Renewable Energy: Costs

Lord Hunt of Kings Heath Excerpts

Thursday 14th November 2024 Lords Chamber

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, it is a great pleasure to respond to this morning’s debate and I congratulate the noble Lord, Lord Frost, on initiating it. We have had an interesting discussion on many of the challenging issues that we face around energy. This is our third debate because, although the noble Lord was not present for it, we had one on electric vehicles, which covered many of the same issues. As the noble Lord, Lord Offord, said, we look forward to the Second Reading of the Great British Energy Bill on Monday.

I welcome the interest. It is so important, on an issue that is of such critical importance to our country, that your Lordships are making a real effort, debating some of the difficult challenges that we face. Clearly, there are different views. I agree with the noble Lords, Lord Frost and Lord Whitty, and the right reverend Prelate about the apposite nature of the debate happening at the same time as the discussions in Baku. I also take the right reverend Prelate’s point about our international responsibilities, which we very much understand.

In essence the noble Lord, Lord Frost, has argued today and in previous debate that he sees the net-zero consensus as breaking down. He has said previously, although he did not cover it much today, that he disagrees that investment in net zero will make us richer. He thinks that we should unwind and invest in gas and nuclear. I agree about nuclear. I note his detailed analysis of the costs of renewables. I will ensure that he receives a considered response. I have a response that I could read out, but it might be better if I wrote to him, with a copy to all Members of your Lordships’ House, since it is technical in nature. I get the substance of what he is saying. He will understand that I do not think the consensus was quite with him. There are clearly many different interpretations of the costs, not least, as noble Lords have said, the costs of not taking action. That is one of the great dividing lines between us. It was discussed by my noble friend Lord Hain, the right reverend Prelate and the noble Lord, Lord Oates, whose speech was about the costs of not taking action.

It is interesting that the noble Lord, Lord Frost, made no reference to climate change, as far as I can recollect. I find it very difficult to debate this without taking climate change as the context in which we develop these arguments. I say to the noble Lord, Lord Moynihan of Chelsea, that I see net zero not as a religion but as a rational response to evidence that is becoming clearer and clearer. The noble Lord, Lord Offord, said that he disagrees with the pace at which we are going—I understand that—but he does not resile from net zero. I do not want to waste your Lordships’ time repeating what other noble Lords have said about the impact of climate change. Clearly, it is with us. I took over the Climate Change Bill from my noble friend Lord Rooker in 2008. When we were debating it, it was almost an academic exercise in whether climate change was real. It was a future threat, but now it is with us. The noble Lord, Lord Oates, is so right about what is now happening. It is not a religion but a rational response to say that we have to take action and speed it up as quickly as we can.

I agree with the noble Lord, Lord Frost, that this requires a lot of investment. We cannot get away from that. I know that some noble Lords opposite are saying that the OBR, the Committee on Climate Change, my own department and NESO are all part of a blob. I hesitated to use the word, because it gives Michael Gove credibility and I think it is a word that is very disrespectful to many people who are doing the right thing—but noble Lords know what I mean. You cannot just dismiss the conclusions of those august, independent institutions. Their broad consensus is that we have to go down this route.

I quote the Committee on Climate Change:

“the net costs of the transition (including upfront investment, ongoing running costs and costs of financing) will be less than 1% of GDP over the entirety of 2020-2050, lower than we concluded in our 2019 Net Zero report”.

The party opposite has started to criticise the OBR, which is unfortunate, but it highlighted that delayed action on reaching net zero will have significant negative fiscal and economic impacts, which would be as true for Northern Ireland as for the rest of the UK, as the noble Lord, Lord Elliott, raised. Do we ignore or just dismiss this? I suggest not; that is the basis on which we make progress.

The National Energy System Operator has produced a report; I have realised that noble Lords can find evidence in it to support any case they wish to put forward, but I think that the substance of what it says is significant. It says that an

“investment programme averaging £40 billion or more annually”

can support “economic and job opportunities” across the UK.

I will briefly mention levelised costs to the noble Lord, Lord Frost. As the noble Lord, Lord Oates, suggested, he may not be comparing like with like, which is part of the problem of having a rational debate on the true cost of energy. For instance, you can have a levelised cost of electricity for offshore wind, which reflects the average cost to build and operate a plant, but it cannot be equated to the strike price. The strike price represents the price needed over the contract for difference for a project to be commercially viable, factoring in revenue, market and policy considerations. There are other points that I could make on that, but I think it best that I circulate a paper so that all noble Lords can see that.

