Vulnerable Households: Energy Costs
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Lord Callanan (Con)
I am interested to see the noble Lord’s figures on that. Various amounts of support are being imposed by different Governments, at different levels and in different ways, so there is a mixed picture across Europe. I know that the German Government, for instance, are putting a huge amount of money behind bills support, as indeed are the UK Government. I struggle to believe that bills are double what they are in Europe.
Lord Teverson (LD)
My Lords, one reason we have very high energy prices, obviously apart from Putin himself, is that we are still very reliant on gas for heating and the generation of electricity. Should not one of the tasks of Ofgem be to persuade the Government to make sure that they have as one of their prime objectives the decarbonisation of our electricity system, not least to make sure that we have connections into the grid—it is a crisis at the present moment?
Lord Callanan (Con)
Ofgem does not need to persuade the Government to do that. We already have decarbonisation of the grid as one of our prime objectives. The noble Lord is right that we still rely very heavily on gas. It is a falling proportion of our generation, as we roll out more and more renewables, but it is a transition. We are advanced on that transition but we clearly need to go faster.
Energy Bill Relief Scheme (Non-Standard Cases) Regulations 2023
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I beg to move that the Energy Bill Relief Scheme (Non-Standard Cases) Regulations 2023, which were laid before the House on 11 January, be approved.
The EBRS regulations require licensed suppliers to discount their prices for the supply of electricity and gas to non-domestic consumers. Licensed suppliers provide the vast majority of electricity and gas supplied to non-domestic customers but some UK businesses do not receive their energy in this way. The Energy Prices Act 2022 allows us to provide financial assistance for energy costs using non-legislative schemes. On 9 January 2023, the EBRS non-standard customers scheme opened for applications. This is a grant scheme that allows payments to be made to those non-domestic customers who receive an unlicensed supply of electricity or gas that has been drawn from the public electricity or gas grid over the period from 1 October 2022 to 31 March 2023. The regulations we are discussing today are ancillary to the non-standard customers scheme.
The businesses eligible to benefit from the scheme include energy-intensive critical national infrastructure. They have been exposed to high energy costs in the same way as those who have benefited from discounts under the EBRS regulations. The scheme enables them to receive relief at a level comparable to the customers of licensed suppliers. We expect businesses to begin receiving support under the scheme this month; this will be applied retrospectively. The EBRS non-standard cases regulations are essential secondary legislation needed to support the operation and delivery of the EBRS non-standard cases scheme. I pay tribute to the work of the Secondary Legislation Scrutiny Committee for reviewing these regulations and note that it has no comments.
Let me turn now to the detail of the regulations for the benefit of the Committee. Identifying who is eligible to receive payments under the scheme is not always straightforward. The regulations provide the Secretary of State with powers to obtain information from those involved in the often quite complex supply chains through which this energy flows, so that we can be sure that the right businesses are admitted to and benefit from the scheme. They imply some terms into the contracts between those involved in these supply chains to help the scheme work more smoothly.
Finally, as in the case of all the schemes put in place under the Act, they provide for certain intermediary businesses—again, often landlords—that receive a benefit under the scheme but which in turn provide energy to others, often in another form, such as heat, and pass a fair share of the benefit that they receive on to their end-users. The regulations also make provisions for pass-through requirements. The energy provider must calculate and pass through a just and reasonable amount of the benefit to end-users as soon as reasonably practicable.
These regulations set out the information which relevant intermediaries are required to provide end-users about the scheme benefit, including the amount and supporting details about how they have calculated this in a just and reasonable manner. Where the energy provider fails to effect a pass-through, the amounts are recoverable from the energy provider by the customer as a civil debt.
To accompany the regulations, we have published a suite of scheme terms and non-statutory guidance, which provides further detail on how the scheme for non-standard cases works. Given the urgency of ensuring that organisations receive the support they need this winter, we have not launched a formal consultation. Instead, we launched a call for evidence on 17 November requesting examples from organisations that are unable to access the EBRS because they are non-licensed suppliers of energy or supply energy to businesses in non-standard ways.
We have also had informal consultation with energy providers, and their energy-intensive customers, on the scheme terms and guidance. My department will continue to monitor this instrument following its implementation, including any feedback from stakeholders, and will of course review as necessary.
Support delivered through the scheme provides relief on the wholesale element of customers’ gas and electricity bills. Customers eligible for support under the scheme are exposed—sometimes very exposed—to high energy costs. In some cases, relief from those costs may well help to avoid firm closures and potential redundancies. More broadly, by reducing industry’s energy costs, the scheme should support economic growth and limit inflation.
In conclusion, the EBRS non-standard customers are a source of critical support for non-domestic customers in the UK, particularly those in energy-intensive industries, many of which are essential to our national infrastructure. I emphasise that the measures in these regulations are crucial for the effective operation of the non-standard cases scheme. The scheme complements the existing large-scale support that the Government are providing during the energy crisis. On that basis, I hope that noble Lords will support these measures and their objectives and I commend these regulations to the Committee.
Lord Teverson (LD)
My Lords, again, this instrument came into force on 12 January and we are now more or less into February. Can the Minister remind us when the scheme ends, because we must be getting quite close to that?
I have only one question on this, and I will not ask the one about prosecution, because these are large amounts of money; I would have thought it was more important. According to the Explanatory Note on page 11,
“Regulations 3 and 4 provide the Secretary of State with a power to obtain information about the supply of gas or electricity to persons who are or may be eligible for assistance under the Scheme.”
I am interested in whether the Minister’s officials have done that, and how they found it.
Lord Lennie (Lab)
My Lords, this requires energy providers to share information with the Government, such as meter readings and contract agreements, to allow BEIS to ensure that appropriate relief can be passed on to businesses that are not eligible for the energy bill relief scheme because their energy is supplied by the grid, not from a licensed supplier. The current energy bill relief scheme, announced in September, comes to an end in March 2023. It supports businesses and public sector organisations such as schools and hospitals, and so on, by providing the discount on wholesale gas and electricity prices.
First, this instrument applies only until March 2023; it has been in effect since September without this information. How much relief has not gone to the relevant businesses in this time period? What impact will this error have had on these businesses and how long will it take the Government to gather this information, analyse it and enact the required changes?
The Government have announced a new energy bills discount scheme, the EBDS, from April 2023 to April 2024 for eligible non-domestic customers in Great Britain and Northern Ireland. Is the error that occurred in the original scheme now fixed so that, from day one, the EBDS will be fully effective?
Lord Teverson (LD)
They are not even fined; they just get the money back plus the interest.
Lord Lennie (Lab)
I agree; there is no penalty at all. They just have to pay back the money to the individual that they should have paid in the first place, plus a bit of additional assistance.
Energy Bills Support Scheme and Alternative Fuel Payment Pass-through Requirement (Northern Ireland) Regulations 2023
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the Energy Bills Support Scheme and Alternative Fuel Payment Pass-through Requirement (Northern Ireland) Regulations 2023 were laid before the House on 11 January 2023.
Throughout this winter, the Government have responded rapidly to the unprecedented rise in energy prices. This includes introducing emergency legislation on energy support. The Government’s support package has protected and will continue to protect households and non-domestic consumers across the United Kingdom.
In December, the Government announced details of the merged delivery of the energy bills support scheme, EBSS, and alternative fuel payment, AFP, in Northern Ireland. Householders in Northern Ireland have already received or will soon receive £600 in a single payment for support with their energy bills. In recognition of the high prevalence of alternative fuel usage in Northern Ireland, the AFP will be delivered to all domestic households in Northern Ireland. The total of £600 is composed of £400 of EBSS, which provides support for the energy costs of all domestic households, and the AFP, which provides an additional £200 of support.
To deliver the scheme, in December the Secretary of State made a direction pursuant to Section 22 of the Energy Prices Act. This placed requirements on Northern Ireland electricity suppliers to provide this crucial support to households this winter. Delivery has commenced and households are already benefiting. We expect the vast majority of eligible households to have benefited by the end of February.
Turning to the pass-through requirements, these regulations will place a legal obligation on intermediaries to pass any benefits received through the schemes to end-users. This will help ensure that the energy support is received by the intended beneficiaries. These regulations have been created under the Energy Prices Act 2022. They are essential secondary legislation to fully implement the schemes.
The regulations are modelled on the pass-through requirements for other energy schemes, such as the EBSS in Great Britain. In that, we are not waiting for intermediaries to act on their own accord; we are legally requiring that they pass on the financial benefit to end-users.
An intermediary is any individual who is party to a domestic electricity contract, has a domestic electricity meter and is the recipient of government energy support. This group includes landlords. An end-user is an individual who consumes the energy and pays for this energy usage. This includes tenants. The regulations also outline when and how intermediaries should communicate with end-users about information regarding pass-through of benefit from the schemes.
The enforcement approach for EBSS AFP NI is consistent with other support such as the energy bills support scheme in Great Britain and the UK-wide energy price guarantee. Namely, if the intermediary does not pass on the benefit, the end-user could pursue recovery of the benefit as a debt through civil proceedings. Should a court rule in the end-user’s favour, they would be entitled to the payment plus interest. The interest is set at 2% above the Bank of England’s base rate.
The Government continue to ensure that the intermediaries and end-users are clear on their obligations and rights. In particular, we have published guidance on GOV.UK to help support intermediaries to discharge their obligations. There are also template letters to support tenants, should they wish to raise concerns with their landlords about their energy bills and the pass-through.
I thank the Secondary Legislation Scrutiny Committee for its view on these regulations. I have noted that its concerns remain the same as those it previously raised on the pass-through requirements of the energy bills support scheme in Great Britain. The committee’s concerns relate to the definition of “just and reasonable”, and to an “inequality of arms” and how that affects vulnerable groups.
The energy market is complex. There is a vast range of contracting structures relating to the supply, resale, provision and charging of energy. This means that there are many different circumstances for how energy can be consumed. That is why it continues to be important that the regulations can account for the numerous configurations of an intermediary/end-user relationship. It is highly risky to draw a narrow and limiting definition which could result in some intermediaries falling outside the pass-through requirements. By requiring landlords to pass on the financial benefit in a just and reasonable manner, end-users will be treated fairly and lawfully.
The fact that the regulations require intermediaries to pass on the amount in a just and reasonable manner means that situations where there could be an inequality of arms are also covered. For example, if a landlord owns multiple properties and receives the scheme benefit on them all, he or she must divide and allocate the amount among their end-users and inform them how they have calculated the financial benefit.
The committee’s other concern, about vulnerable groups, is of course valid. The Government are also making sure that all groups in scope of the pass-through regulations, including vulnerable groups, receive what they are entitled to through our engagement with those impacted. Over the past several months, we have engaged with consumer groups, landlords, housing associations and charities to disseminate communications and to underline the obligations placed on intermediaries and the rights of end-users. Our extensive engagement activities include organisations in Northern Ireland.
In conclusion, these regulations are essential to ensure the effectiveness of the energy bills support scheme and the alternative fuel payment Northern Ireland scheme and that the support reaches the people it is intended to help. Without the regulations, there would be a risk that intermediaries did not pass on the £600 benefit in a just and reasonable way, leaving some households in Northern Ireland exposed to high energy costs. I therefore commend the regulations to the Committee.
Lord Teverson (LD)
My Lords, I thank the Minister for going through yet another of these SIs. I am sure he will not mind if I ask him some just and reasonable questions about it.
First, I note that the measure came into force on 12 January, so it is already in place. Obviously, it is administered, to a degree, by the energy companies, but who is policing it? Is it the Northern Ireland civil servants, or is it BEIS directly? I would be interested to understand that. If it is Northern Ireland officials, are we confident that sufficient management governance will take place from here?
I welcome that the Government and the department have spoken at length to consumer organisations in Northern Ireland. I am interested to understand whether there have been any complaints yet of end-users not receiving this when they feel that they should have, to get some idea of how well it is working.
The Minister talked about the method of civil law, and having fines—plus, generously, an interest-rate benefit if people manage to get through a whole court process. We have said before that it is very unlikely that much of that would happen, but, if an intermediary ignored the need under this legislation to pass on those payments, would the Government have the ability to prosecute that person? I can imagine there being a certain number of landlords who will just think, “No one’s looking at me, there’s not a lot of publicity about this, I’ll just keep the money”. I would be interested to understand whether there is, at the end of the day, a criminal long-stop prosecution ability in terms of fraud and so on. Also, will the Minister say how many more SIs around these schemes are still to come?
Lord Lennie (Lab)
My Lords, I thank the Minister for introducing this scheme. If he feels a bit of déjà-vu, it is because we have already been here. We discussed this on the UK scheme. This scheme is to ensure that support provided to intermediaries on behalf of the end-user in the energy bill support scheme and the alternative fuel payment in Northern Ireland must be passed to the intended recipients. This is welcome and important, but there are questions about what difference the instrument will make to intermediaries if they do not do it.
The Explanatory Memorandum states:
“Relevant intermediaries are any individual that is party to a domestic electricity contract … and passes on the costs of the energy supplied under this contract to an end user of the energy supplied … Intermediaries should pass on the discount irrespective of how the end user pays for their energy use … If an intermediary does not pass through the whole of the scheme benefit provided to them, then they must demonstrate to the end user that the amount they are passing on is just and reasonable, including taking into account the extent to which the intermediary’s charges to end users reflect the increased cost of energy as a result of the energy crisis.”
The Minister said that intermediaries include landlords. They do indeed, but they also include sublets, student accommodation, social housing providers, local authorities, site owners, site managers, marinas for onshore power, combined heat and power operators, electric vehicle charging operators and other residential building managers. It is possible for an intermediary also to be an end-user because they can live in the scheme that they manage. Given the variety and range of intermediaries and the complexity of this calculation, will it have any impact on the number of intermediaries that do or do not pass the benefits through?
The Explanatory Memorandum also states:
“The intermediary must, within 30 days of a scheme benefit being provided, provide information to the end user in writing ... The intermediary must ensure the end user receives the pass-through amount as soon as reasonably practicable ... Where an intermediary fails to effect a pass-through to which an end user is entitled, that end user may recover the amount from the intermediary as a civil debt.”
How many end users will be aware of this? How many will know about this scheme at all? If I am a landlord, is it worth the risk of not passing it on and sitting and waiting to see what happens? If I do not get any orders to justify, I can just keep the funds. It is a small amount of money to a court—a maximum of £600—but to a landlord who may have multiple lettings, it can be a considerable amount of money. Do the Government expect end users will do this for £600? Will fees make it not worth while for them to do it? How will intermediaries be disincentivised from taking this gamble? There is no penalty if you are found not to have passed on the money. Intermediaries are just ordered to pass on the funds in the scheme, plus 2% above interest rates. It does not seem to be a huge gamble that the intermediary might be taking. Will the Government not be enforcing this in any way? As the SLSC said, there is inequality of arms. It almost encourages intermediaries to take a chance, and the victims are the tenants and the end-payers of the scheme.
