Paris Climate Change Conference

Lord Teverson Excerpts

Tuesday 15th December 2015 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister for repeating the Statement today. He is quite right to celebrate the agreement’s achievement and the role that all recent UK Governments have played to bring this about.

All Governments have agreed to the common goal to decarbonise their economies within one generation, to limit increases in global temperatures to below 2 degrees and to target 1.5 degrees. All Governments have agreed to achieve net zero emissions before 2050 and the end of the century to cut pollution and curb carbon emissions. All Governments have agreed to review progress and raise ambitions every five years to make sure that the job gets done. Developed nations have agreed to help fund the developing nations’ transition to clean energy with a flow of $100 billion a year beyond 2020.

The commitment achieved by consensus is immense. The Paris conference witnessed the greatest get-together of world leaders, with 50,000 people in attendance and the dedications of scientists, campaign groups and interest organisations in mobilising public support to insist on an agreement being achieved. This historic achievement was won in a forum of one country, one voice; unlike other intergovernment forums dominated by richer countries, as in the G7, G20, OECD and OPEC. China, the US, the EU and India are responsible for 61% of global emissions but other nations have an equal voice at the UNFCCC. The French must be congratulated for facilitating the conference, working tirelessly to resolve disputes.

The Minister is right to highlight the role played by successive UK Governments and the British Parliament. Now that this Government are the first Conservative Government for 18 years, this is not the time to abandon that consensus. It must be recognised that scientists still point to the dangers that even a rise of 2 degrees will bring and the trajectory that the world is on.

This agreement needs to be followed up by outcomes. In this respect, I congratulate the Government on the decision to phase out coal-powered generation by 2025. Last week, the Minister stated that domestic policies do not resonate on an international stage. His Government cannot think that fine words need not be matched by deeds.

In the Energy Bill 2013, the Government refused to set a 2030 decarbonisation target. There has followed a litany of reversals to important schemes designed to put the UK on track to a low-carbon economy. The UK’s commitment to reach renewable energy targets of 15% by 2020 is in jeopardy. PWC estimates that if the renewables contributions from heat and transport remain at their present levels, the UK will need to generate 52% of electricity from renewables to meet that target.

The Government have attacked the cheapest options for achieving these targets, such as onshore wind, meaning that energy bills will increase by more than they need to. The Green Deal efficiency measures have been abandoned. Carbon capture and storage projects in Yorkshire and Scotland have been axed. Polluting diesel generators have been rewarded with 15-year contracts totalling more than £150 million in the latest capacity auctions.

The UK still requires significant investment in low-carbon technologies. Investor confidence is now undermined by continual sharp policy shifts such as are proposed in the latest Energy Bill. Friends of the Earth states:

“It will be outstanding hypocrisy for the government to trumpet the new climate change agreement unless it does a U-turn on energy policy”.

Will these green policy reversals now be reviewed in the context of the commitments given at Paris? Will the Minister ask the independent Committee on Climate Change to review the progress towards and likely achievement of the UK’s renewable generation target, and whether there should be further policy initiatives to get the UK back to achieving 15% of energy from renewables by 2020?

In Paris, the global ambition has been set to reduce temperature rises from 2 degrees to 1.5 degrees. What further measures does the Minister’s department now consider are necessary?

[Lord Teverson (LD)]

My Lords, what a great result for all sides of this House, for the nation and for the international community. I do not think that we can say more strongly than has the Minister how great this result is. After the pessimism—the omnishambles, we could say—of Copenhagen in 2009, this is truly a good and remarkable result. We should certainly congratulate the French Government, and Laurent Fabius in particular, on their stewardship and their achievement at this conference.

The great thing is that those of us who believe that climate change really is one of the greatest issues facing this planet can be positive again, since for the past six years we have been rather on the defensive and pessimistic about outcomes. What we have here is an agreement not just between 196 nations but an agreement particularly that China, the United States, India and Europe have agreed to. That is quite something and it would have been unbelievable just a few years ago.

We also have something else to celebrate. In 2014, the globe’s emissions were roughly the same—they levelled out for the first time during a period when there was global economic growth—and, this year, we hope that there will be something like a 1% reduction in carbon emissions. So we can move forward with confidence that we are achieving something and perhaps prove wrong the pessimists or disbelievers among us, not just through the science but by showing that real-world Governments, including in the developing world, are taking notice that this is a problem that needs to be solved.

I welcome particularly in this agreement the integration between developed and developing nations—there is not the big divide that there was under Kyoto and China’s emissions this year are falling by some 3% to 4%. I welcome, too, that we will have a proper review programme every five years, starting in 2018—we are not waiting for five years until we start that process—and that we realise that, for those island states in the Pacific and elsewhere, the real challenge should be 1.5 degrees and not 2 degrees, difficult though that will be. Those are great achievements and I welcome the Secretary of State’s Statement, and in particular her thanks to previous Secretaries of State—I think of my former right honourable colleague Ed Davey in that regard.

But we have a problem here: we need those nations to move forward on those agendas, and that includes the United Kingdom. While I agree with the Minister entirely that we have had a positive reaction in ridding ourselves of coal emissions within the next 10 years and increased investment in technology around the green agenda, so far this year we have had a reversal of a number of policies that are really important for driving our commitments forward in this area. The House does not have to believe me because the chief executives of companies such as Panasonic, BT, M&S, Tesco, Vodafone, Ikea and many others have written to the Government saying that this policy change has been in the wrong direction and needs to change. Those are real challenges.

We will come to the fifth carbon budget and I hope that the Government will move forward positively when it comes to decisions, unlike with the difficulties that there were— particularly from the Treasury—when we looked at the fourth carbon budget in the past.

On behalf of my Benches, I welcome this agreement. As the Minister said, it is not the end but it is the beginning of reaching a solution to climate change on this planet. It is the most important way of going forward. Of all the policies that are most important for implementing this agreement, perhaps the cheapest and most effective is the one of energy efficiency. The Government’s move away from zero-carbon homes for 2016 and commercial buildings for 2019 was one of the most negative policies that they could have implemented. My challenge to the Minister is to ask the Secretary of State to reverse at least that one policy so that we can start on the road to fulfilling this agreement.

Electricity Capacity (Amendment) (No. 2) Regulations 2015

Lord Teverson Excerpts

Tuesday 24th November 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, this draft instrument is an amending regulation to the main secondary legislation package for the capacity market scheme, part of the electricity market reform programme. The powers to make this implementing secondary legislation are found in the Energy Act 2013, which, following scrutiny in this House and the other place, received Royal Assent in December 2013 with cross-party support.

The two changes contained in the draft instrument are simplifications intended to make the process easier for applicants, and were overwhelmingly supported by respondents in the consultation, but before I explain them in more detail it may be helpful to the Committee if I say a few background words about the capacity market itself.

I remind noble Lords that the capacity market will address our medium-term electricity needs and ensure that there is sufficient electricity supply towards the end of the decade and beyond. In brief, the capacity market will achieve this by making a regular capacity payment to providers who are successful in capacity auctions. In return for this payment, providers must meet their obligations to provide capacity, or reduce demand, when the system is tight, ensuring that enough capacity is in place to maintain security of electricity supply.

Ensuring that families and businesses across the country have secure, affordable energy supplies that they can rely on is our top priority. That is why we already have firm mechanisms in place, working closely with National Grid and Ofgem, to maintain comfortable margins on the system over coming winters.

Beyond that, it is essential that generators have confidence that they will receive the revenues that they need to maintain, upgrade and refurbish their existing plant, and can finance and build new plant to come on stream as and when existing assets retire. Equally, we want to make sure that those who are able—without detriment to themselves and the wider economy—to shift demand for electricity away from periods of greatest scarcity are incentivised to do so.

That is why we have the capacity market. The first auction, held in December 2014, saw a good outcome for consumers, as fierce competition between providers meant that we obtained the capacity that we will need in 2018-19 at prices below the levels that many had expected. That translates into lower consumer bills.

This instrument makes two minor changes to improve the capacity market, based on feedback from stakeholders. First, this instrument substitutes a new definition of “relevant grant” in Regulation 17, and secondly it extends from five to 15 the number of days in Regulation 59(3) of the 2014 Electricity Capacity Regulations, to permit providers a longer period in which to submit credit cover after receiving a conditional pre-qualification notice.

The amendment to the definition of “relevant grant” will ensure that grants, the purpose of which is to support feasibility studies or research and development in relation to carbon capture and storage, will not preclude participation in the capacity market. The essential feature is that the CCS support should not have provided effective material support which has put a provider at an advantage compared to others which have not so benefited. This will not be the case for such early stage grants for CCS purposes: hence the amendment. The second amendment amends the number of days from five to 15 to allow applicants, after receiving a conditional pre-qualification notice, longer to submit credit cover.

My department consulted on the two changes in March 2015 and received 22 responses. The vast majority of stakeholders who responded were content with the changes proposed. I look forward to hearing what noble Lords have to say on these proposed changes. I beg to move.

[Lord Teverson (LD)]

My Lords, it is the first time that I have spoken in any meeting of the House since the Secretary of State announced that coal was going to come to an end within 10 years, and I congratulate the Government and the Secretary of State on that announcement, which is a major step forward. I disagree with a great deal of government energy and climate change policy but that is an excellent move forward, and I would like the Minister to note that and pass it on.

I have a couple of questions about the capacity market, although I have no issues with this statutory instrument. Will the Minister update us on interconnectors and the capacity market? There have been plans to bring on demand reduction aggregators but in the short term rather than the long term. I would like to think that we can bring on institutionalised demand reduction and aggregation much more than we have done in the past, something which is very much in the Government’s interests. On the reduction of fossil fuels, I recall that quite a number of the successful tenderers for capacity payments were coal generators. Do the Government have any plans to exclude them as we move forward to auctions?

We are now down to a very low level of margin, yet the National Grid and the Government seem fairly relaxed. Does that mean that a 20% margin in the past has been a waste of expensive resource that was not needed and that we should have been managing on much smaller margins? I should be interested to hear the Minister’s response on those issues.

[Baroness Byford (Con)]

I should like to make two observations. The Minister has said that the vast majority accept the proposals, so which respondents did not? I have no difficulty with the proposed change from five working days to 15, but there has been a suggestion in the public domain that electricity supplies could be fairly fragile in the coming months, particularly if we have very cold weather. How has that been built into the system? I am glad that feasibility studies were done and were accepted, but what is the comfortable margin of security of supply in the months ahead? Those are my questions: who did not support these proposals, and what do the Government consider a comfortable margin of security supply?

--- Later in debate ---

[Lord Bourne of Aberystwyth]

It is a huge majority that a lot of parliamentarians would be content with; it is roughly 95%, so it is pretty convincing. If the noble Baroness wants more information, I am happy to supply it.

The second question was a very fair one: what is a satisfactory margin? It is dependent on many factors. As I say, we are confident that 5.1% is a sufficient margin but it is on the tight side so we are trying to build in additional capacity. It is dependent on many factors, most obviously the weather, as well as political factors, such as where gas is coming from. I remember from my very first visit to the National Grid in Wokingham that someone, armed with the Radio Times, was trying to assess whether there was going to be additional demand on the system, such as England playing a football match. Notoriously, at half-time—or into penalties, as it inevitably goes—people go and put the kettle on. Work is done on looking at factors like that. So there are lots of additional factors, but 5.1% seems to be a sufficient margin although, as I say, on the tight side.

I turn to the questions from the noble Lord, Lord Grantchester. Regarding the ongoing position with CFDs, my right honourable friend the Secretary of State announced in her speech that there would be contracts for difference in 2016, and we will set out nearer the time what the technologies are; I suspect that some will not be there, such as onshore wind, but that is just a view. We will set out closer to the time the precise way that that will work. I very much welcome his kind words.

