Carbon Budget 6

Lord Moynihan Excerpts

Tuesday 3rd March 2026 Lords Chamber

[Lord Whitehead (Lab)]

On EV rollout, the noble Earl will be aware of what has been put in place for ending internal combustion engine use in vehicles and the phase-out of hybrid by 2035. The rollout of electric vehicles continues unabated, and the number of electric vehicle charging points in this country, currently at more than 80,000, is well on target for what we think necessary over the next period to ensure that the fleet works as well as it should.

[Lord Moynihan (Con)]

Does the Minister accept that in the UKCS we have a far smaller carbon footprint for our own North Sea gas than the full life-cycle emissions of imported LNG from Qatar and the United States? Given that the Government’s energy security is challenged with growing dependency over the next 10 years on LNG ships passing through the Strait of Hormuz, why are we the only country in the world that is failing to accelerate development of our own gas reserves, in the North Sea, for energy security and environmental objectives so that we can deliver firm and affordable power to all our high-energy-use industries, which currently face crushing energy costs, four times higher than in the United States?

[Lord Whitehead (Lab)]

I think the noble Lord knows that, even if we were substantially to increase the footprint of gas production in the North Sea, that would not come on stream for many years. Secondly, gas is traded on international markets at a particular price, so it would make no difference to energy costs in the UK, because the gas would go to one of the three international gas markets and bringing down that price would be beyond the control of the UK—unless we introduced draconian measures to prevent the price discovery of the particular levels of gas being undertaken on international basis, which I am sure the noble Lord would not be happy with.

Fire and Rescue Services: Clean Energy Projects

Lord Moynihan Excerpts

Thursday 26th February 2026 Lords Chamber

[Lord Whitehead (Lab)]

I think that we should get this into some proportion. As I have said, the number of battery fires over the last five years is four. The percentage of fires that you might encounter in an industrial premises or commercial premises is higher than the proportion per thousand of battery fires. Battery fires stand within the general problem of fires across industry. As far as the extinction of those fires is concerned, there is protocol already in the fire service about how to deal with those particular fires. It is a process of enabling burnout, so that the battery does not self-reignite. The noble Lord is correct to say that there are issues relating to battery fires, particularly the ability of that battery fire to reignite itself even in the absence of oxygen. There is a protocol now to surround the fire with safety measures and allow it to burn out. That, as far as the fire service chiefs are concerned, is a perfectly adequate and safe response to those fires.

[Lord Moynihan (Con)]

My Lords, can the Minister revisit his figures on battery fires? On 6 September 2024, the noble Lord, Lord Redesdale, led an outstanding debate in your Lordships’ House on lithium-ion battery safety. Superb contributions were made across the House, particularly by the noble Lord, Lord Winston. Since then, battery fires in bin lorries and at waste sites in the UK have reached an all-time high—not four, but more than 1,200 in 2024. That is an increase of 71% from 700 in 2022, which was described by the Environmental Services Association as an “epidemic”. Will the Minister take this opportunity to go back to his department and agree that, at a minimum, we need the fire service, the Environmental Agency, and the Health and Safety Executive to be statutory consultees for all planning and new stand-alone battery energy storage systems? There is urgent action required in this sector.

[Lord Whitehead (Lab)]

I do not intend to go back to the department and tell it that its particular concerns are wrong. What we are talking about today are fires in large stand-alone battery storage plants, of which there have been four in the last five years. If the noble Lord would like the individual addresses and locations of those four fires, I have them here. It is not the case that this covers every battery fire there has ever been. We know that certain batteries—for example, illegally imported batteries in scooters—tend to be a little less safe than other batteries. There is proper concern about some areas of battery safety and maintenance, but not about this particular sector, which is very well regulated and safe now. As I have set out today, there have been further measures to ensure that the safety and integrity of those stand-alone batteries is maintained.

Local Power Plan

Lord Moynihan Excerpts

Wednesday 11th February 2026 Lords Chamber

Taken together, this is the most comprehensive package of support to grow local and community energy that our country has ever seen. It builds on the Pride in Place programme, the community right to buy and our world-leading commitment to double the size of the co-operative sector. We know that the local power plan will be delivered not from Whitehall, but place by place and community by community. Today, I issue an invitation to local and community groups: if they come forward with proposals, we will support those groups to help make them happen. This Statement is about a stake for the British people in our energy system, generating returns for local communities and local people, with power, wealth and opportunity in the hands of the many not the few, and I commend it to the House”.

[Lord Moynihan (Con)]

My Lords, although I have no outside interests which impact directly on solar farms and onshore wind, I declare my interest in having worked in the wider field of energy transition since my time as Minister for Energy.

I start by reflecting that we all want clean energy, we all want full engagement with local communities, and we all want to work towards an energy policy based on energy security, sourced from trusted supply chains and, above all, delivering affordable energy. This announcement should be tested against these criteria, for we support community energy enthusiasm where it makes economic sense. Does the Minister agree that reducing energy bills comes only by increasing reliable generation and decreasing costs, yet the local power plan does not come with a generation target nor an analysis of the extent to which it will contribute to reducing bills? If these are not central factors within the policy, I am afraid that it will for sure be time and money misspent.

In the Government’s own press release, they rely on “internal analysis” to claim that additional solar and onshore wind procured through AR7 could lower bills in the early 2030s, but that analysis has not been published. It looks only at a narrow scenario, it seems to exclude wider system costs, and it does not give a full picture of future bill levels. Does it include the load in grid costs to get the power to market, given that many of the wind projects being considered are in Scotland? How does the plan impact on Labour’s promises to cut energy bills by £300, not least given that they have risen by £190 since Labour came to power? How does this initiative change that?

I had a good look at the map of all the proposed projects in the CfD allocation round 7a. There were only two small wind projects in England, some in south Wales, and the vast majority of the other wind projects were in Scotland. Given that there were only two wind projects in England, can the Minister comment on whether this will lead to further increases in the already staggering bill for curtailment—paying wind farms not to produce—because of the grid constraint from Scotland to the south, the B6 boundary, and the cost of debottlenecking that, which is estimated to be north of £50 billion?

Can the Minister comment on whether this initiative is good for employment? There has been real concern recently, which the Minister will be aware of. The OEUK talked a lot about his policies and the redundancies in the offshore sector, and fears that the industrial contagion will spread to onshore supply chain and manufacturing communities. To put this in context, on average, 1,000 direct and indirect jobs are being lost each month from the oil and gas sector. Without intervention, this rate of job losses will continue to 2030. RenewableUK has said that these initiatives being proposed for renewables may create 4,000 more jobs from now to 2030, as against the 50,000 losses of jobs in oil and gas. How does that help employment in the UK? The GMB union’s Scotland secretary, Louise Gilmour, gave the same warning:

“There is a human cost to these decisions that goes beyond the bottom line of this year’s budget and impacts workers, families and communities in Scotland and across Britain. The economic case for easing the financial pressures on our offshore industries is clear and compelling but so too is the moral argument for slowing the rushed and needless abandonment of workers and their communities”.


Does the Minister agree?

I turn to an exceptionally important point. This announcement is principally about solar energy, and solar imports come from China. The Minister of State, the noble Baroness, Lady Chapman of Darlington, stated in a debate initiated in this House recently that

“human rights are a non-negotiable part of this Government’s approach to China”.—[Official Report, 2/2/26; col. 1301.]

This is an initiative to import Chinese goods. Well over 80% of PV modules used in the UK have significant Chinese content, and the true figure is very likely to be above 90% when you include panels made by Chinese-headquartered manufacturers—for example, Jinko, Trina, LONGi, JA Solar and Canadian Solar, all of which are Chinese in origin—and the non-Chinese brands whose wafers, cells or polysilicon is sourced from China. Some 80% to 85% of the global polysilicon that is needed comes from China, and the UK imports almost all its PV hardware. Installers and trade bodies routinely report that Chinese supply chains dominate the UK market because of price and scale. In the map for AR7, we are talking about a widespread, historic, major increase in solar imports from China. This local power plan depends on Chinese goods.

I simply ask the Minister whether he can tonight guarantee that no imported polysilicon, no panels being installed in our schools at the moment under GBE’s first initiative, and no solar content on any of the panels that is foreseen by this particular measure will come from the Xinjiang Uyghur Autonomous Region. A very large share of the world’s solar grade polysilicon has recently come from China, and a significant part of that comes from the Xinjiang Uyghur Autonomous Region.

