critical energy bill support, while also taking account of the fact that wholesale prices are now well below previous levels seen during the peak of the energy crisis. The schemes have been designed to operate robustly and guard against fraud and gaming. We will continue to monitor the schemes to ensure that this support is provided to the people and businesses it is designed to help.

I will now respond to the questions raised by both noble Lords. As the noble Lord, Lord Teverson, pointed out, the regulations require that relevant intermediaries, including landlords, claim the benefit and pass it on to end-users. Intermediaries must take all such reasonable steps necessary to ensure that they are provided with the energy bills discount scheme benefit to which they are entitled, so that they may pass it on to their end-users.

We have taken a consistent approach to determine ETII eligibility. Organisations that operate primarily within an eligible sector will be eligible for the support. This means that about 50% of UK revenue generated in the relevant period must be from activity in an eligible sector. I am sorry to tell the noble Lord that the Government currently have no plans to review the eligibility criteria for the energy and trade intensive element of the EBDS. The Treasury-led review of the energy bill relief scheme took account of many contributions from the private sector, trade associations, the voluntary sector and other types of organisations, and the list is what we ended up with following that.

Finally, I can confirm to the noble Lord, Lord Teverson, that discussions with the European Commission are ongoing, and we hope to reach a conclusion on them soon.

The noble Baroness, Lady Blake, also raised the role of intermediaries and pass-through. As she said, we will continue to monitor the effectiveness of the pass-through regulations as well as our communications strategy for communicating to end-users. Detailed guidance has been produced on GOV.UK to help ensure that consumers and intermediaries, and those who advise them, are aware of the specifics of the scheme.

With regard to the noble Baroness’s point on non-standard cases, we have engaged with a range of stakeholders, and the extended eligibility announced on 1 April means that non-domestic customers on private wire networks are now supported. This includes businesses receiving energy from biomass and waste, to give two examples. The Government remain committed to ensuring that consumers continue to receive help with the rising cost of living, which at the moment includes energy bills. These regulations are vital in ensuring that support is delivered to non-domestic customers and, crucially, to domestic heat network consumers. I therefore commend them to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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On Northern Ireland, I am interested to understand whether the Commission is being difficult and finding objections or whether it is just a question of it taking the time that it takes.

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord will understand that I do not want to go any further at the moment. It is a sensitive area. We are engaging in discussions with the Commission and hope to reach a decision soon. I very much hope that it is not just being deliberately difficult but is seeking the necessary reassurances with regard to the state aid regulations.

COP 28

Debate between Lord Callanan and Lord Teverson
Wednesday 17th May 2023

(9 months, 1 week ago)

Lords Chamber
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Lord Teverson Portrait Lord Teverson (LD)
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I agree with the noble Baroness that it is a great disappointment that we do not have a Secretary of State going to the Gulf for COP 28. Will the UK still be chairing the Powering Past Coal Alliance that it has led and chaired in the past? If so, will it therefore cancel its coal mine intentions in Cumbria, here in the UK?

Lord Callanan Portrait Lord Callanan (Con)
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I am not going to get into the debate about Minister Stuart. He does an excellent job and is well respected across the international community for his work, building on the work that we did at COP 26. We are committed to the Powering Past Coal Alliance. I think the noble Lord is being slightly disingenuous; he knows that the coal mine in Cumbria is nothing to do with power generation.

Non-Domestic Alternative Fuel Payment Application Scheme Pass-through Requirement Regulations 2023

Debate between Lord Callanan and Lord Teverson
Tuesday 16th May 2023

(9 months, 1 week ago)

Grand Committee
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Lord Callanan Portrait Lord Callanan (Con)
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I thank my noble friend Lady McIntosh, and the noble Lords, Lord Teverson and Lord Lennie, for their comments.

This instrument is necessary to ensure the proper delivery of the non-domestic alternative fuel payment scheme by allowing support to reach those who need it. The scheme is already in place and delivering much-needed support to non-domestic consumers across the UK. The scheme supports a wide range of businesses and other non-domestic consumers that are not connected to the gas grid. As I said, it is delivering a payment of £150, thereby helping businesses and organisations that rely on alternative fuels to meet their eligible costs. Most eligible customers should have already received their £150 payment by the end of March as a credit from their electricity suppliers. Where these payments were received by an intermediary, the pass-through regulations that we previously made ensure that they passed it on to the end users in a just and reasonable way. Although a relatively small proportion of businesses and organisations are entitled to a top-up payment, these payments are also important in ensuring that those consumers are not left behind and receive support comparable to those received by consumers on the gas grid and who have benefited from other schemes.

We opened an application service for the top-up payment on 20 March, and we are processing payments as quickly as possible. In addition to the top-up payment, we provided a route for customers to apply for the basic £150 payment in the limited circumstances where it was not possible for them to receive it through an electricity supplier. These regulations ensure that in all these circumstances, where a payment is made following an application, end-users benefit from the requirement that intermediaries pass on that support in a just and reasonable way. It is a case of extending the safeguards already in place for the earlier part of the scheme to payments made following an application.

On the specific points made in the debate, the noble Baroness, Lady McIntosh, asked about the duration of the support and the latest report from the JCSI. We are providing one-off payments to eligible businesses and organisations to ensure comparable support to that received by on-grid customers who have benefited from the energy bill relief scheme, and we are in the process of issuing payments to applicants. In response to the noble Baroness’s point about the JCSI’s comments on enforcement, also raised by the noble Lord, Lord Teverson, our view remains, as the noble Lord, Lord Lennie, correctly predicted, that there is little value in establishing a formal enforcement mechanism. However, we believe that it is important to include a provision on pass-through of information, as most intermediaries will comply with this.

The noble Lord, Lord Teverson, asked how successful the existing pass-through arrangements have been. We are not aware of any significant issues in the delivery of this scheme or the pass-through arrangements. Nevertheless, the scheme remains in progress, and we will continue to keep it under review and respond to any issues as they arise. As the scheme is still in progress, we are not yet in a position to say precisely how many businesses will benefit, but we believe that around 400,000 end-users will receive some level of payment under the scheme. That is a considerable amount of support.

Lord Teverson Portrait Lord Teverson (LD)
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I am grateful to the Minister for that. To clarify, is that the number of businesses that will benefit from this pass-through, as opposed to the scheme altogether?

Lord Callanan Portrait Lord Callanan (Con)
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No; that is the scheme altogether.

Powering Up Britain

Debate between Lord Callanan and Lord Teverson
Wednesday 19th April 2023

(10 months, 1 week ago)

Lords Chamber
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Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I do not in any way disagree with the noble Lord, Lord Lennie, but I have tried to be positive about these reports; a whole suite of reports has come out with this. I spent a little more time on the report entitled Powering up Britain: Energy Security Plan, which I thought may be the document that would get more to the heart of this. I also found the 2030 Strategic Framework for International Climate and Nature Action particularly interesting. These are a long read but have a list of really good stuff. They mention areas that we have debated here such as gas storage, grid connections, carbon capture, energy efficiency and demand management. A few are missing, but it is a very impressive list of subjects that this House has considered during the passage of the Energy Bill, whose Third Reading we await next week. It is a great list, but it is five years too late—something like that.

I have a number of questions for the Minister. Small modular reactors are listed in the energy security plan. When do we expect them to come online? Going back to something we discussed on the Energy Bill, the energy security plan mentions the core responsibility of the future systems operator, or ISOP as we know it. When is it actually going to be established so that it can get on with its work? Those I have spoken to in National Grid ESO are really champing at the bit, because they need to get on with it, as this report says, but it is still not there because of the slowness of the Energy Bill through Parliament.

On Sizewell C, which the report mentions, what lessons have we learned from Hinkley C? There are all sorts of lessons to be learned from budget increases and other issues relating to the building of that. On planning, I am pleased to say that it talks about trying to reduce planning periods, but in the debate on the levelling-up Bill yesterday we discussed how the planning system is core to delivering net zero. In fact, as both the Climate Change Committee and the Chris Skidmore report asked, are the Government going to embed net zero properly into the planning system? As the noble Lord, Lord Lennie, asked, will we really meet not just the COP 26 obligations but the fourth carbon budget, whose period just started, let alone the fifth? I do not believe that these plans really do that.

What impressed me at the end of the energy security plan was a whole long list of timetables. I hope that at DESNZ all the senior officials and the Ministers sit around the table every week and are driven by that plan. I suspect they might not be.

Finally, I am very pleased that the 2030 Strategic Framework for International Climate and Nature Action was published, but this comes back to something the noble Lord, Lord Lennie, said. In the introduction, I read something that really quite excited me, and I thought, “Here we get to the nub of it”. It says:

“Since the publication of the British Energy Security Strategy, our Environmental Improvement Plan and our Net Zero Strategy, the US has taken decisive action in allocating $370 billion for clean energy and manufacturing in its Inflation Reduction Act. And the EU has set out its ambitious plans to grow its green industries through the Green Deal Industrial Plan”.


I then looked on to the next paragraph to find out what we were doing. It went off completely on a different subject. When are we going to understand what our reaction is going to be to those two pieces of legislation in the United States and the EU—our major investment competitors?

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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I thank the noble Lords, Lord Lennie and Lord Teverson, for their comments. I want to thank the noble Lord, Lord Teverson, slightly more than I want to thank the noble Lord, Lord Lennie, because he was slightly more positive, but I thank them both for their comments anyway.

For too long this country has taken cheap, plentiful energy for granted. If the war in Ukraine has shown us anything, it is our decades-long overreliance on fossil fuels. Of course, we have all seen their record prices, but the Government have stepped in to help: we have been paying around half of a typical household’s energy bills this winter, and that support has been extended. Our longer-term challenge now is to bolster our energy resilience as a nation so that never again can we be held hostage by tyrants such as Putin, putting his hand into the pockets of every family and business in this country.

This plan is about setting out a clear path and why we have to diversify our sources of supply. We have to decarbonise them and we have to move toward greater energy independence to secure the cheap, clean energy that Britain needs to prosper in the future. We are making considerable progress along that path, but we all know that we have to do a lot more.

I will move to the specific questions I was asked. The noble Lord, Lord Lennie, asked me about onshore wind. I have a funny feeling that the noble Baroness, Lady Hayman, is going to ask me a similar question, so let me try to pre-empt her. We have included onshore wind in our latest world-leading contracts for difference scheme. We are currently consulting on amending the National Planning Policy Framework so that local authorities can better respond to communities when they wish to host offshore wind infrastructure. A government response will be issued in due course.

The noble Lord, Lord Lennie, also mentioned the US Inflation Reduction Act. Of course, we are well aware of the action taken by international partners to accelerate their own uptake of green technologies. They are getting to the party a bit late, but I am pleased to see that they are finally going in the same direction. We continue to engage with them on this. Although the Act is significant, the race for green tech started decades ago here in the UK, with the rest of the world now playing catch-up, adopting many of the same mechanisms, such as contracts for difference, that we came up with seven or eight years ago.

We will not go toe to toe with our partners in a subsidy race; I have not noticed any commitments from the Labour Party to do this either. Instead, we will double down on our global leadership in clean technologies to tackle climate change, using a range of levers from smart regulation to market frameworks and targeted investments. Noble Lords will also have seen, in the green finance strategy published at the same time as the plan, a lot more information on our very ambitious plans to mobilise considerable amounts of the private investment we will need.

The noble Lord, Lord Lennie, also asked me about our 2030 NDC. We remain firmly committed to delivering our international commitments under the Paris Agreement, including the 2030 NDC. While countries are not due to start reporting to the UNFCCC on progress towards meeting the NDC until 2024, we have already quantified proposals and policies to deliver by 2030 a reduction in emissions of 67% compared to 1990 levels, providing a great majority of the savings required for our NDC target of a 68% reduction by 2030.

The noble Lord asked me about energy efficiency and referred to some vague Labour plan. I would be delighted to see what Labour’s plan in this area actually is. I did see a half-baked press release last week, which was presaging a great announcement, but I do not think that that announcement ever happened. If it did, I certainly did not notice it. What I saw was not a plan at all; it was a wish list, without any numbers attached to it. I will tell the noble Lord exactly what this Government are doing.

When Labour left office in 2010, 14% of UK homes were at EPC level C or above. It is now 47%, and it will be over 50% by the end of next year. The Government are committed to improving the energy performance of homes across the country. I refer again to the new Energy Efficiency Taskforce that we have established to drive improvement. The Chancellor set a target of 15% energy reduction improvements by 2030, for which £6 billion of new funding will be made available from 2025 to 2028, in addition to the £6.6 billion already allocated in this Parliament. This is a key ask from many in the industry, providing long-term funding certainty, supporting the growth of supply chains and ensuring that we scale up delivery over time. In addition, we are still committed to the four-year, £4 billion ECO expansion, and noble Lords will have seen the announcement of the Great British Insulation Scheme and its additional £1 billion of funding.

Moving on, the noble Lord, Lord Teverson, asked me about nuclear and SMRs. I hope that presages that the Liberal Democrats might support us on nuclear in the future. This is well-established technology. We have invested £210 million with Rolls-Royce to develop SMRs in the UK. They are well established and we want to be world leaders in this. Realistically, it will be at least the end of the decade before they are rolled out. This is another world-leading green technology from which the UK can prosper.

Energy Bill [HL]

Debate between Lord Callanan and Lord Teverson
Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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Let me first thank all noble Lords for their amendments, and I thank the noble Lord, Lord Lennie, for the time he gave to discussing this matter. As always, there were valuable contributions from all parts of the House.

On the details of the amendments, Amendment 60, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, seeks to establish an industry-led advisory board for the ISOP. In the original consultation, the respondents strongly indicated that the body should be independent of energy sector interests, and I think that is a view shared by the Opposition. The Government therefore remain concerned that inserting in legislation a formal oversight role, as is being suggested, will place decision-making back in the hands of the energy sector and go against the reasons and mechanism for creating an independent ISOP in the first place. This could make the ISOP risk-averse or unwilling to take action that is potentially challenging to market participants but could be on the side of consumers, even if that action might be beneficial to the system itself.

We are therefore concerned that, rather than enhancing independence, members of such an advisory board would likely hold various energy sector conflicts. There are many ways this could crystallise, including resistance to systemic reform, more strident advice in favour of compensation for energy sector participants, or incumbent bias, for instance seeking to frustrate new market entrants which could stifle the innovation that I think everyone, in all parts of the House, is agreed that we need to reach net zero.

Establishing an industry-led advisory board for the ISOP would be similar to establishing one for, for instance, the Climate Change Committee—an organisation which, in our view, also needs to remain independent of industry interests. I hope noble Lords would agree that we need genuine, independent, expert thinking, rather than vested interests. Thankfully, this amendment is not required to ensure board independence; the Government intend to require that a number of sufficiently independent directors—or SIDs, to use the acronym—sit on the ISOP’s board. A SID is a board member who meets certain criteria to ensure that, as well as being skilled, knowledgeable and experienced, they are impartial, with restrictions including on certain shareholdings in the energy industry. Requirements in the ISOP’s licence will set a minimum number of SIDs to ensure that the ISOP’s board has strong representation from those outside the ISOP and is unconflicted by the interests of the energy industry.

To ensure effective scrutiny of the appointment of the ISOP’s chair, we are also asking the Office of the Commissioner for Public Appointments and the new departmental Select Committee, once established, to conduct pre-appointment scrutiny. Energy sector experts will have opportunities to input to the ISOP’s work, of course. For instance, the system operator’s business plan submissions, assessed by Ofgem, will continue to be open to consultation with market participants, including members of the specific industry forums mentioned in this amendment. Finally, through its price control process, Ofgem will ensure that the FSO is fully resourced to fulfil its objectives and obligations, including the funding of its statutory duties towards consumers, energy security and net zero.