Lord Teverson (LD)
I wish to comment on the Minister’s reply. It seems just a little supine that the only threat to intermediaries and means of enforcement is their tenants having to go through a civil court process for a fairly small amount of money. To me, that seems to have no consequence whatever. I have that concern but, as the Minister has explained, that is the situation.
Prepayment Meters
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
Well, I say to the noble Baroness that the Government recognise the importance of protecting customers, including those on a prepayment meter. This weekend, the Secretary of State set out a five-point plan on prepayment meters. He wrote to energy suppliers, calling on them to take every possible step to support consumers in difficulty. The Government want to see much greater effort from suppliers to help consumers who have payment problems, including offers of additional credit, debt forgiveness or tools such as debt advice. It is worth bearing in mind that the licence conditions set out that forcible prepayment installation should happen only as the absolute last possible resort.
Lord Teverson (LD)
My Lords, there is an irony here when it comes to prepayments, in that those who are worst off have to pay more because prepayment customers pay heavier tariffs than those on direct debit or other means of payment. Surely, this is a fundamental unfairness and one that creates even greater fuel poverty. Should there not be regulations to equalise the costs to consumers?
Lord Callanan (Con)
I say to the noble Lord that prepayment customers do not pay higher tariffs than other customers. They pay slightly more because of the cost of servicing prepayment meters. It is an important distinction. If we were to equalise the cost, that would mean that other customers would pay more to service that, and many other customers in fuel poverty are on credit meters—so I am afraid that there is no easy answer to this problem.
Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, these regulations were laid before the House on 6 December 2022. We have already passed legislation concerning the energy bill relief scheme pass-through requirement for heat suppliers, which ensures that benefits from the energy bill relief scheme, known as the EBRS, are passed through to end consumers on heat networks. This legislation also provides for a route to resolve disputes between consumers and heat networks on these pass-through requirements.
This statutory instrument amends the pass-through regulations, introducing a requirement on heat suppliers to send a simple notification to provide information to the Secretary of State by 6 January 2023. This information, which includes heat suppliers’ names, business addresses and contact details, will be shared with the energy ombudsman and the Consumer Council for Northern Ireland to support their handling of domestic and micro-business consumer complaints. This information will also be shared with the Office for Product Safety & Standards—the OPSS—for enforcement purposes.
The SI strengthens the OPSS’s powers of enforcement, enabling it to request information from suspected heat suppliers to determine whether they fall within the scope of the regulations. The OPSS may also impose existing civil sanctions, including a monetary penalty on heat suppliers who fail to comply with the requirements to notify, join the redress scheme or provide information. The monetary penalty has been modified, providing for a maximum of £5,000 to provide an effective deterrent for non-compliance.
The SI also amends the existing regulations to reduce the administrative burden on heat network companies, removing the requirement for heat suppliers to provide information about the calculation of the benefit when they first notify end-users about the scheme, while retaining the requirement to provide these calculations in the next bill.
The EBRS and the corresponding pass-through regulations have been introduced as a critical component of support for consumers on heat networks and complement other support that the Government are providing with energy and the cost of living. We expect that the notification requirements will facilitate the consumer complaints handling process and that the strengthened enforcement powers will result in a higher number of heat suppliers passing on the EBRS discount to their customers. I commend the regulations to the Committee.
Lord Teverson (LD)
My Lords, I thank the Minister for going through this piece of secondary legislation, which concerns what is clearly an important subject: making sure that the money that is in effect discounted from bills gets through to the final consumer.
It is probably unfair to say this but, having read through this instrument, I would be amazed if the dispute process is ever used or anybody ever gets round to being able to take advantage of it. To be honest, a maximum fine of £5,000 hardly seems a great deterrent to anybody, but there we are; I suspect it will be not a great deal of money in terms of the P&L account of any of these providers, so I am rather surprised that it has been pegged at that amount.
The thing I am really interested in is that, as I read it, a core part of this piece of legislation is finding out the contact details of heat suppliers. If we do not know that information, how do we get in touch with the suppliers to find it out? I do not understand that. Given the fact that this measure was supposed to have happened by 6 January, as this is all in retrospect, clearly this has happened; I am just interested to understand from the Minister whether the Government have had good responses and replies from everybody. How do they know that everybody has replied? I would be interested to understand that.
The only other area I want to probe—the Minister will forgive me, as I should clearly know this—is the Office for Product Safety & Standards, because I had never heard of it before. I am sure it is a well-known organisation in certain parts of the sector, but I am interested in briefly understanding to whom it reports, its status and whether it is tooled up to do this work effectively. However, I thank the Minister, as this is clearly important secondary legislation and I support making the scheme effective.
Lord Callanan (Con)
I thank both noble Lords for their valuable contributions to this brief debate. The Government have put in place robust measures to support consumers in response to the energy crisis. For heat network consumers these measures include the EBRS—energy bill relief scheme—or alternative funding for those without a domestic electricity meter, and the energy price guarantee for electricity. These schemes are up and running, shielding heat network consumers and countless others from excessive energy bill increases this winter.
The measures in today’s SI continue this work by strengthening the legal framework for ensuring that cost reductions from the EBRS received by heat networks are passed on to heat network consumers, leading to immediate short-term benefits to consumers over this winter. This SI results from wide-ranging engagement with industry, including trade associations, heat suppliers and consumer groups in the sector, and ensures an approach which works for both consumers and businesses. The changes are based on practicalities, meaning consumers will be informed of key information without placing an undue burden on heat suppliers.
Turning to the specific points raised by the noble Lords, I start with the noble Lord, Lord Teverson, who asked the obvious question: great minds think alike, as it is the same one I asked when I was introduced to this statutory instrument. How do we know that we have received a good response, as the deadline has already passed, and that everyone has replied? The figures are that, as of last week, we have received notifications from over 2,800 heat suppliers. Previous data obtained from notifications collected under the Heat Network (Metering and Billing) Regulations indicated that there were approximately 2,600 heat suppliers in 2018. We therefore judge that heat supplier engagement with the EBRS pass-through notification form has been good.
Of course there are some enormous heat networks, which everybody knows about, but also some quite small heat networks. Many developers just develop a block of flats, install a heat network and then subcontract out its management to a secondary company—some with great success and others with not such great success. Many people do not realise that they are on a heat network until they have already moved into the property, because it has elements of monopoly about it. If the noble Lord had been present in the debates on the Energy Bill, he could have discussed the fact that we are introducing powers to regulate heat networks, which will be given to Ofgem. We have been having debates separately with the noble Lord, Lord Teverson, and others on that but at the moment the sector is essentially unregulated, which has caused problems in some areas. There are some very bad examples of networks, which we will attempt to rectify.
The noble Lord, Lord Teverson, also asked about the role of the OPSS in ensuring enforcement, which was similarly raised by the noble Lord, Lord Bassam. The OPSS already had a role to receive notifications from heat suppliers and is therefore a natural fit. Notifying is actually a simple process, which should take about five minutes to complete. We would press any heat network suppliers which have not already notified—from the figures, we think that the vast majority have—to do so as soon as possible to ensure the avoidance of enforcement action. Again, all the big ones were known anyway and have complied. It is possible that there might be an odd mansion block or small block of flats somewhere, or some remote properties, that have not yet notified but we think the vast majority have.
If the supplier has not submitted its notification by 6 January or within 30 days of beginning operations, or for any new heat suppliers that began operating after 7 December last year, the OPSS may issue a notice of intent which makes clear the required actions and gives the business the opportunity to become compliant with the regulations. Should the heat supplier then continue to fail to do so, the OPSS may issue a notice of compliance, which sets a final deadline for the supplier to submit its notification after which point, if it is still non-compliant, it may be issued with the penalty fines that I referred to earlier. If the heat supplier does not engage with the ombudsman, or the Consumer Council in Northern Ireland, customers can recover the benefit that they are owed as a civil debt.
In response to the questions asked by the noble Lord, Lord Bassam, about why we are having the debate only after the notification window has closed, these regulations came into effect the day after they were made, on 7 December. This debate has no real bearing on the notification window but is to give time for parliamentary scrutiny and to ensure that this affirmative SI, as it was, does not now fall. We thought the “made affirmative” procedure was appropriate, given the time-sensitive nature of this work. Customers need support as quickly as possible, so ensuring prompt EBRS pass-through is important to provide that support. That underlines the rationale of running the notification window from the earliest possible date after the regulations were made.
The noble Lord, Lord Bassam, also asked a very reasonable question about why we are amending relatively new SIs. The answer is that following the initial regulations, which were made very rapidly given the urgent nature of the problem, we have taken on board feedback from the sector to ensure that this final approach now works for both businesses and customers.
The noble Lord also asked why the definitions of intermediaries have been amended. The amendments distinguish obligations that do not apply to an intermediary who is also an end-user. That could be a landlord, for example. The requirement to join the redress scheme will not apply unless the intermediary is provided with a scheme benefit by way of a discount or reduction under the Energy Bill Relief Scheme Regulations, nor will it apply to a person who supplies heating to the final customer unless that person is provided with a scheme benefit by way of a pass-through under these regulations. A landlord provided with a pass-through amount under the pass-through regulations, which it in turn must pass on to its tenants, will not be required to join the redress scheme unless that landlord also supplies heating through a district or communal heat network. Similarly, an intermediary who is also an end- user will not be required to notify an authorised person of their name, business address and contact details.
The noble Lord also asked why heat network suppliers are being given an extension on the requirement to complete their heat network metering and billing notifications. The answer is that these regulations will introduce minimal costs on heat networks. The information required is information that heat suppliers will already have access to, and we are not requiring heat suppliers to provide information beyond that which they already provide to government under the Heat Network (Metering and Billing) Regulations. We consider that the benefit of heat network consumers receiving lower heat prices resulting from the EBRS pass-through will significantly outweigh these relatively minor administrative costs to heat suppliers. By completing the notification requirement under these regulations, a heat supplier gains an extension in complying with the Heat Network (Metering and Billing) Regulations until 31 March 2023, so this further reduces the burden on the business over what, I think we agree, will be a challenging winter period.
I hope I have successfully answered the questions from both noble Lords, and therefore I commend these regulations to the Committee.
Lord Teverson (LD)
Can I just follow up on a couple of things? Given that this is an unregulated sector and one in which there are issues, as the Minister said, will the OPSS undertake some sort of random survey of end-user customers to make sure that this is getting through to them, so that there is some form of check? I would be interested to understand whether the Minister or his department has any estimate of the proportion of final consumers who have now received payment.
Lord Callanan (Con)
Consumers would not receive payment as such; they would just receive the appropriate discount off the bill presented by the heat network. I am sure the OPSS will want to monitor the market. I think it will primarily be driven by complaints from customers. I assure the noble Lord that, based on my postbag, customers are very willing to complain, both to their Member of Parliament and directly. Because the OPSS is responsible for the original billing regulations, it is best placed to carry out this work and I am sure it will conduct the appropriate market monitoring.
Energy Bill [HL]
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Baroness Worthington (CB)
Since we are having this conversation, it is not a question of putting off these measures but of proportionality and ranking those impacts according to the scale on which they are occurring today, taking into account the positive impacts of offshore wind on no-take zones and the artificial reefs they create, as well as the advances in technology that mean that floating platforms will be more common.
Then there is subsea cabling. The noble Baroness, Lady McIntosh, did not pick up on the fact that the 30% loss she cited is very old data. We do not see those losses now, with modern technology. Subsea cabling will be the future of connections into existing places where there are already reinforced grids, thanks to the closing down of thermal plants. I do not see that we should be unduly raising issues and putting more and more barriers in the way of clean technologies delivering great reductions in emissions, as well as providing energy security and jobs. I support the Government’s amendments and I am sorry that I cannot be more supportive of the amendment proposed by the noble Baroness, Lady McIntosh of Pickering.
Lord Teverson (LD)
My Lords, before I start, as we may talk about energy storage later, I declare my interest as a director of Aldustria Limited, which is into energy storage. I am also chair of the Cornwall and Isles of Scilly Local Nature Partnership.
First, I congratulate the Government on the Chris Skidmore report that has just come out. It is one of the best reports sponsored by the Government, and I look forward to hearing their reaction to its recommendations. There is some really good stuff in there that must be applauded.
Generally, I welcome these amendments. We know that we have to decarbonise our energy and, in particular, our electricity system; the Government have committed to do so completely by 2035. To do that, we have to make sure that we can deliver. Probably pretty well everybody agrees that methods of implementation, planning and getting wind farms into the gestation period all need to happen quicker, but we also know that there is a biodiversity crisis.
I say to the noble Baroness, Lady Worthington, that I deal a lot with the Wildlife Trusts, and it is about nature recovery, not stopping stuff. No other organisation is more into pointing out that we have been in retreat, we continue to retreat and that we need to reverse that—and the ways of doing so, primarily through agriculture but also, in the marine environment, various other ways as well.
I get a bit involved in the Celtic Sea development, which, I am pleased to say, the Minister mentioned. Down in the south-west we have been saying that there needs to be a holistic look at the effects of that programme on the environment—marine and terrestrially, where it comes on board—and that the research needs to be done in advance. That should quicken it, in that it is done in one whole system rather than by individual planning applications for individual farms or floating facilities, and so on. Through that, there is not necessarily a conflict between the two.
I very much support the exposition of the noble Baroness, Lady McIntosh, about the hierarchy, because I am certain that, as we know from onshore and things we have talked about before, off-setting as we knew it is an excuse, mainly for developers—I declare that I have a developer role. It is sometimes too easy to push the problem somewhere else and not confront it where you are actually causing the damage. One of the problems is enforcement and making sure that those things actually happen.
As I said, I generally welcome these amendments and trying to speed up the process, which is necessary, but, like the noble Baroness, Lady Young, I am concerned that we need to make sure that the powers given under these amendments are restricted to environmental improvement, in that they do not detract from that. I am particularly interested in how this compensation might work. The mitigation hierarchy absolutely needs to be put in primary legislation, but I want to understand from the Minister whether it is the Government’s intent that mitigation elsewhere should be a last resort. That is the fundamental question, and I would be very interested to hear the answer.
On the voluntary marine recovery fund, the idea of a voluntary fund seems very strange to me. What does it mean? I would like to understand from the Minister whether it means that, ultimately, it is voluntary. Is it voluntary for a developer that cannot do mitigation as we would all wish to contribute to this fund, or is it, at that point, compulsory? I do not get it. If it is voluntary, I am heavily concerned.
In addition, who will manage it in England? I understand well and I agree that it should be farmed out to the devolved authorities, but who will be the manager of that fund? I assume that it would involve rather large amounts of money, so how it is managed will be particularly important.
