Draft Nuclear Industries Security (Amendment) Regulations 2017

Alan Whitehead Excerpts

Tuesday 21st February 2017 General Committees

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

The Opposition do not have any serious concerns about the measure. It is composed of sensible changes to procedures, which it undertakes on the basis of existing safety regulations. Indeed, it is part of a series of amendments that have been made to those safety regulations since their introduction in 2003. It brings the regulations into line with the new arrangements for security guidance that are coming out in the spring. It is my understanding that the introduction of the regulations is entirely in line with previous practice and not in response to any particular emergency, shortcoming or other factor that might cause rushed legislation to be put in place. They are also entirely in line with the safety guidance as it stands and how it is developing.

A minor question arises on the change to regulation 4 of the 2003 regulations. It appears to suggest that there has been a responsible person and an approved security plan for nuclear premises in place in previous safety regulations, but that there was no connection between the two. The amendment also appears to suggest that there should be a connection:

“The responsible person must ensure that there is an approved security plan in place”.

That puts the blame on the responsible person, as it were, if an approved security plan is not in place. If that is not the case, what happens currently? Is there a serious lacuna in approved security plans—that is, no one is actually responsible for them, and the instrument makes someone responsible for them—or does the instrument merely give legal weight to a practice that is widespread in nuclear safety? Perhaps the Minister will be able to assure me that that is the case. I hope it is, and that the regulation is not filling a hole, but is bringing into law something that is widespread, as security regulations stand at the moment.

May I also ask the Minister where we stand, so far as the regulations are concerned, amended or not, in relation to the treaty from which they stem? The convention on the physical protection of nuclear material is an international convention that puts common practice into place across a wide number of countries. The convention, which was signed up to at the beginning of 1980, is a multilateral convention and an indefinite treaty, and the UK is one of its contracting parties.

On 3 March 1980, Euratom signed up to the convention, apparently on behalf of the contracting parties within Euratom. If we trace the chain back from where we are today, in terms of amendments to the regulations, the relationship of the regulations to the convention and the signing the convention, it appears to be the case that all of this might fall down if we are not a member of Euratom. Can the Minister reassure me that I am not correct on the signing of the convention: it was actually signed up to separately by the contracting parties and that Euratom, although it may have signed the convention, had no relationship to those contracting parties?

Alternatively, if the convention was signed up to by Euratom on behalf of the contracting parties in Europe, what is his view of the salience of the regulations if we were not a member of Euratom? Will we have to go back to the drawing board, write them all out again and start again on nuclear safety? Or would we find other devices in order to recover what we had lost by not being a member of Euratom?

Smart Metering: Electricity and Gas

Alan Whitehead Excerpts

Thursday 9th February 2017 Westminster Hall

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

I congratulate the Science and Technology Committee on its excellent report, which has been the subject of our discussions this afternoon. I also congratulate the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe) on his success in obtaining the debate and on his presentation of the Committee’s concerns, which started an exceptionally well-informed debate about smart meters and their roll-out. I add a caveat, however: the problem is that the more we are informed about the subject, the more questions arise about what has happened, what will happen and what is going on with smart meter roll-out.

A number of those questions arise from what the Select Committee characterised as the multiplicity of aims set out by the Government for smart meter roll-out, and from the dissonance between what are presented as the benefits of the roll-out and what the various benefits actually are. Across this Chamber, I think we would say that those benefits from smart meters are real and considerable over a period time, but they are not necessarily cast as much for the public’s benefit as they are presented.

We do not need to look at a television documentary to tell us where and how the benefits fall, because the Select Committee report provides a helpful breakdown, derived from the 2014 impact assessment of the smart meter balance of benefits. The report sets out, perhaps more widely than in some of our discussion, what range of benefits occurs to what section of the industry and to consumers as a result of the smart meter roll-out.

For example, the Select Committee report sets out the estimated total benefits of smart meters, once they have been installed completely: more than £5 billion accrues to consumers from energy saving and micro- generation; but supplier benefits—the big six energy companies and others—come in at £8 billion, arising from avoided site visits, fewer inquiries and other such things related to the management of energy supply. The benefits also spray out to the rest of the energy industry: network benefits from reduced losses, reduced outage notification calls, fault fixing and so on come in at an estimated £1 billion; and generation benefits from avoided investment in generation from peak shifting through time-of-use arrangements and so on are getting on for another £1 billion.

That picture of the estimated benefits—based on Government figures—clearly shows that the consumer benefit is a fraction of the overall figure. The entire cost of the smart meter roll-out, however, will clearly be borne by that first group I mentioned, the consumers. I worry a little that that continues to be obfuscated in any presentation of what is happening with smart meters.

For example, the 2016 impact assessment—which by the way considerably downgrades the total benefits available and substantially increases the amount for the costs engaged in the system, in particular for DCC—insists on stating:

“Energy suppliers will be required to fund the capital costs of smart meters and IHDs. They will also pay for the installation, operation and maintenance of this equipment plus the communications hub (which links the smart meters to the supplier via the DCC).”

I imagine that that paragraph looks okay from the Government point of view, because it emphasises that the Government are not paying. At the other end, however, consumers are.

