Lord Grantchester
Main Page: Lord Grantchester (Labour - Excepted Hereditary)
Lord Teverson
My Lords, I have a sense of déjà vu about this amendment. With every energy Bill in which I have been involved since I was honoured to become a Member of the House in 2006, I have tried something similar. Each time I refine it slightly more until I think that it is perfect, but of course perfection is no use if there is no application. However, we will see.
I thank the Minister for the support that the department has given geothermal energy recently. It has been slow and difficult but it is getting on to the agenda, particularly in terms of the industrial renewable heat initiative and the contracts-for-difference strike prices. It is starting to appear far more regularly than previously without prompting, which is very good. Geothermal is a technology that works and I will not take a long time describing it because I am sure that Members are all well aware of it. Globally, it is a very important source of energy for hot water, direct heating and electricity generation. As we mentioned in a previous sitting of this Grand Committee, there have been discussions between Britain and Iceland over the use of geothermal energy from that area.
However, it is a lot easier when hot water comes to the surface of its own accord, as it does in many parts of the world, such as New Zealand and Iceland. It is different when one has to drill down five kilometres, 10 kilometres and sometimes a very long way in order to circulate it and bring it up. In the UK, there are examples of shallow geothermal energy but not much deep geothermal energy yet. This technology is credible and possible. It is a source of renewable heat that has a small footprint and acts as a base load rather than being intermittent, which is why it can be particularly attractive. Again, there is a choice between hot water and heating or electricity generation.
Why is this amendment necessary? It is because this issue is a bit like the oil industry. There are noble Lords here who know far more about the petroleum industry than me. However, basically, when you have put a major investment into drilling, as soon as you make your strike on a viable geothermal hot water well, you do not want someone 100 yards along buying the plot next door, extracting the water and then leaving you with all the exploration costs and only half the benefit. That is why a credible regulation infrastructure includes having a licensing regime over a suitable area of land. I particularly emphasise that this does not of its own right mean that there would be planning permission or surface access. That would all have to be sorted out by the exploration companies.
This is a major area where Britain, particularly the south-west but other areas of the UK as well, could benefit by building up its renewable energy resources of heat and electricity. For that to move forward, we must have a licensing system. I do not believe that there will be a great cost to producing this. It has already happened in Ireland and other parts of the world. In the past, we have had positive discussions with Ministers about this but they have never got far—hence this amendment. In due course, I look forward to hearing the Government’s thinking on this from the Minister. In the mean time, I beg to move.
Lord Grantchester
My Lords, the noble Lord, Lord Teverson, is to be congratulated on his persistence in tabling amendments on geothermal energy. He correctly identifies the huge contribution that this could make to the UK’s energy mix. I think this may be the third time that he has come forward with his amendment. The last time was in February 2011 during Committee on the previous Energy Bill. At that time, the Government had just slashed the remaining £2 million of a £6 million allocation for research from Labour’s time in office by 50%—plus ça change. Also at the time, the then Energy Minister, the noble Lord, Lord Marland, explained that two ROCs already in place were available for geothermal, which his department deemed to be sufficient to bring forward investment. However, of course, he rightly identified that it is not the ROCs that are important but the regulations to maintain the returns for the investor. At that time, the Minister spoke positively about this power source while saying that DECC would continue to work on the complexities of introducing a licensing system. That was well over two years ago. Perhaps the Minister will update the Committee today on how those regulations are proceeding.
Baroness Verma
My Lords, as my noble friend Lord Teverson has said, he has a longstanding interest in geothermal technologies. The Government share much of his enthusiasm and recognise that deep geothermal will have a part to play in the UK’s energy mix. We are keen to explore and to help realise this overall potential, both deep geothermal for direct heat use and those projects that are primarily about power generation.
