Electricity and Gas (Energy Company Obligation) Order 2022
Lord McNicol of West Kilbride Excerpts(1 year, 10 months ago)
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Lord Teverson (LD)
My Lords, there have been a few changes in the Government over the past week and it is excellent to see the Minister still here. I took the opportunity to look up his responsibilities, because there has been a bit of a shuffle in BEIS and I was even more delighted to see that he has responsibility specifically for energy efficiency—I think he had it before; the climate change side has moved slightly. I am delighted that energy efficiency remains with the ministerial purview of this House.
I also welcome the fact that the Government tabled an amendment on Report to the UK Infrastructure Bank Bill to include energy efficiency specifically as part of the bank’s remit in terms of its investment. I think the whole House very much welcomed that change. They could have done one or two other things, but at least we had that.
On ECO and the prior schemes, I read a report by the Energy & Climate Intelligence Unit—ECIU. I am on its advisory board and it is one of the better of these think tanks. It was interesting that the report reckoned that between 2009 and 2019 some 6 million homes had been improved to band C in energy performance. It estimated that that amounted to a 20% cut in their gas demand, which meant that on an annual basis now those households were saving £1.2 billion. Clearly, that is significant.
Those figures are from 2009 to 2019 and the ECO scheme came in in 2013, but the number of applications dived hugely over the past eight years and only now has started to tick upwards again. It was interesting to read in the Explanatory Memorandum that some 2.4 million homes had made applications to the ECO scheme, but in 2020 we still had 3.5 million homes in energy poverty. Think about that. There were applications for 2.4 million homes but at the end of that process there were still 3.5 million homes in fuel poverty—and that was before the huge price rises in energy that we are now seeing.
The Minister mentioned 450,000 applications and taking them out of fuel poverty. There is no chance of taking homes out of fuel poverty at the moment. We are going to add to that because of the energy prices that there are.
I know this from my own experience. At the beginning of this year I paid a monthly standing order to Octopus Energy of £212. This month I paid £355. That is not my only energy cost, but I admit that, for me, it is not a crisis. But, my goodness, for people outside that is an horrific increase in their energy bills.
I suppose I just want to make the same old argument again that there is so much to be gained from these programmes, as that statistic from the ECIU suggested, but at the moment they are only a pinprick—a drop in the ocean—in terms of what we actually need. Of course, it is easy to say that if we were not starting from where we are now but from before George Osborne as Chancellor of the Exchequer massacred the various energy efficiency schemes’ futures in terms of new homes and those sorts of applications, my goodness we would be in a better position than we are now. We are in a position where the Government are spending £37 billion, I think it is, on putting right the cost of living crisis, much of which is driven by energy costs, yet all of that is just to stand still, and I am not the first person to say that. If only we were managing to put that money into these sorts of schemes, my goodness those fuel poverty numbers would start to come down rather than inevitably skyrocketing, as they will. That is my comment on this. As the noble Lord, Lord Whitty, said, how can one argue that this is an improvement? As I said, it is a drop in the ocean, given what we need to do.
My question follows on from what the noble Lord, Lord Grantchester, said. One of the lessons from the disaster of the green homes grant was that the bit that involved local authorities actually worked. I am interested to understand how our local authorities, which are so much better at understanding their local communities and the issue of fuel poverty, will be tied in to the way the ECO4 scheme is delivered.
Lord McNicol of West Kilbride (Lab)
My Lords, like many others, I thank the Minister for his explanation of what this order achieves: introducing the latest energy company obligation, ECO4, replacing ECO3, which came to an end in March. I start by echoing what the noble Baroness, Lady McIntosh of Pickering, said, about the effects of the delay. Has any assessment or estimate been made of the effects of the delay between 1 April and the new regulations coming in?
As we heard, the order will place a cost-reduction obligation on gas and electricity suppliers that exceed domestic supply thresholds, requiring them to promote the installation of energy efficiency and heating measures to reduce the cost to low-income and vulnerable households. Unlike ECO1 and ECO2, which were centrally funded, I understand that this obligation to fund and finance again falls on the energy companies using their own resources, as was the case with ECO3.
If this understanding is correct, can the Minister confirm what assessment was made of the difference in impact between these two approaches, given that we now have examples of both? Given that energy suppliers will incur these costs, which will need to be recouped, we can expect them to be passed on directly to customers through energy bills. As others have asked, is this really the best approach at this time, given the energy crisis? Will any steps be taken to encourage or even obligate energy companies not to pass costs on to customers who can ill afford them at this time? In reality, if they are passed on, it will be the consumers and customers who will be paying for the upgrades of their own homes.