[Lord Teverson]

If the Minister will allow me, I would like to come back on one point. I welcome his comments on interconnectors; they are something that over the past five years or so the Government have got more into, and they are an important part of energy supply. I recognise what he was talking about. However, I had the impression that there was an impediment to interconnectors bidding into the capacity mechanism system. That is as I understood it but I may be wrong. If that is the case, are the Government trying to rectify it? It is an important area of increasing competition that could reduce the cost to consumers.

[Lord Bourne of Aberystwyth]

I was unaware that there was a problem. However, 2015 is the first year in which the capacity market extends to interconnectors, so we are anticipating some activity. I hope that that satisfies the noble Lord, who asked a very fair question.

[Lord Teverson]

I thank the Minister and welcome that response.

Motion agreed.

Renewables Obligation Order 2015

Lord Teverson Excerpts

Tuesday 24th November 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, the renewables obligation is a long-standing mechanism for supporting renewable electricity generation in the UK. It places an annual obligation on licensed UK electricity suppliers to source a specified proportion of the electricity that they provide to customers from eligible renewable sources. The scheme is administered by Ofgem, which issues renewables obligation certificates to electricity generators in relation to the amount of eligible renewable electricity that they generate. Generators sell their certificates to suppliers, who use them towards meeting their obligation. Since it was introduced in 2002, the renewables obligation has played a key part in increasing the level of renewable electricity from 2.9% of total UK generation in 2002 to over 25% in the second quarter of this year. It supports around 22 gigawatts of accredited capacity.

The renewables obligation scheme has been subject to a number of changes in recent years. The draft Renewables Obligation Order 2015, which I am putting before the Committee today, revokes, consolidates and re-enacts the Renewables Obligation Order 2009 and the orders that have amended it since it came into force on 1 April 2009. It also makes consequential amendments to the Renewables Obligation Closure Order—in other words, a significant part of this order is a consolidation measure. The consolidation simplifies and brings together in one document the main legislation underpinning the renewables obligation, making it more accessible to those who use it, including the Government and industry stakeholders.

The draft Renewables Obligation Order 2015 also implements outstanding policy decisions on the renewables obligation consulted on in 2013 and 2014. The changes focus on three areas: strengthening the sustainability of biomass electricity generation; providing for biomass conversion projects with an investment contract to regain eligibility for support under the renewables obligation in certain circumstances, which I will go into; and providing for the transfer of biomass co-firing and conversion projects to the capacity market mechanism.

An earlier draft of the order was published for a three-week technical consultation on 24 March 2015. Comments were received from 18 respondents, mainly representing the biomass sector. The majority of responses focused on the detail of how the biomass sustainability land criteria had been incorporated in the draft order. We have considered all of the points raised carefully and have taken them into account where appropriate.

I turn now to the detail of the new provisions in the draft order. The first set of new measures is aimed at strengthening biomass sustainability criteria. The Government are committed to achieving sustainable and cost-effective bioenergy deployment, which drives carbon savings, minimises the environmental risks and makes best use of the biomass resource available, both for energy and non-energy purposes. Currently, there are mandatory sustainability criteria in the renewables obligation for the use of bioliquids, which transpose certain requirements in the renewables energy directive. Since April 2014, generating stations of 1 megawatt and above capacity, using solid or gaseous biomass, have been required to report only on whether they meet greenhouse gas emissions and land use criteria. This draft order consolidates previous changes and makes compliance with the greenhouse gas emissions and land criteria mandatory for generating stations using solid or gaseous biomass, in order to receive support under the renewables obligation, as is the position for bioliquids.

These measures will ensure that renewable generation from home-grown or imported solid or gaseous biomass receives financial support only where that biomass delivers genuine greenhouse gas emissions savings compared with fossil fuel, and where it is sourced from land that is sustainably managed, not from land with a high biodiversity value or carbon stocks. This area of forestry and timber will be an important part of negotiations in the Paris climate change discussions on 1 December, the day after the conference opens.

On greenhouse gas criteria, biomass power generation is already required to meet a greenhouse gas savings target of at least 60% compared with the EU fossil fuel average, and this target becomes tighter in 2020 and 2025, increasing in 2025 to 75%. This draft order introduces a new methodology for calculating an annual average greenhouse gas emissions figure for all biomass used by a generating station, excluding certain types of waste. The purpose of this calculation is to ensure that generators are not penalised if an individual biomass consignment exceeds the greenhouse gas target due to circumstances beyond their control, such as bad weather increasing transport distances. This is subject to the provision that each individual consignment of biomass must not exceed an overall ceiling. This prevents mixing extremely high-emission consignments with lower-emission consignments as a means of ‘washing through’ fuel consignments with unacceptably high greenhouse gas values. I am sure that noble Lords will appreciate that the intention is to be fair in relation to acts of God, extreme weather and so forth, but without providing an opportunity to circumvent what is a sensible provision.

On land criteria, the draft order requires generators using wood fuel to comply with specific land criteria, derived from the Timber Standard for Heat & Electricity—a domestic regulation, not influenced by Europe—which draws on the principles set under the Government’s timber procurement policy. There are some exemptions introduced for certain low-risk categories of wood, such as arboricultural residues—basically hedges—and material removed from non-forest land for ecological reasons. These criteria have been developed following engagement with interest groups and were consulted on in August 2013 and in 2014. They take into account a range of social, economic and environmental issues, including protecting biodiversity, land-use rights, sustainable harvesting and regeneration rates.

The draft Renewables Obligation Order also makes minor technical adjustments to the sustainability criteria for non-woodfuel biomass which correspond to the land criteria for bioliquids, for example, to implement recent EU legislation. It amends the reporting requirements for wood fuel to enable government to monitor more effectively the use of different types of wood by the bio-energy sector, as well as making the reporting provisions more workable for industry. Ofgem will regulate compliance with the mandatory greenhouse gas and land criteria. Generating stations using biomass which have a capacity greater than or equal to 1 megawatt must prepare and submit an annual sustainability assurance report which is compiled by a third party auditor or verifier.

The second new measure relates to implementation of the final element of the renewables obligation to contracts for difference transition policy. The first competitive contract for difference auction for renewables support was completed earlier this year and has allowed us to support low-carbon electricity projects at a lower cost to the consumer. This draft order provides for a biomass conversion unit or station which has previously entered into an investment contract under the final investment decision enabling for renewables process to regain its eligibility for support under the renewables obligation, including conversion-level support, if the contract is terminated for a “permitted termination event”, such as failure to secure, or a delay in securing, state aid approval from the European Union. This specific transition measure is necessary because the investment contract process commenced in 2014, ahead of the rest of the electricity market reform, and contracts were awarded ahead of state aid clearance. It aims to provide the assurance and comfort needed to encourage ongoing investment, safeguard security of electricity supply and ensure value for money for consumers. It may well affect two ongoing projects.

The third new measure in the draft order provides for combustion units to bid into the capacity market and leave the renewables obligation if successful in that bid. As we know, the purpose of the capacity market is to ensure that there is sufficient investment in the overall level of reliable capacity—both supply and demand side—needed to ensure secure electricity supplies. It will bring forward investment at least cost to consumers by allowing the market to set a price for capacity competitively. The first capacity market auction was held at the end of last year for delivery of capacity in 2018-19.

Biomass co-firing or conversion stations or units which wish to transfer from the renewables obligation into the capacity market will be able to claim support under the renewables obligation until the last day prior to the first day of the delivery year under their capacity market agreement—so it will be seamless—as long as they have given a capacity market transfer notice to Ofgem. This will ensure that all stations which are primarily coal-firers but have at some point claimed low levels of biomass co-firing renewable obligation certificates, and remain accredited under the renewables obligation, have a chance to enter the capacity market.

In addition, a biomass co-firing unit or station can withdraw from its capacity market agreement to fully convert under the renewables obligation prior to the first day of the delivery year under its capacity agreement—so it applies in both directions—or before closure of the renewables obligation to new generating capacity from 1 April 2017, whichever is earlier. The aim of this order is therefore mainly consolidation but with some necessary amendments in relation to biomass which I have set out. With that, I beg to move.

[Lord Teverson (LD)]

My Lords, I declare an interest in that I was in front of a very warm wood-burning stove over the weekend in my house, and therefore am a great supporter of wood biomass at a domestic level. There is great pressure these days from various NGOs to take biomass out of the renewables mix. I think the approach of the last Government and this Government has been absolutely right in tightening the definition of sustainable biomass, as this SI does, rather than throwing the baby out with the bathwater and saying, “This is all wrong”. That is the right approach.

Electricity System Resilience (S&T Committee Report)

Lord Teverson Excerpts

Tuesday 3rd November 2015 Lords Chamber

[Lord Teverson (LD)]

My Lords, I am not a member of the committee but I am pleased to take part in the debate about this important subject. I would say one thing about the logic of the noble Viscount, Lord Ridley, on wind-power renewables not reducing carbon. He said that it was because there has to be an equal amount of back-up, but that logic does not work. Even if you need that amount of back-up, if it is not operating then it is not producing carbon. I do not understand the logic there. With the existing regime, even without renewables, the utilisation of generating capacity is, on average, about 50%. It is estimated by National Grid—these are not my figures—that intermittency with renewables becomes a real problem only when they are at about 20% of total generation, so I am not sure whether all that really adds up. However, I agree with the noble Viscount that we should absolutely be taking out coal. I am glad that he agrees with these Benches on that. We should also be getting on and substituting gas in the short term. He was absolutely right about that, too.

I want to concentrate on a couple of things in an excellent report, which is a good reference and has a number of important issues in it. I particularly like the space it gives to the demand side. As the noble Earl said so well, energy efficiency effectively solves the energy trilemma. It helps security, brings down bill costs—even if not necessarily the unit price—and decarbonises the economy. There has always been frustration for all Governments in how to turn that benefit and make that leap, without causing all sorts of unaffordably large public expenditure. Unfortunately, the Green Deal was not very successful in the coalition Government period. It is unfortunate that it seems to have disappeared altogether rather than being improved, which is what was needed. I hope we can move forward in some way in that area.

Demand reduction is key and the UK economy has been quite good at that in recent years, increasing energy efficiency by some 2% or 3% per annum, but the other part of demand is demand-side management. Again, the report tackles that subject, which has been very unfashionable. It has often been forgotten about and is only starting to be considered. In that context, the report specifically mentions capacity payments, which are particularly important. What has effectively happened is that the aggregation of demand-side management, which should really be competing with generation under the capacity payment, has been discriminated against. I remember from the coalition Government years that there were all sorts of issues in DECC about getting the two to compete properly that were legally quite difficult. I do not know but it certainly seems that it should be a priority of government to make sure that demand-side aggregation and management plays an equal part to that of capacity in the capacity mechanism.

The noble Earl was also right to say that most of the existing capacity mechanism has brought in fossil fuels, which is unfortunate. But demand-side management aggregation on the capacity mechanism would make absolutely sure that we do not build extra capacity. We actually need less and should solve it in that way, by taking out the peaks.

I also wanted specifically to mention interconnectors, which is an important area but has been relatively sleepy over the past few years. DECC may have got involved in this again in the last couple of years, so we now have interconnectors with Ireland, the Netherlands and France. We have opportunities, perhaps, for geothermal to come in from Iceland; that may be rather a big ask but I know we have a memorandum of understanding with the Icelandic Government. I would be interested to hear from the Minister where interconnector policy is going. That would not only seem to take out the peaks but has export potential for us as well. We should very much welcome it.

My last point on this excellent report concerns storage. As renewables grow and intermittency becomes a problem, energy storage will be part of the solution. There seems to be a frustratingly slow evolution of efficiency in energy storage. We have run out of capacity in dams and water, and all that side of energy storage. The Tesla corporation seems to be making good progress in the commercial field but I would be interested to hear from the Minister what investment the Government are stimulating in R&D at present. There is clearly a worldwide demand for this, especially in the UK. I commend the report fully and look forward to the Minister’s reply.

