Contracts for Difference (Electricity Supplier Obligations) (Amendment) Regulations 2024
Lord Hunt of Kings Heath Excerpts(3 months ago)
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Lord Hunt of Kings Heath
That the Grand Committee do consider the Contracts for Difference (Electricity Supplier Obligations) (Amendment) Regulations 2024.
Relevant document: 2nd Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
My Lords, these draft regulations were laid before the House on 30 July 2024. This instrument forms an important part of the Government’s commitment to accelerate the deployment of carbon capture, usage and storage—CCUS. We believe this to be critical to deliver clean energy and accelerate our net-zero journey. As the Government recently announced, CCUS is vital as we enter a new era of clean energy, investment and jobs. By boosting this tried and tested technology, the UK has the potential to become a global leader in CCUS, delivering good jobs and economic growth for decades to come.
A critical element of the CCUS mix is the successful deployment of power CCUS—gas-powered electricity generators fitted with carbon capture technology. Power CCUS will complement the rollout of renewable energy, providing secure, flexible, non-weather-dependent low-carbon electricity, critical for a reliable energy system and achieving our mission of clean power by 2030.
The Government are committed to incentivising the deployment of power CCUS and this instrument will enable future payments to power CCUS plants under the business model known as the dispatchable power agreement. This agreement—the DPA—is the contractual framework to support power CCUS. It has been designed specifically to incentivise the investment and deployment of power CCUS in the UK. The DPA is a type of contract for difference and, like a contract for difference, uses the electricity supplier obligation to fund support payments. This levy is calculated and managed by the CfD counterparty—the Low Carbon Contracts Company—and collected from electricity suppliers, who are able to pass the costs on to their customers if they choose to do so.
In addition to the existing renewable contract for difference contract design, the DPA business model will provide an alternative payment based on a power CCUS generator’s availability. This availability payment is based on a generator’s availability of electricity generation and carbon capture, and associated carbon dioxide transport and storage network costs. Under the DPA terms, payments will reduce proportionally to reflect any reduction in a generator’s capture rate or generation.
The payment is made whether a generator dispatches power or not. This ensures that a CCUS power plant will run in response to market signals, ahead of unabated gas plants, but will not surpass cheaper renewables. This arrangement will strengthen security of supply, ensuring that a source of reliable low-carbon energy is available when the wind does not blow and the sun does not shine.
Let me be clear: this proposed instrument enables only certain types of payments under the renewable CfD and DPA contracts to be funded by the supplier levy. Any future support offer to a project will be subject to rigorous negotiation with partners. Any decision to award support will be subject to value-for-money and subsidy control tests to ensure best value for money for consumers.
In effect, this statutory instrument amends the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014. The amendments will allow the payments made under the DPA to be funded by the supplier levy, by changing how the supplier levy rate calculation works in the regulations.
First, Regulation 4 relates to the way an electricity supplier’s daily contributions paid to the CfD counterparty is calculated. This instrument amends Regulation 4 to enable the definition of generation payments such that the supplier obligation can be charged for payments related to the activities of a dispatchable power plant fitted with CCUS technology. This includes amendments to take into account: the electricity generation capacity made available by a generating station on a given day; a generating station’s achieved carbon dioxide capture rate or capture capacity on a given day; the incurred CO2 transport and storage capital costs incurred for transporting such captured carbon dioxide and if required, associated carbon dioxide; transport and storage network revenue shortfalls proportionate to a DPA-supported generating station which arose on that day.
Secondly, Regulation 7 of the 2014 regulations sets out how the CfD counterparty estimates the quarterly obligation payment that electricity suppliers will be required to provide to the counterparty. This instrument amends Regulation 7 to ensure a consideration of matters related to a dispatchable power agreement-supported generating station are taken into account, including the carbon dioxide transport and storage network capital costs and, if required, revenue shortfalls, and the amount of carbon captured.
Together, these amendments allow a CfD counterparty to estimate, raise funds and ultimately pay a DPA-supported CCUS-enabled power plant. The existing payment calculation, based on the amount of electricity generated by renewable CfD-supported generating stations is retained and unaffected.
These proposals have been long considered as the power CCUS business model has been updated. This has included update publications in December 2020, May 2021, October 2021 and April 2022. The instrument was formally consulted on from December 2023 and received a range of responses from electricity suppliers, power operators, a trade body and a consumer-focused charity. Respondents were broadly in agreement with the principles laid out. My department continues to engage closely with industry in the development of the CCUS sector.
In summary, this instrument represents a positive step forward in the delivery of the Government’s ambitious CCUS programme and 2030 clean power mission. It will lay the regulatory groundwork to encourage the deployment of power CCUS and begin to unlock the great economic and jobs opportunities that we see coming from this important development. I beg to move.