It is a simple question and I hope the Minister can answer it by saying that there is absolutely no polysilicon that comes from that autonomous region. If he cannot answer it, it would have been wise and sensible to consider that question first. When comfortable that the Government could answer it in the affirmative, he could then come to the Palace of Westminster and bring forward this initiative for a historic increase in the import of solar panels.

In conclusion, can the Minister also say in this context why the Secretary of State, who is fast becoming a night manager, went to China a year ago, signed an MoU and locked it in his safe, marked “secret”, to be hidden from the public and not to be scrutinised? Why did the Government not publish it? They have published all the other MoUs that the Secretary of State has signed but not the one he negotiated with China a year ago. Why is it secret? Is there a reference to solar supplies from Xinjiang? Is there no reference to human rights? The Prime Minister has recently called for open government and honesty with the public. Surely, by locking it away out of sight, this is doing exactly the opposite; above all, to the local communities which are going to benefit from these solar initiatives. What is there to hide?

[Earl Russell (LD)]

My Lords, on these Benches we very much welcome the publication of the local power plan. This is a landmark moment: up to £1 billion of funding from Great British Energy for local community energy. This is the largest public investment to date. Our communities stand ready to generate their own power, cut bills and keep wealth circulating locally. They have been waiting for the Government to back them with serious funding and a level playing field.

We, and many others across the House, campaigned to secure community energy on the face of the Great British Energy Act 2025. We are pleased to see that commitment transformed into this concrete plan. Our communities should rightly be able to partner in, and directly benefit from, the renewable revolution. The vision is one we support.

Great British Energy aims to support an initial 1,000 local and community projects by 2030. However, I would like to see these plans going beyond programmes that the private sector can deliver itself; for example, a programme of community wind energy for our coastal communities. I would also like to see a broader range of technologies used, and greater integration with the warm homes plan. The four pillars—direct funding, expert advice, market innovation, and regulatory reform—are what community groups have asked for.

Delivery is where this plan will stand or fall. Although the plan is launched this month, the first grant schemes will not open until the spring and the new Great British Energy local products will not be piloted until the summer. There are hundreds of shovel-ready projects just waiting for capital finance. Will the Minister commit to an early fast track for schemes that can demonstrate that they are ready to build this year?

We welcome the commitment of up to £1 billion, but there is a clear gap between this figure and the £3.3 billion previously promised for community energy. Has this ambition been scaled back? How much of this fund is expected to go to actual deployment and how much on facilitation, advice and central programme costs? We recognise the importance of help with these processes but want reassurance that this will not become a scheme where too much is swallowed by planning and too little reaches the projects themselves.

The Government acknowledge that a lack of fair routes to market has held back community energy for too long. Without a genuine right to local supply, underpinned by statute, community groups will remain disadvantaged. The local power plan refers to developing new local energy supply models and a local energy platform, including smart community energy and virtual PPAs. When will the Government bring forward the regulatory changes needed to make them a reality? Can the Minister also confirm that legislation to create a clear right to local supply remains part of the Government’s programme?

The Government are right to recognise that delays and the cost of connections to the grid are among the principal reasons why community schemes have failed. The plan speaks of obligatory response times from DNOs, and of working groups with network companies, but what concrete powers will Ministers use to ensure that these things happen in practice? This matters especially when the technical and regulatory thresholds are already stacked against smaller schemes.

We strongly welcome the intention to introduce a mandatory shared ownership offer for larger renewable developments, and the indication that shared ownership templates and guidance with be published this spring. This could enable fairness into the next generation of large-scale infrastructure. What minimum stake will communities be guaranteed? How will the Government ensure that the offer is genuinely attractive rather than nominal? When will the Government publish the full community benefits framework, so that communities are not left at the mercy of voluntary schemes and of whatever crumbs are left over from the big companies? Will the framework include clear criteria on what counts as meaningful benefit, and will it be underpinned by statutory guidance?

One of the most promising elements of the plan is the commitment to build up local community capacity through expert teams and a “community energy in a box” toolkit, providing standardised documents and advice. Our most underserved areas have previously had the least spare capacity. Communities facing high deprivation, or with small and overstretched councils, lack the volunteers and technical skills needed even to begin. What criteria will Great British Energy use to define these underserved areas? Will they benefit from higher grant-to-loan ratios and more proactive outreach so that they do not miss out?

In the June 2025 spending review, £2.5 billion was allocated for small modular reactors—almost a third of Great British Energy’s existing budget of £8.3 billion. That decision pre-dated the finalisation of the local power plan and of GB Energy’s strategic plan for local energy. Does the Minister accept that the Treasury’s raiding of the Great British Energy budget has constrained what could otherwise have been a more ambitious and better-resourced programme for local power? It may have delayed the scaling up of exactly the projects the Minister is now bringing forward.

The local power plan has the potential to be transformative. Local, community-owned energy is one of the most powerful ways to cut bills, rebuild trust and take people with us on the journey to net zero. To realise this promise, we must move swiftly from plan to practice, getting money out of the door quickly, cutting through grid and regulatory barriers, and ensuring that every community has a fair chance to generate, own and—crucially—sell its own energy locally.

Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026

Lord Moynihan Excerpts

Wednesday 28th January 2026 Grand Committee

[Earl Russell (LD)]

My Lords, we welcome this order but I have some important questions to ask the Minister. My party has long argued that a robust, transparent, high-standard carbon market is a cornerstone of any credible pathway to net zero by 2050. When done well, emissions trading cuts carbon at least cost, drives innovation in clean technologies and gives industry the long-term policy certainty that it needs to invest confidently in the green transition.

This instrument makes a number of sensible technical adjustments, but this update carries more weight than most of the normal updates. We strongly support all the Covid measures; they are sensible, practical and needed.

However, uncertainty persists around our future carbon-market relationship with our closest trading partners. The Government’s own documents show that UK industry has repeatedly called for linking the UK ETS with the EU ETS, which has already been spoken to and which is a step we strongly favour. A stand-alone UK ETS would be smaller and more price volatile, driving up costs for British business compared to the stability and liquidity of a larger linked market. When paired with clean power, deeper market reforms and other measures, a linked system offers real opportunities to cut energy costs, modernise industrial processes and slash emissions.

This order moves us towards dynamic alignment by adopting EU benchmarks from 2028, alongside the phase-down of free allocation for CBAM-exposed sectors and by enabling import levies through the UK CBAM. This is the right direction. We cannot ignore the carbon costs embedded in goods we manufacture or import emissions unchecked, but this complex transition demands adaptability, coherence and close management by the Government as we move forward. We remain in a halfway house, following rules we no longer help to write, without gaining the full benefits of a larger carbon market. I seek clear reassurances that the Government are protecting UK industry, working towards positions where we are rule-makers again and ensuring that our needs are recognised and mitigated during the interregnum.

The impact assessment’s estimate of £9.8 billion net present social value shows gains from effective decarbonisation, yet the £92 million annual cost to business is far from trivial for energy-intensive industries. As free allocation pares down—particularly for cement, fertilisers, iron and steel, aluminium and hydrogen—we must not offset our emissions and jobs to less scrupulous jurisdictions. A carbon price that cleans up British industry is welcome; one that simply relocates it helps neither our targets nor our industrial base.

I therefore have just five questions for the Minister. First, the Minister’s department accepts that EU linking would reduce costs and provide price certainty. Adopting EU benchmarks facilitates that alignment. Can the Minister set out a possible timetable for negotiating a formal linking agreement? Does the Minister tend to think that any conditions might be attached to that? Industry must plan and make investment decisions now, not years ahead, so this certainty is important to it.

Secondly, on parliamentary oversight, concerns remain that dynamic alignment could allow changes to benchmarks and core design features with minimal scrutiny. Can the Minister confirm that any future changes to the 2028-30 benchmarks or material changes from further EU alignment will come by affirmative procedures and be debated in both Houses?

Thirdly, CBAM and ETS reforms help tackle import leakage, but export leakage remains mostly unaddressed. As free allocation withdraws, UK exports may face higher carbon costs than our international competitors do. So what WTO-compatible measures, targeted free allocation, export rebates or other measures are being considered to help protect exporters and strengthen our manufacturing base? On the sectors that are hardest to abate—ceramics were mentioned in the other place, and Ministers are having particular conversations with the ceramics industry—it feels that particular sectors will struggle to abate even if they want to and extra support is needed.