As the Minister outlined, the objectives of this order are to help alleviate fuel poverty, accelerate progress to meet fuel poverty targets, contribute to carbon reduction, reduce the costs of meeting the renewable energy target and encourage innovation. All of these are welcome, as is the targeting of vulnerable and low-income households. If the target we have heard about of annual bill savings of £224 million is reached, this will make a real difference.
TRIPS Agreement: Vaccines
Lord McNicol of West Kilbride Excerpts(1 year, 10 months ago)
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Lord Callanan (Con)
The position is as I repeated to my noble friend Lady Sugg: all vaccine dose donations will be reported as overseas development assistance and be included within the 0.5%. I think the noble Lord is being very unfair about the UK’s support. We are in fact a leader of international support in response to the pandemic; we have spent more than £2.1 billion since 2020 to address its impacts and that includes up to £829 million to support the global development, manufacture and delivery of vaccines, treatments and tests in lower-income countries.
Lord McNicol of West Kilbride (Lab)
My Lord, the deal agreed at the WTO conference obviously fell short of what was initially proposed. Even after 18 months, discussions on extending the waiver to treatments and tests have been postponed again by another six months. Surely sharing clinical data and research on vaccine production is in our own self-interest, but a poor substitute would be having a relationship with or speaking to the pharmaceutical industry. Have Her Majesty’s Government had any representations with British pharmaceutical corporations to try to bypass the obstacles that exist?
Lord Callanan (Con)
The UK Government have regular meetings with pharmaceutical companies. Of course we want to see the maximum amount of support offered to lower-income countries. I just outlined the support we are providing, but we agreed at the meeting to a consensus-based decision that does not waive IP rights but streamlines the processes for developing countries using compulsory licensing to produce and export Covid-19 vaccines.
Post Office: Horizon Compensation
Lord McNicol of West Kilbride Excerpts(1 year, 10 months ago)
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Lord McNicol of West Kilbride (Lab)
My Lords, I thank the Minister for repeating the Statement and in anticipation of answering my questions. He has often been on the right side of this debate, and I thank him for that. The biggest and most frequent criticisms that your Lordships’ House has had are threefold—some have been answered—the time taken to deliver compensation, who gets it, and the levels and amounts. Many of those issues have now been resolved over previous months and with this Statement. March’s announcement that 555 sub-postmasters would receive the compensation that they were entitled to was welcome, as is today’s further announcement confirming a £19.5 million interim compensation package.
However, it is frustrating that it has taken so long to reach this point, when what was needed to be done has been clear and obvious for many years. I am sure that we all agree that the victims of this scandal have been made to endure this stressful uncertainty for far too long.
It is clear that the positive resolution we have now reached is thanks to the tireless work of campaigners both inside and outside this place. That includes, as ever from this place, the noble Lord, Lord Arbuthnot, and from the other place, Kevan Jones. Both have done a tremendous job in fighting this injustice. To be fair, the Minister here and Minister Scully have acted where their predecessors have failed to.
We all know the history of this case, so I will not rehearse the arguments. It is well-documented, both here in Parliament and across the media. We all hope that this sad episode will drive lasting change. The shame of this miscarriage will, rightly, be felt across government for many years to come.
I have a few questions for the Minister; he has touched on some already, and I am looking for more details on others. Can he provide a timescale for when all compensation payments will be made? Will the Minister confirm that the compensation will not affect the Post Office’s core funding, its day-to-day operations or its viability in any way, given the vital role that it performs in many, if not all, our communities? The Minister knows that, across this House, we have called for those involved to be held accountable. Can he update the House—he has a little already—on the ongoing investigations, specifically into Fujitsu and others involved in the technology that led to this failure? Has Fujitsu been sanctioned? Have any of its other contracts been re-evaluated, checked or looked at?
It is not just those external to government. The Minister has previously committed to hold those responsible to account—by that, I mean the Post Office board. Can the Government confirm that the inquiry will extend to the directors of the Post Office, including those placed there by the department—those who wrongly sanctioned legal action? While affected postmasters have lost thousands in legal costs, this is far from all they have lost. The Minister touched on the non-pecuniary damages, but I wonder if he could say a little more. The financials have been restored but, as he and the Statement said, many people were affected in many ways other than financial.
Last year’s historical shortfall scheme for non-GLO postmasters included interim payments, which are urgently needed both for those living in poverty and to start bringing closure to this ordeal. I think the Minister said he expects the payments to start within two weeks, but can he confirm that this will be the case, and will they cover all those affected?
To take a step back, in his High Court judgment in the Horizon IT systems case, Justice Fraser stated that the denial by the Post Office
“amounts to the 21st century equivalent of maintaining that the earth is flat.”
His judgment into this scheme went on to state that the Post Office showed
“the most dreadful complacency, and total lack of interest in investigating these serious issues”.
Will the Post Office now introduce an independent component when conducting prosecutions so that if there are any future prosecutions in other areas, there will be an independent component before taking them to the next stage?
