Energy Bill
Debate between Lord Oxburgh and Lord Teverson(10 years, 6 months ago)
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Lord Oxburgh (CB)
My Lords, I support the amendment. The noble Baroness, Lady Worthington, is too modest. She has made it abundantly clear that clarity is needed in the legislation because, as the wording stands, simply part of an operating unit may be upgraded. I therefore hope that the Government can accept the amendment.
Lord Teverson
My Lords, I welcome the amendment because clarification is needed—and, indeed, I thought that the explanation given by the noble Baroness was very good. I would be very interested to hear the Government’s view on how this issue should be resolved, as it is clearly important for the way in which the industry moves forward.
Energy Bill
Debate between Lord Oxburgh and Lord Teverson
Lord Teverson
I absolutely agree that there are places for advisory boards. There are examples of where that works and I am a member of some advisory boards. However, they tend not to do quite what I believe this body is around to do. I accept much, although not all, of the analysis of the noble Lord, Lord Oxburgh. The issue is that we have to get a much better way of governing at department level. We probably have to reform how the Civil Service works in terms of corporate memory. I have spent much of my life in the private sector and my experience is that its corporate memory is probably far worse than that of government. Perhaps it is not true of some in the oil and energy industries, but certainly in many industries there is not a lot of corporate knowledge. Certainly, there is no more than there is in government departments.
It may have been more of an executive authority but in the rail industry, which perhaps has similar levels or timeframes for investment, the Strategic Rail Authority was brought into existence by the previous Government and abolished because it did not work in relation to departments. Ultimately, departments had to take control. Of course, we have now seen problems with franchising but I do not think that the SRA was the answer to that.
Another area in which I would criticise the detail of this amendment is that the list of areas it looks at avoids energy efficiency and demand management, which are fundamental parts of how we think about the economy. Although I agree that it could be varied in the way it is written, from the description of this committee, I worry that it will again look particularly at building or planning energy in terms of capacity and generating capacity. It is interesting and dispiriting that two weeks ago, when the National Grid asked for tenders for demand reduction and for the demand-side response to looking at the future possible energy crisis, there was generally a very negative reaction from the press and wider than that. That is exactly how we should look at this area. We should not necessarily look at planning for more and more plant, although that would be part of it, but look at the demand side as well.
As regards why we are in the situation we are, I suspect that we will get through it although I entirely accept that the margins are less than we would want them to be. Through the Climate Change Act and the whole area of the climate change challenge, we have changed direction quite substantially in what we expect our generating and our energy industries to do. With not a U-turn but certainly a 45-degree turn on what we expect from our generating industry, it does not necessarily surprise me that, through that policy change in areas where there are long gestation periods in investment and planning, we have this difficulty at the moment. That is not necessarily a function of the way in which government works—necessarily imperfect though it is.
My noble friend Lord Deben mentioned the climate change committee. To me, that is the most important committee in this area by far. It may not be a complete substitute and it clearly is not for the energy side, but the Government really need to take notice of it. On the broader agenda, the climate change committee as set up and put into legislation is a good way of doing it. In terms of infrastructure planning, the case is far from proven.
Lord Oxburgh
Before the noble Lord sits down, I am not clear from what he said whether or not thinks there is a problem. If he thinks there is, precisely what does he propose the Government do about it and on what timescale?
Lord Teverson
No, absolutely. First, this will not solve the problem that we have. There is not time to solve the problem that the noble Lord outlines to this Committee. As he said in his speech, given the timescales involved, we are already too late. What we are trying to do here is to mend the future. I think I said that what I felt should be done was not to add another layer but to fix the way in which the Government and the Civil Service work within departments. To me, that is the challenge, rather than putting a sticking plaster over the top.
Energy Bill
Debate between Lord Oxburgh and Lord Teverson
Lord Teverson
My Lords, I put my name to the amendment of my noble friend Lady Maddock. In three areas of the draft Bill there were major omissions—omissions as opposed to emissions. One such area, which we will probably come to on day 7, 8 or 9, is demand-side management. We have started to discuss decarbonisation. The Government have started to rectify both those omissions. The third area is fuel poverty. I will not go through the arguments again. As the noble Baroness, Lady Liddell, said, 4.5 million people are affected. The figure is slightly lower than the previous year for which statistics are available, but it is still atrocious for a civilised society that expects a certain standard of living and of life for its citizens.