Turning to Amendments 59 and 62, tabled by the noble Lord, Lord Teverson, again we agree with the sentiment of the noble Lord’s amendments, and the Government remain resolute that the ISOP shall be an independent public body. We continue to act to make this so. However, it is critical that the ISOP remains a dynamic organisation capable of adapting and evolving to the future conditions of the energy sector. I therefore hope the noble Lord will agree with me that it is preferable not to constrain the ISOP pre-emptively in legislation at this fairly early stage but to maintain some flexibility. With the rapid deployment expected in the energy sector, reasonable circumstances may arise in which the ISOP is well placed to take on some future energy sector role or interest.

Regarding the specifics of Amendment 62, I believe there are already significant controls and limits upon the Secretary of State in acting as the sole shareholder. These will include limits in the framework agreement, which we will of course make public. These controls will ensure that the ISOP’s operational independence is protected.

Legislating for the ISOP to “be independent” does not, in my view, appear to offer a material benefit beyond the controls already established in Part 4 of the Bill and the framework documents, but it risks preventing the intended corporate composition of the ISOP, thereby undermining its effectiveness.

Finally, on Amendment 61, also tabled by the noble Lord, Lord Teverson, the Government agree that it will be important to ensure that the ISOP is fully resourced to fulfil the objectives and obligations set out in its licence. In our view, the most effective funding mechanism to achieve this and realise our vision for an independent ISOP is for it to be funded by consumers through price control arrangements, much like the current gas and electricity system operators are today.

Levies placed on licensed bodies can be expected to filter through to consumers. However, we are concerned that the requirement to establish an audit board risks duplication with the current well-understood and transparent regulatory model established under Ofgem. Without a price control process run by the regulator, there is also a risk of poor consumer value for money. As with other regulated bodies in this sector, the ISOP will have the operational freedom it needs to manage and organise itself to effectively deliver its roles and objectives. We also intend the ISOP to sit outside the regime of Cabinet Office controls on spending, which bodies funded by taxes and levies are required to operate under.

With the explanations and reassurances that I have been able to provide, I hope that noble Lords will agree not to press their amendments.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I am very encouraged by the Minister’s response on the control of the board and the ISOP. I am disappointed about the funding flows, but I guess that it will work out as it works out. I think that is unfortunate, but I have no intention of pressing the matter. I beg leave to withdraw my amendment.

Lord Callanan Portrait Lord Callanan (Con)
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As I said, the powers that we propose to provide are essentially similar to those that the networks already have on the basis of essential safety works. Still, I am happy to provide the noble Lord with further information and details.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, when the IPCC report on the global warming challenge came out last week, and it gave a pretty dire view, the Secretary-General of the United Nations, António Guterres, who I think had just been watching the Oscars, said it was

“everything, everywhere, all at once”—

but I do not think he would have included the village hydrogen trials within that broad definition. I understand what the Minister has said, and I welcome all his assurances to local citizens about how the trials will work, but, frankly, the science clearly says that hydrogen sent through the gas pipe network to a range of residential properties does not work, does not make sense and is not going to happen in the future.

Cleaner Energy Technologies

Debate between Lord Callanan and Lord Teverson
Tuesday 14th March 2023

(11 months, 2 weeks ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I understand the point my noble friend is making, but the potential of hydrogen to support the global transition to net zero is widely recognised, with international partners, such as the US and the EU, also having set out significant support for hydrogen. The Government are supporting multiple hydrogen production technologies, including both CCUS-enabled and electrolytic hydrogen, to get the scale and cost reductions we need.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, the Energy and Climate Intelligence Unit released a report last week that stated that, when it comes to green steel, the EU has some 38 projects, while the United Kingdom has one—and eight of those in Europe are already functioning. Does that mean, for the country that invented the Industrial Revolution, that we are about to see the extinction of our steel industry?

Lord Callanan Portrait Lord Callanan (Con)
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No, I think the noble Lord is being too pessimistic, as he often is. We have ambitious projects supporting steel. The noble Lord is right that hydrogen is probably one of the technologies that will be required to decarbonise the steel industry and we are working closely with the industry on that.

Green Investment

Debate between Lord Callanan and Lord Teverson
Tuesday 7th March 2023

(11 months, 3 weeks ago)

Lords Chamber
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
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I think that the noble Lord wants to ask the Question standing in his name on the Order Paper; I hope so, anyway. The Government welcome international action on climate change, and work closely with allies and partners to ensure that we can collectively drive global decarbonisation. We continue to assess the impact of international policies on UK investment to ensure that we meet our net-zero and economic growth ambitions. The UK has made significant progress in decarbonising and growing our economy, and we will continue to back our ambitious targets with impactful domestic policy and targeted funding.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I will try to be a little more fluent in my follow-up question. This is very serious. Industry and many people see the Inflation Reduction Act and the EU response as a real threat to us—piggy in the middle—as an economy and on where we need to go on green investment. I do not get the impression that the Government have a plan here. It looks like we are a rabbit frozen in the headlamps of trucks coming in both directions. Is there really a plan coming for how we will survive this onslaught from our economic neighbours?

Lord Callanan Portrait Lord Callanan (Con)
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The short answer to the noble Lord’s question is yes, in essence. He is right to point to both these actions as potential threats, significantly so in the case of the US. The protectionist measures are the problem; we have no problem with it finally coming to the decarbonisation table. We are still waiting to see the details from the EU and will know more next week, but it does not look as though there will be much protectionism there: certainly, from the outline that I saw, none of the items listed is a particular threat. We are looking at this very closely across the Government and will be responding in due course.

Heat and Buildings Strategy: Gas Boilers

Debate between Lord Callanan and Lord Teverson
Tuesday 28th February 2023

(11 months, 4 weeks ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I can correct the right reverend Prelate. We have not set a date of 2035 for prohibiting the installation of new gas boilers; we have said that this is our aim but, crucially, it will depend on the availability of cheap alternatives for people to heat their homes with.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, the overwhelming evidence is that hydrogen will never work in domestic heating. Will the Government stop their trials of hydrogen villages and concentrate their efforts where hydrogen really can make a difference?

Methane Emissions

Debate between Lord Callanan and Lord Teverson
Wednesday 22nd February 2023

(1 year ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I do know the answers to the noble Baroness’s questions, she will be shocked to know. In answer to her first question, I say that the UK is signed up to, and helping to implement, a global target. On the waste sector, she is absolutely right that we need to do more. Landfill emissions over the last 25 years have been tackled in two ways: by reducing the amount of biodegradable waste going to landfill, with the landfill tax being a key driver, and by increasing the efficiency of methane collection from existing landfills. The other thing we need to do more is to increase waste food collections, so that we can generate more clean gas through anaerobic digesters, which is part of my department’s policies.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, the Minister mentioned the word “urgency”, yet if we look at the North Sea, we are emitting three times the amount of methane compared with the equivalent extraction by Norway. On our side, the Government, through the North Sea Transition Authority, are just saying that there should be an end to the regular venting and flaring of methane by 2030. Should we not be performing as well as Norway now, if that urgency is there?

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord is right that we need to do better venting and flaring; it is a priority. We set out our commitment to the World Bank’s Zero Routine Flaring by 2030 initiative, as the noble Lord said. We are working with regulators and industry to eliminate this practice as soon as we possibly can.

Vulnerable Households: Energy Costs

Debate between Lord Callanan and Lord Teverson
Tuesday 31st January 2023

(1 year ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I am interested to see the noble Lord’s figures on that. Various amounts of support are being imposed by different Governments, at different levels and in different ways, so there is a mixed picture across Europe. I know that the German Government, for instance, are putting a huge amount of money behind bills support, as indeed are the UK Government. I struggle to believe that bills are double what they are in Europe.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, one reason we have very high energy prices, obviously apart from Putin himself, is that we are still very reliant on gas for heating and the generation of electricity. Should not one of the tasks of Ofgem be to persuade the Government to make sure that they have as one of their prime objectives the decarbonisation of our electricity system, not least to make sure that we have connections into the grid—it is a crisis at the present moment?

Lord Callanan Portrait Lord Callanan (Con)
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Ofgem does not need to persuade the Government to do that. We already have decarbonisation of the grid as one of our prime objectives. The noble Lord is right that we still rely very heavily on gas. It is a falling proportion of our generation, as we roll out more and more renewables, but it is a transition. We are advanced on that transition but we clearly need to go faster.

Energy Bill Relief Scheme (Non-Standard Cases) Regulations 2023

Debate between Lord Callanan and Lord Teverson
Monday 30th January 2023

(1 year ago)

Grand Committee
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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My Lords, I beg to move that the Energy Bill Relief Scheme (Non-Standard Cases) Regulations 2023, which were laid before the House on 11 January, be approved.

The EBRS regulations require licensed suppliers to discount their prices for the supply of electricity and gas to non-domestic consumers. Licensed suppliers provide the vast majority of electricity and gas supplied to non-domestic customers but some UK businesses do not receive their energy in this way. The Energy Prices Act 2022 allows us to provide financial assistance for energy costs using non-legislative schemes. On 9 January 2023, the EBRS non-standard customers scheme opened for applications. This is a grant scheme that allows payments to be made to those non-domestic customers who receive an unlicensed supply of electricity or gas that has been drawn from the public electricity or gas grid over the period from 1 October 2022 to 31 March 2023. The regulations we are discussing today are ancillary to the non-standard customers scheme.

The businesses eligible to benefit from the scheme include energy-intensive critical national infrastructure. They have been exposed to high energy costs in the same way as those who have benefited from discounts under the EBRS regulations. The scheme enables them to receive relief at a level comparable to the customers of licensed suppliers. We expect businesses to begin receiving support under the scheme this month; this will be applied retrospectively. The EBRS non-standard cases regulations are essential secondary legislation needed to support the operation and delivery of the EBRS non-standard cases scheme. I pay tribute to the work of the Secondary Legislation Scrutiny Committee for reviewing these regulations and note that it has no comments.

Let me turn now to the detail of the regulations for the benefit of the Committee. Identifying who is eligible to receive payments under the scheme is not always straightforward. The regulations provide the Secretary of State with powers to obtain information from those involved in the often quite complex supply chains through which this energy flows, so that we can be sure that the right businesses are admitted to and benefit from the scheme. They imply some terms into the contracts between those involved in these supply chains to help the scheme work more smoothly.

Finally, as in the case of all the schemes put in place under the Act, they provide for certain intermediary businesses—again, often landlords—that receive a benefit under the scheme but which in turn provide energy to others, often in another form, such as heat, and pass a fair share of the benefit that they receive on to their end-users. The regulations also make provisions for pass-through requirements. The energy provider must calculate and pass through a just and reasonable amount of the benefit to end-users as soon as reasonably practicable.

These regulations set out the information which relevant intermediaries are required to provide end-users about the scheme benefit, including the amount and supporting details about how they have calculated this in a just and reasonable manner. Where the energy provider fails to effect a pass-through, the amounts are recoverable from the energy provider by the customer as a civil debt.

To accompany the regulations, we have published a suite of scheme terms and non-statutory guidance, which provides further detail on how the scheme for non-standard cases works. Given the urgency of ensuring that organisations receive the support they need this winter, we have not launched a formal consultation. Instead, we launched a call for evidence on 17 November requesting examples from organisations that are unable to access the EBRS because they are non-licensed suppliers of energy or supply energy to businesses in non-standard ways.

We have also had informal consultation with energy providers, and their energy-intensive customers, on the scheme terms and guidance. My department will continue to monitor this instrument following its implementation, including any feedback from stakeholders, and will of course review as necessary.

Support delivered through the scheme provides relief on the wholesale element of customers’ gas and electricity bills. Customers eligible for support under the scheme are exposed—sometimes very exposed—to high energy costs. In some cases, relief from those costs may well help to avoid firm closures and potential redundancies. More broadly, by reducing industry’s energy costs, the scheme should support economic growth and limit inflation.

In conclusion, the EBRS non-standard customers are a source of critical support for non-domestic customers in the UK, particularly those in energy-intensive industries, many of which are essential to our national infrastructure. I emphasise that the measures in these regulations are crucial for the effective operation of the non-standard cases scheme. The scheme complements the existing large-scale support that the Government are providing during the energy crisis. On that basis, I hope that noble Lords will support these measures and their objectives and I commend these regulations to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, again, this instrument came into force on 12 January and we are now more or less into February. Can the Minister remind us when the scheme ends, because we must be getting quite close to that?

I have only one question on this, and I will not ask the one about prosecution, because these are large amounts of money; I would have thought it was more important. According to the Explanatory Note on page 11,

“Regulations 3 and 4 provide the Secretary of State with a power to obtain information about the supply of gas or electricity to persons who are or may be eligible for assistance under the Scheme.”


I am interested in whether the Minister’s officials have done that, and how they found it.

Energy Bills Support Scheme and Alternative Fuel Payment Pass-through Requirement (Northern Ireland) Regulations 2023

Debate between Lord Callanan and Lord Teverson
Monday 30th January 2023

(1 year ago)

Grand Committee
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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My Lords, the Energy Bills Support Scheme and Alternative Fuel Payment Pass-through Requirement (Northern Ireland) Regulations 2023 were laid before the House on 11 January 2023.

Throughout this winter, the Government have responded rapidly to the unprecedented rise in energy prices. This includes introducing emergency legislation on energy support. The Government’s support package has protected and will continue to protect households and non-domestic consumers across the United Kingdom.

In December, the Government announced details of the merged delivery of the energy bills support scheme, EBSS, and alternative fuel payment, AFP, in Northern Ireland. Householders in Northern Ireland have already received or will soon receive £600 in a single payment for support with their energy bills. In recognition of the high prevalence of alternative fuel usage in Northern Ireland, the AFP will be delivered to all domestic households in Northern Ireland. The total of £600 is composed of £400 of EBSS, which provides support for the energy costs of all domestic households, and the AFP, which provides an additional £200 of support.

To deliver the scheme, in December the Secretary of State made a direction pursuant to Section 22 of the Energy Prices Act. This placed requirements on Northern Ireland electricity suppliers to provide this crucial support to households this winter. Delivery has commenced and households are already benefiting. We expect the vast majority of eligible households to have benefited by the end of February.

Turning to the pass-through requirements, these regulations will place a legal obligation on intermediaries to pass any benefits received through the schemes to end-users. This will help ensure that the energy support is received by the intended beneficiaries. These regulations have been created under the Energy Prices Act 2022. They are essential secondary legislation to fully implement the schemes.

The regulations are modelled on the pass-through requirements for other energy schemes, such as the EBSS in Great Britain. In that, we are not waiting for intermediaries to act on their own accord; we are legally requiring that they pass on the financial benefit to end-users.

An intermediary is any individual who is party to a domestic electricity contract, has a domestic electricity meter and is the recipient of government energy support. This group includes landlords. An end-user is an individual who consumes the energy and pays for this energy usage. This includes tenants. The regulations also outline when and how intermediaries should communicate with end-users about information regarding pass-through of benefit from the schemes.

The enforcement approach for EBSS AFP NI is consistent with other support such as the energy bills support scheme in Great Britain and the UK-wide energy price guarantee. Namely, if the intermediary does not pass on the benefit, the end-user could pursue recovery of the benefit as a debt through civil proceedings. Should a court rule in the end-user’s favour, they would be entitled to the payment plus interest. The interest is set at 2% above the Bank of England’s base rate.