This whole ordeal around the wrongful prosecution of sub-postmasters has caused a huge waste of public funds and time, as well as a huge deal of mental anguish to those wrongfully prosecuted. Can the Government ensure that such a huge level of carelessness and complacency is never repeated so that we can avoid a further waste of public funds, as well as the stress caused by this ordeal?
All sides of this House are rightly united and outraged at what the sub-postmasters and sub-postmistresses experienced and the injustices they suffered for almost 25 years. Lives have been unjustly destroyed, and jobs lost. Some have been imprisoned and others lost their business, and many had the prospect of having a conviction hanging over them. Saddest of all, some did not live to see justice finally restored.
Contracts for Difference (Allocation) and Electricity Market Reform (General) (Amendment) Regulations 2022
Lord McNicol of West Kilbride Excerpts(1 year, 10 months ago)
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Lord McNicol of West Kilbride (Lab)
My Lords, I thank the Minister for his introduction. I similarly had only three questions arising from this SI—two of which the noble Lord, Lord Lilley, asked and the final one has also just been asked. This is a very technical SI, which we support, and I will just pick up on a couple of points.
The instrument will amend the validity period of the supply chain plan statement—one point that the noble Lord, Lord Lilley, raised—so that it is valid for nine months, not 12 months, from the date of notice given by the Secretary of State. However, it goes on to say:
“The Secretary of State will … be able to determine a longer period if in their opinion there is a compelling reason for the period to be longer”.
Can the Minister share what he would consider to be “compelling reasons” for why it would be extended past nine months, if we are moving it back from 12 months? The noble Lord, Lord Lilley, touched on the second point about the qualifying of the impact under the new commitments; I will leave the Minister to answer that question.
On the supply chain, Regulation 2(3) amends the requirement to provide a supply chain plan statement so that it applies to all floating offshore wind projects. This was the point just made: the current 300-megawatt threshold generating capacity will continue to apply to all other eligible projects that are not floating offshore wind projects. Have the Government given any consideration to removing this threshold for other projects to encourage SCPs?
Finally, I understand that the consultation on the new supply chain plan questionnaire—the condensed version—closes tomorrow. Do any of the changes that would come under that affect this SI and does closing the consultation after the Grand Committee agrees this SI have any consequences?
Lord Callanan (Con)
I thank all the three noble Lords for their contributions. They were raising wider concerns about how the process works; I do not think anybody objected to the SI itself, so I thank Members for their support. The points that were raised demonstrate the need for these regulations—they are technical changes—and the support for introducing them.
As I said at the start of the debate, these changes are essential to ensure that the next CfD allocation round, which will be the first annual one, can best support something we all want to see: an increase in the pace of renewable development and the deployment needed to help us achieve our net-zero ambitions and get the price of electricity down in the longer term. At the same time, they help to achieve our legal net-zero commitments.
My noble friend Lord Lilley was right to point out the need to consider the likely cost to consumers, the impacts on energy security, et cetera. These regulations must be made now, ahead of the next CfD allocation round, which is planned for March next year, as I said, so that the developers have certainty as to the legislative framework for the next round.
Dealing with some of the questions raised, my noble friend Lord Lilley asked me to explain how a shorter validity acts as an incentive and what happens after the supply chain lapses. He also asked whether supply chain plans are published. The answer is that they are. They set out how they will improve the capacity of the supply chain. The noble Lord, Lord Teverson, touched on the reason and I need to be slightly careful here. We are endeavouring to ensure that—how should I put this?—as much of the supply chain as possible is located in the United Kingdom, without breaching our legal obligations, which nobody would want to see us do. We are subject to legal action from the European Commission in the WTO, at the moment.
My noble friend Lord Lilley also asked what the Government are doing to stop CfD generators delaying their start dates so they can benefit from high energy prices. First, the vast majority of operational CfD projects are, happily, paying back into the system, due to the current high energy prices. I set out those figures in a letter to the noble Lord, Lord Teverson. Subject to his agreement, I would be happy to send a copy to my noble friend.
In essence, in April this year, the Low Carbon Contracts Company, which is responsible for administering this system, returned £108.3 million to GB suppliers in respect of payments made by generators since last autumn. However, my noble friend is correct, and the Government are aware of a small number of projects that have delayed their contract start dates to try to benefit from current high wholesale prices. Legally, CfDs are private law contracts between the Low Carbon Contracts Company, the CfD counterparty and generators. The Government are not legally a counterparty to those contracts. However, we have raised the matter with the industry and made it clear that, in our view, this practice is not within the spirit of the scheme, which is intended to deliver benefits to both consumers and developers. While operating on commercial terms, these developers will not receive CfD payments. We are examining possible changes to the scheme to prevent future CfD projects acting in this way. While this practice is regrettable, it is important to remember that CfDs have played a significant role in massively bringing down the cost of offshore wind in recent years.
