Energy Bill [Lords]

Alan Brown Excerpts

2nd reading
Tuesday 9th May 2023 Commons Chamber

[Grant Shapps]

I thank my right hon. Friend for his intervention. We will be looking very closely at the proposed amendments—the Bill Minister himself will be addressing those in detail, which is the right way to do it—and of course, the regulator is already very largely focused in that direction. As I often point out, of everybody in this place I have a particular interest in making sure we achieve what we have set out to do, because this House has kindly legislated to send the Secretary of State for Energy to prison if they do not meet the net zero commitments, potentially through contempt of court. We take these things seriously, but my right hon. Friend will wish to hear more on that issue from my hon. Friend the Energy Minister.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is fair to say that the amendment about putting a statutory net zero duty on Ofgem does not need much studying. On the issue of clean, inexpensive energy, Hinkley Point C is now going to cost £33 billion. We know that Sizewell C will cost in the order of £35 billion if that follows, and the existing clean-up for nuclear radioactive waste is in the order of £230 billion, so where on earth does nuclear fit into the definition of clean and inexpensive?

[Grant Shapps]

We are talking about energy security, and about a tyrant costing all our constituents a fortune, and SNP Members do not want to fix it. They do not want to have reliable nuclear power—they stand against it. They stand against oil and gas. I do not know where they expect all this energy to come from in a reliable way in the future. However, where there are differences, I want to be constructive with the hon. Gentleman and, of course, the devolved Administration. By and large, that is the way in which this Bill has progressed, so on the other issues—the amendments—we will of course try to find ways to work with the House in considering all of them.

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[Grant Shapps]

I have been following the discussions in Whitby in the hon. Gentleman’s constituency and I want to be clear: we have no desire to trial hydrogen with communities that do not want to see disruption. On the other hand, I know that other communities are keen on it. For the reasons already discussed in this debate, there are clearly pros and cons in switching to hydrogen for household heating and it will not be appropriate everywhere. That is why we want to learn from those trials, but it is also important to recognise that hydrogen for industrial use is a different matter. We are feeling our way into all this. Together with what we learn from the H100 neighbourhood trial in Fife, the village trial will provide critical evidence to inform decisions on hydrogen in heat decarbonisation, which will not be taken until 2026.

[Alan Brown]

I appreciate the Secretary of State giving way on this matter. Just on the point of hydrogen trials and effectively doing it with consent, one of the clauses in the Bill allows companies to go in and disconnect people from the gas grid to facilitate trials. Surely that is the polar opposite of doing it by consent.

[Grant Shapps]

That is a misreading of what the Bill does. I absolutely agree with the hon. Gentleman: I refer to the answer I just gave. Given my record of campaigning against what happened with prepayment meters, he will know that that would never be the intention. The element in the Bill is to enable those trials to take place where they would not be able to otherwise, but as I just indicated to the hon. Member for Ellesmere Port and Neston (Justin Madders), that certainly would not be forced.

The second pillar in the Bill will help to strengthen our energy security and minimise cost to consumers. It will pave the way for an independent system operator and planner, or ISOP, whose focus will be on building a better, more reliable energy system. The ISOP will maintain our energy security, operate at the cutting edge of net zero with long-term ambitious plans and bring electricity and gas systems together into a single institution, enhancing our ability to plan for our energy system in the future and to reduce costs.

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[Edward Miliband]

The right hon. Member wants to re-litigate the last Labour Government. Let us talk about the future. We want nuclear to move ahead, and actually the Government have had 13 years and failed to do it.

[Alan Brown]

Will the shadow Secretary of State give way?

[Edward Miliband]

No, I will not.

Let us talk about how we can get an energy system that is fit for purpose. Nowhere is that more true than when it comes to the grid, where the delays that have been allowed to build up are a disgrace. For all of the Conservative party’s boasts, this is what Keith Anderson of Scottish Power says about the delays to the grid:

“The wind farms that are coming online today were approved when Gordon Brown was in power—that’s a long time ago and we need to be much faster to move beyond this crisis”.

The new independent system operator is a step forward, but there are questions remaining about whether it goes far enough in its powers, remit and independence.

What the energy system sorely lacks at the moment—this goes to the question that the hon. Member for Hitchin and Harpenden (Bim Afolami) asked the Secretary of State—is a guiding mind. It is about not simply balancing the system day to day and hoping that the market provides—this is the purpose of the regulator—but planning for the future of the system as we transition. This is the point: at the moment, that planning role is a job for everyone—the Energy Department, Ofgem and the network companies—but the ultimate responsibility of nobody. That needs to change with the ISOP so that we auction offshore wind in the right places, we plan and build the grid in the right places and on the right timescale, and we have the right amount of power in the system in the years ahead. For us, that is the purpose of ISOP, and during the Bill’s passage we will test out whether its proposals for ISOP adequately meet that vision.