Consumers will probably pay somewhere between £130 and £200 on their bills to recover the costs of the installation of a smart meter on their property. Just this week two of the big six companies announced sky-high increases in their bills. They stated that the increase is as a result of the price surge in rising wholesale energy prices and—admitting this, I think, for the first time—the Government’s smart meter policy. They specifically state that of the 10% increase, a substantial element is because of the smart meter policy.

Among other things I would like to hear from the Minister this afternoon—it would save me some time, because I sent him a written question on this precise issue, so perhaps we will short-circuit the reply process—is, what are energy companies doing about their recovery of money from smart meters? If what is being said about the recent price rises is an accurate depiction of where the increases come from, at the very least energy companies are seeking to recover the cost of smart meters up-front in tariffs, rather than spreading it over a longer period. If that is the case, the £100 increase on the fuel bill as a result of price increases by the two companies can be depicted as a recovery of between £30 and £40 of smart meter costs in that price alone, which looks like a substantially greater amount of recovery than should have been the case given the spread out nature of the installation of smart meters and what is meant to be the recovery of costs over a period of time.

Has the Minister had any discussions with the energy companies about their policy for the recovery of the cost of smart meter introduction? How will they do that and what will be the impact on bills, bearing in mind that we know that consumers will be paying for it?

I have a great deal of sympathy with the point that my hon. Friend the Member for Blackley and Broughton (Graham Stringer) made that it does not seem right for consumers to bear the whole cost of the introduction and roll-out of smart meters in the way that has been described, particularly given that the benefits are spread across the industry.

The other point that worries me on the basis of better information is the progress of smart meter roll-out. The Select Committee drew attention to that issue, but it is also apparent from the most recent impact assessment, which came out in late 2016, and the announcement at the end of 2016, which the Chair of the Select Committee pointed out, that DCC had finally gone live-ish at the end of November. I make two points about the significance of DCC going live. First, it announced that it had gone live on precisely the last day before it would have started paying penalties for not going live. It announced that it was going live in only two out of the three areas that it operated in, and that it would go live in the third area a month later.

Secondly, the going-live document contained pages and pages of “workarounds”—in English, that means “things we haven’t resolved yet”—and those appear still to be substantially outstanding. I understand from talking to people who rely on DCC going live to get going with SMETS 2 meters in a coherent way that a good proportion of those workarounds and the way things are presently configured render it difficult reliably to go live on those meters. So, to paraphrase a phrase that we have heard recently, is DCC going live actually DCC going live? Are there still issues with DCC, and particularly SMETS 2 roll-out, that we need to look at?

Finally, one of the consequences of roll-out not having started very quickly and SMETS 1 meters having been rolled out that may well be obsolete and need to be replaced in the second phase of roll-out is that in the 2016 impact assessment, there is a curve for roll-out—not just the roll-out itself but the speed of the roll-out—with a gradient that bears no resemblance to the gradient of the curve in the 2014 impact assessment. Contrary to previous suggestions that about a million and a bit meters per year would be installed between 2017-18 and 2018-19 before the finishing date of 2020, it is now suggested that 2.5 million meters should be installed per year. The industry says that it will be impossible to do that over that period.

All that adds up to the suggestion that the hon. Member for St Ives (Derek Thomas) made that it may be time for a review of what is going on, so that we are clear that we can achieve the roll-out on time and it will have the expected benefits for customers, on the basis of a fair distribution of costs and benefits.

[Mr Andrew Turner (in the Chair)]

I call the Minister, who has until 2.58 pm.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 31st January 2017 Commons Chamber

[Jesse Norman]

One hesitates to remind the hon. Gentleman that this is a different matter and a different technology from tidal lagoons, but I think he can take it as read that officials and Ministers will be thinking carefully about all the relevant precedents that might bear on this decision.

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

The question was about the potential contribution of power generated by tidal lagoons to UK energy provision. My understanding is that a limited deployment of tidal lagoons in the Severn estuary alone would contribute about 8% or more of UK electricity demand. Can the Minister tell me if there is any other technology that can provide that sort of power in one location—as a clue, perhaps I can suggest to him that Hinkley C running full tilt without any outages is estimated to contribute about 7% to UK energy requirements?

[Jesse Norman]

I dare to suggest that the hon. Gentleman is misinformed. It is not quite clear what he thinks of as the lagoons in the scheme he describes, but Hinkley Point will be a bigger generator than, certainly, the first round of lagoons, as well as being a higher load and more reliable.

Green Investment Bank

Alan Whitehead Excerpts

Wednesday 25th January 2017 Westminster Hall

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

The Opposition’s position on the sale of the Green Investment Bank is that it should not be sold. The reason for that is at the heart of what the Green Investment Bank is. It is, of course, not a bank. It does not have the full lending and borrowing facilities we would expect in a bank. Indeed, hon. Members may remember that after it was formed the Chancellor imposed conditions on when it might become a bank. It is not a bank: it can be better described as a public policy instrument. That is what it has always been. It is a public policy instrument that, as hon. Members have said, has a particular purpose of using state-backed intervention to overcome market failure, particularly in green investment.