[Lord Hennessy of Nympsfield (CB)]

My Lords, I declare my membership of your Lordships’ Science and Technology Committee and thank our chairman, the noble Earl, Lord Selborne, for his skill in guiding us over some complicated and, for some of us non-scientists, rather stretching terrain.

Among the gifts that we like to think we possess as a people, there is a special cluster on which we pride ourselves: strategic thinking, horizon-scanning and forward planning. The subject before us, I regret to say, does not sit easily within this pleasing self-image for when it comes to the divine spark of electricity, we all too often believe “It’ll Be Alright on the Night”. We are an all-right-on-the-night nation in so many areas, including this one. Our optimism is sometimes burnished by our belief that just over the horizon lies a technological and scientific breakthrough that will match cheapness with abundance, leading to a bright, well-lit future that takes care of itself for generation upon generation, while avoiding harming the planet as a bonus. I am of course talking about nuclear fusion, which I remember reading about as a boy in the late 1950s.

In January 1958, science and energy journalists were invited to Harwell to be briefed on Project ZETA, the Atomic Energy Authority’s nuclear fusion experiment. They were enthused—they really were—and news of it fired up the national newspapers and straddled the globe. The Prime Minister, Mr Harold Macmillan, was on a Commonwealth tour at the time and when he reached New Zealand its prime minister, Walter Nash, asked Macmillan how ZETA worked—a testing question for a classical scholar. As the British high commissioner, Sir George Mallaby, recorded:

“‘Well’, said Mr McMillan, looking vaguely about him, ‘You just take sea water and turn it into power’”.

He paused for effect before adding:

“We are pretty good at sea water”.

We are still waiting for the promise of fusion to be fulfilled. Some experts think it might now be a mere decade away; others reckon that another 40 years should do it. All the rest of us can do is live in hope that the shining hour will come.

This evening I should like to concentrate, first, on the need for a consensual, long-term strategy for electricity supply, as outlined so well by our chairman. I am pleased that this will be central to the work of the new National Infrastructure Commission, for which I generally have high hopes. Secondly, I should like to anticipate briefly the array of threats that we may face as an advanced society, ever-more dependent on an uninterrupted supply of electricity.

There are certain thresholds that a country cannot afford to reach, let alone to cross. Electricity supply is one of them. As the committee’s report notes, last winter:

“National Grid procured extra capacity to raise the capacity margin from 4.1% to 6.1%”,

to,

“guard against a potential shortage of electricity”.

The committee stressed that it was,

“a matter for concern … that this extra capacity was put in place at short notice, at considerable cost, and in a way which conflicts with the decarbonisation agenda”.

The report goes on:

“This should not be allowed to happen again; it is not acceptable for an advanced economy, hugely dependent on electricity, to sail so close to the wind”.

As the noble Earl, Lord Selborne, emphasised, the committee also noted that but for the economic slowdown which followed the financial crash of 2008,

“capacity margins would have been much tighter”.

I must confess that it is a mystery to me why this question has lacked the bite it deserves in the Cabinet and across Cabinet Committee rooms over several Governments. In political terms, there are few surer or swifter sappers of public confidence in a Government than serious interruptions to electricity supply, as those of us who lived through the 1970s winters of discontent remember all too vividly.

In its own way, security of power supply is a first-order element in the defence of the realm. Indeed, given our justified anxieties about the nature and scope of future cyberattacks, it will rise higher still up the hierarchy in the risk register. Already, we are facing between 150 and 200 serious cyberattacks on government and business every month. Those wishing us serious, widespread and swift harm in the future will go for the electricity grid first. Our ever-greater reliance on the internet and on the coming internet of things will no doubt bring great and accumulating economic advantage, and improve personal consumption and comfort, but the risks will rise too.

I am a natural consensualist but not, I hope, an indiscriminate one. I am convinced that a sure and safe electricity supply is an area where consensus is justifiable and desirable. By all means let us have our arguments about the ingredients of our energy mix, and the respective roles of the state and private suppliers, but the evidence presented to the committee during its inquiry demonstrated a near-universal belief that electricity supply is, and must remain, a managed market in the United Kingdom. Muddling through, however smartly, is not enough. The problem we are dealing with today requires an enduring national effort, ranging from sustained political attention to large-scale investment, energetic R&D on the possibilities of electricity storage, the development of interconnectors with our neighbours, as other noble Lords have mentioned, and as many cyberdefences as our scientists and technologists can provide.

Short of a devastating solar event—which we considered, for reasons of completeness, I am sure—about which we could do very little, remedies are very much in our own hands. Let us seize them and avoid our becoming an outage society. If in future we go into the dark, our people will be unforgiving, and they will be right to be so.

[Lord Teverson]

My Lords, just before the right reverend Prelate speaks, I want to apologise to the House. I think I referred to “the noble Earl” when I meant the noble Viscount, Lord Ridley, when I addressed the House. I apologise for getting my titles wrong.

Hinkley Point: Chinese Investment

Lord Teverson Excerpts

Monday 2nd November 2015 Lords Chamber

[Lord Bourne of Aberystwyth]

My Lords, the noble Lord is right that the projects in France at Flamanville and in Finland to which he referred, and indeed in China—although the model is slightly different there—are ahead of what is happening at Hinkley Point C. This has been subject to detailed scrutiny, and we are satisfied that it is the best way forward. These are the first nuclear reactors that will have been built in this country for 25 years, and we are satisfied that this is the best way forward.

[Lord Teverson (LD)]

My Lords, given that Hinkley will almost certainly be followed by Bradwell in Essex in due course, what conversations have we had with the Chinese Government about the safe disposal of nuclear waste on nuclear sites? This is clearly important not just for world security but for our own security.

[Lord Bourne of Aberystwyth]

My Lords, the noble Lord is right about the disposal of nuclear waste. It is an issue that we have to address. We have much nuclear power at the moment and it is being addressed. It is an integral part of the discussions with the Chinese and EDF. It has to be remembered that the project at Hinkley Point C is not a China lead: one-third of the project is Chinese and two-thirds is EDF. However, it is central to the project.

Global Climate Change

Lord Teverson Excerpts

Thursday 29th October 2015 Lords Chamber

[Lord Teverson (LD)]

My Lords, I too thank the noble Lord, Lord Hunt, for this debate. On a personal basis, I also thank him for his great contribution to the Arctic Select Committee, whose report we are debating next week. I am not going to go through the list of all the things in green and environmental policy on which the Government seem to have gone into reverse. My noble friend Lord Greaves did that very adequately at the beginning.

However, I would like to ask the Minister about something where I have a real concern: the recent announcement by the Treasury during Report in the other place on the Finance Bill about changing the tax regime on community energy schemes. I know that in my own area, the south-west, community volunteers in the Exeter area have spent some two years building up these schemes. They have no chance of getting to where they need to be by 30 November, which will now be the cut-off date for taking advantage of that regime. That will really hit communities and volunteers—the people who do this because of their belief in their own communities. I would be interested to hear the Minister comment on that.

I was very pleased that the noble Lord, Lord Krebs, raised a specific area that does not otherwise feature in this Government’s policy. It did not feature during the coalition period either but I would like to raise it too. For most of this year, I have been privileged to have been asked by the University of Birmingham to chair a commission for it on “doing cold smarter”. This is the opposite side of the coin to heating as it is about refrigeration and cooling, which are increasingly important. I will illustrate that in a minute but, clearly, we use cooling for ourselves through air conditioning in our homes and cars. We use it increasingly for our data in data centres worldwide. We use it for keeping food eatable and at the right temperature, through refrigeration in our supermarkets and homes. But perhaps even more importantly for some of the themes I will develop, we use it in transport, for medicines and for various scientific processes and implements as well.

It is estimated that in this country now, some 16% of our generated electricity is used to cool rather than to heat. Globally, it is estimated that some 10% of total carbon emissions come from refrigeration and cooling. Internationally, that is important and a good thing because some 50% of vegetables and fruit in the developing world are wasted or spoiled before they get from field to market. This area will grow over the next few decades, partly because in developing countries, particularly in cities, the middle classes and those with greater disposable income will use more refrigeration and air conditioning. This is why the urban environment is important as part of this debate. The most recent statistics I could find were for 2010, when 50 million air-conditioning units were purchased in China alone—in just that one country in one year—because of rising affluence and the issues of temperature and personal comfort which the noble Lord, Lord Krebs, mentioned.

It is estimated that by 2060 the world will use more of its generating capacity for cooling down than it does at the moment for heating, so this is a real issue. I am pleased that the Committee on Climate Change mentioned it in this report. It is the only area of policy and political debate I am aware of that focuses on buildings being designed to dissipate heat in future, as well as to conserve it for fuel poverty and keep it in winter.

One challenge of this area is not just that growing demand, which, to come back to what we are discussing, is particularly in urban areas. It is about much dirtier and more toxic technologies than what else is in our energy landscape. I have to admit that I have blood on my hands because most of my business career was in the freight sector. Latterly, I operated fleets of trucks nationally that were temperature-controlled to distribute to supermarkets. Those of your Lordships who know that industry, or who even look at the streetscape when you walk outside, will know that the majority of refrigerated vehicles have diesel units on the front, which essentially keep the temperatures right for the products inside. The noble Lord, Lord Berkeley, mentioned the Euro 6 standard. The fact is that those standards do not apply for transport refrigeration units. In fact, to come back to the important points made by the noble Lord, Lord Borwick, about nitrous oxides, they create something like 30 times more nitrous oxide emissions than diesel engines. They also perform very badly when it comes to particulates. We do not do that smartly but there are fantastic technologies coming forward in the United Kingdom to challenge some of these problems. I hope that the Minister can take an interest in this area, as I am sure he would want to, and discover some of those differences.

One other area relates particularly to the urban environment. I expect all noble Lords who have been to cities in the developing world but also in North America and other places will have walked down a street and seen all these air conditioning units sat outside windows, banked up on high-rise buildings as part of the urban landscape. Of course the outcome of that is that the residents inside manage to remain cool—at huge energy cost—but you also have whole heat islands in urban landscapes, which cause urban heat to rise, so you have this cycle and spiral in terms of energy needs, emissions and everything else.

There are answers to this and ways round it. For instance, although we are not very successful at them, we talk about local district heating networks. There are opportunities for district cooling networks as well—that is one of the technologies we could do. We should be able to change, through liquid air and other technologies, how these refrigerated transport systems work. I was fascinated by the contribution of the noble Baroness, Lady Young, relating to fashion. Supermarkets will not, on the whole, put doors on their cooling units and displays, because we as consumers would then stop buying as many of those products. Supermarkets therefore have shelves without doors in order to keep their sales up. I cannot criticise that as such—it is our consumer behaviour that maybe is the problem.

When I was very close to Ed Davey and others in the coalition Government, I have to say that I did nothing about this issue—I am guilty. But this is an area where there are big, serious energy challenges into the future, particularly around the urban environment, and about not just carbon pollution but nitrous oxide pollution. This is something for the future. I commend the Committee on Climate Change and the noble Lord, Lord Krebs, for bringing this to people’s attention. We really need to pay attention to this in the future and I hope the Minister will take this up and pursue it. I am very happy to help him to do that.

Energy Bill [HL]

Lord Teverson Excerpts

Wednesday 21st October 2015 Lords Chamber

[Lord Howell of Guildford]

My Lords, I congratulate the noble Baroness on the ingenuity of the proposals in this amendment; they are fascinating and make one think very hard, because these are hugely complex issues. Perhaps I may put two questions to her and perhaps also to my noble friend.

First, will this switch to this way of trying to achieve our carbon obligations and decarbonisation lead to cheaper power in the power sector? That must be an important question. We discussed earlier the problems in the power sector and the fact that pushing it too far and too fast may not necessarily help decarbonisation but will have to be paid for in lost jobs. That is bound to be on people’s minds when looking at this kind of amendment.