If the regime is to work—I concur with the interventions on the Secretary of State—we need a price regulator in Ofgem that supports and never stands in the way of change. I hope that the Secretary of State’s failure to say that he would oppose such an amendment is a good sign, but obviously Ofgem should have a formal net zero duty. I think that was recommended by the net zero tsar, the right hon. Member for Kingswood (Chris Skidmore), and it was rightly inserted by the House of Lords. However—this is boring but very important—we also need to sort out the issues of planning.

The National Infrastructure Commission recently produced an important report about the delays to planning. It said that, in part, that was the fault of Government, who have not updated their energy national policy statements for a decade. It also said that there should be a statutory duty on the Government to review them every five years, and we agree. Here is the other thing that is important: all relevant regulators, including the Planning Inspectorate, should have a net zero duty, because otherwise we will find the system being slowed down and gummed up. Of course, the views of local people are important and must be taken into account, but we must also make progress.

The Bill could achieve those things to speed up the planning process. However, even if we get all the forms of low-carbon power that we need—I think that we should have all of them—and we sort out the grid and planning, there is an obvious question that the Secretary of State did not address. Even if we get all of those renewables and indeed nuclear, the price of electricity is currently tied to the prevailing price of gas. We do need reform of that system. Labour first called for that in January last year, and I say to the Secretary of State that we will be talking about that in the Bill Committee. We believe that there should be a commitment in the Bill to a timetable for that delinking; otherwise, we will get more drift and delay and we will not reap the benefits of the move to zero-carbon power.

On the one hand, we need the drive to zero-carbon power, but we also need a decisive shift away from the high-carbon expensive path—again, that was raised earlier—and unfortunately the Bill does not attempt to make that shift; it is business as usual on fossil fuels.

On coal, the Secretary of State rather dismissed the intervention of the hon. Member for Bath (Wera Hobhouse). Yes, there has been a good record on coal in the last decade. [Interruption.] He says “Thank you”, and he wants to chunter away, but opening a new coalmine drives a coach and horses through that record. [Interruption.] He says that it does not. We cannot go around the world, as did the former President of COP, the right hon. Member for Reading West (Sir Alok Sharma), telling everybody that they have to power past coal, and then say, “But not us,” because that totally undermines our moral authority. Here is the thing: the steel industry in Britain says it will not use the coking coal, it will not provide the long-term jobs that Cumbria needs and it sends utterly the wrong message on climate. That is why their lordships inserted a provision to ban new coalmines. Labour supports that amendment.

Labour will also table an amendment to ban dangerous, expensive, unpopular fracking. I know that Conservative Members want to say the Truss period was a bad dream—Bobby Ewing in the shower and all that. [Interruption.] I am showing my age, that is true. I am a big “Dallas” fan, actually. Labour will table an amendment on fracking.

We also believe—this is an important point—that the Bill should remove the 2015 duty to extract every last drop, the so-called maximum economic recovery, from the North sea. I can do no better than to quote the net zero tsar, the right hon. Member for Kingswood, praised by the Secretary of State, who did a very serious piece of work—Government Front Benchers are nodding. What he said could not be clearer:

“developing new oil and gas fields is incompatible with limiting warming to 1.5°… There is no such thing as a new net zero oilfield.”

Those are not my words, or those of the Liberal Democrats or any other party in this place. [Interruption.] The Secretary of State starts chuntering, but he should talk to his own net zero tsar, who did a brilliant report that he himself praised.

Let me just explain, for the benefit of right hon. and hon. Members, why that is the right position. That approach will have no impact on bringing down bills. How do we know that? Because every previous Energy Minister has said that. Gas and oil are traded on an inter—[Interruption.] Just pipe down for a minute. The price is set on the international market and 80% of our oil is exported. It drives a coach and horses through any possibility of keeping global warming to 1.5°, according to hundreds of leading scientists and the right hon. Member for Kingswood.

Here is the other thing, which is a new part of this. We now know how much the Government are having to shell out to the oil and gas industry to persuade it to make this investment, because it is in the detail of the Budget Red Book: over £11 billion. The current Prime Minister, the previous Chancellor, introduced a windfall tax, but then he introduced an absolutely massive super-deduction—not available now to any other industry, including renewables—of over £11 billion. Massive, massive cost to the taxpayer, no impact on bills, the oil from Rosebank exported, and driving a coach and horses through our climate commitments—no wonder the net zero tsar concluded that it is the wrong policy for Britain. It is. Government Members can carry on pretending that business as usual is consistent with the science and consistent with what we go around the world saying, but it is not and the net zero tsar has rightly said so. Labour will seek to improve the Bill so that it delivers on the zero-carbon sprint we need.