We know that the market failure issue has not been resolved and that green investment, particularly because of the requirement for patient capital and long-term investment as it attempts to ride a number of waves at the same time, continues to be difficult as we hear from reports coming into this country. We also know that investment is essential if we are to move to the next stage of low-carbon investment. The Green Investment Bank, as the public policy instrument to ensure that happens, has been a remarkable success. It continues to be a remarkable success and to do very well what it originally set out to do, which, as hon. Members have said, is not to give grants out to anybody or take companies over but to pull capital in from elsewhere with the back-up of capital from the Green Investment Bank, which is backed in the first place by Government, to immensely enhance the value of the investments that have been secured. In so doing, the Green Investment Bank has, as we know, secured more than £10 billion of capital investment with an input of just over £2 billion of Government-backed money via the Green Investment Bank’s instruments. It does not seem a very wise course of action to sell that public policy instrument, with all the consequences that may arise from that now and for the strategy that we need to adopt for green investment.

The Government have not only decided to sell the Green Investment Bank, but they have decided to make the preferred bidder for the bank a company that does not have anything like that model in its investment arrangements. As hon. Members have mentioned, that particular company appears to have been involved in specific amendments to the arrangements of the Green Investment Bank so that it would be possible to make that bank work in an entirely different way—setting up, in November and December, 10 companies, which would fit neatly in at least four of the major investments that the Green Investment Bank has been involved in—the Galloper, Rampion and Westermost Rough fields, and GIB offshore wind collectively, amounting to a Green Investment Bank total investment of about £1 billion. It would not be a bad start—to be able to take the Green Investment Bank over, flog off half of the assets that have been taken over, get £1 billion back and then move on to the next stage. To the casual observer, that has the potential to be a pretty scandalous forward move to do to the Green Investment Bank exactly what we fear would happen were it to be privatised in that way.

I personally do not go along with Donald Trump’s view of the press, particularly the quality press and the Financial Times and The Sunday Times. This weekend, the statement in The Sunday Times was simply this:

“Ministers are poised to scrap a planned sale of the Green Investment Bank…to Australian investment firm Macquarie, pushing instead for a £3.8bn stock market listing.”

I understand that the Minister cannot and will not mention the word Macquarie, but I wonder whether he would enlighten us by using a different formulation, such as, “No, the Government are not poised to scrap a planned sale of the Green Investment Bank to a preferred bidder, and no, they are not pushing instead for a £3.8 billion stock market listing.” That would be a suitable statement for the Minister to make this afternoon in response to speculation in the press. I would take silence on that formulation as an indication that the Government may be having second thoughts. If they are, I would fully support them, because they would start to be coming into line with the issues that hon. Members have raised this afternoon and at other times.

If those second thoughts included, for example, an initial public offering that was a minority sale of shares, or even a majority sale of shares with a controlling share retained by Government, that would easily overcome the issue that hon. Members have also raised—the arrangements that we know will be inadequate to stop asset-stripping in the way that appears to be lined up for the bank at the moment. Those arrangements are very narrowly based on the memorandum and articles of association of the company, not on the asset possessions of the company, and would have no real effect in the way that I think hon. Members would want.

If the Government were to decide to float shares in an IPO, I guess that would take about two years. That would give the bank a substantial amount of time to do its work, particularly in view of the likely withdrawal of the European Investment Bank, which other hon. Members have mentioned. We ought to remember that the European Investment Bank has actually invested twice as much as the Green Investment Bank over the past few years in green projects that are difficult to invest in. Upon Brexit, the EIB’s investment is likely to fall to between 10% and 0% of its current investment. That is a further reason why the Green Investment Bank is so important to making investments right now.

I have on previous occasions asked the Minister to wink in the Opposition’s direction if he has had a change of heart. Perhaps nothing as flamboyant as that is necessary today, but it would be helpful if he could indicate whether a different route is being considered for the Green Investment Bank so we can discuss its future in a rather less negative way.

[Albert Owen (in the Chair)]

The Minister has a little extra time to respond to the debate. I remind him that if he wishes, he can leave Ms Thomson a couple of minutes to sum up.

--- Later in debate ---

[Mr Hurd]

I am happy to address that point, because it is important. The hon. Lady needs to reflect on the motivation of anyone wanting to buy the GIB. It is a special organisation; there are other vehicles that people can buy if they simply want to invest in clean energy or strip assets. The GIB was set up for a special purpose. We put in place governance frameworks—the hon. Lady calls it the golden share; we call it the green share—that we think are robust and that Parliament approved.

Why bother if the only intention is to do easy stuff? The GIB has proven that it can do difficult stuff and make a return. We therefore come back to the motivation of a bidder, and to our doing our job in making sure that we test any proposal against the criteria we have set. One of those criteria is about not just the volume of future investment commitment to the UK, but the degree to which any buyer buys into the ethos and purpose of the organisation.

To draw things to a close, the central point is that the Government set out our case for privatisation and set out the criteria—value for money, declassification, but also a desire to see a credible commitment to the ongoing organisation and to increased levels of investment in the UK’s low carbon economy. We ran a competitive process, we received a proposal from a preferred bidder and we are now evaluating that against those criteria. No decision has yet been taken, because this is a very serious decision.

The debate, and the urgent question debate, have been very helpful—not only in sending a message about the importance of getting this right, which had already been received by Government, but, critically, in sending a message to anyone looking to buy the organisation about the importance that Members from both sides attach to getting the transaction right: it must be seen to deliver value for money, but also show a commitment to the ongoing organisation.

[Dr Whitehead]

rose—

[Mr Hurd]

I am happy to give way, if time allows.