The Government continue to ensure that the intermediaries and end-users are clear on their obligations and rights. In particular, we have published guidance on GOV.UK to help support intermediaries to discharge their obligations. There are also template letters to support tenants, should they wish to raise concerns with their landlords about their energy bills and the pass-through.

I thank the Secondary Legislation Scrutiny Committee for its view on these regulations. I have noted that its concerns remain the same as those it previously raised on the pass-through requirements of the energy bills support scheme in Great Britain. The committee’s concerns relate to the definition of “just and reasonable”, and to an “inequality of arms” and how that affects vulnerable groups.

The energy market is complex. There is a vast range of contracting structures relating to the supply, resale, provision and charging of energy. This means that there are many different circumstances for how energy can be consumed. That is why it continues to be important that the regulations can account for the numerous configurations of an intermediary/end-user relationship. It is highly risky to draw a narrow and limiting definition which could result in some intermediaries falling outside the pass-through requirements. By requiring landlords to pass on the financial benefit in a just and reasonable manner, end-users will be treated fairly and lawfully.

The fact that the regulations require intermediaries to pass on the amount in a just and reasonable manner means that situations where there could be an inequality of arms are also covered. For example, if a landlord owns multiple properties and receives the scheme benefit on them all, he or she must divide and allocate the amount among their end-users and inform them how they have calculated the financial benefit.

The committee’s other concern, about vulnerable groups, is of course valid. The Government are also making sure that all groups in scope of the pass-through regulations, including vulnerable groups, receive what they are entitled to through our engagement with those impacted. Over the past several months, we have engaged with consumer groups, landlords, housing associations and charities to disseminate communications and to underline the obligations placed on intermediaries and the rights of end-users. Our extensive engagement activities include organisations in Northern Ireland.

In conclusion, these regulations are essential to ensure the effectiveness of the energy bills support scheme and the alternative fuel payment Northern Ireland scheme and that the support reaches the people it is intended to help. Without the regulations, there would be a risk that intermediaries did not pass on the £600 benefit in a just and reasonable way, leaving some households in Northern Ireland exposed to high energy costs. I therefore commend the regulations to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

My Lords, I thank the Minister for going through yet another of these SIs. I am sure he will not mind if I ask him some just and reasonable questions about it.

First, I note that the measure came into force on 12 January, so it is already in place. Obviously, it is administered, to a degree, by the energy companies, but who is policing it? Is it the Northern Ireland civil servants, or is it BEIS directly? I would be interested to understand that. If it is Northern Ireland officials, are we confident that sufficient management governance will take place from here?

I welcome that the Government and the department have spoken at length to consumer organisations in Northern Ireland. I am interested to understand whether there have been any complaints yet of end-users not receiving this when they feel that they should have, to get some idea of how well it is working.

The Minister talked about the method of civil law, and having fines—plus, generously, an interest-rate benefit if people manage to get through a whole court process. We have said before that it is very unlikely that much of that would happen, but, if an intermediary ignored the need under this legislation to pass on those payments, would the Government have the ability to prosecute that person? I can imagine there being a certain number of landlords who will just think, “No one’s looking at me, there’s not a lot of publicity about this, I’ll just keep the money”. I would be interested to understand whether there is, at the end of the day, a criminal long-stop prosecution ability in terms of fraud and so on. Also, will the Minister say how many more SIs around these schemes are still to come?

Prepayment Meters

Debate between Lord Callanan and Lord Teverson
Tuesday 24th January 2023

(1 year ago)

Lords Chamber
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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Well, I say to the noble Baroness that the Government recognise the importance of protecting customers, including those on a prepayment meter. This weekend, the Secretary of State set out a five-point plan on prepayment meters. He wrote to energy suppliers, calling on them to take every possible step to support consumers in difficulty. The Government want to see much greater effort from suppliers to help consumers who have payment problems, including offers of additional credit, debt forgiveness or tools such as debt advice. It is worth bearing in mind that the licence conditions set out that forcible prepayment installation should happen only as the absolute last possible resort.

Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

My Lords, there is an irony here when it comes to prepayments, in that those who are worst off have to pay more because prepayment customers pay heavier tariffs than those on direct debit or other means of payment. Surely, this is a fundamental unfairness and one that creates even greater fuel poverty. Should there not be regulations to equalise the costs to consumers?

Lord Callanan Portrait Lord Callanan (Con)
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I say to the noble Lord that prepayment customers do not pay higher tariffs than other customers. They pay slightly more because of the cost of servicing prepayment meters. It is an important distinction. If we were to equalise the cost, that would mean that other customers would pay more to service that, and many other customers in fuel poverty are on credit meters—so I am afraid that there is no easy answer to this problem.

Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022

Debate between Lord Callanan and Lord Teverson
Tuesday 17th January 2023

(1 year, 1 month ago)

Grand Committee
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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My Lords, these regulations were laid before the House on 6 December 2022. We have already passed legislation concerning the energy bill relief scheme pass-through requirement for heat suppliers, which ensures that benefits from the energy bill relief scheme, known as the EBRS, are passed through to end consumers on heat networks. This legislation also provides for a route to resolve disputes between consumers and heat networks on these pass-through requirements.

This statutory instrument amends the pass-through regulations, introducing a requirement on heat suppliers to send a simple notification to provide information to the Secretary of State by 6 January 2023. This information, which includes heat suppliers’ names, business addresses and contact details, will be shared with the energy ombudsman and the Consumer Council for Northern Ireland to support their handling of domestic and micro-business consumer complaints. This information will also be shared with the Office for Product Safety & Standards—the OPSS—for enforcement purposes.

The SI strengthens the OPSS’s powers of enforcement, enabling it to request information from suspected heat suppliers to determine whether they fall within the scope of the regulations. The OPSS may also impose existing civil sanctions, including a monetary penalty on heat suppliers who fail to comply with the requirements to notify, join the redress scheme or provide information. The monetary penalty has been modified, providing for a maximum of £5,000 to provide an effective deterrent for non-compliance.

The SI also amends the existing regulations to reduce the administrative burden on heat network companies, removing the requirement for heat suppliers to provide information about the calculation of the benefit when they first notify end-users about the scheme, while retaining the requirement to provide these calculations in the next bill.

The EBRS and the corresponding pass-through regulations have been introduced as a critical component of support for consumers on heat networks and complement other support that the Government are providing with energy and the cost of living. We expect that the notification requirements will facilitate the consumer complaints handling process and that the strengthened enforcement powers will result in a higher number of heat suppliers passing on the EBRS discount to their customers. I commend the regulations to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

My Lords, I thank the Minister for going through this piece of secondary legislation, which concerns what is clearly an important subject: making sure that the money that is in effect discounted from bills gets through to the final consumer.

It is probably unfair to say this but, having read through this instrument, I would be amazed if the dispute process is ever used or anybody ever gets round to being able to take advantage of it. To be honest, a maximum fine of £5,000 hardly seems a great deterrent to anybody, but there we are; I suspect it will be not a great deal of money in terms of the P&L account of any of these providers, so I am rather surprised that it has been pegged at that amount.

The thing I am really interested in is that, as I read it, a core part of this piece of legislation is finding out the contact details of heat suppliers. If we do not know that information, how do we get in touch with the suppliers to find it out? I do not understand that. Given the fact that this measure was supposed to have happened by 6 January, as this is all in retrospect, clearly this has happened; I am just interested to understand from the Minister whether the Government have had good responses and replies from everybody. How do they know that everybody has replied? I would be interested to understand that.

The only other area I want to probe—the Minister will forgive me, as I should clearly know this—is the Office for Product Safety & Standards, because I had never heard of it before. I am sure it is a well-known organisation in certain parts of the sector, but I am interested in briefly understanding to whom it reports, its status and whether it is tooled up to do this work effectively. However, I thank the Minister, as this is clearly important secondary legislation and I support making the scheme effective.

--- Later in debate ---
Lord Callanan Portrait Lord Callanan (Con)
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I thank both noble Lords for their valuable contributions to this brief debate. The Government have put in place robust measures to support consumers in response to the energy crisis. For heat network consumers these measures include the EBRS—energy bill relief scheme—or alternative funding for those without a domestic electricity meter, and the energy price guarantee for electricity. These schemes are up and running, shielding heat network consumers and countless others from excessive energy bill increases this winter.

The measures in today’s SI continue this work by strengthening the legal framework for ensuring that cost reductions from the EBRS received by heat networks are passed on to heat network consumers, leading to immediate short-term benefits to consumers over this winter. This SI results from wide-ranging engagement with industry, including trade associations, heat suppliers and consumer groups in the sector, and ensures an approach which works for both consumers and businesses. The changes are based on practicalities, meaning consumers will be informed of key information without placing an undue burden on heat suppliers.

Turning to the specific points raised by the noble Lords, I start with the noble Lord, Lord Teverson, who asked the obvious question: great minds think alike, as it is the same one I asked when I was introduced to this statutory instrument. How do we know that we have received a good response, as the deadline has already passed, and that everyone has replied? The figures are that, as of last week, we have received notifications from over 2,800 heat suppliers. Previous data obtained from notifications collected under the Heat Network (Metering and Billing) Regulations indicated that there were approximately 2,600 heat suppliers in 2018. We therefore judge that heat supplier engagement with the EBRS pass-through notification form has been good.

Of course there are some enormous heat networks, which everybody knows about, but also some quite small heat networks. Many developers just develop a block of flats, install a heat network and then subcontract out its management to a secondary company—some with great success and others with not such great success. Many people do not realise that they are on a heat network until they have already moved into the property, because it has elements of monopoly about it. If the noble Lord had been present in the debates on the Energy Bill, he could have discussed the fact that we are introducing powers to regulate heat networks, which will be given to Ofgem. We have been having debates separately with the noble Lord, Lord Teverson, and others on that but at the moment the sector is essentially unregulated, which has caused problems in some areas. There are some very bad examples of networks, which we will attempt to rectify.

The noble Lord, Lord Teverson, also asked about the role of the OPSS in ensuring enforcement, which was similarly raised by the noble Lord, Lord Bassam. The OPSS already had a role to receive notifications from heat suppliers and is therefore a natural fit. Notifying is actually a simple process, which should take about five minutes to complete. We would press any heat network suppliers which have not already notified—from the figures, we think that the vast majority have—to do so as soon as possible to ensure the avoidance of enforcement action. Again, all the big ones were known anyway and have complied. It is possible that there might be an odd mansion block or small block of flats somewhere, or some remote properties, that have not yet notified but we think the vast majority have.

If the supplier has not submitted its notification by 6 January or within 30 days of beginning operations, or for any new heat suppliers that began operating after 7 December last year, the OPSS may issue a notice of intent which makes clear the required actions and gives the business the opportunity to become compliant with the regulations. Should the heat supplier then continue to fail to do so, the OPSS may issue a notice of compliance, which sets a final deadline for the supplier to submit its notification after which point, if it is still non-compliant, it may be issued with the penalty fines that I referred to earlier. If the heat supplier does not engage with the ombudsman, or the Consumer Council in Northern Ireland, customers can recover the benefit that they are owed as a civil debt.

In response to the questions asked by the noble Lord, Lord Bassam, about why we are having the debate only after the notification window has closed, these regulations came into effect the day after they were made, on 7 December. This debate has no real bearing on the notification window but is to give time for parliamentary scrutiny and to ensure that this affirmative SI, as it was, does not now fall. We thought the “made affirmative” procedure was appropriate, given the time-sensitive nature of this work. Customers need support as quickly as possible, so ensuring prompt EBRS pass-through is important to provide that support. That underlines the rationale of running the notification window from the earliest possible date after the regulations were made.

The noble Lord, Lord Bassam, also asked a very reasonable question about why we are amending relatively new SIs. The answer is that following the initial regulations, which were made very rapidly given the urgent nature of the problem, we have taken on board feedback from the sector to ensure that this final approach now works for both businesses and customers.

The noble Lord also asked why the definitions of intermediaries have been amended. The amendments distinguish obligations that do not apply to an intermediary who is also an end-user. That could be a landlord, for example. The requirement to join the redress scheme will not apply unless the intermediary is provided with a scheme benefit by way of a discount or reduction under the Energy Bill Relief Scheme Regulations, nor will it apply to a person who supplies heating to the final customer unless that person is provided with a scheme benefit by way of a pass-through under these regulations. A landlord provided with a pass-through amount under the pass-through regulations, which it in turn must pass on to its tenants, will not be required to join the redress scheme unless that landlord also supplies heating through a district or communal heat network. Similarly, an intermediary who is also an end- user will not be required to notify an authorised person of their name, business address and contact details.

The noble Lord also asked why heat network suppliers are being given an extension on the requirement to complete their heat network metering and billing notifications. The answer is that these regulations will introduce minimal costs on heat networks. The information required is information that heat suppliers will already have access to, and we are not requiring heat suppliers to provide information beyond that which they already provide to government under the Heat Network (Metering and Billing) Regulations. We consider that the benefit of heat network consumers receiving lower heat prices resulting from the EBRS pass-through will significantly outweigh these relatively minor administrative costs to heat suppliers. By completing the notification requirement under these regulations, a heat supplier gains an extension in complying with the Heat Network (Metering and Billing) Regulations until 31 March 2023, so this further reduces the burden on the business over what, I think we agree, will be a challenging winter period.

I hope I have successfully answered the questions from both noble Lords, and therefore I commend these regulations to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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Can I just follow up on a couple of things? Given that this is an unregulated sector and one in which there are issues, as the Minister said, will the OPSS undertake some sort of random survey of end-user customers to make sure that this is getting through to them, so that there is some form of check? I would be interested to understand whether the Minister or his department has any estimate of the proportion of final consumers who have now received payment.

Lord Callanan Portrait Lord Callanan (Con)
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Consumers would not receive payment as such; they would just receive the appropriate discount off the bill presented by the heat network. I am sure the OPSS will want to monitor the market. I think it will primarily be driven by complaints from customers. I assure the noble Lord that, based on my postbag, customers are very willing to complain, both to their Member of Parliament and directly. Because the OPSS is responsible for the original billing regulations, it is best placed to carry out this work and I am sure it will conduct the appropriate market monitoring.

Lord Teverson Portrait Lord Teverson (LD)
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I will not detain the Minister for long, it was interesting that he referenced the Climate Change Committee in response to my noble friend’s amendment. That same letter said,

“the evidence against any new consents for coal exploration or production is overwhelming.”

I am sorry that the Minister accepts part of that letter, but maybe not the other part. The Minister has nobly and served well a number of Administrations, including the one during COP 26, and I would like to know how he reconciles the COP 26 statements by his own department with the opening of that new coal mine.

Lord Callanan Portrait Lord Callanan (Con)
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The decision was taken by a different department, by DLUHC, in a quasi-judicial manner. It is likely to be the subject of judicial proceedings, so I cannot comment in detail on that decision, as the noble Lord will understand. I am sure we will be having this debate lots of times in future.

I move on to the question from the noble Baroness, Lady Blake. The reasons for the Secretary of State’s decision are set out in full in his published letter on GOV.UK, which takes into account matters like the demand for coal, climate change and the impact on the local economy. To reiterate the point of my noble friend, coking coal is used in the production of steel—it is not used in power generation—which is, of course, crucial to building the infrastructure that we all wish to see more of, such as offshore wind turbines.

