(1 week, 3 days ago)
Grand CommitteeThat the Grand Committee do consider the Electricity Capacity (Amendment) Regulations 2025.
My Lords, this instrument, laid before the House on 16 December 2024, seeks to make technical improvements and changes to the capacity market scheme—the Government’s main tool for ensuring security of electricity supply in Great Britain.
The capacity market was introduced in 2014 and is designed to ensure that sufficient electrical capacity is available to meet future predicted demand, to maintain the security of electricity supply. It provides all forms of existing and new-build capacity with the right incentives to be on the system to deliver when needed. It covers generation, storage, consumer-led flexibility—formerly known as demand-side response—and interconnection capacity.
Through capacity market auctions, held annually, one year and four years ahead of delivery, we secure the capacity needed to meet future peak demand under a range of scenarios, based on advice from the capacity market delivery body—the National Energy System Operator, or NESO.
Since its introduction in 2014, the capacity market has contributed to investment in just under 19 gigawatts of new, flexible capacity needed to replace older, less efficient plant as we transition to a net-zero economy. To date, the capacity market has been successful in ensuring that Great Britain has adequate electricity capacity to meet demand, and continues to be required to maintain security of supply and provide investor confidence. To ensure that the capacity market continues to function effectively, we regularly make adjustments to the implementing legislation, based on our day-to-day experiences of operating the scheme.
The draft instrument makes changes to eight regulations, to deliver technical improvements and changes that support the functioning of the capacity market, which have been identified and explored through consultation. This will improve security of supply. It will also accelerate investment in low-carbon technologies, increasing the role that they play in the capacity market, supporting the Government’s 2030 clean power mission.
Stakeholder feedback has identified a need to review the wider timescales associated with the settlement body’s calculation activities. This ensures that timelines for settlement remain appropriate. The “settlement body” refers to the Electricity Settlements Company, a private company owned by the Secretary of State, established to oversee the settlement of payments to and from suppliers and capacity providers. The draft instrument amends the timelines for the settlement body’s determination so that they are in line with those concerning penalty charges.
As part of the requirements under the Capacity Market Rules, some capacity market units must complete an extended performance test. This provides assurance that a capacity market unit from a storage-generating technology class can deliver capacity for the relevant duration. In effect, extended performance tests are a sub-function of the satisfactory performance days requirement, which requires a capacity provider to demonstrate availability during a delivery year. The policy intent is that failure to meet extended performance tests should have the same consequence as failure to meet satisfactory performance days. The draft instrument ensures that the regime is consistent and that the two demonstrations of performance are treated in similar fashion when failed.
To assist industry prequalifying for the capacity market, this draft instrument will further clarify that a capacity market unit can be prequalified only where no contract for difference has been awarded, unless the contract for difference in question has expired or terminated. The instrument also further clarifies that a contract for difference means a contract for difference or an investment contract entered into with a contract for difference counterparty, which has always been the policy intent.
Finally, multiyear agreements provide greater revenue certainty and are likely to incentivise further low-carbon participation in the capacity market, which improves market liquidity and can lead to a greater diversity of technologies. A new nine-year capex threshold introduced by this draft instrument will ensure that new and refurbishing projects, with costs that fall between the existing thresholds, are not prevented from entering the capacity market.
The instrument also enables participants to access a three-year agreement with a capex threshold of nought per kilowatt hour, available to low-carbon new build and unproven demand-side response capacity. It will remove barriers for low-carbon, low-capex technologies to access longer agreements in the capacity market. To ensure that projects meet the definition of low-carbon capacity, a low emissions determination, which is a decision that the delivery body may take, has been introduced by this instrument as a further reviewable decision type.
Two public consultations were conducted on the measures in this instrument. It contains a second phase of capacity market reforms, which was consulted on towards the end of 2023, on strengthening security of supply and accelerating investment in low-carbon technologies. Respondents were broadly supportive of the proposals included in this instrument.
We have also made a number of technical amendments to the Capacity Market Rules that support the regulations, which, as I said earlier, were laid before the House on 16 December 2024.
In conclusion, this is another instrument that follows from work that the previous Government did. It is self-evident that these technical changes are helpful and necessary, and I commend the regulations to the Committee. I beg to move.
My Lords, these regulations propose amendments to the Electricity Capacity Regulations 2014. While presented as essential to streamline the capacity market, we must be careful around one or two of the implications that arise.
As has been outlined by the Minister, the proposed changes stem from two public consultations held in 2023, which received broad support—especially for increasing the role of low-carbon technologies. However, there are some concerns: how will these regulations ensure long-term energy security, and will they genuinely accelerate the shift to a low-carbon system?
First, the Government seek to remove the 10-year reapproval requirement for the capacity market, allowing it to operate indefinitely without regular reviews. While this may offer stability, we ask whether this move risks stagnating the market’s ability to adapt to fast-evolving technologies and changing energy needs. Do we not need to maintain regular scrutiny of such a critical, dynamic sector, especially in the next 10 years when technology is moving rapidly?
Secondly, the regulations aim to establish the capacity market as a permanent fixture and remove any reference to it as temporary. This again raises the question of whether this shift represents a real commitment to security of supply or whether we are entrenching an outdated system that may fail to evolve with the energy sector and the technological advancements to which we have referred.
Thirdly, while the regulations repeal provisions from the EU electricity regulation that are deemed unnecessary, we must ask whether we are simplifying the system too much and whether this could leave gaps that harm flexibility and responsiveness during crises.
Fourthly and finally, the Government are focusing on low-carbon technologies. However, can renewables, such as wind and solar, provide the same reliability as traditional generation during peak demand or system stress? Will prioritising low-carbon technologies risk energy security? How will the Government ensure that the capacity market remains competitive and attracts investment in both low-carbon and reliable generation technologies?
These regulations raise a couple of critical questions. First, how will the Government ensure that the removal of the 10-year reapproval requirement does not result in stagnation, particularly as energy generation technologies evolve rapidly? Secondly, given the emphasis on low-carbon technologies, what measures are being taken to ensure that infrastructure is in place to integrate these technologies into the grid without compromising system reliability?
My Lords, I am grateful to the noble Lord, Lord Offord, for his general support for what is proposed in these regulations and for his specific questions in relation to the implications for long-term energy security and whether there is a risk of stagnating the market. He also asked whether we are going to keep this under regular review.
I should start by saying that the capacity market has been operating since 2014 and has worked pretty well. I acknowledge that. We see no reason why we cannot continue with it. In a sense, the permanent nature of the system that the noble Lord referred to is a perfectly reasonable response to the fact that the system is tried and tested. I should also say that it has supported investment in just under 19 gigawatts of new-build flexible capacity, including low-carbon technologies, since its introduction. That is solid evidence to suggest that the system can deliver the capacity needed to meet future peak demand and respond to the kind of challenge that he raised about introducing low-carbon technology into the frame as older capacity starts to be replaced.
I take the noble Lord’s point about keeping this under review. We absolutely are going to keep this under regular review. We have to do so. That is so important. We are committed to ensuring that the right policy tools are in place for delivering the secure and affordable energy system we need. I can confirm to the noble Lord that we regularly assess the performance of the capacity market and explore improvements to the scheme. We do not hesitate to bring to your Lordships’ House and the other place further changes in relation to further statutory instruments.
This is all intended to improve security of supply. We believe that accelerating investment in low-carbon technologies can increase the role they play in the capacity market. Our evidence since 2014 suggests that the mechanism that we have put in place is going to work. I am quite confident that we are right to say that this should be a permanent feature. Having said that, I thank the noble Lord for his constructive response to this SI.
(1 week, 3 days ago)
Grand CommitteeThat the Grand Committee do consider the Energy Bill Relief Scheme and Energy Bills Discount Scheme (Amendment) Regulations 2024.
My Lords, these regulations, which were laid before the House on 16 December 2024, amend two schemes created by the previous Government in response to the energy crisis.
The amendments address an issue that was not considered in the rush to get the schemes into operation but which has now come to the fore as the schemes have been brought to an end. The issue is technical: both the energy bill relief scheme and the energy bills discount scheme, which I shall refer to as EBRS and EBDS respectively, supported non-domestic energy users, including businesses and heat networks. EBRS supported energy bills from October 2022 to March 2023, while EBDS supported bills from April 2023 to March 2024. Both schemes operated on a “claim back” model, meaning that suppliers paid out the discount to their customers before recouping those costs from the department.
Scheme funds were paid out on estimated and actual meter readings. As actual meter readings are received by energy suppliers, they rebill their customers, replacing earlier estimated bills, and the discount paid out by the department becomes settled. The department calls this process “actualisation”. Suppliers then come back to government to recover additional discount they have paid out or to pay back any excess discount resulting from an initial overestimation of the energy. This is right: the intention behind the schemes has always been for government to fund the discount to the consumer and not the energy suppliers.
The regulations require the Secretary of State to determine when a supplier should leave the scheme, based on an assessment that there will be no further material amount owed from the department to a supplier or vice versa. One of the supporting criteria to make that assessment is that a supplier has billed customers on actual meter readings to a threshold of 95% of gas supplied and 97% of electricity supported under the scheme, wherever possible. Once a supplier has left the scheme, it is unable to claim back any further money from the department for discounts that it has paid out on behalf of the schemes.
However, as the regulations currently stand, suppliers are still required to pay out discounts on any newly billed energy supplied during the periods of either scheme, when this situation could arise through no fault of their own; for example, when customers have moved premises and failed to notify the supplier or have been tardy in allowing access to meter readers. This could result in suppliers funding government support without the ability to recoup these costs from the department. This is contrary to the intention of the schemes. As a result, suppliers have been reluctant to leave the schemes, which must come to an end in a timely manner.
The amendments in this statutory instrument remove the obligation on suppliers to provide the discounts to customers, except in instances where the consumer has lost out due to poor practices by their energy supplier. In these instances, we have provided carve-outs to balance the interests of suppliers with the support and protection of consumers.
The first consumer protection is, when a supplier is rebilling a customer, it must still apply the discount for energy which was previously billed before the discount duties, even if the newly calculated additional consumption is exempt. The second protection relates to unbilled customers. When a customer receives a bill that falls within the scheme period, a supplier would be required to pass on the appropriate discount if it has not previously provided that customer with a bill. This is to ensure that the original policy intent of providing consumer support is realised. The third and final consumer protection is when unreasonable delay, or another failure on the part of the energy supplier, has led to the energy not being billed accurately or at all when the discount duties applied. An example might be if the bill was sent unreasonably late after exit from the scheme, rather than before. In those circumstances, the customer should not and will not lose their entitlement to the discount.
There is still an obligation on suppliers to repay the Government any discount they have recovered; for example, if actual consumption was lower than the estimated consumption and a discount is clawed back. Should any dispute arise between suppliers and customers in relation to these carve-outs, the resolution mechanisms would be those normally used in the industry: via a complaint to the Energy Ombudsman, where available; investigation and potential sanction by the regulator; or court action.
The amendment applies to energy suppliers in Great Britain. Separately, the regulations also amend the Energy Prices Act 2022 to allow the devolved Administration in Northern Ireland to make amendments to address this issue in the Northern Ireland scheme. This is because their power to amend their equivalent legislation has expired.
In very limited circumstances, it is possible that a customer could lose out on some entitlement to discount. If a supplier had already exited the schemes and had underestimated a customer’s energy consumption, the customer would not receive the discount on the additional newly billed energy unless the supplier was at fault, as I have just described. Given that the vast majority of energy supported by the schemes is based on actual meter readings, we do not expect many customers to be in this position.
Furthermore, our analysis shows that suppliers tend to slightly overestimate and that customers reduced consumption during the energy crisis, switching off non- critical operations to reduce costs. None of the suppliers that have left the scheme to date, nor any of their customers, has reported this risk materialising. We expect and hope that this amendment will give suppliers confidence to exit the scheme without the risk of ongoing financial liability through no fault of their own.
Energy prices for non-domestic consumers have dropped following record peaks, but of course we recognise that they remain high and pose issues for some businesses. We believe that our mission to deliver clean power by 2030 is the best way to break our dependence on global fossil fuel markets and permanently protect bill payers, including non-domestic consumers. In the short term, the Government are taking action to better protect businesses from being locked into unfair and expensive energy contracts. Last year, the Government launched a consultation on introducing regulation of third-party intermediaries such as energy brokers. This is aimed at enhancing consumer protection, particularly for non-domestic consumers. The consultation has now closed, and a government response will follow in due course.
The Government are also empowering businesses to challenge unfair and poor service from their suppliers. Since December last year, SMEs with fewer than 50 employees or that meet energy consumption or financial thresholds can now access free support to resolve issues with their energy supplier through the Energy Ombudsman service. This expands the service to 99% of British businesses, allowing them to access up to £20,000 in financial awards.
I propose to the Committee that this is a very sensible statutory instrument dealing with some issues that have arisen. It follows on from the previous Government’s decision and is consistent with what they sought to do. I beg to move.
My Lords, I congratulate the Minister on the stamina he has shown over the last 48 hours. I welcome these regulations; had we remained in Government, I am sure that we would have done exactly the same—as was also said in the debate in the House of Commons.
The Minister alluded to the fact that energy prices are still quite high. I understand that within one of these regulations there is provision for an off-grid payment of £150. If that is the case, will his department look favourably on charities, public sector bodies such as schools and hospitals and, as he rightly mentioned, micro-businesses of under 15 employees—or even 50—so that they might remain eligible for that?
The noble Lord referred to unfair, and what I would call sharp, practices that are perhaps still going on. This is only anecdotal, and I cannot prove it, but there was a restaurant not too far from this building which I think partly closed and changed hands because they had an unbelievably high electricity bill in January last year, so I am delighted to hear that the Government have launched this consultation with a third party. It would be interesting to hear more about how those brokers might operate. What provision will be made to ensure that the brokers are reliable and able to operate within this sphere?
With that, I pay tribute to the previous Government for their work and the protection that was given to non-domestic customers, which was very welcome at the time. I recognise that we are still in a period of high energy prices and, with those few questions, I wish the SI a safe passage.
My Lords, I commend the Minister for a pretty spectacular explanation of what is quite a complicated and technical exercise. These schemes were introduced, as was said, between October 2022 and March 2024 and, as we know, they gave much-needed assistance to non-domestic customers. We are dealing now with a small yet significant minority of consumers who have not received their finalised bills, due to ongoing delays in the actualisation process. My understanding is that these delays arise mostly from the use of estimated rather than actual meter readings, but they have created significant complexities for both suppliers and consumers, especially when one of the issues around this is the concept that the supplier can become “off-boarded” when they hit the actualisation thresholds, as mentioned by the Minister, of 95% for billed gas and 97% for billed electricity, which means they are no longer required to apply further discounts.
We agree that this is a legacy issue that needs to be dealt with. Our only issue—I am sure that the department is working on this—is the need to deal with unintended consequences, such as where a supplier is off-boarded but still has unbilled energy due to these administrative delays. The amendment allows for discounts to continue only in cases where a billing failure has occurred, but does that provide sufficient protection to the consumer if the errors are on the supplier’s part, for example?
Further issues might be that the amendment extends the rule limiting discounts on variable price contracts. Discounts can only be reduced, not increased, post off-boarding. Does that sufficiently accommodate fluctuations in wholesale energy prices that suppliers may face? Does it risk creating an imbalance in terms of supplier and consumer rights? Then there is the issue of disputes. While the original scheme allowed for disputes to be referred to the Secretary of State—a horrendous concept—the amendment seeks to close that avenue. I am sure that the department is all over this, but we need to ensure that, in the technicalities of actually making this happen, we get a fair balance between supplier and consumer rights. Otherwise, we support the passage of this SI.