[Dr Whitehead]

The Minister has been very generous in giving way. Before he concludes, will he briefly categorically deny that the story in the Financial Times has any truth in it at all?

[Mr Hurd]

I am confused about what story the hon. Gentleman is referring to; there have been so many stories. I can say that the Government continue to evaluate a proposal from a preferred bidder and that no decision has been taken.

UK Decarbonisation and Carbon Capture and Storage

Alan Whitehead Excerpts

Tuesday 24th January 2017 Westminster Hall

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

I was going to say that the debate had been characterised by a mighty cross-party alliance in favour of CCS, which I heartily concur with, but obviously there is this afternoon one exception to that. I want briefly to address that exception: the hon. Member for East Antrim (Sammy Wilson).

The issue is basically about the imperative to decarbonise our energy supplies, and it is an unashamed imperative because we know that climate change is real and that, if we do not do anything about it, that will be disastrous overall, for us all. Indeed, we can go back, in terms of alternative costings, to the Stern report. Stern said that doing nothing on climate change would probably consume 5% of our GDP, whereas doing something about it might consume 1% of our GDP. It is a very substantial investment for the future and rather a good bargain overall, in terms of what we might put in and what we might get out.

Of course, the same applies, in the context of the energy sector, to CCS. The question is really how we decarbonise our energy supplies, using different potential scenarios, and what would happen if we did not take CCS into account as far as decarbonising our energy supplies was concerned. It is not that we cannot, but it is about the relative costs of doing that with different technologies. It is not me saying this: it is the Committee on Climate Change in setting out its scenarios for the fifth carbon budget, which, of course, the Government have now adopted as a way forward over the next period.

We have basically adopted a scenario for energy decarbonisation that has at its centre, and as part of that fifth carbon budget, that energy emissions should be below 100 grams of CO₂ per kWh by about 2030. The Committee on Climate Change says that the investments we have at the moment give us an emissions intensity of about 250 grams of CO₂ per kWh. If we close remaining coal-fired power stations and replace them with gas-fired generation in the short term, that would take emissions marginally further down to 190 grams of CO₂ per kWh.

Of course, if all the existing nuclear power stations were also replaced by gas, and gas met new demand subsequently, emissions intensities would rise to over 300 grams of CO₂ per kWh by 2030. The Committee on Climate Change goes on to say:

“Commercialisation programmes for CCS and offshore wind alongside lowest-cost investments in the 2020s in a mix of new nuclear, onshore wind, solar and offshore wind rather than expanding gas generation would bring emissions intensity down to below 100 gCO₂/kWh.”

That is a very straightforward and exact road map for where we need to go in terms of energy decarbonisation.

Of course, if we did not have CCS in that scenario, we would have to do a lot of different things to replace what CCS would have done by physically taking the carbon dioxide out of the process and putting it into the ground. We would have to do something else to take that carbon dioxide out of the process. That could be a lot of additional energy efficiency or it could be a lot of new, different low-carbon plant.

We come to the question of what the alternative costs might be if we did not have CCS in the process. Indeed, the NAO report on the carbon capture and storage pilots, which hon. Members have mentioned this afternoon, clearly sets out that meeting the 2050 target for decarbonisation of our whole system, without CCS, would

“cost up to £30 billion more in the power sector alone”.

Hon. Members have mentioned what that means in terms of an annual basis, but that is the overall cost. Interestingly, the NAO cites where that particular figure comes from: of course, it came from the Department of Energy and Climate Change in 2015.

We are clear about the ends, but we are not currently clear about the means. That is where the scandalous cancellation of the two pilot projects—which, by the way, had already been included in those Committee on Climate Change estimates I just mentioned, so we are even further back from the starting line than we would otherwise have been—puts us in terms of having, at the moment, the possibility of ends.

We have agreed the fifth carbon budget. The Government are due to produce their low-carbon plan some day soon; I think it was supposed to be last year and then it was supposed to be this spring, but I see from the industrial strategy announcement yesterday that the target is now some time in 2017. I am interested to know from the Minister whether that low-carbon plan is going to be published in the early part of 2017, as I hope. If it is, I would be extremely surprised if it included no mention of the key role CCS will have to play in making that plan a reality. That is the truth of the matter: without CCS, it is very difficult to envisage a lot of the systems that we talk about in terms of low-carbon energy as a whole—not just low-carbon electricity—working very well.

My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) mentioned, among other things, the possible role that hydrogen might play in the future heat economy. Hydrogen can be made by electrolysis of spare electricity but it is more likely that, during the earlier period, it is going to be made using existing infrastructure by steam methane reformation. That gives us a potent fuel in terms of sorting out the decarbonisation of our heat structures, and possibly the substantial decarbonisation of our transport structures, but CO₂ is a by-product that needs sequestering in the process, otherwise it is not low-carbon at all.

The essential role that carbon capture and storage will play across the board in our decarbonised, low-carbon energy economy is without question. The question is: what do we do about it? We have heard mention this afternoon of the estimable Oxburgh report, which was essentially commissioned by Government after the closing down of the pilot schemes. Without wishing to repeat some of the details of the Oxburgh report that have been mentioned this afternoon, I would say that the report does not talk about pilots and does not talk about ways of trying to introduce bits of CCS here and there. It talks about a very practical route forward, which is costed and relatively low-cost, for what Government need to do—exactly in line with what we think we are doing at the moment about industrial strategy and how we move that forward—to make carbon capture and storage a part of our energy landscape over the next period.

