Draft Carbon Capture Revenue Support (Directions, Eligibility and Counterparty) Regulations 2024 Draft Carbon Dioxide Transport and Storage Revenue Support (Directions and Counterparty) Regulations 2024

Alan Whitehead Excerpts

Monday 13th May 2024 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I ought to start by saying that we not only have no objections to these regulations but certainly plan to support them, inasmuch as they are a reasonably timely response to the Energy Act, which, as the Minister says, went through the House last autumn. One day, when the BBC gets round to broadcasting the episode of “The Reunion” about the Energy Act, the Minister and I will probably be hauled up to give our amusing anecdotes about the Bill’s riotous—and lengthy—passage through the House. But until then we will have to keep those secrets to ourselves.

These two statutory instruments stem from, as I have said, a pretty timely next stage in the business arrangements for carbon capture and storage and stem primarily from sections 59 and 60 of the Energy Act. I will not draw the Committee’s attention to what exactly is in the regulations, because the Minister has already set it out in a very straightforward and comprehensive way. I will just say that they establish the relationship of the contract-giving process to the counterparty, the circumstances under which those eligible for revenue support under those arrangements can or cannot receive it, and who is and is not an eligible transporter and storer. That is all very good and very straightforward.

By way of clarification, I have two brief questions, which are about the process rather than the validity or otherwise of the measures. Hon. Members will have noticed two things about the SIs. The first is that they talk about “a” counterparty; indeed, the consultation a little while ago indicated that the Government would probably designate the Low Carbon Contracts Company as the counterparty for these processes. The explanatory memorandum to the directions, eligibility and counterparty regulations sets out why the LCCC is a good fit as the counterparty, and noted that its costs will be no more than £350,000 a year, making it a good fit for the amount of work it is supposed to do.

What I cannot find anywhere is whether the Government actually have designated the LCCC as the counterparty. Section 59 of the Act states:

“The Secretary of State may by notice given to a person designate the person to be a counterparty for carbon dioxide transport and storage revenue support contracts”,

which are the subject of the carbon dioxide transport and storage revenue support regulations. Is that a secretly given notice that we do not know about, or is it a public action that we should know about? Is it an action that has not yet been taken but that may be taken in the not-too-distant future, or are there considerations still outstanding as to whether the LCCC should be designated?

That is not a completely academic point, because the SIs talk as if the LCCC has already been designated, but there appears to be at least a technical possibility that it has not been and that another person might be so designated, if the designation has not already, by notice, been finalised. It would be helpful if the Minister said whether that notice of designation has been given and I have missed it, or whether it is still to be given and there are issues outstanding in the issuing of it.

The second thing hon. Members may have noticed is the extent of the carbon dioxide transport and storage revenue support regulations. The explanatory memorandum states:

“The extent of this instrument (that is, the jurisdiction(s) which the instrument forms part of the law of) is England and Wales, Scotland and Northern Ireland...The territorial application of this instrument (that is, where the instrument produces a practical effect) is the United Kingdom. The activities of a carbon dioxide transport and storage company may take place in the United Kingdom, above or below the territorial sea adjacent to the United Kingdom, and waters in a Gas Importation and Storage Zone”—

and we have discussed gas importation and storage zones previously. The point is that it is not immediately apparent that all the activities of a carbon capture and storage transportation company will land within the UK’s territorial waters, inasmuch as it is widely anticipated that captured carbon will, at a fairly early stage in the development of CCS arrangements, be barged in from jurisdictions outside the UK for storage in UK territorial waters. Indeed, one ambition of a number of the hub-based storage arrangements is that they will attract custom from other European jurisdictions, outside the UK. The position of the hubs in the North sea makes that an enticing proposition for countries whose storage facilities are not as developed as those we are likely to have in the UK.

In those circumstances, the question for the Minister is: how do the draft regulations apply? When things come into the UK’s jurisdiction—things that do not originate from within the UK, but which still fall within the purposes of carbon capture and storage in general —what part of that is covered by the revenue support arrangements, or is it all covered? If there are problems with what part is in or what part is out, is it the Minister’s view that in general they should be outside the regulations? Or, does he intend to produce arrangements whereby what he sees as actions within UK territorial waters can be revenue supported as part of the whole process?

Those are a couple of minor questions to keep the Minister on his toes. Other than that, we have no objections to the arrangements.

[Andrew Bowie]

I thank the hon. Gentleman for his contribution; as ever, it was thoughtful and thought provoking. The two draft instruments we are discussing are broadly administrative in nature, as I am sure everyone will have judged, but they outline the vital operational procedures for enabling Government’s proposed business models for carbon capture, transportation and storage.

To respond to the hon. Gentleman’s first point, I, too, look forward to that episode of “The Reunion” on Radio 4. Indeed, to extend his analogy, if hon. Members were ever on “Desert Island Discs”, I am sure they would find the Hansard of our proceedings and discussions on the Energy Act an essential tool to take with them to the desert island. I would suggest that an audio version might be useful in getting some sleep on said desert island.

On the hon. Gentleman’s questions about a counterparty, as he said, the Low Carbon Contracts Company is expected to be the counterparty to the RSA. On his specific point about whether it has already been appointed, the LCCC is the existing counterparty for the contracts for difference for low-carbon electricity. It is the resource-efficient and cost-effective option to act as the RSA counterparty, and stakeholders can therefore be confident in the LCCC’s ability to carry out the counterparty functions.

[Dr Whitehead]

Has it been designated?

[Andrew Bowie]

As I just said, it has already been designated as the existing counterparty for contracts for difference, and there is an assumption that it will be designated for the transportation and storage moving forward.

[Dr Whitehead]

So the answer is no.