The second and even more obvious question is whether these arrangements will get the combined-cycle gas turbines built. At present speed, under the contracts for difference regime, and the capacity payments auction and so on, will they get them built in time? We are now entering a very worrying period, with a very low margin of safety in our electricity system—I believe that it will be down to 1.2 gigawatts. When I had some responsibility for these matters, years ago, it was 17 gigawatts. That gives noble Lords an idea of how far we have come down thanks to the rapid closure of many coal-fired stations and so on. Will this pattern lead to that result? These may be layman’s questions addressed to a very complex issue but I would be interested to know the answers. If the implication is the other way, we will have additional costs on power and get further out of line with our competitors. We always have to remember that in the Climate Change Act—behind which the noble Baroness was one of the founding figures and driving forces—there was the reservation that we should not get too far out of line with our competitors. In some areas, we clearly have done; we are out of line. In the steel industry, as we were saying earlier, we have energy charges that fall on at least parts of that industry at twice the level of charges in Germany and, in turn, are far higher than those throughout Europe. I saw one figure showing that they are 10 times the levels in China—which might account for our present woes in the steel industry. In examining this, can we please be guided on whether this will deliver the goods? That is my question.

[Lord Teverson (LD)]

My Lords, I particularly wish to speak to Amendment 78UA, to which I have added my name, but I will start with Amendment 78S, which is the decarbonisation debate. I was certainly very disappointed that the Minister confirmed—he was very clear, and I welcome clarity—that the Government will not take advantage of the opportunities opened to them under the previous Energy Act and declare a decarbonisation target. We have had a lot of discussion about the Conservative manifesto, and in fact the Minister referred to it in the context of saying why that would not happen. However, the words of the Conservative manifesto were completely clear. They suggest that a decarbonisation target would meet both the Government’s objectives. The manifesto says:

“We will cut emissions as cost-effectively as possible, and will not support additional distorting and expensive power sector targets”.

That is very clear.

The point about a decarbonisation target—exactly as the noble Baroness, Lady Worthington, said—is that it moves on from the distorting targets that we had for renewables in terms of decarbonising our energy sector. In fact, because it brings in proper mechanisms in terms of markets and all of that, it is actually less expensive. So, it seems that a decarbonisation target will not only help us very specifically meet our Climate Change Act targets—which the Conservative manifesto fully supports—but provide a route for those targets to be met with a non-distorting and less expensive method than we had under the renewable targets under the EU’s 2020 system and so on. This is therefore a very good and logical amendment. It is almost a vital amendment that the Government should be able to accept to fulfil their own manifesto commitments. I do not say that to make a clever lawyer’s argument; I say it because it is how I read it. It is in plain English in the manifesto.

I move on to Amendment 78UA, to which I have put my name. I pay credit to the noble Baroness, Lady Worthington, for the great role that she played in bringing the Climate Change Act into being. I played a much more modest role in those days on the Front Bench of the Liberal Democrats in opposition—strangely, we are back in opposition again; but there we are. I was going to mention the noble Lord, Lord Taylor of Holbeach, and the fantastic work that he did with me and the noble Lord, Lord Rooker. We helped to deliver, right across the House, together with the Cross Benches, the fantastic Climate Change Act. The noble Lord, Lord Taylor, did a great piece of work.

One of the things that I did then was to try to bring to the attention of the Bill team and Ministers the fact that although those carbon budgets were great, they excluded 50% of the country’s emissions because they took into account the EU ETS trading. So, in effect, government policy only controlled, or had an effect on, about 50% of UK emissions. The Bill team did not seem to understand this—albeit that at the time the department was not DECC but Defra—and nor did the Ministers particularly take an interest in it. I think that the trouble was that, once those in the Treasury understood it—at least, they certainly understood it well ahead of anybody else—they decided that they did not want this at all. Ironically, that was under a Labour Government. However, as the noble Baroness said, the Climate Change Act was a great thing.

--- Later in debate ---

[Baroness Worthington]

My Lords, I reassure the Minister that this is not a matter on which I intend to seek the opinion of the House. It is an issue which I believe we need to discuss in the context of an energy Bill, but I hope that a discussion can be had outside the Chamber. I just wanted to alert the House to the issue because it is materially relevant to the energy policy as it is being played out.

One pillar of the Energy Act 2013 was the introduction of a new support mechanism to help fund extra capacity in the market, designed to complement the contracts being signed for low carbon. It is a very detailed policy with many aspects.

It has come to my attention that the annual auctions of new capacity under the capacity mechanism are bringing forward rather a lot of applications for 15-year contracts from distributed, very small-scale generating plant. Many of those plants are diesel-powered and many others are open-cycle gas turbines of a small scale which are much less efficient than the full-scale CCGTs that are normally built for capacity.

The amendment was tabled to enable us to have a debate on the Floor of the House on an issue which is time-critical, because the next auction will take place in December. Three gigawatts’ worth of small generating plant are prequalified. That is on top of a number of megawatts that were granted in the previous auction that took place last year. So my fear is that, over time, we are starting to see a substantial amount of distributed thermal energy coming forward under the capacity mechanism. Of course, the capacity mechanism creates an incentive to new-build. Having read the Government’s gas strategy, I believe that the Government intended those 15-year contracts to be made available to larger-scale, very efficient, state-of-the-art gas turbines to be there as back-up and to provide us with base-load power. Instead of that, we are seeing coming forward, as a result of significant market distortion, investment in much smaller kit that is far less efficient and much more polluting. The danger is that this drift towards distributed diesel generators and open-cycle gas will significantly affect our ability to decarbonise.

One argument that will be made will be that such generators are there just to catch the peaks and will not operate more than that. However, there is nothing in government policy or legislation that prevents them operating for far longer periods. My fear is that, because of the scale of these plants, they will not be paying a carbon price: they are not subject to the EU carbon price, nor are they subject to the Government’s carbon price support mechanism, which tops up the EU price. That is a significant distortion that we should be mindful of. Markets are nothing if not efficient and nothing if not good at finding loopholes. It will be an unintended consequence of the capacity mechanism rules as they are currently drafted that this will be the market’s answer to our capacity issues.

I visit my mother-in-law in India. Building an energy system in which diesel generators are providing back-up is not a modern-economy solution. There are many other ways to provide safe and reliable power. We should not rely on diesel generation, which is much more what you would find in developing countries that have fewer options and are not able to deliver secure and stable supplies of electricity. We have been doing that for decades and have a world-class grid that enables us to do it. So we are concerned that while we are not letting contracts for clean power, we are continuing to let contracts for traditional fossil-fuelled power, and that there is this loophole in the capacity mechanism rules which allows a far greater volume than anyone would have anticipated of small distributed diesel generators.

In addition to paying no carbon price, such generators also have very loose air-quality standards applied to them—far looser than are applied to larger plant. I do not need to bring the House’s attention to the fact that we have had a rather high-profile problem with diesel in the past few months. “Dieselgate” and VW’s cheating on the standards is a serious issue which helps to explain why we might be struggling to hit our legally binding air-quality standards in the European Union, because if everyone is cheating it is no wonder that our emissions are higher than we thought they should be according to our inventory calculations. So we have an air-quality issue; in fact, the Government have been taken to court over their failure to comply with those air-quality standards. Having a large number of distributed diesel generators operating potentially for long periods through the winter months will not do anything to alleviate our air-quality problems. There is a definite correlation between exposure to the particulates that emerge from diesel and ill-health, especially in younger and older people. So, not just for climate reasons but for air-quality reasons, we should not allow a huge proliferation of this very inefficient and very polluting smaller generating plant—and that we should be giving them 15-year contracts really concerns me.

We know that all Governments in the UK hold as sacrosanct the fact that if you sign a contract with the private sector, you will not then go back on it. That is a tenet that we hold dear in order to preserve our investor credibility. Once those contracts are signed, there will be nothing we can do for 15 years, which worries me greatly. I am not expecting a full and detailed response from the Minister today; I hope that I can just convey the reason for my concern. I hope that I will hear some reassurance that the department is alive to this problem, that it is indeed seen as an unintended consequence and a loophole, and that we are not simply saying, “Ah, well, that’s what the market’s delivering”. That is not sufficient, especially as there are distortions in relation to carbon and not paying the carbon price, and especially in relation to air quality.

Amendment 78V would therefore require that any fossil fuel-generating plant granted a 15-year capacity contract under the capacity mechanism created under the Energy Act 2013 would be subject to a carbon price, so that the Government would apply a taxation policy to such plant; that such plant would be required to fit best-available technology to mitigate air pollutants; and that the Government’s emissions performance standard as was introduced in the Act would apply as well, which would act as a constraint and a break on the number of hours that such stations could run—it would not be a full answer to the problem because it would still allow them to run for considerable periods, but certainly it would not allow them to run unimpeded for an entire year.

Given the position of leadership that the UK rightly enjoys in terms of our sensible policies for decarbonisation and our Climate Change Act, the idea that the energy policy in front of us should lead to us relying on diesel generators fills me with alarm. I hope that we can do something collectively, across all sides of the House, to address this issue before the contracts are signed in December. I think that I have said enough. I do not wish to detain the House any further and I look forward to hearing a response from the Government.

[Lord Teverson]

My Lords, I shall not detain the House very long. I am not sure that the amendment as written is precisely right, but the important principle that comes out of it—I come back to what I said briefly at Second Reading—is that, at the end of the day, the UK economy has to crowd out coal by other generating fuels. Before the election, the Prime Minister, the then Deputy Prime Minister and the then leader of the Opposition together bravely pledged that coal should come out of UK generating capacity. For whatever reason, after the election only one of those people is left in office—the Prime Minister—so on his shoulders rests that responsibility as our Prime Minister to achieve that pledge.

I do not see a great deal of movement from the Government in fulfilling it. It needs to be addressed and this amendment goes some way towards that. But it is a much larger issue which we could solve so easily, probably by using an active emissions performance standard rather than one that is fixed, as it is at the moment, in primary legislation. I hope that the Government—indeed, the Prime Minister and the Cabinet Office—will bring forward proposals to deliver this. In Scotland, they talk about vows; I see this as a vow that is fundamental to our climate change obligation not just to the UK but to the rest of the world.

[The Lord Bishop of Chester]

My Lords, once again very briefly, could the Minister also make some comment in his response about what the cost to the consumer will be of electricity which is generated by plant under contracts under the capacity mechanism?

Energy Bill [HL]

Lord Teverson Excerpts

Monday 19th October 2015 Lords Chamber

To return to Amendments 19 and 21, which I am sure noble Lords from the Lib Dem Benches will speak to, what can we do to ensure that we are not simply rushing to decommission, and that we have a planned strategy? What can the OGA do and not do? Ultimately, I suspect that the hardest question will be: who pays? I look forward to hearing from the Minister and from other contributors to the debate.

[Lord Teverson (LD)]

My Lords, I thank the Minister for the meetings that we have had. I found one of them particularly useful because we had a wide range of representatives, from both the department and the OGA. One of the issues that came up, which perhaps I should have understood more but did not, was that oil and gas infrastructure, particularly in the North Sea, was of particular importance, as well as the importance of managing that infrastructure in terms of decommissioning and making sure of other uses, such as CCS. What came out was that a lot of this infrastructure could well be critical to the nation, not just in the context of carbon capture and storage, but even in how the oil and gas market might move.

The question then came down to: if there was critical infrastructure and this decommissioning took place, what happened if the commercial sector— the industry—decided that there was no way that it wanted to keep particular assets operational and they should therefore be decommissioned, but the Secretary of State, the Government and the nation had a different view? Who carries the financial can for that in the future? If industry was not there, who else would step in?

I ask the Minister to forgive me for this: in a way our amendment is a probing amendment, which of course we should not really do on Report, but it is an important point to understand. My question is a fundamental one: if we have critical infrastructure in this industry—in the North Sea, say—and it is to be decommissioned, yet the OGA sees it as critical for future development, whether with greenhouse gases or the future of oil and gas itself, what happens when the private sector will no longer pay for that asset to remain operational, or at least be mothballed? Our amendment asks that question, but it also lays down that the OGA should have a specific responsibility to bring it to the attention of the Secretary of State, should such a situation arise. To solve that, the Secretary of State should be able to pay out of public funds for that critical infrastructure to remain.