I commend anybody who has not read that report to look at exactly what it says. That is exactly what it does: it sets out how we move forward over the next period to integrate carbon capture and storage with various measures as part of our processes. I ask the Minister whether the Government intend to respond to the Oxburgh report in the near future. If they do intend to respond, what form is that response likely to take? I hope that when the Government decide to respond, they respond in a very positive way because that is what we need right now. Undoubtedly, we need to decarbonise radically. Undoubtedly, carbon capture and storage has to be a part of that decarbonisation. Setting out a way forward for making carbon capture and storage a reality in our energy firmament is, it seems to me, a very high priority for Government at the moment.

[Mr Clive Betts (in the Chair)]

I thank all hon. Members for being so co-operative with the time available to make sure that we got everyone in and they had a full opportunity to contribute. I now call the Minister.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 13th December 2016 Commons Chamber

[Jesse Norman]

I certainly do, and I am very glad that my hon. Friend has brought that to the attention of the House.

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

After the latest capacity auction, the overall scores for the procurement of new combined cycle gas generation plant stand at one small buildable plant over three auctions, at a total cost so far of £3 billion and £12 a year on customer bills. Does the Secretary of State have any other good ideas up his sleeve to secure the procurement and building of new capacity up to 2020?

[Jesse Norman]

As the hon. Gentleman will know, the gas capacity market auction was an enormous success. It secured a widespread diversity of supply at low cost and in higher amounts than ever before, and it included some innovative new technologies. The Department should be celebrated for managing this.

Emission Reductions and Low Carbon Investments

Alan Whitehead Excerpts

Monday 12th December 2016 General Committees

[The Chair]

We now have until 5.43 pm for questions to the Minister. May I remind Members that questions should be brief? It is open to a Member, subject to the discretion of the Chair, to ask related supplementary questions.

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

I note that the Minister has set out the UK’s position on phase IV of EU ETS in a document supplied for the Committee’s attention this afternoon. In that document, mention is made of the overhang of allowances that the Minister said will remain within EU ETS, but no mention is made of any Government position concerning what might be done about that overhang as we go into phase IV. Does the Minister any views on that and does he think there should be a Government position on it?

[Mr Hurd]

Yes, we do. What we have argued for is what is called a volume-based approach. This is our second crack at this issue. In the 2014 initiative, we were instrumental in setting up the market stability reserve, which is basically a mechanism for taking surplus allowances above a certain threshold out of the system.

What we suggest this time around, and it seems to be gathering some support, is that we should accelerate that process, in terms of both scale and time. As the hon. Gentleman will know from his deep experience of tracking the ETS, that is because the fundamental problem is a structural imbalance of demand and supply allowance. Our proposal is a volume-based approach, which is seeing whether can we accelerate the mechanisms for taking this surplus out of the system.

[Dr Whitehead]

I thank the Minister for that reply. However, the question of taking surpluses out can be done by means of the market stability reserve, which will be completely transported from phase III to phase IV, with all the surpluses, as things appear to stand at the moment. That means that, because the system is currently trading at about 200 million allowances below the capped level, there will be increased surpluses coming into phase IV, in addition to those in the market stability reserve and those carried over. The suggestion that might be put is that those should be forcibly retired in phase IV. Does the Minister have any views on that?

[Mr Hurd]

We are open to mechanisms and discussion about the how. The point that we are trying to make is that we need to accelerate the process of taking surplus allowances out. We think the MSR continues to be the right primary tool for doing that; the issue is the pace at which it is done. We are trying to gather support for doing that on a bigger scale at a faster pace.

--- Later in debate ---

[Mr Hurd]

We are talking about negotiating the principal elements of the reform of the emissions trading scheme. As far as I can see—it is a fairly opaque process—that is due to be completed by the end of 2017. That is when the base of the agreement is likely to be reached, and work can then begin on underpinning the implementation. That is well within the Brexit timeframe. Our view, therefore, is that we should continue to be a very constructive, positive, inquisitive voice at the table to ensure that the next phase of the emissions trading scheme—I would argue that it is in one of the most critical phases in its history—is structured in the right way.

[Dr Whitehead]

Pursuant to whether we will be a member of the EU when the fourth phase comes into operation, the Minister of course knows that a number of non-EU members are already in the EU ETS. First, does he have a model in mind of what our relationship with the EU ETS might be, bearing in mind that there are already non-EU members in the EU ETS?

Secondly, does the Minister have any views on the recent announcement in the autumn statement that there is no definite commitment to extend our carbon floor price mechanism beyond 2020-21? As was said in the autumn statement, it is possible that the EU ETS level will coincide with our carbon price support in the middle of the next decade, which strongly implies a relationship, whether we are in the EU or not, between the EU ETS and our carbon price support mechanism.

--- Later in debate ---

[Dr Whitehead]

We have had a good session, and the Minister was asked number of pertinent questions. They focused, first, on whether we are actually going to be there to influence the EU ETS in any way in the future, and, secondly, even if we are not there to influence it, on the extent to which it will continue to have a substantial influence on us, however it is sorted out in the absence of the UK as a member of the EU.