My Lords, I am grateful to the noble Baroness, Lady McIntosh, and the noble Lord, Lord Offord, for the welcome that they gave to the statutory instruments. I say to the noble Lord that we think the statutory instrument will be sufficient. The carve-outs, which are relevant to the points he raised, are aimed at ensuring that consumers will be well protected from poor operational practice by suppliers.
The noble Lord also asked about disputes. The fact is that, if a supplier cannot resolve an issue with a customer satisfactorily, the customer can either directly refer the matter to the ombudsman, if eligible, or to Ofgem, or get in touch with the department, which will then refer the matter to Ofgem. Ofgem will then review the customer’s complaint and decide whether a formal investigation into the supplier is required. If the customer has exhausted other routes, they are obviously also able to seek civil restitution through the courts, but I hope that that would not normally be necessary.
On the non-domestic alternative fuel payment, it was indeed part of the support programme. Obviously, it served its purpose, and I accept the point the noble Baroness raised.
I have mentioned the carve-outs. I understand the issue about energy bills, and we know the pressure that this causes. We debated some of these matters extensively —I was going to say last night but it was actually this morning. I might leave it there. I am most grateful to noble Lords.
(1 week, 3 days ago)
Lords ChamberI thank the Government for their Statement on short-term support for large-scale biomass generation as part of the UK’s energy generation mix. The Government inherited from the Conservatives a system where large-scale state subsidies are provided for the burning of biomass. This form of energy generation currently plays an important role in our energy system, providing some 5% of our national energy needs. These subsidies are worth some £2 million a day. Over time, Drax has received billions of pounds in government subsidies and from bill payers because wood pellets are classed as a source of renewable energy. Lucrative government subsidies are due to come to an end in 2027, hence the Statement before us today. The new agreement reached with Drax will run from 2027 to 2031 and will see the power station used only as a back-up to cheaper renewable sources of power such as wind and solar.
We can have lots of arguments about the sustainability calculations used to justify Drax. I listened with interest to the noble Lord, Lord Krebs, speaking on the Great British Energy Bill on Report last night, and I am not a scientist and do not have the exact answers. What I will say is that shipping wood across the Atlantic has a carbon footprint. Repeated incidence of old-growth forest being felled and burned undermines credibility and must stop.
Finally, the very fact that the Government are looking at carbon capture and storage to prolong the life of Drax is telling. Labour’s new plan will allow for four more years of unabated wood burning, which produces 18% more CO2 than burning coal, according to the IPCC data. It takes nearly 100 years for this carbon to be pulled back from the atmosphere. Climate change driven by CO2 emissions is clearly the greatest threat to humanity’s survival. Even a 100-year, long-term carbon-neutral Drax is hardly beneficial to anything we need to achieve to effect any real change in the race for humanity’s survival.
The Liberal Democrats see biomass as a fundamentally inefficient method of producing electricity, and we strongly believe that it should not qualify as a form of renewable energy. The Government’s plan to continue to subsidise the Drax power plant causes environmental harm and is not beneficial compared to investment in renewable energy. It does not provide good value for money for our bill payers. We are concerned that, although this plan would cut the amount of wood Drax is burning by 50%, the price is still lucrative—indeed, I see in the news that Drax’s share price has risen by 11% this week.
We are deeply concerned about the destruction of primary forests. The new agreement states that the wood must be 100% sustainably sourced. How will the Government verify that this is the case, when it has not been in the past? Further, I ask the Minister to publish the 2022 KPMG report into Drax’s record on claiming subsidies on a false basis. Are the Government prepared to publish that report?
The new proposals will see a halving in the use of Drax and a saving on subsidies of £147 million. Will those savings be redirected into other renewable projects? Under this proposal, Drax can step in to increase energy generation and provide flexibility where it is needed. Is this not just an energy marriage of convenience? Will the Government consider reclassifying Drax as being not a renewable source? It is time to stop calling it such; if the Government need that power generation for flexibility, clearer labels should be given.
The Liberal Democrats are clear that we would ensure that 90% of the UK’s electricity is generated from renewables by 2030—and that would not include biomass. When will the statutory instrument be published? I am pleased that the Government have halved the subsidies for Drax, but I hope that further progress is possible.
Finally, I wish to challenge the Minister. This Government should agree to ask NESO to write an independent report, to be produced relatively quickly, examining: the impacts of ending all subsidies to Drax; how those funds could be replaced and used for alternative renewables technologies; and what the resulting impact would be on our energy security and journey to net zero.
I am grateful to the noble Lord and the noble Earl for their comments. I understand, of course, that this is a sensitive area and that there are concerns, as noble Lords across the House have expressed. Equally, we have taken advice from the National Energy System Operator. It has advised us that Drax will play an important role in delivering security of supply between 2027 and 2031. It is true that we could seek to replace Drax, but that would probably be with new gas-fired power stations. We believe that there would be significant risks in relying on that approach, and that what has been taken is a pragmatic decision.
I noted what the noble Lord, Lord Offord, said. I would point out, though, that it was the then Secretary of State for DESNZ who, under the Conservative Government, put their name on the planning approval for Drax’s plans for BECCS at the Selby site. The decision letter stated that the project would
“support the transition to Net Zero by 2050”.
I will respond to some of the points that noble Lords have made. The important thing is that the agreement reached ensures that Drax plays a much more limited role in the system, providing low-carbon dispatchable power only when that is really needed. Drax currently runs around two-thirds of the time; that means it provides power, even when other renewable sources are abundant. Under the new arrangement, Drax is being supported to operate only at a maximum load factor of just 27%, operating less than half as often as it currently does. This will be guaranteed by the design of the dispatchable contract for difference that has been agreed. What that means is that when renewable power is abundant, Drax will not generate and consumers will benefit from cheaper wind and solar instead.
On cost, the new deal halves the subsidies for Drax compared with existing support. That is the equivalent of a saving of nearly £6 per household per year. Our analysis shows that this will save consumers £170 million in subsidy in each year of the agreement, compared with the alternative of procuring gas in the capacity market.
Your Lordships’ House has expressed a lot of concern about the obviously important questions on the measurement of sustainability over the past few months. I too was interested in the analysis by the noble Lord, Lord Krebs—this was some time last night—as the chair of the challenge group that exists at Drax. We will increase the proportion of woody biomass that must come from sustainable sources from 70% to 100%. We will significantly cut the allowable supply chain emissions to a level in line with the stricter regulations currently operating in the rest of Europe, as some noble Lords here have asked for, and exclude material sourced from primary forest and old-growth forest from receiving support payments. There are substantial penalties if these criteria are not met.
I know that there is concern about the regulatory system, but Ofgem has shown that it is prepared to act, and has acted. We will continue to make sure that our independent regulator has the support it needs to do what is necessary. We should have some faith in Ofgem’s ability to monitor and police this.
On the future of Drax, this new arrangement takes us from 2027 to 2031. We have not made any decisions post 2031, but we want to have proper options. We are setting up an independent review to consider how options for greenhouse gas removal, including large-scale power BECCS and DACS, can assist the UK in meeting our net-zero targets.
On the KPMG reports, Ofgem considered those as part of its detailed investigation into Drax. These are internal reports that the company commissioned and I cannot make a commitment on that, but I will take it away to see what I can do.
Overall, it seems to me that this is a—what is the word?—pragmatic response to a challenging question. The fact is that Drax makes an important contribution to our generating capacity. Equally, noble Lords will know that the Government have taken note of their concern about the general issue of sustainability by increasing the requirements. This is a four-year agreement and, clearly, we will come back to this important issue in the next few years.
My Lords, I want to following on from the Minister’s response about oversight of the source of the biomass going into Drax. He said he has confidence in the independent regulator, Ofgem. He alluded to the fact that, last year, Drax agreed to pay £25 million after Ofgem found that it had submitted inaccurate data on the sourcing of wood pellets. Does the Minister acknowledge that the problem there is that it is after the event? The trees have already been cut down and burned, and then, some years later, we get a fine. But the trees are no longer there and the carbon dioxide is in the atmosphere. There was a fine of £25 million, but the noble Earl, Lord Russell, referred to what is happening with Drax’s share price. Is there not a risk that Drax just regards this as part of the cost of doing business?
My Lords, the noble Baroness will know that Ministers do not comment on share prices at the Dispatch Box, for very good reasons.
We need to be clear that Ofgem’s investigation was thorough and rigorous. I have a great deal of trust in the work of Ofgem. The noble Baroness will know that there was no suggestion that Drax was awarded subsidies incorrectly under the existing renewables obligation or contracts for difference arrangements. It was more to with the documentation. The investigation found no evidence to suggest that Drax had been issued with subsidies incorrectly, and Ofgem was confident in its conclusions. Drax made a redress payment because there is a scheme within Ofgem for companies to do that. I must say that £25 million is substantial; I think it was a good indication to Drax that it needs to get its documents in order—and I very much hope that it has done so.
Of course, we will be looking to Ofgem to ensure that that happens, that everything is proper and that, under the new arrangements, we are satisfied that Drax can meet the criteria. This has not been an easy decision. In our debate yesterday, I was interested in the response of the noble Baroness, Lady Boycott, who essentially said that she welcomed the progress; she was not overwhelmed with the decision, but there was an acknowledgement that we are making progress and understand the sensitivities.
One has to come back to the issue of biomass and its sustainability. The UK’s Committee on Climate Change and the Intergovernmental Panel on Climate Change recognise that bioenergy can play a significant role in decarbonising economies. We support the use of sustainable biomass generators only if it meets our sustainability criteria. I have said we are going to toughen that up. At the end of the day, it is a difficult question. I think we have come to a sensible arrangement, which, after all, is a short-term arrangement in the lifetime of the generators of four years from 2027 to 2031.
I would like to ask the Minister which issues will be taken into account for the decision after 2031. I welcome this as a first step towards reducing and hopefully eliminating our reliance on biomass as a sustainable fuel. I recognise that it is difficult at the moment to commit to what will happen in 2031. However, it might be useful to know from the Minister exactly what criteria will surround the decision about 2031, because it will take some time to make that decision. We will probably use up quite a lot of the time between now and then arguing about what the decision is going to be.
In particular, I would like some clarification on the Government’s position and expectation on the Drax carbon capture, utilisation and storage programme. Is that going to continue under the current arrangement, or will it be subject to a separate negotiation? Will it involve additional payments to Drax to fund that programme? How material will the outcome of that programme be on reaching a decision on what happens after 2031?
My Lords, I cannot say very much more about how we will review post 2031, but I am very happy to talk to my noble friend about her views. I am not unaware of her views about the continuation of the subsidy, as she spoke to me a few months ago.
We probably have to go back to the analysis of NESO and the advice we received on the impact on our electricity system covering the period 2027 to 2031 if support for Drax was withdrawn in 2027. It said that
“having large-scale biomass available in this period could have a significant impact in mitigating potential risks to electricity security of supply and could also support the delivery of clean power by 2030. The analysis showed that without large-scale biomass, security of supply would not be ensured in scenarios with additional supply losses. While alternative options could deliver the same outcomes, these options have greater delivery risks”.
That is clearly one of the factors that would have to be considered in any long-term review, and there will be other factors as well.
Having reached this agreement, I should say to the noble Earl, Lord Russell, that I do not know yet when the statutory instrument will be coming. Work has to be done on that. We also normally have to consult on a draft SI. I think it will probably be some months before we get to debate it, but I understand the importance of that debate.
We have made no decision about the deployment of large scale BECCS. I think I said earlier that we are going to have an independent review, looking at options for greenhouse gas removal, including how large-scale power BECCS and DACCS can assist us. Again, I cannot answer that question, but it is clearly something that we are giving very earnest consideration to at the moment. The noble Baroness speaks with great authority. If she and other noble Lords want to feed in ideas to the department about the long-term review, I would be very happy to take them.
My Lords, I am very grateful for the direction of travel indicated in the Statement. Perhaps I could just ask a couple of questions.
First, I was struck by the comments of the noble Lord, Lord Krebs, yesterday—as the Minister and other Members were—on the subtlety around whether biomass is making a negative or a positive contribution. At the moment it seems that, as long as it comes from the right sort of forest, it is almost always treated as being naturally positive. I wonder whether His Majesty’s Government will consider a more subtle understanding, based on the insights of the noble Lord, Lord Krebs, and others, of what should be counted as helping us towards a net zero and what is actually putting more carbon into the atmosphere.
On carbon capture and storage, I remember vividly going to a lecture for alumni at my old college in Cambridge. I am a mathematician and one of my former lecturers was at the cutting edge of carbon capture and storage technology. He was telling us about the work that he was doing with government and others and said that it was just about five or six years around the corner. I think it was probably about 25 years ago that I went to that lecture. It seems that carbon capture and storage is like cold nuclear fusion; it is always just around the corner but never actually comes. Could the Minister give any assessment of how much we can really take note of carbon capture and storage, or is it just another Cinderella that is never really going to happen?
It is a very interesting question. If the noble Baroness, Lady Bloomfield, were here, she would say that fusion is just around the corner. We have this STEP programme. We have global leadership here and my officials and people in the industry are very excited about the potential. When I was doing this job 14 or 16 years agreement, people were telling me it would be 20 years away. I emphasise to the right reverend Prelate that there is real optimism that we are seriously going to be able to make advances. It is the same with carbon capture, usage and storage. Again, we have been talking about this for years, but the Government are putting in some serious investment. We know the technology can work and we think it has great potential.
My Lords, since we have time, I would like to go back to Drax. We have spoken about where the biomass comes from, in terms of the source of the trees and whether they are whole trees or trimmings. But have the Government given any consideration to what happens in wood pellet facilities, where the material is processed into pellets in the United States? There is evidence of a huge amount of harmful air pollution, including dust, particulate matter, volatile organic compounds and, particularly, toxic or hazardous pollutants such as acrolein and methanol. These can cause problems such as asthma and respiratory illnesses in nearby communities. It is worth noting that many of these facilities are located near communities of colour, who already suffer serious economic disadvantages and health problems.
We know that regulation of environmental factors and environmental health in the US has always been poor. We are seeing every indication from the new US regime that it intends to make it much poorer still. Is this something the Government have considered, are considering or will talk to Drax about and put pressure on it? I come back to a phrase we became very familiar with during the Covid pandemic: no one is safe until everyone is safe. A terrible state of public health in the US—think about what is happening with the H5N1 virus—is of concern to all of us. Are the conditions under which these pellets are produced something the Government think about?
Yes, it is. We do rely on regulators, both here and in other countries, but the science underpinning biomass sustainability does continue to evolve. The Government have listened to feedback from the noble Baroness, and other parliamentarians and stakeholder groups, about ways in which we can strengthen the sustainability criteria. We are going to consult separately on developing a common sustainability framework, where we plan to gather views and evidence on strengthening wider aspects of biomass sustainability. The points the noble Baroness has raised could very much be embraced within that, and I will make sure that they are.
(1 week, 3 days ago)
Lords ChamberMy Lords, I am not going to speculate on individual projects. The noble Lord will understand that I cannot say anything that would prejudice future regulatory decision-making. What I can say is what the Government are doing. The noble Lord knows that on 29 January the Court of Session published its judgment in relation to the Rosebank and Jackdaw oil and gas fields, setting out that previous consents granted to those two fields were unlawful as they failed to take into account the emissions from burning the fuel produced.
If developers wish to proceed with these projects, they will have to reapply for consents, this time considering scope 3 emissions, as required by the Supreme Court judgment last year. The judgment itself is of course a matter for the courts, but we took action in October, in light of the original Finch judgment, to consult on revised environmental guidance. The consultation closed on 8 January, and we are working towards publication of finalised guidance as soon as we possibly can. Once that is in place, the Government will resume making decisions with respect to environmental impact assessments for offshore oil and gas developments, and the court confirmed it is in the interests of good administration for that consultation and guidance to be treated properly.