I come to the issue that the noble Lord really raised. He agrees with net zero but thinks that we are going too fast. He and my noble friend Lord Rooker and the noble Lord, Lord Elliott, suggested that the 2030 target is unrealisable. We can look again at the NESO report, but it depends how you interpret it. I interpret it as saying that that is very challenging. I do not think anyone has resiled from that; of course it is challenging. It involves plumbing, as the noble Lord said, and there are issues with the planning system at the moment about the grid and what needs to happen, but we are working very fast to try to resolve some of them. I say to my noble friend Lord Rooker that we may not be of the same measure as the members of the original Lunar Society, in our great city of Birmingham, but we believe that we can meet those targets.

To the noble Lord, Lord Swire, I say that of course pylons are not popular. We understand that. I was interested in what he said about potential alternatives, although he will understand that the figures we have so far suggest that they are much more expensive at the moment. In the end, we have to make connections to the grid much quicker and we have to invest in and see an extension of the grid. This is inevitable and it will sometimes involve unpopular decisions. I accept that.

In relation to public opinion on the cost of energy to householders, the noble Lord, Lord Moynihan, made his point very well. I gently say that most of these costs actually occurred under previous Governments, over a long period. The decisions that we are taking now will have an impact—there is no question about that—but noble Lords need to accept that that was an inevitability given what needs to happen to start to invest in the move towards clean power.

The noble Lord, Lord Howell, was absolutely right when he said that this is but one part of the story. The decarbonisation of heating, transport and industrial processes represents an immense challenge too, as we go towards 2050. This is very well understood, and our debate on electric vehicles two weeks ago brought that home to your Lordships.

The noble Lords, Lord Howell and Lord Moynihan, the noble Baroness, Lady Finn, and others mentioned nuclear. I say to the party opposite that, when I was doing this job between 2008 and 2010, we had just taken the decision to go back to new nuclear and were in firm discussions about Hinkley Point C and its siting, the skilled jobs required and the supply chain. I understand that the final investment decision did not take place until 2017, so there was an awful lot of delay. There have been other issues too. The cost of the project was underestimated and there was an unrealistic assumption that taking a technology from France and putting it into Hinkley Point C would not involve design changes because of our approach to regulation.

In July, I went to see Hinkley Point C, and I met the chief executive yesterday to talk about progress. It is fair to say that considerable progress is now being made. It is the largest construction in the UK, if not in Europe. It is immensely impressive, and 65% of the value of the supply chain went to UK companies. Another point is that, when Sizewell C is developed and we get to final investment decisions, which I hope will be in the next few months, it is going to be a replica above ground of Hinkley Point C, so all the lessons that have been learned will be translated. Huge progress has been made between the first and second reactors.

Noble Lords will understand that I am very passionate about the role of nuclear. It provides the essential baseload and deals with some of the issues that noble Lords have mentioned. The issue of intermittency is well understood, and it is part of the cost of what we seek to do. Our approach is to take nuclear as the essential base load.

I think the noble Lord, Lord Moynihan, was a bit unfair about progress. The technology of the SMR programme is being appraised by Great British Nuclear at the moment, and I hope that over the next few months we will begin to see progress there. There is clearly great potential with AMRs as well. We are all excited by what is happening in the US and the link between the major media companies’ data centres and potential AMR technology, and I want the UK to be part of that.

On Wylfa, I understand its potential. We will come to decisions over the next few months.

A number of noble Lords mentioned oil and gas and the North Sea. I understand the potential that it still has, because we are still going to need gas and the flexibility of gas. We want to develop carbon capture, usage and storage to make sure that it is abated gas, which means that we wish to see an orderly transition. We are working, and will work, very closely with industry in relation to the North Sea.

Other technologies have been mentioned: the noble Lord, Lord Moynihan, mentioned hydrogen and the noble Baroness, Lady Whitaker, and my noble friend Lord Hain mentioned wave energy technologies. I readily acknowledge that all that may have a role to play. Essentially, we are ever-open to people coming forward with ideas and new technologies, but, at the moment, we think that in reaching clean power we need to focus on offshore wind, onshore wind and solar, alongside ensuring that the nuclear programme speeds ahead as quickly as it possibly can.

The noble Lord, Lord Frost, did not discuss this today, but implicit in what he says is his doubt about the impact on the economy of investing in renewables. The evidence we have is that many jobs will become available in future because of what is happening and our drive towards clean power. We reckon that 640,000 people are employed in the UK in what are described as green jobs, and that number is going to grow as we accelerate to 2030. We have an office for clean energy jobs that is going to focus on how we can develop the skilled workforce.