I also understand, although I do not think it is in the amendments, that there will be offshore wind environmental standards; I think that is in part of the briefing. I presume that these will have to be done by Defra. Defra is absolutely useless at doing environmental standards anything like on time. It has the whole of the EU repeal legislation Bill to do; I think the Defra Minister, Richard—
Lord Teverson (LD)
Yes; the noble Lord, Lord Benyon, said that there were 1,200 pieces of legislation. I am therefore very concerned about how those standards will be produced and when. Perhaps the Minister could just give us an idea of those deadlines. I have a concern about enforcement generally but I am sure that the Minister will say, “They will be enforced.”
I have a further question in this area, which is around making sure in future that we have much better co-ordination on new developments and sharing infrastructure. I know this has come up in the Bill, but can the Minister assure us that this will be much better managed than in the past and that it will be a network rather than point to point? I again congratulate the Government on their agreement with the EU last month on the North Seas Energy Cooperation forum, which the UK has now joined. That makes complete sense to me. I will be interested to hear from the Minister what the next step on that co-operation is.
Baroness Blake of Leeds (Lab)
I start by thanking the Minister for his full explanation of the amendments in this group. I also thank all those who have contributed to the discussion so far and I very much look forward to the answers the Minister will give to the relevant questions that have been asked.
Obviously, the Government’s ambition of delivering up to 50 gigawatts of offshore wind by 2030, including up to five gigawatts of innovative floating offshore wind generation, is to be welcomed. However, as we have heard, this is a challenge in terms of delivery and obviously, it poses questions about the impact on the wildlife in the areas where these installations will go.
I understand that Denmark is well advanced in this respect, particularly on innovative floating offshore developments. Are we in dialogue with Denmark about its experience in this area? What has it learned, and does it have the same measures in place? It does not seem that we need to be setting this out if some of these challenges have already been met or understood, or indeed through implementation. I know that one of Denmark’s real concerns is moving the energy off the island and how that will be achieved, but also energy storage. Perhaps the Minister could enlighten us as to the thinking on putting in these installations and how we will get the maximum benefit from them without losing, as we have heard, some of the valuable energy delivered through the process.
Lord Teverson (LD)
I shall speak to my Amendments 223 and 232, but I am in sympathy with my noble friend Lady Sheehan’s amendments. On flaring, we are undoubtedly the dirty man of the North Sea. Although the Minister may say that over the past year we have reduced our flaring by some 20%—we are starting to get there—as my noble friend said, really it should be zero, as many North Sea neighbours have been able to do.
Amendment 223 effectively bans fracking. It is straightforward, in black and white. I shall go through a bit of modern history—this Government’s view of fracking. In November 2019, there was a moratorium on fracking. In September 2022, fracking was allowed. In October 2022, fracking was banned. Let us be clear about this: we need a little certainty and the firm smack of decisive government here. Let us put this to bed by putting a ban on fracking in primary legislation.
With the cost of energy from gas at the moment, the problem is that in the UK we are still overdependent on gas, but our production, even with fracking, would be minuscule in terms of global production, so it would have little effect on the market price. Looking back to last February, Kwasi Kwarteng tweeted
“UK producers won’t sell shale gas to UK consumers below the market price. They are not charities.”
Indeed they are not. Fracking in this country will make no difference to gas prices at the moment. It will take some years to develop it, and the time is past. Let us be decisive about this and make clear where the UK stands.
Amendment 232 is very similar; it concerns England, because this is a devolved area. We should end the licensing of new coal mines. I was quite shocked at the end of last year that the Whitehaven mine in Cumbria was approved, and that it was approved by the Levelling-Up Secretary, Michael Gove, who should know better, having invented the 25-year environment plan, knowing all about these issues and being one of the best Environment Secretaries we have had for many years and a member of a Government who have sufficient respect and leverage to say no to something that should not happen. We have become an international laughing stock in many ways. Our reputation has been straightforwardly destroyed by hypocrisy.
I looked at a BEIS press release from just over a year ago, on 3 November 2021, regarding COP 26. It says:
“The end of coal—the single biggest contributor to climate change—is in sight thanks to the UK securing a 190-strong coalition of countries and organisations at COP26, with countries such as Indonesia, South Korea, Poland, Vietnam, and Chile announcing clear commitments to phase out coal power … Business & Energy Secretary Kwasi Kwarteng said: ‘Today marks a milestone moment in our global efforts to tackle climate change as nations from all corners of the world unite in Glasgow to declare that coal has no part to play in our future power generation. Spearheaded by the UK’s COP26 Presidency, today’s ambitious commitments made by our international partners demonstrate that the end of coal is in sight.’”
A year later, just after COP 27 has finished, we have the Government declaring that a coal mine should open in England.
Lord Lilley (Con)
Would the noble Lord remind the Committee that that coal mine will not produce power—all the pledges that he has just talked about concern the use of coal to produce power—but steel?
Lord Teverson (LD)
The noble Lord makes a very good point. One-fifth of that production is estimated to be going towards steel, an industry that needs to decarbonise and has said that it will do that itself. The other 80% is to be exported and will be used as energy. I cannot understand what else it would be used for.
Lord Teverson (LD)
But that industry should be decarbonised. Whatever the noble Lord says, it goes exactly against what we as a nation have said about the future of coal. That brings disrespect, I am sad to say, on not just this Government but this country. That is why I believe this amendment is an important one to go forward.
If the Government cannot agree to the amendment from the noble Lord, Lord Lennie, on the name of the Oil and Gas Authority then there is absolutely no hope for the Bill. I also very much support the amendment by the noble Baroness, Lady Bennett. I remind the Committee that the International Energy Agency’s executive director, Fatih Birol, said at the end of last year:
“If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now—from this year.”
Lord Moylan (Con)
My Lords, I shall speak to Amendments 224 and 230 standing in my name. Before I do so, I shall make a supportive remark about Amendment 226 in the name of my noble friend Lord Lilley.
I remind the Committee, since it is such a long time since Second Reading back in July, that the context in which it was introduced was one of a very serious energy crisis. Whether or not we have a climate crisis is highly debateable, and many of us do not accept that alarmist language. However, that we undoubtedly had an energy crisis in the course of last year is absolutely manifest in the lives of hundreds of thousands, if not millions, of ordinary people living in this country. Although we have been assisted by the weather in having a very moderate winter and therefore less demand for domestic energy, none the less that energy crisis has not abated; prices remain extremely high and energy is in short supply. We all know the reprehensible reasons lying behind that and we condemn Russia’s action in Ukraine, but none the less there is no likelihood of it ending very soon, as far as anyone can see, and we have a very serious crisis. That is the background to the amendments that I am speaking to. It is remarkable that in the same group there are a number of other amendments that seek to cut off—radically, permanently and, by statute, for ever—access to energy supplies that we have available to us.
The noble Baroness, Lady Sheehan, was somewhat surprised that I should talk in Amendment 224—which I will speak to in more detail in moment—about increasing gas supply to reduce foreign dependency. The noble Baroness seems to think that we have a target of zero carbon emissions set in law in this country. We do not; we have a net-zero target and there is nothing that I am aware of in government policy that says that the use of some amounts of carbon, including gas, in our energy mix over the long term is not both foreseeable and acceptable, provided that it meets a net-zero target.
Lord Teverson (LD)
I am not objecting to importing. I have supported fracking in the past. The point is that the time has gone; it has all changed. The United States has been fracking for some time; I have no problem if we import that. My whole concern is about new sources and new exploration.
Lord Teverson (LD)
That is a very good question. It is partly answered by the fact that I put my amendment down first before the other amendment went down. The other answer is that in all legislative processes—the noble Lord, Lord Lilley, will know far more about this than me—you try to go for what might be possible, and I suspect that the Government are less keen on the amendment tabled by the noble Baroness, Lady Bennett, whereas all my amendment does is confirm present government policy.
Lord Lilley (Con)
So, had the noble Baroness, Lady Bennett, got her amendment in first, the noble Lord would have signed it. It is interesting to know that the Liberal Democrats are against any new fields in the North Sea.
What I want to try to get home to those members of the Committee who have not yet taken it on board is that up to now we have pursued a path to net zero which involves reducing demand for fossil fuels by replacing fossil fuels with renewable energy. That is a logical path to pursue. We have not been seeking to achieve it by reducing supply of fossil fuels. As a result, if people choose to produce more fossil fuels than there is demand, as demand falls fossil fuel producers will be left with stranded assets and lose money. It could not happen to a nicer bunch of people, but why should we think that our judgments are better than theirs or worry about them erring and producing too much, investing too much and not getting their money back? That is up to them.
Lord Teverson (LD)
I will not detain the Minister for long, it was interesting that he referenced the Climate Change Committee in response to my noble friend’s amendment. That same letter said,
“the evidence against any new consents for coal exploration or production is overwhelming.”
I am sorry that the Minister accepts part of that letter, but maybe not the other part. The Minister has nobly and served well a number of Administrations, including the one during COP 26, and I would like to know how he reconciles the COP 26 statements by his own department with the opening of that new coal mine.
Lord Callanan (Con)
The decision was taken by a different department, by DLUHC, in a quasi-judicial manner. It is likely to be the subject of judicial proceedings, so I cannot comment in detail on that decision, as the noble Lord will understand. I am sure we will be having this debate lots of times in future.
I move on to the question from the noble Baroness, Lady Blake. The reasons for the Secretary of State’s decision are set out in full in his published letter on GOV.UK, which takes into account matters like the demand for coal, climate change and the impact on the local economy. To reiterate the point of my noble friend, coking coal is used in the production of steel—it is not used in power generation—which is, of course, crucial to building the infrastructure that we all wish to see more of, such as offshore wind turbines.
On fracking, I thank my noble friend Lady McIntosh for her contribution. The Government have been clear that in line with the commitment made in the 2019 Conservative manifesto, it is adopting a presumption against issuing any further hydraulic fracturing consents for the extraction of shale gas. That position is, in effect, a moratorium. This will be maintained until compelling new evidence is provided that addresses the concerns around prediction and management of induced seismicity.
I move on to my noble friend Lord Lilley’s amendment. I welcome his thoughtful contributions to today’s debate, as well of those of my noble friend Lady Altmann. British Standard 5228, which my noble friend quoted, recommends procedures for noise and vibration control in respect of construction and open-site operations. It is not a measure designed to reduce the risk of induced seismicity. The potential for induced seismicity from hydraulic fracturing is a result of the injection of fluid deep underground, at depths of one kilometre or more. Seismicity induced by hydraulic fracturing is therefore different in nature from vibration directly induced by a construction site, and the application of BS 5228 would therefore not be appropriate.
My noble friend Lord Moylan tabled an amendment about the composition of our domestic gas supply. A review of the Gas Safety (Management) Regulations 1996 is currently under way. The Health and Safety Executive has been reviewing these regulations, which govern gas quality, and is consulting on a set of proposed changes. The HSE’s consultation closed in March 2022, and it will be aiming to publish its response in due course. BEIS has worked closely with the HSE and has taken regular opportunities to input into the process in both an analytical and a policy capacity. A statement by the Secretary of State at this stage is therefore unnecessary as the publication of the Government’s formal response will be tantamount to just that. I hope my noble friend will understand that in advance of that document, I cannot comment as it would not be proper.
The noble Baroness, Lady Sheehan, tabled two amendments in this group. On Amendment 222A, I should say at the outset that tax matters are an area for the Treasury. Since the introduction of decommissioning relief deeds—DRDs—the Treasury issues a Written Ministerial Statement at the end of each financial year updating on DRDs, including the total number of DRDs in force during the past financial year, past payments under DRDs and the projected value of future payments under ongoing DRD claims. While a DRD claim may arise where a company has defaulted on its decommissioning obligations, the tax system also provides tax relief for decommissioning costs in recognition that decommissioning is a significantly expensive and statutory obligation. HMRC publishes information annually on the estimated sum of all forecast tax relief payments due to decommissioning as part of its annual report and accounts.
Baroness Bennett of Manor Castle (GP)
As I say in the Member’s explanatory statement, this debate is to raise issues that many people have raised with me about the purpose of Clause 230, which covers licensing nuclear sites that are on or under the territorial sea of the UK.
The noble Baroness, Lady McIntosh of Pickering, in talking about offshore wind farms, referred to the impact on marine mammals of seismic testing in particular. In the middle of last year we saw seismic surveys being carried out in the Irish Sea off Cumbria in order to assess the potential of undersea nuclear storage. At that time the Marine Management Organisation noted in a letter that those tests could cause disturbance to certain cetacean species. Those tests were carried out before this Bill became law. Those are interesting circumstances for them to be carried out in, which I will come back to.
In the Government’s own words, they need to keep the waste safe and secure for hundreds of thousands of years, give or take, for the radioactivity to decay. That is why they are seeking long-term storage for hundreds and thousands of years. The UK has the world’s largest stockpile of untreated nuclear waste, more than 100 tonnes of plutonium, and the total volume is 750,000 cubic metres. We are talking about a lot of nuclear waste. The chair of Nuclear Free Local Authorities, David Blackburn, who for full disclosure I will note is also the leader of the Green Party group on Leeds City Council, has said:
“The waste would be left in situ for millennia and, no matter how effective the barriers, some of the radioactivity will eventually reach the surface. The rate at which radioactivity would leak … can be poorly predicted and is likely to remain so for an indefinite period.”
I was in Cumbria a decade ago when there was talk of onshore storage of nuclear waste there and a great deal of local resistance. We are aware that there is no certainty. Putting it under the sea would seem to add to that uncertainty, to the risks and to the difficulties of dealing with anything should it go wrong. I put down this clause stand part debate because there is a great deal of uncertainty. People are unsure what the Government’s intentions are, which is why I hope the Minister may be able to provide more certainty.
I also refer to the fact that seismic testing was going on. The Explanatory Notes for the Bill appear to suggest that Clause 230 is actually to close a possible loophole that nuclear sites under the sea might not currently require a licence or be subject to the nuclear regulator. Page 71 of the Explanatory Notes states that:
“This clause amends section 1 and section 26 of the NIA 1965 and section 68 of the Energy Act 2013 … to make it expressly clear that certain nuclear sites located wholly or partly in or under the … sea … require a licence and are regulated by the Office for Nuclear Regulation”.
That raises a question that I will put explicitly to the Minister: are the Government aware OF or concerned about any unlicensed or unregulated nuclear sites on or partly on or underneath the sea in UK territorial waters?
Lord Teverson (LD)
My Lords, I shall be brief. When I first read this clause I assumed it was effectively to give permission to go out to sea from land, like some coal mines. I am interested to know whether that was the Government’s intention.
I was also quite interested that the site has to be partly in territorial waters. Territorial waters go out to 12 nautical miles, so that seems to suggests that it does not. I wonder why there is the stipulation that the site has to be partly in territorial waters. It seems to me that if this is done it really needs to be within territorial waters. I have no other questions.