The other area, which is slightly more contentious, is the excess number of winter deaths. The figure for the winter before last is estimated at 24,000. That is an even greater indicator of a failure of policy, and a failure to look after the citizens of this country. As the noble Lord, Lord O’Neill, said, the Green Deal is absolutely the right instrument, but it is taking time. I can see that the noble Lord is looking sceptically at me. However, the Green Deal will not rely on national budgets if we can make it work. It will be primarily privately financed and self-funding, so at the end of the day political decisions will be taken out of it. However, it still has to prove itself.
One area of the Bill that has to be strengthened—I am aware that this is a probing amendment—is the fuel poverty agenda. It is mentioned in this one line. This amendment would strengthen it. But the Government have to take this back, not just to the Department of Energy and Climate Change but to other departments, and really try to balance this change in legislation within a context of rising energy prices. I believe that it will bring down those rising energy prices in the future, but they are certainly going to be there in the short term. As has been said, rightly, they discriminate against those who are stuck with a completely electric household in terms of heating.
I look forward to hearing from my noble friend the Minister how the Government want to approach this as the Bill proceeds through the House. I hope that we can find a way in which this can be taken into account when this Bill goes on to the statute book.
Lord Oxburgh
My Lords, I, too, am extremely sympathetic to the objective of this amendment. But perhaps I am alone in not really seeing why fuel poverty is different from other kinds of poverty. For example, why do the Government not put one point on the rate of VAT on fuel and simply direct the proceeds towards dealing with fuel poverty as part of the general poverty issue?
The difficulty here is that we already have a complex Bill and a complex situation, and we are making it even more complicated if we try to solve a real and very important social problem at the same time. Unless there is something that I have not seen about this, I would much prefer to see this dealt with directly.
Storage of Carbon Dioxide (Inspections etc.) Regulations 2012
Debate between Lord Oxburgh and Lord Teverson(12 years, 3 months ago)
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Lord Oxburgh
My Lords, I declare an interest as president of the Carbon Capture and Storage Association. Given that geological formations do not respect international boundaries, are protocols in place to handle the quite significant likelihood that some of the proposed repositories will cross the border between Scottish waters and English waters? This is a problem which the oil industry faces and solves regularly, and it is simply a matter of ensuring that appropriate protocols are in place in this area as well.
Lord Teverson
My Lords, having read through these regulations and the Explanatory Memorandum, I find that most of my questions have been answered. I had not thought of the point about Scotland which has just been raised by the noble Lord, Lord Oxburgh, and I note that the Explanatory Memorandum states that this procedure fulfils the Hampton principles. I would like to be clear on that. The Explanatory Memorandum stated that this would require only one person for three days a week, and that that would probably be the same person who inspected oilfields. Does that mean that the regulatory authority is the same as the one that looks at oilfields, or is it a separate authority that uses someone from the other authority? It is important to understand what the Government's proposals are in that area.
I was also slightly surprised to see that there had been no consultation. Perhaps this is a minor area but it is always quite useful to learn from industry, and the directive will be three years old in April.
My other question perhaps falls outside the scope of the order. Is the safety of pipelines or other means of transport to the storage area covered by the directive or is it covered elsewhere? I would have thought that that was potentially more risky than the storage itself. Although carbon dioxide is not directly dangerous, if it excludes oxygen or air, it can cause death through overconcentration.
Lastly, I would like to get an understanding from the Minister. Inspection regimes are all very well, and the UK has a very high standard of inspection in these areas. What does he see as the smart areas of inspection of carbon dioxide storage? What are the things that will need to be looked at? Leakages are an obvious answer, but what work will go on to make sure that the inspectorate is active and forward-looking, and that it makes sure that problems do not arise rather than fixes them after they have arisen?
Energy Bill [HL]
Debate between Lord Oxburgh and Lord Teverson
Lord Oxburgh
My Lords, I, too, have some sympathy with the interest of the noble Lord, Lord Lea of Crondall, in proposing this amendment. However, I, too, do not feel that this is the way forward. This is a very big matter and requires very careful consideration. At this point, I think I have an opportunity to offend all political parties in the House by saying that within the energy industry there is bewilderment that pretty much all the political parties believe that energy poverty should be treated separately from every other sort of poverty at the expense of distorting our energy market and our energy costing. In the view of many outside, it would be much more sensible to let energy prices do what they must. It is inevitable that we go into a more expensive energy world and handle the whole poverty problem together.