The Earl of Effingham (Con)
My Lords, His Majesty’s Official Opposition welcome the Government’s Contracts for Difference (Electricity Supplier Obligations) (Amendment) Regulations 2024. These regulations will enable licensed electricity suppliers to make payments to natural gas power plants fitted with carbon capture, usage and storage—also known as CCUS—technology. In 2023, we introduced funding for CCUS with the plan to make up to £20 billion available to support the early development of CCUS, so we welcome this step as an essential part of reaching the net-zero target, and we are pleased to see that the current Government are continuing our work in this area.
On these Benches, we both aspire to and understand the need to reach net zero, and there is indeed consensus from all on the 2050 target. The use of carbon capture technology will play an important role in achieving that goal, and this amendment introduces incentives for suppliers to produce low-carbon electricity—an objective with which we agree.
However, we seek clarification from the Minister. When in government, we committed to deploying CCUS technology in four industrial clusters by 2030. Can he please inform the Committee as to whether his Government will also commit to working towards and reaching that same target?
Lord Hunt of Kings Heath (Lab)
My Lords, I welcome the noble Earl’s welcome for the statutory instrument. He is right that a lot of the original work was undertaken by the previous Government. I think I said in my opening speech that most of the consultations took place under the auspices of the previous Government, so there is clearly consensus about the key role of CCUS.
I had expected greater attendance and that we might have debated the principles of CCUS. For me, it is an essential part of the transition. We will need gas-powered electricity generators for years to come. They give the flexibility we need in relation to renewables and having nuclear as a baseload. If we can have it abated then that would clearly decarbonise our energy structure, but it can also play a key role in the industrial use of energy.
On the noble Earl’s question, I say gently to him that, in a sense, the previous Government’s £20 billion seemed rather a theoretical figure. We have had to work hard with our colleagues across government to get to the almost £22 billion that we have announced. Clearly, that money is to be spent on building the foundations for the industry. Basically, the funding we have announced is being invested in our first projects. These include the underpinning CO2 transport and storage networks and three CO2 capture projects. Other projects will join later, but these are subject to agreement across government. Of course, the noble Earl will know that we will have the Budget and spending review decisions very shortly. I will have to wait till those decisions are made before I respond on where we will go next.
I thank the noble Earl for his general support for this instrument. I believe we need as much political consensus as possible in relation to net zero, and the general support for CCUS is very welcome.
EV Strategy: (ECC Committee Report)
Lord Hunt of Kings Heath Excerpts(3 months, 2 weeks ago)
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Lord Fuller (Con)
My Lords, this is an important debate at a pivotal moment for the personal mobility that underpins our economy and growth. The report explains in great detail that the choice of an electric vehicle affords much greater driving pleasure, greater acceleration, lower maintenance costs for home chargers, competitive daily charges and, thanks to direct-drive motors, the consignment of the grinding of gears to the history books—but if only this mode shift were that simple.
The market for EVs was already stuttering when the report was published in February. Since then, there have been further dramatic changes, as the growth as a proportion of the whole market has stagnated. We are literally at a fork in the road for electric vehicles. The report highlights a number of things that must be done for us to get back on track.
Before I talk about the rollout of chargers, I thank my noble friend Lord Leicester for his comprehensive list of electric vehicles that are made in this country. He missed out one that is close to home for us both, in Norfolk, because Lotus Cars is shortly to be manufacturing its Type 135 in our great county.
To return to the provision of charging infrastructure, the report makes it clear that it is much easier for the market to provide charging points along the motorways and main roads, while there are few incentives on the B roads and in out-of-the-way places. As a council leader back in 2018, I recognised that it was really important for the council to take a lead in the provision of this public infrastructure. Our approach was grounded in the understanding that not every motorist has a long gravel drive; many live in flats or terraced homes, and simply do not have anywhere to park outside their home—a point that other noble Lords have made. Our council understood that we would never get the wide uptake of EVs unless we democratised the opportunity for anybody to charge a vehicle close by, so we invested in the fat cables in our car parks to serve the first generation of fast chargers, with better app support. We have now extended the number of installations in our leisure centres and other public buildings with a second generation, taking advantage of government funding and adding our own resources to decarbonise.
However, we still needed to drive forward, having done our bit to begin with. Two years ago, we made a big offer to each of the 120 town and parish councils in our district. We would procure, install, maintain and manage an electric charging point in the grounds of their village hall or bowls club car park; all they needed to do was find that space. We would hook it up to the mains, and the app would ensure that any electricity consumed by chargers would be refunded, with a margin for themselves.
A third of our population lives in rural villages, and we wanted all residents and their visitors to be able to charge, especially as we had lost so many rural petrol stations. We would provide a real choice of mobility technologies for everybody in the countryside—and, of course, by putting the capital costs of these chargers on to the local council tax payer, those amortisation costs would then not fall in a surcharge on the pence per kilowatt hour on the public charges, which the noble Baroness, Lady Parminter, and the report have enumerated. We did not want to discriminate against those who could not charge at home.
