Sustainable Aviation Fuel Bill

Debate between Lord Ravensdale and Lord Hendy of Richmond Hill

Committee stage
Wednesday 10th December 2025 Lords Chamber

[The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)]

My Lords, I thank noble Lords for this group of amendments. Amendments 1 and 6 would require the Secretary of State to enter into at least one revenue certainty contract with a SAF producer that is using power-to-liquid technology. The Government recognise the potential that power-to-liquid fuel may have. These fuels will have high greenhouse gas emissions reduction potential, with a low risk of environmental issues such as land use change.

However, adopting these amendments would limit the Government’s allocation flexibility by setting criteria in advance, which could ultimately reduce value for money in the contracts agreed. It is important that the allocation strategy is able to reflect different technologies as they develop. The Government will establish a fair and transparent process to assess each project’s key costs, benefits and risks. This process will be developed over the coming months and will involve consultation with stakeholders.

The decisions on contract allocation will be determined during the contract allocation process. The noble Lord, Lord Moylan, is right that we do not want perpetual subsidy, but we have to establish over time the opportunity for different technologies to develop.

The noble Lord, Lord Moylan, is right in his remarks about contract lengths; there is no humiliation there at all. The length of contracts is not set out in the Bill, and the amendments other than his Amendment 2 would extend the time in which the contracts could be entered into, not the length of the contracts themselves. We are engaging a range of stakeholders on contract length because it obviously makes sense to talk to the market about that. No final decisions have yet been made.

Contracts issued under similar schemes are generally for a period of 10 to 15 years, which reflects a standard debt repayment period. Limiting the contract to 10 years may not be sufficient to attract the investment necessary to construct these plants, and I contend that it is premature to decide the contract length until the market has advised what it would need to construct the plants that would make the fuel.

The Bill allows the Secretary of State crucial flexibility to adjust any standard contract length in between allocation rounds in the light of emerging market evidence. It also preserves optionality for the potential needs of emerging pathways—for example, nuclear-derived SAF. The addition of a no-fault break clause would, of course, undermine the certainty provided by the contract and seriously risks losing the investor confidence that the Bill aims to increase.

In respect of the point made by the noble Lord, Lord Harper, the learning from the energy market is that the contracts need to be long enough to secure the investment that we are talking about. The noble Baroness, Lady Pidgeon, asked what the right contract length is. I think we have to establish that by talking to the market, so it is premature to determine it now.

On the contrary, Amendment 3 seeks to extend the time in which revenue certainty contracts can be allocated from 10 years to 20 years. The purpose of the Bill is to kick-start the industry in this country. The revenue certainty mechanism is intended to be a time-limited measure and to stimulate the early market. Once investors have confidence in the market price and the first-of-a-kind technology has proved itself at commercial scale—to the point made by the noble Lord, Lord Moylan—the mechanism should no longer be needed.

The Government contend that Amendment 3 is not the right way to go. However, if the Government find in due course that it is necessary to extend the provision, Clause 1(8) will allow the Secretary of State to extend the period by which contracts can be allocated in five-year increments by making regulations by the affirmative resolution, so that Parliament can take a view about the applicability of that extension at the time that it is proposed.

Amendment 5 from the noble Lord, Lord Ravensdale, seeks to include a contract allocation framework in the Bill. The Government will need to carefully consider and work with industry on the specifics of contract allocation. This will ensure that there will be a fair and transparent allocation process that evaluates the key costs, benefits and risks of each project. This will be developed over the coming months and will be rightly subject to consultation with stakeholders. The amendment as it stands would reduce the Government’s leverage in negotiations by setting criteria in advance and limit the ability to secure the best value for money in the contract signed.

The noble Lord, Lord Ravensdale, referred to the Energy Act 2023. The allocation framework was included in the Energy Act 2013 and the Energy Act 2023 to ensure that the Secretary of State could effectively regulate the activities of an allocation body where one is appointed under that legislation. In this Bill, the Secretary of State will carry out the allocation process, so it is not necessary to set out an allocation framework to govern the activities of an allocation body.

I hope that my explanations have answered the concerns and that noble Lords feel able not to press their amendments.

[Lord Ravensdale (CB)]

The Minister’s response to Amendment 6 is appreciated, but there is a risk that if the amount of third generation SAF or power-to-liquid that needs to be produced is not set out, then the Bill would not, in effect, align with the SAF mandates, which have clear percentages on power-to-liquid fuel requirements. Does he accept that there is a bit of a gap between this legislation and delivering the SAF mandates, in that one does not support the other?

[Lord Hendy of Richmond Hill (Lab)]

I thank the noble Lord for his intervention. If he is willing, I will take that point away and contemplate it further.

[Lord Ravensdale (CB)]

I thank the Minister. This has been an excellent short debate and the noble Lord, Lord Moylan, and the Minister, certainly provided the clarity on contract length that we were missing. I was pleased to hear that the allocation process will be fleshed out through a consultation. For now, I beg leave to withdraw my amendment.

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[Lord Ravensdale (CB)]

My Lords, I rise briefly to support Amendment 18, to which I have added my name, and the other amendment in this group. As has been said, it is important for the Government to consider setting out the definitions in the amendments of what manufacture means and how it is going to be supported in making sure that this is all UK-based. As the noble Lord, Lord Harper, said, that is the point of the Bill.