Lord Lennie (Lab)
My Lords, I will also be brief. I do not want to provoke another debate—two hours on this would be unnecessary. We are all doing our bit by keeping this Room at low temperature in terms of this debate. I do not know whether they can turn the heat up a bit, as I think that would be helpful to all of us.
Lord Teverson (LD)
One thing that the Minister did not mention, although I may have missed it, is the employees and staff of the NDA. What consultation has taken place as far as they are concerned?
Baroness Blake of Leeds (Lab)
I have a few questions and, if it is not possible to answer them all, I shall accept a written response. It would appear that the Government are bringing forward legislation that breaks promises of previous Governments, going way back, in relation to nuclear workers’ pensions. The statutory pensions protections that Parliament previously legislated for were vital to the success of privatisation. Is it right for the Government to promise those protections to ensure that success, and then to rip them up that many years after the event? We would like some clarification as to whether the Minister believes that that is the case—and, if not, why not?
Is it accurate to claim that these reforms would bring pension provision across the NDA group into line with wider public sector pensions? These pension schemes underwent much more radical reform long before my noble friend Lord Hutton’s review of public sector pensions. They have been closed to new entrants for many years. My noble friend recommended that public sector pension accrual should remain on a defined benefit basis, but pension provision across the NDA group is mostly on a defined contribution basis. I have it on good authority that there is an appetite from the trade unions to discuss these reforms with Ministers. Would the Minister be prepared to accept this course of action?
Several more questions are coming up, particularly on technical issues and questions about the proposed amendments. The amendments should allow for the implementation of the agreement between BEIS, the NDA and the recognised trade unions. There is a lot of detail about the proposed career average benefit structure in the heads of terms, but the proposed amendments are drafted in more general terms. Regulations are the proper place for the detail to be set out, but might the agreed accrual rate be an important enough term of the agreement to be in the Bill as well? The average member contribution rate of 8.2% is specified.
There are concerns about proposed new subsection 3(c) of the first proposed new clause that adds this chapter to Part 12, which provides for the increase of pensions in line with CPI, not RPI, for active and deferred pensioner members. However, it says that only increases for active and deferred members—that is, re-evaluation—cannot be capped. This opens the real possibility that the Government intend to bring forward regulations that provide for pension increases for at least some members, possibly members of the Magnox group, to be capped. This is contrary to the heads of terms, which explicitly states that pension increases will be in line with inflation as measured by CPI, with no reference to any cap. Would it be possible to propose an amendment so that we can look at ensuring that regulations cannot propose capped increases for any pensioners?
I will end by asking: how confident are the Government that they can identify people in and out of scope of future regulations, given that there is a fair degree of geographical mobility around the industry?
Lord Teverson
“Net Zero duty(1) In section 4AA of the Gas Act 1986, after subsection (1) insert—“(1ZA) In exercising its functions in relation to the principal objective the Authority has a duty to assist the delivery of greenhouse gas emissions targets as set out in the Climate Change Act 2008.”(2) In section 3A of the Electricity Act 1989, after subsection (1) insert—“(1ZA) In exercising its functions in relation to the principal objective the Authority has a duty to assist the delivery of greenhouse gas emissions targets as set out in the Climate Change Act 2008.”” Member’s explanatory statement
This amendment would place on the Gas and Electricity Markets Authority a duty to assist in the delivery of Net Zero.
Lord Teverson (LD)
My Lords, I will speak also to Amendments 229 and 233 in my name. Amendment 228 is around Ofgem. We have debated this many times, in many contexts, within the House. It is about Ofgem having a direct net-zero responsibility and objective. That is what this amendment does, and I know another amendment is trying to do exactly the same thing. I am indifferent as to which one is accepted, as long as we achieve this.
The thing about Ofgem is that it is, rightly, customer focused in many ways, but it is focused very much on the short term and not so much on the long term—and that is why we are here. I believe that, in many ways, we have high energy prices because we have not transitioned enough towards net zero in the past. This is partly around the lack of infrastructure and the way that Ofgem assesses investment by the national grid and DNOs, in particular to upgrade the transmission system in the United Kingdom.
Ofgem’s objectives have not been updated since its establishment in 2000. Although Ministers have always said that there is, in effect, a net-zero obligation on Ofgem, I do not believe it is specific enough. There are a number of blockages in the system at the moment: solar farms are not all able to connect and we have talked before about slow offshore wind, which will be more likely in the future. I hope that new onshore wind is coming on, but I am sure the connections for that will be equally difficult. We even have housing developments in the south-east that are not able to connect to the grid through lack of capacity. This is all around Ofgem not being balanced in the way that it looks at investment programmes.
Page 10 of Chris Skidmore’s report says that one of the needs is
“to finally update the mandate of Ofgem”,
which must be to
“accelerate the connection of our cheap renewable generation”.
So let us bite the bullet with my Amendment 228 and finally put a net-zero objective into Ofgem.
As I said, I was impressed that the Government’s future systems operator—which, we understand, is, in effect, a subsidiary of Ofgem, although I am sceptical about that structure—does indeed have a net-zero objective. I welcomed that at the time and welcome it now. Let us reflect that up the management chain to Ofgem as well.
Lord Callanan (Con)
I am sure that we will have lots to discuss about lots of issues on Report.
Lord Teverson (LD)
My Lords, there have been some excellent responses. We are getting somewhere on the capacity market and onshore wind. I thank the noble Baroness, Lady Hayman, for her support on onshore wind and my amendment. I had not realised there would be the contract for difference, and I take that as very positive. As the Minister knows, I like to be positive about these things.
However, I find it very difficult that the Government and the Minister will still not bite the simple bullet around Ofgem and the decarbonisation of the grid. It is having a practical effect as regards moving the whole transmission system forward—it really is. Those dilemmas about objectives that he talks about are the same for the future system operator, yet it has that objective.
I am sure that we will come back to this on Report. It is certainly my intention to work with others of a similar mind to find the right amendment and back whoever wishes to bring it forward. However, at this stage, I beg leave to withdraw the amendment.
Lord Teverson (LD)
My Lords, I have a question for the Minister that follows on from that. I very much support the idea of an energy commission, although Chris Skidmore says very strongly in his report, on decarbonisation, that:
“None of this will happen without a step change in the government’s approach to delivering net zero.”
He says that an office for net-zero delivery within government is needed but, if we cannot get that, energy efficiency must be part of it.
When we were in the European Union and single market, part of energy efficiency was around appliances and all sorts of things that we use or do, and we have had an increase in energy efficiency—not fast enough, but a sectoral trend—largely because of the sorts of implements we use; cars, vacuum cleaners or whatever. I therefore ask the Minister: in terms of energy efficiency and standards for equipment and pieces of machinery, what is happening now? Is BEIS doing this itself? Does it have a programme? How does that relate to our export markets and manufacturing sector? I would be interested to understand.
Baroness Bennett of Manor Castle (GP)
The noble Lord, Lord Bruce of Bennachie, has presented very interesting proposals. Like the noble Lord, Lord Teverson, I think this offers us one way forward on the crucial issue of energy efficiency, but I have a question for the noble Lord, Lord Bruce. Would he agree that a useful role for the energy efficiency commission would be ensuring systems to educate people to install this new technology properly, so that people such as the plumber whom he cited had the information available to ensure that they knew that what they were installing would work for their customers?
Energy Bill [HL]
Lord Teverson ExcerptsMonday 19th December 2022
(1 year, 11 months ago)
Grand CommitteeRead Full debate Energy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-V Fifth marshalled list for Grand Committee - (15 Dec 2022)
Lord Lucas (Con)
My Lords, I wonder whether rounds one to three of the green heat network fund are throwing some light on the potential for expansion in this sector. Are the Government viewing heat networks as something that we will see a lot of, or just little bits and pieces? Coming back to the amendment spoken to by the noble Lord, Lord Ravensdale, if we are going to see a lot, are we seeing green heat sources coming into play in this area? If we are to see a lot of networks, and since the ones I am familiar with, at least, require serious street works, is there a possibility of combining those street works with separating sewage from storm water?
Lord Teverson (LD)
My Lords, I want to reflect the comments of the noble Lord, Lord Whitty, in welcoming the fact that the Government really are concentrating on this area and giving it the attention that they have. We are one of the lackeys on heat networks, certainly in comparison with the rest of Europe.
One thing that struck me, though, was that on the occasions when I meet the Minister before a Bill goes through, he normally asks me to keep the number of Liberal Democrat amendments to a minimum. I think he has broken the record on this occasion, but I will keep my side of the bargain.
Lord Teverson (LD)
Is there a way in which we can just say yes to the government amendments here? There are hundreds of them—well, about 50—so it would make a lot of sense.
The Deputy Chairman of Committees (Lord Haskel) (Lab)
I am applying the usual convention. Okay?
Lord Lennie (Lab)
I shall speak to just this amendment and be fairly brief. It would ensure that the Gas and Electricity Markets Authority was designated as the regulator for heat network zones. Those zones are fundamental to the scale of expansion necessary to achieve net zero. As we heard before, this in turn depends on local authorities having the right resources to deliver their responsibilities effectively. The amendment would ensure that the Secretary of State delegates to GEMA its authority status to act as regulator in this regard, as already described for heat networks. Essentially, they should expand them in the most efficient manner possible if we are to achieve net zero. Given Ofgem’s regulatory responsibility for zoning, as well as for the networks themselves, this would ensure a joint approach to get the best out of heat networks.
While the devil may be in the detail of the regulations themselves—we have heard about some of that already—the Opposition support the proposals in this group of amendments. Essentially, they are adaptable to changes. Monitoring and adapting to market changes will be vital, and we support the amendments in the names of the noble Lords, Lord Teverson and Lord Ravensdale, to which they will speak shortly. I beg to move.
Lord Teverson (LD)
My Lords, we move on to the zoning regulations. I very much agree with the amendment moved by the noble Lord, Lord Lennie. When I read through this section, I must admit that I found it extremely opaque in many ways. I will come to my own amendments in a minute, but perhaps the Minister can explain a few things to me. Clause 174(2) says:
“A heat network zone is an area in England”.
I presume that means that this is just English legislation, not for the rest of the United Kingdom, but it is very unspecific about what a network zone would be. I had assumed that it would be a single zone or single heating system, but it obviously is not. I am interested to hear from the Minister what a zone is likely to be in practice.
We then have a zone authority. Clause 175(1) states:
“Zones regulations may designate a person to act as the Heat Network Zones Authority”.
Again, as the noble Lord, Lord Lennie, pointed out, we have very vague ideas as to who this should be. I am interested to hear again from the Minister who the authority is expected to be.
Then we move on to zone co-ordinators. Who are they and what exactly do they do in comparison with the zone authority? Of course, in Clause 175(5), we have a list defining local authorities. I was delighted to see the Council of the Isles of Scilly, which I have represented in the past, there—all 2,000 souls are represented in that list. I would be really interested to understand from the Minister how all this works. Clause 175(4) says that the
“Regulations … may make provision for the Authority to require a local authority, or two or more local authorities”,
so it seems to me a very complicated landscape. I would be interested to understand how that jigsaw fits together.
Two of my amendments would change “may” to “must”; I just cannot see how it could remain “may” in those two places. The main thrust of my arguments is in Amendments 165 and 166. They are about making sure that the regulations are in line not only with the strategy and policy statement—which we have referred to many times already regarding the text of the Bill—but with, in particular, local authorities’ net-zero plans. A huge number of local authorities, as I know the noble Baroness, Lady Bennett, has pointed out, now have net-zero objectives and plans to back them up. We should give credit to that and include it in the Bill. My Amendment 166 is very much on the same area of the delivery of heat networks within zones and how they fit in with local net-zero energy systems.
As I said, it would be really useful to everybody to understand how this geography is meant to work. I suppose my question is: is this just too complicated or is there some logical method here that does not get in the way, and does not create a bureaucracy that gets in the way, of these systems?
Lord Ravensdale (CB)
My Lords, I again declare my interests as set out in the register. I speak to Amendment 167 in my name, which really builds on the amendments that the noble Lords, Lord Lennie and Lord Teverson, have put forward to better set out the role of local authorities in this picture.
There is a great opportunity here to extend the zoning powers that we have in the Bill beyond heat networks into other areas. Ensuing that the Bill better defines local authority roles is really very applicable to the delivery of heat, because it is local authorities that know best about their housing stock and its condition and how they can deliver clean heat in their areas.
Lord Callanan (Con)
Let me first remind the Committee of the broader ambitions of this section of the Bill, which covers heat network zoning, which is a key policy to deliver the scale of expansion of heat networks that will be required to meet net zero. This process brings together local stakeholders and industry, to identify and designate areas where heat networks are expected to be the lowest-cost solution for decarbonising heating. The clauses will enable the Government’s commitment to introduce zoning by 2025.
Amendments 162YYYA, 162YYYB, 162YYYC, 162YYYD, 162YYYE, 162YYYF, 162YYYG and 165A—who gives these numbers to amendments?—are in my name. They will permit regulations to allow the heat network zones authority, which I will refer to as the authority, to directly designate zone co-ordinators and heat network zones in cases where these functions have not been performed by the relevant responsible bodies. This will deliver a more efficient process for establishing heat network zones.
More specifically, Amendment 162YYYA permits regulations to enable the authority to designate a person as zone co-ordinator. This may be necessary in scenarios where, despite directing it to do so using the powers in Clause 176(4), a local authority does not establish a zone co-ordinator. This could prevent the heat network opportunity that has been identified from being realised. Similarly, Amendments 162YYYB to 162YYYG provide for areas to be designated as heat network zones by the authority, in addition to zone co-ordinators as already provided for in Clause 177(1)(b). They also ensure that this expanded role for the authority is reflected elsewhere in Clause 177. This mirrors existing powers for identifying areas as heat network zones and reviewing areas designated as such. The authority or zone co-ordinators may undertake each of these activities. These amendments will therefore ensure that the authority may designate zones directly, avoiding unnecessary delays to the rollout of heat networks.
Amendment 165A concerns low-carbon heat sources. A range of heat sources could potentially be used by heat networks, including heat from thermal power stations, industrial processes or cooling and refrigeration. Clause 180 gives the Secretary of State powers to require heat sources in zones to connect to a heat network. This amendment will allow regulations to ensure that heat sources that are required to connect do not abuse their monopoly position and charge disproportionate prices for the heat that they provide. Equally, it will allow the regulations to ensure that the requirement to connect does not unduly disadvantage heat sources themselves. This will help to support fair pricing, which will give investors greater security and confidence and help to accelerate the delivery of large-scale heat networks in zones.
I now turn to Amendment 162YYYZA in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake of Leeds, regarding designating GEMA as the heat network zones authority. The authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.