Fourthly, on regional fairness, the impact assessment highlights burdens on industrial clusters, particularly in Wales, Scotland, Northern Ireland and the north of England. A lot of these areas have already been hit by processes of post-industrialisation. So how do the ETS reforms integrate with wider decarbonisation strategies, including cluster sequencing, CCUS, hydrogen support and the shared prosperity fund?

Fifthly, obviously SMEs are mostly outside these schemes, but some are captured. Where they are, will tailored support and special consideration be given to their needs?

I have some general questions. How will the Government monitor and report the impacts of these measures, particularly in relation to carbon leakage? What mechanisms will track investment in clean technologies that the Government want to see and expect to happen? What mechanisms will track price changes and the competitiveness of the industries related to those?

My belief is that openness in this sector as we move forward is in everybody’s interests. We support the direction of this order but, without bolder steps toward EU ETS integration, the UK risks drifting—aligning in practice but isolated—and being subscale in market terms. That does not serve our industries, investors or climate objectives. We urge the Government to put linkage firmly on the agenda and give British industry the stable framework that it needs. Our climate and our industry standards cannot afford continued ambiguity.

[Lord Moynihan (Con)]

My Lords, I thank the Minister for introducing this statutory instrument. He generously banked the good will between the noble Earl, Lord Russell, myself and himself yesterday, and I assure him that he will have no need to draw down on that, because I am sure he will disassociate himself from his colleagues in another place when it comes to this scheme.

For once, this is a policy that is solely conceived by the Labour Government. It is a straightforward decision by DESNZ to increase carbon taxes on major industrial users which depend on hydrocarbons, particularly gas in the UK industrial market. Many industries have no choice but to use gas, and no alternative firm sources of supply; indeed, they face heavy dependence on high electricity prices to stay in business.

The Minister’s speech may sound technical, and it is true that 104 pages covering the order and the Explanatory Memorandum take some digesting, but a reread shows exactly what this statutory instrument does. The good news is that the noble Lord, Lord Lemos, sitting beside the Minister, is a good Lewisham man and he had no difficulty understanding every word of the particular trading scheme order that is before us. He will be able to help the Minister; I see he is already doing so.

What does this order do? It reduces the supply of free allowances—the key point that was made by the Minister—and thus it increases the carbon tax cost to many of the UK’s major energy industries in a highly competitive global market. These free allowances have been the mechanisms used to protect businesses such as ceramics, cement and steel from being undercut by cheaper imported products from countries that do not charge carbon taxes.

Take the very real example, considered and referred to by the noble Earl, Lord Russell, which was considered in another place yesterday by Gareth Snell, the Labour MP. He focused on the ceramics industry and said that this sector

“is very difficult to decarbonise”

but that it is

“producing things that are integral to the Government’s missions, whether that be house bricks for our house building programme or advanced ceramics to support our defence industry … because we cannot make steel in this country without ceramics … We are still at huge risk of carbon leakage. We work in an unfair market at the moment, not least because of the way in which non-market economy status countries import into this country … the ceramics sector is desperately trying to do all that it can to reduce its output of greenhouse gases, but that is really difficult when it has to run a kiln at several hundred degrees for many hours to do the bisque and the glaze firing, and run refractories for 12 to 14 hours at 1,500°C. Electrification is not available to many of those businesses at the moment, because the capital to invest … is simply not available; the profit margins on their products do not allow for it … We are wedded to gas for the foreseeable future”.

The sector fears that,

“as we move at pace to meet some of the decarbonisation agendas and reduce the overall cap through the emissions trading scheme, that will mean that the free allowances also have to come down, which will push the ceramics sector into having to buy many more free allowances”,—[Official Report, Commons, Delegated Legislation Committee, 27/1/26; cols. 9-10.]

leading to higher costs.

Even in the Government’s net-zero nirvana of green power plants, gas is the dispatchable power in the system. There is no other choice; nothing else will keep the lights on when the wind does not blow and the sun does not shine. This SI needlessly imposes a tax that inflates the price of gas to the industry and then passes the additional cost through to the consumer when they have no other choice.

Everybody wants clean rivers, clean energy and an improved environment with a clear commitment to tackle global warming. But these objectives should never purposely lead to deindustrialising the country, negating growth and increasing unemployment in our high labour-intensive, high energy-consuming industries on the altar of net-zero zealotry.

We have among the highest power prices in the world and today we are putting them up again. If you drain free allowances out of the system, energy costs rise yet more in comparison with international competitors. Not surprisingly, international companies will relocate abroad in more competitive markets and accelerate deindustrialisation in the petrochemicals sector, the steel sector, ceramics and refineries. Sadly, this may also apply to data centres in the future, with fewer choosing the UK for the very same reasons.

--- Later in debate ---

[Lord Whitehead (Lab)]

I thank noble Lords for their contributions to this debate, which were absolutely up to the rather technical nature of this SI—although I would say that the noble Lord, Lord Moynihan, managed to take in a large landscape on the whole question of whether a decarbonisation policy is good or not. I suggest that that debate is for another day because we are talking about some specific changes that are being made to a specific policy.

That policy relates, of course, to an overall adjunct to decarbonisation policy in general, which is to secure a good carbon price to underpin moves towards developing a more sustainable, low-carbon, green economy based on making sure that fossil fuels are at the margins of the energy economy, rather than at the centre of it; and that incentives are put in place for that to happen and for the economy to run on low-carbon energy in general.

If the noble Lord, Lord Moynihan, considers that a bad idea overall, perhaps he might say so; he has moved a little way along that path. I do not think that the Bank has yet cashed in all its good will, but we need to set one or two things straight about how that relates to this SI. The free allowances that are presently in place for a number of energy-intensive industries that are in danger of carbon leakage as a result of low-carbon policies are being continued for 2026 but are being tapered down—not because the Government think that they are a terrible idea and that we ought to stop giving out free allowances but because we are on the road to CBAM, which is in itself a comprehensive shield against carbon leakage.

Having a series of free allowances running alongside a CBAM arrangement would therefore duplicate the protections that are, and should be, in place. Having a mechanism that enables the CBAM process to come into place, while making sure that the industry has the free allowances it needs to move towards CBAM, seems a very sensible thing to do to keep the overall low-carbon energy show on the road in the longer term. I have not heard from the noble Lord, Lord Moynihan, whether he thinks that CBAM is a bad idea; the industry generally thinks that it is a very good idea.

[Lord Moynihan (Con)]

The Minister has put two points back to me. First, I have no dispute with that; I think that decarbonising the industrial sector over time is a sensible policy. The problem is that, if you try to accelerate that decarbonisation into 2030 and you must raise electricity prices to the level the Government have done through a carbon tax, you make industry uncompetitive. If you make industry uncompetitive on the altar of long-term decarbonisation, you will have serious employment problems; that precise point was made by an MP in another place in speaking on behalf of ceramics.

My issue, therefore, is not with the long-term decarbonisation of industry; I am totally at one with the Minister on that point. My point is that, if you hurry this along on an artificial timescale of three years, you will have to put up carbon taxes and you will put businesses out of business, in effect, from the moment when they must face these carbon taxes, which are not imposed by their competitors around the world; they may, therefore, find themselves uncompetitive.

I am not arguing against CBAM but I am making the obvious point that, if you then remove these allowances—say you have free allowances of 10 out of 100, and you take 10 of those free allowances away—you have to acquire the other 10 allowances from the market. There is a significant additional cost; that is outlined very clearly in the impact assessment before us today. Indeed, paragraph 18.8 of that document states:

“These factors combined can lead to domestic prices being consistently higher than import prices, enabling substantial price pass-through”.


It is right here in the very document that we have been considering today, and it proves my point about an increase in prices—a significant increase from what are already very expensive electricity prices—that must then be passed through. Also, the nature of that pass- through goes even further than what I have said. Paragraph 18.7 of the impact assessment says:

“The results suggest that most sectors could pass about 80-90% of cost increases to consumers”.


It is the consumers who will feel the pain of this measure; that is the Government’s own clear statement on page 70 of the impact assessment.

[Lord Whitehead (Lab)]

The Government are of course very well aware of the whole question of how energy prices should be kept within reasonable bounds. By the way, the noble Lord went on a bit about gas a moment ago. He should remember his own period in government, when the Government spent something like £70 billion trying to bring prices back down when they had got completely out of control with the spikes in the price of shipped gas coming into the UK, which rose to 600p per therm at one stage in the mid-2020s.