Geothermal energy for direct heat use is a clear strategic fit with the Government’s planned transition to low-carbon heating. The Government’s heat strategy identified heat networks as having an important role to play in providing low-carbon heat to dense urban areas. Heat networks can have multiple sources of heat supply. Cities such as Manchester and Newcastle have identified deep geothermal as a possible future heat source for their networks. DECC is helping those cities to develop their heat network plans, including grant support for feasibility work and by creating a new heat networks delivery unit to add capacity and expertise to project teams in individual local authorities. The Government are also proposing a higher renewable heat incentive tariff for deep geothermal heat projects to support such developments.
The noble Lord, Lord Grantchester, and my noble friend Lord Teverson will recall that in 2011 the Environment Agency introduced changes to the abstraction licence procedures to provide greater certainty to deep geothermal investors for those projects accessing groundwater resources. This light-touch amendment to existing regulations was welcomed by the industry.
The department has been considering what additional support might be possible for deep geothermal power to help explore and test the resource for power generation. However, despite grant awards and eligibility for the renewables obligation, no deep geothermal power projects have commenced in the UK.
In response to this, the department has initiated a two-stage process to try to move the deep geothermal power sector forward. The first phase is an expert feasibility study to draw together all the evidence to explore and test the case for additional government support. Subject to the outcome of this first step, and taking into account value-for-money considerations, the various options for further support will be then analysed. The feasibility study, which is being undertaken by Atkins, will conclude shortly. We will need further analysis to help gauge the realisable potential of deep geothermal power and the extent of any support it may need.
My noble friend and, I know, many in industry argue that a licensing regime is required to underpin the expansion of this technology and to ensure that it can approach its full potential in the UK. At present the UK sector is at an early stage of development, which makes it difficult to gauge the impact of a licensing regime. The Government accept my noble friend’s argument that the impact is likely to be positive. The question is one of proportionality. At present, all parts of UK law are essentially silent on the subject of heat from deep below the earth’s surface. Any legislation would therefore proceed from a blank page, and full licensing regimes are complex to create. The legislation to do this in the Australian state of Queensland runs to more than 500 pages of primary legislation, which suggests that the call on the time of this House would not be trivial. The Atkins report will guide the Government’s position on how best we may be able to help support the geothermal sector, which will help to steer a future position on any new regulatory approaches.
I hope that my noble friend will agree with me that we must be guided by the Atkins report’s outputs and recommendations to help inform the Government’s position and next steps. I hope that on that basis my noble friend will feel reassured and withdraw his amendment.
Baroness Maddock
My Lords, my name is attached to the amendment. I was not going to speak because of time, but the noble Lord, Lord Jenkin, has reminded me of a presentation that I had some years ago. I may have got the town wrong but I think it was Barnsley. It was in a coalfield area. The local authority there used coal for the district heating in its blocks of flats. I will always remember the description of the terrible mess that the coal dust made everywhere; the women who lived in the flats hated it because they always got coal dust in their curtains. The story is that they changed over to local biomass, which was interesting biomass because it was entirely what they gleaned from trimming and pruning trees and shrubs in the local area. Enough was produced, so it did not have to travel a long way but was enough to replace the coal in these blocks of flats, and the ladies with their curtains were delighted because they did not get soot any more. That has stayed in my mind.
When people first started looking at biomass, that is the sort of thing that they were thinking about. However, when you start to go into some of the ideas about bringing all sorts of things from America—we have just heard that they do not certify their wood either—then it is a completely different issue that we need to look at more carefully. Still, I thought the Barnsley system was pretty good.
Lord Grantchester
Like the noble Lord, Lord Teverson, we agree that biomass could make a significant and important contribution to the UK’s renewable energy thorough the use of sustainable feed stocks from waste. Again like the noble Lord, we agree that biomass should be sustainable.
The current plans would result in a rapid expansion of large-scale biomass electricity generation, principally through the full or part-conversion of existing coal-fired power stations. The EPS establishes a maximum level of emissions for electricity generated by a power station over a year. However, the only emissions that it recognises are those from fossil fuels, while biomass emissions are counted as zero.