In terms of who could fulfil the authority role, Clause 176(3) is explicit that the Secretary of State may but need not be designated as the authority. The clause as drafted therefore already provides that regulations may appoint GEMA as the authority. We will be specifying the authority’s functions and responsibilities in the regulations; this will therefore be the subject of further consultation.
The authority will fulfil a different function from the heat network regulator, which, as set out in Clause 166, we propose will be fulfilled by GEMA in relation to Great Britain. This role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England. We will be specifying the authority’s functions and responsibilities in the appropriate regulations; we intend for the body to undertake functions on behalf of the Secretary of State and be accountable to the Secretary of State.
Detailed considerations regarding roles and responsibilities in zones will of course be subject to further consultation as we continue to develop our policy proposals. Consultation on these issues will take place in due course. Appointing the authority in regulations will allow for amendment should this be required as and when its functions change over time as the networks become more developed in the UK. I hope that this has helped to clarify our proposed approach and the scope of the powers already provided.
I thank the noble Lord, Lord Teverson, for his thoughtful Amendments 163 and 164, which would make the provision of the zoning methodology mandatory and require the methodology to include certain details. As always, we want legislation to be flexible and future-proofed. In this context, this means that the regulations can adapt to developments in the heat network market. The Government are clear that a national methodology for identifying zones will be necessary to enable a robust and transparent approach that increases overall efficiency and drives consistency. To this end, a pilot to support the development of the methodology is under way in 28 English cities and towns. The outputs from the pilot will help to inform policy design and future consultation on the methodology and its contents. Accepting these amendments now would, in effect, tie the Government’s hands at this stage to the potential cost of industry, stakeholders and, ultimately, consumers.
Next, I turn to Amendments 165 and 166, also from the noble Lord, Lord Teverson, which concern interactions between the national methodology and the co-ordination and delivery of heat networks at a local level. Accepting Amendment 165 would mean that the methodology was no longer nationally determined and would have to vary according to each local authority’s requirements. A national methodology will minimise the duplication of effort at the local level and instead ensure that local input is applied at the most appropriate stage: the refinement and designation of the zones themselves.
Heat network zoning will support local net-zero goals by unlocking the lowest-cost pathway to heat decarbonisation in built-up areas. As we expect that zoning co-ordinators will work with the local authority, their work will be brought into local net-zero plans. Therefore, Amendment 166 risks creating unnecessary bureaucracy at a local level, reducing zoning co-ordinators’ capacity to focus on the effective delivery of zones.
The final amendment in this group, Amendment 167 tabled by the noble Lord, Lord Ravensdale, would extend the Bill’s heat network zoning provisions to individual heat pumps. As noble Lords will be aware, various factors, including building density and availability of heat sources, mean that certain localised areas are particularly suited to heat networks. This is why we are introducing a framework to identify where heat networks can provide the lowest-cost low-carbon heating solution.
The noble Lord’s amendment would apply zoning to heat pumps. Our strategic approach, set out in the heat and buildings strategy, is to work with the grain of the market and our policy levers are aligned to natural trigger points to create optionality for consumers regarding their various heating options. For clarity, such trigger points include appliance replacement and change of tenancy or property ownership, among many others of course. An approach where more technologies are zoned risks removing choice for consumers and could cause early appliance scrappage and additional disruption.
I thank noble Lords for this debate and for their amendments. I ask them not to press their amendments.
Lord Teverson (LD)
Could I ask the Minister for some clarification? I apologise if I have not got my head around this. What is a zone: a council estate, a county, a region or a combined authority? I am trying to get from the Minister a mental picture of what a zone could be and what determines that boundary.
Lord Callanan (Con)
No specific boundary is set out in the proposals. It can vary from authority to authority. It is very unlikely to be a whole region; it is much more likely to be an inner-city area, an industrial estate or something like that. It will very much depend on the local circumstances and what heating sources are available. Crucially, it will depend on local support, which is why local authorities are crucial to this process. Many local authorities around the country are already in discussions and are very keen to get on with these zoning proposals, presumably including Leeds. Although I know that the noble Baroness, Lady Blake, does not speak for Leeds any more, I know that it is one of the pioneers in this area.
Baroness Young of Old Scone (Lab)
My Lords, I also support Amendments 237 and 238, to which I have added my name, and Amendments 242F and 242G in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, which, with some variations, aim to achieve the same outcome. Previous speakers talked about the role of community energy generation, which is an important one in future energy supply. It was a small but growing effort in this country and a contribution to the development of renewable energy on a local scale.
However, when the feed-in tariff disappeared for new applications that really put the nail through the head of that growth, and nothing that the Government have done in the last few years to try to reignite it seems to have worked. People have talked about Licence Lite and the smart export guarantee, but neither of these has really produced an uptick in that trend of community energy generation. We need to find a way to get around that. This depends quite substantially on reducing the barriers of upfront capital and the regulatory effort of getting a connection to the system, on making sure that there is a key partnership between the big boys and the small community energy generators, and on some sort of guarantee of purchase price and length of contract. If we do not have those, we will not get any security into the community energy generation sector through investment.
These amendments put forward simple solutions. I shall not go into any detail, because the noble Baroness, Lady Bennett, has gone through them, suffice it to say that the whole issue is about how local energy generators can sell the power they generate locally through a community scheme to local communities. That is the magic bit in this area of community generation. Local schemes are developed and owned by local people, and they have local benefits in the form of cheaper and cleaner energy. They also provide other benefits for local communities.
When I was thinking about a way of describing this, it came to mind that the Labour Party used to talk about Arthur Scargill in a particular way: “He may be a bastard but at least he’s our bastard”. There is a difference between “damn windmills” and “our damn windmills”, so there is a real attraction in local support. I thought that the Government were keen on improving the popularity of locally determined schemes—I am sure that they are—which gives me huge confidence that the Minister will take these four amendments and do the job that the noble Baroness, Lady Bennett, suggested some of the rest of us do: draw out the best cherries from among them.
However, I do not intend to do that. I would rather like the Minister to do it and come forward on Report with a government amendment that meets the key needs of obligating the big boys to buy from the small-scale generators; setting a predictable, fair price; and setting a minimum contract period.
Lord Teverson (LD)
My Lords, I was pleased to put my name to both of the amendments in the name of the noble Baroness, Lady Bennett. Most of what needs to be said has been said. I guess I need to declare my interests: I am a fairly insignificant shareholder of St Ewe community energy, which I have not heard a lot from recently—probably because of the reasons that we outlined here.
The one point I want to make is that this is exactly one of the areas that has been left out of this Bill, as the noble Baroness, Lady Boycott, said. It should be in here. However, to me, although community energy is about generating power, the real importance of it is in allowing communities to come together and be a part of the national and global march forwards to net zero. When there were feed-in tariffs, there was an enthusiasm for people coming together and being part of this essential journey towards a clean economy, a clean society and the environment that communities, families, households and small businesses wanted to see in their local areas. It is not about participation in that big COP 27 or whatever; it is about the local contribution that allows people to participate in one of the most important journeys and fights that we face at the moment, which is about climate change and all the benefits that come from net zero.
Let us have this issue in the Bill. Let us ignite this sector again. Let communities participate in one of the most important objectives that we have on this planet.
Baroness Meacher (CB)
My Lords, I rise to add my strong support for Amendments 237 and 238, so ably introduced by the noble Baroness, Lady Bennett of Manor Castle, and her strong team of cross-party supporters. I thank Steve Shaw of Power for People for his briefing. I will speak only briefly, principally to ask a few questions of the Minister; I hope that he will be able to respond to them—if he heard what I just said.
As we face the existential threat from climate change, it cannot be right for small-scale community renewable energy schemes to be rendered unworkable by disproportionate regulatory burdens and costs. Other countries are promoting small-scale energy production, apparently often by community groups, far more effectively. It must be possible for the UK to do the same. I hope that, today, the Minister will agree in principle that this Bill must remove the barriers to community energy production.
As somebody else—I think it was the noble Lord, Lord Teverson—said, if the Government can come up with improved amendments on Report to achieve this objective, I for one will welcome them. Does the Minister accept that the community renewable energy sector has the potential, as claimed by its advocates and the noble Baroness, Lady Bennett, to provide 10% of the UK’s electricity generation? I hope that the Minister can respond to this question because it is incredibly important. If the Government can really do that—come on—surely we have to enable them to do it.
Does the Minister accept that it is perfectly feasible to reduce significantly the financial, technical and operational requirements to become a licensed energy supplier, and thus to reduce significantly the initial £1 million start-up cost involved? Of course, that makes the whole idea of developing these community energy schemes quite out of the question. Can he assure the Committee that the department will work to resolve these issues before Report?
Lord Callanan (Con)
As I said, a number of suppliers already offer competitive tariffs in the market. They will provide long-term certainty on pricing. There are many examples of industrial units that have already put solar panels on. Obviously, the most cost-effective way is for them to use that power themselves and export any surplus power to the grid using the smart export tariff guarantees. I will answer that question again: the Government are supportive of community energy schemes. We want to see more of them, but we think that is best delivered through the market framework. I will happily provide noble Lords with more detail in writing.
Lord Teverson (LD)
Can I remind the Minister that it is government policy to decarbonise the electricity system within 12 years and one week? That is no time at all. I am absolutely a defender and promoter of market forces, but in some places they just do not act quickly enough. We have a very short period of time in which we must decarbonise the electricity system. I cannot see why the Minister would not be in favour of ease of movement into this market. As the noble Lord, Lord Lucas, said, it does not necessarily require subsidy. To use a Borisonian term, it would unleash the real will of communities in this country to help in that target of decarbonisation by 2035. I cannot see why the Government do not grasp this and make the most of it.
Lord Callanan (Con)
As I said, we are supportive of proposals. We accept the target for decarbonising electricity production and we are moving ahead full-scale with our sails erected—which is no doubt a Borisonian term—towards that goal. Community energy will play probably a small role, but it will play a role. Obviously, larger-scale generators will supply the majority of the nation’s electricity.
Baroness Randerson (LD)
My little Amendment 177 seems to have intruded on this group of government amendments. I tabled it because I was concerned about the practical implications of the Government’s reliance on smart regulations and smart appliances. I am certainly not arguing with the technology but I am seeking to tease out exactly how this will impact on us and the people of Britain as ordinary consumers.
If you read Clause 187, you will see that it is very dictatorial and centralised in its approach. Yet if you look at paragraph 438 of the Explanatory Notes you will see that, in practice, the Government’s intentions are going to be carried out by retailers and manufacturers, and they will face penalties if they do not get it right. My concern is that one size does not fit all. For example, the noble Baroness just mentioned washing machines and so on, but my example would be electric vehicles. We are told to charge electric vehicles at times when electricity usage is low, and we are promised that this will become an automatic default position. The Government are relying on smart usage, in effect, to expand limited national grid capacity. At the weekend, when I was reading some background material, I noticed that there are only two regions where there is currently said to be any level of surplus national grid capacity. The rest of the country is in a very stretched position.
I have been asking these questions for some years. I have been asking how a reliance on telling people when they can wash their clothes or charge their cars will impact on consumers and the way we use our gadgets and run our daily lives. There is a current experiment, not using smart technology but with a voluntary agreement, to get people to opt in to using their washing machines, dishwashers and so on at low-demand periods, with a financial incentive to do that. That is great if it is convenient for these people and they are opting in to do it. I am pleased that the experiment is taking place, as I am sure it will produce some useful information, but I want to float past everyone a couple of potential issues.
First, I do not want to bore noble Lords for long with the details of my domestic life but I have solar panels and an electric car. I want to use my washing machine and dishwasher and charge my electric vehicle when the sun is out; sometimes, that is at a time of peak demand. I am saving myself money, which I regard as a good thing, but, more importantly, I am limiting the amount I draw down from the grid because my solar panels provide my electricity. I am minimising my call on the grid. There are lots of people like me with solar panels; let us hope that there are heaps more in the coming months and years. This issue needs to be taken into account.
Secondly, more importantly, there is a host of people whose working patterns require them to charge their cars and do their washing at peak times. A care worker working nights has to fit their domestic life around those daily patterns, which might be peak demand times. This is not just about just care workers; it is about health workers, district nurses or anyone working on shifts—the police, firefighters and taxi drivers. We want taxi drivers to drive electric vehicles but they are going to run out of electricity half way through the day; they must be enabled to carry on their work.
We have all, I am sure, experienced a situation where we have had to take our phone or laptop to the technical experts because it is doing something strange, behaving in a way that is beyond our understanding. We are normally told that it is the factory settings or an automatic download. I am now aware that, because they are so automated, electric vehicles adopt patterns that one might not necessarily understand fully because they have downloaded a new program and so on. As the technology becomes more sophisticated, in reality, consumers will find it more difficult to understand what it is doing, why and to override it when they need to.
My big question is that any reliance on smart charging and smart usage must be able to be adapted for that large body of people for whom it is not convenient. In days of high energy prices, most of us can probably be relied on to know what is best for us financially and, therefore, what draws least from the grid. I am concerned that the way in which this is expressed allows no latitude, judgment or option for consumers to make that decision for themselves.
Lord Teverson (LD)
My Lords, I will speak to Amendment 181 in my name, which follows on from what my noble friend Lady Randerson was talking about.
The whole area of smart appliances is really important. It is in fact where demand management starts to creep into this Bill; it is about the only place that it does. The popularity of their potential has, I think, been shown by National Grid’s call for people to offer to manage their energy usage over particular times in the winter; the Minister may give us the figures but I think that more than a million people have shown an interest in it. I would be interested to know where we are with that.
There is a risk here, however. We have seen it with smart meters. I will not go back to the smart meters argument but one barrier to rollout has been the fear of people sharing information. Clearly, data is core to smart technology; data is personal so there is the question of how that data will be used.
My Amendment 181 is really a probing amendment; it is not in the form that would finally go into a Bill. It seeks to understand how the Government are going to communicate what is a really important thrust in terms of demand management and the way we use dispersed energy systems in a smart grid. How are they going to explain and deliver the strategy outlined so that we do not have the consumer reaction that we have had in other areas, including smart meters—very much media-driven, I should add? I want to avoid that.
The other area on which I want to tackle the Minister is concerns Clause 187(3)(d). It is one sub-paragraph of just three lines about security of information—indeed, the whole area of security. This is a core, important area: we know that, wherever smart systems or information technology are involved, there are all sorts of threats regarding the use of personal information. There is also the threat of external hacking, with state actors or others going into these systems and making them unusable.
It is easy and right to say that personal and other data used with smart technologies are secure or otherwise protected, but who is actually going to do that? I am talking about security or communication software systems. I would like to know from the Minister who will be responsible for the protection and security of these systems. I believe that it is important from the bottom up in terms of personal information but also in terms of smart grids and external, less favourable people towards the United Kingdom intervening here. I am sure that the Government have this under control and consideration but it is a really important area. We need to understand that it is being taken seriously and that, whoever the person or authority, they are going to make sure that these particular three lines in Clause 187(3)(d) are delivered.