You could say that, because the Government at that time did not control international gas prices in the way that the noble Lord seems to think can be done— I very much doubt that the various measures he is proposing to regulate international shipped gas prices would have the effect on volatility that he thinks they would have—we are still open to that enormous volatility in gas across the world. Indeed, just recently the price spiked quite substantially—probably not to the extent that happened in the early 2020s, but that is a spectre that continues to haunt us with reliance on international gas and not going to a low-carbon economy.

I am on the side of insulating the UK economy from those enormous global changes in gas prices, particularly by moving, broadly speaking, not to a no-gas economy but to a low-gas economy as far as the future is concerned. That will be of tremendous benefit to UK industry and exports, and jobs and industry in general, because we will have a stable energy economy for the future, which will allow us to plan ahead properly without the spikes, volatility and panics that we have seen over the last few years. I think the noble Lord wants me to give way again.

[Lord Moynihan (Con)]

May I say how flattered I am that the Minister thinks that I was in government on this side of the turn of the century? I must look a lot younger than I thought I did. I have to go back to 1990, to be precise, when I was Minister for Energy and we started the offshore decarbonisation of gas. In fact, we stopped flaring at that time, at the same time as we set up a non-fossil fuel obligation to encourage renewables. We had low domestic and industrial gas prices in the United Kingdom because we encouraged combined-cycle gas turbines. I just wanted to place that on the record, but I say it in a spirit of deep gratitude to the Minister for thinking that I was in government only recently and that I obviously look far too young to have been a Minister in 1990—or perhaps I look far too old.

[Lord Whitehead (Lab)]

I thank the noble Lord for that correction as far as his status in previous Governments is concerned. I was making a point not about his own distinguished period as an Energy Minister, which I appreciate was much earlier and perhaps in a rather happier energy era than we have today, but about the mangled response from the Conservative Government to the last gas volatility crisis in this country, and what resulted in terms of the money going out of the Exchequer for the attempts to protect domestic consumers and businesses from that spike, since he raised it as one of his concerns about this SI.

I ought to add, by the way, that, in the Government’s industrial strategy—yes, we have an industrial strategy, unlike previous Administrations—we announced additional support for 7,000 energy-intensive firms through the British industrial competitiveness scheme, which will reduce electricity costs by up to £40 per megawatt-hour. Through the British Energy supercharger, the Government are increasing support for the most energy-intensive firms by covering more of the energy network charges they normally have to pay. From 2026, the discount on these charges—namely, legacy costs, capacity market feed-in tariffs and so on—will be discounted by 90% from their present 60% level. That is a substantial boost to industry, as far as prices are concerned, by the direct actions of the Government under these circumstances.

I am conscious that I have spent rather too long addressing what the noble Lord, Lord Moynihan, has perhaps wound me up to talk about more than I might otherwise have done. I have to now address the questions that were put to me by the noble Baroness, Lady McIntosh of Pickering—who I applaud for being, as it were, on the side of these particular measures and ideas from the other side—and the noble Earl, Lord Russell.

I have, to some extent, covered the questions that the noble Baroness put to me. The first allocation period will be extended to 2026 to ensure that the changes implemented from the free allocation review come into force in 2027, to align with the introduction of UK CBAM. On her questions on bills, emissions trading has been a key element of power sector decarbonisation. Therefore, maintaining a strong UK ETS and, dare I say it, aligning it with the much wider market that we can enter into, for the stability of the ETS, will not be a joining of the EU ETS but a linkage of the UK ETS to the EU ETS. The UK ETS will continue. It has been determined following a recent consultation discussion that it will continue until at least 2040.

Warm Homes Plan

Lord Moynihan Excerpts

Tuesday 27th January 2026 Lords Chamber

[Lord Moynihan (Con)]

My Lords, I thank the Minister for responding on the Statement made in another place.

I very much appreciate that this plan has taken longer to finalise than expected, with a year’s delay, but I have to say that we will join those who support a measured and incremental move towards low-carbon home heating systems. If that is the objective, there are many measures in the plan today that are worthy of support, not least, for example, the greater role for home batteries.

Where our concerns lie is with the test against which any transition must be judged; namely, its impact on the capital and operating costs for families—in other words, on household bills. Having read the Statement and the impact assessment, our view is that what should be a welcome and important initiative to save consumers money looks more likely to have the opposite effect, with rising energy bills and taxpayer-funded initiatives, not least through the recently locked-in energy costs well above market rates.

In the impact assessment, there was no reference to the impact on tenants as a result of the requirements placed on landlords. I very much hope the Minister will address whether these costs can or in his view will be passed on to tenants.

Regarding heating systems, 50% of the British public are unlikely to install low-carbon systems, such as heat pumps, due to high installation costs. Even if the warm homes plan takes the proclaimed £200 off bills for the 5 million projected homes over the next four years, which is unlikely given current energy and projected costs, that will still leave 25 million homes without respite, worrying about the installation costs of the new heating systems. How does the Minister intend to reach the other 80% of the country struggling with higher bills?

Does the Minister agree that the central and more enduring problem is the ongoing operational costs of low-carbon heating? Two-thirds of people with heat pumps now find it more expensive to heat their homes than they did with their previous system. Frankly, that is no surprise. The price of electricity per unit currently sits at a multiple of that of gas, yet the Secretary of State’s plan offers no redress for the long-term costs of this policy. Perhaps the Minister can now lay out whether the department has plans to address the high operating costs of heat pumps.

The Secretary of State has also announced the founding of a new quango, the warm homes agency. The Government claim to be offsetting this with the abolition of Salix, but I am sure your Lordships are aware that this is not a like-for-like trade-off. Can the Minister now confirm what his colleague in the other place could not and give an estimate of the cost of both the new arm’s-length body and the net cost of this quango reorganisation?

Another key element of the plan is the move to introduce widespread solar panels in the UK, set out in the Warm Homes Plan as

“Unleashing the rooftop solar revolution”

on page 33. This is timely, given the Prime Minister’s visit to China. The reason this is so important is that well over 80% of PV modules used in the UK have significant Chinese content. The true figure is very likely to be above 90% when we include panels made by Chinese-headquartered manufacturers. As so many non-Chinese brands still rely on Chinese wafers, a panel can be assembled in, say, Vietnam, Malaysia or the EU and still be heavily Chinese in content. That is why estimates based only on the brand’s country of assembly understate the real proportion. Including these brands, most energy analysts treat around 90% of UK PV panels as having Chinese content in their supply chain.

China’s share of the global supply of polysilicon is some 80% to 85%, and the Xinjiang Uyghur Autonomous Region’s share of China’s solar polysilicon has been variously estimated at between 35% and 45% at its peak, all of which implies that 25% to 35% of global solar polysilicon has plausibly been sourced from Xinjiang-based plants. Can the Minister inform the House how Great British Energy can meet its legal obligation to track exactly which polysilicon plant was used for any UK import, whether that plant is in Xinjiang or elsewhere, and whether specific batches are verified as free of Uyghur labour?

The noble Lord, Lord Alton, has spoken in this House and discussed with me this morning his concern that forced labour has been widely documented in the region and that there is a need to shut the door on forced labour components found in Chinese supplies of polysilicon. Does the Minister therefore accept that independent auditors and NGOs still argue that full traceability is patchy due to multisite production in different factories and different time periods, continuously shifting new contracts and new plants coming online, and lack of full transparency at the level of polysilicon origin?

As I have said, the intentions behind the warm homes plan are commendable, and the help with capital costs is welcome, but this must be accompanied by plans for lowering operational costs, coupled with wider reforms to bring down the cost of electricity. Otherwise, this well-intentioned plan will become a passport to higher domestic electricity bills. I look forward to the Minister’s response.

[Earl Russell (LD)]

My Lords, I welcome this Statement. Promised nearly two years ago as a “flagship response” to soaring energy bills and poor home efficiency, it has taken some time. Delays have consequences, particularly for the millions of families living in homes that are cold. They are paying the price.

That said, this plan brings forward welcome innovation and greater policy coherence, particularly through its focus on climate adaption and mitigation. It marks a significant milestone amid a national affordability crisis and an accelerating climate emergency. But if warm homes are one side of the equation, cheap, clean energy and market reforms are, indeed, the other. We need both to succeed.