[Lord Hendy of Richmond Hill (Lab)]

I join the noble Earl, Lord Russell, in sending the noble Lord, Lord Grayling, our good wishes for him and his family. I congratulate the noble Earl on his recent nomination for a life peerage. That is an odd sentence to say, but there you go. The noble Baroness, Lady Jones, has got lucky by signing this amendment, as she will shortly hear.

The revenue certainty mechanism is intended to support only eligible SAF plants in the UK, and this will be ensured through the allocation process. This Government are committed to supporting the UK SAF sector through our advanced fuels fund, which is supporting projects across the UK, and through the revenue certainty mechanism. The UK SAF sector will create jobs and growth opportunities in the UK, help secure a supply of SAF for UK airlines and enhance energy security.

On Amendment 4, SAF projects that use imported precursors still offer significant economic benefits to the UK because of the investment needed to construct them and the employment that they would provide. I fully recognise the strong points made by noble Lords this evening around UK production being in the Bill, and I will seriously consider this point ahead of the next stage of the Bill. I will invite noble Lords who have spoken tonight—or rather those who tabled the amendments—to meet me and my officials ahead of the next stage. I therefore invite the noble Lord to withdraw the amendment.

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[Lord Hendy of Richmond Hill (Lab)]

My Lords, the noble Lord, Lord Moylan, asked some questions in relation to Amendment 19 in his closing remarks. I will write to him and provide a copy to all noble Lords about standing by the cost-benefit analysis on ticket prices and how we can control the cost to passengers by controlling costs through the allocation process. For good measure, I will also clarify the phrase “per year”.

On Amendment 21, I understand the desire of the noble Lord, Lord Ravensdale, to exclude crops from the revenue certainty mechanism. Several other noble Lords also spoke about their concerns on growing crops for purposes other than food at Second Reading. The noble Earl, Lord Russell, just now, was realistic about some of the practicalities of doing so. The sustainability criteria in the revenue certainty mechanism will align with the criteria in the SAF mandate.

As I mentioned before, there will be a call for evidence shortly, focusing on the potential benefits, risks and trade-offs of using crops in SAF production. The scope of the call for evidence will include different types of crops, including feed crops, dedicated energy crops and cover crops. While this call for evidence will neither propose any changes to the SAF mandate nor signal the future direction of the mandate, we would not want to expressly exclude SAF derived from relevant crops from the scope of the RCM if they might be included in the SAF mandate in the future.

We will, of course, continue to engage with industry on these issues. I echo the words of the noble Earl, Lord Russell, that this is developing and things will change over time. We need to understand it, and that call for evidence is part of that process.

The noble Lord, Lord Ravensdale, and the noble Earl, Lord Russell, referred to nuclear eligibility. We will match that in the SAF mandate. We are already supporting nuclear through the advanced fuels fund, which we believe to be right.

Turning to Amendment 22, I agree with the noble Lord, Lord Moylan, that HEFA SAF—I hate these acronyms—has already overcome many of the barriers to investment. For that reason, in our response to the first consultation on RCM, we announced that HEFA SAF projects will be excluded from the first round of contract allocation. I hope what I have said is sufficient to persuade the noble Lord to withdraw his amendment.

[Lord Ravensdale (CB)]

Just to clarify what he said, could the Minister just confirm that nuclear-derived fuels are eligible under the SAF mandate and that they are also eligible under the revenue certainty mechanism, please?

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[Lord Hendy of Richmond Hill (Lab)]

In answer to the noble Lord, I will not do that at this stage, but I will consider what he has just said.

[Lord Ravensdale (CB)]

I thank noble Lords for this short debate. In terms of eligibility of crop-based biofuels, as the noble Earl, Lord Russell, said, this is a journey we are going on and, absolutely, crop-based biofuels are part of that journey. The noble Lord, Lord Moylan said, and made the case quite strongly, that we have not heard any rationale for why those fuels should specifically get support under the revenue certainty mechanism, but I look forward to those further conversations. We have had the clarification on nuclear-derived fuels. On that basis, I beg leave to withdraw the amendment.

Railway 200

Debate between Lord Ravensdale and Lord Hendy of Richmond Hill

Thursday 31st October 2024 Lords Chamber

[Lord Hendy of Richmond Hill (Lab)]

It is a great pleasure to see the noble Lord in front of me. He was material in moving this project on at an earlier stage, for which I thank him very much. I had not caught the issue that he raises and my best course of action is to go away, inform myself, and then see what can be done about it.

[Lord Ravensdale (CB)]

My Lords, I declare my interests as set out in the register. The Midlands Rail Hub project is eagerly awaited by stakeholders right across the region, not least in addressing those east-west links in the region that have been such a problem in the past. I heard no mention of the Midlands Rail Hub in yesterday’s Budget. Can the Minister update the House on progress within the department on this vital project?

[Lord Hendy of Richmond Hill (Lab)]

It is as with so many other projects; this Government found when they took office a very large list of projects with a much smaller funding envelope to deliver them. The Secretary of State for Transport has commissioned a full review of all transport infrastructure projects. This needs to be done properly. As I have said before here, everything you do with the railway lasts 150 years. When we have finished reviewing all those projects we will have a plan to go forward to invest in the best possible way.