Baroness Blake of Leeds (Lab)
I will be brief, but I will continue the comments made by the noble Lord, Lord Teverson, on security. I do not have a sense of confidence when we are told that the Government are going to be responsible for these specific areas. Could we have some more detail from the Minister about how this will be put in place and regulated? As we have heard in this discussion, exposure to cyberthreats could be enhanced by the very nature of smart technology. Therefore, we need a great deal of reassurance that this is being dealt with appropriately, and we know who is ultimately responsible for that reassurance.
Baroness Bloomfield of Hinton Waldrist (Con)
My Lords, this group of amendments seeks to strengthen the enforcement powers of the energy smart regulations. This would enable an enforcement authority to investigate and take action swiftly and effectively against non-compliance, and to provide support to industry to comply with their obligations. First, these amendments enable the regulations to place obligations on economic actors to take steps to remedy non-compliance, and to provide evidence of their compliance to an enforcement authority.
Secondly, the amendments allow an enforcement authority to test and make test purchases to assess and to ensure that appliances comply with the regulations. This is an essential requirement, given the necessarily technical requirements the Government will impose to protect consumers and the energy system. If severe non-compliance is identified, Amendment 186 grants a power to an enforcement authority to issue a recall notice to withdraw appliances from the market, if necessary.
Thirdly, Amendment 187 permits an enforcement authority to accept enforcement undertakings. This allows authorities to work constructively with industry to ensure appliances are brought into compliance with regulations, without the need for costly corrective enforcement action being taken.
Finally, Amendment 188 allows an enforcement authority to issue guidance about the enforcement of the regulations and how any authority would exercise its role. This will support industry to comply with their obligations. The market for these appliances is expected to grow rapidly and will play an essential part in the transition to a smarter energy system. These appliances will help consumers save money on bills and contribute to cost-efficient decarbonisation. I hope noble Lords will agree that this is an important group of amendments to enable an appropriate and proportionate enforcement regime to develop, which is consistent and compatible with existing product safety legislation. I beg to move.
Lord Teverson (LD)
My Lords, I just want to probe the Minister so that I understand how this works in practice. What are the Government enforcing? Is it an operating system? Is it the design of a chip? Is it the company that makes them? Will they be type-approved in the UK? Will there be compatibility across different domains? All producers of white goods are international, I think. Will we have our own standards here? I am trying to understand how this will work practically. I absolutely agree with the Minister that this is a key area.
Enforcement authorities are mentioned in the Bill. I just want to understand who they are. Are they the thought police? The Minister mentioned an organisation—the UK cyber headquarters or whatever—so is it that? Is it the Department of Trade, as we would have understood it? Is it the police? Who are those enforcement agencies and how will they work?
I have one last request for clarification. Clause 189(2)(f) refers to
“conferring functions, including functions involving the exercise of a discretion.”
I cannot work out what that means so I would be pleased to understand it.
Baroness Bloomfield of Hinton Waldrist (Con)
I agree that the language in that particular paragraph is quite legalistic. I might need to come back to the noble Lord on that one unless I can get an instant answer.
As I have said, the detailed enforcement regime will be set out in legislation. The enforcement powers underpinning these regulations will provide an appropriate toolkit to allow an enforcement authority to work with industry to ensure that appliances are both compliant with the future regulations and proportionate to the risks that non-compliant devices could pose to consumers and the grid. The Government have aligned the enforcement powers underpinning the regulations with other product regulations that have similar enforcement powers, such as the Electrical Equipment (Safety) Regulations 2016 and the Electric Vehicles (Smart Charge Points) Regulations 2021.
We are in conversation with regulators on our measures. We are confident that we will have the right knowledge and expertise to resource and regulate this market as it develops. I think that is probably as far as I can go at this stage.
Lord Callanan (Con)
My Lords, for the benefit of the noble Lord, Lord Teverson, I have some more government amendments for his delectation. I will also speak to Amendments 200 to 211, 243 and 244, 246 and 247, which all stand in my name.
Amendment 199 introduces a new Part 9A to the Bill which relates to the existing energy savings opportunity scheme, commonly referred to as ESOS. I committed at Second Reading to table these new clauses regarding improvements to ESOS. For those noble Lords who do not know, ESOS is a mandatory energy audit scheme for large organisations, covering their buildings, transport and industrial processes. ESOS provides businesses with cost-effective recommendations on energy efficiency measures. The existing scheme is estimated to lead to £1.6 billion of net benefits to the UK, with the majority of these benefits applying to participating businesses as a result of reduced energy costs.
The power in the amendment would replace the repealed power in the European Communities Act 1972 under which the UK established ESOS in 2014. Without this, ESOS is a frozen scheme and cannot be updated. The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings.
Lord Teverson (LD)
Can the Minister clarify: did he say that this Bill revokes that EU legislation? Is that what he just said?
Lord Callanan (Con)
The power in the amendment would replace the repealed power in the European Communities Act 1972, which I presume was repealed after Brexit, or rather the end of the implementation period.
The changes are aimed at encouraging businesses to take action on recommendations to increase their energy and carbon savings. The benefits to existing participating businesses are estimated to be savings of £1.12 billion from 2023 to 2037 through reduced energy bills. The savings would of course help to support businesses to keep the costs of their products and services affordable for consumers.
Amendments 200 to 202 outline some of the details of the ESOS regime and associated powers to make regulations. They include provisions regarding which undertakings ESOS should apply to; provisions regarding when, how and by whom an ESOS assessment should be carried out; and ESOS assessor functions and requirements.
Amendment 203 enables regulations to introduce a requirement for ESOS participants to publish an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. This requirement aims to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures. Amendment 204 enables regulations to impose requirements for ESOS participants to take actions that directly or indirectly support the reduction of energy use or greenhouse gas emissions.
Amendments 205 to 207, 209 and 210 concern the administration and enforcement of the scheme. They enable regulations to make provisions about the appointment of scheme administrators and their functions, including compliance monitoring and enforcement, provisions on penalties and offences, and rights of appeal. These amendments also enable the Secretary of State to provide financial assistance and to give directions to a scheme administrator, with which it must comply.
Amendment 208 concerns procedures for making regulations. It requires the Secretary of State to consult appropriate persons considered likely to be affected by the regulations and, where provisions relate to devolved matters, the respective devolved Administrations. It describes where affirmative procedure would be required, for example if extending ESOS to smaller businesses, mandating action by ESOS participants or creating offences.
Amendments 211 and 243 define certain terms used in the ESOS provisions, explain where provisions fall within devolved competence and set out the extent of the ESOS provisions to be England and Wales, Scotland and Northern Ireland. Amendments 244 and 246 clarify when the amendments will come into force. Amendment 247 inserts into the Title of the Bill a reference to the new clauses on ESOS, introduced by Amendments 199 to 211. With that, I beg to move Amendment 199 in my name.
Lord Callanan (Con)
The clause enables the Secretary of State to provide financial assistance to scheme administrators and ESOS participants. It does not, of course, compel us to do so but we are taking a power to have that option. If we decide to provide financial assistance, I will inform the House accordingly.
Lord Teverson (LD)
My Lords, there was a reason for my question. I absolutely agree that the Minister warned us that we would have these amendments coming down the track, and on ESOS I welcome that fact because it has been a very good scheme. Although companies occasionally bitch about it, as he says, it has caused actual change.
As the Minister will know, being a former MEP and so on, the ESOS scheme at the moment is based on the energy efficiency directive of 2012, which was updated in 2018. It came into force in the UK in 2014 and, as the Government’s website says:
“Government established ESOS to implement Article 8 (4 to 6) of the EU Energy Efficiency Directive (2012/27/EU).”
The reason I asked him for a clarification on his opening statement is that nowhere in his amendments could I see anything that repealed the existing directive or regulations that related to the energy efficiency directive.
Is this a sort of parallel scheme to the one that still exists, or is it still based on the original EU directive? If it is still based or relies upon the original EU directive, what happens if ever the retained EU law revocation Bill becomes a statute? Does all this fall away because it still relies on that EU legislation? If it is a parallel scheme, when does the existing one stop under the EU directive and this one actually start? That is what I am trying to understand. The Minister may well have explained this—forgive me if he has—but I do not get a flavour for what the big difference is between this one and the existing one. What would he see as the big positive change?
My last question is a more general one. I have not counted the non-government amendments that have come forward, yet—despite having on this side, and even part of that side, combined brains the size of a planet, excluding mine—the Government have not seen one amendment worthy of thinking, “Yes, that could be useful and might be something that could improve the Bill.” I just ask the Minister before the end of the year—and I wish him and the Bill team a very enjoyable Christmas and break—why has none of the brainpower on this side has been worth taking notice of in terms of the Bill going forward?
Lord Callanan (Con)
We are not proposing to extend it to medium-sized businesses at this stage. We would want to work with stakeholders on the detail of any potential future implementation, which would be subject to a further consultation and, ultimately, a cost-benefit analysis. This is a complicated area and there are a number of different views. We have had a couple of consultations on this. With these amendments, we are taking the powers to implement the scheme. Of course, the regulations would be subject to further debate in the House.
Lord Teverson (LD)
I just want to check something with the Minister. Are we saying that, if the retained EU law Bill became an Act, with its sunset clause of 2023, this scheme would still remain in force and there would be no legal ambiguity about it? Also, I believe that the next deadline for reporting is December 2023. Can I check that this still holds?
Lord Callanan (Con)
The noble Lord is asking for commitments on a different piece of legislation. When that Bill arrives in the House, we will no doubt have a full discussion on it. My understanding is that it is at Report stage in the House of Commons now. The sunset date is still set at 2023 although there are powers in that Bill to exempt particular pieces of legislation and Ministers have the option of extending the sunset date for pieces of retained law that it is not possible to update or review in the short time available. I am sure that we will have a long, involved discussion on the retained EU law Bill when it arrives in the House and that I will get déjà vu from the Brexit withdrawal Act, with many of the same people no doubt making many of the same points they made during that time.
Energy Bill [HL]
Lord Teverson ExcerptsMonday 12th December 2022
(1 year, 11 months ago)
Grand CommitteeRead Full debate Energy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 39-IV Fourth marshalled list for Grand Committee - (12 Dec 2022)
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, it is a great pleasure to be back in Committee once again, debating the Energy Bill. I thank noble Lords for their patience during the interregnum. Noble Lords will recall that the Bill was necessarily paused following the death of Her Majesty the Queen. However, we have always been clear that the Bill represents a landmark piece of legislation to provide for a cleaner, more affordable and more secure energy system that is fit for the future, so I am very happy to be debating it again.
Clause 84 makes changes to Section 30 of the Energy Act 2008, which in turn enables modifications to Part IV of the Petroleum Act 1998. Amendments 90 and 91 make consequential changes to definitions in Clause 84 in response to government Amendment 70.
The next set of amendments relate to Clause 85. Amendments 92, 93, 101 and 102 update the heading, labels and definitions in Section 30A of the Energy Act 2008, as amended by this Bill, to avoid inconsistencies with existing definitions in the 2008 Act. Amendment 103 makes a consequential change due to the changes in definitions.
Moving to Amendments 94 and 95, the existing Section 30A of the Energy Act 2008 includes a carve-out in subsections (2) and (3). This prevents the Secretary of State designating an installation as eligible for change of use relief if it is to be used as part of a CCUS project that is in Scotland or is licensed by Scottish Ministers. However, the Scottish Parliament is also unable to legislate to confer such a designation power on Scottish Ministers because oil and gas is a reserved matter. It is important that change of use relief is available to oil and gas assets in Scottish territorial waters to create a consistent application of this policy. Amendment 94 removes this carve-out from Section 30A of the Energy Act 2008. Amendment 95 then updates a cross reference as a result of the proposed Amendment 94.
The process for issuing change of use relief first requires that an asset is designated as eligible. Only after this can the asset then qualify for that relief. Amendment 97 makes clear what conditions must be satisfied for an installation already designated as eligible for change of use relief by the Secretary of State actually to qualify for that relief. The first condition is that the Secretary of State has issued a carbon capture and storage-related abandonment notice under Section 29 of the Petroleum Act 1998 on a person for that installation. The second is that the trigger event has been satisfied.
Amendment 98 describes the trigger event that must occur for the relief to take effect. The trigger event requires that, first, a decommissioning fund must have been established for the relevant asset. Secondly, an appropriate amount must have been paid into this fund to reflect the decommissioning liability that the previous owner is being relieved of. This amendment would also give the Secretary of State power to make regulations on the required amount that must be paid into the decommissioning fund, and who may make such a payment, to qualify for change of use relief.
The Secretary of State must also approve that the amount paid into the fund is sufficient. Amendment 96 imposes a requirement on the Secretary of State to consult the Oil and Gas Authority before certifying that the amount is sufficient. Amendment 104 makes consequential changes to defined terms in Clause 85 as a result of Amendment 97.
I now turn to the other amendments tabled by noble Lords in this group. Amendments 99 and 100, tabled by the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, seek to enable the Secretary of State to accept financial security from the previous owner, rather than requiring the amount to be paid in cash into the decommissioning fund. The Government acknowledge the point made by noble Lords regarding the value-for-money considerations when requesting funds to be set aside for decommissioning. The costs of decommissioning a repurposed asset are likely to be incurred at the end of the carbon storage asset’s life, which may be many years after the establishment of the decommissioning fund. However, the purpose of this trigger event for the issuance of change of use relief is to help protect the taxpayer from the decommissioning liability by having funds available to decommission repurposed assets. The requirement for a cash deposit looks to ensure that funds are available should the carbon storage asset close early and decommissioning of the existing infrastructure is required. This reduces the risk that the burden of decommissioning is left completely to the taxpayer. It is also intended that decommissioning funds will be invested to allow the fund to retain its value over time until decommissioning is required. This is another reason why it is important for the previous oil and gas owner to contribute money into the decommissioning fund.
More generally, the policy intent of change of use relief is to provide previous oil and gas owners with greater certainty over their liabilities, to incentivise the repurposing of assets. In return, however, the taxpayer should equally expect assurance that the oil and gas owners’ liability will be met, in accordance with the obligations that the owners agreed to undertake on commencement of their oil and gas activities. The Government judge that this can be provided only through a cash deposit, and not through a promise of funding, potentially decades into the future. This is the principle on which the policy was proposed in the Government’s consultation in August 2021 and with which, at the time, respondents broadly agreed. Therefore, I beg to move the amendment in my name and ask the noble Baroness, Lady Liddell and the noble Lord, Lord Foulkes, not to move their amendments.
Lord Teverson (LD)
My Lords, I welcome the Bill’s return to Committee; I am very pleased that that is the case. I have no comments to make on the amendments, but I note that during that interregnum, as the Minister described it, the Government gave planning permission for a coal mine. Although we are not going to debate it here today, that is a hugely retrograde decision which flies in the face of the Bill and the general way in which it looks forward. However, I have no comments on the amendments that the Minister has tabled.