My noble friend also asked about capacity. The CfD scheme currently supports 16 gigawatts of new capacity, of which 13 gigawatts is offshore wind. Only two projects, totalling 1.4 gigawatts, have delayed their contract start dates in order to sell their electricity on the open market.
Turning to the slightly problematic area which concerns the noble Lord, Lord Teverson, reflecting the concern of the EU that we are breaching WTO rules, my legalistic response to this is that in the supply chain plans we do not require developers to use UK content. The supply chain plans are there to encourage them to invest in creating competitive, capable and efficient supply chains which are, of course, necessary for us to deliver net zero, taking into account our national obligations.
Construction Contracts (England) Exclusion Order 2022
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Lord Callanan (Con)
Yes—very good. There is a pipeline of potential projects that could adopt this model, and the Government believe that its use will deliver benefits to consumers. Through increasing competition in the delivery of strategic infrastructure, it will ensure that the cost of this infrastructure is market tested and therefore fair for water and sewerage customers. I apologise for the complicated nature of the explanation and I commend this instrument to the House.
Lord Fox (LD)
As the Minister knows, I am no lawyer—perhaps I should have taken a law degree before attempting this statutory instrument. I note that it is not just the European Union that can amass red tape; we seem to be doing it very well on our own, so I am not sure it can refer us to the WTO for competition.
This is a very complex model. I was caught by the idea that we appear to have been progressing without it for a while. In a sense, is this closing a loophole that has been spotted, or does this reflect a trend in how the market is going about delivering these projects? What drove the decision to table this statutory instrument now? In other words, what has caused this to happen now when it clearly could have happened some time before or in future?
In passing, the Minister mentioned benefits to consumers. I think he outlined that there would be some sort of competitive tendering process, and therefore the price of a particular project would go down in cost. I am interested in the very sharp end of the consumer experience—the connection and that kind of thing. I assume that this applies to that as well as to the larger projects. If it does not, how will a new consumer attempting to join the system experience it? As I understand it, at the moment they are given a “take it or leave it” price by the water supplier. Does that continue to be the case? Will there be an opportunity for consumers to drive down the cost to them of an individual connection or is this focusing only on much larger projects?
The other point is how this flows through the supply chain. The Minister mentioned that the tier 1 contractors are potentially liable to be most affected. However, this marks a change right down through the chain to tiers 2, 3 and others. I would be interested to know how low down their tier structure the department intends to bring suppliers up to speed on how they address their role in this change in the supply chain. Other than that, I think I welcome this and certainly look forward to the Minister’s answers.
Lord McNicol of West Kilbride (Lab)
My Lords, I again thank the Minister for his introduction to another very technical SI. Until his introduction, the only real question I had was around the consultation. He touched on it at the end of his introduction, but I could not find any of the details of the responses to it online. That is probably me, but could he say a little more about the feedback received as part of the consultation?
Following on from the themes of the general public and who will benefit from this SI, the Minister said there were some concerns and worries from the first-tier subcontractors. I think we all agree that the removal of “pay when paid” was good. I worry a little, if we are bringing back special circumstances which in reality are “pay when paid”—although under slightly different processes in terms of certificates and completions—whether we are opening it up. Is the Minister worried about this at all or is the SI tight enough to prevent “pay when paid” returning to the construction sector?
The final point has been touched on by the noble Lords, Lord Berkeley and Lord Fox, and is about fair competition and the general public. Does the Minister believe there will be any increase in price or unitary charge for the general public in this SI? With that, I will leave my questions.
Lord Callanan (Con)
In essence, the noble Lord is right. The regulation exemption will apply to the main, overall contract, but the separate contracts that will exist lower down the supply chain with SMEs will still be subject to the provisions of the construction Act. I suppose the answer to the noble Lord’s question is ultimately it is for the main supplier to price in the risk. Of course, if it wants to be paid, it needs to deliver on the contract and on the service that it is being contracted to provide. As in all these things, it is about providing the right incentives and fair value for the taxpayer or, in this case, the water bill payer, and for the main contractor to deliver the project as efficiently as possible. Ultimately contracts between the lower-tier levels and smaller SMEs are still subject to the provisions and they will need to be paid in any case.
In response to the question asked by the noble Lord, Lord McNicol, this instrument is limited to a specific procurement model that Ofwat wants to use in the regulated water and sewerage sector. He referred to the consultation. That was held through individual and group meetings with the relevant construction industry and with water sector stakeholders and was undertaken over a two-month period.
I was asked a question on pay when paid.
Lord McNicol of West Kilbride (Lab)
I understand when the consultation took place. The bit I could not find when I was reading the statutory instrument was the response to the consultation and whether that has been published on the website or shared at all, because I could not find any information on the consultation. I knew exactly when it was and what happened.