I am not completely naive in this area. Clearly, if the private sector sees that the taxpayer is likely to underwrite an asset into the long-term future, perhaps not surprisingly people in that sector might be rather quicker to decommission, move out of these assets and move that cost across to the taxpayer. There is clearly that risk. However, we on these Benches seek through this amendment to obtain clarity on how we defend and preserve the national interest in terms of these assets while at the same time making sure that any taxpayer commitment will be protected—namely, that we keep these strategic assets when the OGA and the Secretary of State believe that they are critical for the nation’s future.

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I thank the noble Baroness, Lady Worthington, and the noble Lord, Lord Teverson, for these amendments. I wish to speak to the non-government amendments before addressing the government amendments. Following discussions held during the dinner break, I am happy to revisit Amendment 72, which we looked at before the dinner break.

Amendment 19 seeks to amend Clause 5 to give the Secretary of State the power to direct the Oil and Gas Authority to postpone or prohibit decommissioning of infrastructure until such time as she determines that a carbon capture and storage operator is in a position to utilise the infrastructure. I must first clarify that it is not the intention that the Bill will give the OGA the power to prohibit or postpone decommissioning. The ultimate power to approve, or disapprove as necessary, a decommissioning plan lies with the Secretary of State under Part 4 of the Petroleum Act 1998, and will continue to do so.

In any event, taking a power to delay or prohibit decommissioning on an open-ended basis for the purpose suggested would appear to require an owner of relevant infrastructure to pay for the ongoing maintenance of the infrastructure on an indefinite basis until the CCS development is ready. These would be significant costs, running to tens of millions of pounds for ongoing maintenance every year, simply to keep the relevant infrastructure safe until such time as it might be reused for CCS. When, as we all hope will quickly become the case, CCS is a proven technology, we can be certain of how and when relevant infrastructure can be reused for CCS and a commercial deal is viable, preventing decommissioning of existing assets to make way for CCS may be sensible and permissible under the current proposals the Government have made. However, as we debate the merits of this amendment today, we cannot say with any certainty when or how such infrastructure could be reused for CCS. I fear that this amendment risks making the United Kingdom continental shelf less attractive to investors and jeopardising the vital investment we need for the future of the basin. This would put us in significant conflict with the recommendations set out in the Wood review, and would be perilous given the challenging economic realities in the United Kingdom continental shelf today.

I hope that this explanation is helpful in setting out why this amendment is not workable from a structural perspective, since it will be the Secretary of State, not the OGA, who will hold the key power to decide whether to approve or reject an abandonment programme. In addition, as I will outline shortly, the government amendments brought forward on Report today aim to strike the right balance between keeping the continental shelf open for business while putting rigorous checks in place to ensure that the preservation and reuse of North Sea infrastructure, including for CCS, is appropriately considered before any decommissioning can take place.

The Government’s proposals would allow the Secretary of State to ensure that decommissioning takes place in accordance with an approved decommissioning plan, enabling her to ensure that alternatives to decommissioning are taken into account and that the costs of plans are kept to the minimum reasonably practicable. The intention is very much to bring consideration of such reuse to the forefront of the process and ensure that opportunities are identified early, allowing for adequate commercial arrangements to be made between parties and preventing situations requiring a party to maintain an asset against their will.

I turn to non-government Amendment 21. This amendment seeks to insert a new clause after Clause 7. The new clause would require the Oil and Gas Authority to report to the Secretary of State if the operability of any element of critical oil and gas infrastructure is at risk due to the financial condition of the owner, or for any other reason. It would also enable the Secretary of State to provide financial support to maintain such assets, if she considers the asset is at risk of closure or becoming inoperable, and it is in the national interest for it to remain in operational order.

I, too, am concerned to ensure that critical oil and gas infrastructure is properly identified and safeguarded in the national interest. This is an area already being addressed by the Oil and Gas Authority. Its recent Call to Action: Six Months On report highlighted actions being taken to protect critical infrastructure. However, we will continue to monitor this work and provision in this Bill will already enable the Secretary of State to require action from the OGA if necessary.

Energy Bill [HL]

Lord Teverson Excerpts

Monday 19th October 2015 Lords Chamber

[Baroness Liddell of Coatdyke (Lab)]

My Lords, it seems to be “Kick the Minister” time, but I do not particularly want to do that, since I know how he feels—I once had to take through a utility Bill that ended up with 1,000 amendments. However, I think everyone would acknowledge that this Bill has been a bit of a dog’s breakfast.

Further to the points made by the noble Lord, Lord Howell, the uncertainty facing the North Sea oil and gas industry is considerable at the moment, and there is speculation about perhaps another 10,000 jobs being marked to disappear. I ask the Minister to get some indication of certainty about what is going to happen about the OGA. We cannot go on with this miasma of uncertainty, with changes to amendments and perhaps even further amendments going through to the House of Commons, at a time when there is such a feverish atmosphere around the North Sea.

While I am on the issue of uncertainty, is the Minister aware of the comments by Professor Jacqueline McGlade from the United Nations this morning about the impact of uncertainty on those who are investing? She was talking primarily about the renewables industry, but it also has an impact on oil and gas, particularly in relation to decommissioning.

[Lord Teverson (LD)]

My Lords, I echo the comments by the noble Lords, Lord O’Neill and Lord Foulkes, surrounding the tsunami of amendments that we have had to the Bill so far, with more to come on Wednesday, with very little notice indeed. That makes it very difficult for this House to do what it sees as its core activity in this sort of legislation.

I have no issue at all with the managerial nature of the amendments, but I echo the comments by the noble Baroness, Lady Liddell. While I agree wholeheartedly with the Minister that the key factor here is that we should be able to continue to benefit from our own oil rather than import it, which is important with regard to both energy security and the environment, I hesitate more and more as we go through these energy conversations when it comes to the Minister’s and the Government’s confidence about our ability to meet our own climate change targets, which we all passed into law with the Climate Change Act with cross-party agreement in this House and the other place, and which we all still say we support. We are far from being able to be confident about achieving those targets a few years hence, let alone by 2050. We have to look at all these debates on Report as part of that challenge, whether it is from the United Nations special scientific advisers or from our own Committee on Climate Change. The writing is on the wall that we are moving in the wrong direction, and I think that we should take this concern very seriously.

[Baroness Worthington (Lab)]

My Lords, I am grateful to the Minister for his introductory comments. As we start the first day of Report on the Bill, it is welcome to hear from the Government a reiteration of their commitment to action on climate change and to decarbonising the UK economy.

I add my voice to those of noble Lords who have spoken ahead of me in reflecting on the way in which the Bill has been conducted. I am probably not alone in not having had much of a weekend; I am sure that the Minister has had similar issues to deal with. I take these issues incredibly seriously, as people know, and it makes me genuinely unsettled and discomfited to know that I am not able to do the best job that I can because of the timescales that we are working under. I think that many noble Lords share that feeling. As I have said before at the Dispatch Box, we are where we are—but it could have been so different.

In these opening comments on Report, I want to reflect on the question of why we are making such haste. Why is such an important body as the OGA being created in such a piecemeal way, with amendments coming forward and new issues arising in a very febrile and fast-changing environment? There seems to be no time for the Government to take stock and review. It is because the timing of the Bill is not about the major portion of it, which is the OGA, but Clause 66 which closes the RO a year early. It was closing anyway in 2017, so we are in rather a rush to make that deadline in order for this not to be a complete waste of our parliamentary time. That is why we are racing through. That is why we have not had enough pre-legislative scrutiny and why there are so many fundamental issues that have not been properly addressed in Committee. That is why we are facing an inundation of amendments now. It is a very regrettable situation and one that I personally take very seriously, as I am sure the Minister does, too. I only wish that perhaps people in other parts of the Government took this issue as seriously as those who are represented here today, because it is not good enough.

--- Later in debate ---

[Lord Spicer (Con)]

I have not spoken on this subject for 25 years. I do not intend to make up for it now—in fact, my intervention will be very short. The reason that I have not spoken for 25 years is that I have been rather too close to the industry for comfort. I was a Minister for Energy in the late 1980s and took through the Electricity Bill. Subsequently I have been chairman and president of Energy UK and of the Association of Electricity Producers. I have therefore been close to the industry. It is not until now, when I have been released from those happy burdens, that I feel that I can say at least a short work about energy matters.

In the present context, two things matter to the energy industry, particularly the petroleum industry in the North Sea. They are, first, certainty and stability, particularly in government policy, and, secondly, less rather than more regulation. On the question of certainty, we have to recognise that the petroleum industry in the North Sea is very fragile. My noble friend Lord Howell has mentioned that at the moment it is also very poor. There are questions as to how many more burdens it can bear.

I was thinking about the question of certainty just now when it comes for instance to the nuclear industry. We have now got the Chinese beginning to enter the fray. My mind goes back to when I talked to the Americans about flogging off bits of our privatised nuclear industry to them and got into terrible trouble with the Prime Minister at the time, Lady Thatcher. It is slightly ironic to me that we are now talking to the Chinese about the same subject.

Be that as it may, the question of certainty is terribly important. That brings me to the amendment. The noble Baroness fears the threat of privatisation. I do not see the point of setting something up for the purpose of privatisation. We have already been told that there are probably too many players in the industry in the North Sea at the moment and that they are too stretched. Therefore, my suspicion is that we are talking about more regulation. I cannot understand the argument of the noble Baroness at all on this point. I hope that it is not about more regulation and that the Minister will tell me that it is not. However, I think that it has to be about regulation. That is why I agree with my noble friend Lord Howell that if, as I think, it is about more regulation we have to be fearful about whether the industry can sustain the costs, particularly in the North Sea. Therefore, I have the opposite view to the noble Baroness and I hope that my noble friend will be able to reassure me on this point.

[Lord Teverson]

My Lords, I was pleased to add my name to this amendment. I agree with the noble Lord, Lord Spicer, that we do not want any more regulation than we need, but I do not see this as bringing forward greater regulation.

In my business career I learned three things in particular. The first was that you should concentrate and keep your mind on your core activity. I felt a certain resonance when the oil and gas industry wrote about this amendment that actually that was the imperative thing that needed to happen because—as I know from my extended family—at the moment that industry is under threat. There is great retrenchment and difficulty, so the OGA needs to concentrate strongly on its responsibilities for the oil and gas industry.

Having said that, the second thing that I learned from practice was that you can concentrate as much as you like on the business that you are in but the most important thing is to follow the market. That is not exactly what you can do here, but what is clearly true is that the future will be about carbon capture and storage. This is a core part of government policy and all of our policy on climate change and carbon emissions. Therefore there needs to be a real future for this sector and these facilities. That is why it is important that that element is brought into this part of the Bill and will be there for the future. I take perhaps the naive example of Beeching and the railways; now down in the south-west we are trying to reopen one or two of the lines that were closed back in the 1960s. If we thought more about future uses and what happens after our actions, we might moderate and think more about decisions for the longer-term future.

The third thing I learned from business was “right first time”, which is the best thing to remember as a principle for running any organisation. It seems to me that getting it “right first time” on this issue would be to make sure that we take into consideration carbon capture and storage, and what that offers in terms of solving our climate change issues, as well as to use the facilities, the network and the vital assets that are currently in the North Sea. We need to include that in legislation now rather than in the future.

[Lord Bourne of Aberystwyth]

My Lords, first, I thank the noble Baroness for setting out the non-government amendments relating to this part of the Bill. Amendment 11 would replace the principal objective in Part 1A of the Petroleum Act 1998 of,

“maximising the economic recovery of UK petroleum”,

with an objective to maximise the economic return on UK petroleum while, first, retaining oversight of the decommissioning of oil and gas infrastructure and, secondly, securing its reuse for the transportation and storage of greenhouse gases.