On fracking, I thank my noble friend Lady McIntosh for her contribution. The Government have been clear that in line with the commitment made in the 2019 Conservative manifesto, it is adopting a presumption against issuing any further hydraulic fracturing consents for the extraction of shale gas. That position is, in effect, a moratorium. This will be maintained until compelling new evidence is provided that addresses the concerns around prediction and management of induced seismicity.

I move on to my noble friend Lord Lilley’s amendment. I welcome his thoughtful contributions to today’s debate, as well of those of my noble friend Lady Altmann. British Standard 5228, which my noble friend quoted, recommends procedures for noise and vibration control in respect of construction and open-site operations. It is not a measure designed to reduce the risk of induced seismicity. The potential for induced seismicity from hydraulic fracturing is a result of the injection of fluid deep underground, at depths of one kilometre or more. Seismicity induced by hydraulic fracturing is therefore different in nature from vibration directly induced by a construction site, and the application of BS 5228 would therefore not be appropriate.

My noble friend Lord Moylan tabled an amendment about the composition of our domestic gas supply. A review of the Gas Safety (Management) Regulations 1996 is currently under way. The Health and Safety Executive has been reviewing these regulations, which govern gas quality, and is consulting on a set of proposed changes. The HSE’s consultation closed in March 2022, and it will be aiming to publish its response in due course. BEIS has worked closely with the HSE and has taken regular opportunities to input into the process in both an analytical and a policy capacity. A statement by the Secretary of State at this stage is therefore unnecessary as the publication of the Government’s formal response will be tantamount to just that. I hope my noble friend will understand that in advance of that document, I cannot comment as it would not be proper.

The noble Baroness, Lady Sheehan, tabled two amendments in this group. On Amendment 222A, I should say at the outset that tax matters are an area for the Treasury. Since the introduction of decommissioning relief deeds—DRDs—the Treasury issues a Written Ministerial Statement at the end of each financial year updating on DRDs, including the total number of DRDs in force during the past financial year, past payments under DRDs and the projected value of future payments under ongoing DRD claims. While a DRD claim may arise where a company has defaulted on its decommissioning obligations, the tax system also provides tax relief for decommissioning costs in recognition that decommissioning is a significantly expensive and statutory obligation. HMRC publishes information annually on the estimated sum of all forecast tax relief payments due to decommissioning as part of its annual report and accounts.

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Lord Callanan Portrait Lord Callanan (Con)
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I am sure that we will have lots to discuss about lots of issues on Report.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, there have been some excellent responses. We are getting somewhere on the capacity market and onshore wind. I thank the noble Baroness, Lady Hayman, for her support on onshore wind and my amendment. I had not realised there would be the contract for difference, and I take that as very positive. As the Minister knows, I like to be positive about these things.

However, I find it very difficult that the Government and the Minister will still not bite the simple bullet around Ofgem and the decarbonisation of the grid. It is having a practical effect as regards moving the whole transmission system forward—it really is. Those dilemmas about objectives that he talks about are the same for the future system operator, yet it has that objective.

I am sure that we will come back to this on Report. It is certainly my intention to work with others of a similar mind to find the right amendment and back whoever wishes to bring it forward. However, at this stage, I beg leave to withdraw the amendment.

Energy Bill [HL]

Debate between Lord Callanan and Lord Teverson
Lord Callanan Portrait Lord Callanan (Con)
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Let me first remind the Committee of the broader ambitions of this section of the Bill, which covers heat network zoning, which is a key policy to deliver the scale of expansion of heat networks that will be required to meet net zero. This process brings together local stakeholders and industry, to identify and designate areas where heat networks are expected to be the lowest-cost solution for decarbonising heating. The clauses will enable the Government’s commitment to introduce zoning by 2025.

Amendments 162YYYA, 162YYYB, 162YYYC, 162YYYD, 162YYYE, 162YYYF, 162YYYG and 165A—who gives these numbers to amendments?—are in my name. They will permit regulations to allow the heat network zones authority, which I will refer to as the authority, to directly designate zone co-ordinators and heat network zones in cases where these functions have not been performed by the relevant responsible bodies. This will deliver a more efficient process for establishing heat network zones.

More specifically, Amendment 162YYYA permits regulations to enable the authority to designate a person as zone co-ordinator. This may be necessary in scenarios where, despite directing it to do so using the powers in Clause 176(4), a local authority does not establish a zone co-ordinator. This could prevent the heat network opportunity that has been identified from being realised. Similarly, Amendments 162YYYB to 162YYYG provide for areas to be designated as heat network zones by the authority, in addition to zone co-ordinators as already provided for in Clause 177(1)(b). They also ensure that this expanded role for the authority is reflected elsewhere in Clause 177. This mirrors existing powers for identifying areas as heat network zones and reviewing areas designated as such. The authority or zone co-ordinators may undertake each of these activities. These amendments will therefore ensure that the authority may designate zones directly, avoiding unnecessary delays to the rollout of heat networks.

Amendment 165A concerns low-carbon heat sources. A range of heat sources could potentially be used by heat networks, including heat from thermal power stations, industrial processes or cooling and refrigeration. Clause 180 gives the Secretary of State powers to require heat sources in zones to connect to a heat network. This amendment will allow regulations to ensure that heat sources that are required to connect do not abuse their monopoly position and charge disproportionate prices for the heat that they provide. Equally, it will allow the regulations to ensure that the requirement to connect does not unduly disadvantage heat sources themselves. This will help to support fair pricing, which will give investors greater security and confidence and help to accelerate the delivery of large-scale heat networks in zones.

I now turn to Amendment 162YYYZA in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, regarding designating GEMA as the heat network zones authority. The authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.

In terms of who could fulfil the authority role, Clause 176(3) is explicit that the Secretary of State may but need not be designated as the authority. The clause as drafted therefore already provides that regulations may appoint GEMA as the authority. We will be specifying the authority’s functions and responsibilities in the regulations; this will therefore be the subject of further consultation.

The authority will fulfil a different function from the heat network regulator, which, as set out in Clause 166, we propose will be fulfilled by GEMA in relation to Great Britain. This role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England. We will be specifying the authority’s functions and responsibilities in the appropriate regulations; we intend for the body to undertake functions on behalf of the Secretary of State and be accountable to the Secretary of State.

Detailed considerations regarding roles and responsibilities in zones will of course be subject to further consultation as we continue to develop our policy proposals. Consultation on these issues will take place in due course. Appointing the authority in regulations will allow for amendment should this be required as and when its functions change over time as the networks become more developed in the UK. I hope that this has helped to clarify our proposed approach and the scope of the powers already provided.

I thank the noble Lord, Lord Teverson, for his thoughtful Amendments 163 and 164, which would make the provision of the zoning methodology mandatory and require the methodology to include certain details. As always, we want legislation to be flexible and future-proofed. In this context, this means that the regulations can adapt to developments in the heat network market. The Government are clear that a national methodology for identifying zones will be necessary to enable a robust and transparent approach that increases overall efficiency and drives consistency. To this end, a pilot to support the development of the methodology is under way in 28 English cities and towns. The outputs from the pilot will help to inform policy design and future consultation on the methodology and its contents. Accepting these amendments now would, in effect, tie the Government’s hands at this stage to the potential cost of industry, stakeholders and, ultimately, consumers.

Next, I turn to Amendments 165 and 166, also from the noble Lord, Lord Teverson, which concern interactions between the national methodology and the co-ordination and delivery of heat networks at a local level. Accepting Amendment 165 would mean that the methodology was no longer nationally determined and would have to vary according to each local authority’s requirements. A national methodology will minimise the duplication of effort at the local level and instead ensure that local input is applied at the most appropriate stage: the refinement and designation of the zones themselves.

Heat network zoning will support local net-zero goals by unlocking the lowest-cost pathway to heat decarbonisation in built-up areas. As we expect that zoning co-ordinators will work with the local authority, their work will be brought into local net-zero plans. Therefore, Amendment 166 risks creating unnecessary bureaucracy at a local level, reducing zoning co-ordinators’ capacity to focus on the effective delivery of zones.

The final amendment in this group, Amendment 167 tabled by the noble Lord, Lord Ravensdale, would extend the Bill’s heat network zoning provisions to individual heat pumps. As noble Lords will be aware, various factors, including building density and availability of heat sources, mean that certain localised areas are particularly suited to heat networks. This is why we are introducing a framework to identify where heat networks can provide the lowest-cost low-carbon heating solution.

The noble Lord’s amendment would apply zoning to heat pumps. Our strategic approach, set out in the heat and buildings strategy, is to work with the grain of the market and our policy levers are aligned to natural trigger points to create optionality for consumers regarding their various heating options. For clarity, such trigger points include appliance replacement and change of tenancy or property ownership, among many others of course. An approach where more technologies are zoned risks removing choice for consumers and could cause early appliance scrappage and additional disruption.

I thank noble Lords for this debate and for their amendments. I ask them not to press their amendments.

Lord Teverson Portrait Lord Teverson (LD)
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Could I ask the Minister for some clarification? I apologise if I have not got my head around this. What is a zone: a council estate, a county, a region or a combined authority? I am trying to get from the Minister a mental picture of what a zone could be and what determines that boundary.

Lord Callanan Portrait Lord Callanan (Con)
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No specific boundary is set out in the proposals. It can vary from authority to authority. It is very unlikely to be a whole region; it is much more likely to be an inner-city area, an industrial estate or something like that. It will very much depend on the local circumstances and what heating sources are available. Crucially, it will depend on local support, which is why local authorities are crucial to this process. Many local authorities around the country are already in discussions and are very keen to get on with these zoning proposals, presumably including Leeds. Although I know that the noble Baroness, Lady Blake, does not speak for Leeds any more, I know that it is one of the pioneers in this area.

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Lord Callanan Portrait Lord Callanan (Con)
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As I said, a number of suppliers already offer competitive tariffs in the market. They will provide long-term certainty on pricing. There are many examples of industrial units that have already put solar panels on. Obviously, the most cost-effective way is for them to use that power themselves and export any surplus power to the grid using the smart export tariff guarantees. I will answer that question again: the Government are supportive of community energy schemes. We want to see more of them, but we think that is best delivered through the market framework. I will happily provide noble Lords with more detail in writing.

Lord Teverson Portrait Lord Teverson (LD)
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Can I remind the Minister that it is government policy to decarbonise the electricity system within 12 years and one week? That is no time at all. I am absolutely a defender and promoter of market forces, but in some places they just do not act quickly enough. We have a very short period of time in which we must decarbonise the electricity system. I cannot see why the Minister would not be in favour of ease of movement into this market. As the noble Lord, Lord Lucas, said, it does not necessarily require subsidy. To use a Borisonian term, it would unleash the real will of communities in this country to help in that target of decarbonisation by 2035. I cannot see why the Government do not grasp this and make the most of it.

Lord Callanan Portrait Lord Callanan (Con)
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As I said, we are supportive of proposals. We accept the target for decarbonising electricity production and we are moving ahead full-scale with our sails erected—which is no doubt a Borisonian term—towards that goal. Community energy will play probably a small role, but it will play a role. Obviously, larger-scale generators will supply the majority of the nation’s electricity.

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Lord Callanan Portrait Lord Callanan (Con)
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My Lords, for the benefit of the noble Lord, Lord Teverson, I have some more government amendments for his delectation. I will also speak to Amendments 200 to 211, 243 and 244, 246 and 247, which all stand in my name.

Amendment 199 introduces a new Part 9A to the Bill which relates to the existing energy savings opportunity scheme, commonly referred to as ESOS. I committed at Second Reading to table these new clauses regarding improvements to ESOS. For those noble Lords who do not know, ESOS is a mandatory energy audit scheme for large organisations, covering their buildings, transport and industrial processes. ESOS provides businesses with cost-effective recommendations on energy efficiency measures. The existing scheme is estimated to lead to £1.6 billion of net benefits to the UK, with the majority of these benefits applying to participating businesses as a result of reduced energy costs.

The power in the amendment would replace the repealed power in the European Communities Act 1972 under which the UK established ESOS in 2014. Without this, ESOS is a frozen scheme and cannot be updated. The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings.

Lord Teverson Portrait Lord Teverson (LD)
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Can the Minister clarify: did he say that this Bill revokes that EU legislation? Is that what he just said?

Lord Callanan Portrait Lord Callanan (Con)
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The power in the amendment would replace the repealed power in the European Communities Act 1972, which I presume was repealed after Brexit, or rather the end of the implementation period.

The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings. The benefits to existing participating businesses are estimated to be savings of £1.12 billion from 2023 to 2037 through reduced energy bills. The savings would of course help to support businesses to keep the costs of their products and services affordable for consumers.

Amendments 200 to 202 outline some of the details of the ESOS regime and associated powers to make regulations. They include provisions regarding which undertakings ESOS should apply to; provisions regarding when, how and by whom an ESOS assessment should be carried out; and ESOS assessor functions and requirements.

Amendment 203 enables regulations to introduce a requirement for ESOS participants to publish an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. This requirement aims to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures. Amendment 204 enables regulations to impose requirements for ESOS participants to take actions that directly or indirectly support the reduction of energy use or greenhouse gas emissions.

Amendments 205 to 207, 209 and 210 concern the administration and enforcement of the scheme. They enable regulations to make provisions about the appointment of scheme administrators and their functions, including compliance monitoring and enforcement, provisions on penalties and offences, and rights of appeal. These amendments also enable the Secretary of State to provide financial assistance and to give directions to a scheme administrator, with which it must comply.

Amendment 208 concerns procedures for making regulations. It requires the Secretary of State to consult appropriate persons considered likely to be affected by the regulations and, where provisions relate to devolved matters, the respective devolved Administrations. It describes where affirmative procedure would be required, for example if extending ESOS to smaller businesses, mandating action by ESOS participants or creating offences.

Amendments 211 and 243 define certain terms used in the ESOS provisions, explain where provisions fall within devolved competence and set out the extent of the ESOS provisions to be England and Wales, Scotland and Northern Ireland. Amendments 244 and 246 clarify when the amendments will come into force. Amendment 247 inserts into the Title of the Bill a reference to the new clauses on ESOS, introduced by Amendments 199 to 211. With that, I beg to move Amendment 199 in my name.

Lord Callanan Portrait Lord Callanan (Con)
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The clause enables the Secretary of State to provide financial assistance to scheme administrators and ESOS participants. It does not, of course, compel us to do so but we are taking a power to have that option. If we decide to provide financial assistance, I will inform the House accordingly.

Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

My Lords, there was a reason for my question. I absolutely agree that the Minister warned us that we would have these amendments coming down the track, and on ESOS I welcome that fact because it has been a very good scheme. Although companies occasionally bitch about it, as he says, it has caused actual change.

As the Minister will know, being a former MEP and so on, the ESOS scheme at the moment is based on the energy efficiency directive of 2012, which was updated in 2018. It came into force in the UK in 2014 and, as the Government’s website says:

“Government established ESOS to implement Article 8 (4 to 6) of the EU Energy Efficiency Directive (2012/27/EU).”


The reason I asked him for a clarification on his opening statement is that nowhere in his amendments could I see anything that repealed the existing directive or regulations that related to the energy efficiency directive.

Is this a sort of parallel scheme to the one that still exists, or is it still based on the original EU directive? If it is still based or relies upon the original EU directive, what happens if ever the retained EU law revocation Bill becomes a statute? Does all this fall away because it still relies on that EU legislation? If it is a parallel scheme, when does the existing one stop under the EU directive and this one actually start? That is what I am trying to understand. The Minister may well have explained this—forgive me if he has—but I do not get a flavour for what the big difference is between this one and the existing one. What would he see as the big positive change?