These parish councils are valued partners and make an enormously positive contribution to our national life, but, two years on, I regret to say that only a single installation has been made under our offer to the villages. Although there are a few in the pipeline, our offer ran flat. Yes, the market will provide on the highway and, yes, urban authorities can upgrade their lamp-posts, but we can and must do more in the countryside.
I want to relay some of the reasons why our parish councils did not take up our offer. Some parishes simply assumed that there was not enough electricity, notwithstanding that we were going to have a survey as part of the offer. The offer was rejected on the basis of hearsay, rather than evidence. Some market towns felt that taking a lead locally and installing charging points was a service—a service that, on principle, they did not seek to provide. Others felt that they were not going to get used, so why bother? A few cited the lack of mobile coverage in the countryside as an issue; unless you have a mobile connection, you cannot connect to the app and download the code, and so the electric charger would not work—but that is of course notwithstanding that most village halls in most parish councils now have wifi.
There were cases where the parish council wanted to learn more but could not persuade the village hall committee to get on board. Some were just simply unrealistic. Sometimes in rural areas there is just not the oomph in the network to provide the sort of rapid charging found at a service station. They were rejected on that basis, and therein lies a real case of the excellent being an enemy of the simply satisfactory. Finally, and notably, most local councillors just did not want people hanging around the village hall. I was disappointed. There was a pocketful of excuses.
I tell these disappointing stories because they are part of my real-life experience, and if there is to be a plan for more electric cars, we will need a national strategy that takes some of these concerns into account. As the SMMT has observed to me, just making the plan is worthless unless the market participants can look beyond defeatism or prejudice. Having a plan is one thing but delivering it is another. Only when we have leadership across the whole of the public sector—that includes some of our 9,000 parish councils, as well as principal authorities—will we get universal, not just urban-based, coverage.
It is important to make progress quickly because, unless we start to address some of these headwinds, we will never get progress. I was pleased that the report makes it clear that home-based charging is nearly always cheaper, but home-based charging is just one of the costs. It has become clear to me, especially since February, when the report was written, that, leaving the simple energy cost per mile to one side, the total cost of EVs is now rising fast, and is making the internal combustion engine even more competitive once again.
Although electric cars are now subsidised by manufacturers, as the noble Lord, Lord Woodley, said, the upfront purchase costs are still more expensive—especially when taking into account the interest payments, which are not the same as when interest rates were 0.5%. There are also insurance costs: a function of providing a like-for-like replacement, plus some astonishingly risk-averse repair quotations for minor prangs in the car park that see write-offs, are now driving premiums to eye-watering levels. Depreciation is ruinous. It has destabilised the motor traders, who have been trying to catch a falling knife on the impaired value of their stock. The private motorist, as we have heard, is at a serious disadvantage to the corporate purchaser, with no tax incentives or opportunities for salary sacrifice and other things. Of course, battery range is not what it was thought to be—my noble friend made that point so clearly.
I will not dwell further on the 20% versus 5% VAT level, but it is discriminating against people who live in flats and do not have the long gravel drive or large diesel 4x4 to fall back on. We know from the SMMT that the fiscal drag is bringing electric cars into the luxury super-charged tax rate, at another £500 per year. Who would buy such a car with their own money? The costs, over and above the mileage costs, are running away.
We hear now that road charges have been mooted. I can understand why the noble Lord, Lord Whitty, mentioned this, because it is a truth that we will have to grip. Not only is the total cost of ownership of electric versus combustion becoming much more significant but, if we then end up with road pricing, it will be the nail in the coffin. It would dramatically increase the cost of running an electric car.
I am not going to dwell further on the increasing proportion of electric vehicles against internal combustion engines in sales, but the policy is destabilising UK motor dealers, and undermining European and domestic manufacturers, by encouraging a flood of Chinese imports of uncertain quality and with concerns over embedded IT. This well-intentioned regulation is undermining our economic stability and electronic security, delegating production and wealth creation to parts of the world with lower environmental standards. Given the importance of cars to the global economy, we cannot ignore this global context. We must approach EVs and our policies as part of economic security, which in turn is part of our national security.
The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
My Lords, there has been a bit of chuntering so I should explain that the Clock was wrong; the noble Lord has not taken more than 15 minutes.
Lord Fuller (Con)
I thank the noble Lord, Lord Hunt. I noticed that it was showing eight minutes when I started, so I think I have some more time.
I was talking about the role of electric vehicles and our treatment, in trade and tariffs, of our economic and national security. A dilemma is around the corner. After the US elections, will we follow the Canadians with a 100% tariff on Chinese EVs, or will we pursue a more EU-aligned strategy that combines a less aggressive tariff approach with tighter regulation—but at the risk of hobbling UK production? Informed commentators know that the upcoming UK policy choices on such matters as tariffs and trade are being watched closely in Beijing and Washington, as well as by our new friends in Brussels, who are the subject of a renewed charm offensive from London.