The commitment to £15 billion of public investment is ambitious and right. Ministers forecast upgrades for 5 million homes and relief from fuel poverty for 1 million families by 2030. These are the benchmarks by which this plan will be judged. Too many families still live in cold and damp homes, causing ill health and rising health costs. Labour is right to call out the “lost decade” under the Conservatives, when investment collapsed and home upgrades fell by 90%. Greater vulnerability followed Russia’s invasion: 85% of our homes were still dependent on fossil fuels, and £40 billion in emergency support was required. This was the cost of the Conservatives’ delay.

Against this backdrop, the plan’s innovative pathway is welcome. Partnerships with British climate tech firms could, if implemented well, build a world-class retrofit industry, but SMEs need support, predictable regulation and open markets to bring products from design to real homes quickly. The proposed retrofit innovation panel and sherpa approval models are positive, if they deliver.

I am concerned about the six-month cliff edge gap between previous schemes winding down and new schemes starting. I ask the Minister for greater clarity, particularly on the use of the £1.5 billion reserve to help fill this gap.

I welcome the focus on climate adaption. Increasing heat will be a slow-motion killer, so homes must be built for cooling as well as warmth. Including air-to-air heat pumps and supporting communal ground source systems is vital. Passive measures are also needed. The plan’s emphasis on consumer-led energy flexibility is encouraging, with an ambition to triple solar by 2030. Integrating solar batteries, EVs and smart meters can turn homes into virtual power grid participants, cutting bills and easing pressures on the grid. However, this “rooftop revolution” will falter without faster grid connections, planning reform and more resources for local authorities.

The transition must create good jobs and uphold ethical standards. I supported the amendment from the noble Lord, Lord Alton, to the Great British Energy Bill on forced labour. Our clean energy revolution must not rest on exploitation. What measures are we undertaking with our EU partners and others to build our solar manufacturing capacity?

Despite the promising direction and other areas of overlap, this plan stands in isolation from Great British Energy and our community energy plans. This is a missed opportunity. We welcome the support for the UK heat pump industry but question whether £19 million will be enough. The dilution of deployment ambition is troubling—well below the 600,000 a year target by 2028. Even with a £7,500 grant, typical households still face a £5,000 shortfall, which will be too costly for many.

I reiterate the Liberal Democrats’ call for free heat pumps and insulation for low-income families. We welcome the innovation financing models but ask for greater details. Can the Minister assure the House that these will be properly regulated and transparent, and will not put people’s homes at risk?

The new rented sector standards, benefiting some 3 million over the next four years, are also welcome, but how will their effectiveness be measured? We welcome the warm homes agency as a single point of leadership. What more can be done to make sure that people are not the victims of energy scams? Can the Minister explain how the plan will be monitored and reviewed, and confirm some level of flexibility?

Too often in the past, insulation was missing or simply done badly. Government must work to restore confidence. It is essential that we do insulation and we do it well. Without insulation, the best technology cannot prevent heat loss.

Finally, I agree with the Opposition: we need energy market reform, and clean energy needs to be affordable. Electricity costs are too high; while they are that high, households will not change from fossil fuels, so we must balance levies and take them off bills.

To conclude, we welcome the ambition and the funding, but ambition must now be met with urgency, coherence and fairness. Ministers must close the funding gap, put insulation back at the heart, reform markets to make clean energy affordable, and back British workers and innovators. If Ministers rise to that challenge, this plan can deliver not just warmer homes but a fairer, cleaner and more secure future for Britain.

High Temperature Gas-Cooled Reactors

Lord Moynihan Excerpts

Monday 19th January 2026 Lords Chamber

[Lord Vallance of Balham (Lab)]

The point raised about the heat production of HTGRs is very important. This is not just about the electricity; it is about the heat and what can be done with it. It is why we are keen to encourage advanced modular reactors in the UK. There is also an opportunity to make them much smaller and to site them in different places, which will free up the link directly to industrial purposes. The advanced nuclear framework lays this out very clearly and encourages the private sector and others to join in putting forward new technologies.

[Lord Moynihan (Con)]

My Lords, given that the Minister has mentioned new technologies, is he aware that the Japanese high-temperature gas-cooled reactors operating at 950 degrees—he mentioned the importance of heat—produce hydrogen at scale and at reasonable cost? Would it not be beneficial to co-operate further with the Japan Atomic Energy Agency on multi-purpose nuclear heat applications, especially hydrogen production, using its high-temperature engineering test reactor, since the low-cost production of energy should be our overall policy objective?

[Lord Vallance of Balham (Lab)]

We have had two collaborations with the Japanese over the last couple of years, one on HTGRs and one on coated fuels, and we have an ongoing one on robotics. The point made about heat production is crucial. The Japanese, through our collaboration with them through UKNNL, have the demonstrator HTGR ready to go in 2028, specifically focused on hydrogen. We will keep in close contact with them over that, because that production of green hydrogen through nuclear is a very interesting opportunity.

Offshore Wind

Lord Moynihan Excerpts

Monday 19th January 2026 Lords Chamber

Let me close by saying that Britain faces a choice over the coming years. We can seize the opportunities of clean, homegrown energy to cut bills and create jobs, or we can double down on our exposure to fossil fuels. In calling for us to cancel this auction, our opponents made their choice: they are setting their face against cheaper, clean, homegrown power; against 7,000 jobs supported today and thousands more to come; against taking back control of our energy sovereignty; and against action on the climate crisis to protect our children and grandchildren. This Government have made our choice: we choose energy security, lower bills, good jobs, and the climate. I commend this Statement to the House”.

[Lord Moynihan (Con)]

My Lords, I declare my interests. I am chair of Amey UK Ltd, Acteon and Buckthorn Partners LLP. As this is the first time that I have spoken to a Statement on an energy debate from the Front Bench since I was Minister for Energy, I inform the House that I have spent my working life in the energy sector. I was also Minister for Energy in the Margaret Thatcher and John Major Governments and aimed to maximise a low-cost oil and gas province in the UKCS, always emphasising production with the highest importance attached to the environmental impact of all offshore activity, while in 1990 simultaneously launching the non-fossil fuel obligation, the renewable support framework and establishing the UK renewable energy advisory group. I place that on record because that political experience informs the contributions that I intend to make and the questions that I will be asking.

It is axiomatic that we should judge the Statement against the principles of creating greater energy security; increased affordability to all consumers, both industrial and domestic; strengthening the base of low-cost, firm power in the grid; and moving towards cleaner energy. Every decision we take should be addressed against fuel poverty. How can this be so when the order promises the highest prices for intermittent offshore wind in over a decade? How can it be affordable to the UK industry when this order is still more expensive than the £80 per megawatt for gas—which goes down to £55 if you deduct the government-imposed carbon taxes? How can it be when the overall price of contract extension is 24% higher than last year? Why are the Government using the levelised cost of energy matrix when we should be using the only true cost comparator, a full systems cost? As it is intermittent power, do the Government acknowledge that we need more firm gas power plants anyway? Is it not the case that the Government told NESO that there need to be 40 gigawatts of backup generating capacity?

Let us look at what is happening this evening. At a time when the wind is hardly blowing, is it not the case that we are here, this evening, generating nearly 60% of our power from firm gas and only 18% throughout the whole of the United Kingdom from intermittent wind? Worse still, is it not the case that we are importing gas from an increasingly unstable global economy and burning more CO₂ through imported LNG than we would if we developed our own resources to the full, while this minute continuing to burn biomass in Drax, which is more polluting than coal and comes, at this point in time, to only 50% of the total wind generation throughout the whole of the United Kingdom?

Does the Minister agree with Prime Minister Støre of Norway who, at the same time as the Secretary of State was making this announcement, faced the country and stated that he regarded Norway as facing many similar choices to us in the North Sea? He said:

“gas … is crucially important for Norway, and should be developed, not phased out”.

He also said:

“The oil and gas industry is crucial for Norwegian jobs and our welfare state. At the same time, Norwegian gas has never before been as important for European energy security as after Russia’s full-scale invasion of Ukraine”.


Does the Minister agree with him?

Does the Minister agree with Jensen Huang, the CEO of Nvidia, who came to these shores in September 2025 and stated on a visit that the UK will need to utilise natural gas-fired power alongside renewable energy to meet the massive energy demands of new artificial intelligence data centres? For without that strategy, we will have no chance of generating thousands of jobs with competitive new data centres.