My last question is a more general one. I have not counted the non-government amendments that have come forward, yet—despite having on this side, and even part of that side, combined brains the size of a planet, excluding mine—the Government have not seen one amendment worthy of thinking, “Yes, that could be useful and might be something that could improve the Bill.” I just ask the Minister before the end of the year—and I wish him and the Bill team a very enjoyable Christmas and break—why has none of the brainpower on this side has been worth taking notice of in terms of the Bill going forward?

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Lord Callanan Portrait Lord Callanan (Con)
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We are not proposing to extend it to medium-sized businesses at this stage. We would want to work with stakeholders on the detail of any potential future implementation, which would be subject to a further consultation and, ultimately, a cost-benefit analysis. This is a complicated area and there are a number of different views. We have had a couple of consultations on this. With these amendments, we are taking the powers to implement the scheme. Of course, the regulations would be subject to further debate in the House.

Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

I just want to check something with the Minister. Are we saying that, if the retained EU law Bill became an Act, with its sunset clause of 2023, this scheme would still remain in force and there would be no legal ambiguity about it? Also, I believe that the next deadline for reporting is December 2023. Can I check that this still holds?

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord is asking for commitments on a different piece of legislation. When that Bill arrives in the House, we will no doubt have a full discussion on it. My understanding is that it is at Report stage in the House of Commons now. The sunset date is still set at 2023 although there are powers in that Bill to exempt particular pieces of legislation and Ministers have the option of extending the sunset date for pieces of retained law that it is not possible to update or review in the short time available. I am sure that we will have a long, involved discussion on the retained EU law Bill when it arrives in the House and that I will get déjà vu from the Brexit withdrawal Act, with many of the same people no doubt making many of the same points they made during that time.

Energy Bill [HL]

Debate between Lord Callanan and Lord Teverson
Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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My Lords, it is a great pleasure to be back in Committee once again, debating the Energy Bill. I thank noble Lords for their patience during the interregnum. Noble Lords will recall that the Bill was necessarily paused following the death of Her Majesty the Queen. However, we have always been clear that the Bill represents a landmark piece of legislation to provide for a cleaner, more affordable and more secure energy system that is fit for the future, so I am very happy to be debating it again.

Clause 84 makes changes to Section 30 of the Energy Act 2008, which in turn enables modifications to Part IV of the Petroleum Act 1998. Amendments 90 and 91 make consequential changes to definitions in Clause 84 in response to government Amendment 70.

The next set of amendments relate to Clause 85. Amendments 92, 93, 101 and 102 update the heading, labels and definitions in Section 30A of the Energy Act 2008, as amended by this Bill, to avoid inconsistencies with existing definitions in the 2008 Act. Amendment 103 makes a consequential change due to the changes in definitions.

Moving to Amendments 94 and 95, the existing Section 30A of the Energy Act 2008 includes a carve-out in subsections (2) and (3). This prevents the Secretary of State designating an installation as eligible for change of use relief if it is to be used as part of a CCUS project that is in Scotland or is licensed by Scottish Ministers. However, the Scottish Parliament is also unable to legislate to confer such a designation power on Scottish Ministers because oil and gas is a reserved matter. It is important that change of use relief is available to oil and gas assets in Scottish territorial waters to create a consistent application of this policy. Amendment 94 removes this carve-out from Section 30A of the Energy Act 2008. Amendment 95 then updates a cross reference as a result of the proposed Amendment 94.

The process for issuing change of use relief first requires that an asset is designated as eligible. Only after this can the asset then qualify for that relief. Amendment 97 makes clear what conditions must be satisfied for an installation already designated as eligible for change of use relief by the Secretary of State actually to qualify for that relief. The first condition is that the Secretary of State has issued a carbon capture and storage-related abandonment notice under Section 29 of the Petroleum Act 1998 on a person for that installation. The second is that the trigger event has been satisfied.

Amendment 98 describes the trigger event that must occur for the relief to take effect. The trigger event requires that, first, a decommissioning fund must have been established for the relevant asset. Secondly, an appropriate amount must have been paid into this fund to reflect the decommissioning liability that the previous owner is being relieved of. This amendment would also give the Secretary of State power to make regulations on the required amount that must be paid into the decommissioning fund, and who may make such a payment, to qualify for change of use relief.

The Secretary of State must also approve that the amount paid into the fund is sufficient. Amendment 96 imposes a requirement on the Secretary of State to consult the Oil and Gas Authority before certifying that the amount is sufficient. Amendment 104 makes consequential changes to defined terms in Clause 85 as a result of Amendment 97.

I now turn to the other amendments tabled by noble Lords in this group. Amendments 99 and 100, tabled by the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, seek to enable the Secretary of State to accept financial security from the previous owner, rather than requiring the amount to be paid in cash into the decommissioning fund. The Government acknowledge the point made by noble Lords regarding the value-for-money considerations when requesting funds to be set aside for decommissioning. The costs of decommissioning a repurposed asset are likely to be incurred at the end of the carbon storage asset’s life, which may be many years after the establishment of the decommissioning fund. However, the purpose of this trigger event for the issuance of change of use relief is to help protect the taxpayer from the decommissioning liability by having funds available to decommission repurposed assets. The requirement for a cash deposit looks to ensure that funds are available should the carbon storage asset close early and decommissioning of the existing infrastructure is required. This reduces the risk that the burden of decommissioning is left completely to the taxpayer. It is also intended that decommissioning funds will be invested to allow the fund to retain its value over time until decommissioning is required. This is another reason why it is important for the previous oil and gas owner to contribute money into the decommissioning fund.

More generally, the policy intent of change of use relief is to provide previous oil and gas owners with greater certainty over their liabilities, to incentivise the repurposing of assets. In return, however, the taxpayer should equally expect assurance that the oil and gas owners’ liability will be met, in accordance with the obligations that the owners agreed to undertake on commencement of their oil and gas activities. The Government judge that this can be provided only through a cash deposit, and not through a promise of funding, potentially decades into the future. This is the principle on which the policy was proposed in the Government’s consultation in August 2021 and with which, at the time, respondents broadly agreed. Therefore, I beg to move the amendment in my name and ask the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, not to move their amendments.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I welcome the Bill’s return to Committee; I am very pleased that that is the case. I have no comments to make on the amendments, but I note that during that interregnum, as the Minister described it, the Government gave planning permission for a coal mine. Although we are not going to debate it here today, that is a hugely retrograde decision which flies in the face of the Bill and the general way in which it looks forward. However, I have no comments on the amendments that the Minister has tabled.

Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, I am also delighted to be debating the Energy Bill again. I am delighted that the noble Lord is still the Minister so that we at least have continuity on the Bill; it remains much the same as it was before we left it some three months ago.

As the Minister said, the amendments refer to Clauses 84 and 85 of Chapter 2 of Part 2 on “Decommissioning of carbon storage installations”. This gives the Secretary of State a power to make regulations regarding the financing and provision of security for decommissioning and legacy costs associated with carbon capture utilisation and storage. The decommissioning of offshore installations and pipelines used for carbon dioxide storage purposes is modified by Section 30 of the Energy Act 2008, which modified Part 4 of the Petroleum Act. Clause 84 enables further modifications to the modified Part 4 in relation to the definition of carbon storage installation, and the establishment of decommissioning funds and legacy costs as set out in Clause 82, “Financing of costs of decommissioning etc”.

Clause 85 relates to Sections 30A and 30B of the Energy Act 2008, which make provision for a person to qualify for change of use relief on installations and submarine pipelines converted for CCS demonstration projects—as defined by Energy Act 2010. This relief removes the ability for the Secretary of State, in some circumstances, to take steps under the modified Part 4. This clause makes amendments to Section 30A of the Energy Act 2008 by broadening the scope of change of use relief so that it applies to eligible carbon storage installations more generally, amending the trigger point to qualify for such relief.

Amendments 99 and 100, which the Minister referred to, were tabled by my noble friend Lady Liddell, who unfortunately cannot be here and therefore will not be able to move them. They reflect value-for-money considerations in the decision-making process, meaning that the Secretary of State could accept provision of security in respect of amounts to be contributed on account of decommissioning costs—costs likely to be incurred, as the Minister said, many years after the establishment of the fund—rather than requiring such amounts to be paid simply in cash.

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Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I was getting ahead of myself on the last group, and I apologise to the Grand Committee for that. I would have thought that the Government would like to accept this amendment, as they are likely to be in opposition in five years’ time. I wait to hear from the Minister.

Lord Callanan Portrait Lord Callanan (Con)
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I thank the noble Lords, Lord Lennie and Lord Teverson, for their concern about whoever might be the Official Opposition at the time. I suppose we will see. I am surprised that the noble Lord, Lord Teverson, did not want to ask for the fourth-placed political party in Parliament to be a statutory consultee as well.

These amendments seek to clarify those who must be consulted as part of the process of designating a CCUS strategy and policy statement. Amendment 113 was tabled by the noble Lord, Lord Lennie, the noble Baroness, Lady Blake, and the noble Baroness, Lady Bennett—who, sadly for us all, is unable to be with us. This amendment seeks to require the Official Opposition to be consulted as part of the strategy process. I reassure noble Lords that parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement, which must be approved by a resolution of each House of Parliament before it can be designated, as is provided for by Clause 91(10). So, of course, whoever is the Official Opposition at the time, and whoever is the fourth-placed political party at the time, will have a full opportunity to contribute to the debate on this matter.

As the Bill sets out, any CCUS strategy and policy statement that has been designated will be required to be reviewed every five years, although, in the specified circumstances set out in the Bill, a review could take place sooner than five years. When the outcome of a review is that the Secretary of State considers that the statement should be amended, the Bill provides for a statutory consultation process, including consultation with the economic regulator and relevant Ministers in the devolved Administrations. An amended statement would also be required to be approved by a resolution of each House, and would therefore be subject to parliamentary scrutiny and approval before it could be designated.

The process for designating the CCUS strategy and policy statement mirrors the process set out in the Energy Act 2013 for an energy strategy and policy statement. When the outcome of a review is that the Secretary of State considers that the statement does not require amendment, or should be withdrawn, this also requires consultation with the economic regulator and Ministers in the devolved Administrations. This is to ensure that any impact that this decision would have on the conduct of the regulator’s functions, or in relation to the important matter of devolved policy, is taken into account in the decision-making process. It is also the case, of course, that the Secretary of State can update Parliament on the plans for, and outcome of, any review, as part of the normal process of parliamentary business.

On Amendment 114, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, Clause 91 provides for the Secretary of State to consult whomever he or she considers appropriate, in addition to certain specified persons, in the process of developing a strategy and policy statement. This formulation enables the Secretary of State to consult ahead of laying a statement before Parliament. As I have set out, it is for Parliament to consider and approve any new or amended statement.

Although I thank noble Lords for their concern about whoever ends up being the Official Opposition at the time, and for their interest in this topic, I hope that the reassurances I have been able to provide on these points mean that they will not press their amendments.

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Lord Callanan Portrait Lord Callanan (Con)
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My Lords, I will start with my Amendments 123 and 124. Amendment 123 seeks to provide additional clarity to Clause 100. Clause 100(1) provides examples of how targets for a low-carbon heat scheme may be set. The amendment’s addition of proposed new subsection (2A) clarifies that an average appliance efficiency or emissions intensity target could apply to all of a given manufacturer’s heating appliances sold in the UK, whether or not they were sold or installed by the manufacturer itself. This had been explicit in one of the examples in the list in subsection (1) but not in others. The Government believe that it is prudent to make this explicit and it provides additional clarity.

The Government have tabled Amendment 124 purely to correct a minor drafting error in Clause 100(4), replacing “activity” with “appliance” so that the subsection has its intended meaning.

Moving on to the amendments tabled by other noble Lords, I will start with Amendment 117 from the noble Baroness, Lady Worthington. The Government have always been clear that they intend to introduce the low-carbon heat scheme provided for by this chapter in very short order; namely, from 2024. However, it is the Government’s view that it would not be appropriate to incorporate a timeline into the Bill. If the noble Baroness will take my word for it, we intend to get on with this fairly quickly. It is important that the legislation retains the opportunity, if necessary, to respond to any unforeseen changes in market conditions, et cetera, and to ensure that the necessary administrative and enforcement systems are established. We are indeed looking at the appropriate enforcement mechanism at the moment.

I turn to Amendment 118, the first of four in this group in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I also thank the noble Baroness, Lady Sheehan, for her contribution. This amendment would require there to be a link between the introduction of a low-carbon heat scheme and a ban on the installation of gas boilers in new-build and existing properties respectively.

Noble Lords will be aware that the Government will introduce a future homes standard in 2025, which will effectively require that new properties are equipped with low-carbon heating and high energy efficiency, avoiding the need for future retrofitting. New properties would be taken care of in that respect. It would be premature to decide exactly what policy approaches will be best suited to implement the phase-out of natural gas boilers in existing properties.

I do not believe that it is helpful to create a dependency between the ability to launch a scheme on the one hand and a particular, separate measure such as an appliance ban, as the amendment proposes, on the other. That would risk delaying the introduction of such a scheme altogether.

On Amendment 119, the Government have been clear that a range of low-carbon technologies are likely to play a role in decarbonising heating. District heat networks have an important role to play in all future heating scenarios, as do electric heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting gas networks to supply 100% hydrogen for heating. As the noble Baroness, Lady Sheehan, said, it is indeed a considerable challenge, but we need to do the studies to work out whether it is feasible. Of course, other technologies may also play a supporting role.

To establish whether or not it is a feasible technology, the Government have an extensive programme of work already under way to develop the strategic and policy options for all these technologies and for different building segments. Another plan, seeking restrictively to prescribe the right solution for all properties now and out to 2050, is not particularly necessary or helpful.

I thank my noble friend Lord Naseby for his contribution on Amendment 121. This amendment would expand the potential set of low-carbon heating appliances that could be supported by a scheme established under the power in this chapter. However, I emphasise that the set of potential relevant low-carbon heating appliances established in this clause is solely for the purposes of a scheme under this power. It does not in any way serve as a comprehensive statement of all potential low-carbon heating appliances, and it has no wider bearing on what could be considered low-carbon heating appliances in any other policies, schemes or legislation.

The Government recognise that low-carbon hydrogen could be one of a few key options for decarbonising heat in buildings. To that end, the Government are working to enable strategic decisions in 2026 on the role of hydrogen in heat decarbonisation; I note the scepticism of a number of noble Members about this. The Government will bring forward the necessary policies and schemes to support the deployment of hydrogen heating, depending on the outcome of these decisions. We will also shortly consult on the option of requiring that all domestic gas boilers are hydrogen-ready from 2026. Since the scheme provided for by this measure would not be suitable or necessary to support the rollout of hydrogen-using or hydrogen-ready heating appliances, it would not be helpful to expand the scope of the power in this way.

Finally, Amendment 122 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, would require that three specific targets be incorporated into regulations for a low-carbon heat scheme. Again, the Government believe that targets are best set and adjusted in the scheme regulations, based on an assessment of the market conditions at the time, rather than in the enabling legislation in advance.

I turn to the specific targets that the noble Lord proposed. I have said a number of times that the Government’s ambition is to develop the market towards 600,000 heat pump installations per year in 2028. That is what we assess to be a scale necessary for and compatible with all strategic scenarios for decarbonising heating by 2050. Although the Government have clear plans to support industry to build a thriving manufacturing sector for heat pumps in the UK, we do not believe that a production quota is an appropriate way to achieve this.