That is the situation. I say again that I recognise that, although the UK continental shelf may be a declining asset, it is an important one. We believe we have reached a sensible position of not allowing new licences, but there are a number of applications that have already received licences that need to go through the consent process. The guidance, when published, will set out the parameters on which the applicants can apply. We will then have to see the outcome of that proposal.
In the meantime, I acknowledge the work that has been carried out in the North Sea. The noble Lord knows we are very committed to a just transition for people involved who will be coming out of the industry. I acknowledge the importance of the industry and the role that it has to play for many years to come.
My Lords, I welcome the commitment that this Government aim to deliver a fair, orderly and prosperous transition in the North Sea, a transition in line with our climate and legal obligations. The Liberal Democrats are opposed to new oilfields at Jackdaw and Rosebank. Instead, we call on the Government to increase the amount, scale and pace of investment in our renewable energy future.
Will the Government confirm whether they will treat any further licence requests for the Jackdaw and Rosebank oilfields as existing or new applications? I can see no prejudicial reasons why that question cannot be answered today.
First, my Lords, we need to draw a distinction between licensing and consenting. Licensing gives rights to search and bore for petroleum in the UK continental shelf, and those are vested in the Crown. The NSTA is a non-departmental public body, sponsored by my department, that is responsible for maximising the economic recovery of oil from the North Sea. Blocks of the North Sea are allocated to operators in that way. The operators can then explore for oil and gas under the licence. At that point, there is often a five-year gap between licensing and consenting. What we have said is that we will not consent to any new licenses, and we will shortly be consulting on that.
I am sorry, but I am not going to comment more in relation to individual projects such as Rosebank and Jackdaw. I have to be very careful as a Minister in the department in relation to future processes that will be gone through in which we exercise decision-making. I am sorry, but I really cannot go any further than that.
Perhaps I might make it a bit wider, to avoid putting the Minister in a difficult situation. We have heard that there are a number of projects that have previously been approved to a certain stage and—at the risk of a pun—are in the pipeline. Have the Government made any estimate of the impact that schemes in this sort of pipeline will have on the UK being able to meet its net-zero targets?
My Lords, there clearly are a number of projects that have gone through the licensing process but have yet to come through to the end. We are confident that at the end of the road —or the end of the pipeline, as the right reverend Prelate put it—we will have a situation where, because of no new licences, we will have a thriving asset in the North Sea. The production will reduce, as it is doing at the moment. This will fit in with our overall strategy towards net zero. Clearly, this needs sensitive management. I cannot say it is an art rather than a science, but it is difficult to be more precise than that.
I also refer the right reverend Prelate to the work of NESO, which has made some points on the role of unabated gas. It is also worth reflecting that much of the oil and gas coming from the UK continental shelf is exported. This is another feature of this very interesting subject.
My Lords, I understand the Minister’s desire not to comment on any individual projects. So, I will ask a general question. A report published this week by the Grantham Institute on Climate Change, chaired by the noble Lord, Lord Stern, from these parts, looked at the current geopolitical situation. It argued that any further advance toward drilling or exploration in the UK would signal to other fossil fuel producers—particularly the US and Russia— that we support a “business as usual” approach to the oil and gas industry. That is the geopolitical context. Will the Government consider that?
My Lords, I have always thought that Aberdeen’s influence in the oil and gas sector is something we should treasure. Whether actions we take here will be influential internationally is a matter we will have to see follow. We think it right that developers who have gone through the licensing process must be allowed to finish that. We believe that our calculations embrace that. We have reached the right decision: we will continue to support the North Sea and recognise the contribution it makes, but we will not agree to any new licences. We have reached a balanced approach there. I am of course very interested in the report the noble Baroness mentioned.
(1 week, 4 days ago)
Lords ChamberMy Lords, in moving Amendment 21, I acknowledge and thank the noble Earl, Lord Russell, for putting his name to it. It requires the Secretary of State to prepare a statement of strategic priorities within a period of six months from the day on which the Act comes into force.
As noble Lords will know, we had extensive discussion about the statement of strategic priorities in Committee, and I am glad to say that we have had a lot of constructive discussion between Committee and Report. In recognition of the concerns raised on the length of time that Great British Energy could be operating without a set of strategic priorities, I am glad to bring forward this amendment, which clarifies the length of time in which the first statement of strategic priorities should be prepared.
In addition to this amendment, I make a commitment at the Dispatch Box that the Government will publish a Written Ministerial Statement when the first statement of strategic priorities is published, so that this House and the other place will be informed. I hope that noble Lords will support this amendment. I beg to move.
My Lords, briefly, I thank the Minister for tabling Amendment 21. It is identical to an amendment I tabled in Committee, and introduces a time limit of six months for the publication of the statement of strategic priorities. Given the importance of that statement, as we have had many discussions around, and that it is the only place where the aims for GBE will be set out, it is clearly essential that the publication should not be delayed. I am very grateful to the Minister for accepting the principle.
I was going to ask the Minister whether the statement will be accompanied by an impact statement or assessment, or whether the business cases and spending reviews will be published. He pre-empted that on the first group, and I am grateful for his positive answers to those questions.
My Lords, I wish to speak to Amendment 33, which is somewhat misplaced in this group. I have been asked by the noble Viscount, Lord Trenchard—
My Lords, the noble Viscount, Lord Trenchard, is not here to move Amendment 33.
I have been asked to speak on his behalf. Is that liable? That was his request.
My Lords, as the noble Viscount, Lord Hanworth, pointed out, it is a bit odd if we think about it. Since we started on this Bill, the Prime Minister has been making some very lively speeches, but going in a different direction. According to the newspapers, he wants to power the energy-hungry data centres needed for artificial intelligence. We all know about those: they are being built and they cannot get enough juice. He expects this own party to back small nuclear reactors in their constituencies. The headline is, “Starmer to Push Past Nimbys and Build Many New Nuclear Plants”. This is all extremely welcome to me. It is the sort of tone we have to adopt 10 times over to meet the challenges and the vast amount of clean electricity that we need. So it is strange that we are here in the meanwhile pursuing an area where nuclear is “verboten”, to use a German term. The noble Viscount, Lord Hanworth, has got a point. I would like a comment from the Minister on whether we are still on the right track or whether we should scrap the whole thing and start with a different policy of him backing the Prime Minister.
My Lords, in answer to the noble Lord, Lord Howell, who speaks with such authority on energy matters, I have to say that is my view that we are on the right track. I do not see any inconsistency in government policies and actions and I thank noble Lords for their support for my Amendment 21.
Turning to Amendment 26, tabled by the noble Lord, Lord Offord, let me make this clear: the founding statement outlined that supply chains would be a key focus in the work of Great British Energy. It says:
“The sustainability of UK supply chains plays a key role in achieving greater energy security. Great British Energy will help to drive forward greater investment in clean, home-grown energy production and build supply chains in every corner of the UK. Great British Energy will work with industry to accelerate the deployment of key energy projects and support the transition to an affordable, decarbonised power system by 2030 built using domestic manufacturing and supply chains”.
That is an important statement of principle.
I can also reiterate that GBE will help drive the growth of supply chains in the industry by working with my department, the Crown Estate, the National Wealth Fund and other parts of the public sector to deliver a comprehensive package of support for domestic clean energy supply chains in everything from offshore wind to carbon capture and storage.
I turn to the amendment tabled by the noble Viscount, Lord Trenchard, and spoken to so eloquently by my noble friend. On the point about NESO, it was asked to report to the department on what we needed to do to get to clean power by 2030, so it is no accident that its focus would be on renewable energy. But in fact it did not ignore nuclear. In the Clean Power Action Plan which followed from the NESO report, there is an extensive section on nuclear power. On page 80 it says:
“Nuclear will play a key role in achieving Clean Power 2030 … and our long-term net zero objectives”.
Since then, we have published the new policy statement for consultation, which, as we debated earlier, essentially brings in a more flexible siting policy for the future. The Secretary of State has indicated the importance of nuclear energy in providing an essential baseload.
I say to the noble Lord, Lord Howell, that I do not see any conflict. We think it is very important to get Sizewell C over the line, and obviously we are now into SR discussions about the final investment decisions, and we see great potential in relation to small modular reactors. Of course, we are very interested in the developments we have seen in the US of the links between the big tech companies and the developers of advanced nuclear technology. Clearly, I am working with colleagues across government to make sure that the UK can take the potential of this as well. So, I want to assure the House that we see nuclear energy as having a very important role to play in the future.
The Minister has been very clear, but at the moment it just still does not add up. At the moment about 6% of our electricity comes from nuclear—that is what it has shrunk to. We have four and a half years until 2030. Nothing nuclear is being built except Sizewell C, where they are clearing the ground and have already spent £10 billion—miles above what they originally estimated—and apparently the word is going around that it will be ready in the mid-2030s. I suspect that it will be more like 2040. If the private investor is not attracted by it, whereas they are attracted by these SMRs, is there an agenda we have not quite heard about and the SMRs are going to be rushed forward, starting next summer? As in other countries, will they be built in series on the endless sites that are now becoming available—the old Magnox sites, maybe some of the new sites? All sorts of areas are possible and are so far acceptable to the public, although there is a lot of explaining to do. Is that the plan and, if so, can we hear it?
My Lords, the contribution of nuclear was more than 6%—I think it is about 13% or 14% as of today. Clearly, it will go down, because a number of the current nuclear power stations are due to go offline. However, I must pay tribute to EDF for going through the proper consent process. There have been extensions to a number of existing nuclear power stations and, in a statement it issued I think about three or four weeks ago, it made it clear that it saw further potential for extensions, subject to the regulatory provisions being required.
On Hinkley Point C, the company says that it expects the first unit to go online between 2029 and 2031. With two units, that will be 3.2 gigawatts. Sizewell C will follow. It is a replica of Hinkley Point C: 80% above ground, another 3.2 gigawatts. With the SMR programme, Great British Nuclear is going through a technological appraisal; it is in negotiation with the companies, and this is all subject to the spending review. Clearly, we want to see a long-term projection of new nuclear power stations opening, giving us energy security but also developing a much stronger UK supply chain. Although we will see a dip in the contribution that nuclear power provides, in time, it will start to go up again. I do not think there is a conflict; I think it is just a recognition of what has happened. It is worth making the point to the party opposite that there has been a lot of messing around in terms of decision-making on Hinkley Point C. There was disappointment at what happened at Wylfa. We are now getting this back on track.
My Lords, it is clearly the Government who have come up with this number: that they are going to reduce energy bills by £300 per household. I say to the noble Lord, Lord Teverson, that it is nothing to do with the Opposition. This issue is very important. This is a commitment that has been made by the Government. We should have it in legislation to make sure that it is delivered on; if we do not, it will indicate that the Government are not serious about this matter. It matters very much to people in this country that we reduce their energy bills. Many of us think that it is not going to happen. On the other hand, the Government have constantly assured us that it is going to happen and that, somehow, energy bills are going to come down. I think that many people in this country are looking forward to that, because we want to see a dividend for all this greenery. We have heard already from the noble Lord on the Liberal Democrat Benches that this is the effect of green energy: it brings down your electricity bills. Well, as far as most people in this country are concerned, so far, we have just seen our energy bills go up and not down. I think there is a lot of cynicism around that green energy does not deliver lower prices.
My Lords, would the noble Lord like to comment on the energy bills when his Government were in office?
The British people made a decision on the previous Conservative Government. They did not think much of our record and thought even less of our manifesto, so they made it quite clear that they do not want to know anything about the previous Conservative Government. What we are now interested in is what the manifesto of the Labour Government, who are now in power, said. What happened to us is irrelevant because we have been virtually wiped out.
With the greatest respect, if the noble Lord starts to preach to this Government about energy prices, it is right for me to point out that the highest energy prices occurred under his Government’s stewardship.
That may well be so; it was probably as a result of our pursuing these green policies, which has led to higher prices and which some of us think was probably rather mistaken. We are now in a position where we continue to pursue a green agenda.
Yes, they can write a quick leaflet saying that they held the Government to account, when actually they achieved nothing other than tabling an amendment. The last Tory Government had a de facto ban on onshore wind, did little to develop renewable technologies, left us dependent on Russian gas and ended up spending £40 billion subsidising bill payers to import foreign gas, for little or no long-term benefit. The previous Government gave up on delivering on nearly all energy-efficient measures and left UK citizens in cold and damp homes. We believe that, if done well, GB Energy will provide energy security, reduce energy bills, create green jobs and kick-start economic growth. Many of these arguments also apply to Amendment 24.
Without wasting time, our response is much the same as to the previous amendment. Frankly, we feel that holding the Government to account by enacting something in a Bill is pretty delusional. It would be far better to do that outside of the Chamber.
My Lords, I resist these two amendments. My noble friend Lord Rooker, who knows more about parliamentary procedure than almost anyone in either House, is absolutely right about the inappropriateness of these kinds of amendments. I do not want to carry on this enjoyable debate with the noble Lord, Lord Hamilton, but I think it takes the biscuit in view his Government’s record. Also, as the noble Lord, Lord Teverson, said, I do not recall the last Government ever agreeing to change legislation in the way that has been suggested.
I want to allow the noble Lord, Lord Offord, to call a vote tonight, as I am sure he is very anxious to do, but the fact is that the only way to guarantee energy security and protect bill payers is to speed up the transition to homegrown energy; that is what we were elected on, that is the basis of this Bill and we are receiving huge support for doing so. Surely, the experience in the last few months and years of the kind of gas price shocks that we have seen, which have helped to drive increases and led to the introduction of the price cap, tells us that we have to get out of our dependence on fossil fuels and rely on homegrown energy.
As far as bills are concerned, the independent National Energy System Operator has confirmed that our 2030 clean power goal is achievable and can create a cheaper, more secure energy system. The Climate Change Committee confirms that a clean energy future is the best way to make British energy independent and protect bill payers, create good jobs and tackle the climate crisis.
As far as the question of employment is concerned, our expectation across this Parliament, in the early stages of the company, is that Great British Energy will employ 200 to 300 people at its Aberdeen headquarters. But, more substantially, through its activities and investments, GBE will also create and support thousands of jobs across the country. This is what we should focus on. I hope that, as the noble Lord, Lord Offord, puts this to the vote, the House will reject it.
Before the Minister sits down, can he help me? I have been here since just after the debate started and the Minister has made some incredibly positive contributions today and has transitioned well from health to his current brief, but I am surprised that, in his answer to this particular amendment, he has not mentioned the £300. We have had a variety of quotes from various Labour politicians in the election campaign who mentioned £300, which is a specific point in the amendment. Will the Minister comment on when he thinks this Government will reduce energy prices, and will it be by up to £300?
I am very grateful to the noble Lord for his kind intervention. I actually did this job from 2008 to 2010, so I have some experience in this area. I am not going to answer the question in the way that he has asked me to. I am confident that the policies we are putting in place will lead to homegrown, secure energy and that, as a result, we will see a reduction in real terms in prices over the years ahead.
My Lords, may I just come back and apologise, as I did not know—
My Lords, in moving Amendment 27 I will speak also to government Amendments 28 to 32 and 34. They relate to Clause 5 and the role for the devolved Governments in developing the Secretary of State’s strategic priorities for Great British Energy.
Clause 5 currently requires the Secretary of State to consult respective devolved Governments before including any references to matters within devolved competence in a statement of strategic priorities. Throughout the passage of the Bill, and through positive discussions with devolved Government Ministers, the case has been made to me and my ministerial colleagues that this requirement to consult should be changed to a requirement to obtain the consent of the devolved Governments.