We need to keep our eyes open to the economics of energy and to the wider UK economic and political consequences of this Statement and the Government’s energy policy. Does the Minister agree it reduces energy security by increasing the need to buy more foreign LNG to meet the need for firm power; that it increases unemployment through higher energy costs; and that it accelerates the Government’s deindustrialisation of the chemical and petrochemical industries, which was all over the news this weekend, by pricing them out of the market? It drives a coach and horses through affordability for households and industries alike, and it takes us in the direction of significantly increasing the cost of energy when the rest of the world is managing to reduce costs in a highly competitive global market.

Yet, in this order, are we not faced with record subsidy contracts for offshore wind? Is there not a rise in the annual budget for fixed-bottom offshore contracts from the £900 million when the terms were first announced in October—only three months ago—to £1.8 billion last week?

Is the consequence not a poorer UK economy and a loss of jobs from the once prosperous Aberdeen now facing the chill winds of offshore recession? Is it true these are massive wins to the Germans who totally dominated the round and won the lion’s share of the contracts?

I conclude by asking the Minister whether he agrees with the analysis in the FT of the article which covered this round. One reader wrote:

“We have … just about the highest electricity prices in the world despite access to relatively low cost North Sea gas…We have loads of gas boilers…so ongoing gas grid upgrades are required irrespective of…investment in extremely expensive renewables”.


Do the Government agree with Sir Dieter Helm that current UK electricity prices are high because the true system costs of integrating intermittent renewables—wind and solar—plus grid upgrades and back-up are not fully priced in? Does the Minister agree that we all want clean, low-cost renewable energy, and we all want, and can have, domestic gas production which has far lower impact on the environment than imported LNG or high-cost CO₂ emissions from Drax? Why can we not strive to deliver a policy built on these three pillars? I look forward to the Minister’s reply.

COP Climate Negotiations: Cities

Lord Moynihan Excerpts

Wednesday 14th January 2026 Lords Chamber

[Lord Spellar (Lab)]

My Lords, will there not be greater support for these measures from the citizens of those cities and towns in the UK if they can see the benefit coming through to them in their work? What steps are the Government, and those towns and cities when they are commissioning work, taking to ensure that, whenever possible, the work is sourced from the United Kingdom, unlike so many cities that are, for example, buying buses from China with all the other attendant issues?

[Lord Moynihan (Con)]

My Lords—

[Noble Lords]

Oh!

--- Later in debate ---

[Lord Moynihan (Con)]

My Lords, I declare my interests as non-executive chair of Amey and Acteon. In returning to the Front Bench, I pay respect to the Minister’s outstanding parliamentary contribution and extensive knowledge of energy and net-zero policies. I have no hesitation in asking him whether he agrees with the Prime Minister’s warning at COP 30 that the “consensus is gone” on fighting climate change? Does the Minister agree that it is now time to pause to reflect that last week, on the bitterly cold day of 5 January when the UK generated 47 gigawatts of electricity, over 52% had to come from gas because the wind was not blowing, and that fully developing our own offshore natural gas reserves, akin to the strategy adopted in Norway, would not only increase our energy security but be environmentally preferable and cheaper for the people living in British cities than relying heavily on imported LNG from the Middle East and the US?

[Lord Whitehead (Lab)]

I warmly welcome the noble Lord to his place as the opposition spokesperson as far as DESNZ is concerned. He has had a distinguished career in energy, being a former Energy Minister himself, and a distinguished business career in renewables. I look forward to having a very fruitful and constructive dialogue with him over the next period, as the energy discussions move forward.

As far as his question is concerned, I say gently that last year had the highest-ever number of days that were powered completely by renewable energy—more than 80 days—so his concern about particular days being powered by mainly non-renewable power should be set against that overall trajectory, which will continue, particularly with the results of AR7 that have just come out today.

Offshore Petroleum Licensing Bill

Lord Moynihan Excerpts

Committee stage
Tuesday 23rd April 2024 Grand Committee

[Lord Bruce of Bennachie (LD)]

My Lords, I rise to speak briefly to this group of amendments. Noble Lords will know that I have spent pretty much all my adult life in the north-east of Scotland and have seen the North Sea oil and gas industry pretty much from its inception right through to where we are today. It is a declining industry, as the right reverend Prelate rightly said, and it will continue to decline whatever we do. The question is: how quickly, and how will it impact the transition?

Turning to Amendment 1, on flaring, as far as I understand it from the transition authority, all new developments that are approved will be zero flaring, so, in a sense, the amendment is already being tested. I do not have a problem with it, but I think that is the case. I accept that the desire to reduce or eliminate flaring on existing fields leaves a tension as to timescale. It would be good if it could be speeded up, and the transition authority should be encouraged to make that happen, but it is not quite as easy as people say, because it has implications for the physical operation of platforms. However, I do not think it is a wrong aspiration.

On Amendment 2, on green skills, we should absolutely be developing them. However, the point I hear every day in the north-east of Scotland is that we are producing oil and gas and it is going to decline, but its revenue, technology and supply chain are all being redeployed to the transition. If we do not have that revenue, our ability to redeploy will be slowed down or stopped, and that is a real factor.

There is huge enthusiasm in the north-east of Scotland for the rapidest transition we can make. Indeed, just this week, one of the largest offshore wind farms in the world has been announced, off Peterhead. This is an investment of £3 billion in 35 turbines and potentially hundreds of jobs; there is huge enthusiasm for that. A lot of that will be going to companies in the oil and gas supply chain. The really important thing here is to get the balance right. If we accelerate it too quickly, that supply chain will disappear. The faster we bring in the investment in offshore, the faster we can make the transition, but it is really important to get the balance right. That is the debate the north-east of Scotland wishes to happen nationally.

That is one of the reasons why I support my noble friend’s amendment to replace “must” with “may”. As I said at Second Reading, the Bill is not necessary because we can issue licences whenever we like, and it has been up to the transition authority to determine whether that may be the case. To those who say that we should not have any more licences, I do not mean to be patronising at all, but some understanding of the North Sea reveals that there are sometimes requirements to bring things on stream in order to facilitate decommissioning, as well extending the life of existing infrastructure. Saying that it is not going to be done at all will probably almost immediately lead to a situation in which the practicalities mean that it makes more sense. So, there should be that discretion. However, the onus should be put on the transition authority to do that only if it believes it is necessary in order to achieve the transition in an orderly and efficient manner. That is essentially why the amendment makes practical sense.

Investing half the profits in renewables is a good idea. I am not sure whether one should be quite as specific as that; however, the reality is that the companies I talk to are investing increasingly in renewable energy because they can see that oil and gas is a declining asset. They know, as the noble Lord, Lord Deben, knows, that every projection for oil and gas through to net zero still has oil and gas in the mix.

So, oil and gas will be around. There is a sensible question to be asked: why should it not be ours, rather than importing it, as long as we can do that in the most efficient and least environmentally damaging way? I accept that it has an impact. In the process, we can ensure that the transition from the oil and gas industry to the renewables industry enables the jobs, the technology and the companies to be smoothly part of it. There is a real flight of investment from the UK in this sector right now, because of a combination of uncertainty—the Labour Party’s policy does not encourage people—and the Government’s confusing people, I have to say to the Minister. On the one hand, we have a Bill that says, let us have an annual licensing round; yet, on the other hand, we are saying that we are going to tax the industry to the nth degree.

Frankly, a lot of the companies are saying that the UK does not seem like a decent investment. For those in this room who are not keen on the North Sea, that may make them all happy but there are consequences. It is a successful major industry and a significant part of our economy. It is one of our high technologies. We are the world-leading experts in subsea technology. About one third of the market is UK-based, driven by what we do in the North Sea. To throw all that away, if we do things too quickly, would be a criminal waste of talent and resource, and would be an economic self-wound. We can do this properly and right, in an orderly fashion, or we can try to reverse it, which is foolish and will not work, or we can accelerate it at a level that would be damaging and destructive.

These amendments set the balance, I hope. We can make sure that if we are going to manage this transition and the decline in the North Sea, it is done in a way that respects the contribution that the people who have developed this industry over the past 40 years have given and can give. It would also allow us to develop the new technologies at a pace that will create a viable industry quickly, without causing a huge dip in economic activity and unemployment, which can be avoided.

[Lord Moynihan (Con)]

My Lords, my interests are set out in the register. The noble Lord, Lord Bruce, did not quite do himself a service by saying that he was there at the start 50 years ago; I am sure it is little bit less than that. I was very much involved some 35 years ago as Minister for Energy, at the time when this whole question started. There was extensive gas flaring in those days and no value was associated with gas. Therefore, the environmental impact was appalling and we wanted to assess it, especially when it came to the central North Sea. The southern North Sea had yet to be moved forward. The northern North Sea had far less of a problem of associated gas, but the central North Sea fields were very much in the context of what we are discussing.