Lord Teverson
My Lords, I, too, sympathise with a number of the themes that the noble Lord, Lord Lea, has brought forward, but I remind the House that this is Report stage and, to be honest, I find this amendment quite muddled. I find it very difficult to understand its detail or even what it is trying to achieve in terms of its words. I understand from the noble Lord, Lord Lea, what he is trying to achieve, but I am not even sure that if we put this into the Bill it would achieve that. Subsection (1) of the proposed new clause refers to a range of things including quasi-fiscal instruments. I do not know whether that is a technical Treasury term that the noble Lord, Lord Lea, has got from his friends in the Treasury, but I do not understand it.
I seriously do not understand what proposed new subsection (2) means. It seems to connect carbon budget periods, which as we know are five years, with annual assessments, and I am not sure what it is trying to do. The list in proposed new subsection (2)(a) to (c) exclude the industry that paid for my mortgage in the first 20 years—the road freight industry—inland waterways and shipping, and I am not sure that its purpose is comprehensive.
Proposed new subsections (3) and (4), again, come back to statistics that I think are generally available. It has not been difficult for me to find most energy statistics that I have tried to find.
I agree that we have an issue with the amount of money that ROCs and feed-in tariffs actually cost consumers, as my noble friend Lord Jenkin of Roding reminded us, and with the way in which these charges affect groups in fuel poverty differently. However, I honestly do not feel that this amendment achieves what we want to achieve within a reasonable understanding of what this amendment actually says. For that reason, I find it impossible to support it at this stage of the Bill.
Energy Bill [HL]
Debate between Lord Oxburgh and Lord Teverson(13 years, 3 months ago)
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Lord Teverson
My Lords, we come to a specific issue here, which is around one of the older renewable technologies in many ways—geothermal or, in this case, deep geothermal. I do not wish in any way to give noble Lords a lecture, but I would like briefly to summarise the position of geothermal energy. It is a tried-and-tested technology in many parts of the world. In the volcanic areas of our globe, hot water rises naturally—it does not need persuasion or drilling—and is used for heating directly or for generating. That part of the technology has existed for some time in places such as Italy, Japan, New Zealand and Iceland in particular. It is a fundamental part of electricity and power generation in those countries. It is also possible to have a variation where there is drilling, often down to five or 10 kilometres, with cold water pushed down and hot water coming out at the top. That is the clever bit—the bit that needs to happen. In the oil industry and other industries, drilling technology is pretty proven.
A great deal of work is taking place on geothermal in Australia, the United States and Europe to make the technology work. The good thing about it—this is where I will end my sales pitch—is that it is the one renewable technology that can produce large-scale electricity, but it is also consistent in its operation. It is not intermittent, as so many other of the renewable technologies—tidal, wave, solar and wind—can be, which is important. In many ways, the United Kingdom led the field in the 1970s and 1980s. Then, as happened with so many of these technologies, with the crash of oil prices the research stopped taking place and progress happened elsewhere in the world. Various bits of the technology are proven; it is highly desirable in its characteristics; and it is available in the United Kingdom, particularly but not only in the south-west, so it could be an important part of our renewable energy mix. Indeed, two planning permissions have been granted in Cornwall for geothermal stations of a smaller scale than the large ones that there can be. Visually, they have a small footprint and do not have great impact either.
However, as noble Lords will understand, one of the areas that must be tied up for exploitation of any energy resource is certainty for investors and the engineers who make these systems work. Elsewhere in the world, in Ireland next door, Germany, Australia and various other parts of the world, licensing regimes have been introduced. What should not happen is that if there is a strike and a well is made that produces hot water— 200 degrees plus is the optimum—someone in the next field should not be able to exploit that resource and that heat for themselves because they have not had the risk or made the investment for exploration.
The amendment would do one simple thing. It would give power to the Secretary of State to consult and then put into place within a certain time period, which I will come back to, a licensing regime for geothermal. The industry feels that one key part of the jigsaw is to allow investment with some certainty on the return, so that investments can be made.
The amendment refers to 18 months in terms of the licensing regime. When I tabled this amendment for the last Energy Bill I thought it should be two years, but now that these types of agreement have moved on, I feel that 18 months is perhaps the maximum. The industry feels that it could go through this process within a year. Since the industry has said that it can cope, I would prefer 18 months.
That is why the amendment is so important. It fits very well in the Bill because it has a whole area on renewable technologies. It is something that the United Kingdom still has an opportunity to lead on. That may be difficult because other nations have got further ahead at the moment, but it is an important technology. It works in other parts of the world and we should benefit from it in terms of meeting our own renewable energy targets—not necessarily up to 2020, although it may make a small contribution, but certainly beyond that. I beg to move.