I suggested that it is worth examining the EU ETS’s structures in respect of the countries that fully participate in it but are not EU members. There are particular regulations relating to that, but those countries participate fully in the EU ETS and are not just observers at the table. They are bound by what happens in the ETS, but they are active participants in shaping it. I hope at the very least that, in our future relationship with the EU ETS, we aim to be a full member and sit round the table, even if we are not a member of the European Union, so that the fact that the development of the EU ETS reflects our country’s priorities for the decarbonisation of our industries and for climate change is fully taken into account.

The Minister made it clear that the Government’s aim in the discussions was to ensure that the allocations were retired or removed from the system at an accelerated pace. I very much concur with that aim, because we need to understand where the EU ETS stands at the moment and where it might position itself relative to our carbon price support mechanism in the future. We are coming to the end of phase III, but particularly because of the recession and crisis of 2008-09, the number of allowances that are being generated in the system—we have already achieved the targets that the EU ETS requires us to meet by the end of phase III—means, as I mentioned in questions, that we are not retiring or reducing allowances at the moment, but creating 200 million additional allowances before the end of phase III. The proposal for dealing with that—the market stability mechanism—effectively loads those allowances, which have been placed in quarantine, as it were, into the beginning of phase IV, in addition to the new allowances.

Unless we do something about rebasing where we start from in 2020, we have the prospect of a continuing overhang of emissions through the whole period of phase IV of the EU ETS. My first proposition, which I suggest the Government ought to look at in their continuing engagement with the outcome of this—although, as the Minister said, it will be on a vastly accelerated scale to that which was previously the case—is that the 2020 starting point for phase IV should be rephased so that it is based on actual emissions in 2020, rather than the trajectory that they have been on hitherto, which would mean that the 2020 figure did not reflect real emissions and therefore institutionalised the overhang of allowances in the system into the fourth phase.



This afternoon the Minister said that there is not a great deal of support for the linear reduction factor to rise from the proposed 2.2% per annum. Again, however, when it comes to attacking those outstanding allowances, some figure higher than 2.2% would be very helpful and important. Considering whether it could go up to something like 2.4% would be a useful addition to the fight to shape the EU ETS, so that it is fighting fit and combative over the next period, regarding what it is trying to do not only about the overall capping of emissions but having a reasonable price level for allowances. Of course, that is the big question over the next period—whether those allowances get that price, which can only be really achieved by the cap and those allowances decreasing, and their coming together to keep the price up to a good level.

I take the Minister’s point about energy-intensive industries and the aim during phase IV of reducing allocated allowances from 80%—I think—to 23%, and therefore concentrating those allowances particularly in relation to energy-intensive industries and making sure the carbon leakage is properly accounted for over the next phase. I fully support that.

However, the Government’s present position regarding what the EU ETS will look like in phase IV is not sufficient, particularly in the context of what we have said about the future of our own carbon price support system. It is not sufficient at the moment to secure that convergence, which is potentially so important regarding what we do about the future of our own carbon price support system.

We have two possible ways forward. We either commit ourselves now, at an early stage, to saying that we think the EU ETS, in whatever form it is going to be in, will have, a respectable-ish price for allowances, but because we will not have solved the overhang problem, we will never get to the right amount so that we can confidently say that our own carbon price support system will at any stage start to align with whatever that price is in the mid-2020s. In that case, we presumably need to say, “Well, we act now to secure our own carbon price support system for the long term and we take a decision on that fairly early”, or we press for proposals that are quite a bit more radical within the EU ETS, so that it can achieve that particular level.

To my mind, that means, first, that we need mechanisms that do rather more than the market stability reserve to retire allowances, and have them permanently retired and not quarantined for future reference—actually taken out of the system entirely over phase IV—and, secondly, that we have a realistic starting point for phase IV, so that it allows those retiring allowances to have maximum effect on price over the next period.

Without looking at those particular aspects of EU ETS over the next period, we will almost certainly have a level of crisis in EU ETS over the next decade similar to that we have at the moment, as that overhang of allowances takes its toll on the good intentions of EU ETS.

I would appreciate hearing any thoughts that the Minister has on that particular way of going about things, which I think is important. I know that he cannot say too much about this, but a small nod and a wink in the direction of saying that we are pretty committed to staying in the EU ETS, although we cannot actually say so right now, would be very helpful for future discussions.

Tidal Lagoons and UK Energy Strategy

Alan Whitehead Excerpts

Tuesday 6th December 2016 Westminster Hall

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

We have had an excellent debate, with contributions from Members on both sides of the Chamber indicating almost unanimous support for the Swansea bay tidal lagoon. That outcome—the clash of ideas in the white-hot heat of full agreement—should be impressed on the Minister. Even though there was what might be regarded as one dissenting view from the hon. Member for Eddisbury (Antoinette Sandbach), I think that she supports the idea. She made some important points about value of money and about how careful one needs to be to get that right.

We can, I think, say that there is agreement, more or less, about the principle of the Swansea bay tidal lagoon and full agreement, at least by the Opposition, about the practice. Indeed, Opposition turnout and the first-rate contributions made by my hon. Friends the Members for Aberavon (Stephen Kinnock), Swansea West (Geraint Davies), Swansea East (Carolyn Harris), Newport East (Jessica Morden) and Workington (Sue Hayman), and by the hon. Member for Aberdeen South (Callum McCaig), indicate just how full the support is on this side of the House, not just from south Wales Members but across the country. I think that is because we need to make it clear that support for Swansea needs to be based, as Members have emphasised, not just on whether we build that tidal lagoon but on what it means for tidal lagoon technology for the UK’s future and what it means also for the series of lagoons that can come about as a result of the Swansea proving lagoon.