I echo many of the comments of the noble Lord, Lord Bruce, about these amendments, in particular Amendment 1, which I want to address. The important points he has raised go to the comments of my noble friend Lord Deben. All new developments absolutely should be planned on the basis of zero routine flaring and venting. That is the case, as of today. I hope that the Minister can echo that point, because that is substantively what the amendment seeks to achieve.

My second point is that it is not wise to put equal weight on the environmental impact of venting and flaring. Venting is far worse. Methane is about 30 times more damaging to the environment than CO₂, which comes, effectively, from the flaring process. However, both are recognised by everyone who works in the oil and gas sector, particularly the supply and service sector, as practices we should end. There is a clear, unequivocal decision by government and by everyone working in the sector that we should bring these practices to an end by 2030.

The question is one of timing. As I read it—I may be wrong—the amendment is really about whether, two years on from the Bill receiving Royal Assent, we start the process as though it is 2026 rather than 2030. There is merit in considering that in detail, but we should also look at the industry’s capacity to retrofit by that timetable. It may be possible, but my research shows that it is quite difficult, and we would have to move from the current voluntary system. To be fair, that system has worked well. Progress has already been made in reducing flaring. It is down by some 50% since 2018 and we can get the rest of it removed by 2030.

The question is: should that be accelerated? In fairness, I think that is what the noble Baroness, Lady Hayman, is putting to us today—that this amendment, if passed, would not affect the new developments that are already being planned, on the basis that there was zero routine flaring and venting, but would accelerate the timetable for the rest of the platforms. My question to the Minister concerns that timetable and speeding it up. Do he and the Government believe, and can they demonstrate, that the voluntary-based momentum that needs to accelerate —the industry recognises that it must accelerate in order to achieve the 2030 deadline—is better or worse than a slower, compliance-based mechanism, which would require a complete infrastructure from government to achieve the sort of timetable that is set out in this amendment? That is the real question. By the way, the amendment is not precise because it will depend on when the secondary legislation is introduced before Parliament, so it might be implemented quite close to the 2030s or in the late 2020s.

--- Later in debate ---

[Lord Kerr of Kinlochard (CB)]

I intervene briefly to express a little scepticism about Amendments 5 and 17. I declare an interest because I used to be deputy chairman of Shell for a time. I think the answer to the very fair question of the noble Lord, Lord Bruce, is that we cannot, unless we nationalise the companies or direct their sales, because they will sell at the market price. I do not think that the condition that Amendments 5 and 17 would impose will ever be met. We will never be able clearly to demonstrate that prices and the cost of living would be lower X many years out. First, one cannot be clear. It takes five, seven or eight years for a project to come into production and guessing prices and the cost of living that far ahead, as I saw at Shell, is not an exact science. It is difficult to do “clearly”—the wording in the amendment.

Secondly, I am not clear whether this third test is a cumulative condition, like the carbon intensity test and the net importer test. If it is cumulative, then no licenses will be issued at all, because that will never be able to be proved.

I am afraid that, for the same reasons, my scepticism also extends to the net importer test. I do not understand the Bill. We are setting out a perfectly reasonable set of propositions for a nationalised industry, but if you want the North Sea to be developed as it is now, or for the development to continue as it is now, run by commercial companies, then the commercial companies will sell at the world price. They will not allocate a little bit to you at a better price so that you can satisfy your tests; in particular, a cost of living test. It does not work like that. I am making everybody in the room angry, because I do not really agree with Amendments 5 and 17, and I do not actually agree with the Bill when it comes to the net importer test.

[Lord Moynihan (Con)]

My Lords, I recognise the expertise of the noble Lord who has just spoken, but I think that the two tests in the Bill—which is the subject of this group of amendments, because we are looking to see whether it is feasible and appropriate to add to those tests—are important tests.

On the net importer test, it is fundamentally important as a country to have security of supply. Security of supply comes through diversity of supply, and that security of supply has been shown to be exceptionally important recently, not least with the Russian invasion of Ukraine and the impact that had on western Europe’s gas, being at the end of the pipeline from Russia. It was important to bring home the reality that we need to develop our own energy sources efficiently and economically, in the most benign, sustainable way that we can possibly do with modern technology. The net importer test is important, and I am pleased that it is in the Bill. It absolutely underpins the concept of security of supply, which has always been the basis for our energy system in the United Kingdom.

The carbon intensity test is also relevant, in this day and age of developing reserves internationally and bringing them here with LNG, then transferring that LNG, through a process, to natural gas for power generation in the United Kingdom. If the LNG had a lesser carbon footprint than what we produce in the North Sea, then there would be a very real argument for not having further licensing rounds in the North Sea, because the environmental impact of what we do in this industry is vital, and that is shared on both sides of the Committee.

It is important to question whether we should move towards a position whereby we go to a global test, which the noble Lord, Lord Lennie, suggested, through what was probably a probing amendment rather than one that he would like to see in the Bill. We have an important but minimal impact on whether that 1.5 degree average surface warming above pre-industrial temperatures under the Paris Agreement is achieved. We should be looking to make sure that, as far as possible, everything we do in the North Sea is as sustainable as possible, with the lowest possible carbon footprint. As far as I am concerned, sustainability is one of the four pillars for the consideration of our energy sector. We must address sustainability concerns; we must address GHG emissions; and we must ensure the protection and stewardship of our environment. As I have mentioned, at the same time, we need to have security and reliability. That is the second pillar. We must ensure that current and future energy demand is supplied reliably and responsibly, and, as I said earlier, is able to robustly withstand system shocks.

The third pillar is accessibility and affordability. We must enable energy provision to consumers while minimising cost, and we must support social and economic development. That is one of the reasons we have diversification of supply in the country and the free market to ensure that that is the case.

That free market point is important because we need economic viability of investment. Investment in, and the adoption of, energy solutions characterised by a sustainable return on investment is the fourth and most fundamental pillar. I would just question whether we need to go further than the two tests in the Bill.

I have never, either at Second Reading or in Committee, thought that this Bill was top of the agenda in terms of importance to any Government. I am not sure that it is. I agree with the noble Lord, Lord Bruce, that we can have annual licensing rounds if we want them. In any event, if it is important that they are annual as opposed to biennial, to me, is debateable. The important thing is that all the licences that are awarded must be awarded against a set of criteria; increasingly important in the set of criteria is the environmental footprint around every single aspect of offshore oil and gas production.

We need firm, reliable energy in the United Kingdom to underpin a growth in renewables, but that firm power must be uninterrupted. At a time when we are not moving towards new nuclear as fast as we should be, gas is that basic firm power that will fuel the whole electrification of our system. The other side of this coin is that we are looking for far greater electrification of our rail and wider transport system. Well, for that, you need firm power.

How renewables are at the moment, as well as the lack of good battery storage power—it is interesting to note that the existing battery storage power in the UK covered approximately only eight minutes of average UK electricity demand for the whole of 2023—this lack of battery technology and breakthrough on renewables, without firm power, shows just how much further we have to go. We must have improved and enhanced battery technology. We need firm energy as our lifeblood in this country, not sporadic energy, although moving towards a greater reliance on renewables is, to me, critical. That needs to be underpinned by maximising our gas reserves in the United Kingdom.

Given the limitations of this Bill, those two tests seem reasonable and appropriate to me. I am not sure that the additional tests that are being recommended in the amendments are necessary or helpful in achieving the four pillars that I set out in response to the noble Lord’s very good introduction, if I may say so, of his amendment.

[Lord Callanan (Con)]

I thank all those who contributed. I start with Amendments 3 and 18 in the name of the noble Lord, Lord Lennie, which seek to impose a new climate change test as part of this Bill.

I say at the outset, in response to the challenge presented by the noble Baroness, Lady Jones, that this Bill is entirely consistent with the Government’s target to reach net zero by 2050. Even with continued exploration and development, UK oil and gas production is expected to decline by 7% a year. This decline is faster than the average annual global decline needed to align with the IPCC’s 1.5 degrees Celsius pathway. The noble Baroness might not like those facts but they are facts nevertheless.