Next, I want to turn to the second part of my remarks —I will try to speed up, Mr Deputy Speaker—on what the Bill can do to ensure the fairness of the transition. We know that the fairness of the transition is essential if we are to take the public with us, and we know there are huge opportunities. I want to come back to the issue of energy efficiency, because Government Members go on and on about their great record on energy efficiency. Here are the facts. In 2010, there were 1.6 million energy efficiency upgrades. In 2022, there were 160,000 equivalent measures. In other words, there were 10 times more when the last Labour Government left office than there are now.

We know why that has happened. The Chair of the Environmental Audit Committee, the right hon. Member for Ludlow (Philip Dunne), has done many important and learned reports on this question. Massive cuts were imposed on energy efficiency schemes when David Cameron said, “cut the green crap” and the investment has not recovered. That is why the UK Business Council for Sustainable Development says it will take almost 200 years at the current rate to get all homes up to EPC C—200 years. That is not just bad for the constituents of my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), who intervened earlier, and the constituents of many others in this House; it also means we import more gas and use more gas supplies. The estimates are that we could cut gas demand by 20% if we got all homes up to EPC C.

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[Alan Brown (Kilmarnock and Loudoun) (SNP)]

For once, I find myself in the unusual position of debating legislation that I do not intend to reject out of hand. I have to admit that I broadly welcome most of the measures in the Bill, particularly those relating to carbon capture and storage and hydrogen models. That said, I must put on record my objection to all the comments that have been made about nuclear. Nuclear is the only energy technology that has become more expensive rather than cheaper over the years, so talk of its making our bills less expensive is collective madness. We need to move away from that. As for the talk about small modular reactors, no design has even been approved for their implementation yet. I do not know how the competition can be judged when there is no approved design for SMRs, and I understand that the process that is going on will take at least another 18 months.

Another aspect of the Bill that I cannot get my head round is the fact that the so- called revising Chamber was deemed to be the right place in which to introduce it. That seems counterintuitive to me, but I will say to the Secretary of State that, if the other place was indeed deemed most appropriate for the purpose, the House should trust the five amendments that were made there and recommend that they should remain in the Bill. Let me say for the record that I support them.

The amendment that would prevent any new coalmines from being opened by the Coal Authority or its successors makes sense if we are serious about net zero. We cannot have the hypocrisy of lecturing developing countries about the use of coal while considering extracting coal ourselves. We cannot have the hypocrisy of Tory MPs’ decrying Germany for using coal while at the same time supporting the new Cumbrian coalmine. We need to end the pretence of a zero emission coalmine that ignores the emissions from the carbon embedded in the coal that is about to be burnt, and we need to end the hypocrisy of arguing for indigenous coal for steel coking in the UK when the coal is generally not suitable for the purpose and 84% of it will be exported to be burnt elsewhere.

As for the amendment to ensure that meeting the UK’s net zero targets becomes a specific part of Ofgem’s general responsibilities, that is just plain common sense. We have heard a number of interventions in support of it, and indeed it is one of the recommendations in the Skidmore review, as well as being called for by representatives of the wider industry including Energy UK, RenewableUK, the Climate Change Committee and the National Infrastructure Commission, and groups such as the Green Alliance. It is logical to assume that, if the Government object to Ofgem’s having a net zero mandate, they are signalling that they are not serious about doing everything possible to meet the net zero target—and when are they ever going to publish the long-delayed strategy and policy statement for Ofgem? For too long they have seemed to suggest that Ofgem should have responsibility for policy considerations when awkward questions arise, when it is clearly their responsibility to set policy decisions for Ofgem in that strategy and policy statement.

For years I have been going on about the unfair transmission grid charging system which penalises Scottish sites where the best load factor and wind resource can be found. As has been re-confirmed by the Green Alliance, the current system, overseen by Ofgem, favours electricity coming from Europe rather than wind farms built in the UK’s windiest areas. On average, according to the alliance, EU electricity generators paid 16 times less in transmission charges to send their energy to England last year than the cost of bringing energy down from Scotland, and Scottish generators are now at a significant disadvantage in comparison with sites in France, the Netherlands, Belgium, Germany, Denmark and Norway. What kind of perverse logic is that?