Clearly, it is fundamental to the success of Great British Energy that it can operate across the UK. These amendments, to require the consent of the devolved Governments in relation to matters within devolved competence in a statement of strategic priorities, demonstrate our commitment to close collaboration and a resetting of relationships with the devolved Governments.
As I have previously set out to your Lordships’ House, Clause 5 is not a power to legislate in respect of devolved matters but rather enables the Secretary of State to provide Great British Energy with guidance on where the company should focus its activities. It is clear that we need to work together across the UK to achieve net-zero ambitions and drive economic growth. Given this, and the strength of feeling on this issue in the devolved nations, we have agreed with the devolved Governments to bring forward these government amendments.
I want to state for the record, on the related matter of Clause 6 and the process for issuing directions, our view that, where a direction relates to a matter that is within the legislative competence of one or more of the devolved legislatures, the relevant devolved Government would be considered an appropriate person under Clause 6(3)(b) and would therefore be consulted before a direction was issued by the Secretary of State.
I am pleased to share with the House that Motions for legislative consent for the Great British Energy Bill have been passed by the Senedd, the Scottish Parliament and, this morning, the Northern Ireland Assembly. This is good progress, and I hope noble Lords will agree to support these amendments. I beg to move.
My Lords, I welcome the progress that has been made on these issues. There will be times when there may be differences of opinion, but on devolved matters it is right that the devolved authorities should have the proper say. I welcome the change being proposed by the Government.
My Lords, I thank the Minister for tabling these amendments on devolution, which I welcome. They follow concerns that we raised in Committee. I emphasise that it is important that consultations on devolution are published. Amendment 27 proposes a significant change to the current wording of Clause 5, and we agree that we need to move away from “consult” to “consent”.
The key tenet here is the Sewel convention, which we know well in this House. It is not a trivial matter of semantics; it reflects the principle that the devolved Administrations must have a genuine say in matters that affect their legislative domain. At the end of the day, the Scottish Parliament in particular has responsibility for significant aspects of energy policy, including renewable energy, energy efficiency and environmental protection. We have mirrored that in Amendment 29 for the Welsh Government.
All in all, we think that by requiring consent from the Scottish and Welsh Governments we can ensure that the energy priorities are developed in a way that respects the distinct needs and perspectives of each nation. I urge the Government to monitor those relationships carefully.
I am grateful to the noble Lords, Lord Offord and Lord Wigley. I commend the amendment to the House.
My Lords, in moving my Amendment 38, I begin this group by referring to the letter I sent to all Peers on 5 February.
This amendment relates to a new clause to be inserted after Clause 7, which requires Great British Energy to keep under review the impact of its activities on the achievement of sustainable development in the United Kingdom. Throughout our debates I have been clear that a healthy natural environment is critical to a strong economy and sustainable growth and development. Our commitment to the environment is unwavering, including through meeting the Environment Act 2021 targets, such as halting biodiversity decline in England by 2030. I have also been clear that through driving clean energy deployment and supporting decarbonisation, Great British Energy will support the delivery of our carbon budgets and net zero, helping protect nature from the impact of further climate change.
I thank noble Lords for their engagement in debates on nature and biodiversity. I thank the noble Baroness, Lady Hayman, and Peers for the Planet for their constructive engagement ahead of Report. We are clear that we want to work together, across the United Kingdom, to achieve our net-zero ambitions, and we are going to carry on working together in this regard.
We see sustainable development as a broad category, recognised by the UN, covering the economy, the environment and society. The legislative amendment will be explained further in the framework document that governs the relationship between my department and Great British Energy. The framework document will be published in 2025, following Royal Assent of the Bill, to ensure that it reflects the final form of legislation.
My Lords, I shall speak to my Amendment 40. I am rather disappointed that the Minister did not refer to the other amendments in this group.
With great respect, my Lords, I think the form is that I move my own amendment and then respond to other amendments in the group when I wind up.
I am grateful for that clarification.
I welcome the government amendment in this group. However, I seek a specific assurance from the Minister as to exactly how and when the Government will ensure that the impact of GB Energy’s activities will not harm sustainable development in the United Kingdom. Why I prefer the wording of my amendment to the Minister’s, and why I regret the fact that the framework document will not be available before the passage of the Bill through Parliament, is because the Environment Act 2021 set out very clear environmental standards that have to be followed in subsequent legislation.
Amendment 40 addresses the issue of Great British Energy operating in such a way as to meet the criteria and environmental standards in the Environment Act 2021, which set out clear standards for environment and animal welfare that any project approved by GB Energy should meet. The projects we have discussed during the passage of the Bill potentially risk criss-crossing the countryside, covering the landscape with intrusive miles of pylons and overhead transmission lines, as well as massive solar farms and battery storage plants, the latter also posing a fire risk. Up to 10% of land currently farmed could be taken out of production, with a consequential effect on farming and food security to create a strand of energy which will bring no local benefits whatever but feed energy into the already well-fed National Grid.
I call on the Government to address offshore wind farms in a clear and pragmatic way, with one planning application for any future offshore wind farm taken at the same time as permission to build an onshore substation, to take the electricity generated and, at the same time, any proposal for onward transmission of the energy through overhead power lines and pylons.
Other damaging aspects of offshore wind farms at severe odds with sustainable development are their impact on fishers and fisheries. Wind farms damage marine life and sea mammals, and interfere with fishers going about their business. I am grateful to the National Federation of Fishermen’s Organisations for its briefing, which clearly highlights the threat from offshore renewables, primarily winds but also wave and tidal.
Ten per cent of UK seas will be designated as highly protected marine areas, where fishing will be banned. The worst-case scenario could result in the loss of half of the UK’s fishing waters, some 375,000 square kilometres: Scotland would lose 56% of its fishing waters and England and Wales 36% of theirs. Even if the worst-case assumptions are not realised, 38% of UK waters are likely to be lost, threatening the very existence of UK fishing businesses and causing severe harm to coastal communities.
I feel that the sentiments expressed in Amendment 40 sum up those also expressed in Amendments 47 and 48, in the name of my noble friend Lord Offord, and Amendment 51, in the name of my noble friend Lord Fuller. All I seek this evening is an assurance that farmland and residential properties will be protected from massive solar farms, battery storage plants and the like, and the impact of major substations bringing electricity onshore from these offshore wind farms. The long lines of unwelcome, intrusive overhead lines transmitting the energy to the National Grid should be removed or reduced and spatial rights for fishers should be recognised. I hope that the Minister will look kindly on the assurance that I seek.
My Lords, how good it is to see so many Opposition Members taking such an interest in this Bill.
First, I thank the noble Baroness, Lady Hayman, for her support for my amendment. As she rightly said, it has to be seen alongside my Dispatch Box commitment in relation to the framework document. I agree with her about the frankness required in some of these difficult decisions and the balances that must be drawn. I take her point about the Crown Estate; I will draw her comment to the attention of Great British Energy.
The noble Baroness, Lady Bennett—who I thought might get up to support my amendment but, as ever, I remain disappointed in that regard—said that this is a weak amendment, but it is not so. It is a strong amendment that fits with the architecture of the Bill. One has to read it alongside the commitment that I have made tonight at the Dispatch Box. The one thing I can say is that it is not, and will not be, a tick-box approach. We will ensure that it is much more than that.
On Amendment 40, let me be clear: the core focus of Great British Energy is to tackle the energy crisis and deliver clean power. While its mission naturally aligns with environmental and biodiversity goals, additional statutory obligations might undermine its ability to execute its primary objectives effectively. The point here is that GBE will be fully subject to all existing environmental and climate regulations, ensuring strict compliance with environmental safeguards. If we place additional duties on a new organisation, that risks overcomplicating its mandate. My amendment already ensures that GBE will continually assess its impact on sustainable developments, aligning with climate and biodiversity commitments. In the light of my amendment and the commitments that I made regarding Great British Energy’s framework document, we are surely broadly aligned in terms of a dedication to ensure that the environment and the climate crisis are dealt with collectively.
If made, the effect of Amendments 47, 48, 51 and 53 in the names of the noble Lords, Lord Offord of Garvel and Lord Fuller, would be Great British Energy being required to cease facilitating, encouraging or participating in the relevant activity if it is found to be causing significant harm to local communities, environmental damage or significant welfare issues. Amendments 47, 48 and 51 propose a new clause after Clause 7 which would require the Secretary of State to assess the impact of Great British Energy’s activities in relation to offshore wind installations and generation, as well as the decommissioning of oil and gas structures.
I do not think that these amendments are necessary for three reasons. First, GBE projects will already be subject to the UK’s rigorous planning processes and environmental regulations, including environmental impact assessments, habitat regulations assessments and statutory community engagement. These ensure full consideration of local environmental and social impacts before any project proceeds.
Secondly, existing regulations—the Infrastructure Planning (Environmental Impact Assessment) Regulations 2017, the Town and Country Planning (Environmental Impact Assessment) Regulations 2017, and the Conservation of Habitats and Species Regulations 2017—already require scrutiny. GBE will be held to the same high standards as any other developer.
Thirdly, on decommissioning, let me clarify that GBE will not be involved in decommissioning oil and gas structures. Even if it were, the UK’s strict decommissioning regulations require robust safety and environmental assessments before any decision is made. More broadly, our environmental commitment remains firm. We will meet the Environment Act targets, halt biodiversity decline and safeguard marine protected areas. Given these reassurances, I hope that noble Lords will not press their amendments.
My Lords, before the Minister sits down—
My Lords, 30 seconds. The Minister referred to rigorous planning standards. I note a government press release of 26 January saying:
“Sweeping reforms under the Planning and Infrastructure Bill will take an axe to red tape that slows down approval of infrastructure projects”.
Is the Minister confident that there will still be rigorous planning standards after the changes that the Government have announced?
My Lords, we are on Report, but I will answer this. Of course, we are talking about speeding up the planning processes without impacting on the environmental protections that we have. That is our aim and what we will achieve.
My Lords, my noble friends are not here at this stage. This was part of the first group that was discussed somewhat earlier, and I think quite a lot of us feel that this was not properly answered by His Majesty’s Government. I wonder whether we could have a further response from the Minister on Amendment 39, because I am concerned that the House has not yet had a proper explanation. I beg to move.
My Lords, I have great respect for the noble Lord, but I am not sure whether he was present when we debated it. I thought I gave a very full response to the noble Lord, Lord Frost. I referred to the issue of whether the appointment of the chair of GBE was subject to scrutiny by a Select Committee and said to the House that, following normal practice and the practice of the last Government, this would be a matter for discussions between the Secretary of State and the chair of the Select Committee. I think it was a very full and appropriate response.
I am afraid I am not happy with that and I think I would beg to test the opinion of the House.
My Lords, for clarity, we are debating Amendment 45.
My Lords, I am very grateful to the noble Lord, Lord Vaux, particularly for his patience because I think this was originally in the first group, so he has done great service. We have had a very constructive discussion with the noble Lord. I am happy to confirm that the Government will bring forward an amendment on an independent review of effectiveness at Third Reading.
I am also aware, as the noble Lord said, that his amendment includes an additionality element. I am happy to confirm that additionality will be an important principle of Great British Energy—I said that earlier this evening, or this afternoon or many hours ago—particularly in respect of its investment activity. As such, we expect that it will be covered for the requirement for the independent review to consider the effectiveness of Great British Energy and to have regard to the stated strategic priorities in doing so. I look forward to bringing an amendment to the House at Third Reading.
My Lords, I am very grateful to the Minister for those confirmations and, on that basis, I beg leave to withdraw the amendment.
My Lords, I understand that transporting electricity will continue to be a challenge; much of it is generated offshore in Scotland, but the need is far greater in the south. Pylons are not loved infrastructures by most but are a necessary evil. There is therefore an absolute need to assess their effect on not only those communities that live nearby but the environment, as pylons march across the countryside, often through much of our most scenic areas, not to mention the flora and fauna.
I suggest that pylons are not the only method of transport; my noble friend Lord Offord mentioned underground cables, and sea cables are also an option. There remain environmental factors, but power still has to come ashore to the areas of demand. The onshore issues therefore still remain.
The spend to achieve this, according to NESO, is some £40 billion a year for six years until 2030. I suggest two items of practicality: can the infrastructure be built on time, and do we actually have the workforce to complete this massive task? Local communities deserve nothing less than an assessment of the potential impact for the years to come.
My Lords, we come to the issue of pylons. This is of course an interesting issue; I well understand that pylons are not necessarily popular with the public. They are, I am afraid, just a consequence of what we need to do to expand the grid.
The projects that Great British Energy is involved in may require the erection of pylons, but the assurance I can give is that they will be subject to existing rigorous planning processes and the relevant regulations, as with any similar projects, including environmental impact assessments and statutory stakeholder engagement. We recognise that poorly sited pylon projects can have an impact on the local area, as has been mentioned, such as in relation to wildlife, heritage or sense of place. That is why we are retaining the checks and balances in the planning system and why we want to ensure that all developers continue to engage with communities.
Noble Lords have mentioned offshore solutions. We are already building an extensive offshore network. Indeed, the latest network design from NESO means that, by 2035, three times as much undersea cabling could be laid than pylons across Britain, so we are not ignoring the potential but we will need pylons. We are not reducing the planning regime in any way at all; we want to speed it up, but we will have the protections in place and environmental considerations will come to the fore.
We do not need this amendment. I am quite satisfied that the provisions in statute at the moment are sufficient.
My Lords, I believe that the Government’s tunnel-visioned focus on renewable energies means that the grid will have to be developed at a far greater rate than if we turned our attention to gas and nuclear. Renewables are by nature less dense in energy and require more infrastructure to connect their assets to areas of high demand. It is striking that, as reported by NESO, we will need twice as much grid to be built in the next five years as we have built in the last 10 years combined.
Under this Government, communities are being overridden and their concerns ignored. This is not the way to undergo a successful clean energy transition. By choosing to bring forward unilaterally their clean energy target by five years to 2030, the Government have shown that it is ideological dogma. Where is the community benefit scheme that we set out when in government?
NESO has also said that all grid projects need to be met on time and that three will have to be fast-tracked ahead of schedule. If that does not happen, the Government will not meet their target and families will pay billions of pounds in extra curtailment costs. This is the cost of these accelerated power plans. We must balance carefully the necessity of enhancing our energy infrastructure with the preservation of the landscape and the communities that rely on it.
This is not simply about building pylons; it is about ensuring that the energy transition does not come at the expense of the environment or local economies. That being said, I hope that noble Lords will look to support the amendment in my name. I wish to test the opinion of the House.
My Lords, I rise to speak briefly in support of my noble friend Lord Hamilton of Epsom’s Amendments 54 and 55. My noble friend referenced an interview given on 3 February 2025, in which the chair of Great British Energy, Jürgen Maier, admitted that only 200 to 300 jobs would be created in Aberdeen by Great British Energy and it could take up to 20 years for the 1,000 promised jobs to materialise. Yet in January, the Energy Minister, the Member for Rutherglen in the other place, confirmed that the Government’s plan for Great British Energy to create 1,000 jobs in Aberdeen “has not changed”. It seems that we are told one thing by Ministers and another by Great British Energy’s chair.
It seems that the Government have given Great British Energy the responsibility for delivering on their commitments, but Great British Energy does not agree that Ministers’ ambitions are its responsibility. While Ministers and Great British Energy executives can disagree, the British people will be left without the tangible benefits they were promised. It strikes me that this should be of great concern to Ministers, who will be ultimately accountable for Great British Energy’s failure to deliver on the promises they themselves made.
Turning to Amendment 55 in the name of my noble friend Lord Hamilton, I supported his decision to probe the costs and viability of the Government’s net-zero targets. We have already had discussions around this question, most notably when we discussed pylons in an earlier group. We agree that the Government’s net-zero targets are driven by ideology and need to be reviewed to ensure that they are practically and affordably achievable. I hope that the Minister will look kindly on my noble friend’s amendment in his reply.