Lord Callanan (Con)
It was not published, but I would be happy to send the noble Lord a letter with the details of the consultation in question.
I was asked a question on pay when paid. Again, it is quite technical. DPC first-tier subcontracts are not excluded from Section 113 of the Housing Grants, Construction and Regeneration Act 1996 under this statutory instrument. This means that pay-when-paid clauses are not permitted. Instead, payments will be made according to an agreed schedule for the delivery of the project.
The basis of DPC is to provide better value for money for customers, ultimately, and bills are expected to be lower than they would have been if the schemes were delivered by regulated water companies via the traditional business-as-usual model by which companies’ prices are set. The first-tier contractors are expected to be part of the highest-level CAP and they are responsible for funding the delivery of the schemes under those contracts.
I hope that I have been able to satisfy the Committee on the questions that were asked—obviously not.
India: Cereals Export Ban
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Lord Grimstone of Boscobel (Con)
My Lords, as I said earlier, only a very small amount indeed of Indian wheat comes to the UK. Indeed, the majority of production of wheat in India contributes to the domestic market. India produced 109 million tonnes of wheat last year, and of that no less than 90 million was consumed domestically.
Lord McNicol of West Kilbride (Lab)
My Lords, since the Russian invasion of Ukraine, the number of countries imposing export restrictions on food has climbed from three to 16. With Russia and Ukraine accounting for 29% of global wheat exports, cereal prices have jumped another 6% following India’s announcement. The Minister is right that the impact on the UK will be negligible, but this is on top of a cost of living crisis. What steps are Her Majesty’s Government taking to alleviate that crisis and to mitigate the current vulnerability of food shortages and food cost spikes?
Contracts for Difference (Miscellaneous Amendments) Regulations 2022
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Lord McNicol of West Kilbride (Lab)
My Lords, although it is a little tangential, I declare my interest as set out in the register as a commissioner on the UK Hydrogen Policy Commission, which is within the same field though not directly relevant to this SI.
First, as other noble Lords have done, I thank the Minister for his explanation of the regulations before the Committee. As we have heard, they make a few minor but important amendments to two previous sets of regulations—the eligible generator regulations and the allocation regulations. Before I dive into those, I reiterate our support for the continuation of contracts for difference as a method of securing energy capacity while ensuring that developers, government and customers can be confident in the security of long-term, high-cost and high-investment projects.
Regulation 2 in the draft regulations ensures that non-pipeline transport methods are included within the definition of complete CCS systems. My reading of the 2014 eligible generator regulations, and that of many who responded to the consultation, certainly did not appear to exclude this system. I am not convinced how necessary it is. I agree that non-pipeline transport of carbon dioxide is essential to decarbonised projects outside the clusters. As the noble Lord, Lord Teverson, said, we would hope that transport around and inside the clusters would be by pipeline.
The noble Lord, Lord Teverson, presumed that this would be on trucks. My presumption was that it would be on rails. Again, it would be interesting if the Minister had any information from the department about how non-pipeline transport would take place, as there is an environmental difference between rail and road transport.
Regulation 2 also widens the criteria for carrying out generating activity to include alterations of existing generation stations to connect them to a CCS system. As other noble Lords have said, this makes perfect sense. I agree that it is an important step to help retrofit a station to give access to the benefits of contracts for difference.
That change is appropriately repeated, in Regulation 3, for the allocation regulations, but the main thrust of Regulation 3 is to allow contemplation of contracts that do not specify a strike price and reference price, in line with the new payment method under the DPA business model. Instead, the DPA business model will implement an availability payment for low-carbon generation capacity and a variable payment, which links the new power CCS plants—again, there is a long time lead-in here, since we are hoping they will be in operation by 2030, so perhaps the Minister can confirm the dates for the completion of the CCS plants—with an unabated reference plant. This is said to incentivise availability and enable more flexible operation. Of course, it is right to ensure that the regulations are updated correctly, to allow for these new developments to take place, but perhaps the Minister could elaborate somewhat on how these changes will incentivise availability and when we can expect to reap the benefits from the new power CCS plants.
The noble Baroness, Lady McIntosh, has already picked up on—and I am sure that the Minister has read with excitement—the Secondary Legislation Scrutiny Committee’s 37th report. In paragraphs 21 to 23, as has been stated, the committee was critical. To be fair, all our interventions have been quite detailed. In the produced documentation, I have been able to understand clearly that it is of importance. We have already had from the department an Explanatory Memorandum on that. I hope that, before all future debates, these points raised on page 9 of the committee’s report will be taken into consideration.