As net importers, we produce less than we need—a point made ably by the noble Lord, Lord Bruce. This is projected to remain the case even as our demand for oil and gas shrinks as we achieve net zero. There are already a number of climate checks to ensure that offshore oil and gas activities remain consistent with our climate goals: the climate compatibility checkpoint ensures that the compatibility of future licensing with the UK’s climate objectives has been evaluated before a new licensing round opens; and the North Sea Transition Authority has a specific obligation to assist the Secretary of State in meeting the net-zero target. The recently published OGA plan makes clear that, for production to continue in the North Sea, it must continue to become cleaner. Adding a new test to this Bill is, in our view, therefore unnecessary.

Offshore Petroleum Licensing Bill

Lord Moynihan Excerpts

2nd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Moynihan (Con)]

My Lords, it is a pleasure and an honour to follow the right reverend Prelate the Bishop of Norwich, although I humbly reflect that I see nothing in the Bill that detracts from the energy transition. I will try to set out the arguments why.

I am in agreement with the noble Lord, Lord Bruce. It reminds me of the time many years ago when I had the privilege of being Minister for Energy, back in 1990. He set out a very reasoned case about how difficult this Bill is in many respects in trying to balance the importance of energy transition with recognising the truism that this is not a zero-sum game with oil and gas production in the North Sea.

I declare my interests as set out in the register. I welcome the Bill, although I share the views of noble Lords on both sides of the House in that I am uncertain that it is needed. We call on the Minister a great deal to do admirable work in this House; I think this might have been an opportunity when we did not require his presence. The reason why I think it may not be needed is that it just confirms the policy framework to which existing legislation, licensing rounds, customs and practices in the North Sea already apply.

Why this Bill may prove to be important is that it can underpin a prioritisation of the security of supply as we move towards the sustainable energy policy structured on the net-zero ambitions we all share. I mentioned 1990, when I was Minister for Energy when Margaret Thatcher’s Government first introduced a renewable energy programme into the UK, as has been mentioned, following the seminal speech she gave in 1989, and we launched the non-fossil fuel obligation to provide a market framework to help accelerate the move to renewables and nuclear power. We now measure our trajectory towards net zero by using 1990 as our baseline and my noble friend the Minister is right that we lead the world in the journey to net zero and should retain energy transition as our major priority.

Some 34 years on, we are now half way to net zero. However, we should be under no illusion that this has been, to a large degree, a function of the imposition of measures, with only marginal consumer sensitivity, knowledge or reaction. Changes from oil- and coal-fired power generation to renewables and gas are key policy developments in power generation and have been significant in the build of the combined-cycle gas turbine market and the declining use of coal for power generation in the UK. But to achieve the next 50% of the reductions to get to net zero, we will be asking consumers for something far greater, to go far further in changing their lifestyle—what cars they drive, how they travel, how they heat and insulate their houses and, ultimately, what they eat. We have only 26 years left to achieve that important social and behavioural revolution. I share my noble friend Lord Lilley’s view that there is considerable doubt as to whether we will be carbon-neutral by 2050, but, if we are, it will a private-sector driven change which helps us reach that goal. There is nothing in the Bill that would negatively impact on the vital energy transition measures.

Additionally, a holistic approach to the environmental impact of everything we do offshore must be a priority—being as clean as possible, improving efficiency, significantly reducing all forms of pollution and substantially mitigating carbon emissions. By employing these measures, it will not be difficult to demonstrate as central to the Bill that improved environmental practice will ensure that gas production in the UK will meet one of the Government’s key criteria; namely, that the carbon intensity of natural gas is lower than that of liquefied natural gas imported into the UK. The baseload demand—to which add the demand for firm power, as mentioned by the noble Lord, Lord Bruce, as opposed to the intermittent power generated by renewables when the wind blows—will ensure that the UK is projected to remain an importer of both oil and gas for many decades to come.

This is a function—it is so important—of both the need for firm power and the actions of a responsible Government to recognise that security of supply is achieved by diversity of supply, and nothing is more secure than the production of energy at home rather than an increasing dependence on imported oil and gas, whether in the form of LNG or interconnectors. I prefer to think that the Bill was not the product of a good lunch but what my noble friend the Minister referred to as the “energy shock” created at the time of Putin’s invasion of Ukraine, which supports the critical importance of maximising domestic production.

Philip Lambert, one of the foremost energy specialists in the UK, has noted:

“The starting point is that the offshore oil and gas sector in the UK is an existentially important foundation stone of the UK industrial base and UK energy security future—the maturing but still prolifically producing UK North Sea oil and gas province, still incredibly producing just over 1.3 million barrels of oil a day, or, to put it another way, 50% of our needs, 50 years on from first production”.


The key point of this and the hoped-for outcome of the Bill is to emphasise that what the UK industrial sector now needs is greater help from the Government, both to build up renewables and to maximise oil and gas production from the 1.3 million barrels of oil today, resulting in a postponement of decommissioning across the UKCS and genuine maximisation of tax proceeds, while preserving hundreds of thousands of oil and gas-related jobs as they migrate across through energy transition to renewables.

We should not pander to those who welcome the fact that we would, unforgivably, be leaving stranded under the seabed over 10 billion barrels and upwards of $700 billion-worth of UK national wealth by revenue, notably in the prolific and still highly prospective west of Shetlands region but also in the central and southern North Sea, where new seismic and technical breakthroughs are facilitating renewed hydrocarbon promise, with enhanced and improved carbon reduction techniques, services and systems.

Of course, the noble Baroness, Lady Willis, and the right reverend Prelate are right that it is vital that the industry focuses on its impact on special marine environments. I am pleased that that will be debated in Committee as it is an exceptionally important point. It should be a major factor in determining where licences are issued and under what conditions. But the ideologically enforced stranding of the North Sea’s responsible hydrocarbon reserves, which I think is a misplaced tenet of net-zero ideology, will, paradoxically, be highly damaging to the UK’s decarbonisation efforts, which, as I have mentioned, I fully support.

The ironic and perverse outlook is based on the estimate of UK oil and gas demand. Increased demand is a reality, despite the very welcome transition measures which will support the development of renewables and the early green shoots of a functioning and growing nuclear programme, which, I might add, nobody believes is going to have a significant impact on the UK economy until 2035 and later—sadly; I wish it was much sooner. That is the reality and we have to look at the energy balance now and recognise that there is a balance between growing renewables and the need for firm power which comes principally through our own gas reserves but also imported gas.

The moves to diminish oil and gas production will inevitably cause a rapid increase in imports of higher carbon per barrel oil and gas from countries with much less responsible adherence to best practices, as well as causing an unnecessary reduction in home-grown production. If you combine that with the possible shutdown of the aged Rough storage field due to well integrity problems, we risk either energy and power shortages in the UK or an emergency fall back to coal. Genuine decarbonisation efforts by facilitating the seminally important UK/European coal to gas switch continue to be essential and I am sorry that that is not more clearly stated as an objective in the legislation we are considering.

This policy, based on the tenet that we proactively maximise our gas reserves to demonstrate irrefutably and boldly to Putin and his henchmen that not only will he never win the military war but he is comprehensively losing his westward-facing, gas-driven energy war on Europe, is welcome. Upholding national and global energy security has therefore now become an even more integral and vital part of the wider struggle against regimes determined to destabilise western Europe.

Failure to combine the Bill with a supportive tax regime merely disincentivises new investment, accelerates oil and gas production declines, accelerates the economic need to abandon maturing fields and thereby, paradoxically, reduces the net tax receipts for the Government. It costs potentially hundreds of thousands of skilled jobs and denies the UK tens of billions of dollars of badly needed inward investment into the economy. My noble friend Lord Lilley mentioned the key point: it stunts the supply but does not address the demand.

The still prolific and prosperous UK North Sea sector, with 3.5 billion barrels of already discovered but still to be developed reserves, could have a similar bright future to underpin the necessary transition to renewables by supplying us with firm power in the interim period. Rapidly increasing renewables without gas means intermittency in the energy system, which, in effect, leads to more energy insecurity, not less. Just look at California’s woes if you want to underpin this point.

In very few countries is oil and gas so important and coal so unimportant to the energy security and economic well-being of a nation than in the UK today. Oil and gas represents 75% of the energy lifeblood of the UK, a percentage which will remain robust over the new two decades, with gas gaining and oil failing. As I said at the outset, energy transition remains the most important point—focused on mitigating carbon emissions in the exploration, appraisal and production of oil and gas remaining paramount and new technologies and new renewables coming on stream.