That series of tidal lagoons is not a concept based on thin air; it is not about harnessing an as yet untried technology that might come from the middle of nowhere and save us as far as low-carbon power is concerned. Essentially, it works on a simple principle of proven, well-known technology, of water entering the lagoon subject to its flow through a turbine, both when it is coming in and on its release when the lagoon is full, that allows for the generation of some 14 hours of utterly predictable power. We know that the principle works well because, as the Rance barrage in France has shown, the technology is reliable over many years and, as has been mentioned, it is a power source with a lifetime far in excess of those estimated for wind, gas and even nuclear. It is likely also that the outage time over a long period will be relatively low.

Swansea is not a large lagoon in terms of what is possible. It will have an installed capacity of 350 MW, which is approximately a tenth of the most worked-up second lagoon, in Cardiff bay, which comes in at a capacity close to that of Hinkley Point C power station. However, it is the possibility of Swansea being the proving ground for a number of tidal lagoons that will not only be cheaper to construct and operate than Swansea but will open up the prospect of a large contribution—perhaps 10%—of our electrical power needs that ought to be a condition for supporting it. What we should be investing in as a country is not Swansea, but Swansea and the prospect of all the others as a major component of our future energy make-up.

As Members have mentioned, as far as our country’s overall energy make-up is concerned, power plant is going offline at an alarming rate, with 23 GW of conventional thermal plant being closed or mothballed since 2010, and a further 24 GW—mostly of coal and nuclear—to be closed by 2025. It is unlikely that nuclear will even begin to make up that gap. Hinkley is delayed by longer than seven years and will probably not be on line until 2026-27 and, according to the latest consultation, coal is due to come offline by 2025.

We need replacements for the lost capacity, and a lot of that will come from the aggregation of renewables, but at present the only plan appears to be that gas-fired power stations will be built out at some pace between now and the late 2020s. We know that gas power stations are not, at present, getting built and, indeed, the Government are pursuing expensive capacity market operations—with an auction today or thereabouts possibly costing us £2.5 billion—for capacity over the next period. That is the last chance saloon, one might say, for gas plant procurement under the present arrangements. Swansea, and other lagoons, would certainly serve as a substantial alternative to some of that build, which, if procured, would cost substantial amounts—something that needs to be taken into account where value for money is concerned. All energy, at the moment, is expensive to build. All energy, at the moment, is being subsidised in its build. It is not about considering just what Swansea might cost but about what the alternatives might cost as well. Under those circumstances, Swansea performs, in the long term, very well.

Within a few years, perhaps, a number of those replacement power stations will need replacing anyway. Meanwhile, Swansea and other lagoons would have sailed through the period, producing reliable ultra-low-carbon electricity. By the way, in terms of a larger lagoon strategy, they will be able to supply reliable and known amounts of power pretty much round the clock, for the simple reason that the time of high tide varies considerably along the UK coast. I always like to try to introduce a not very well known fact into my contributions and today it is that, right this minute—this very minute—it is high tide in Morecambe bay. That means that if there were to be a lagoon in Morecambe bay it would produce power for seven hours either side of its high tide.



It is not high tide in Swansea. High tide was at 10.20 am. Power could be produced seven hours either side of that high tide, which would overlap almost exactly with the power produced in Morecambe bay on its high tide. With a series of lagoons, there would be round-the-clock, reliable, known, predictable power that was just as predictable and round-the-clock as any nuclear power station or gas-fired power station that we might care to build in this country.

The benefits of developing Swansea and subsequent lagoons are manifest from a low-carbon energy point of view. As Members have alluded to, there would be considerable other benefits, too. Jobs and supply chains would be created, mostly in the UK. It is estimated that 65% of the pathfinder project spend will go on UK content, which is close to the figure achieved by the North sea oil and gas industry. There would be 200 jobs in Swansea and perhaps 11,000 jobs in Cardiff during construction, and several thousand jobs during operation. Developing Swansea is important for what UK plc should be doing to secure the exportable potential of those technologies in which we are world leaders. We certainly are leading in tidal, tidal stream and wave.

As the hon. Member for Aberdeen South said, we only have to look back a little to see how close we came to securing exportable UK industry in wind before we lost our lead and most of our manufacturing and expertise to others, most notably Denmark, because we did not back the development of our world lead through industrial strategy. Yes, I have mentioned the words “industrial strategy”. It appears in the title of the new Department—the Department for Business, Energy and Industrial Strategy—but there is still an absence of anything that looks like an actual industrial strategy from the Government. We were promised a Green Paper on industrial strategy would appear shortly. With lagoons, we have an industrial strategy in the round already, with jobs, a supply chain and exportability. It is running up to us, metaphorically asking us to bite its hand off, and at the moment we are not responding in a positive way.

In all of this, we have to consider the question of value for money, which the hon. Member for Eddisbury mentioned. Comparatively, lagoons provide value for money. Undoubtedly even Swansea will come in as better value for money for electricity-generating purposes than the deal we have concluded with Hinckley C. Comparatively it is in the same league as offshore wind. A series of lagoons would certainly be much better value overall, although we need to cast our minds towards the longer term in thinking about value. Swansea is asking for a CfD for 60 years. That is half the operating life of the lagoon, with payments reducing substantially over that period. Swansea is not asking for a block CfD degressing through future projects; it is asking for a CfD degressing within the project’s lifetime.