Lord Callanan (Con)
First, I thank my noble friend Lady McIntosh, and the noble Lords, Lord Teverson and Lord McNicol, for their constructive points and comments. Let me start by emphasising that the changes contained in these regulations are essential to enable the award of power carbon capture and storage contracts. The Government are committed to reaching net zero and, of course, to decarbonising our electricity system. All noble Lords will be aware that the Climate Change Committee has described CCS as a necessity and not an option to help us on the road and transition to net zero. Therefore, CCUS will be essential to meeting the UK’s 2050 net-zero target—I think that all three speakers agreed with that point.
Decarbonising the power sector has so far led the UK’s efforts to reduce greenhouse gas emissions. Thirty years ago, fossil fuels provided nearly 80% of the UK’s electricity supply. In 1990, electricity generation accounted for about 25% of total UK emissions, but by 2018 that was down to only 15% of total UK emissions. Today, I am pleased to say that the country gets over half of its power from low-carbon technologies, and the majority of those are renewable.
We can be confident that renewables will continue to play a key and increasing role in our generation mix on the overall journey to net zero, to decarbonise while maintaining security of supply, and keeping costs low. But for when the wind is not blowing and when the sun is not shining—something that applies particularly to the homeland of the noble Lord, Lord McNicol—we will need to balance renewable variable against demand. To do that, of course, we need system flexibility and energy storage, and we need non-weather dependent low-carbon power generation. That is why we consider that thermal power with carbon capture and storage is one technology that can provide that at scale. Therefore, carbon capture storage technologies will be important for the trajectory to achieving our 2050 net-zero target, and they will play a vital role in levelling up the economy, supporting the low-carbon economic transformation in our industrial regions and helping to create new high-value jobs.
On the specific points that were raised, starting with my noble friend Lady McIntosh, I am pleased to say that these regulations will indeed facilitate the rollout of the Government’s CCUS programme but of course will not bring projects forward in themselves. However, I am pleased to say that we have also seen significant interest in the programme, particularly from the east-coast cluster that my noble friend mentioned. We will seek to bring forward at least one power CCUS plant in the mid-2020s. This will be achieved through the CCUS cluster sequencing process and is subject to the outcome of that process, including, as always, value for money and affordability considerations. I am sure that my noble friend would agree with that.
Around half of our demand for gas is met through domestic supplies, but in meeting net zero by 2050 we may still use a quarter of the gas that we use now. So, to help to reduce our reliance on fossil fuels, we have to fully utilise the great North Sea reserve: we have to use the empty caverns that we have created for CO2 storage, and we must bring through hydrogen to use as an alternative to natural gas and help to use our offshore expertise to support our offshore wind sector. As a result of those plans, the North Sea will still be a foundation of our energy security, but of course we will have reduced our gas consumption by over 40% by 2030.
As clarified by the noble Lord, Lord Teverson, who was doing my job for me, the Explanatory Memorandum was revised on 5 May with in-depth footnotes to explain the acronyms and technical terms. I apologise if it was not clear; obviously, it is a complicated subject.
On the points made by the noble Lord, Lord Teverson, we consider that the capacity for T&S networks to be able to accept CO2 from dispersed sites and from international sources, transported by ship, road or rail—which would be non-pipeline transportation—may be important for our long-term objectives of achieving our carbon budgets and net zero, so we do not want to exclude power CCS projects that can transport and store CO2 by non-pipeline transport. We will need significant volumes of new-build, low-carbon capacity to meet growing electricity demand and to take the place of retiring capacity. To complement expanding intermittent renewables, it is important that some of this capacity is flexible and can operate for extended periods when renewable output is lower.
Our existing gas generation capacity is ageing. Most of it was built in the 1990s, during the so-called dash for gas. Advances in gas turbine technology mean that a purpose-built, modern, new-build gas-fired power station with CCUS would be more efficient than an older design retrofitted with CCUS technology. However, utilising existing assets can of course improve value for money in some cases, and to decarbonise our electricity system in line with the targets of the fifth and sixth carbon budgets, we consider that we will have to use existing generation as well as new-build capacity, both of which of course would need to be abated.
On the capacity market, CCUS requires more support for capacity given the co-ordination problem with infrastructure yet to be built, and the DPA incentivises investment to bring forward low-carbon generation capacity. The availability payment also acts as a way to incentivise those power CCUS projects and helps to maintain high capture rates throughout the DPA. I will come back to the noble Lord in writing on his question regarding the “payback” from CfDs for departments, but I think the answer will revolve around the fact that the money goes into Ofgem and is therefore used to offset other CfD payments. I certainly do not think that any of it appears either in the BEIS or Treasury budgets, but I will come back to the noble Lord and confirm the details of that.