My Lords, I always look kindly on the contributions made by the noble Lord, Lord Hamilton, and enjoy debating these with him. However, sadly, I am not going to respond sympathetically to either of his amendments, perhaps to his disappointment and surprise.
The amendments would delay the designation of Great British Energy under Clause 1 and the ability of the Secretary of State to provide financial assistance under Clause 4. I must object to that. It is essential that Great British Energy starts its operations as soon as possible.
On Amendment 54, I will just say this: anyone who has met Juergen Maier will have been impressed with the quality and energy, and breadth of knowledge, experience and wisdom, that he brings to the job. He certainly has the backing of His Majesty’s Government.
We need to put to rest this nonsense around Aberdeen. I have stated very clearly already this evening that we expect Great British Energy to employ 200 to 300 people, initially at its Aberdeen headquarters. The substantial issue is that GBE’s activities will create and support thousands of jobs across the country.
As far as the continental shelf is concerned, I readily acknowledge the great contribution that it has made to the United Kingdom and the work of the skilled people who work in the North Sea. However, it is a declining asset. We have said that it will continue to play an important role in the future, but the future of energy in this country is to move to clean power as soon as we possibly can. We want to see continued extraction from the North Sea while that is necessary. We want to ensure a just transition for people working in the industry to other sectors, because they have a huge contribution to make.
In respect of the 200 or 300 people, the fact is that we are talking about this Parliament. As the years go by, there will be more jobs in Aberdeen and the GBE contribution will be enhanced.
I hope that the noble Lord, Lord Hamilton, will recognise that the Government are fully on top of these issues, and that we have a consistent, coherent policy to lead us to energy security, and will not press his amendment.
My Lords, I am extremely worried if the Government do not recognise that there are certain liabilities that seem to be carried by Mr Jürgen Maier. I do not think he is going to be an adequate spokesman for GB Energy, or indeed for alternative energy. His interview, with a very mild and pretty passive Scottish journalist, was a complete car crash.
My Lords, this is not the appropriate place to criticise a man of his stature and of the seniority which he brings. Noble Lords have had an opportunity to meet him, and they were generally impressed by the approach that he took. I would like to leave this morning’s debate with a sense that the House recognises that we have made a really good appointment. I express my full confidence in him.
I have no doubt that Mr Jürgen Maier will be very grateful for the confidence of the Minister, but I do not think that it is necessarily shared that widely. I would like to test the opinion of the House.
(1 week, 4 days ago)
Lords ChamberMy Lords, I thank my noble friend Lady Noakes for opening the debate on this group of amendments, as well as all noble Lords who have contributed to the debate so far.
My noble friend Lord Frost pointed out in Committee that this Bill is even thinner in its contents than Bills that we would normally term skeleton Bills. I completely agree with this characterisation. As it stands, there is nothing in the Bill that tells us what Great British Energy will actually do. What will it invest in? How will it decide where its money goes? What criteria will it use for its investments? We have had three and a half days of Committee over five days on the Bill. We still do not know the answers to these questions.
On the first day in Committee, the Minister said:
“The key thing in the structure of the Bill is the objectives set in Clause 3. They will be informed by the statement of strategic priorities that Great British Energy will operate in, making sure that it will be aligned with the Government’s priorities”.—[Official Report, 3/12/24; col. 1066.]
We have discussed the different objects and objectives of Great British Energy, but I think that we need to return to this topic. It was pointed out by my noble friend Lady Noakes and the noble Lord, Lord Vaux of Harrowden, that, contrary to what the Minister has claimed, Clause 3 does not set out the objectives of Great British Energy.
Clause 3 establishes the objects of Great British Energy. Those objects set out what GBE will do. Those objects will be the means through which it will try to achieve its objectives, but what those objectives are still eludes us. That is why Amendment 1, tabled by my noble friend Lady Noakes and signed by the noble Lord, Lord Vaux, is so important. It establishes in the Bill the objectives that Great British Energy will have to work towards. Ensuring energy security, increasing long-term energy storage, increasing the levels of clean energy generation and reducing energy costs are all laudable objectives. They are all things that the Government have indicated that they want Great British Energy to work towards, but unless they are put into the legislation, there is no assurance that they will happen.
This point is especially pertinent given the recent refusal to re-commit to reducing energy bills. Noble Lords will be all too aware that during the election campaign the Government pledged to reduce energy bills by £300 per household. We then heard the chair of Great British Energy, Jürgen Maier, speaking on Sky News this weekend and refusing to say whether that promise still stood. Then the Prime Minister, speaking at the National Nuclear Laboratory last week, confirmed this figure and said:
“We said we’d aim for £300 … That’s what I want to achieve”.
We therefore have what appear to be different commitments from the chair and the Prime Minister. The chair will not commit to reducing household energy bills by £300 per year, but the Prime Minister will. Which one is it? If we already have a difference in opinion, and clearly no joined-up thinking before the Bill has even been passed, how can anyone believe that Great British Energy will follow through on its supposed objectives? It is evident that the only way this will happen is if there is a clear statement of those objectives in the Bill.
I turn to the other amendments in this group. My Amendment 20, and Amendment 37, tabled by the noble Lord, Lord Vaux of Harrowden, seek to ensure that there are clearer reporting requirements in the Bill. Currently, there are no requirements to submit reports other than the usual ones under the Companies Act 2006. Many noble Lords have argued that this is not acceptable. The reporting requirements in these two amendments are not overly onerous for GBE to comply with, yet the net benefit would be significant.
I have also tabled Amendment 41, which seeks to ensure that Great British Energy is given a specific direction to achieve a 10% minimum return on its investments annually. Like with the rest of the Bill, there has been absolutely no indication of the expectations that will be placed on GBE. Without this, how can anyone be certain that the taxpayer will see value for money from this investment? If £8.3 billion from the public purse is going to be funnelled into a state-operated investment company, I am certain that taxpayers would like some guarantee that it will pay off—or at least some measure of target return.
This brings me to Amendment 49. Given the permissive extent of the borrowing provisions in the Bill, it is pertinent to allow the Secretary of State to implement a restriction on borrowing. The amendment does this via affirmative statutory instrument, allowing the Secretary of State flexibility, while placing greater safeguards on the amount to be spent via Great British Energy.
In the same vein, we also need to ensure that there are adequate safeguards for the financial assistance that the Secretary of State can provide. Amendment 56 does this by preventing Clause 4 coming into force until the Secretary of State has established the conditions under which financial assistance may be provided. Once again, we need clarity around this issue. We need to know when, how and why the Secretary of State would give financial assistance, under what circumstances and with what conditions attached; otherwise, there is a distinct possibility of the Bill becoming a blank cheque to Great British Energy for unlimited sums of public money.
Finally, Amendment 57, in my name and that of my noble friend Lord Effingham, requires the publication of a revised financial framework document. I said in Committee that I did not feel it possible to move forward with the creation of Great British Energy until the Government were more forthcoming on this matter. Regrettably, this elusive information is still being withheld. We need sight of the framework document. Once again, I strongly urge the Government to produce this and allow noble Lords to examine its contents.
My Lords, I am grateful to all noble Lords who have taken part in this interesting debate. Of course, we have returned to some of the arguments that we had in Committee. I understand that noble Lords would like to have more information about the activities of Great British Energy, but we have chosen to bring a Bill that, essentially, sets up the basics of establishing a company. Much of the detail that noble Lords have discussed will come through the statement of strategic priorities, which we will debate later.
We do not think it right that we can publish our own statement, or a draft, without the full active participation of Great British Energy, and we are not really going to move from that position. Given that the statement of strategic priorities is to come and that we will hold Great British Energy to account for its performance, as would be expected with any normal public body for which the Government are ultimately responsible, we are resistant to putting what we believe to be unnecessary detail in the Bill, restricting what the company can do in carrying out its activities, especially as these evolve over the longer term.
Can the Minister be absolutely clear on the role of the Treasury? He talks about £8.3 billion being allocated to GB Energy, but will the money not actually be held in a sort of escrow account in the Treasury and will GB Energy not have to apply to the Treasury before it can spend any of it? It is rather important whether the ultimate decision lies with the Treasury or GB Energy.
My Lords, we need to await the outcome of the spending review and the timetabling of the money to be allocated to Great British Energy. We are trying to establish a balance between wanting to give Great British Energy operational independence and ensuring that the proper controls over public expenditure are kept appropriately. I think the noble Lord, with all his experience of how government works, will have confidence that the Treasury will be keeping a very close eye on this and the processes, and ensuring that public money is spent wisely. My role as a Minister, too, is to ensure that, none the less, GBE has sufficient operational independence to be able to make the kind of decisions that need to be made to get the investment decisions right. We are trying to get, and clearly want to get, a balance between proper control and giving GBE the right ability to make the decisions it needs to make without being excessively micromanaged.
We do not expect that GBE will need to borrow. However, if it turned out at some point in the long term that a Government decided that, and GBE asked for more borrowing facility, the normal processes of His Majesty’s Treasury would come into play. As a public body, GBE would require explicit agreement from His Majesty’s Treasury before being able to borrow from external providers, if HM Treasury agreed that this would be beneficial. We should also bear in mind that the chief executive officer of Great British Energy will be the accounting officer. That too should give a great deal of comfort on the proper expenditure of public money.
On Amendments 20 and 37, on the reporting requirements that were the subject of much discussion in Committee, I do not want to restate previous arguments, but much of the content proposed in the amendments would already be included in the annual report and accounts of Great British Energy, which, as I said, will be laid before Parliament. Also, the Treasury already has the ability to request specific reporting information from arm’s-length bodies through the Government Resources and Accounts Act 2000. Furthermore, GBE will be required to follow the provisions of the Government Financial Reporting Manual, which sets out details of required reporting by arm’s-length bodies through annual reports and accounts; these are additional to the requirements of the Companies Act 2006.
I thank the noble Lord, Lord Vaux: we have had a series of engagements between Committee and Report on the issue of additionality. I well recognise that this is an important matter, and noble Lords have been right to raise it. Let me be clear here: additionality will be an important principle for Great British Energy, and it will form part of the way in which Great British Energy assesses its opportunities and investment decisions. In the context of the noble Lord’s amendment, I am very happy to confirm our expectation that Great British Energy will include reporting on additionality as part of its annual report and accounts. I also confirm that all investment into and expenditure of Great British Energy will be subject to future business cases, including the cost and benefits of these investments, and the monetised and non-monetised impacts of Great British Energy’s future activities will also be considered.
Additionally, Great British Energy is part of the Government’s major projects portfolio. We therefore expect a summary business case for these activities to be published in due course. Moreover, we expect the outcomes of future spending reviews to be made public through the Chancellor’s Budget announcements, as is customary.
On Amendment 39, on the subject of Great British Energy’s chair, which was tabled by the noble Lord, Lord Frost, and returns to a point he raised in Committee, one accepts that it is important to ensure the quality and performance of the chair, but the existing framework and best practices, which I outlined extensively in Committee, already provide robust mechanisms for oversight and accountability. I will again say—the noble Lord, in a sense, challenges me on this—that the decision on scrutiny of appointments normally falls to discussions between the Secretary of State and the relevant Select Committee chair. It is a procedure that the previous Government followed; we will continue with that. Moreover, the proposal for an annual review of the chair by external auditors seems to be way over the top. I have already said that GBE will be subject to the normal accountability arrangements. I would expect Ministers, in addition, to meet the chair of GBE frequently, as Ministers in my department do in relation to a number of public bodies for which they are accountable. As ever, we are trying to find the balance between holding GBE properly to account and putting our trust in it, in the quality of people around the board led by the chair, and in the senior officials that they then appoint to do the job properly and effectively.
In relation to Amendment 41, proposed by the noble Lord, Lord Offord, on the rate of return, I think this is going into too much detail and is inappropriate for Parliament to insist on. The Bill we have before us is focused solely on making the minimum necessary provisions to enable the establishment of this operationally independent company. Adding the proposed detail risks too narrowly restricting the company in carrying out its activities, not least because GBE’s work will extend beyond investments. We do not want to be restrictive and put a rate-of-return requirement on all its activities. For me, one of the most important activities that GBE will do is to carry out a lot of the groundwork to enable investors to come in. We know that we have a big problem with the manifold delays in energy infrastructure development and investment. We, of course, seek to reform the planning system and find other ways in which we can speed up development, but GBE has a vital role to play in relation to that too.
I will resist Amendments 56 and 57, on the commencement of the powers in the Bill. These amendments would delay the designation of GBE under Clause 1 and the ability of the Secretary of State to provide financial assistance to it under Clause 4. Those clauses are fundamental to GBE’s ability to start its operations as soon as this Bill is passed.
I am very grateful to noble Lords for their interventions and contributions. I understand that they wish to ensure that GBE is properly held to account. I hope I have convinced them that we will indeed hold GBE to account. Equally, I must fly the flag for operational independence and for the ability of the board to do the job we set out for it to do.
I thank all noble Lords who took part in the debate on this group of amendments. I will start with Amendment 37, in the name of the noble Lord, Lord Vaux. He will decide, when we get to Amendment 37 in its place on the Marshalled List, what he does with it. I will just say now that I was grateful for what he said on additionality, because it is important that we get proper public reporting on whether Great British Energy has achieved the additionality to which it is required to adhere.
I thank the various noble Lords who have given their support to my Amendment 1. I got lukewarm or even negative support from the Liberal Democrat Benches, but I think they were trying to engage in the wording of the objectives. My sense was not about the detailed wording; I was trying to capture what I thought the Government were trying to achieve in terms of objectives for Great British Energy, because the key thing for me is that we have things against which we can hold Great British Energy to account.
The Minister said that the strategic objectives would be set by the statement of strategic priorities. As I tried to argue, it is not inevitable that a statement of strategic priorities would include objectives. If the Minister is telling me that it will include objectives, then we should have something against which we can hold Great British Energy to account. He rather confusingly then went on to say that we would be able hold it to account for its activities. My argument is not that we hold it to account for its activities but that we hold it to account for what it achieves against what it is supposed to be achieving, but I assume that that was loose language on the part of the Minister and that the strategic priority statement will indeed set strategic priorities. On that basis, I beg leave to withdraw the amendment.
My Lords, Amendment 8 relates to Clause 3 and makes it clear that community energy is within scope of the objects of Great British Energy. I am grateful to the noble Earl, Lord Russell, for his support and for our engagement between Committee and Report.
We had an interesting and somewhat lengthy debate in Committee on the role of community energy. I have always recognised the important role that community energy can have as we strive for clean power and net zero. Following positive discussions across the House, particularly with the noble Earl, Lord Russell, I accepted that the role of community energy could be made explicit in the Bill. That is why this amendment has been tabled. It sets out a clear intention that local and community energy is important for Great British Energy and the Government.
GBE will enhance existing support for community energy. This will be done through partnering with, and providing funding and support to, local and combined authorities, as well as community energy groups. This is very important. To support community energy groups to access funding and to establish themselves in all areas of Great Britain, GBE will provide commercial, technical and project-planning assistance, increasing the capability and capacity to build a pipeline of successful projects in local areas. This has clearly been missing in the current arrangements, where lots of local groups want to develop community energy but find it difficult to access advice and access the pathway to finance. GBE has a really important role to play here. I beg to move.
My Lords, I support government Amendment 8 and will speak to my Amendments 14 and 25. I am deeply grateful to the Minister for putting community energy in the Bill with Amendment 8. It is now clear that Great British Energy may facilitate, encourage and participate in those things mentioned in Clause 3(2)(a) to (d) through projects involving or benefiting local communities.