I know the Government have not been idle in all this, although on the surface not much has happened since general support for the idea of the Swansea bay lagoon was included in the Conservative party’s 2015 election manifesto. Indeed, as my hon. Friend the Member for Aberavon said, it was also in the manifestos of all the other major parties. I hoped we would hear something positive about Swansea in the autumn statement, but nothing was announced. We will have to wait until the Hendry review has been examined. That review is headed by an estimable former Energy Minister, the right hon. Charles Hendry. I am confident he will have a positive look at value for money and the bigger picture I have described of the lagoon, but we do not know where that review is. We think it is on its way to Government as we speak, but we have not yet had any confirmation that it has been received, or whether there is a timetable for looking at that review or for action after it has been considered. I join my hon. Friends in calling for early publication of the review so that we can all have sight of what it is about. We also call for an early Government response to that review, even if a final decision about proceeding with the Swansea tidal lagoon has not been made.

I conclude by emphasising that timing is important. We have a worked-up, permitted, committed plan that cannot stand in suspended animation while people spend so long making up their mind. Swansea bay, in case anyone needs reminding, is not an interesting concept that we can cogitate on at our leisure, but a real project that needs to be developed within a reasonable timescale. Otherwise all the money invested in it—£50 million—will start to go stale and the project may fail, possibly never to be revived. We need to get on with it, not just for Swansea’s sake, but for the sake of a real solution that could be producing power by the very early 2020s if it is given the go-ahead now. It would be a solution for our mounting energy gap in the early part of the next decade.

[Ian Paisley (in the Chair)]

If the Minister can take about 12 minutes, that will give Mr Crabb a minute and a half to wind-up at the end.

draft Contracts for Difference (Allocation) (Excluded Sites) amendment regulations 2016

Alan Whitehead Excerpts

Monday 14th November 2016 General Committees

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

I reflect the Minister’s pleasure at serving under your chairmanship, Mrs Moon. He made a good job of attempting to explain what on earth the draft regulations are all about. To the extent that there can be clarity, he has provided it, so we should not be detained too long by this business.

Labour Members welcome the thrust of the statutory instrument and the greater clarity that has been achieved regarding the questions I asked in a previous statutory instrument Committee about the next allocation round and the future of CfD allocations, and in the light of the publication that arose last Thursday, which sets out in greater detail what allocations will consist of and the support for future allocation rounds over the next period. We still have several questions about that arrangement, particularly about how it is going to relate to the overall progress of the levy control framework, but that is not really a discussion for today.

I have two specific questions on how the changes to the 2014 regulations are going to work in practice. First, the changes will considerably widen what was in the excluded periods in the 2014 regulations, which could give rise to substantial greater questions of possible interpretation about what it means not to have delivered within 13 months or to have been excluded from a further auction round for two years, given the circumstances in which that exclusion might have taken place. For example, someone wishing to put in an application for an allocation at a subsequent auction round may consider themselves to have been unfairly treated in how they were excluded by the widening of the regulations. Are processes in place that can provide for a legally robust way to ensure that that exclusion can be properly managed and that we are not going to open ourselves up to a series of actions that could be debilitating for the auction round when it comes to pre-qualifying for a subsequent auction and the process of putting in an auction bid? I would be grateful if the Minister clarified that.

Secondly, under the circumstances outlined, the regulations are not just about exclusions from future bidding, or an excluded period if someone has not either signed a CfD or undertaken the milestones in a CfD agreement previously. They are also about the extent to which otherwise frozen CfDs may be unfrozen for future use as a result of those people who are not taking up their CfDs in a proper way having perhaps put in a bid that was never realistic in the first place. It is a matter of making sure that the CfDs freed up by the implementation of that process are available for future auction processes.

As there is no impact assessment with the report other than the general impact assessment relating to the process overall, I wonder whether the Minister has looked at the circumstances where that release of CfDs might apply; whether he has made any assessment of what level that is likely to run at; and, if he has, what arrangements he might have in hand for ensuring that the CfDs will be recycled in an orderly manner when future auctions come up. It may be that they could be so significant as to lead to the possibility of further sub-auctions as the process develops. How significant might that part of the process be in carrying out the whole auction process in the most efficient way?

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 8th November 2016 Commons Chamber

[Mr Hurd]

I know my hon. Friend to be a great champion of his area and of innovation there. Cornwall has interesting assets in relation to geothermal. I have written to him, but I can place on record here that the answer is yes.

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

On clean energy, we are close to the first anniversary of the announcement by the Secretary of State’s predecessor that all unabated coal generation would close by 2025 and that a consultation on that closure would be launched in spring 2016. As we can see, it is not spring any more, and no consultation appears to be in sight. Is that because the Department is reconsidering his predecessor’s commitment, or because the Department has not got around to writing the consultation yet?

[Mr Hurd]

The hon. Gentleman will not have to wait much longer for the answer to that question. The Government are committed to the transition from coal to clean energy. In fact, he will know that this year is the first in which we will generate more electricity from renewable energy than we do from coal.