On the nuclear side, the national Nuclear Skills Taskforce has estimated that, by 2030, we need an extra 40,000 people. If the programme goes well and we have a continuous number of nuclear power plants being developed, that figure could go well over 100,000 by the 2040s. We are talking about high-quality, well-paid jobs in all these sectors.

In relation to the North Sea, many of the skills being used there are translatable. We want to make sure that happens as smoothly as possible.

[Lord Howell of Guildford (Con)]

My Lords, in a very interesting speech, the Minister said just now that, in the next few months—those were his words—some decisions will be made on the smaller end of modular reactors and so on. My understanding from Great British Nuclear is that no decision will be made before 2029. Is this a new position being taken up? If so, that is extremely encouraging.

[Lord Hunt of Kings Heath (Lab)]

I hope I have not just announced a new position. The position is that they are now going through a technology appraisal, which will take a matter of months. At that stage, the Government will then have to make decisions about what will happen in the future and on the funding, and we will have to have discussions with our friends in His Majesty’s Treasury in relation to that. Before that, I hope we will be having discussions about a final investment decision on Sizewell C.

I am in danger of overrunning. I thank the noble Lord, Lord Frost, again. This has actually been a very interesting debate, although he did not anticipate consensus. I am going to disappoint him on his request for yet another committee. I have picked up the suggestion by the noble Lord, Lord Browne, of an energy institute—without commitment, I should say, but it is very interesting. I am grateful to the noble Lord, Lord Frost, for instituting such an interesting debate.

Climate Agenda

Lord Hunt of Kings Heath Excerpts

Thursday 24th October 2024 Lords Chamber

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, I am very grateful to the noble Lord, Lord Lilley, for instituting a very interesting debate and to all noble Lords who have spoken in it. I welcome the noble Lord, Lord Offord, to what I think is his first speaking outing in his new position. I thank him for his service as a Minister and readily acknowledge that on the Horizon sub-postmasters and sub-postmistresses issue he was very fair in the information and responses he gave to the House.

I congratulate the noble Baroness, Lady May, on what I can describe only as a truly excellent maiden speech, which included her insights into the threats that climate change can bring and the risk to vulnerable people. I commend her record in relation to modern slavery, which has been very much recognised in our debates on these issues over the last few years. I echo the noble Lord, Lord Young, in saying that her sensitivity to the House of Lords when it came to the question of the balance of membership and appointments was highly regarded around the House.

We have had a really interesting debate. We have heard again from the noble Lord, Lord Lilley, who extended the argument that he started in our King’s Speech debate. Essentially, as he said then, he accepts that the science of global warming is rock solid but he is sceptical that tackling climate change and accelerating the move to net zero will lower energy bills and generate economic growth. I get his argument, but I think he would recognise that he had a mixed response even from his own Benches. I certainly warmed to the noble Lords, Lord Randall, Lord Willetts and Lord Ahmad. The noble Lord, Lord Deben, a former chair of the Climate Change Committee, put the case for urgent action.

It is noticeable that the noble Lords, Lord Moynihan, Lord Frost and Lord Strathcarron, and to a certain extent the noble Earl, Lord Leicester, came in firmly behind the noble Lord, Lord Lilley. The noble Lord, Lord Offord, while praising our ambitions, posed challenges over the 2030 target. I sense, as the noble Lord, Lord Frost, suggested, that some of the political consensus on net zero may be breaking down. That would be a great pity. It would be a pity if the Conservative Party under its new leadership retreated on net zero. To pick up the point about the need to take the public with us and to paint them a picture of where we are trying to get to on net zero, a lack of political consensus would make it much harder to get that over to the public, whose support we need for what are often going to be very challenging policies. There is no point running away from that. The noble Lord, Lord Browne, is right: the last Prime Minister relaxing the electric vehicles target had a really damaging impact on the sector and public confidence. My worry is that the Conservative Party as a whole seems to be retreating from its ambitions. With due acknowledgement to St Augustine, the Conservatives seem to be saying, “Oh Lord, deliver us from climate change, but not just yet”.

As the noble Baroness, Lady Hayman—whose leadership of Peers for the Planet I readily acknowledge and applaud—put it, the 2030 target is not a notional political game. The fact is that we cannot afford to slow down; we have to speed up. Despite the comments by the noble Lord, Lord Frost, on climate change we know that human activity has already resulted in warming of around 1.3 degrees Celsius above pre-industrial levels. We are seeing the impact already. This is no longer a theoretical construct for the future; it is happening now, here and globally. As the noble Lord, Lord Oates, said, in some developing countries the impact is having a huge consequence on individual vulnerable people already.