I understand the purpose of this amendment. Indeed, I have detailed significant positive amendments from the Government—which we will discuss more fully elsewhere—to ensure that both CCS and decommissioning are given a prominent focus in the Bill. Indeed, the amendments that I have tabled ensure that the OGA will have a strong role on decommissioning, to ensure both that costs are controlled and that reuse of assets, including for CCS development, is given full consideration before decommissioning begins. The Infrastructure Act 2015 refers to abandonment, which of course is the technical term used in the Act for decommissioning.

I hope that noble Lords will agree that the Government’s decommissioning amendments achieve the same effect as the reference to decommissioning in this amendment, rendering it unnecessary. I have tabled a large number of amendments to ensure that CCS developments will be a firm and important consideration for the Oil and Gas Authority. My noble friends Lord Howell and Lord Spicer, and others, referred to the fragile nature of the industry, and we do not want to add more costs to it. This will be particularly relevant in looking at some later amendments, but it is relevant here, too.

Bringing CCS into Clause 4 and maximising the potential synergies, as we have done with the amendments we have tabled, will be much more effective than trying to give the Oil and Gas Authority a new and separate objective on CCS. The amendments that I have tabled are meaningful, and I hope that they will be sufficient to satisfy noble Lords that Amendment 11 is not necessary. The noble Baroness suggested that the review was limited to the Oil and Gas Authority’s performance for each review period. That is not strictly true. Subsection (4) of the new clause in Amendment 26 says:

“A review must, in particular … assess how effective the OGA has been in exercising its functions, and … consider the OGA’s functions under … Part 2, and … Chapter 3 of Part 1 of the Energy Act 2008 (storage of carbon dioxide), with regard to their fitness for purpose and scope”.

Amendment 11 is therefore broader than the noble Baroness was suggesting. It would create a significant expansion of the OGA’s responsibilities, which would have consequences for the OGA and industry.

Notwithstanding the difficult challenges that the industry is facing, the recommendations of the Wood review remain as important as ever. They continue to attract strong industry support, and I have been pleased to note the continued cross-party support for them throughout the passage of the Bill. The Wood review envisaged an Oil and Gas Authority focused on maximising economic recovery, and the recommendations made by Sir Ian Wood hold that principle front and centre.

I have not spoken to Sir Ian Wood—it might be unhelpful to ask him to revisit the review and interpret it back to the House—but it is worth noting that he has chaired the interim advisory panel of the Oil and Gas Authority, which is looking into the functions and preparation of the authority before it achieves its enhanced status, so he is very much involved in the process.

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[Lord Foulkes of Cumnock]

My Lords, I want to take up a point made by the noble Lord, Lord Oxburgh, with which he reinforced our concern about this Bill being rushed through and consideration not being made. We have just heard from the noble Lord, Lord Howell, about whether renewables can be equated with carbon production, which he challenges. As the noble Lord, Lord Oxburgh, said, these are the kind of things that could be and should be dealt with in pre-legislative scrutiny in the kind of get-together that he suggested.

I am not a fan of this non-elected House. I want to see a move towards a senate of the nations and regions. When we eventually get a Labour Government, we will move in that direction. However, again and again I hear from those who do like this nominated House that we have lots of experts on various subjects, and why do we not make use of them and get them together to provide that experience, insight and knowledge into the legislative process? If we get things rushed through in the way in which this is being rushed through, we are not able to do that.

We saw that again today at Question Time. Members who were present will have heard my intervention when I got really irate concerning the noble Lord, Lord Prior. I think that it was the noble Baroness, Lady Maddock, who said that it was not for the first time. The noble Lord seemed to be acting like a disinterested observer of what is happening in social care, which is being reduced enormously, and it was as if he could do nothing about it. He seems to forget that he is a member of the Government who is supposed to report to us and supposed also to take our views back to the Government to try to influence what they do. Ministers are not here just to read out the instructions that they get from the Civil Service and from down the corridor. They are here to listen to what Members of the House of Lords say, to take account of it and to pass it on. To be fair to the noble Lord, Lord Bourne, as my noble friend Lady Worthington said, he has taken account of some of the specific aspects that have been raised. But there are others that have been overlooked and I fear that there will be others that will be overlooked. I hope that I am proved wrong on Wednesday and that some account will be taken.

The noble Lord, Lord Howell, is about to disappear but I think even he would agree that, if not a direct equation between CO₂ emissions and renewables, renewables have a high correlation between their development and their expansion, and the reduction of CO₂. Not every renewable energy source is perfect and does not have some carbon emissions in the production of the equipment that it uses and so on, but producing this clean energy must be considered much better than the alternatives and all the ones that we have had in the past.

Incidentally, I should have declared an interest right at the start; I did so on previous occasions. I am a trustee and treasurer of the Climate Parliament. We argue very strongly at every opportunity we have in every parliament around the world to try to ensure that all countries, including the United Kingdom, are doing as much as possible to reduce carbon emissions.

Before I ask a specific question, I must say that the Minister is an eloquent man. As a Welshman, he is, like me, grieving at what happened over the last few days with the rugby results; in our case we were cheated out of a great victory. I have had dealings with him before he became a Minister and I have great respect for him, but even he, with all his Welsh eloquence, cannot argue that there has not been a deep depression in the renewable energy sector with what has happened over the last few months in solar energy—where we have seen and are seeing job losses because of the cutbacks—and now in onshore wind. We will talk more on this on Wednesday.

I ask the Minister one particular question: tomorrow we will hear the wit and wisdom of the President of China. It has been suggested that we should make all sorts of representations to him on human rights and discuss with him a range of issues concerning trade and co-operation in a variety of fields. Specifically, will we talk with him about energy in general, and in particular about the Green Grid alliance? At the United Nations, the Chinese President said that he is in favour of a global energy network for clean energy. The Chinese corporation dealing with this has put a lot of resources and thinking into developing a grid that takes energy from areas where it is produced cheaply and regularly, such as the deserts where solar energy is produced, and channelling it through a green grid to areas where it is used and needed.

I hope that at some point in his visit, Ministers—if not the Prime Minister—will raise with the Chinese President how the United Kingdom Government can co-operate with the Chinese Government on this. They are very far-thinking. They have great resources, a great number of people and great knowledge. I hope that we will pursue this with them, that we will take the opportunity to raise it with him when he is here and follow it up in the weeks and months to come.

[Lord Teverson]

My Lords, I shall speak to my Amendments 15 and 18, and to Amendment 72 in the name of the noble Lord, Lord Oxburgh. I am very pleased that the noble Lord, Lord Foulkes, mentioned the President of China because tomorrow we have to interrupt an Economic Affairs Committee meeting. I suggested that we might ask the President to be a witness on some of these issues, but unfortunately I do not think that that got anywhere.

I welcome a number of the government amendments in terms of their nod to the environment. My amendments look to try to place the OGA and this part of the Bill in the context of the broader climate change and environmental debate. We do not have those amendments completely right. In fact, I rather prefer the amendment of the noble Baroness, Lady Worthington, although I am not sure how far she will press it. As I said previously, although the OGA needs to focus on its prime areas in doing its day-to-day business, it needs to operate within this broader environmental area, as does the whole regime.

Energy Bill [HL]

Lord Teverson Excerpts

Monday 14th September 2015 Lords Chamber

Debate on whether Clause 59 should stand part of the Bill.

[Lord Teverson (LD)]

My Lords, I have also put my name to this proposal, therefore I will speak on it on behalf of the noble Lord, Lord Whitty, as well as myself.

We come to one of the most important parts of the Bill, which concerns wind power. Although I fully accept there were strong arguments against onshore wind in the Conservative manifesto, that is very regrettable and it is important to have consistency in government policy. One element of that manifesto was that climate change measures and renewables should be at least cost. As I pointed out to the House before, onshore wind costs some £65 per tonne of CO₂ saved whereas with offshore—still one of the Government’s favourites; I have no criticism of that—the cost per tonne of CO₂ displaced is almost double that at £121. In terms of financial support, onshore wind cost on a ROC basis is about £40 per megawatt hour and offshore is more than double that at some £85. That puts into context this part of the Bill and the two clauses that we start to consider here.

The irony is that in many ways I would welcome this clause because it repatriates planning decisions around certain energy generators—onshore wind above 50 megawatts—back to what many of us see as the democratic base of decision-making, which is local planning. In some ways, that is quite a positive thing. However, the inconsistency and the agenda behind it concern me. It seems that the Government are in favour of this reallocation or repatriation because they want to put greater obstacles in the way of this far more cost-effective and efficient form of energy: onshore wind. Yet in other areas of energy policy, not least fracking—I am not against fracking in principle—the Government try to move things in exactly the opposite direction. Due to the frustrations felt with Lancashire County Council, we have the irony of the Government trying to move decision-making up to the Secretary of State whereas onshore wind, which seems bad in terms of Tory ideology, is moving the other way and back to local authorities. That inconsistency concerns me.

My noble and learned friend Lord Wallace of Tankerness will doubtless come to this on the next clause, but it also means that the outside world, whether that is financial institutions within the UK or worldwide, starts to look at British Government decision-making as being very inconsistent and changeable, in a way that is not necessarily financially correct but comes from a bounce and ricochet of policies. It seems that we have a confusion and inconsistencies in UK energy policy that will deter investment. I know that that will be a continuing theme this afternoon.

I have questions to ask the Minister. First, paragraph 130 on page 18 of the Explanatory Notes says:

“The Government currently expects that applications which have already been made under section 36 of the Electricity Act 1989 but not yet decided when the Bill provision commences, will continue to be considered under that Act”.

However, I understand that we have no detail of how that will be done. Again, we have uncertainty in this area. I would be grateful to hear from the Minister on where we are in that.

Again on detail, the other thing I find difficult about this clause is that even if we accept that this level of planning should come down to local authorities, despite that inconsistency, I understand that it is also the Government’s intention that approvals for onshore wind should be given by primary planning authorities only if they are also in line with agreements on neighbourhood plan areas. Now, no one is a greater fan than I am of the neighbourhood planning brought into being by the coalition Government. That is a great move forward and has been successful in housing and other areas so far.

Perhaps I may have some clarity from the Minister. I know that large areas of England do not yet have neighbourhood plans; in fact, many planning authorities do not have local plans. I should like to understand the detail of how onshore wind farm developers, who can surmount all these other hurdles, deal with this area. Neighbourhood plans must not be in conflict with local plans, so what happens in areas that do not yet have neighbourhood plans? I know it is obviously a DCLG issue, but I would be very pleased if the Minister could write to me and tell me how many neighbourhood plans have been passed and what proportion of the English landscape that covers. Indeed, I would like to know the same for local plans, a number of which are waiting to be agreed by the Secretary of State.

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[Lord Bourne of Aberystwyth]

The noble Lord has made a fair point but I am coming on to Clause 59 and will happily do so. Of course it has an effect on energy policy across the board.

I thank noble Lords who have participated in this debate and I will seek to answer their points, which have properly been raised. The issue obviously affects the energy mix that helps us to reach our decarbonisation targets. I should say that there is no way that we will reach them if we do not have new nuclear, so my point certainly is relevant.

Clause 59 seeks to amend Section 36 of the Electricity Act 1989 by removing the obligation to obtain consent from the Secretary of State for Energy and Climate Change to construct, extend or operate an onshore wind farm in England or Wales. To be clear, this requirement relates to new wind farms with a capacity greater than 50 megawatts. Smaller wind farms, including those owned by the community, are already consented by the relevant local planning authority.

The change, alongside further proposals to make secondary legislation amending the Planning Act 2008 and the Electricity Act 1989, will have the combined effect of removing the requirement for planning consent to be obtained from the Secretary of State for the construction of new onshore wind farms. Instead, developers will need to apply for planning permission under the Town and Country Planning Act 1990, where the primary decision-maker is the local planning authority.