In the light of what I have been able to say, particularly on the consultation, I hope that the noble Baroness, Lady Worthington, will agree to withdraw her amendment.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I wanted to give the Minister the opportunity to introduce his amendments, but I will say a couple of things about this because low-carbon heating is a key issue. As he will know, 40% of UK emissions, more or less, are from heating. One of the big gaps in the Bill is part of the solution to that: home efficiency, which does not really appear in the Bill at all but should have.

I would like to ask the Minister specifically about energy from waste. Clause 98(4) has a list of fossil fuels, but energy from waste is not there. It is sort of a hybrid of being one and not. Over the last decade or so, one of the issues has been that when we have had energy-from-waste plants there has been a big emphasis on them being compatible with using the excess heat for commercial or domestic heating purposes, but hardly any of them do that. They get the planning permission but hardly anything happens. There are one or two in south London where it works, but generally it is not the case. Where do energy from waste and the high carbon emissions from disposing waste fit into this? Do the Government have any appetite—I do not really see it in this section of the Bill—to repair that past omission and make sure that excess heat from those facilities is used far more effectively, and perhaps compulsorily, in future?

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Lord Callanan Portrait Lord Callanan (Con)
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The answer to both of those questions is yes. No one will be forced to take part in the trial. If they do not take part in the trial, they will of course be given an alternative low-carbon solution.

Lord Teverson Portrait Lord Teverson (LD)
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Can the Minister clarify what areas are being looked at? I have seen Redcar, Whitby and Fife being looked at as potential areas. Are those agreed? Is the number roughly three and when are those locations likely to be confirmed?

Lord Callanan Portrait Lord Callanan (Con)
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There is already a small-scale trial in Fife in Scotland. There are two shortlisted villages, Redcar and Whitby—on the west coast, not Whitby on the east coast. They have been shortlisted for the trial and we will make a decision on the basis of submissions from both communities in the new year.

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Lord Callanan Portrait Lord Callanan (Con)
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Let me reiterate once again. Noble Lords are getting involved in the detail of what these trials will comprise—timescales, consumer protections, et cetera. This Bill is about giving the Secretary of State the powers to make the regulations, which will then come back this House, when I am sure that we will have a massively long and involved discussion about all these precise and important details—but this Bill is not the place.

Lord Teverson Portrait Lord Teverson (LD)
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In defence of my noble friend, I think it is reasonable to ask the Minister to come back and give us an indication of the length of the trials. He must know that, and that would be a very useful bit of information.

Lord Callanan Portrait Lord Callanan (Con)
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The initial intention is for them to last two years, but we will want to come back and look at all these details on the basis of proper scientific evidence.

Republic of Ireland and Northern Ireland: Energy Supply Shortfalls

Debate between Lord Callanan and Lord Teverson
Monday 21st November 2022

(1 year, 3 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I will check but I do not think my noble friend is exactly right; I do not think the Republic of Ireland has any LNG terminals. It relies on the ample supply Great Britain has. We supply them through our interconnector pipelines. He is also right that there is a single electricity market in Ireland with power stations, many of them gas-fired, on both sides of the border. We will ensure that they continue to receive supplies.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, Germany has 89 days, France 103 days and the Netherlands 123 days of gas storage. I believe we have nine days. Could the Minister inform us what is happening with the Islandmagee facility in County Antrim, Northern Ireland? I understand that the Rough facility in the North Sea was commissioned last month. Is that now full?

Lord Callanan Portrait Lord Callanan (Con)
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The Rough facility is working again, which was a commercial decision taken by the operators. The noble Lord is right about the overall quantity of supply but, of course, the countries he mentioned have no indigenous supplies of their own. We are very fortunate that some 40% of our supplies come from the North Sea.

Energy Bill Relief Scheme Regulations 2022

Debate between Lord Callanan and Lord Teverson
Wednesday 16th November 2022

(1 year, 3 months ago)

Grand Committee
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Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord makes a very good point. As I said, we will conduct a review as soon as possible with the aim that it will be published before the end of the year. That will inform businesses of where we hope to go with the scheme after its expiry in April. That applies not just to businesses in Northern Ireland but to small businesses across the whole United Kingdom.

In conclusion, the Government remain committed to ensuring that consumers receive help with the rising cost of living and with energy costs. These regulations are vital to ensuring that support is delivered this coming winter. I commend this draft instrument to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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I thank the Minister for his reply to my point on fraud but, as he has not replied on holiday home lets, I assume that, if they are on business rates, they will get this benefit.

Lord Callanan Portrait Lord Callanan (Con)
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There are two aspects to this support. The price guarantee applies to domestic consumers and the EBRS applies to business consumers. If it is registered as a domestic premise, the home owner would receive this support in the same way as other owners of multiple homes would receive it—under the domestic scheme. If it is registered as a business, again they would receive a price discount. That applies to all businesses across the UK, with a few exceptions for some generators.

I take the noble Lord’s point about how this will probably go down badly in the areas concerned, but the scheme was rolled out at pace. We saw similar effects with the Bounce Back Loan Scheme during the pandemic. By the very nature of these schemes, if you do not spend years putting the scheme in place, going through every detail and exempting certain groups that might perhaps be undeserving of the support, there will be cases that most people regard as slightly unfair. That is in the nature of rolling something out quickly. We needed to get the support out quickly, which is why this has been done that way.

Climate Change (Targeted Greenhouse Gases) Order 2022

Debate between Lord Callanan and Lord Teverson
Tuesday 15th November 2022

(1 year, 3 months ago)

Lords Chamber
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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My Lords, this order was laid before the House on 19 October. It will amend the Climate Change Act 2008, expanding the definition of greenhouse gases under the Act to include nitrogen trifluoride, which I will refer to as NF3. The order will make NF3 a targeted greenhouse gas. This means that NF3 emissions will be included within the scope of emissions presented to Parliament annually, and within scope of the full accounting period for the UK’s third and subsequent carbon budgets.

Tackling climate change is, of course, of the utmost importance to this Government. Internationally, we have taken a leading role to promote action through COP 26 and have considerable achievements to reflect on. Through our leadership, we delivered the Glasgow climate pact, wherein 197 countries reached a consensus on the need to urgently tackle climate change. Net-zero commitments now cover 90% of the world’s economy—up from 30% two years ago, when the UK took on the COP 26 presidency. We have continued to champion the need for action in the COP 27 conference taking place as we speak and will strive to ensure that the historic Glasgow climate pact is at the forefront of international co-operation, keeping alive the ambition of limiting the rise in global temperature to 1.5 degrees.

Domestically, we have achieved a great deal on our road to net zero already. Between 1990 and 2019, we grew our economy by 76% and cut our emissions by 44%, decarbonising faster than any other G7 country. Our domestic target is also consistent with the Paris agreement temperature goal to limit global warming to well below 2 degrees centigrade and pursue efforts towards 1.5 degrees centigrade.

Our legally binding carbon budgets are in line with the latest science and put us on a trajectory to achieve net zero by 2050. In June last year, the Government set the sixth carbon budget, for the first time incorporating the UK’s share of international aviation and shipping emissions, an important part of the Government’s decarbonisation efforts that will allow for these emissions to be accounted for consistently.

I will take a moment to talk through what this order will do. The Climate Change Act 2008 was the first of its kind and made the UK the first country to introduce a legally binding long-term emissions reduction target. This order updates the Act by introducing nitrogen trifluoride as the seventh targeted greenhouse gas under the Act. NF3, primarily used in the production of electronics, is considered a potent contributor to climate change, and estimated to be 17,000 times more potent than carbon dioxide. This order will rightly introduce new duties on the Secretary of State to report on these harmful emissions.

Happily, I can assure the House that NF3 emissions have been captured in UK greenhouse gas emissions national statistics and international reporting to the UN Framework Convention on Climate Change since 2015. NF3 is also in scope of the UK’s nationally determined contribution under the Paris Agreement. This order will, however, ensure that the Climate Change Act and statutory reporting pursuant to the Act are aligned with our greenhouse gas inventories and international reporting practice, and that our domestic targets continue to align with the latest science.

I assure the House that this statutory instrument does not put our domestic targets at risk. Representing less than 0.0001% of total UK territorial emissions in 2020, this inclusion in carbon budgets does not make a material difference to the challenge of meeting them and can therefore be tackled without reviewing the levels of the legislated targets.

I place on record my thanks to the Committee on Climate Change for its advice in this regard. It similarly holds the view that the addition of NF3 to the Act will not jeopardise our ability to meet our carbon budgets and net-zero target. Recognising the important role of measuring and reporting energy use and carbon data, the Government introduced a streamlined energy and carbon reporting framework on 1 April 2019. This reporting framework sets a light-touch reporting regime, setting out minimum mandatory emissions reporting requirements for all quoted companies and large businesses, which will, as a result of this order, now also cover NF3 emissions. Due to the very low use of NF3 in UK production, and as existing reporting methodologies, such as the widely used greenhouse gas protocol, already require NF3 to be included in companies’ inventories, I assure the House that the impact on business from this instrument coming into force will also be minimal.

I place on record my thanks to the Administrations in Scotland, Wales and Northern Ireland, for their support during the consultation process in bringing forward this legislation. I am grateful to the Welsh Minister for Climate Change, who has also tabled a statutory instrument consent memorandum before the Senedd, stating that this order is the most practicable legislative vehicle for the provision in question to apply in Wales. My officials will continue to engage with their colleagues in the Welsh Government and I hope that, by the time this order leaves the other place, an SI consent Motion will have been passed by the Senedd.

The Government want to ensure that, as we transition the economy to net zero, the Climate Change Act evolves with the necessary developments in science and our international commitments. Therefore, I commend this order to the House.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I have to admit that I never came across nitrogen trifluoride in my chemistry lessons, or at all before I read this SI. Although I very much accept the Minister saying that we have very small emissions in this area, as he says, it is some 17,000 times more potent than CO2. It also lasts in the atmosphere for something like 500 years.

What I do not understand is how we measure these emissions. They are used in LCD screens. Although we do not manufacture many of those in this country, can the Minister explain whether this gas escapes in disposal of those electronic items, and whether we then measure that? Our consumption of those products is much greater than our production, so I would be interested to understand how that works and whether we have a bigger problem than he stated. I am not saying that this is the case but am trying to understand. If it is the case, do the Government have any means to manage this? Also, the SI mentions pensions. The Minister did not mention anything about this. Why are the regulations on those coming along later, as I understand it from the Explanatory Memorandum, rather than now?

The major thing that I want to understand, which the Minister mentioned, is the contradiction in the context given in the Explanatory Memorandum, paragraph 6.4 of which says:

“As of 2021, all international reporting practice has been to include NF3 as a targeted greenhouse gas.”


However, paragraph 7.2 says:

“In 2013, the UNFCCC mandated the inclusion of NF3 in all national greenhouse gas inventories”.


Therefore, I am rather confused as to whether this all happened in 2021 and will be reported in 2023 or whether we have done all this since 2013. It would be useful to understand that.

Lord Lennie Portrait Lord Lennie (Lab)
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My Lords, I thank the Minister for introducing this statutory instrument, and send apologies from my noble friend Lady Blake, who was due to be here but is currently supervising the birth of her latest grandchild—good luck with that.

The instrument extends the scope of emissions captured and reported under the Climate Change Act 2008 by including nitrogen trifluoride—I had not heard of it either, until yesterday when preparing for this—as a targeted greenhouse gas. Following on from the point made by the noble Lord, Lord Teverson, I point out that this means that NF3 emissions will be included within the scope of emissions for the annual statement of emissions for 2021, to be published by 31 March 2023, the full accounting period for the UK’s third carbon budget—CB3—and for subsequent carbon budgets. I am not sure whether that is the answer, but that is my understanding of what we are dealing with.

We on this side of the House have no objections to this instrument, but we have some questions. The Climate Change Act requires the Secretary of State to reduce the amount of net UK carbon emissions to at least 100% below the 1990 level, and to set a carbon budget for each five-year period, to report each year in line with international reporting practices. As we have heard, NF3 has a global warming potential that is 17,000 times or thereabouts greater than carbon dioxide, although I am not sure that you can smell it, taste it or see it. Therefore, it is right to include it in the annual emissions reporting.

The Climate Change Committee highlighted that the volume of current NF3 emissions is so low that it is not likely to impact on achieving the 2050 target, as the Minister said in his introduction. However, I am interested in whether the Government have made any assessment of the likelihood of this changing and whether there should be any increase in NF3 emissions. Also, what is likely to affect the increase in NF3 emissions into the atmosphere?

As we are coming to the end of the third carbon budget period, I would appreciate it if the Minister could update the House on the current expectation going into the fourth period next year. Given that these budgets were set long in advance—the third in 2008 and the fourth in 2011—they require long-term policy planning, and while the Climate Change Committee in June this year stated that the prospects for meeting the fourth are better than for meeting the fifth and sixth, it has also highlighted the dependence on short-term macroeconomic trends and the extent to which emissions rebounded following the pandemic.

On a wider note, the Climate Change Committee’s report in June emphasised that delivery is undermining the Government’s policy ambition. What steps are the Government taking to address this and to ensure that the positive words are met with the required delivery actions? The report also emphasised that action to address the rising cost of living should be aligned to net zero, yet we have seen the Government favouring non-renewables, with their loopholes to the oil and gas levy, while continuing their apparent ban on onshore wind.

We have asked for this to be considered many times, but I would be interested to hear the Government’s assessment of the impact that these decisions will have on their ability to hit forthcoming carbon budgets.

Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Order 2022

Debate between Lord Callanan and Lord Teverson
Thursday 3rd November 2022

(1 year, 3 months ago)

Grand Committee
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Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
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My Lords, I beg to move that the draft Greenhouse Gas Emissions Trading Scheme (Amendment) (No.3) Order 2022, which was laid before the House on 7 September 2022, be approved.

The UK Emissions Trading Scheme—the ETS—was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme to encourage cost-effective emissions reductions, contributing to the UK’s emissions reduction targets and our net-zero goal. This scheme replaced the UK’s participation in the EU Emissions Trading Scheme—the EU ETS—and the 2020 order applied existing rules on the monitoring, reporting and verification of emissions with modifications to ensure that they work for the UK ETS.

The 2020 order was subsequently amended by several statutory instruments in 2020, 2021, and 2022 to set up the scheme. These included provisions for the free allocation of allowances and the UK ETS registry, as well as a series of technical and operational amendments to improve the running of the scheme. Regulations under the Finance Act 2020 established rules for auctioning allowances and mechanisms to support market stability.

The purpose of this order is to amend the 2020 order to enable the inclusion of flights from Great Britain to Switzerland within the scope of the UK ETS. The existing UK ETS currently covers domestic flights, flights from the UK to the European Economic Area, and flights between the UK and Gibraltar. Since our departure from the European Union, flights between the UK and Switzerland are not covered in either the UK ETS or the Swiss Emissions Trading System, creating a gap in ETS coverage.

The Government consulted on the policy in this draft instrument between May and July 2019 as part of a consultation on the future of UK carbon pricing. In the 2020 government response to that consultation, we committed to include UK to Switzerland flights within the scope of the UK ETS if an agreement could be reached with Switzerland. I am happy to say that we have now agreed with Switzerland to cover these flights, and Switzerland has amended its relevant domestic legislation to ensure that flights from Switzerland to the UK are included in the Swiss ETS from 2023.

This instrument amends the 2020 order to include flights from Great Britain to Switzerland in the definition of “aviation activity” and to bring them within the scope of the UK ETS for the start of the 2023 scheme year. In 2019, UK to Switzerland flights amounted to approximately a quarter of a megatonne of CO2, which is less than 0.2% of the UK ETS cap for the 2023 scheme year.