I am really pleased, as this is a win for MPs on all sides of the other Chamber and for noble Lords on all Benches in this Chamber. There is notable strong cross-party support to see community energy in the Bill. It was a key objective for us, and I am delighted that we have had a successful negotiation and got this done. We have the third-best wind resources in the world. It is our view that there can be no Great British Energy without Great British community energy. With this amendment, our objective has been achieved.
It is worth noting that, as the Minister said, GB Energy has a unique role here. When Jürgen Maier was before the Energy Security and Net Zero Committee he talked about a system coming “out of the box”. That is exactly it—going into local communities, GB Energy will be able to deliver community energy and engage with them from start to finish.
I remind the House that community energy could deliver up to 8 gigawatts and power 2.2 million homes, saving two nuclear reactors-worth of energy. It could remove 2.5 million tonnes of CO2 and provide over 30,000 jobs. What is not to like about that? I am delighted that we have made progress on this and I thank the Minister.
Moving on, my Amendment 25 is a probing amendment in response to a question that my counterpart, Pippa Heylings, asked in the Commons this week about the fact that, at the moment, the £10 million community energy fund is oversubscribed. Some 100 projects are unable to get funding, and the money is due to run out in May. While I greatly appreciate getting community energy into the Bill, can the Minister provide clarity on what will happen with that fund? Is he able to put more money in? Is there an interregnum until GB Energy can start funding it? Ed Miliband gave very strong words in support of community energy but did not really answer my honourable friend’s point about the money. If the Minister can provide any more certainty or say whether this is being looked at, that would be appreciated.
Amendment 14 is our warm homes plan and emergency home insulation plan. It requires the Government to transfer the responsibility for the warm homes plan to GB Energy should it be requested. We have some of that coldest, dampest and most miserable homes in Europe. UK housing stock accounts for around 7% of total carbon emissions. They are among the least energy-efficient homes in Europe, with 12 million homes in England alone currently falling below adequate energy efficiency standards. The UK Climate Change Committee has said that residential retrofits need to increase to a rate of 500,000 a year by 2025 and 1 million a year by 2030 to meet our climate targets. This is a huge and daunting task. It is one of the biggest infrastructure tasks of the 21st century.
Our citizens have suffered cold, damp, draughty and unhealthy homes for far too long. In the single largest housing-related cost burden to the NHS in 2023, some £50 million was spent fighting cold-related illness. Homes cost more to heat than they should because they do not retain the heat that the homeowners pay for. The best energy of all is the energy that we never use, in particular the energy that we do not waste on absolutely nothing. Energy efficiency remains a missing part of overall energy policy. Citizens should not have to choose between heating and eating. In this country, 6 million people live in fuel poverty, while at the same time we are wasting this energy. It is utter madness.
The last Government completely failed to tackle this problem. They cut the funding and the ambition to deliver warm homes and to insulate our homes. That was not good enough. Carbon Brief calculated that UK energy bills were £22 billion higher over the past decade than they should have been because the Conservatives cut the “green crap”. The number of homes being insulated each year at the start of 2024 was 98% below 2012 levels. Of that £22 billion, £5 billion was due to poorly insulated homes and £3 billion was because homes were being built that were not meeting energy efficient standards.
However, no Government of any persuasion has ever managed to tackle this problem. It is a tough nut to crack, even with the best will in the world. Going house-by-house and retrofitting our mixed housing stock is an extremely challenging undertaking. I welcome this Government’s commitment to the warm homes plan and the £6.6 billion in funding that has already been provided. The programme that the Government are setting out will provide low-interest loans to support families to invest in insulation, encourage low-carbon heating and enable the retrofitting of our homes. The Climate Change Committee has estimated that £3.15 billion is probably the total cost of getting this done, but I welcome what the Government are doing. My amendment is not a criticism of that but is here to support.
The burden is on the private sector, where 90% of these properties are owner-occupied and not meeting standards. We need to do stuff with the over-65s, because that is a particular problem. We need to tackle fuel poverty, as we have 2.26 million homes in fuel poverty as of 2022. We need new financing options, particularly green mortgages, so that private home owners can take the cost of making these measures and put them against their mortgage, and we need similar situations for people in the private rented sector.
This is good, though. The New Economics Foundation has said that every £1 spent of public investment could generate £4.60 in capital expenditure and £6.90 in broader economic activity; this is good for our homes and our economy. It could create thousands of green jobs and increase local UK supply chains.
I am worried about the delivery of these plans; that is why I have put this amendment forward. I recognise that the Government are exploring these issues as we speak and that my amendment is a bit radical and left field. I say to the Minister that this is difficult, and at a time when the Government are also trying to put in solar panels and heat pumps. I am not the only person to be concerned about delivery of these plans. I recognise that GB Energy is an independent organisation. My amendment is not prescriptive; it is simply about not ruling out options from the start. It is about making sure that that door is not closed to GB Energy from before it is set up; it is about making sure that there is space for those conversations to take place.
If my amendment passes and GB Energy never approaches the Government or the Minister to say that it wants to take any of this on, for whatever reason, then my amendment does no damage at all; it makes no difference whatever. It comes into play only if GB Energy approaches the Minister and says that it has the skills and the contacts within the industry, that it fits with its community energy plans, and that it wants to do this and make a difference. This amendment, if it does nothing else, allows these conversations to take place, and I think that is a good thing. I dare the Government to be different and take a different approach to this daunting and challenging task.
My Lords, the topic of community energy was raised several times in Committee by noble Lords on all sides of the House, because it is a highly important aspect of energy provision. When in government, we introduced the community energy fund, which provided funding to specifically target the community energy sector. So, I would concur with noble Lords that it is very important that communities are involved, as they are able to raise and solve issues that are unique to their local community.
My Lords, I will first say that I am grateful to noble Lords for their support for my Amendment 8. I echo what the noble Baroness, Lady Bennett, said about the success of campaigning. She might have recognised the Government’s role in this, but she did not quite get that over the line. But there is always hope.
On the point made by the noble Lord, Lord Hamilton, about community benefits, I agree with the principle; we are looking at community benefit schemes. I have told noble Lords before about my visit to Biggleswade wind farm, where the company involved is giving around £40,000 a year to the local community. Certainly, we need to look at schemes like that and see what we can do to extend them.
As regards nuclear and that interesting discussion, the noble Lord, Lord Wigley, made it very clear that the existing sites contained in the last statement will always be recognised for what they offer. We are not seeking to undermine their potential; we are simply saying that we need a more flexible siting policy in the future.
The noble Lord did not mention Wylfa, so I will. Of course, he will know that Wylfa was identified as one of the sites in the last statement. Clearly, it still offers many potential opportunities. There was a great deal of interest earlier this week in the planning inspector’s report, which purportedly came out against the development of Wylfa. I, for one, think that it offers great potential.
My Lords, I have already spoken to my Amendment 8 and I now turn to Amendment 9 from my noble friend Lord Whitty, which is an amendment to my amendment. I had an opportunity for a very useful discussion with him after Committee. On jobs—the skilled people in the industry—I make it clear to the House that in Great British Energy’s policy priorities its mission is to drive clean energy deployment, boost energy independence and create jobs, alongside the other important aims. The GBE founding statement is explicit that GBE will boost the number of skilled jobs in this essential industry.
The statement of strategic priorities will reiterate these points and provide some more detail, and I am confident that GBE will take strongly on board the point that my noble friend has raised. We have already said that we expect trade unions to have a role in GBE, and I think the appointment as a non-executive director of my noble friend Lady O’Grady, the former general secretary of the TUC, supports this. I would also very much like to arrange a meeting between my noble friends to discuss this further.
On Amendment 22, we expect the statement of strategic priorities to outline any areas or programmes of activity that the Government would like GBE to prioritise in pursuit of its objectives. The problem with the wording of this amendment is that it would distort the work of GBE by placing community energy above and beyond the company’s other strategic priorities.
On Amendment 25, to support community energy groups to access funding and establish themselves in all areas of the UK—a point I made earlier—GBE will provide commercial, technical and project planning assistance, increasing the capability and capacity to build a pipeline of successful projects in local areas. Our local power plan will ensure coherence with other public sector advisory functions, and funding and finance organisations operating in the local energy space.
On community funds, of course we recognise the important role that community groups play in our efforts to tackle climate change and the sector asks around future funding. Great British Energy will build on the community energy fund by partnering with and providing funding and support to community energy groups to roll out renewable energy projects and develop, as noble Lords have said, up to 8 gigawatts of power. Further details will be set out shortly, but that is as far as I can go tonight.
As far as Amendment 14 is concerned, I make it clear to the noble Earl, Lord Russell, that there is no question about the importance of what he said about the challenge we face in relation to our building stock. That is therefore the challenge of our warm homes plan. We do not agree with the amendment because we do not think it should be the role of GBE to roll out the warm homes plan. I think he was talking about a wider principle than specifically the Bill and the role of GBE.
The warm homes plan has to be seen as a vital component of our ambition to become a clean energy superstar. As a first step we have committed an initial £3.4 billion in the next three years towards heat decarbonisation and household energy efficiency, and £1 billion of that has been allocated in the 2025-26 financial year. The intention is to upgrade up to 5 million homes across the country over this Parliament by accelerating the installation of efficient new technologies such as heat pumps, solar, batteries and insulation and to work and partner with combined authorities and local and devolved governments to roll this out. I accept that this is essentially a first step. It is a really challenging area, alongside our industrial processes. We will set out further details on the warm homes plan in due course, and we think that is the best way to proceed.
Finally, there are two responses to Amendment 53 tabled by the noble Lord, Lord Fuller, with whom I had the opportunity of a very useful discussion. I do not think it necessary to constrain GBE. Any development in which it is involved and provides finance will be subject to the existing stringent planning regulations, although we hope to see reform of our planning system, and the environmental impact assessments in environmental legislation that is brought to bear when considering these applications. The noble Lord’s argument should be with the planning system and environmental protections. The noble Lord, Lord Teverson, is right—we do not think that this Bill is the appropriate place for these proposals.
My Lords, I will withdraw this amendment to an amendment. I tabled it because Clause 3(2) restricts the objects without mentioning the workforce. If my noble friend has other ways of dealing with this, that is fine.
My Lords, I support the amendments in the name of my noble friend Lord Petitgas. In tabling his amendments, my noble friend looks to protect the taxpayer while securing the financial integrity of GB Energy, establishing that GB Energy’s attempt to ramp up renewables must not come at the cost of fiscal responsibility and £8.3 billion. The drafting of Clause 4 is far too ambiguous. We must introduce sufficient safeguards by limiting the scope that the financial powers in the Bill afford the Secretary of State. The taxpayer is coughing up a significant £8.3 billion into an investment vehicle that, as my noble friend Lord Petitgas said, has the potential to completely de-risk the profits of multi-million pound energy companies. Meanwhile, the Government have cancelled winter fuel payments, introduced an NI jobs tax and launched a raid on British farmers, all to save money.
The reality is that £8.3 billion is actually a very tricky number. On the one hand, it is a lot of money, a big, significant investment into energy. On the other hand, in the scheme of energy investment required, it is a relatively inconsequential figure, especially when we talk about wind farms being built out to the potential tune of £100 billion. Either way, whether we consider that to be a big or a small number, the taxpayer deserves to know that the Government are deploying public funds appropriately. The Bill contains no limitation on how much financial assistance GB Energy will receive, there is no cap on the money that can be pumped into GB Energy and nor does the funding have to undergo any approval. What is to stop GB Energy becoming a bottomless pit?
Clause 4 states:
“The Secretary of State may provide financial assistance to Great British Energy”.
But, again, we are lacking in detail on ways to hold the Secretary of State and GB Energy accountable. We have seen no method to restrict the amount of financial assistance the Secretary of State may provide, nor do we understand how the success of each investment will be measured, or indeed reported on. I trust that the Minister will take these amendments seriously. Our transition to net zero must be done with an eye to fiscal responsibility, ensuring that the energy transition is both sustainable and affordable.
My Lords, I am grateful to the noble Lord, Lord Petitgas, for returning to a theme he developed in Committee. I assure the noble Lord, Lord Offord, that I take the amendments seriously. But, like the noble Earl, Lord Russell, I do not believe that they are appropriate, because I do not think it right to constrain the arrangements we set out in the Bill in this way. Nor do I think it appropriate for Parliament to take to itself the kinds of controls that the noble Lord is suggesting.
Let me make it clear, first, that in terms of the sum, we are committed to capitalising Great British Energy with £8.3 billion over this Parliament, but we have the flexibility in the future for a current or future Secretary of State to provide further financial support if it were required in this or a future Parliament. There must be flexibility here: one cannot set in stone a figure for all time. We must allow GBE to develop and grow, and we have to learn by experience.
However, the idea that the money being spent by GBE will not be subject to thorough tests and reviews is simply not true. As we have already said, any financial assistance to GBE provided by the Secretary of State will have to be subject to the usual governance and control principles applicable to public sector bodies, such as His Majesty’s Treasury’s Managing Public Money principles. GBE will be allocated funding through the spending review and will draw down on it when required in the normal way, through the supply estimates process, which is scrutinised, of course, by the other place. As is the case with any government spending, the Secretary of State will be able to finance planned activities only if Parliament votes the necessary financial provision.
My Lords, Amendment 18 is a simple yet essential safeguard that ensures that public funds will not support companies tainted by modern slavery in their energy supply chains. The UK has long stood against forced labour and exploitation. If we are serious about a just and ethical transition to clean energy, we must ensure that Great British Energy, a publicly backed entity, operates to the highest moral and legal standards. There is a clear precedent for this approach. The UK’s Modern Slavery Act 2015 requires companies to take responsibility for their supply chains, yet we know that modern slavery remains a serious issue in the global energy sector, particularly in the sourcing of solar panels, batteries and raw materials such as lithium and cobalt.
This amendment does not create unnecessary bureaucracy or hinder investment; it simply ensures that taxpayers’ money does not fund exploitation. If there is credible evidence of modern slavery in the supply chain, public funding must not flow to that company. It is a basic ethical standard. It is also a matter of economic resilience, because reliance on unethical supply chains creates risk for businesses, investors and the public. Therefore, supporting this amendment strengthens the integrity of Great British Energy. aligns our economic ambition with our moral obligations and sends a clear message that Britain’s clean energy future must be built on ethical foundations. I urge all noble Lords to support this amendment.
My Lords, I am grateful to all noble Lords who spoke in this important debate, and particularly, of course, the noble Lord, Lord Alton. He and I have worked together on a number of these issues, particularly in relation to enforced organ donation in Xinjiang province, and I have always been tremendously grateful for the advice and support he has given.
On this debate in general, I agree with the noble Earl, Lord Russell, that behind it lies more fundamental changes that we need to see, including his point about the development, where we can, of a UK supply chain. He said that he is going to support the noble Lord, Lord Alton; I understand and accept that.
Let me say at once that the Government wholeheartedly agree on the importance of confronting human rights abuses, including modern slavery, in energy supply chains, and we are committed to tackling the issue. I am glad that the meeting with Jürgen Maier was helpful; he is providing some strong leadership in this area. I have had also had discussions with the noble Lord, Lord Alton, between Committee and Report, but we have not quite found a way through as yet.
My understanding is that Great British Energy will already have a range of tools in place to support its efforts to identify and tackle human rights abuses in its supply chain. Indeed, as a state-owned company, it will be expected not only to abide by but to be a first-in-class example of adherence to the UK’s existing legislation and guidance. We support voluntary due diligence approaches taken by UK businesses to respect human rights across their operations and supplier relationships, in line with the UN’s Guiding Principles on Business and Human Rights and the OECD guidelines for multinational enterprises.