On the points raised by the noble Lord, Lord McNicol, we wanted to ensure that non-pipeline transport was explicitly and unambiguously included in these regulations, and there is certainly no presumption in favour of road transport. Indeed, rail or shipping may also be covered and are probably more likely forms of transport. To take one pertinent example, at the moment Norway is currently shipping CO2. I hope that clarifies the point for the noble Lord.
To close, I underline once more that these regulations are a vital part of the UK’s efforts to reach net zero and to decarbonise our electricity system. With that, I commend these draft regulations to the Committee.
Queen’s Speech
Lord McNicol of West Kilbride Excerpts(1 year, 11 months ago)
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Lord McNicol of West Kilbride (Lab)
My Lords, the economy, energy and the environment are three of the biggest challenges that we as a country now face. It is no wonder that so many from across your Lordships’ House wanted to contribute to this debate.
I start by thanking all those who have spoken. There have been many thoughtful and thought-provoking speeches—your Lordships’ House at its best. I particularly thank my noble friend Lady Jones of Whitchurch for her opening contribution, in which she clearly outlined the fundamental failure of this Queen’s Speech when she said:
“We know that what really concern people are the cost of living crisis, the huge rise in energy bills, lengthening NHS waiting lists and the impact of climate change on our future well-being. However, instead of a programme to address these very real concerns, the Government have chosen to pick fabricated fights to please a dwindling group of core supporters.”
I also congratulate the right reverend Prelate the Bishop of St Edmundsbury and Ipswich on his maiden speech and offer these Benches’ support in addressing his priority—the challenges facing young people in towns and villages—which we are more than happy to support.
The Queen’s Speech contained 39 draft Bills, of which two sit in the Treasury, two in Defra and two and a half in BEIS. It is not just the lack of Bills that worries me but the content of them. They feel woefully inadequate to deal with today’s challenges across the economy, environment and energy. Inflation is currently at a 30-year high, with the potential for it to peak above 10%. An environmental crisis is rapidly approaching and looming, while millions of families are facing the catastrophe of soaring energy bills. My question to the Minister is this: does he really believe that the Bills as set out in the Queen’s Speech address these challenges? If he does, which is what I expect him to say, can he outline how the Treasury, BEIS and Defra Bills will actually deliver on that? Will he also answer some of the questions from his own Benches, specifically those from the noble Lord, Lord Forsyth?
I start with the economy. Over the last five hours of this debate, we have heard speech after speech and statistic after statistic on how the Government are failing on the economy—and that is just from the Government’s own Benches. This Government have overseen a decade of low growth. The IMF has predicted that, in 2023, the UK will slump to the bottom of the G7 league table. In March, the British Chambers of Commerce downgraded its own growth forecast for 2022 by half a per cent on its previous estimates, reflecting a deteriorating outlook for consumer spending and a weaker than expected rebound in business investment. Most people are experiencing real-terms pay cuts this year and are likely to do so for the next few years. As my noble friend Lord Chandos said in addressing these issues, it is painful for many but it is devastating for the poorest.
The Bank of England has increased the base interest rate from 0.75% to 1% in order to counter inflationary pressures, but this will further squeeze household incomes. The Bank of England has warned that, for many years, the cost of living crisis will feel more like a recession. While the Government like to talk of record numbers of vacancies, many businesses are finding that they are simply unable to recruit the staff that they need, holding back their potential and that of the wider economy. Rather than presenting a coherent set of measures to tackle the cost of living crisis and rebalance the economy, the Government’s answer to poor economic performance appears to be deregulation of financial services, which could pave the way for a repeat of past financial crises.
The financial services and markets Bill should be about how financial systems work for the people, by prioritising financial inclusion, green investment and the regulation of emerging markets such as those relating to cryptocurrencies—but I fear it will not. These Benches welcome the UK innovation bank being put on a statutory footing, but there needs to be greater and more consistent focus on green investment.
The Queen’s Speech did nothing to revisit social security uprating, as my noble friend Lord Wood and many others outlined. That is despite the Prime Minister committing to consider a more generous increase when he appeared before the Commons Liaison Committee earlier this year. As the noble Lord, Lord Bridges, said, the Government say one thing and do another. A variety of charities are warning of an exceptional growth in poverty unless the Government ensure that social security payments keep pace with inflation. In response to the Queen’s Speech, the Trussell Trust noted that, for many families, life is
“no longer about living but surviving”.
For millions of families facing the catastrophe of soaring energy costs, the Government’s energy Bill is hopelessly inadequate. There is nothing to tackle the cost of living crisis, to bring forward energy efficiency measures or to ensure the green energy sprint that could bring down bills. The current energy crisis is a product of failed energy policies. British people are paying the price of higher energy bills now, because of the Government’s failure, over the last decade, to properly regulate the energy market or to develop renewables. Fortunately, we have seen some progress on nuclear power and will see more nuclear build, but more needs to be invested in renewables.