Noble Lords should note that the policy intent is to include flights from across the UK to Switzerland within the scope of the UK ETS. However, as the Northern Ireland Assembly was not able to consider affirmative legislation at the time when the instrument began the legislative process, this legislation brings only GB to Switzerland flights into the scope of the UK ETS. Once the Northern Ireland Assembly is functioning, equivalent legislation will be proposed to the Assembly as soon as possible to ensure that all flights between the UK and Switzerland are then covered. This order will enable the inclusion of flights from Great Britain to Switzerland within the scope of the UK ETS.

In conclusion, this SI will close a gap in coverage in the UK ETS, fulfilling the commitment set out in the government response to the future of UK carbon pricing consultation and upholding our agreement with Switzerland. On that basis, I therefore commend this order to the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I very much thank the noble Lord for that explanation. It is good to see the usual BEIS team opposite.

I went to Switzerland on holiday this summer. I was very lucky to do so. We went by train.

Lord Callanan Portrait Lord Callanan (Con)
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Do you have pictures for us?

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord makes a good point. As he correctly observes, it is difficult to implement in practice because by their very nature, those households do not have a relationship with their energy supplier. We are urgently looking at a delivery mechanism, with all the appropriate protections against fraud et cetera. Delivery is likely to be through local authorities, but we are still working on a precise mechanism and as soon as we have more details, we will update the House.

Lord Teverson Portrait Lord Teverson (LD)
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I thank the Minister for that. If you cannot do it directly through Ministers, then through local authorities is probably the right way to do it. I know that Cornwall council is already starting to make some preparations in that area. I beg leave to withdraw Amendment 5.

Energy Prices Bill

Debate between Lord Callanan and Lord Teverson
Lord Callanan Portrait Lord Callanan (Con)
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I thank all noble Lords for their contributions to this important debate today. I will respond to as many as possible of the issues that were raised in the time that is available to me.

I start by briefly reminding noble Lords of the importance of the Bill. Russia’s illegal war in Ukraine has led to a global energy crisis, and the Government are taking urgent action now to support households and businesses across the UK which would otherwise face significant financial difficulties this winter. I know that many speakers in the debate recognised that. This legislation will ensure that households, businesses and other bodies such as charities and public organisations—and indeed churches—receive the financial support that they need by providing the framework to deliver the Government’s energy support package. In so doing, the Bill will help drive down inflation and support economic growth.

I turn to points raised by noble Lords in their contributions. First, I thank the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, for their letter that I received this morning on the Energy Security Bill. I will respond to them in writing shortly, but I assure the House that the government remain committed to the important measures in that Bill to deliver change in the energy system over the longer term. We have to deal with the short-term crisis but we are not forgetting the longer-term context, and many of the measures in that Bill are to ensure that changes are made in the regulations that will benefit us all in the long term.

In the meantime, we are facing a global energy crisis, and we must ensure that we prioritise delivering the measures in this Bill to provide that much-needed support to consumers. I will say a few words about why it is so important to get this legislation passed soon. I thank the noble Baroness, Lady Worthington, and the right reverend Prelate the Bishop of Manchester for raising the important issue of the speed of this legislation; I readily accept that we are going through it extremely rapidly.

Households and businesses face rising energy prices, and it is essential that this legislation and subsequent secondary legislation that will be laid under it is in place by the end of this month. This is to allow for urgent financial assistance for householders, businesses and other organisations across the UK ahead of the winter, and particularly from the start of November.

Building on the DPRRC’s report, the noble Lords, Lord Lennie, Lord Teverson, Lord Foster and Lord Grantchester, and the noble Baronesses, Lady Worthington and Lady Young, raised concerns about the delegated powers in the Bill. Again, I pay tribute to the work of the DPRRC and thank the committee for its report, which I will also respond to shortly. The Bill takes a relatively limited number of powers but I readily accept that they are broad ones. They are essential for ensuring that these crucial support schemes can be stood up at pace. The House will appreciate the speed at which this measure has been drafted. I pay tribute to the exemplary work of the officials involved in delivering it; it has involved lots of late nights and weekend working for them, for which I thank them. It is essential that these measures are delivered as intended. To be frank with noble Lords, these powers will allow us to do this with the appropriate scrutiny.

As I said in my introduction, the vast majority of the powers in the Bill are effectively time-limited through either direct sunsetting—normally, noble Lords are calling on me to sunset powers—their link to other powers in the Bill, or indeed the duration of this energy crisis. The ability to extend time limits ensures that we have sufficient scope if we need to change them over time. I assure the House that noble Lords will of course have an opportunity for further scrutiny on the details of those schemes via the secondary legislation route, much of which is subject to the affirmative procedure.

A number of noble Lords raised concerns about the powers in Clauses 21 and 22, specifically powers to modify licences and give direction; those concerns were also reflected in the DPRRC’s report. In my view, these powers are necessary to facilitate the delivery of a number of support schemes, including the Northern Ireland energy bills support scheme and the alternative fuel payment for domestic and, potentially, non-domestic customers as well. Let me make it clear to the House that, under the terms of the Bill, Clauses 21 and 22 must be used in response to the current energy crisis. Using the powers in either clause in relation to action under any of the other powers in the Bill is in effect time- limited, as these powers are themselves time-limited.

As expected, and as always happens in these debates, many noble Lords raised the important issue of energy efficiency. A crisis gives even greater urgency for action to make homes more energy efficient in order to reduce energy bills and, crucially, to tackle fuel poverty. That is why the Government are investing £12 billion in our Help to Heat scheme, including £1.5 billion to upgrade around 130,000 social housing and low-income properties in England. I was able to launch an additional £800 million of that scheme in discussions with housing associations and local authorities only last week.

The Government have also announced further support on energy efficiency through the ECO Plus measures. This scheme was announced in the mini-Budget—it is one of the few measures from the mini-Budget to have survived so far. It will help hundreds of thousands of households to reduce their energy bills by targeting that support to the most vulnerable. Of course, as it is an obligation, we will consult on the detailed policy design of ECO Plus shortly; I am sure that noble Lords who take an interest in these matters will want to contribute. We hope to have the scheme up and running by April next year.

In addition, our energy security strategy sets out further commitments to support property owners, including facilitating low-cost finance from retail lenders to help consumers upgrade their properties at low cost. This includes zero-rating VAT on the installation of insulation and low-carbon heating for the next five years. That will potentially save up to £2,000 on the cost of an air source heat pump—should the noble Baroness, Lady Young of Old Scone, want to move in that direction.

The noble Lord, Lord Lennie, and the noble Baroness, Lady Young, raised the cost-plus revenue limit. The Government recognise the importance of dispatchable and baseload generation for security of supply. The low-carbon technologies that can deliver these types of power, such as biomass and nuclear, tend to have higher input costs. This is being considered as part of the detailed policy design for the cost-plus revenue limit. We intend the limit to last only for as long as it is strictly necessary. A number of noble Lords referred to the five-year sunset provision. That would allow the Government to respond to the immediate effects of high wholesale prices on consumers while ensuring their ongoing protection if gas prices remain abnormally high for a prolonged period beyond current expectations.

Lord Teverson Portrait Lord Teverson (LD)
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Can the Minister clarify that renewables on the cost-plus, whether hydro, solar, wind, AD or whatever, will be assessed separately within those different sectors, rather than it being an across-the-board average?

Lord Callanan Portrait Lord Callanan (Con)
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That goes back to the point I made in my introduction. There are many different circumstances facing different providers. Some of them have pointed out quite loudly that they have sold their power in long-term contracts, et cetera, so it varies from provider to provider. However, the noble Lord gives me the opportunity to say that the precise mechanics of the temporary cost-plus revenue limit will of course be subject to a full consultation, which we will launch shortly.

The noble Baroness, Lady Worthington, raised important issues on who should bear the cost of the measures. The energy profits levy on oil and gas and the cost-plus revenue limit that have been announced for low-carbon generators will help to fund these schemes. The scale of the crisis means that the sums involved are beyond those two mechanisms so higher borrowing will be necessary to pay for this temporary support, and it is right that we use all the available tools to support businesses through this crisis and to spread the costs over time.

The right reverend Prelate the Bishop of Manchester, the noble Baroness, Lady Young—

Energy Supplies

Debate between Lord Callanan and Lord Teverson
Wednesday 12th October 2022

(1 year, 4 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord makes an important point. A number of scare stories have been circulating, although I would gently point out that many parts of America are much less densely populated than many parts of the UK.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, it is well understood that fracking will take some time to develop, and it is more expensive than many renewables. As an alternative, solar is renewable, a lot cheaper and can be implemented much more quickly. Can the Government guarantee that they will not restrict further the rollout of solar in the country during the next couple of years?

Lord Callanan Portrait Lord Callanan (Con)
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Not only can I guarantee that but we will be expanding renewables production. We need to do both. We need to roll out renewables, which have a good track record. They are relatively cheap, but they are intermittent—it is no good telling people that they can keep their lights on for only 60% of the time. The real watchword is that we need diversity of supply. We need more renewables; we need gas; we need nuclear; we need biomass production—we need all of them.

Lord Teverson Portrait Lord Teverson (LD)
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That is moving back from what I understood. I understood there had been an agreement, or is it just that the facility has been licensed? Is that how far it has got, and so a commercial agreement has still to be made? Is that where we are?

Lord Callanan Portrait Lord Callanan (Con)
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As I said at OQs this afternoon, licences have been granted by Ofgem, by the regulatory bodies, because the safety and security of the facility is important. Centrica has taken a commercial decision to open part of the storage facility for this winter, and it has submitted other plans for our consideration, which we are doing. I apologise to the noble Lord, but I can go no further than that at the moment. As soon I have further information, and we expect progress in the near future, I will inform the noble Lord and the rest of the Committee.

Lord Teverson Portrait Lord Teverson (LD)
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I thank the Minister for that information, but it sounds to me like Centrica is conducting a very hard negotiation with the Government, maybe at the security expense of the country—I do not know.

Lord Callanan Portrait Lord Callanan (Con)
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I will leave that as a comment; there is nothing I can reply to on it. When I have further information, I will update the Committee.

The commitment proposed by my noble friend Lord Moylan to have in storage gas equivalent to 25% of forecast domestic consumption by 2025 is extremely ambitious. It is also horrendously expensive to do and, I submit to the Committee, unnecessary. The Government fully recognise the importance of gas storage, as I said, and officials continue to work on the future role that it can play in the clean energy landscape, particularly as gas production, as a number of noble Lords have said, can start to decline. But, of course, the fact that we get 45% of our production from our own continental shelf is, in effect, a giant gas storage facility and that is why we have traditionally had much less than continental countries which do not have those advantages. There is an integrated market—that is correct—and both sides benefit from it. As I said, the interconnectors over this year have been operating massively in the direction of the rest of continental Europe from the UK.

I think I have answered all the questions that were raised about gas storage facilities.

--- Later in debate ---
Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I think we are all trying to achieve the same thing here. As the noble Baroness, Lady Blake, said, maybe we need to take this forward as a way to do it. The cost to consumers is absolutely central at the moment, and this is not a short-term thing—it is at least medium term. Later we will come to an amendment which says we should repeal the Nuclear Energy (Financing) Act, which was all about raising costs to consumers in the short term and has nothing to do with nuclear power otherwise.

In my amendment, I am trying to do something very similar to what has already been debated: if we are going to accept this levy—we know levies are always very contentious when implemented in terms of who has to pay for them and who gets the benefits from them, which leads to a lot of argument—it is quite clear that for hydrogen there is only a very limited sector of organisations, people and population who will actually benefit from it. In its own way, my amendment seeks to prevent other consumers who are not benefiting from hydrogen having to pay for that investment.

It is very much in line with other Members’ amendments and it is absolutely fundamental to the messages that we as a Parliament, and the Government, are putting out at the moment to consumers and company users of energy. Let us make sure that, if we have this levy, it is kept to those who benefit from hydrogen rather than those outside who do not.

Lord Callanan Portrait Lord Callanan (Con)
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I thank the noble Lords, Lord Lennie and Lord Teverson, and the noble Baronesses, Lady Worthington and Lady Blake, for their amendments relating to the hydrogen levy provision. Before turning to the amendments, let me make the general point that these provisions in the Energy Bill will not, as all noble Lords are aware, immediately introduce this levy; they will only enable government to introduce the levy later through secondary legislation.

I will start with Amendments 52, 54 and 62 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. Amendments 52 and 54 seek to limit the energy market participants that could be obliged to pay any future hydrogen levy to gas shippers only. The Government intend that the levy would initially be placed on energy suppliers, and it will operate in a similar way to the existing levy schemes, where revenue support is funded through energy supplier obligations, such as the supplier obligation that funds the current contracts for difference regime. That is because these funding mechanisms are well understood by the private sector and have been extremely successful. The Government consider that establishing a similar levy would provide investors and developers with confidence to invest in low-carbon hydrogen production projects.

The option to levy gas shippers has been included with the intention to allow for a greater range of options for future levy design. The Government anticipate that the costs of any future levy on gas shippers would be passed through the energy supply chain and ultimately on to energy users, in a similar way to existing supplier obligations. It is unlikely therefore that these amendments would have the effect of preventing costs associated with the levy being passed on to households.

I turn to Amendment 62, which seeks to guarantee the return of overpayments of the levy to energy customers. The Government’s intention, and our expectation, would be that, in the event of overpayment by relevant market participants, those sums would be returned to market participants, who in turn should then pass them on to their customers.

Amendment 53, tabled by the noble Lord, Lord Teverson, seeks to ensure than an obligation to pay a hydrogen levy would, where possible, be placed only on those who would directly benefit from the low-carbon hydrogen production funded by the levy. Low-carbon hydrogen could support decarbonisation across the economy, which could benefit gas and electricity customers generally.

The powers that we have in the Bill provide options for where a hydrogen levy might be placed in the energy value chain, enabling future regulations to make provisions requiring one or more descriptions of gas suppliers, electricity suppliers and/or gas shippers to pay the levy. The Government have not yet reached a decision regarding which types of market participants will be obliged to pay the levy. That decision will be taken in due course and will no doubt be discussed in our Lordships’ House during the course of the secondary legislation that would be required to implement it. The decision will take into account a wide range of considerations, including but not limited to considerations related to fairness, which I know are the focus of the amendments tabled by the noble Lords. Given the Government’s approach to policy development on this levy, I hope that noble Lords recognise the amendment is unnecessary.

I turn to Amendments 55, 56 and 57, tabled by the noble Baroness, Lady Worthington. Amendment 55 seeks to ensure that an obligation to pay a hydrogen levy administrator could not be placed on electricity suppliers. I would contend that it is crucial that the provisions in the Bill allow for a range of options for where the levy might be placed to help enable the Government to future-proof the levy over the longer term and accommodate changes to the wider energy market.

As I alluded to earlier, we expect low-carbon hydrogen to play an important role in decarbonising the electricity sector. This provides support to the case for including electricity suppliers as a possible point of obligation for the levy. I understand the concern expressed by the noble Baroness and, if she will allow me, I will take this away and possibly revisit it at Report, but I hope she will not press her amendment.

North Sea Gas

Debate between Lord Callanan and Lord Teverson
Wednesday 7th September 2022

(1 year, 5 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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As I intimated in my previous answer, we are co-operating closely with the European Union, and as I said, throughout the summer, in the quiet months, the UK’s LNG terminals—we have 20% of the entire European capacity—have been working overtime precisely to help our European friends to refill their storage capacity in time for the winter months. Therefore, security is a top priority for us, and of course we work very closely with other suppliers such as Norway, with LNG suppliers, and with our European friends.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, it is incredible to me that Centrica, a private company, was just able to close our national gas storage facility without, it would seem, any consultation or intervention by the Government. What will stop that happening again in two or three years’ time?