As other noble Lords have argued, emissions from biomass can be interpreted as being quite substantial, as they should include emissions associated with the planting, growing, harvesting, processing and transport of biomass. This is in addition to the increase in emissions as a result of carbon debt—that is, the time it takes for tree regrowth and recovery of carbon stocks. Indeed, the sources of the stocks are also to be taken into account in sustainability requirements.
Many coal-powered plants are planned to be converted partially or entirely to biomass to extend their operating lifetimes and to benefit from the substantial subsidies available under the renewable obligations. A conversion to biomass under these amendments would trigger the EPS to cover the whole power station, including the life-cycle emissions from biomass. The amendments would complement the Government’s own proposals for sustainability standards for biomass generators, which include a life-cycle greenhouse gas emissions standard for emissions from harvesting and processing. We entirely support the intention that the EPS is triggered should any generation from biomass take place. If that is not to be the case, there is a danger that a plant close to breaching its limit might convert to a small amount of biomass in an attempt to remain under the threshold.
Lord Gardiner of Kimble
My Lords, first, I thank my noble friend for tabling the amendment, and all noble Lords who have contributed to this debate. Whether it is for energy or, more particularly, their beauty, this country has a strong bond with trees. Although this is going off the subject, the tree diseases we have are particularly alarming and we need to do something about them.
I appreciate entirely the intention behind my noble friend’s amendments. They raise the issue of biomass for power generation and the need for appropriate measures to ensure that the sourcing and use of biomass are environmentally sustainable. The Government share my noble friend’s wishes in this respect and are taking steps to ensure that biomass can continue to play a sustainable role in a low-carbon energy mix.
Sustainability reporting is already applied to biomass plants under the renewables obligation. Generators using solid biomass and biogas feedstocks are asked to report on their performance against sustainability criteria, including a greenhouse gas life cycle target of 285 grams per kilowatt hour. The sustainability reports are published by Ofgem. However, under the current regime, if a generator does not meet the target, the consequence is solely one of reputational risk.
The Government have therefore consulted on proposals to enhance the existing sustainability criteria under the renewables obligation. The consultation includes proposals to: bring in a tightening trajectory so that the current target of a 60% greenhouse emissions saving compared to fossil fuel gets tougher over time in a series of steps; bring in new sustainable forest management criteria that consider a range of forestry issues, including biodiversity, land use rights, and sustainable harvesting rates; require generators to provide an independent audit of their sustainability report; and link eligibility for financial support with demonstrating meeting the improved criteria. We are planning to publish the Government’s response to the consultation later this month.
My noble friend also mentioned what the EU is doing in terms of sustainability under the renewables target. The European Commission expects to publish an updated report on sustainability criteria for solid biomass and biogas later this year. The current approach is voluntary and the Commission is considering if a mandatory approach is needed for solid biomass and biogas, and for biofuels and bioliquid. Some progress is being made there.
Given the incentive created by linking financial support to sustainability criteria, we believe that the renewables obligation is the most appropriate mechanism for delivering these improvements. Biomass projects supported under a contract for difference are also intended to be subjected to sustainability controls, and Clauses 6 and 10 of the Bill provide the necessary powers. Although no final decision has been taken on the details of these controls under contracts for difference, it would seem sensible for consistency and clarity that these will be consistent with those under the renewables obligation.
Given that the Government are already proposing to strengthen the renewables obligation, and that powers exist for CFDs to include terms relating to sustainability, I hope that my noble friend will understand the concern that the thrust of these amendments to the EPS is covered elsewhere and may risk creating undue complexity and uncertainty for investors. The purpose of the EPS is to place a limit on the carbon emissions from fossil fuel power plants. In addition to the reasons I have set out, installations which use biomass exclusively as their fuel are specifically excluded from the EU Emissions Trading Scheme. Consequently, choosing not to cover biomass under the EPS treats it in a manner consistent with the EU Emissions Trading Scheme.
While I am wholly sympathetic to the intent behind my noble friend’s amendments, I hope that he will be sufficiently reassured that the Government are taking appropriate steps to strengthen further existing sustainability requirements in respect of the use of biomass. On that basis, I hope he might withdraw his amendment.