The paper circulated before this debate by Peers for the Planet and Exeter University quotes a number of people including Professor Penny Endersby, chief exec of the Met Office, who should know a thing or two about this. She says that if we do not limit temperature rises to 1.5 degrees Celsius, we will see

“many more weather and climate extremes”,

resulting in

“loss of food, water and energy security, leading to increased global conflict”.

The other point raised by the noble Lord, Lord Oates, is that the spread of disease cannot be confined to those vulnerable developing countries. In the end, we will suffer the impact as well.

The comment by the noble Lord, Lord Ahmad, about the threat to small islands was very well taken. I also noted his comment about climate finance and the need to support developing countries. I can confirm to him that we are resolutely committed to upholding previously agreed international commitments, such as the global forest finance pledge. He will of course understand that we are approaching crucial discussions at Baku in the next COP meeting.

The noble Lord, Lord Lilley, was a mite critical of the Committee on Climate Change. I thought that his noble friend answered that pretty robustly as well, but the Government respect the work of the committee. We rely on its independence to provide us with robust advice, which I believe it has done. The robustness of its research and evidence has been first rate. The committee was critical of the previous Government because of the inconsistent messages they gave on net zero, with the cancellations, delays and exemptions to certain practices undermining confidence. The committee has said to us that we are currently off track to hit the 2030 target of a 68% reduction in emissions compared with 1990 levels and that we have to move “fast”. It said:

“Action is needed across all sectors of the economy, with low-carbon technologies … the norm”.


I suppose that is one of my responses to the noble Lord, Lord Offord. That is why we have to move so quickly.

So what we have done? The noble Lord, Lord Young, asked how effective the Government’s approach is and the noble Baroness, Lady Hayman, discussed the power of government. In a sense, the philosophical question that the noble Lord posed was about whether this should be bottom up or led by the Government. I think that, on climate change, the challenge is so tough that government really have to take a lead.

This is what we have done in the last few weeks. We have got rid of the ban on onshore wind; consented a number of large solar farms; launched GB Energy to leverage in private sector investment; and reached a partnership deal between GB Energy and the Crown Estate to encourage yet more offshore wind development. I say to the noble Lord, Lord Lucas, that we have also signalled our support for nuclear power as the essential baseload of our electricity generation. We had a very successful auction round, which delivered a record number of new clean energy projects. We have announced funding for carbon capture utilisation and storage projects, which are very important for the industrial processes of the future. We have set up an office for clean energy jobs, because of the whole discussion about the skills agenda, and published an industrial strategy to support key growth-driven sectors, including clean energy.

Unlike some members of the party opposite, we actually believe in an industrial strategy. It is not a question so much of government picking winners as of trying to support, as much as we can, from the centre, those sectors that clearly have great potential to grow and to export. The central argument is that investing in clean energy at speed and scale can help tackle the climate crisis. We can create good-quality jobs, drive investment, protect bill payers in the long term and, crucially, ensure energy security.

On the question of why the UK should be taking the lead, my answer is: why on earth not? The noble Lord, Lord Deben, and the noble Baroness, Lady Hayman, were so right. We have a strong vested interest in the world achieving net zero as soon as possible and we can have a pivotal role in persuading other countries to follow our example.

The question of costs and economic growth was focused on by the noble Lords, Lord Moynihan, Lord Lilley, and the noble Earl, Lord Leicester. The noble Lord, Lord Lilley, referred to Dieter Helm’s review for the previous Government. I have now had a look at least at the summary of the report, in light of his King’s Speech remarks. What is noticeable is that the previous Government ducked it when they had the results of the review. They then conducted what they called a “listening exercise”, and we all know why Governments do listening exercises—because they have received a report they did not like. As far as I know, the previous Government are still listening, because it was never brought to a conclusion. I suspect that means that this is not a simple area of cost comparisons.

I know that the noble Lord, Lord Lilley, is critical of the use of levelised costs to get a fair comparison—he said that, too, in the King’s Speech debate—but it does attempt to compare the costs of different generating technologies over different timescales: essentially, over the lifetime of the generator.

The noble Earl, Lord Leicester, asked: can we afford the transition to net zero? An assessment by the Office for Budget Responsibility in 2021 concluded, as the noble Lord, Lord Deben, surmised, that the

“costs of failing to get climate change under control would be much larger than those of bringing emissions down to net zero”.

My noble friend Lord Davies was critical of an Answer I gave to a Written Question yesterday on AMOC. He is concerned that the risk assessment of the actuarial profession is not fully recognised. The noble Baroness, Lady Bennett, also referred to this. I say to him that that Answer came after very considered advice, but of course I will take away his comments. I take his point about actuaries: who could doubt the importance of actuaries in forecasting the future? But even they do not always get it right.