Lord Lennie (Lab)
My Lords, I am also delighted to be debating the Energy Bill again. I am delighted that the noble Lord is still the Minister so that we at least have continuity on the Bill; it remains much the same as it was before we left it some three months ago.
As the Minister said, the amendments refer to Clauses 84 and 85 of Chapter 2 of Part 2 on “Decommissioning of carbon storage installations”. This gives the Secretary of State a power to make regulations regarding the financing and provision of security for decommissioning and legacy costs associated with carbon capture utilisation and storage. The decommissioning of offshore installations and pipelines used for carbon dioxide storage purposes is modified by Section 30 of the Energy Act 2008, which modified Part 4 of the Petroleum Act. Clause 84 enables further modifications to the modified Part 4 in relation to the definition of carbon storage installation, and the establishment of decommissioning funds and legacy costs as set out in Clause 82, “Financing of costs of decommissioning etc”.
Clause 85 relates to Sections 30A and 30B of the Energy Act 2008, which make provision for a person to qualify for change of use relief on installations and submarine pipelines converted for CCS demonstration projects—as defined by Energy Act 2010. This relief removes the ability for the Secretary of State, in some circumstances, to take steps under the modified Part 4. This clause makes amendments to Section 30A of the Energy Act 2008 by broadening the scope of change of use relief so that it applies to eligible carbon storage installations more generally, amending the trigger point to qualify for such relief.
Amendments 99 and 100, which the Minister referred to, were tabled by my noble friend Lady Liddell, who unfortunately cannot be here and therefore will not be able to move them. They reflect value-for-money considerations in the decision-making process, meaning that the Secretary of State could accept provision of security in respect of amounts to be contributed on account of decommissioning costs—costs likely to be incurred, as the Minister said, many years after the establishment of the fund—rather than requiring such amounts to be paid simply in cash.
Lord Teverson (LD)
My Lords, I really have just one question for the Minister, and it is on decommissioning funds. It is not clear to me—that may be because I have not gone through the absolute intricacies of all these lines—who actually holds the funds for the decommissioning fund. Are they banked, are they in the Treasury, or are they in the Oil and Gas Authority? What guarantee do we have that they are there when needed and that they are not just used by the Treasury but are part of offsetting the public sector borrowing requirement? I am very keen to understand whether that is similar to the nuclear decommissioning sector, and where that happens.
I turn to the amendments from the noble Lord, Lord Lennie. He has not spoken to them yet. I suspect that the Government might accept—
Lord Teverson (LD)
Forgive me. I am looking at a slightly out-of-date document. Anyway, that is the area that I would be interested to understand from the Minister. We will come to other amendments another time.
Baroness Blake of Leeds (Lab)
I too welcome the return of the Bill. It is quite interesting to reflect back to the first and second days in Committee, when we were recording the hottest temperatures that we had ever experienced in this country and were making full use of that experience. We were also in the midst of the leadership contest and questioning the commitment of the candidates; we had no way of knowing, of course, that both of them would take their turn in No. 10 and have the ability to demonstrate their commitment.
We are really pleased to see the return of the Bill. We were concerned that there would be changes and, as we said on the first two days in Committee, there are some measures in this Bill that are urgent and that we need to get a move on with in order to address the challenges that we face in this space.
I do not have an enormous amount to add to the Minister’s very full comments. I just seek clarification. When I see an amendment on consultation, I am always slightly concerned to know who exactly would come into the sphere of consultation and make sure that it is as full as it could be. The issues around making sure that the fund remains sufficient are very practical and necessary. With that plea for clarification on consultation, I am happy to leave it there.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lord, Lord Teverson, and the noble Baroness, Lady Blake, for their remarks. I will start with the noble Baroness’s final question. As set out in the Government’s response to that consultation, it is expected that the owners of the asset will submit their assessment of the decommissioning liability to the Offshore Petroleum Regulator for Environment and Decommissioning for verification. This verification will include consultation with the North Sea Transition Authority, which will be able to compare the assessment against its extensive benchmarking data. OPRED will also be able to engage third parties to provide its own assessment if necessary. Once OPRED is satisfied that the assessment is accurate, it will advise the Secretary of State on approving the amount. That is the advice route that the Secretary of State would take.
In response to the question from the noble Lord, Lord Teverson, transport and storage companies will hold the decommissioning funds, but will be overseen by the economic and operational regulators. Funds to cover decommissioning costs will be included in the allowed revenue paid to the transport and storage company. The proportion of revenue to be paid into the decommissioning fund will be determined by the economic regulator once the decommissioning liability has been calculated. I hope that that deals with that satisfactorily—clearly not.
Lord Teverson (LD)
I thank the Minister for that very useful answer. Let me get that correct: the funds are being held by the commercial companies that are putting this money aside. Is that ring-fenced? If they go bankrupt, is that lost? How does it work?
Baroness Bloomfield of Hinton Waldrist (Con)
It could be a commercial company. It depends who gets the contract for the funds. Then they will be invested.
Baroness Bloomfield of Hinton Waldrist (Con)
I do not think we have a detailed enough answer, so perhaps we should follow up in writing.
Lord Teverson (LD)
I have a concern about this area and I think it is important that this is clarified.
Baroness Bloomfield of Hinton Waldrist (Con)
We will clarify that point in writing before the next stage.
Lord Lennie (Lab)
My Lords, these amendments refer to Clauses 90 and 91. They concern consultation over the CCUS strategy and its periodic review. I am grateful to Drax for providing definitions. Carbon capture and storage traps and removes carbon dioxide from large sources and most of that CO2 is not released into the atmosphere. That can be either pre or post combustion. If it is post combustion, the storage usually takes place underground in large silos, the largest of which is in Texas and which is currently processing 5 million tonnes of CO2 a year. As an advert for Drax, it reckons that it would be able to process 20 million tonnes in North Yorkshire by 2030 or thereabouts.
Amendment 113 is about the requirement to include His Majesty’s Opposition in the list of organisations that must be included in stakeholder consultation. These reviews must happen either every five years or more frequently if certain circumstances take place, including a general election or if there is a material change of policy on CCUS. These reviews are to ensure a stable and predictable regulatory landscape for investors. I would have thought that the amendment to include the Opposition in the consultees’ list would be quite attractive to the Government, given the current state of the political landscape in the UK—but there you go. This new requirement would clearly be of overall benefit to the development strategy by involving a wider parliamentary group beyond just the Secretary of State when a review is required. If the Secretary of State seeks to amend the statement, they will have to follow the requirements in Clause 91, which include the requirement for the statement to have been approved by a resolution of each House of Parliament before the Secretary of State can designate it as a strategy and policy statement.
The amendment tabled by the noble Baroness, Lady Liddell, in this group would ensure a requirement for consultation on the CCUS strategy and policy statement, if the Government should seek to amend it. It sets out the process that would have to be followed, and the Opposition support this amendment. I beg to move.
Lord Teverson (LD)
My Lords, I was getting ahead of myself on the last group, and I apologise to the Grand Committee for that. I would have thought that the Government would like to accept this amendment, as they are likely to be in opposition in five years’ time. I wait to hear from the Minister.
Lord Callanan (Con)
I thank the noble Lords, Lord Lennie and Lord Teverson, for their concern about whoever might be the Official Opposition at the time. I suppose we will see. I am surprised that the noble Lord, Lord Teverson, did not want to ask for the fourth-placed political party in Parliament to be a statutory consultee as well.
These amendments seek to clarify those who must be consulted as part of the process of designating a CCUS strategy and policy statement. Amendment 113 was tabled by the noble Lord, Lord Lennie, the noble Baroness, Lady Blake, and the noble Baroness, Lady Bennett—who, sadly for us all, is unable to be with us. This amendment seeks to require the Official Opposition to be consulted as part of the strategy process. I reassure noble Lords that parliamentarians will have the opportunity to consider any draft CCUS strategy and policy statement, which must be approved by a resolution of each House of Parliament before it can be designated, as is provided for by Clause 91(10). So, of course, whoever is the Official Opposition at the time, and whoever is the fourth-placed political party at the time, will have a full opportunity to contribute to the debate on this matter.
As the Bill sets out, any CCUS strategy and policy statement that has been designated will be required to be reviewed every five years, although, in the specified circumstances set out in the Bill, a review could take place sooner than five years. When the outcome of a review is that the Secretary of State considers that the statement should be amended, the Bill provides for a statutory consultation process, including consultation with the economic regulator and relevant Ministers in the devolved Administrations. An amended statement would also be required to be approved by a resolution of each House, and would therefore be subject to parliamentary scrutiny and approval before it could be designated.
The process for designating the CCUS strategy and policy statement mirrors the process set out in the Energy Act 2013 for an energy strategy and policy statement. When the outcome of a review is that the Secretary of State considers that the statement does not require amendment, or should be withdrawn, this also requires consultation with the economic regulator and Ministers in the devolved Administrations. This is to ensure that any impact that this decision would have on the conduct of the regulator’s functions, or in relation to the important matter of devolved policy, is taken into account in the decision-making process. It is also the case, of course, that the Secretary of State can update Parliament on the plans for, and outcome of, any review, as part of the normal process of parliamentary business.
On Amendment 114, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, Clause 91 provides for the Secretary of State to consult whomever he or she considers appropriate, in addition to certain specified persons, in the process of developing a strategy and policy statement. This formulation enables the Secretary of State to consult ahead of laying a statement before Parliament. As I have set out, it is for Parliament to consider and approve any new or amended statement.
Although I thank noble Lords for their concern about whoever ends up being the Official Opposition at the time, and for their interest in this topic, I hope that the reassurances I have been able to provide on these points mean that they will not press their amendments.
Lord Teverson (LD)
May I come back to the Minister on Amendment 114? It seems very restrictive to consult as the Secretary of State decides. I cannot pinpoint this, but in many other pieces of legislation the wording is much closer to that in Amendment 114. I do not understand why the Government would not accept that very modest amendment to those “affected” by a revision of the strategy. Surely this is far more restrictive than most government legislation in this area.
Lord Callanan (Con)
My Lords, I will start with my Amendments 123 and 124. Amendment 123 seeks to provide additional clarity to Clause 100. Clause 100(1) provides examples of how targets for a low-carbon heat scheme may be set. The amendment’s addition of proposed new subsection (2A) clarifies that an average appliance efficiency or emissions intensity target could apply to all of a given manufacturer’s heating appliances sold in the UK, whether or not they were sold or installed by the manufacturer itself. This had been explicit in one of the examples in the list in subsection (1) but not in others. The Government believe that it is prudent to make this explicit and it provides additional clarity.
The Government have tabled Amendment 124 purely to correct a minor drafting error in Clause 100(4), replacing “activity” with “appliance” so that the subsection has its intended meaning.
Moving on to the amendments tabled by other noble Lords, I will start with Amendment 117 from the noble Baroness, Lady Worthington. The Government have always been clear that they intend to introduce the low-carbon heat scheme provided for by this chapter in very short order; namely, from 2024. However, it is the Government’s view that it would not be appropriate to incorporate a timeline into the Bill. If the noble Baroness will take my word for it, we intend to get on with this fairly quickly. It is important that the legislation retains the opportunity, if necessary, to respond to any unforeseen changes in market conditions, et cetera, and to ensure that the necessary administrative and enforcement systems are established. We are indeed looking at the appropriate enforcement mechanism at the moment.
I turn to Amendment 118, the first of four in this group in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. I also thank the noble Baroness, Lady Sheehan, for her contribution. This amendment would require there to be a link between the introduction of a low-carbon heat scheme and a ban on the installation of gas boilers in new-build and existing properties respectively.
Noble Lords will be aware that the Government will introduce a future homes standard in 2025, which will effectively require that new properties are equipped with low-carbon heating and high energy efficiency, avoiding the need for future retrofitting. New properties would be taken care of in that respect. It would be premature to decide exactly what policy approaches will be best suited to implement the phase-out of natural gas boilers in existing properties.
I do not believe that it is helpful to create a dependency between the ability to launch a scheme on the one hand and a particular, separate measure such as an appliance ban, as the amendment proposes, on the other. That would risk delaying the introduction of such a scheme altogether.
On Amendment 119, the Government have been clear that a range of low-carbon technologies are likely to play a role in decarbonising heating. District heat networks have an important role to play in all future heating scenarios, as do electric heat pumps. Work is ongoing with industry, regulators and others to assess the feasibility, costs and benefits of converting gas networks to supply 100% hydrogen for heating. As the noble Baroness, Lady Sheehan, said, it is indeed a considerable challenge, but we need to do the studies to work out whether it is feasible. Of course, other technologies may also play a supporting role.
To establish whether or not it is a feasible technology, the Government have an extensive programme of work already under way to develop the strategic and policy options for all these technologies and for different building segments. Another plan, seeking restrictively to prescribe the right solution for all properties now and out to 2050, is not particularly necessary or helpful.
I thank my noble friend Lord Naseby for his contribution on Amendment 121. This amendment would expand the potential set of low-carbon heating appliances that could be supported by a scheme established under the power in this chapter. However, I emphasise that the set of potential relevant low-carbon heating appliances established in this clause is solely for the purposes of a scheme under this power. It does not in any way serve as a comprehensive statement of all potential low-carbon heating appliances, and it has no wider bearing on what could be considered low-carbon heating appliances in any other policies, schemes or legislation.
The Government recognise that low-carbon hydrogen could be one of a few key options for decarbonising heat in buildings. To that end, the Government are working to enable strategic decisions in 2026 on the role of hydrogen in heat decarbonisation; I note the scepticism of a number of noble Members about this. The Government will bring forward the necessary policies and schemes to support the deployment of hydrogen heating, depending on the outcome of these decisions. We will also shortly consult on the option of requiring that all domestic gas boilers are hydrogen-ready from 2026. Since the scheme provided for by this measure would not be suitable or necessary to support the rollout of hydrogen-using or hydrogen-ready heating appliances, it would not be helpful to expand the scope of the power in this way.
Finally, Amendment 122 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, would require that three specific targets be incorporated into regulations for a low-carbon heat scheme. Again, the Government believe that targets are best set and adjusted in the scheme regulations, based on an assessment of the market conditions at the time, rather than in the enabling legislation in advance.
I turn to the specific targets that the noble Lord proposed. I have said a number of times that the Government’s ambition is to develop the market towards 600,000 heat pump installations per year in 2028. That is what we assess to be a scale necessary for and compatible with all strategic scenarios for decarbonising heating by 2050. Although the Government have clear plans to support industry to build a thriving manufacturing sector for heat pumps in the UK, we do not believe that a production quota is an appropriate way to achieve this.