Worse still, National Grid ESO has confirmed that £4.6 billion was paid in constraint payments last year, mainly owing to the lack of grid capacity between Scotland and England. If ever there was an example of lack of strategy and forward thinking between the Government and the regulator, this is it. Paying wind farm developers to stop generating because of a lack of grid capacity, while either paying fossil fuel generators to ramp up gas generation to meet the demand or importing from the continent at the same time, is madness. Those constraint payments could easily have covered the cost of grid upgrades.

As well as the need for grid build-out to facilitate the renewable energy targets, there is a need for the Government—if they want to deploy renewable energy—to listen to what the industry is saying about the pressures of inflation and how it will struggle to meet the strike rates that have been suggested for allocation round 5. Indeed, some of the biggest developers mentioned by the Secretary of State are struggling to deliver on their AR4 commitments. We need to learn from the Spanish auction, which was a complete failure, to listen to industry and to ensure that that failure is not repeated as we try to deploy renewable energy as quickly as possible.

The Government’s own offshore wind champion has pointed out that they will be well short of the 2030 target of 50 GW of offshore wind. The Government should consider revising the “first come, first served” approach and the ability to hold on to grid consents, which is a prize that companies seek to retain. We need to move away from that system and allow access to the grid for companies that can deploy quickly. The Government rightly talk of speeding up consent processes in England and Wales through the planning system, but we must ensure that Scotland is not left behind. The Scottish Government have made contact with his Department. I am sure he understands that, while Scottish Ministers have responsibility for signing off planning consent for major infrastructure projects, the regulations themselves are reserved to Westminster under section 36 of the Electricity Act 1989. The two Governments need to work together to revise those regulations so that Scotland is not left behind.

Several bodies, including Energy UK and the Climate Change Committee, have called on the Government to apply a net zero test to all policy, regulatory, spending and taxation decisions. I support that, because I know that we need to move away from silo working and ensure that there is a joined-up net zero policy across all Government Departments. I also think that the UK Government should learn from the Scottish Government’s establishment of a Just Transition Commission to place fairness and long-term job creation and transfer at the forefront of net zero, and I call on them once more to match the Scottish Government’s £500 million just transition funding.

I also support the amendment on community energy. As a co-sponsor of the Local Electricity Bill, I support the suggested change to provide a framework to support the growth of a community and smaller-scale electricity export guarantee scheme. It has already been supported by Community Energy Scotland, and 318 MPs now support the Bill, including 125 Back-Bench Conservatives —more than enough to win a vote in the House. The concept is also backed by more than 110 local authorities—including my own, East Ayrshire Council—and more than 80 national organisations.

The organisation Power for People deserves the most credit for getting the campaign to this stage. It is estimated that community energy generation could grow between 12 and 20-fold in size over a decade, which could mean up to 10% of electricity being generated by community-owned projects. That would facilitate additional investment providing returns for communities, building better network resilience with small schemes scattered across the grid—and, of course, that is far better value for money than the £70 billion or so for two large-scale nuclear power stations. In 2021, according to Power for People, community energy groups spent more than half a million pounds on energy efficiency upgrades, helping 21,000 people to reduce their energy bills, while nearly 60,000 individuals were engaged in energy efficiency initiatives. This means reducing energy demand in the entire system. It is clear that the reinvestment of returns by community schemes is a virtuous circle.

A policy that was successful in the past was the feed-in tariff, which secured the deployment of small-scale generation projects, particularly small-scale hydro projects in Scotland. Those projects work: they are proven technology, and last for decades. That is why we need pricing certainty for such generation. Some form of export price guarantee could reinvigorate hydro schemes around the 5 MW capacity, as delivered by companies across the Scottish highlands, such as Green Highland Renewables. It makes no sense for them to have reached maximum efficiency and expertise in terms of designers and contracts, but then to have the rug pulled from under their feet and that expertise lost.

On that subject, I want to put on record again the plea to find a way forward for pumped storage hydropower. I was disappointed that the Minister for Nuclear and Networks, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), said at the Scottish Affairs Committee that that would not happen any time soon. That technology can be deployed right now. It is proven technology that can be deployed fast, and we should be moving forward on it.

On energy efficiency, the Secretary of State was again boasting that the stock of properties rated EPC or above has increased from 14% to 47% since 2010. Yes, that is progress, but it is progress based on addressing the easiest homes first. Clearly, if only 33% of stock has been addressed in 13 years, the target for completing the rest by the target date of 2035 will not be met.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

My hon. Friend mentioned energy efficiency. Is he as concerned as I am that there was no mention of strengthening minimum energy efficiency standards in the Bill, but measures to create powers for the Secretary of State to remove European performance of buildings regulations in the UK are included?