The noble Lord, Lord Offord, referred to legislation passed by his Government, which I readily acknowledge. Under Section 54 of the Modern Slavery Act 2015, Great British Energy will be required to prepare a slavery and human trafficking statement for the financial year, in relation to its turnover of £36 million or more, outlining the steps it has taken in the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains nor any part of its business. Once the Procurement Act 2023 comes into force—on which the noble Lord, Lord Alton, and I shared a common endeavour—it can reject bids and terminate contracts with suppliers which are known to use forced labour themselves or anywhere in their supply chain.
We will also use the modern slavery assessment tool known as MSAT to assess the supply base for modern slavery risks. With these tools, I am assured and am confident that Great British Energy will not ignore credible evidence of modern slavery and human rights abuses. I believe that its exemplary adherence to this legislation, which the Government rightfully expect, will not only ensure that the company is doing all in its power to combat modern slavery but also pull up the standards expected of the UK’s wider energy industry under the existing legislative landscape. I think the chair of GBE has reinforced that point.
It is our belief that any action that has to be taken must not only be robust but—to take the point of the noble Earl, Lord Russell—take a whole-of-government and society approach. We expect UK businesses, including GBE, to do everything in their power to remove any instances of forced labour from their supply chain. Our guidance and international principles encourage business to remediate or mitigate when instances are uncovered, such as industry collaboration or improved internal purchasing practices. Amendments 18 and 19 would not allow GBE the opportunity for mediation; they would only penalise it.
There is a practical question around how these amendments might work in practice and what their impacts on GBE and its operations would be. They do not define what is meant by “credible evidence”, and this could be left open to interpretation. I am not trying to be pedantic here because, clearly, the noble Lord, Lord Alton, suggested in his opening remarks that he wanted to give the Commons the opportunity to debate this matter. I agree that we should not be too pedantic about the wording of the amendment, but I wanted to mention that as one of the practical consequences of enacting the amendments as they are currently drafted.
Combating human rights abuses, such as modern slavery, across the whole energy industry is a much more effective way to make progress than applying measures on a company-by-company basis, as these amendments would do. We recognise that the landscape has changed since the Modern Slavery Act was introduced; that is why we are committed to improving our response to modern slavery and will set out next steps more broadly in due course.
I should inform the House that we are partnering with an expert institution to provide detailed and relevant information on what modern slavery statements should cover, including practical advice for businesses to go beyond compliance with their legal requirements and actively identify and remedy instances of modern slavery in their supply chains. GBE will follow that, of course.
The noble Lord, Lord Alton, expressed some scepticism about the Solar Taskforce. Having been relaunched by my department, it will focus on identifying and taking forward the actions needed to develop resilient, sustainable and innovative supply chains that are free from forced labour. The aim is to support the significant increases needed in the deployment of solar panels to meet our ambition of seeing a large increase by 2030.
More widely, the Government are taking action to ensure that our clean energy supply chains are resilient as a key priority in the transition to net zero, in both de-risking the delivery of our carbon budgets and maximising the economic benefits from the transition. This will involve domestic action, such as investment in manufacturing, and international action, such as removing trade barriers and collaborating with our allies.
With respect to the speech from the noble Lord, Lord Alton, I know that the House wants to see action from the Government. I can assure noble Lords that my department is working collaboratively across Whitehall on this important issue, including with the Department for Business and Trade and the Home Office, to assess and monitor the effectiveness of the UK’s existing measures, alongside the impacts of new policy tools that are emerging to tackle forced labour in global supply chains, including in the energy sector. We are not ignoring the points made by the noble Lord. We take this seriously and, as I said, we are strongly looking at this across Whitehall at the moment.
I turn to the amendment in the name of the noble Baroness, Lady Bennett, to which she spoke so eloquently. Let me be clear: the UK’s existing sustainability criteria put limits on the greenhouse gas emissions of the supply chain and already include environmental protections. Where biomass is sourced from forests, the land criteria include requirements around sustainable harvesting and maintaining productivity. This ensures that forests are managed well and in a sustainable manner, as carbon dioxide emissions released during combustion are absorbed continuously by new forest growth. The statement that we made on Monday in relation to biomass reflects how the Government are moving. They might not be moving as fast as the noble Baroness wants, but we are, I think, moving in the direction that she wishes to see.
I remind the noble Baroness, Lady Bennett, that, as a public body, Great British Energy already has a duty to conserve and enhance biodiversity. The noble Earl, Lord Russell, was right to remind me of my own Amendment 38, which we will come on to at some point this evening. I do not want to repeat what I am going to say later, but it is a very important amendment and I hope it will provide considerable reassurance to the House.
My Lords, I am grateful to the Minister. I have taken my own remarks at something of a gallop this evening, but this has been a very worthwhile debate. It was good to hear from the noble Baroness, Lady Bennett, the noble Earl, Lord Russell, and the noble Lords, Lord Wigley, Lord Teverson and Lord Offord. The fact that there was so much agreement across the House about the scourge of modern-day slavery and the failure, 10 years later, of the 2015 legislation to deal with this problem effectively demonstrates the truth of what has been—
My Lords, in my remarks, I accepted that life has moved on since 2015. The Government know that we need to look at this further, which is why we are working across Whitehall at the moment. I wanted to assure the noble Lord that we do not ignore the fact that we need to move on from the 2015 legislation.
I accept that it is not the Minister who is at fault here. However, whether there is the same enthusiasm elsewhere across government is something that we can all speculate on. He will remember that, in Committee, I drew to his attention the report on 26 December 2024 in the Financial Times linking 14 companies to events in Xinjiang involving $1.4 billion of exposure.
I am sorry to challenge again the noble Lord but, seeing my noble friend Lord Collins on the Bench, I assure the noble Lord that I speak for the Government in saying that we are very concerned about this. We are not at all being complacent.
(2 weeks, 3 days ago)
Lords ChamberThat the draft Regulations laid before the House on 28 November 2024 be approved.
Considered in Grand Committee on 3 February.
My Lords, that is a very hard act to follow. I beg to move the Motion standing in my name on the Order Paper.
(2 weeks, 5 days ago)
Grand CommitteeThat the Grand Committee do consider the Heat Networks (Market Framework) (Great Britain) Regulations 2025.
My Lords, these regulations were laid before the house on 28 November 2024.
We know that to reach our net-zero commitment and reduce our reliance on international fossil fuels, we must use all the tools we have available. Currently, heating accounts for 23% of the UK’s carbon emissions. Two of our key technologies for decarbonising heat are heat pumps and heat networks.
Heat networks present us with an opportunity to enable a more resilient and flexible future for the UK’s heat, reducing carbon emissions and our future bills. Heat networks are particularly important, as they are in a unique position to exploit larger-scale and local low-carbon energy sources, such as large, efficient heat pumps and waste heat from industry or from natural sources that would otherwise be dumped. Proven internationally to provide affordable, low-carbon heat, heat networks are especially suited to dense urban areas. The Government expect that about 20% of the UK’s heat demand will be met by heat networks by 2050, which will be a significant increase from the current figure, which is about 3%.
We want to do everything that we can to support the much-needed growth of the heat network sector, but we also want to ensure that we deliver a fair deal for heat network consumers. Heat networks currently function as an unregulated monopoly: the 470,000 households that are supplied by heat networks cannot change their supplier if they are dissatisfied with their service or obtain redress if they are unfairly treated. The lack of regulation means that consumers are not guaranteed a fair service: heating is less reliable, suppliers are less transparent and it is harder for consumers to represent themselves or make complaints.
We have been working with consumer groups and have engaged in research that will allow, and has allowed, us to identify where this is happening in the market and what we can do to put in place measures to prevent such activity. These regulations are what we need to put in place to ensure that customers are protected. They stem from the Energy Act 2023, which provides powers for the Secretary of State to introduce regulations across Great Britain that will protect heat network consumers in a way that is rightfully comparable with other regulated utilities.
This statutory instrument seeks to provide protections to heat network consumers that are comparable with activities such as those in the gas and electricity sector. The instrument introduces an authorisation regime to be implemented by Ofgem; this will work in a similar way to the gas and electricity licensing regimes. It takes an outcomes-based approach to reflect heat networks’ diversity of scale and their nascent market position.
The regulations ban running a heat network without an authorisation. Existing heat networks are automatically given an authorisation in order to phase in market regulation. The conditions for authorisation are set by either the Secretary of State or Ofgem, and apply rules for running a heat network. Ofgem will be able to monitor compliance with regulations and act where appropriate.
Actions Ofgem can take include issuing information notices for compliance data, investigating suspected non-compliance, inspecting commercial premises of authorised persons and issuing a range of orders requiring remedial action. Consumer redress orders can also be issued, requiring that affected consumers are given compensation.
These regulations require Ofgem to publish statements of policy on how powers are used. Penalties will be proportionate to the authorised person’s size and the scale of harm that their non-compliance has caused. Additionally, the instrument gives Ofgem powers to set minimum performance standards. Although the scope of these standards is not defined in this instrument, these will include quality of service, outage minimisation and treatment of vulnerable customers.
This instrument also applies Parts 1 and 2 of the Consumers, Estate Agents and Redress Act 2007, with some modifications to apply them to heat networks. These create the roles of consumer advocacy bodies for heat network consumers, providing access to advice. It also extends the Energy Ombudsman’s redress scheme to these consumers. The regulations automatically enrol all heat networks into the scheme.
The commencement dates for some of the provisions are slightly different. This is because delays to the passage of the Energy Act mean that Ofgem cannot commence regulatory activities before January 2026. However, to ensure that heat network consumers are afforded some support before then, we are establishing the roles of the consumer advocacy, advice and redress scheme providers earlier, in April 2025.
Finally, this instrument makes amendments to the Heat Networks (Scotland) Act 2021, following extensive consultations with the Scottish Government. These amendments were made to ensure that Ofgem can regulate consistently across Great Britain.
My department has carried out two consultations to inform these regulations. The first consultation was on creating a market framework, in 2020; the second was on consumer protection, in 2023. Across both consultations, broad support for the structures created in this instrument was expressed. There is an ongoing consultation on the contents of the authorisation conditions, the outcome of which will be published before the authorisation regime commences.
In summary, this instrument represents the important first step in introducing comprehensive utility regulation to the heat network market. It lays the groundwork for a much fairer and just sector where heat network consumers are protected. We expect that this will provide a very good foundation for growing the sector in future. Putting consumer protection at the heart of our agenda is, we believe, a way to inspire public confidence. I beg to move.
My Lords, I am pleased to say that we are very supportive of the heat networks regulations before us. We broadly welcome these moves, which will start to regulate the heat networks market in England, Wales and Scotland.
These regulations will bring in some much-needed consumer controls and protections for the customers of heat networks. As the Minister said, heat networks are a form of deregulated energy distribution, where heating, cooling and hot water are circulated from central sources of generation to multiple endpoints of use. These can include domestic dwellings as well as public and commercial buildings.
Frankly, it is shocking that heat networks have been largely unregulated to date, despite being an essential utility that is presently used by nearly 500,000 households in the UK. The only legislation that currently applies specifically to heat networks are the Heat Network (Metering and Billing) Regulations, which apply only to metering and billing.
Heat network customers have significantly fewer rights and protections compared with any other energy utility customers in the UK. A report carried out by the Competition and Markets Authority in 2018 found that the existing market was, in effect, a monopoly. It raised concerns about customer protections as this market grows and moves forward. To date, this market has been allowed to operate mostly unregulated. In all other aspects, heat network customers have fewer rights and consumer protections than any other energy customers.
We welcome the Government’s intention to grow this share of the energy market and we recognise that the extension of heat networks can bring benefits to customers as we make the energy transition. We welcome the use of large-scale heat pumps and novel uses of waste heat, particularly in urban areas. The recently announced Bunhill 2 Energy Centre, which will provide heat and hot water to more than 1,350 homes, a school and two leisure centres in Islington, with waste heat from the London Underground, is an example of this type of innovation. In future, waste heat from industrial processes or data centres could be used to provide new forms of domestic heat and hot water from heat that is currently used just as a by-product and released into the atmosphere.
I note the Government’s stated intention to see that some 20% of the UK’s heat demand is met by heat networks by 2050. These regulations are about creating those basic consumer protections for heat network customers so that they have the same protections as everybody else. We want to make sure that this heat network market is fit for purpose so that it can grow and new customers can enter it. At the moment, the lack of consumer protection is the main barrier to growing this market, so we fully agree with the Government on these points. The lack of a properly regulated market needs to be resolved, and we support the Government doing so.
This instrument uses the powers in Chapter 1 of Part 8 of the Energy Act 2023. It defines “regulated activities” in relation to heat networks and provides that anyone carrying out these activities needs an authorisation. Authorisations are to be granted by the Gas and Electricity Markets Authority, GEMA, and in practice by Ofgem. Ofgem will also have relevant enforcement powers and authorisations under the instrument. The regulations give it the powers to carry out this role, including investigative powers to collect information and issue different types of compliance notices, consumer redress orders and variable penalties.
What support will the Government give to very small heat networks and small community heat networks, particularly those with fewer than 50 members? Obviously, with new regulations there is some level of new burden, so are the Government aware of that and doing everything they can to support them in the transition?
As the Minister said, these regulations are only the first step in introducing a much fuller regulatory regime in the months and years to come. The authorisation regime run by Ofgem will come into force on 27 January 2026, but the provisions on consumer advocacy and the redress scheme to be operated by the Energy Ombudsman will come into force on 1 April 2025. How will those two systems work together? What will happen in that interregnum? Will the Minister and the Government ensure that, as they move from one regulatory regime to another, consumers will be protected through that transition?
I want to ask about historical legacy issues, in particular the money the Government gave to people in heat networks. Once these regulations come into force, what will happen to any legacy issues, conflicts or problems that pre-date these regulations?
Finally, in a statement in the other place it was made clear, as the Minister has said, that the Government want to grow heat networks to 20% by 2050. This has not had a lot of discussion in this place or the other place. We welcome this policy, but will the Minister take a moment to say how they plan to grow the heat network market? Beyond these regulations and making the regulatory framework work, what steps are planned to help increase the use of heat networks? What investment framework are the Government looking to use to help bring about more heat networks? What other mechanisms do they have in mind to help grow this market? How will it be reported on? What organisations will oversee the delivery of the increase in heat networks? Finally, does the Minister see a role for GB Energy in increasing the number of heat networks?
My Lords, could I ask the Minister one question? I apologise to him: I realised this was being done today only about 20 minutes ago.
A significant number of existing heat networks are run by local authorities or hived-off organisations owned by local authorities. The aim of this legislation, as far as consumers are concerned, I have strongly supported for a long time, including during the proceedings of the Energy Act. I am very much in favour of consumer protection and consumer redress as spelled out in part of these regulations, but I have been told elsewhere that those protections and certainly those forms of redress are different if they are for consumers of heat networks run by local authorities, compared with a private sector or mixed ownership of the heat network. I would like to know whether that is true in principle. If it is at all true, perhaps the Minister could write to me and explain what the situation is.
My Lords, I am most grateful to noble Lords who have taken part in this short but none the less interesting and, I think, important debate. As the noble Earl, Lord Russell, the noble Baroness, Lady Bloomfield, and my noble friend Lord Whitty have suggested, the development of heat networks is a very important one, and we want to see considerable progress over the next few years.
I also think it is important that the sector itself has broadly supported the regulatory proposals. I believe, and I think it was explicit in what the noble Baroness said, that that confidence will allow them to invest in the future and develop the market, which is what we earnestly hope for and wish to see.