Whether it is America, China or Europe, the trade treatment of EVs here in the UK will set the tone for global trade negotiations in a much more complicated trading environment in an unstable world. One thing is for sure, though: if we side with our allies on protectionist tariffs, this will drive up the costs of UK electric vehicles still further, which will increasingly aggravate the move to electric. But if we side with China, this could kill off our industry anyway and leave us reliant on imports for ever. These are big dilemmas.
There is nothing more democratic than the freedom to get about. This report has made an important contribution to this important market at a single point in time, but it is a fast-moving target. I wish the noble Lord, Lord Hunt, well in navigating this complex macroeconomic, security and environmental situation. My view is that the fiscal approach, our environmental regulations and government policy targets need to be urgently tweaked—not done away with—to ensure that customer preference for electric vehicles is maintained, not further undermined with our economy damaged. This is not a market that can afford to go into reverse but, unless there is a change in tone, gears will continue to grind. Let us hope the engine does not seize up completely.
Lord Hunt of Kings Heath (Lab)
My Lords, it is a great pleasure to respond to what has been an excellent debate. I thank the noble Baroness, Lady Parminter, for her opening speech and the many members of the Select Committee, and other noble Lords, who have spoken today. I very much agree with the tributes paid by the noble Baroness, Lady Randerson, and the noble Earl, Lord Effingham, to the noble Baroness, Lady Parminter. Her opening speech without notes was a remarkable effort that set the tone of the debate.
She outlined the main themes in the Select Committee report, which were clearly built on in the debate. She spoke of this being a critical challenge for the Government and the need for the Government to take a lead. Her committee said that the transition to electric vehicles was “essential” if the UK is to meet its net-zero emissions target by 2050. Her report said that EVs could provide “dramatic reductions” in emissions, in addition to improved air quality, but that “concerted Government action” is required.
In the debate, we heard about a number of the key measures. I think that there is a pretty broad consensus among noble Lords about what needs to happen, including the issues around upfront costs, charging infrastructure and affordability, and the grid and planning regulations. VAT and the vehicle excise duty were also raised, which I am afraid I will completely duck and say are a Treasury matter, although I have noted noble Lords’ comments on them.
The committee and the noble Lord, Lord Birt, said that, to ensure the transition to EVs, it was necessary to decarbonise the electricity used for charging. The report—as well as the noble Lords, Lord Lucas and Lord Grantchester, and the noble Earl, Lord Leicester—also said that we need to review urgently progress on EV and battery recycling facilities.
An important matter that a number of noble Lords raised, including the noble Baroness, Lady Randerson, as well as the committee, is that consumer confidence is critical to secure a successful transition and that the Government need to do more to convey a positive vision of EVs and to counter misinformation about the technology. Of course, there are many other things in the Select Committee report as well.
I was very interested in the noble Earl’s comments about what he thought the Government should be doing. He went through a list of actions taken by the last Government, which I readily acknowledge. However, he rather glossed over what the Select Committee had to say when it was particularly critical of the September 2023 speech by the former Prime Minister, Rishi Sunak, in which he pushed back the petrol and diesel phase-out date from 2030 to 2035. The noble Earl had a go at defending that, presenting it as a positive asset in terms of consumer choice. However, I think—and the evidence is here in this debate today— that it had a dampening effect on industry and consumer confidence. That is a reflection of the fact that Mr Sunak told the public that achieving
“net zero is going to be hard”.
He had emphasised the costs of EVs while failing to stress the benefits. So, coming back to the issue of growing confidence, this is clearly a role I believe government has to take, and it is one that we readily accept.
There was a very interesting discussion about costs and subsidy. The noble Lord, Lord Lilley, was articulate as ever in relation to that matter. He has a debate in a week’s time looking at the whole relationship between what we seek to do in terms of energy net zero and the cost of it, and of course his speech during the King’s Speech debate reflected his views on that.
The noble Lord, Lord Lucas, also raised the issue of costs. Of course, costs and subsidies are involved, and the Department for Transport is engaged in discussions with our friends in the Treasury on Budget and spending review decisions. I recognise that noble Lords have asked me to give precise dates about when announcements will be made and how policies will be taken forward. The fact is that I cannot say, because many of these are bound up in the current spending discussions. However, I can say that I have noted the issues that have been raised today, as will the Department for Transport, and they will of course be considered by the department in taking these matters forward.
Costs and subsidies are involved; equally, my noble friend Lady Young made the very important point that the cost of not taking action also has to be taken into account in terms of the impact of climate change. As the noble Baroness, Lady Jones, said, that is not some distant threat but is with us now, and we are seeing the consequences.