Lord Callanan Portrait Lord Callanan (Con)
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We have received proposals from Centrica, which we are closely examining at the moment. I point out that the market in 2017 was in a very different position. A number of independent reports were produced by experts at the time, supporting that decision from Centrica. However, the situation is very different now, which is why it is now looking at reopening it.

Energy Bill [HL]

Debate between Lord Callanan and Lord Teverson
Lord Callanan Portrait Lord Callanan (Con)
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If the licence is transferred to another body, it will also have to be approved under the same process. You cannot just wake up in the morning and decide to transfer your legal obligations to somebody else who is not an appropriate, fit and proper person. So, of course, that will be taken into consideration.

I must say that the noble Baroness is wrong to provide the parallel with the existing water companies. I do not think that anybody is arguing that people who hold those licences are not fit and proper to do the job. There is a legitimate argument about levels of investment and how that money is being spent, et cetera. However, no one is arguing about their competence; the noble Baroness is trying to draw a very bad parallel there.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, I hope the Minister will forgive me for not understanding some of this, because it has raised a number of questions in my mind. If the CO2 is put, say, under the sea—as we have been talking about—who actually owns the CO2 once it has gone there? Who is liable for it and who has the legal right to the storage area itself? Given that most of these are created from the oil and gas that has been extracted, does that belong to the lease of the fossil fuel company that extracted them and does that last for ever? I do not understand how this works and where the liabilities land.

As the noble Baroness, Lady Bennett, said, if an organisation says, “I don’t want to do this any more”, there is no obligation for anybody else to take it on—so there will be a legal limbo. Perhaps the Minister could explain how this licensing works within that context. It seems to me that the Crown Estate will come into this somewhere, but maybe the Minister could enlighten me. I apologise again, because I should know the answer to all of these questions.

Lord Callanan Portrait Lord Callanan (Con)
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I am happy to confirm the legal detail of the system to the noble Lord in writing, but my understanding is that the operator of the site would bear the responsibility. That is precisely why we have built in the relative decommissioning costs. The fund will have to be established and the operator will have to show that the ability is there to decommission the relevant pipe work, et cetera. I assume that that assurance and other long-term effects will also be built into that condition, but I will be very happy to confirm that in writing to the noble Lord.

Lord Teverson Portrait Lord Teverson (LD)
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That would be very useful.

Energy: Prices and Supply

Debate between Lord Callanan and Lord Teverson
Thursday 14th July 2022

(1 year, 7 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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My noble friend is tempting me to say what is understood and is not understood by the Treasury, which is perhaps a road I should not go down. Of course, the point is right. The contribution of energy to the consumer prices index is particularly important, and my noble friend is also correct about the proportion of indirect taxes on energy bills.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, the Conservative manifesto of 2019 stated:

“We will help lower energy bills by investing £9.2 billion in the energy efficiency of homes, schools and hospitals.”


Now that we are over half way through this parliamentary term, exactly how much money has been spent—not planned to be spent—on the energy efficiency of homes and other buildings?

Lord Callanan Portrait Lord Callanan (Con)
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Certainly, we are well on the way to that commitment, and this spending review period allocated about £6.6 billion towards those targets. For example, we have spent £471 million to date on the social housing decarbonisation fund and £350 million on the sustainable warmth programme, and we are going out to bids later this year for another £800 million of spending under the social housing decarbonisation fund, so we are making considerable progress.

Warm Home Discount (England and Wales) Regulations 2022

Debate between Lord Callanan and Lord Teverson
Monday 20th June 2022

(1 year, 8 months ago)

Grand Committee
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Lord Teverson Portrait Lord Teverson (LD)
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That is a very useful explanation, but will the department look at how accurate it was in retrospect? Will it take a sample of properties and see whether the scheme reflected how things were on the ground to check the effectiveness of the algorithm?

Lord Callanan Portrait Lord Callanan (Con)
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Yes, of course we will conduct a process of constant improvement. As more data become available, as universal credit is rolled out, and as EPCs are increasingly rolled out and more properties have one, it will make targeting easier. We will modify the scheme as we go forward, using new and improved targeting data.

I thank noble Lords for the useful points they made. I am pleased that virtually everyone who spoke was in broad agreement that the scheme should continue at this time because it has been very successful at providing householders on the lowest incomes with critical support.

Contracts for Difference (Allocation) and Electricity Market Reform (General) (Amendment) Regulations 2022

Debate between Lord Callanan and Lord Teverson
Monday 13th June 2022

(1 year, 8 months ago)

Grand Committee
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Lord Callanan Portrait Lord Callanan (Con)
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I thank all the three noble Lords for their contributions. They were raising wider concerns about how the process works; I do not think anybody objected to the SI itself, so I thank Members for their support. The points that were raised demonstrate the need for these regulations—they are technical changes—and the support for introducing them.

As I said at the start of the debate, these changes are essential to ensure that the next CfD allocation round, which will be the first annual one, can best support something we all want to see: an increase in the pace of renewable development and the deployment needed to help us achieve our net-zero ambitions and get the price of electricity down in the longer term. At the same time, they help to achieve our legal net-zero commitments.

My noble friend Lord Lilley was right to point out the need to consider the likely cost to consumers, the impacts on energy security, et cetera. These regulations must be made now, ahead of the next CfD allocation round, which is planned for March next year, as I said, so that the developers have certainty as to the legislative framework for the next round.

Dealing with some of the questions raised, my noble friend Lord Lilley asked me to explain how a shorter validity acts as an incentive and what happens after the supply chain lapses. He also asked whether supply chain plans are published. The answer is that they are. They set out how they will improve the capacity of the supply chain. The noble Lord, Lord Teverson, touched on the reason and I need to be slightly careful here. We are endeavouring to ensure that—how should I put this?—as much of the supply chain as possible is located in the United Kingdom, without breaching our legal obligations, which nobody would want to see us do. We are subject to legal action from the European Commission in the WTO, at the moment.

My noble friend Lord Lilley also asked what the Government are doing to stop CfD generators delaying their start dates so they can benefit from high energy prices. First, the vast majority of operational CfD projects are, happily, paying back into the system, due to the current high energy prices. I set out those figures in a letter to the noble Lord, Lord Teverson. Subject to his agreement, I would be happy to send a copy to my noble friend.

In essence, in April this year, the Low Carbon Contracts Company, which is responsible for administering this system, returned £108.3 million to GB suppliers in respect of payments made by generators since last autumn. However, my noble friend is correct, and the Government are aware of a small number of projects that have delayed their contract start dates to try to benefit from current high wholesale prices. Legally, CfDs are private law contracts between the Low Carbon Contracts Company, the CfD counterparty and generators. The Government are not legally a counterparty to those contracts. However, we have raised the matter with the industry and made it clear that, in our view, this practice is not within the spirit of the scheme, which is intended to deliver benefits to both consumers and developers. While operating on commercial terms, these developers will not receive CfD payments. We are examining possible changes to the scheme to prevent future CfD projects acting in this way. While this practice is regrettable, it is important to remember that CfDs have played a significant role in massively bringing down the cost of offshore wind in recent years.

My noble friend also asked about capacity. The CfD scheme currently supports 16 gigawatts of new capacity, of which 13 gigawatts is offshore wind. Only two projects, totalling 1.4 gigawatts, have delayed their contract start dates in order to sell their electricity on the open market.

Turning to the slightly problematic area which concerns the noble Lord, Lord Teverson, reflecting the concern of the EU that we are breaching WTO rules, my legalistic response to this is that in the supply chain plans we do not require developers to use UK content. The supply chain plans are there to encourage them to invest in creating competitive, capable and efficient supply chains which are, of course, necessary for us to deliver net zero, taking into account our national obligations.

Lord Teverson Portrait Lord Teverson (LD)
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May I say to the noble Lord that that is highly commendable?

Lord Callanan Portrait Lord Callanan (Con)
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I thank the noble Lord for his comments. The noble Lord also asked why there is discrimination against floating offshore wind in terms of the 300-megawatt capacity. The answer is that this technology is at a key juncture in terms of its deployment, and we think that certain emerging technologies—such as floating offshore wind—have the potential to play an important role in the future in helping us to meet net zero. Bringing them into the supply chain process now will allow BEIS to support the development of the associated supply chain at an early stage by encouraging the industry to invest in competitive supply chains and—as has happened with offshore wind—to accelerate the cost reduction, by which we are now all benefitting.

There were also a number of technical questions raised by the noble Lord, Lord McNicol. This SI is not affected by the detailed questionnaire that was issued. On his other questions, it may be better if I reply to him in writing, if he will allow me to do so. With that, I commend this draft instrument to the House.

Fuel Poverty

Debate between Lord Callanan and Lord Teverson
Monday 13th June 2022

(1 year, 8 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I totally understand the points that my noble friend is making, and the Chancellor has, of course, already reduced fuel duty. Domestic fuels, such as gas and electricity, are already subject to the reduced rate of 5% VAT. Going further, I would not guarantee that prices would fall, given that most of the price rises are driven by a number of factors that can be seen worldwide. The other problem is that cutting VAT would also be a tax cut for everyone, including wealthier people in society.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, among the most vulnerable groups are park home owners—some 85,000 of them—whose energy supply is often controlled by landlords. These are often, I regret to say, rogue landlords. How will the Minister guarantee that those park home residents will be able to take advantage of the Government’s rebate schemes and the various other things to alleviate energy prices over the next few months?

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord makes a very good point, and that is one of the aspects we are looking at—indirect suppliers through the consultations that we are holding on the various support schemes. I also point out that park home owners are already benefiting from a number of our energy-efficiency improvements, and there have some excellent examples of retrofitting park homes that have been carried out under schemes such as the local authority delivery energy efficiency scheme.

Costs of Living

Debate between Lord Callanan and Lord Teverson
Wednesday 25th May 2022

(1 year, 9 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I do not doubt that it is an incredibly difficult time, and the Government are fully aware of the pressures facing many households. I can tell the noble Lord that we are monitoring the situation very closely, and the Chancellor and the rest of the Government stand ready to take any further steps, if they are needed, to support households.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, the Government are going to make a windfall gain—because of the electricity price contracts for difference, the price of the market will move above the strike price. How many billions extra will the Treasury get over the next year, and will that be fed back to hard-pressed consumers?

Energy Security Strategy

Debate between Lord Callanan and Lord Teverson
Wednesday 27th April 2022

(1 year, 10 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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Ultimately, yes, but in the short term we will want to support both forms of hydrogen production to get the market started and we will look towards providing something similar to the contracts for difference scheme for hydrogen production. As the noble Viscount is aware, we announced an expansion of hydrogen production in the strategy.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, is it still the case that despite this plan, just one person in a local community can in effect veto an onshore wind plan for that community?

Lord Callanan Portrait Lord Callanan (Con)
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I do not think so—I do not think it would be that specific. We will not have one person vetoing an application. However, we would want to make sure that there was general community support for further onshore wind capacity before development proceeded.

Shale Gas Production

Debate between Lord Callanan and Lord Teverson
Tuesday 15th March 2022

(1 year, 11 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I am slightly nervous now if the noble Baroness is welcoming a Statement which we have made. We might have made a mistake in our energy policy—sorry, I am being facetious.

The difficulty with the Green Party’s position is that they say that everything should be done with renewables, but that does not give us solutions to the problems in the near term. This is a gradual transition. We already have some of the largest quantities of offshore wind and renewables in the world. I accept that the position of the noble Baroness is that we should go even further and faster, but we are progressing as fast as we possibly can. We have huge investments going into renewables. However, we need fossil fuels in the short term—unless the Greens are also proposing that we should stop driving our petrol and diesel fuel vehicles and disconnect our gas boilers. This is a gradual transition; there is a need for fossil fuels during the transition, and the independent Committee on Climate Change has accepted that. Even the noble Baroness might think that it was probably more sensible to gain those fuels during the transition from our own domestic production, rather than from Putin.

Lord Teverson Portrait Lord Teverson (LD)
- Hansard - - - Excerpts

My Lords, I also welcome the Minister’s Statement. It is good to hear what the Minister said in general. Historically, I have not been that opposed to fracking done under absolutely the right conditions. However, he is absolutely right that the development period would now be far too long. History has moved on, and gas has to be cut down rather than supplied locally. For renewables developments such as offshore wind, which the Minister mentioned, the gestation period for those sort of investments is still something like 10 to 12 years from when the Crown Estates goes out and makes an offer. Does the Minister have any views about how that period can be cut down, without in any way compromising on the environmental investigation aspect? It seems to me that we should be able to do that sort of stuff quicker.

Lord Callanan Portrait Lord Callanan (Con)
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The noble Lord makes a good point; I think he has put his finger on the nub of the problem. Whenever there is a crisis in politics—and there is definitely a crisis at the moment—there is always a search for quick and easy solutions. Unfortunately, on energy infrastructure, there are no quick and easy solutions: these things take years, if not decades, to put into operation. We are progressing nuclear power, as indeed we should, but nothing is going to happen for a number of years—possibly not until the start of the next decade. We already have in motion the expansion that I mentioned earlier of offshore wind. We have the targets in place for 2030 and those developments are already proceeding.

The same problem occurs with the search for new licensing fields in the North Sea, if we push ahead with it: it will be a number of years before new fields can be developed. Even if we did progress shale, it would be a number of years—possibly a decade—before we would get meaningful quantities of gas out of the ground, even if we overcame all the environmental objections. I am afraid that there are no easy silver bullets to this problem. It is probably a silver buckshot: there are lots of different smaller-scale solutions that we will need to develop over a number of years.

Green Skills

Debate between Lord Callanan and Lord Teverson
Wednesday 9th March 2022

(1 year, 11 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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It is very much not business as usual. As the noble Baroness will be aware, we have one of the most ambitious decarbonisation targets in the western world. We have decarbonised faster than most other industrialised countries. I am sorry if the noble Baroness does not like that, but it remains a fact. As I said in an earlier answer, we are responsible for 1% of worldwide emissions. Yes, we need to make progress in this country, but we also have to look at a global scale and work with partners across the world to bring down their emissions as well.

Lord Teverson Portrait Lord Teverson (LD)
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My Lords, can I make a plea to the Government? So often when we talk about green jobs—as has been mentioned already, in fact—it is nearly always around green energy, renewable energy and all of that side, whereas there is a huge need for those skills that are meeting the biodiversity emergency in this country and globally, as the noble Baroness, Lady Fookes, said. In particular, I mean biologists, ecologists, horticulturalists and farm advisers—there is a real shortage of these. If we want that emergency to be solved as well, we need jobs and training in that sector.

Lord Callanan Portrait Lord Callanan (Con)
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Yes, I am very happy to agree with the noble Lord on that point. He makes some good observations.

Net Zero Test

Debate between Lord Callanan and Lord Teverson
Thursday 22nd July 2021

(2 years, 7 months ago)

Lords Chamber
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Lord Callanan Portrait Lord Callanan (Con)
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I understand the point the noble Lord is making, but I would refer him to the independent Committee on Climate Change, which does many of the things he is suggesting. It was established by the Climate Change Act 2008 and provides expert advice to the Government on climate change mitigation and adaptation. As he will have seen in its written reports, it is not afraid to point out what it sees as any deficiencies.