The Government were elected with a clear commitment to give local people the final say on whether to have a wind farm in their area. This should not have taken anyone by surprise. These changes help deliver just that, as was stated in our manifesto. This is important. The majority of the population do not live in the vicinity of a wind farm. For those who do, we have seen many examples of local community groups vigorously opposing wind farm developments because of local impacts relating to noise, amenity and visual changes. It is against that background that the proposal appeared in the manifesto. By transferring decisions to the local level, we are putting local communities in the driving seat. Onshore wind farms should get the go-ahead only when local people have said they want them, and where. That said, onshore wind will continue to be important to help us deliver our renewables targets. It will certainly not disappear and we anticipate that there will be new onshore wind farms—community wind farms and so on.

I turn to some of the specific points raised. The noble Lord, Lord Teverson, mentioned paragraph 130 of the memorandum. It remains the case that all electricity applications are caught by the policy. I believe that all existing Electricity Act 1989 applications have been decided, and the issue should therefore not arise. If I am wrong, I will write to the noble Lord, Lord Teverson, and to the other noble Lords opposite. We will consider this issue soon when the Electricity Act order comes before us.

The noble Lord, Lord Teverson, and the noble Baroness, Lady Young, also raised the issue of planning authority and neighbourhood plans. There is a transitional arrangement for when a valid planning application for a wind energy development has already been submitted to a local planning authority and the development plan does not identify suitable sites. In such instances, local planning authorities can find the proposal acceptable if, following consultation, they are satisfied that it has addressed the planning impacts identified by local communities and therefore has their backing. This is set out in the ministerial Statement made by my right honourable friend the Secretary of State for Communities and Local Government in another place, and I will make sure that it is circulated to noble Lords so that they are aware of it. That should cover the point.

My noble friend Lord Howell made some powerful arguments on onshore wind, the ongoing situation and the potential—or almost certain—overdeployment of onshore wind, even following this action, in terms of both the budget and the plans for onshore wind. Onshore wind is becoming cheaper. My right honourable friend the Secretary of State for Energy and Climate Change has met with some developers who are happy to carry on deploying without the subsidies. I appreciate that we are not being specific about this at the moment, but we anticipate the continuing importance of onshore wind. However, it is important to look at the whole range of renewables, not just onshore wind.

It would be interesting to know the Opposition’s position on fracking. It is legitimate to ask that because the issue has been raised. We are obviously trying to encourage new energy sources in order to reduce costs and increase energy security. However, local communities, across the range, must be fully involved in planning decisions—be it shale or onshore wind—and we proceed on that basis. There should and will be a full public consultation for both. On that basis, I believe that Clause 59 should stand part of the Bill.

[Lord Teverson]

My Lords, I thank the Minister and everybody else who has taken part in this debate.

First of all, I absolutely agree with the noble Lord, Lord Howell, that where subsidy—whether it be through tax breaks, ROCs or whatever—starts to be excessive, we must cut that back. Indeed, when he was Secretary of State, Ed Davey took a number of very tough decisions around solar and wind energy that did exactly that. None of us, certainly on these Benches, want profiteering from this area. That is not really what we are getting at in this debate. Clearly, value for money is important; the more that we can make it competitive, the better.

I press the Minister to tell us the challenge there still is to get neighbourhood plans across England, so we can understand; perhaps he will not be able to come back on it now. Whether this mechanism decided on by the Government works or not, I would still be very interested to hear where we are on it. Only by that being effective can even this system, as revised by the Government, really work. I would be pleased to get further feedback on that.

Clearly it is not appropriate to have a vote here, but I am very concerned that we have government policy going in one direction on one form of energy and in completely the opposite direction on another. That means inconsistency and a lack of confidence nationally and internationally in terms of finance. However, based on the Minister’s reply, I withdraw my opposition to the clause.

Clause 59 agreed.

--- Later in debate ---

So for years ahead, possibly decades, we will need an effective marriage between adequate gas supplies from somewhere and the effective operation of wind power and the wind sector. That is why I think the amendment is sadly misplaced and why the Government should certainly stick to their line and, I hope, develop a more robust pattern of energy and climate policy that delivers the emissions reduction needed to be an example to the Chinese, the Russians, the Indians and all the other places where this will really be decided, and at the same time maintain and deliver reliable electricity and what we certainly do not have at the moment: affordable electricity. We have one of the most expensive patterns of electricity in Europe, if not the world, and our industry needs cheaper power while our poorest families need lower energy bills. These are worthy social and economic aims, and we should give them a proper balance and a proper place in our energy policy.

[Lord Teverson]

My Lords, perhaps I may intervene on a couple of those issues. The noble Lord, Lord Howell, completely forgets about the demand side in demand response management. That will become a lot simpler and more important as time goes on. No other part of economics that works properly in this world concentrates only on supply and ignores demand. That is one of the real challenges in policy-making, and it is starting to move forward.

On investment and guaranteed returns, I agree. When people investing in renewables sometimes complain about what is going on, I often compare the energy system to the common agricultural policy, as was, and say that this is heaven: there are guaranteed prices out into the future. Why do we do that? Because it is recognised that the Government are not going to invest, CEGB-wise, as they did in the old days. The biggest component in that conversion is capital costs. The biggest way you can make a difference to the cost of high-capital-intensity energy—not just renewables but nuclear and a lot of other technologies too—is by keeping the cost of money absolutely down. That is a decision that we make for good policy reasons: to keep the cost of energy as low as possible because the capital costs and cost of financing are as low as possible.

The noble Lord asked when we will get to a point where we stop subsidising. I suppose the answer is when we start charging fossil fuels the cost of the pollution that they put into the atmosphere and what they are going to cost future generations who will have to cope with climate change—next to the migration issues that they will face in the future, what we have now is nothing—along with all the issues and costs that there will be around it. When fossil fuels count that back into the present cost, that is how a realistic carbon price can be arrived at, as is often talked about on all sides of the House. That is one way of doing it but we have not managed to do it sufficiently. The Chancellor in the previous Government decided to cap the carbon price floor where it was, so that policy has been blocked as well. Those are some of the answers to the noble Lord’s questions. Are we left with a perfect world? No, we are not. That is why we have a mixture of technologies at the moment to try to drive this agenda forward, so that we move towards a sane and safer future for us all.

There are two important points here. First, I am probably on the same agenda as the noble Viscount, Lord Ridley, on the gas side, but the way to get gas into this equation is to take coal out of it. That is the most important thing that we can do, as Dieter Helm often preaches at us as policymakers. So that whole area needs to be taken into consideration.

Secondly, it is one of the ironies that through this legislation we are throwing away one of the cheaper, though admittedly not perfect, technologies. Yes, there is variability in wind power. As I have said many times in this House, I can see many wind turbines from my own house. Do they ever stop? Hardly ever but, while it is not intermittency, I agree that there is a high degree of variability. However, I remember a government statistic from about five years ago, when we had started going through the alternative planning system for major infrastructure projects in the Moses Room. This was a time when wind power did not make up the proportion of energy generation that it does now and then the utilisation of the total UK fleet of generators—sometimes we make it sound as if it were something like 90% to 95%—was in fact 50%. So we have major redundancy even within our conventional power systems. Some of these arguments can be rather exaggerated.

[Viscount Ridley]

Before the noble Lord sits down, I wonder if he could answer the question that I posed: how much has wind power reduced emissions by? If you take into account the full integration costs and the fact that, as he has just said, we have been unable to drive coal off the system with gas because gas does not want to come on to the system because of wind, it is very hard to argue that there has been any significant reduction as a result of wind power.

[Lord Teverson]

I absolutely agree about the failure of gas to drive out coal. That is why I have been a major advocate of emissions performance standards, which we brought in with the Energy Act 2013, but we have delayed actually doing that. I wish that I had the numbers with me. My noble and learned friend is showing me a document but I do not have my glasses on, so I hope I will be forgiven for not being able to read it. I do not know what the CO₂ figure is—I am sure that government documents from DECC have said what it is and I shall have to look it up—but I am absolutely certain that through the increase in the proportion of energy transmission through renewables the levels have gone down, because renewables, which are zero-carbon technologies, are a much bigger proportion of our generation. Over the same time, I am pleased to say that energy efficiency has gone up by 2% per annum, or whatever the figure is. I look forward to finding out that information and informing the noble Viscount. I do not necessarily recognise a lot of his figures within the context of what he is talking about but I am sure that they are as good as any quoted in the House.

[Baroness Worthington]

My Lords, I am grateful to the noble and learned Lord, Lord Wallace, for opposing the Question that the clause should stand part of the Bill. It is tempting to engage on the many points that have been made about the principle of onshore wind in general, but I would rather stay focused on Clause 60 and say why I have a great deal of sympathy with the noble and learned Lord’s proposal that it should not form part of the Bill. That is mainly due to the process by which the Government have conducted themselves. I do not wish to misquote the Minister but he said that he needs time to think things through in relation to the grace period, and that is quite a telling statement. It is clear to me that this clause has not been fully thought through and that it has been put in hastily, without due consideration of the full implications and without due consultation. For those reasons, I am very supportive of the idea that we should simply take the clause out, do the thinking and consulting, and then come back with something that is fit for purpose.

With regard to things being fit for purpose, during the course of the Bill we have had exchanges about the impact assessment. We now have an impact assessment in relation to this clause, but I have to say that it was not exactly worth waiting for. It does not cover some of the most important issues in enough detail. It is incredibly lacking in proper detail in its attempt to make a net present value calculation of the implications of introducing the clause, and I find that it has significant weaknesses.

My overall impression is that the department is building the aeroplane as it takes off from the runway and that not enough thought has been given to this clause. It all seems to hinge on two words in the Conservative Party manifesto: “new” and “subsidies”. There is a great deal of subjectivity in interpreting the phrase “new subsidies”. It cannot be claimed that the RO is a new subsidy—it has been in existence for a number of years—and it cannot be argued that the RO provides, in the words of the noble Baroness, Lady Byford, subsidies for ever and ever. It does not do that. It does not create an unending subsidy. The RO is closing. It will close, as we agreed in the Energy Act 2013, in March 2017. That is not far away—in the grand scheme of things, it is about 12 months. In their haste to generate some kind of political benefit from this attempt to destabilise onshore wind, in those 12 months the Government are destabilising investment across the energy market, and that is deeply regrettable. I am very grateful to the noble Lord, Lord Cameron, for stating the wider implications of what the Government are doing here. There is a question of how we deal with industry and how we encourage people to invest in the UK.

I raised a general point about my disappointment with the impact assessment. I made it clear in a letter to the Minister and on the Floor of the House that we wanted to see the impact assessment properly make the case for the Government’s concern about the levy control framework running out of money or not having sufficient money. I am afraid that there is insufficient detail in the impact assessment. It does not give us any sight of the Government’s numbers on this or explain why they are so concerned.

More than that, the impact assessment makes me fear that the department does not even understand the energy policy that it is governing. When it comes to considering the benefits and costs of this intemperate change to policy, which was changing anyway, it considers only the positive benefit of a reduction in resources—by which I assume it means the amount of money that has been spent on onshore wind—and then it sets against that the increased cost of the EUA purchases. It makes very precise calculations over a period of 24 years to 2040. I am in the business of monitoring the carbon market in Europe and not a single analyst can give you any degree of confidence about the numbers relating to the carbon price over that period. I am afraid that the table on page 15 is really a work of fiction.

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[Lord Bourne of Aberystwyth]

I hope the noble Baroness will agree that we are on track in relation to the electricity ambition.

[Lord Teverson]

The obligation relates not to electricity but to energy. There is no electricity obligation of any kind.