In the light of what I have been able to say, particularly on the consultation, I hope that the noble Baroness, Lady Worthington, will agree to withdraw her amendment.
Lord Teverson (LD)
My Lords, I wanted to give the Minister the opportunity to introduce his amendments, but I will say a couple of things about this because low-carbon heating is a key issue. As he will know, 40% of UK emissions, more or less, are from heating. One of the big gaps in the Bill is part of the solution to that: home efficiency, which does not really appear in the Bill at all but should have.
I would like to ask the Minister specifically about energy from waste. Clause 98(4) has a list of fossil fuels, but energy from waste is not there. It is sort of a hybrid of being one and not. Over the last decade or so, one of the issues has been that when we have had energy-from-waste plants there has been a big emphasis on them being compatible with using the excess heat for commercial or domestic heating purposes, but hardly any of them do that. They get the planning permission but hardly anything happens. There are one or two in south London where it works, but generally it is not the case. Where do energy from waste and the high carbon emissions from disposing waste fit into this? Do the Government have any appetite—I do not really see it in this section of the Bill—to repair that past omission and make sure that excess heat from those facilities is used far more effectively, and perhaps compulsorily, in future?
Baroness Worthington (CB)
My Lords, I added my name to the Clause 108 and Clause 109 stand part notices and to Amendment 125 in the name of the noble Lord, Lord Teverson.
We have had wide-ranging debates but, when it comes down to the content of the Bill, the most egregious elements are possibly these two clauses. It seems absolutely incredible that we should require people to enter into a trial for something on which multiple studies have been undertaken already. We are essentially legislating to force people to take part in something we already know the answer to. We know the answer because 32 independent studies of the use of hydrogen in heating—since 2019, so they are relatively recent—by organisations including the IPCC, the IEA, Imperial College, the Potsdam Institute, the University of Manchester, the Wuppertal Institut, Element Energy and the International Council on Clean Transportation, have all found that hydrogen should not play a role in heating buildings. Hydrogen will be hugely inefficient, compared with other clean alternatives and gas, in terms of pure energy efficiency, damaging to health and dangerous. That should be enough evidence for the Government to rule out this unnecessary trial.
I honestly believe that this is a consequence of a huge amount of lobbying coming from the incumbents in the industry, including those who today manufacture gas boilers, produce gas and move gas around in the networks. What they fail to mention is that it is not as simple as just switching over to hydrogen: you have to replace virtually everything to be able to burn hydrogen at high levels. Yes, of course, you can burn very low levels, but who wants low levels? We are talking about a net-zero strategy in the next 25 years; you cannot afford to go through increments of 20% hydrogen and 30% hydrogen—it is simply not credible. It will do exactly what we saw in the co-firing of biomass in coal-fired power stations; it keeps the incumbents going for longer, keeps their investors and shareholders happy, and gives them an answer to the question, “How are you going to make your business compatible with climate change?”. It is a glib answer. It is not a full answer—in fact, it is false—but it is an answer none the less. That is why we are being forced into considering this, even though the evidence is absolutely clear that this is not the answer.
If I were a resident living in one of these poor villages—the villages of the damned, as I like to call them—I would be absolutely up in arms at the prospect of being forced into this egregious position in which I am asked to take this technology, which will be more expensive, less beneficial for my health and more damaging to the climate compared with other alternatives. I fully support the withdrawal of the two clauses; the Bill would be vastly better if we got rid of them. I am very grateful to the noble Baroness for tabling this.
Lord Teverson (LD)
My Lords, I particularly support the proposal to take out Clauses 108 and 109. I did not put my name to that, but it seems the obvious solution. As the noble Baroness, Lady Worthington, said, we have all been on the receiving end of massive lobbying by the hydrogen lobby. I will not go into hydrogen extensively, but clearly there are areas where hydrogen will need to work. It will be important in some energy-intensive industries and some long-term transport solutions, but we seem to have overreached in terms of those applications.
For heating, it just cannot make sense to use green hydrogen, which would have to be produced by renewable electricity, as electricity could be used anyway. Scientifically and in terms of the laws of physics and efficiency, it does not make sense. Heating is an important area—as we said, it represents some 40% of UK emissions—so surely it must be electrification directly, geothermal technologies or air source heat pumps, as we have discussed before. That is why I think these clauses not standing part is the best solution. If that is not agreed, I thank the noble Baroness for supporting my amendment; the noble Lord, Lord Lennie, has a similar one. This should not be compulsory and those consumers should be very aware of all the other repercussions.
My second amendment, Amendment 126, is less important. As with previous amendments, it just makes sure that only people who really benefit from these trials should have to pay for them and that those who do not should not. I do not understand how BEIS and the Government have become the victims of the lobbying that takes place.
Finally, perhaps I can cite a gentleman whose work I have been reading, Jan Rosenow. He takes his statistics from BEIS’s Hydrogen Production Costs 2021 and Ofgem’s wholesale market indicators. He is very clear that, depending on how you look at the timescale between now and 2050, hydrogen will cost three to 11 times more than fossil fuel gas at its present levels. Clearly, this is not an acceptable solution or route for decarbonisation.
Lord Lennie (Lab)
My Lords, these amendments relate to Clauses 108 and 109—Chapter 2 in Part 3—on hydrogen grid conversion trials, covering modifications of the gas code and regulations for the protection of consumers. The background to this is that in 2021 the Government launched a consultation on facilitating a grid conversion hydrogen heating trial. The Government’s Ten Point Plan for a Green Industrial Revolution sets out the ambition to support the industry to deliver hydrogen neighbourhood and hydrogen village trials by 2025. This consultation sought views on proposals to legislate to allow gas distribution network operators to carry out activities needed to deliver a grid conversion.
It would be unfair to say that the Government did not alert people to the complexity of the trial, because the consultation document announced that it involved replacing gas supplies with hydrogen in consumers’ premises. It also said:
“Existing in-home appliances and devices such as boilers and meters will need to be replaced with hydrogen-compatible equivalents. Pipework may need to be replaced if it is not already suitable for hydrogen. Additional internal work may also be required to make the property ‘hydrogen-ready’.”
On the face of it, the Government understood the complexity. They also said that the trials would be carried out by the gas distribution network operators in partnership with local authorities, and that, in the trial of hydrogen, safety
“will be of paramount importance”—
that is good news—with the Health and Safety Executive being consulted and involved in any measures of conversion.
Lord Callanan (Con)
The answer to both of those questions is yes. No one will be forced to take part in the trial. If they do not take part in the trial, they will of course be given an alternative low-carbon solution.
Lord Teverson (LD)
Can the Minister clarify what areas are being looked at? I have seen Redcar, Whitby and Fife being looked at as potential areas. Are those agreed? Is the number roughly three and when are those locations likely to be confirmed?
Lord Callanan (Con)
There is already a small-scale trial in Fife in Scotland. There are two shortlisted villages, Redcar and Whitby—on the west coast, not Whitby on the east coast. They have been shortlisted for the trial and we will make a decision on the basis of submissions from both communities in the new year.
Lord Callanan (Con)
Let me reiterate once again. Noble Lords are getting involved in the detail of what these trials will comprise—timescales, consumer protections, et cetera. This Bill is about giving the Secretary of State the powers to make the regulations, which will then come back this House, when I am sure that we will have a massively long and involved discussion about all these precise and important details—but this Bill is not the place.
Lord Teverson (LD)
In defence of my noble friend, I think it is reasonable to ask the Minister to come back and give us an indication of the length of the trials. He must know that, and that would be a very useful bit of information.
Lord Callanan (Con)
The initial intention is for them to last two years, but we will want to come back and look at all these details on the basis of proper scientific evidence.
Battery Strategy (Science and Technology Committee Report)
Lord Teverson Excerpts(1 year, 12 months ago)
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Lord Teverson (LD)
My Lords, I first declare my interest as a director of and shareholder in Aldustria Ltd, a battery storage company, and a trustee of Regen, a renewable energy trade association—I think that that is the best way to describe it. Like many other noble Lords here, I very much welcome the report and congratulate the committee and its chair on it.
One thing that always seems to be forgotten outside this area is the timebomb in the trade and co-operation agreement that is around the 2007 rules of origin and when the percentages come into force. There are different ones for cars, cells and assembled batteries and they are a real challenge to that industry.
Soon after the EU referendum, one substantial vehicle manufacturer in the west of England, Honda, at Swindon, was straight on to me, and I am sure to other Members who were interested in the west of England economy, and said, “If something isn’t sorted out on rules of origin, the automotive industry in this country is going to be dead”. And, of course, Honda has gone; it is no longer there, which is a huge blow to the economy of Swindon. It decided to get out while the going was good.
I am not going to go on hugely about vehicles, because that is what other Members have already done, but the point has come over strongly, in the report and in the Faraday Institution’s work, that at the end of the day it is not just around tariffs—we export around 80% of our car manufacturing and 50% of that goes to the EU—but location. In electric vehicles, batteries are the most substantial accessory or part of the vehicle—quite obviously. There is a huge benefit in terms of colocation between the rest of the manufacture and assembly of automobiles and the gigafactory being close by. If we do not have those gigafactories, almost whatever the tariffs are, those manufacturing centres will disappear out of our area.
I want to move on to something that my noble friend Lady Sheehan has mentioned. It comes also from what the noble Lord, Lord Lilley, referred to. It is around resources and the circular economy. If there is one challenge in this area that is being overlooked, although the committee did look at this area, it is the reuse of scarce resources and rare earths that are used in a lot of electronic goods, in automobiles and in batteries. The stranglehold is largely in China and some other economies as well. We need to make sure that we have a circular economy ability to recycle batteries. On the whole they can be refurbished fairly easily. Often when they are at the end of their life, only one or two cells have gone, which can be replaced. Also, they can then be used for other purposes and have a second life. That industry, I believe, is one area where we could get well ahead. Europe is already on its way, but I believe that it is important for both our resource security and for having a viable industry in this area that we are good on the circular economy as well.
In my last comments, I will come to a completely different sector, which is stationary batteries and those that are to be used in grid balancing. It is chaotic at the moment. One of the big things that it is almost impossible to do if you are a developer is to get access to the grid. It is not just around battery storage but around housing developments—even in west London—and around renewables, solar and offshore wind coming into the UK grid system. To quote a current example, a connection in the south-west given by the local transmission network, Western Power Distribution, is for 2038: that is where the queue has got to. There is no way under Ofgem rules at the moment of undoing that queueing mechanism and getting the right priorities for the right place.
If we want to get to a net-zero electricity and energy system, we need batteries to be a part of that. In fact, if energy storage is seen as a solution to the grid and not a problem—not an extra load—we can in fact move a lot quicker towards net zero and a resilient grid system. This is a serious problem at the moment. The figures I looked up say that 25 gigawatts of battery storage is needed to get to net zero—if they are four-hour batteries, that is roughly about 100 gigawatt hours, obviously. As I say, the connection wait times are now out to something like 2038.
Now this is a sector that does not require any public money at all; it is completely mercantile. But it is unable to bring forward that balancing, and through balancing bring down the cost of energy into the future. So I would be very interested to hear from the Minister what the likelihood is of us solving that. There are various studies going on at the moment, but they are slow and there is not really much light at the end of the tunnel. Frankly, what we need in terms of the national grid is anticipatory investment, not the reactive investment that we have at the moment.
I have a last question for the Minister. In terms of battery storage, there were amendments to change battery storage from being defined as an energy generator in the Energy Bill. I know that he will not say when the Energy Bill will come back to this House, but can he say when there might be a decision as to when the Bill might come back to this House?
Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022
Lord Teverson Excerpts(2 years ago)
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Lord Hodgson of Astley Abbotts (Con)
My Lords, I am grateful to my noble friend for his explanation and for the way he has addressed some of the concerns of the Secondary Legislation Scrutiny Committee, which I chair. The SLSC, a cross-party committee, is of course not concerned with politics. That is for the House, the Government and, in due course, the electorate to decide.
My remarks now are therefore not about the energy policy but about the administration and process by which it is being delivered. We have quite narrow objectives in our terms of reference. The two that I think apply today are, first, that the instruments are
“politically or legally important and give rise to issues of public policy likely to be of interest to the House”;
and secondly, that they may imperfectly achieve their policy objectives. I particularly want to compare the unfavourable treatment of Statutory Instruments Nos. 1102, 1103 and 1125 with the other two in this group, Statutory Instruments Nos. 1101 and 1124. The first lot are about energy and the second lot are about heat.
As my noble friend the Minister has explained, this is about making sure that a fair share of the proceeds are passed on to tenants by landlords. He has gone through the rationale for “fair”, “reasonable” and so on and so forth, but it is worth while us putting ourselves in the position of an elderly widow. Let us say that she is in a block of 50 flats. Let us say that the landlord has two or three blocks of flats; they may have a couple of hundred tenants. The landlord may say, “Here is your rebate”. She may, for one reason or another, decide that it is not right. She must therefore begin proceedings to recover what she believes her fair and reasonable share is. That is what the committee was concerned about: inequality of arms.
We have to think about a single individual, maybe a vulnerable individual. I accept that I am exaggerating slightly to make a point, by taking one particular angle on the people who might be affected, but I am trying to explain to the Committee that this person is somehow going to have to have the courage, conviction, energy and money to take the landlord on and take them to the county court over what may not be a huge sum of money. Although I am sure my noble friend wishes to find ways of ensuring that tenants are informed and helped and that landlords are required to provide proper shares, records and so on, I am not sure that this is going to work in the real world as happily as the Government, I and the SLSC would wish it to. The inequality of arms—above all, in the power to delay and ask for more particulars; as I said, this should be looked at in a lot of detail—is likely to work in favour of landlords, particularly multiple landlords, against tenants, particularly tenants who are vulnerable, elderly or disadvantaged in one way or another.
When we come to the first three SIs, Nos. 1102, 1103 and 1125, there is no further appeal—that is the end—whereas when we get to Nos. 1101 and 1124, there is an appeal to the Energy Ombudsman and the General Consumer Council for Northern Ireland, in respect of activities in the Province. So, although I quite understand what the Government are doing and wish to do well, they will need to keep a very close eye on what is going on under these regulations to ensure that fairness is not only being sought but being achieved and that, in cases where people are less well equipped to fight their corner, they are properly protected and looked after.
Lord Teverson (LD)
My Lords, I would very much like to follow up on a number of the points that the noble Lord, Lord Hodgson, made so clearly. First, I welcome these regulations. Clearly, they are important pieces of secondary legislation. They are really important in terms of making sure that energy contributions, subsidies and public payments reach the people they need to reach. The questions I am going to ask are not a prosecution, if you like; I want to understand how some of this is going to work. I recognise fully the difficulty that the Government might have in finding a way to make this work.
First, what is the size of this problem? Does the Minister have any indication of the number of households that, in effect, have their landlords pay their electricity and energy bills? I do not know whether he has any idea what that is.