[Alan Brown]

I certainly share my hon. Friend’s concerns. It looks as if that is another Brexit dividend in reverse, where we could end up falling behind our European counterparts as those regulations have helped to drive forward standards in the UK.

To return to the Government’s efforts to upgrade stock and meet the 2035 target, we have to bear in mind that, even as house building continues, new housing is not being built to the correct energy efficiency standards, meaning that as time goes on the number of retrofits that will be required will increase. That is completely illogical and needs to be addressed as soon as possible.

On the slippage on targets, simultaneously, energy companies are finding it difficult to find homes that meet the criteria required for ECO4 upgrades. They are struggling to hit targets. It is clear that the Government will have to revise costing proposals for the scheme, or ECO4 will collapse completely. Of course that will mean the supply chain will move elsewhere and it will be hard to recover the situation. I ask the Secretary of the State to have a wee think on that.

Without action on housing and buildings, there is no plausible path to achieving the fifth carbon budget or meeting the 2030 statutory fuel poverty target. The reality is that about 7 million homes are now classed as being in fuel poverty. Energy efficiency requires much greater urgency, especially in the private rented sector. Now is the time for a proper fair social tariff; I would be happy to support amendments in that area in Committee.

There is no doubt that hydrogen production is needed as part of the net zero pathway. It can provide fuel for shipping, aviation and HGVs, for example. It will be vital for decarbonising some energy-intensive industries. However, there is a growing understanding of the reality of the cost of hydrogen production, which means it is extremely unlikely to be part of a large-scale domestic heating switch-over.

I have previously supported the H100 Fife project, which I want to see come to a conclusion as we need to have an evidence base. However, in reality, hydrogen looks to be too costly and is unlikely to be a solution. Low-carbon expert Jan Rosenow, who was a special adviser to the Business, Energy and Industrial Strategy Committee when we looked at heat decarbonisation, has identified and looked at 36 independent studies that do not predict any large-scale use of hydrogen for heating.

I can see the arguments in favour of hydrogen blending and its benefits as an interim measure to reduce the use of methane gas in heating systems, but more than 20 organisations have written to the Secretary of State outlining their belief that it will be too expensive and just another burden on bill payers. We need clarity on what the hydrogen levy will look like. We know the Government want to pass it on to bill payers, but what is the anticipated cost to consumers? How can an additional levy on bills be justified at this juncture? When France and Germany are investing heavily directly in hydrogen development and with the Inflation Reduction Act in the United States, the Government’s levy proposal means the UK will just fall further behind.

Another concern that I have raised with the Secretary of State is about a clause in the Bill that could allow forcible disconnection from the gas network to facilitate hydrogen trials. It is really important that we do not go down the route of forcing people to disconnect, because that is no way to get the public on side.

There is a lack of joined-up thinking. The Government have said they have aspirations for hydrogen blending, but the current health and safety regulations allow a maximum limit of 2% of hydrogen to be blended into the system. At the moment, there are no proposals to change that legislation, so again the Government’s own targets cannot be met because they have other legislation that needs to be changed to make that happen.

Turning to carbon capture and storage, I welcome the legislation for the licensing and funding models, which is long overdue. This is enabling legislation, and it is clear that there are no definitive models proposed yet. There are also no clear funding pathways. We have the £20 billion a year pledge from 2028, but that has no corresponding budget line and it is at the behest of a future Government. This Government always say that they cannot bind the hands of a successor Government, so saying they can guarantee the £20 billion a year pledge is clearly at odds with that.

In the here and now, we still do not have certainty over the track 2 timeline. I ask the Secretary of State once again, when will Acorn get the backing it deserves? The Scottish Government’s 2030 targets cannot be met without it. Without further CCS clusters, the UK will miss its own targets as well. It is no surprise that the Carbon Capture and Storage Association has written to the Secretary of State outlining its concerns.

In conclusion, I turn to devolution. The Bill is littered with comments that the Secretary of State must consult

“the Scottish Ministers, if the regulations contain provision that would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament”.

The requirement only to consult is not good enough. As an absolute minimum, the UK Government should seek to work with and obtain the permission of the Scottish Government where regulations relate to devolved competency. This is another example of a power grab, as the matter is set out in the Bill instead of there being collegiate working. I ask the Secretary of State to think again on this, because it is outrageous that 29 clauses have that wording. That relates directly to what I said earlier about the need to revise section 36 of the Electricity Act 1989 to ensure that the Scottish Parliament has full competency over planning, which should be a devolved matter.

Going forward, these matters need to be addressed, and there are many issues that need a strategic overview. I would be happy to work with the Government on that, and I will certainly bring forward amendments in Committee.

[Several hon. Members rose—]