[Lord Bourne of Aberystwyth]

My Lords, onshore wind has deployed successfully to date and is an important part of our energy mix. Our analysis demonstrates that when we take early closure of the renewables obligation into account we still expect total UK deployment of onshore wind to fall within our Electricity Market Reform Delivery Plan projections of between 11 and 13 gigawatts by 2020. This is our best estimate of what we would need to meet our 2020 targets and what we can afford under our low-carbon spending cap. In fact, the department’s projections relating to the 18 June announcement estimated that by 2020 onshore wind deployment, in the absence of intervention, could be between 12 and 15 gigawatts. The upper end of this range is significantly higher than the 11 to 13 gigawatts set out at the time of the delivery plan. Without any action, we could deploy beyond this range. As the 18 June announcement made clear, we therefore considered it appropriate to curtail further deployment of onshore wind, thereby balancing the interests of onshore wind developers with those of the wider public.

This takes us on to my second point: affordability. My noble friend Lord Ridley referred to the trilemma and the fact that the Government are seeking three things, as the previous Government did: to ensure affordability, security and carbon-free. That very much remains the aim. Tackling climate change must be done in a cost-effective way. We want to ensure that consumer energy bills are kept as low as possible while we cut carbon emissions.

The Government have provided vital financial support to the renewables sector, which has helped new and innovative technologies, reduced our emissions and increased the amount of low-carbon electricity that powers homes and businesses across the United Kingdom. In short, subsidy is necessary to give some impetus to development, and that is what we have done, but we have to keep the costs under review and control.

However, the Office for Budget Responsibility’s latest projections show that subsidies raised from consumer bills are currently set to be higher than expected when the schemes were set up under our low-carbon spending cap, the levy control framework. This is due to a number of uncontrollable factors, including lower than expected wholesale prices and greater than expected renewable generation. The revised levy control framework forecasts indicate that spending in 2020 is projected to be £9.1 billion in 2012 prices for low-carbon generation. The Government set a limit of £7.6 billion. As such, the current forecast is £1.5 billion above that limit. These additional costs could be met through increases in consumer energy bills. It is therefore only right that we now look at ways to protect value for money and affordability under the levy control framework. My department has announced a package of measures to deal with the projected overallocation of renewable energy subsidies. The onshore wind measures are therefore part of a co-ordinated approach to managing spend under the levy control framework.

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[Lord Whitty (Lab)]

My Lords, my name is also on the amendment, but I must apologise to the Committee for not being here during its long discussions on the previous two amendments, which relate to the contribution that renewables, in particular wind power, make to the reduction of carbon emissions and the decarbonisation of electricity supply.

This clause or something like it is necessary in the Bill because of the consternation that the changes in support for and expectations of wind power, solar power and other renewables have caused within those industries. They are concerned not that, understandably, the Government wish to reduce the subsidy as those technologies become more competitive with conventional energy, but that they should change the pace at which and the terms on which they are doing it at such short notice, and with such drastic impacts on projects conceived and put to planning long before those changes were proposed. Some of that will have been covered in earlier debates, but the fact is that the renewables industry will lose confidence in this Government’s support for and wider commitment to the objectives established under the Climate Change Act, and those we hope will be established at EU and global level, if they are not prepared to continue such support.

If the Government have a better way of reporting to this House and to the country how well they are doing on their carbon reduction targets and their overall trajectory towards reduced carbon use, it would be helpful for the Committee to hear of it, but, in default of that and in reaction to what has been already announced, it is legitimate for us to put within this Bill an obligation on the Secretary of State to produce a report within six months of the passage of the Act. I hope the Minister can accept something like this amendment or indicate what alternative methods of report the Government are now proposing.

[Lord Teverson]

Although I agree in principle with what this amendment is trying to get at, I have a recollection—I cannot find it, so I may be wrong—that under the Energy Act 2013 the Secretary of State has to give an annual report to Parliament anyway. If that is the case, I just want an assurance from the Minister that that report would cover the sort of issues discussed in this debate. We could have endless reports, but the main thing is to have a key area of reporting where all these things come over at one time, and that Parliament can debate them.

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[Lord Whitty]

In the unavoidable absence of my noble friend Lord Foulkes, I will speak to Amendment 35A. As we have just discussed, electricity decarbonisation is a key component of our carbon reduction strategy. The amendment would provide a mechanism whereby decarbonisation by supplier is built in and becomes transparent, and is therefore enforceable supplier by supplier. It would require the Secretary of State to issue regulations to place on each electricity supplier—subject to definition in the regulations—a maximum level of carbon intensity in the electricity that it supplies within England and Wales. This decarbonisation obligation would be a proportion taken over the year of the carbon content of the electricity supply to its consumers over the course of that year.

The amendment of course does not specify exactly how the obligation would be expressed nor the level, nor whether there would be a single figure or whether that would be varied supplier by supplier depending on their pre-existing achievement of reductions in carbon intensity. That is a matter for consultation prior to the regulations being promulgated. The only specification in the amendment is that the Secretary of State needs to take the advice on this issue of the Committee on Climate Change—I am glad to see that the noble Lord, Lord Deben, has joined us at an appropriate point. Therefore, that would be the benchmark against which the Secretary of State calculates the requirement. It is noticeable that the amendment would apply only in England and Wales. There would be different arrangements in Scotland and Northern Ireland.

The amendment would give a crucial mechanism to the Secretary of State for ensuring that the pace of decarbonisation in the electricity supply was maintained, transparent and understood supplier by supplier. It would be an important additional weapon in the Secretary of State’s armoury. The Minister has assured us that we are on track for 30% of renewables by 2020. We need to go much further than that to meet what will be the requirements for carbon reductions over the years beyond 2020. I beg to move.

[Lord Teverson]

My Lords, I was pleased to add my name to the amendment, although I do not pretend to be an expert on exactly how it would work. There was a great celebration in February this year when our Prime Minister, to whom I give full credit, made a declaration jointly with Nick Clegg, the then Deputy Prime Minister and Ed Miliband the then leader of the Official Opposition. They made pledges through the Green Alliance, one of which was to accelerate the transition to a competitive energy-efficient, low-carbon economy and to end the use of unabated coal for power generation.

That was a fantastic declaration at the beginning of a general election campaign when politics was running high and competition between political parties was starting to move into a more confrontational stage. Yet three party leaders came together and said that low carbon and taking out unabated coal would be key. I see the amendment as something that could move us towards that solution in a concrete way. That is why I support it so strongly.

The Energy Act 2013 started off being about decarbonisation. It made it clear that the Secretary of State had the ability to—and in parliamentary Bill language that presumed that the Secretary of State would—declare a decarbonisation target in 2016 when the Committee on Climate Change came forward with its recommendations for the fifth carbon budget. My question to the Minister on this key area in meeting Climate Change Act obligations is whether the Secretary of State intends next year to follow that through in the carbon budget that is recommended and the one that is subsequently agreed.

The other attractive thing about this amendment is that it tries to find a least-cost way through to decarbonisation. As previous debates have shown, in this House we are united in wanting to decarbonise our economy at least cost. We all know that that is important to consumers, for fuel poverty and to the competitiveness of our economy. This amendment finds a way to do that.

I welcome the amendment and I agree entirely with what the noble Lord, Lord Whitty, has put forward. I will be interested to learn from the Minister how the Government intend to take forward the pledge the Prime Minister made in February. Will the Government move next year to a decarbonisation target for 2030 and, as part of that, will they make sure that coal really does disappear from our system as soon as that is practically possible?

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[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord Whitty, for moving the amendment, but perhaps I may turn first to the opening comments of the noble Baroness, Lady Worthington. Although I am, as she will know, her great admirer in the area of climate change, I cannot allow the allegation to go unchecked and unanswered that we are in the business of nationalising the energy supply. It shows considerable chutzpah to come up with such an argument in view of what happened at the weekend. It is far from the truth. The area is certainly highly regulated but I make no apology for that. It needs to be so.

We are committed to ensuring that the United Kingdom continues to do its part to tackle climate change in line with the Climate Change Act, which, of course, has legal backing and legal obligations. As I indicated earlier, we will respond to the progress report; as the noble Lord, Lord Deben, mentioned, we will do so by 15 October, as we do annually.

Decarbonisation remains a clear goal of the Government. Emissions from carbon intensity fell by 12% in 2014, according to the Committee on Climate Change, and we are very much wedded to that. The noble Lord, Lord Teverson, referred to the commitment of the Prime Minister and our obligations in relation to unabated coal. I agree with the noble Baroness, Lady Worthington, when she said that there is a part for all forms of energy except unabated coal. That is certainly right and I would not dissent from it. We must do this as cost effectively as possible to ensure that our energy is secure and affordable as well as low carbon, as I indicated previously.

Locking ourselves into an expensive and inflexible target for the power sector is not the way to do that. There are just too many things that we cannot predict about how the energy system will develop up to 2030. The costs of getting it wrong would be picked up by consumers for decades to come. The amendment as set out would, in effect, require the Government to introduce an additional power sector target, in the form of an obligation on electricity suppliers in England and Wales. The manifesto on which the Government were elected clearly stated that we will not support additional power sector targets.

Noble Lords will know that the subject of setting a decarbonisation target has previously been debated in this House, as has been indicated, on at least two occasions: during the passage of the Energy Bill in 2013 and of the Infrastructure Bill in 2015. I therefore know that noble Lords will be familiar with the arguments against setting a target such as this. I agree that investors want to know that we have clear, credible and affordable plans. However, the CBI has said that clarity on future financial support for low-carbon electricity will be more important in driving investment than targets. That is why we have said that we will set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade. That is why we have also said that we will set out plans in the autumn on future contracts for difference allocation rounds.

For those reasons I cannot accept the amendment. I hope that the noble Lord will withdraw it.

[Lord Teverson]

The Minister will forgive me if I did not catch this properly, but are the Government saying that they will not undertake the clause in the Energy Act 2013 that says that the Secretary of State “may”—with the presumption that the Secretary of State “would”—set a decarbonisation target for the electricity sector for 2030? Did he say that the Government will not do that?

[Lord Bourne of Aberystwyth]

No, my Lords. I was saying that we would not support additional power sector targets. As I understand it, that target is already in existence.

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[Lord Whitty]

My Lords, if I understand that right it is very disappointing. I can understand the objection, or at least the querying by the noble Lord, Lord Deben, as to whether we need a detailed mechanism for setting carbon intensity coefficients by supply, but he argued very persuasively, and has done before, for a decarbonisation target for 2030. That is why that was written into the 2013 Act and why there was an expectation and general indication from the Minister’s predecessors that there would be a target set in 2016, but only in the context of the carbon budget, which they are obliged by the Climate Change Act to come forward with. I did not accept that argument, but I understood it in terms of the timing. There was some considerable debate about that during what became the passage of the 2013 Act.

It is very disappointing, not only to us in this House but to the various industry operators, including the supply companies, that there seems to be an abandonment of that commitment in what the Minister has interpreted from the Conservative Party manifesto. As I well know, manifestos are pretty flexible things. I hope that he can consult with his colleagues as to whether it actually meant that, or whether there was some more room—

[Lord Teverson]

I am not quite sure how to ask the noble Lord, Lord Whitty, this, but having read the Conservative manifesto many times and having it on my iPad on iBooks, I have not seen this obligation not to have a target anywhere in it. Has he?

[Lord Whitty]

My Lords, I am not quite such a conscientious and diligent reader of the manifestos of various parties—even my own—as the noble Lord, Lord Teverson. The best thing we can ask the Minister to do is to go back and talk to his colleagues—whether it was in the manifesto or not—about whether they are definitely now not going ahead with what was allowed for in the 2013 Act. If that is the case, there are ramifications. I understand why the Minister is opposed to the mechanism proposed in the amendment. I would have thought that having set the 2030 target for decarbonisation would be a useful addition to the armoury, as the Committee on Climate Change and the noble Lord, Lord Deben, advocated. If the Minister feels that that would be too much interference in the market mechanisms, I understand that. It would still be up to the supply companies how they met that obligation and what kind of technologies and contracts they entered into. The market is still operating there. I understand and accept that the Minister is not prepared to go along with that.