Lord Oxburgh
My Lords, I am happy to support the amendment, to which I put my name, and I support everything that the Lord, Lord Teverson, just said. The Government have very challenging targets for renewable energy by 2020. They will achieve those targets only if there is sufficient private investment. Investment decisions depend on assessment of risk.
In the case of geothermal in this country, there is a really no doubt about the existence of the resource. Indeed, a couple of decades ago, I was co-leader of the group that produced the first geothermal map of the UK. The resource is certainly there. I declare an interest as a technical consultant to one of the companies to which the noble Lord, Lord Teverson, just referred.
We know that we have the hot rocks at depth. The real question is whether we have adequate technology to extract the heat from those rocks. Therein lies the uncertainty and the exploration risk. There is a good chance that we can do that, but if an investor is going to invest in this he really wants to see the risks minimised. As the noble Lord pointed out, after the demonstration of a successful well in one place, there is a real danger of someone else coming in and drilling nearby.
At an earlier stage in informal discussions, the Government’s position was that that could probably be managed through local planning consents, but I do not think that that is the case. Modern drilling technology allows you to drill in one place, maybe 10 miles away, and then turn your well horizontal and go into anywhere within a pretty wide radius. In other words, if we are really to give investors the kind of security which I suspect they will demand in order to support this kind of investment, we really have to have a licensing regime which effectively pre-empts others who come in later and have not made the primary investment from tapping in on the risky exploration work that the initial company has done. I am not sure whether this amendment is in the exact terms that we need, but there will not be significant investment in geothermal in this country, I believe, unless something along these lines is done fairly rapidly.
What we have to bear in mind is that capital moves between countries and that any company interested in investing in geothermal will compare the opportunities in this country with those elsewhere. For example, I believe that Ireland has legislation in place to give the kind of protection that we are asking for here. Ireland has comparable geothermal possibilities; the same is true in other parts of Europe. If we do not do this, the capital will simply move elsewhere and this contribution to the 2020 target will not be realised.
Lord Oxburgh
I am sorry. To repeat, 25 to 35 years is a plausible length of time for a field such as this to operate. There are various possibilities of rejuvenation, but it is too early to think of that.
The right reverend Prelate also asked whether there would be low-grade heat available as well. Yes, there normally is low-grade heat available after you have generated electricity. The aspiration is that a project such as this would wash its face commercially simply on the basis of electricity generation. If you can find a local use for low-grade heat associated with it, whether it is for agriculture or for district heating, that is an additional bonus.
Lord Teverson
I thank all noble Lords who have taken part in this debate. I should like to follow through on a couple of questions. The noble Lord, Lord Oxburgh, was talking about generation that was purely electricity or purely heat. If there is a demand for hot water, whether it be for market gardening or district heating, the most energy-efficient thing to do would be to use as much of it as you could for that purpose. This is primarily for electricity generation although you could theoretically have one or the other.
In terms of depletion, as I understand it—the noble Lord, Lord Oxburgh, knows about it far better than I do—that is a conservative estimate. It could be argued that there should be no depletion over time on very deep exploration; there is a chance for rejuvenation. The industry is rightly conservative regarding those estimates because ultimately the earth is being heated from the core upwards. Cornwall and Devon are particularly good in this respect because there is a layer of limestone over granite, which makes it a particularly good cocktail. I have probably got that slightly wrong. I see from the noble Lord, Lord Oxburgh, that I have. That is what someone from the industry told me, but there we are. It is not just Devon and Cornwall—this relates to other areas as well.
On remuneration, the two-ROCs regime is already in place, as the Minister said. The industry would like to look at the renewable heat initiative in terms of the hot water that comes out. That is probably an area of future discussion.
I am very encouraged by the Minister. I know that these things are not necessarily easy to achieve. Other countries, particularly in Europe, have these systems in place and they are the sine qua non. Without them, you will not get development of this technology. That is why it is important to get on with it. I would have thought that setting up a licensing regime from fresh would be a civil servant’s heaven—that there would probably be people queueing up in DECC to invent the British geothermal licensing system. That clearly has a cost in people power, but there is no ongoing cost to the department afterwards. Indeed, I hope that in due course revenues will come in from this technology, as in oil or whatever.
I am encouraged by the Minister’s remarks. I am sure that this will be a point of discussion between now and Report, and on that basis I am pleased to withdraw my amendment.