I also agreed with the noble Baroness, Lady Jones, on the question of decarbonising our energy network. That is why it is one of the five key missions of the Government. I know that noble Lords have asked me to set out how we will get there, first to clean power 2030 and then to net zero. We have asked NESO, the new body, to provide us with advice on the precise path to 2030.
I accept that the noble Baroness, Lady Jones, also mentioned the need for a coherent approach across government. In a sense, I hope that the fact that I am here at the Dispatch Box responding to this issue is a reflection of that. However, I acknowledge, as my noble friend Lord Whitty said, that the policy lead for electric vehicles rests with the Department for Transport.
I was disappointed that the noble Baroness, Lady Parminter, said that the Government had not made sufficient progress since the election. That has not been for want of lack of energy, emphasis and importance. Of course it is very important but, as I said, so much of this is tied into spending review and budgetary issues, and it is difficult for me to give the kind of responses she seeks. However, I can say that the Government see this as being a very important policy area, and we look forward to making a series of announcements in the next few months when we are clearer about the financial situation and the other issues that we need to take forward.
I turn to the manifesto commitment, which is clear. We said that we would support the transition to electric vehicles by accelerating the rollout of charge points and giving certainty to manufacturers by restoring the phase-out date of 2030 for new cars with internal combustion engines. I say to the noble Earl, Lord Effingham, that we are of course actively engaging with the industry on these matters. We are also supporting buyers of second-hand electric cars by standardising the information supplied on the condition of batteries.
I say to my noble friend Lord Grantchester that it is our firm intention to phase out the sale of new cars powered solely by internal combustion engine by 2030. All new cars and vans will need to be zero-emission by 2035. I say to my noble friends Lady Young and Lord Birt that we do believe that this is doable. We are not being spooked by the adverse comments we occasionally see in the media.
As noble Lords know, the zero-emission vehicle mandate will increase from 22% this year to 80% in 2030, while that for vans will rise from 10% this year to 70% in 2030. As the noble Earl, Lord Effingham, said, following extensive consultation with vehicle manufacturers, a number of flexibilities were built into the ZEV mandate which vehicle manufacturers can use to be compliant with the legislation. These include reducing the CO2 of non-ZEVs to earn additional ZEV credits, borrowing from future years and trading with other manufacturers. We think the targets are within reach.
We then come to the matter of cost, which a number of noble Lords, including the noble Baroness and the noble Earl, Lord Effingham, raised. I know from looking at the media reporting on electric vehicles in the last few months that there is a sense that production and the whole policy have stalled, but it is worth pointing out that the number of electric vehicles sold in the UK continues to rise. So far, 270,000 battery electric cars have been sold this year, 13% higher than last year. The September figure is particularly encouraging; one hopes—I certainly do— that it is a sign that consumers and the industry now have greater confidence in our making progress on the targets we have set, and that this will be the start of an acceleration in interest in and the purchase of electric vehicles.
On the used car market, there is some evidence that electric cars are now priced similarly to their petrol and diesel equivalents. Obviously, this provides a more affordable route for drivers to purchase an EV; none the less, I accept that cost is a key barrier to EV uptake. We know that, in the end, everyone should benefit from the transition to EVs and the cheaper running costs that can occur, but the Government are going to continue to review demand incentives to make sure that we strike the right balance between value for money for the taxpayer and support for the transition to electric vehicles. So, this is very much a work in progress.
It is the same answer, really, in relation to charging infrastructure and costs. We know that to give the public confidence in making the switch to electric vehicles, they must be confident in their ability to charge those vehicles. The noble Earl illustrated the point very well indeed.
I take on board the comments made by the noble Lord, Lord Fuller, about the democratisation of charging —as he described it—the potential contribution of parish councils, the lack of uptake and the issue of rurality, which I will make sure the department gives full consideration to, as I recognise that this is very important. He talked about parish councils, but we know that the performance of local authorities generally is patchy. In souping-up the policy going forward, we must look at how we can encourage local authorities, including parish councils, to take up the charge rather more enthusiastically.
Obviously, charging at home works for many people. One of the benefits of the election was campaigning, during which we knocked on doors and talked to people who had home chargers. My perception was that people who have them are very happy with them, but clearly it cannot be for everyone. Noble Lords have raised a number of problems for those people who do not have access, as well as the issue of renters. Clearly, we need to reflect on what we can do to improve the situation. Public charging provision has increased by 42% since last year, and the noble Earl referred to that as well. We need to look at what we can do to encourage ever-more increase in the charge point provision.
I take note of the well-made point from the noble Lord, Lord Birt, on service stations and rapid charging points. My understanding is that we now have 960 open access rapid and ultra-rapid charge points at motorway service areas, with many more on or close to our key A roads. The rapid charging fund is piloting and funding a portion of the cost of upgrading the electricity grid at motorway service areas where it is currently not commercially viable. We are looking at applications for the fund pilot at the moment and will be coming forward with further information in due course—to use the phrase beloved of government departments.