There is the question of course of whether in our drive to net zero we are impacting our own industries and importing more from abroad. Of course, I do take that and I accept that we will never be a leading manufacturer in all renewable technologies. However, we can assemble, and we are now assembling, many of those imports, so a lot of the value comes to British companies and workers. We also have many opportunities to export our skills as well. For instance, the noble Lord, Lord Browne, referred to our world-leading R&D capability, which is capable of export in many ways too.

There are areas of technology where we have a great opportunity to export. I cannot go into the details of, for instance, the assessment by Great British Nuclear of the small modular reactor technologies at the moment, but British companies are involved in development. It is just worth noting that Rolls-Royce has a contract with Czechia to produce a fleet of nuclear reactors in that country. There are many other opportunities as well.

The noble Lord, Lord Strathcarron, spoke about the issue of green jobs. We reckon that around 640,000 people are employed in green jobs in the UK. That is a rise of 20% even from 2020 to 2022, which I would have thought those in the party opposite would wish to acknowledge; it happened under their stewardship. The noble Lord, Lord Frost, suggested that we wanted the fewest, highly productive jobs, and I agree with him. But these jobs are often very high-quality jobs in a growing sector and are very well paid. We surely need to embrace that. One of the issues we face is that, in many of those sectors, there may now be a shortage of people coming forward. We need to work very hard to make sure we have enough people who can contribute in those sectors.

I have responsibility for the nuclear industry in my department. We have a target; we need 40,000 more people in that sector by 2030. The national nuclear skills council projects that, by the 2040s, we will need well over 100,000 people. That is a huge opportunity for really high-quality skilled jobs. They can be at apprentice level, graduate level or, indeed, PhD level. It is an industry which, like many other low-carbon industries, really has a future.

The noble Lords, Lord Offord and Lord Strathcarron, were critical of our approach to oil and gas, specifically oil and gas production in the North Sea. North Sea oil and gas production will be with us for many years to come and we will need oil and gas for many years, but as the noble Lord, Lord Offord, knows, the UK continental shelf is described as a super-mature basin. Since 2000, its production has gone down by about 7% to 8% per year on average. The key challenge for us is to maintain that field, because of its strategic importance, but to allow it to transition as we change the energy structure. I totally agree with the noble Lord about the people working there and their skills. He is right that many of them have transferred to the offshore wind sector. I believe they can transition to other skilled jobs as well.

I was asked a number of questions about the externality of carbon emissions. The UK prices emissions in the UK Emissions Trading Scheme, but I will write to noble Lords with some of the details of that.

Are we confident about private sector investment? Yes—all the indicators we have show that many private sector companies want to invest in this new agenda.

Many other points were raised. I say to the noble Lord, Lord Inglewood, that I asked my officials for quick advice on using the ark, but answer came there none. I have already referred to the point made by the noble Lord, Lord Lucas, on nuclear. On his point about data centres and advanced nuclear reactors, we have recently seen some exciting developments in the US. It would be good to see similar developments here, and we clearly need a much more flexible siting policy to allow that to happen. We are working on that. I have met a number of companies that are very interested in investing in AMRs, linked to either data centres or industrial centres. They have told me that they do not need any government money, but we will see.

The right reverend Prelate the Bishop of St Albans and the noble Baroness, Lady McIntosh, made some telling interventions on rural issues. I take their point about farmers, food security and the need to embrace them in this agenda. We worked with the NFU on that when I was a Defra Minister many years ago, and we clearly need to carry on doing so.

The noble Lord, Lord Willetts, in particular, as well as the noble Baroness, Lady McIntosh, raised electric vehicles. We had a debate on this last week, and the points raised there are being taken forward by the Department for Transport. If the noble Lord and the noble Baroness read Hansard, they will see that their points on issues in rural areas and on the differential in charging were very much picked up.

I of course understand the concerns expressed by the noble Baroness, Lady McIntosh, about the grid. No one really likes grid pylons but we have to do something about the grid network—we have to invest in it. I take her point about local incentives. I recently went to Biggleswade solar farm in Bedfordshire, where the company makes a contribution to local community projects each year—churches and things like that—which goes down well. We are looking at that issue.

This has been an excellent debate. I thank the noble Lord, Lord Lilley, for his willingness to raise sometimes challenging issues. We believe we are delivering on our manifesto commitment. We need decisive action on both climate change and energy security. We will have a big positive impact on jobs and prosperity. We must press on and we will.