In response to the noble Baroness, Lady Bloomfield, I accept that this is another responsibility that is being placed on Ofgem. I have had quite considerable experience in dealing with regulators in my time in government. I think Ofgem discharges its responsibilities very seriously, and I have confidence in its ability to discharge this new responsibility. In a sense, it is simply extending the principles of the current regulation of gas and electricity to network heating, so it is something I am confident it will be able to do.
In response to the noble Earl, Lord Russell, I make it clear that from April this year, heat network consumers will also be able to seek redress from the Energy Ombudsman scheme and, through Citizens Advice and Consumer Scotland, will have access to advice and advocacy services afforded to the gas and electricity markets. In answer to the noble Baroness, we think this will be particularly helpful to the vulnerable customers she mentioned.
The noble Earl asked me about retrospection. The new arrangements will not be able to be applied retrospectively. The fact he raised this shows why it is so important that we get a move on in introducing these new regulations, and how customers were at risk under the previous arrangements.
As far as fair competition is concerned, again, I very much accept that point. Indeed, this work arose from the Competition and Markets Authority, and Ofgem is well used to intervening in areas where it feels that competition is not being fairly adopted. I am confident that it can deal with that. The data gathered by Ofgem—and, of course, it will have this ability to require data to be provided to it—will enable it to identify emerging issues and trends and adapt regulation as the heat sector develops and grows. As I see it, regulation will be proportionate and organic, marching in step with the way the market itself develops.
I inform the Committee that we will be introducing further regulations this year: first, to introduce protections against insolvency and debt management; and, secondly, to create an entity to implement mandatory technical standards. Putting those together will provide the foundation for this market to grow in future. Market growth seems to me to be a fundamental question, so we are working to expand the existing heat network market through capital funding via the green heat network fund, which will establish heat network zones in key locations. This will allow heat network developers to deploy large-scale district heat networks in dense urban locations, where, as I have said already, they are best suited to provide low-carbon heat.
On support for smaller heat networks, my understanding is that, first, Ofgem will take a proportionate and outcomes-based approach to regulation, providing guidance and supporting small operations.
To come back to the legacy issue and add a bit more information, on legacy issues with existing heat networks, we will take action to guide heat networks through legacy challenges that they face with existing heat networks, with remedial works implemented over time. One advantage of giving authorisation to current schemes is that, once they have been given an authorisation, they then come under these regulations. In one way, if there are pre-existing issues, at some point they will be authorised, and then they can be dealt with under these regulations. So, in fact, although strictly speaking it cannot be retrospectively applied, I hope that that can bring comfort to customers who are really concerned about the situation as it is.
I understand also, in relation to vulnerable customers, that a priority services register will enable vulnerable consumers to access additional support relating to their heat network, including receiving communications in an accessible format, assistance reading their meters and the ability to nominate another person to act on their behalf when dealing with their heat provider.
In relation to the point raised about regulation and customer prices, Ofgem will have direct powers to intervene on prices with a general authorisation condition, to set prices fairly, with data-driven interventions proceeding from January 2026.
On the point raised by my noble friend Lord Whitty, first, I acknowledge the work of local authorities of in some ways even pioneering district heating systems. My noble friend may know that in the heart of the city of Birmingham we had a district heating system that ran right through the city centre, and we can see the potential area. I have also been informed about the South Westminster Area Network, which is being established through close working between Westminster Council and Westminster business improvement districts. That is a new approach to procurement; it took four months to bring forward a partner, which is much quicker than for many of the schemes and developments.
The point that my noble friend raised is a new one to me, and I hope that he does not mind me just checking it out and coming back to him on it. On the face of it, it seems puzzling, but I think that I need to find out some more information about it. But I take his point that we want local authorities to continue to take a lead in developing some of these network heating schemes and, clearly, the public must have confidence in how that is done.
Finally, the noble Earl, Lord Russell, asked me about Great British Energy. He will know that we believe that, in the development of local plans and the role of GBE in doing that, there is clearly potential to give encouragement to community energy schemes and network schemes. I cannot really say any more about that, but I shall draw those remarks to the attention of the start-up chair of Great British Energy.
I should just clarify my remarks about Ofgem. In no way was I intending to imply that its work was anything other than exemplary—I was just commenting on the increasing workload that we are putting on Ofgem.
I did not take it as a criticism at all. The noble Baroness is absolutely right that we are asking Ofgem to do a lot—but her experience and mine is that it is very capable of doing that.
(3 weeks, 3 days ago)
Lords ChamberMy Lords, I gather from looking at the press release more than the original Statement that 65,000 applications will be checked through Ofgem procedures. Today I met someone who is affected by this, and I want to emphasise just the worry that the 65,000 or whatever will have over the future of their houses, their saleability, their onward renting or the damages to landlords. This is a real concern.
How many of the 39 companies that the noble Baroness, Lady Bloomfield, mentioned, were part of the TrustMark scheme? That scheme, which I believe all those contractors should have been a part of, is described as “Government Endorsed Quality”. What really worries me regarding future schemes—I know there is a big ambition on the part of this Government to carry on retrofitting—is that there will be a loss of confidence.
The one question I would really like an answer from the Minister on is about what I think is wishful thinking: namely, the Government’s view that all these issues will be replaced or rectified by the original installers. I do not wish to accuse the department of being naive, but let us be clear: the majority building business model is that when you get into trouble, you go into liquidation. I and, I think, other people really want to understand who will then bear the cost of those rectifications where that happens, as I suspect it will quite regularly.
My Lords, I am grateful to the noble Baroness and the noble Lord. The noble Baroness has taken time out from Nuclear Week, which we have both been spending a very enjoyable three days on. She is absolutely right to stress the importance of the scheme. Clearly, there is consensus across the House on dealing with this big problem, as both the noble Lord and the noble Baroness suggested.
I make it clear that we have the evidence of an audit of about 1,100 of those 65,000, and there will now be a massive piece of work to follow up with further audits, which will be overseen by Ofgem. Some of those will be desk based and others will be in-person site visits. There will be a proportionality test to decide how the audits will be undertaken.
The sampling that has been done was geared towards the installers that were thought to be most risky, but the fact is that a significant proportion of that sample showed that there were major issues, which is why we needed to take swift action to conduct further checks and initiate a further programme of remediation. We think it is 38 installers, not 39—a correction has been made by TrustMark. To answer the noble Lord, of course they were all under the auspices of TrustMark, and we are working very hard through certification bodies and TrustMark to require them to remediate the work.
As the noble Lord pointed out, it is a requirement for those schemes to be registered with TrustMark. In the case of those already audited, this is happening. I believe most installers want to do the right thing and do a good job. My understanding is that where issues are being flagged, they are repairing the work, but clearly we are having mechanisms put in place to make sure that the installers deliver on their obligations, and the guarantee system we have acts as a backstop. Clearly, the current system is not working. There is a combination of TrustMark, the companies involved, the certification process and the UK accreditation system—there are a lot of bodies involved and there is not sufficient co-ordination or tight oversight of this. We need to focus on remediation, but then we must move on to establish a better system in future.
On whether remediation will be carried out effectively, we are going to put additional spot checks in across the system to make sure that where insulation faults have been remediated, that work has been done to the required standard. Suppliers have committed to additional checks and monitoring future installations of solid-wall insulation so that householders can be confident that it is done to a better standard. I very much agree that any householder who has learned about this issue will be concerned. They will be concerned about the impact on their home, but also about whether the remediation work will be done effectively.
In terms of information to those households, Ofgem has begun writing to all households that have had solid-wall installation installed under energy company obligation 4 or the Great British Insulation Scheme. As I said, we will be reviewing the quality of all 65,000 solid-wall insulations, and we hope that the vast majority will not have any issues or that any issues found will be minor, but if we see major concerns, we will want action to take place immediately. It is clearly important that we carry out a quality check across all solid-wall insulation under these schemes.
I want to pick up the issue of saleability raised by the noble Lord, Lord Teverson. Clearly, this will be a concern. Householders seeking to sell or perhaps remortgage their home will be worried about lenders’ approach. Our expectation is that the firms that have done this shoddy work must pay for the remediation. Clearly, that must be the principle under which we operate. There is a moral hazard in my saying anything different from the Dispatch Box on that issue.
Looking further ahead, it is clear that the whole system of consumer protection is fragmented and in need of reform. In terms of our overall goal towards net zero and the massive challenge of heating efficiency in our homes, it is essential that in all these programmes the public have confidence in the quality of the installation. That is why what has been discovered has been very disappointing, but we have to take it, look at the whole system and improve it.
My Lords, I do not for a minute doubt the Government’s commitment to improving the energy efficiency of existing properties, and I know that they are well aware of the huge task that is ahead of them to meet the 2030 and 2035 targets. However, the Statement makes it very clear that yet more work will have to be done as a result of the problems described in it. Earlier today, I asked the noble Baroness, Lady Taylor, whether she could explain where the staff were going to come from to carry out this work. Now there is an additional problem to be dealt with. The noble Baroness made it very clear that the department is working closely with the Department for Education to develop solutions to this, not least through the apprenticeship scheme, but can the Minister give us a little more detail about what is actually going to arise as a result of those discussions, because many people are deeply concerned that we will not have the staff to be able to carry out the work that arises under this Statement, let alone the work that is urgently needed to improve energy efficiency in other homes?
My Lords, I was privileged to be by the side of my noble friend when we had that very interesting Question, because of course, although she answered it, the future homes standard very much concerns my department as well, which is why we are working so closely together. I think that she said that not only is the skills issue very much on her agenda but that her department is working closely with the Department for Education. Of course, my department has a huge vested interest in ensuring that we deal with any skills shortages. We are very focused on the supply chain. We are supporting the sector to obtain necessary qualifications to work in government schemes through our skills competition and exploring measures to ensure that installers are getting the right skills and experience to carry out high-quality installation. Clearly, this is one issue that must arise from what has happened: why installers do not seem to be able to do the right thing.
There is much that we are going to work on, but I would say on the positive side that if ever one wanted to make a connection between the growth agenda and the charge to net zero, this is it. A huge number of skilled jobs will be there to be filled in future. Our job in government is to facilitate the training and development that need to take place to respond to that challenge.
My Lords, the Minister just spoke about the possibility of a huge number of skilled jobs. He may be aware of the TUC’s recommendations from last year for the Government’s warm homes strategy. If we are going to train people in those skills, we have to make sure those are also good jobs. Those TUC recommendations include ensuring that these are high-quality jobs supporting direct employment, with strong procurement rules and adherence to nationally negotiated terms and conditions. One key thing we have seen in the past is that government policies have come and gone, people have got trained up and started businesses, then the money has gone away and those people have left the industry. The TUC is recommending a multi-decade national retrofit plan. Are the Government listening to what the TUC has to say on making sure those are good jobs for skilled people?
Actually, I agree with much of what the noble Baroness says. What the sector—and that includes trade unions and the people working in the sector—needs is certainty for the future. Indeed, to relate it to another low-carbon energy structure, nuclear, that is the message that we have been getting over the last three days. Obviously, we are still developing our plans and projects around the massive challenge of the decarbonisation of buildings. Clearly, we need to make sure that we provide the kind of certainty that the private sector needs to make the investment. We need to make sure that a supply chain is vibrant and that we have skilled people working in it. I should say that the whole energy industry, if I may put it that way, although it also relates to my noble friend’s responsibility, offers such potential for the future. It really is an exciting time to be thinking about what we need to do to provide what the noble Baroness has just said.
My Lords, the Statement says:
“We will put in place a robust system of compliance, audit and regulation, so that consumers have the confidence to take up the offer of upgrading their homes”.
Can the Minister say whether he thinks this was a failure of regulation? If so, can he reassure the House that the move to regulate or not regulate so that growth can be set free will not jeopardise schemes such as this and lead to more failure?
Actually, that is a very interesting question and the answer is yes. Clearly, the failure was in the hands of the companies that got the contracts to provide the services. They have been shown visibly to have failed. However, the regulatory system is a mishmash. There are too many bodies involved. There is confusion about who is responsible for what. The certification bodies can be in competition with each other. There is a risk, therefore, of a lowest common denominator approach. Clearly, we need to improve that, but what we want is not a huge amount of unnecessary bureaucracy but proportionate regulation. I think this can be done more efficiently and the public can have more confidence—and that actually is the Government’s view on regulation generally.
My Lords, the Minister has made several points that certainly chime with me. In a sense, we have been here before because of things such as electro-osmotic damp-proof courses, types of urea formaldehyde foam being put into wall cavities and, more recently, polyurethane foam being sprayed on the inside of roof slopes. All these firms seem to be task-and-finish jobs. I have been involved with this for probably nearly 50 years as a professional dealing with property and I have seen these people come and go and reappear in different guises. If one is going to have a system of regulation-lite and move to individual responsibility, I get that up to a point, but there is not the penetration to make sure that that is constantly policed and enforced, and there is only one other option that is available to prevent people operating like spivs and charlatans, if I can put it that way—that is not to say all in industry are like that, but clearly some of them are—and that is to have a regime of strict liability at director and company level, in the same way as we had with health and safety, in order that they cannot escape the liabilities anything like as quickly simply by disappearing off and becoming insolvent. Would the Minister care to comment on that?
My Lords, I am grateful to the noble Lord because he speaks with such expertise in this area. In a sense I should have reflected on that in my answer to the point made by the noble Lord, Lord Teverson. I am not going to commit myself in terms of what the future is going to look like, but I will take his remarks and make sure my ministerial colleagues see them. As I said, our first task must be remediation and responding to the concerns of 65,000 people who will be very concerned. Obviously, they are going to get the letter from Ofgem; some of them are already getting it. We will then be reflecting very much on how we need to develop a more robust system.
I, too, have experience. I remember being a Minister in the Department for Work and Pensions when King’s College reviewed the work of gas installers, and, again, they found a great number of problems. As a result, the whole gas regulation process was shaken up. So we have to look at these things very seriously, because the credibility of the net-zero programme and the decarbonisation of our homes depends on public trust. If we cannot gain the public’s trust, they will not take the necessary action, so we really have to work hard on this.
My Lords, further to the answer the Minister gave to my noble friend Lord Foster regarding skills, I sit on the Industry and Regulators Committee and we had a very good presentation regarding the Government’s skills strategy and the formation of Skills England, but there was some concern expressed as to whether sufficient weight would be given to those in the construction trades, which is where many of those who are required will come from. I hope that the Minister and his ministerial colleague will put some pressure on Skills England to make sure that those skills are given the weight they should have, because without them we will not get the benefits of growth in that industry.
My Lords, I agree with the noble Viscount. I will take that away in terms of the work we are going to be doing. Within the energy sector there are some fantastic examples of industries that really have invested in skills and training. To take EDF as an example and looking at Bridgwater and Taunton College, where it has invested hugely and where the quality of education and skills training is phenomenal, I say that it is things like that I would like to see across the whole sector.
I welcome the determination to correct this and put the situation right. I am concerned over the effect of this on public confidence in TrustMark and undertaking home improvements. Regarding retrofitting, householders used to be able to approach with confidence the charity Carbon Trust as a one-stop for advice on energy home improvements. It was extremely helpful in giving independent guidance to householders on the necessary measures for upgrading the energy efficiency of their homes. Will the Minister look at how such advice might be made available again?
My Lords, I think my noble friend is hinting at whether there is a one-stop shop. The answer is no, there is not. Obviously, we have a number of agencies that provide very helpful advice, including the Energy Saving Trust, Citizens Advice and National Energy Action. In the immediate aftermath of what has happened, Ofgem, in addition to sending letters out, will have a helpline and contact details. The point the noble Lord raises is an important one and we will be looking at this as part of our review of the general arrangements.
(3 weeks, 4 days ago)
Lords ChamberThat the draft Regulations laid before the House on 30 October and 3 December 2024 be approved.
Considered in Grand Committee on 27 January.