The noble Lord, Lord Birt, referred generally to the need for a reliable charging network. The Public Charge Point Regulations were introduced in November last year, meaning, in effect, that charge point operators will be required to offer 24/7 access to a free helpline, share open data, increase the provision of contactless payment options and be 99% reliable across each rapid charging network. We are definitely not complacent on this; we know that more needs to be done. We also recognise the importance of what the right reverend Prelate the Bishop of Oxford said very well in relation to fairness.
The noble Lords, Lord Whitty and Lord Lilley, mentioned road pricing. I must say from the Dispatch Box that there are no current plans to introduce a system of national road pricing. However, we recognise that motoring tax revenues in general need to keep pace with the changes that are being brought about by the switch to EVs, while keeping the transition affordable for consumers.
A number of noble Lords made important points about manufacturing, recycling and the battery supply chain. I have listened to those very carefully indeed. To the noble Lord, Lord Lucas, and the noble Earl, Lord Effingham, I can say that we are going to work closely with investors, via the automotive transformation fund, to build a globally competitive EV and battery supply chain in the UK.
I ought to turn to the issue of communication, because this is such an important area. A number of noble Lords—the noble Lords, Lord Lucas and Lord Whitty, the right reverend Prelate and my noble friend Lady Young—particularly raised the problem of misinformation about electric vehicles. This is something we need to be concerned about and not be complacent. I recognise that we as the Government have a clear duty and responsibility in terms of giving clear information to consumers on the benefits and use of electric vehicles. We need to work closely with industry in terms of correcting this misleading coverage and delivering factual communications to consumers on the many benefits that electric vehicles provide. We are already taking proactive action to counter inaccurate information presented by the media on the subject of EVs when this arises. Today’s debate has reinforced my view of the importance of doing this and I know that my colleagues in the Department for Transport will be listening very carefully to what has been said in relation to the role of government here.
To summarise the Government’s view, we welcome this report. I know that it was published in February and here we are in October, but none the less I can reassure members of the Select Committee that the report has informed, and is informing, the Government’s policy now about the way we need to go forward. I have said already that there are a lot of areas where I cannot give precise answers in terms of what we will do and what the dates are, because it is very much dependent on the spending review and budgetary discussions. Let us be frank: the public finances are particularly challenging and I will not hesitate to remind the party opposite of the public expenditure hole that they left us in. Clearly, that is a factor as well. But this is an important policy area; electric vehicles play a major role in the journey towards net zero and we know that it is important that we come back with some of the answers to the questions noble Lords have raised today.
In conclusion, I again thank the Select Committee and its chair for the extraordinary, valuable piece of work that they have done.
King’s Speech
Lord Hunt of Kings Heath Excerpts(6 months, 2 weeks ago)
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Lord Reid of Cardowan
That an humble Address be presented to His Majesty as follows:
“Most Gracious Sovereign—We, Your Majesty’s most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament”.
The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)
My Lords, it is a great honour for me to open our six-day debate on the gracious Speech. I start by thanking my predecessor at the Department for Energy Security and Net Zero, the noble Lord, Lord Callanan, for his contribution to the department and his considerable efforts to keep noble Lords informed and debate vigorously with them. I also very much welcome the noble Lord, Lord Fuller, who is making his maiden speech during our debate. I am sure that it will be the first of many important contributions.
Since I was last a Minister in what was the Department of Energy and Climate Change, 14 years have passed. While the office still looks familiar—and the Secretary of State is certainly familiar—the challenges we face are undoubtedly more profound. The vulnerabilities in our energy system have been laid bare by Putin’s invasion of Ukraine and his weaponisation of international fossil fuel markets. Families are still in a cost of living crisis, exacerbated by energy bills that remain high. There is also a deep and urgent demand for good jobs, good houses and good economic opportunities across the UK, particularly in former industrial heartlands, which feel like they have been left behind in recent years. All the while, the climate crisis is no longer a future threat: it is happening right now, all around us. We are seeing the effect of warming in droughts, wildfires and floods across the world, and feeling it in extreme temperatures, with June this year the 13th consecutive month to set a record global high.
As was set out in the gracious Speech, the Government are on a mission to address these challenges. At the heart of that mission is the plan to make Britain a clean energy superpower. If we want to wean ourselves off our dependence on fossil fuels and become more energy secure, we need clean energy. If we want to tackle the cost of living crisis and make sure that British people feel better off, we need to harness our domestic potential for cheap clean energy. If we want skilled jobs with good wages, bringing a new wave of prosperity to every corner of the country, we need an industrial strategy focused on clean energy. If we want to halt climate change and protect our planet, we need clean energy.