The Government could, today, have introduced greater support for working families and pensioners facing these rising bills, funded by a windfall tax on oil and gas companies. Nor does the Bill contain the measures desperately needed to end the ban on onshore wind and to build a national mission of home insulation. A decade of failed energy policy has left energy bills too high and the UK’s energy system just too weak. Labour would have brought forward an ambitious energy Bill that took real action to bring down energy bills, accelerate the green energy sprint and strengthen the UK’s energy security.
Finally, on the environment, the Covid pandemic served to highlight the importance of open and outdoor spaces. This Session of Parliament will see us debate a number of vital environmental targets, but, as the noble Baroness, Lady Hayman, rightly highlighted, this will be done by secondary legislation enabled by the Environment Act. The process underpinning this has been chaotic from the start. That, coupled with a lack of environmental content in the Queen’s Speech, does not instil in us sufficient belief that the Government have the ambition to solve this crisis. Given the severity of the climate crisis and the level of public interest in it, it is disappointing that the Government are not doubling down on commitments relating to net zero—an opportunity missed. The Government seem to have chosen to devote more time and political capital to stopping climate-related direct action from protesters than to solving the issues they are raising.
In conclusion, this Queen’s Speech feels light and full of rhetoric, with little ambition. To quote the noble Lord, Lord Tugendhat, there is an “absence of urgency”. Where is the high-skill, high-tech, high-wage Britain of the 21st century? Where is the plan to rebalance and rebuild our economy? Where is the plan to reduce energy bills for consumers and businesses? And where is the promised employment rights Bill? The Government simply do not have the answers to the challenges our country now faces.
Tomorrow, Labour will give the Government another chance to support a windfall tax. As we have heard, there is much support for this across the Floor of the House. Let us hope the Government take that opportunity.
Energy Security Strategy
Lord McNicol of West Kilbride Excerpts(2 years, 1 month ago)
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Lord Callanan (Con)
There were a number of questions from the noble Baroness. I think she may have unfairly maligned my noble friend Lord Ashton. I am not aware that he has any strong views on the subject. I am sure he will communicate with me if he does, but he has not so far. The strategy will be published later today, and I apologise that the noble Baroness has not had a chance to look at it so far.
With regard to her other questions, we are rolling out the development and formation of low-carbon sources of power, be they nuclear or offshore wind, and we are going to go further on onshore wind. I know it is a subject that the noble Baroness feels passionately about. We must do so in full recognition of the concerns of many local communities. We want to take people with us when we do that, so we will seek a number of pilots to take those policies forward.
We are already spending a lot of money on energy efficiency programmes. I have outlined them numerous times in this House before, but I would be happy to do so again. It would have been good to go further but, regrettably, that was not possible in this case.
Lord McNicol of West Kilbride (Lab)
My Lords, I think there may be a theme to these questions. The Minister is well aware of these Benches’ support for nuclear and offshore wind. However, onshore wind and solar power are the electricity sources that can reduce our reliance on Russian gas the fastest, given their short construction times. Bottlenecks in planning can be resolved through changes to regulation, and doing so would unlock new power to eliminate Russian gas from our energy mix. Yet our understanding is that specific targets for onshore wind, which is the cheapest and fastest, have disappeared or been removed. Could the Minister explain why? Surely it is not possible that the Government are once again prioritising internal party politics rather than the national interest.
Lord Callanan (Con)
There is a lot of good news in this strategy for those who believe in the development and deployment of low-carbon power: the expansion of nuclear and of offshore wind, further developments in hydrogen, et cetera. As I said, in terms of onshore wind, we will be looking to develop a limited range of partnerships with supportive local communities. I should add that this is in England; Scotland and Wales have their own separate planning powers. We will look to develop partnerships with a limited range of supportive communities to try to agree further deployment of onshore wind.
Gazprom Energy
Lord McNicol of West Kilbride Excerpts(2 years, 1 month ago)
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Lord Callanan (Con)
We keep these matters under constant review and the sanctions regime is constantly evolving. The noble Lord will be aware that the Foreign Secretary today sanctioned another 65 new bodies, and we have now sanctioned over 1,000 individuals and businesses since the invasion started.
Lord McNicol of West Kilbride (Lab)
Many local authorities, NHS trusts and other public bodies have gas supply contracts with Gazprom Energy. What support is Her Majesty’s Government giving to authorities and trusts that wish to break their contracts with Gazprom, and what consideration has the Government given to changing public procurement rules to allow that?
Lord Callanan (Con)
The noble Lord makes an important point. Gazprom Energy supplies about 20% of the UK business market, as he correctly observes, including many schools and hospitals, and so on. It would not be right for the Government to interfere in individual contractual decisions but for those that choose to break their contracts, the Crown Commercial Service stands by to support them in securing their next energy contract.