Instead of having to choose between security, sustainability and affordability—what is known as the energy trilemma—we have an extraordinary opportunity to boost all three by investing in clean energy at speed and scale. That is why the Government are focused on achieving clean electricity by 2030, with a system based on renewables and nuclear power, and then building on that momentum to achieve the ultimate goal of net zero by 2050, which means we will then be no longer adding to the total amount of greenhouse gases in the atmosphere, and therefore no longer contributing to climate change.
The Great British Energy Bill, put forward in the gracious Speech, will establish a publicly owned company to spearhead our mission to become a clean energy superpower. Headquartered in Scotland, Great British Energy will encourage, own and develop clean energy projects of all sizes across the country. It is highly unlikely that the scale and pace of investment required to decarbonise the electricity system could be achieved by the private sector alone within the current institutional and policy framework. This new public energy company, alongside additional electricity market reforms, can provide the spark we need, supporting and encouraging private investment. Working in conjunction with industry, Great British Energy will help substantially expand our renewable capacity by the end of this decade.
The Bill will establish GBE, which will develop, own and operate assets, investing in partnership with the private sector, and will have a capitalisation of £8.3 billion of new money over the lifetime of this Parliament. Through these investments, GBE will take a stake for the British people in projects and supply chains that accelerate technologies for the future, reaping benefits at home in cheap clean power and securing Britain at the front of the global race for technology, which has such major global export potential.
GBE will also facilitate, encourage and participate in the production, distribution, storage and supply of clean energy, and the reduction of greenhouse gas emissions from energy produced by fossil fuels, as well as measures for furthering the transition to clean energy and improving energy efficiency. The Bill gives the Secretary of State the ability to provide GBE with the financial backing needed to meet its aims and ambitions. The Secretary of State will be required under the Bill to prepare a strategic priority statement for GBE, to ensure it focuses its effort on government priorities. GBE will also, of course, accelerate ground-breaking new developments, with public investment helping to crowd in investment from the private sector and supporting the development of municipal and community energy.
Renewables are not only greener but the fastest to deploy, cheapest to build and operate, and more secure. A renewables-led system is the cheapest foundation for a decarbonised grid. It also gives us energy security, because renewables are not sold on markets controlled by foreign powers. By accelerating the clean energy transition, GBE will not just put us firmly on track for net zero but will boost our energy security and create those skilled jobs we need. Further, it will ensure that electricity bills are no longer exposed to the kinds of gas price shocks that helped to drive increases in the electricity price cap of over £1,300 for a typical household during winter 2022-23.
GBE will work alongside our new mission control centre, which is exactly what it sounds like—a strategic hub in government that will set out the path, and monitor and drive our progress, to reaching clean power by 2030. It will draw upon the unique expertise of industry leaders, in a format unprecedented in government, bringing together the best possible people to shape how we achieve decarbonised electricity. I share the Secretary of State’s delight in having such a credible expert at the helm in Chris Stark, the former chief executive of the Climate Change Committee.
If anyone needed proof of the pace at which this Government are willing to move, they need look only at the lifting of the onshore wind ban, after just 72 hours. Onshore wind accounts for roughly a quarter of all electricity generated from renewables. We already have a strong pipeline of projects in the planning system, but planning and grid constraints in England and Wales mean we have seen little investment in onshore wind outside Scotland in recent years. We have removed the de facto ban in England by deleting onshore wind- specific planning tests that have been in the National Planning Policy Framework for almost a decade. What this essentially does is place onshore wind on the same footing as other energy developments.
We are very eager for communities to benefit from hosting local renewable energy infrastructure, which is why we will soon publish an update to the community benefits protocol for onshore wind in England.
We are building on the strategic spatial energy plan, which is being developed by the National Energy System Operator. This is about speeding up the rollout of clean power, giving more certainty to the planning and consenting process, and seeking to expand the use of spatial planning to other infrastructure sectors.
Work is under way on a host of other vital reforms, including energy system reform to ensure that our regulator can hold companies to account for wrongdoing, and the warm homes plan, which will offer grants and low-interest loans to support insulation, as well as the installation of solar panels, batteries and low-carbon heating. We will seek to extend the lifetime of existing nuclear power plants while supporting the completion of new sites, such as Sizewell C.
The Chancellor has already committed to a national wealth fund to drive investment in the industries of the future and create thousands of jobs in clean energy. This new national wealth fund task force will be led by the people who know best, including the former Bank of England Governor Mark Carney, the CEO of Barclays Bank, and Aviva CEO, Dame Amanda Blanc.
I turn to the environment. At the heart of our net zero plans is, of course, a determination to protect our natural environment for generations to come. For too long our natural world has been destroyed, and our farmers and rural communities neglected. Action is needed to urgently reverse this damage and bring about lasting and positive results.
It is surely a national shame that there are record levels of sewage in our rivers, lakes and seas. Cleaning this up is a priority that can no longer be ignored. That is why we are bringing forward legislation this Session that will take the first important step towards substantial reform in the waste sector. We want to hold water companies to account, putting them under special measures through strengthened regulation, but there is much more that has to happen if we are to support economic growth and minimise environmental harm.
We are committed to creating a circular economy that uses our resources in a more environmentally, economically and socially sustainable way, creating a road map that will finally move Britain to a zero-waste economy. We recognise that food security is critical to our national security, so will be working hard to support our farmers and rural communities, and will do more to protect communities from the devastating damage that flooding causes.
We should surely be proud of our country’s remarkable natural beauty, but the fact is that we are currently one of the most nature-depleted countries in the world. So we will take action to meet the targets set out in the Environment Act and work in partnership with communities to restore and protect nature.
Another central pillar of the Government’s agenda for change is housing. A safe, secure, affordable home is the foundation of a good life, but we know that for too many people it is increasingly out of reach. In hostels throughout the country, there are children in temporary accommodation. Couples are stuck living with parents, unable to move out and start a family, and millions of lives are put on hold because of the failure to address our housing emergency. This is holding us all back because new homes do not just provide families with security to make plans and get on but help create well-paid jobs, attract investment into local infrastructure and spark the economic growth that Britain desperately needs.
As some of the biggest contributors to our carbon emissions, homes also hold the key to a greener, cleaner future that brings down people’s bills while doing our best for the planet. That is why we have made it a mission to get Britain building again with 1.5 million new homes across the country, including the biggest wave of affordable, social and council homes for a generation. These new homes will be energy efficient, with proper insulation to bring down bills. To achieve this, the Government are reintroducing local housing targets, reforming the National Planning Policy Framework, kick-starting the next generation of new towns and creating a new task force to accelerate stalled housing projects, including hiring 300 more planning officers. In doing this, we will focus on nature-friendly planning, starting with the development of poor-quality grey-belt land—disused wasteland—and prioritising building on brownfield sites. We also need to address the real reasons that many people oppose homes being built in their neighbourhood, so we will make sure that more homes also means more doctors, more schools and better transport.
Government is often about making difficult decisions, and it can sometimes feel like a Catch-22 situation where every positive choice seems to involve some sort of push-back. The energy crisis is not a Catch-22. Nor is the need to protect our natural environment, nor the demand for good-quality housing. In all those areas we have an extraordinary opportunity at this time. By investing in clean energy, protecting our environment and building hundreds of thousands of good-quality homes, we can make ordinary working people better off and build a more secure and prosperous future for all. I beg to move.
Earl Attlee (Con)
My Lords, I intend to be brief. I congratulate my noble friend Lord Fuller on his maiden speech.
I am grateful to the noble Lord, Lord Hunt of Kings Heath, for introducing the debate. We have sparred for many years, and I know how much he enjoys my supplementary question technique. His speech was slightly disappointing: he expressed no sentiments that I disagreed with.
Earl Attlee (Con)
I am full of optimism for this Parliament and strongly support the proposed planning reforms, including for offshore wind, and I agree with everything that was said by the noble Lord, Lord Rooker. I just worry that the Government’s proposals will not go far enough, though I think they will unlock development. I assure the Government that I will do nothing to impede these reforms. I have already checked my diary; I have business meetings on every conceivable day that we will be voting against these proposals. We have allowed the population of the United Kingdom to grow significantly. If we increase the population, it is inevitable that we must bring more land into development, not just for housing but for employment. The noble Lord, Lord Rooker, explained why this is not a problem.
I see far too many businesses operating in units that are too small, badly organised and inefficiently laid out, and with no space for new and more modern machinery. This results in them having to send goods to another factory, using transport and emissions, in order to carry out a further process. We need to improve the supply of industrial premises. I hope that some of the Government’s planning reforms will make that easier. A few years ago, I wanted to buy a small industrial unit near home, near Portsmouth. I gave up. I could not buy a small industrial unit—there were none.
The noble Lord, Lord Hunt, talked about GB Energy. I know that private funding will be leveraged in, but I wonder whether the amount of money he is talking about is going to be enough to make a difference.
My noble friends Lady Moyo and Lord Lilley talked about the increase in electricity demand. There is demand from data centres but also for charging heavy goods vehicles, which uses a huge amount of electricity. Problems are arising with the movement of new heavy electrical equipment. Some of these high-voltage DC transformers that enable electricity to be transmitted long distances weigh 200 to 300 tonnes. There are serious and complex technical and regulatory problems, and several government departments are involved. I am doing what I can to help, and will be engaging with Ministers and officials. I am the subject matter expert and I am not convinced that a layman working from a brief will be able to perform the same function that I do, but no one else in Parliament has the knowledge. Once I am ejected from your Lordships’ House, who will look after this industrial problem?
Finally, I support onshore wind turbines. Of course there are adverse effects, but carbon reduction surely is a priority. I am afraid that I am not convinced by the arguments laid out by my noble friend Lady McIntosh.